Income-tax Officer, Dhule V. M/s. Sew Precision Joint Venture, Dhule

ITA 4/PUN/2012

• Counselvise Citation: 424514 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 03-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D U ANJANEYULU
• Section: 143(3); 194C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.04/PN/2012 (ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER WARD 3 (2), DHULE . APPELLANT VS. M/S SEW PRECISION JOINT VENTURE C/O SEW CONSTRUCTION LTD. 31, BADGUJAR COLONY, VIDYANAGAR, DEOPUR, DHULE PAN : ABDFS2985G . RESPONDENT C.O. NO.05/PN/2013 (ARISING OUT OF ITA NO.04/PN/2012) (ASSESSMENT YEAR : 2006-07) M/S SEW PRECISION JOINT VENTURE C/O SEW CONSTRUCTION LTD. 31, BADGUJAR COLONY, VIDYANAGAR, DEOPUR, DHULE PAN : ABDFS2985G . APPELLANT VS. INCOME TAX OFFICER WARD 3 (2), DHULE . RESPONDENT APPELLANT BY : MR. D.U. ANJANEYULU RESPONDENT BY : MR. SANTOSH KUMAR DATE OF HEARING : 19-06-2013 DATE OF PRONOUNCEMENT : 25-06-2013 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL AND THE CROSS OBJECTION HAVE BEEN PREFERRED BY THE REVENUE AND THE ASSESSEE RESPECTIVELY, AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATE D 03.11.2011 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 24.12.2010 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESS MENT YEAR 2006-07. ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 2. IN THE APPEAL OF THE REVENUE, THE SOLITARY GRIEV ANCE IS AGAINST THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OR RS. 1,09,44,818/- MADE BY THE ASSESSING OFFICER INVOKING SECTION 40(A)(IA) OF THE ACT. 3. BRIEFLY PUT THE RELEVANT FACTS ARE AS FOLLOWS. T HE ASSESSEE IS A JOINT VENTURE BETWEEN M/S SEW CONSTRUCTION LTD., HYDERABA D AND M/S PRECISION TECHNOFAB & ENGINEERING PVT. LTD., KARAD, DIST.- SA TARA CREATED FOR THE PURPOSE OF COMPLETING THE WORK OF PROVIDING, ERECTI NG VERTICAL LIFT TYPE MILD STEEL GATES FOR SULWADE BARRAGE PROJECT INCLUDING H OISTING ARRANGEMENT WITH ALL APPURTENANT WORKS AND TESTING IT WITH FURTHER O PERATION AND MAINTENANCE FOR 3 YEARS AFTER SATISFACTORY ERECTION AND TESTING ETC ., NEAR VILLAGE SULWADE, TAL- SHINDKHEDA, DIST.- DHULE, MAHARASHTRA. FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED A RETURN OF INCOME DE CLARED NIL INCOME. IN THE ASSESSMENT MADE UNDER SECTION 143(1)/147 OF THE ACT , THE ASSESSING OFFICER NOTED THAT ASSESSEE HAD DEDUCTED TAX AT SOURCE OF R S.1,60,869/- ON CONTRACTOR PAYMENTS AS PER SECTION 194C OF THE ACT BUT THE SAM E WAS NOT DEPOSITED WITHIN THE PRESCRIBED TIME LIMITS AND THEREFORE THE CORRESPONDING EXPENDITURE OF RS.1,09,44,818/- WAS DISALLOWABLE IN TERMS OF SE CTION 40(A)(IA) OF THE ACT. 4. THE STAND OF THE ASSESSEE BEFORE THE CIT(A) AS W ELL AS BEFORE THE ASSESSING OFFICER WAS THAT THE PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO AN EXPENDITURE OUTSTANDING AT TH E END OF THE YEAR AND NOT TO THE EXPENDITURE WHICH HAS BEEN ACTUALLY PAID DURING THE YEAR ITSELF. AS PER THE ASSESSEE THE EXPENDITURE IN QUESTION OF RS.1,09,44, 818/- REPRESENTED AMOUNTS ACTUALLY PAID TO THE SUB-CONTRACTOR DURING THE YEAR UNDER CONSIDERATION ITSELF, AND THEREFORE THE DEFAULT IN LATE DEPOSIT OF THE CORRESPONDING TAX DEDUCTED AT SOURCE, SHALL NOT INV ITE THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT WITH REGARD TO THE IMP UGNED EXPENDITURE. ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 5. THE ASSESSING OFFICER DID NOT ACCEPT THE AFORESA ID PLEA BUT THE CIT(A) HAS SINCE ACCEPTED THE PLEA FOLLOWING THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S TEJA CONSTRUCTIONS VIDE ITA NO.308/HYD/2009 DATED 23.10.2009. ACCORDINGLY, THE CIT(A) DELETED T HE DISALLOWANCE OF RS.1,09,44,818/- WHICH WAS MADE BY THE ASSESSING OF FICER BY INVOKING SECTION 40(A)(IA) OF THE ACT. AGAINST THE AFORESAID DECISION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US, THE RIVAL COUNSELS FAIRLY CONVERGED O N THE POINT THAT THE VIEW OF THE CIT(A) BASED ON THE DECISION OF THE HYDERABA D BENCH OF THE TRIBUNAL IN THE CASE M/S TEJA CONSTRUCTION HYDERABAD (SUPRA) IS UNTENABLE HAVING REGARD TO THE SUBSEQUENT JUDGEMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (ITAT 20 OF 2013, GA 190 OF 2013) DATED 03.04.2013 WHEREIN IT HAS BEEN OBSERVED THAT THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE APPLICABLE NOT ONLY IN RE SPECT OF THE AMOUNTS PAYABLE AT THE END OF THE YEAR BUT ALSO ON THE AMOUNTS ACTU ALLY PAID DURING THE YEAR ITSELF. IN THIS VIEW OF THE MATTER, THEREFORE, THE AFORESAID ORDER OF THE CIT(A) IS UNTENABLE AND THE REVENUE HAS TO SUCCEED IN ITS APP EAL. WE HOLD SO. 7. HOWEVER, BY WAY OF CROSS OBJECTION, THE ASSESSEE HAS SOUGHT TO RESIST THE DISALLOWANCE ON THE GROUND THAT HAVING REGARD T O THE PROVISIONS OF SECTION 194C AS IT STOOD FOR THE ASSESSMENT YEAR UNDER CONS IDERATION, IT DID NOT COVER THE ASSESSEES CASE AND THEREFORE THE DEFAULT OF NO T DEPOSITING THE TDS INTO THE GOVERNMENT ACCOUNT WITHIN THE PRESCRIBED TIME L IMITS, CANNOT BE PUT AGAINST THE ASSESSEE. IN THIS CONTEXT, THE PLEA OF THE ASSESSEE IS THAT THE PROVISIONS OF SECTION 194C OF THE ACT WERE AMENDED BY THE FINANCE ACT, 2008 TO INCLUDE INTER-ALIA AN ASSOCIATION OF PERSONS (AOP) TO DEDUCT TAX AT S OURCE AT THE TIME OF CREDIT OR PAYMENT OF AMOUNTS TO THE CON TRACTOR UNDER SECTION 194C(1) OF THE ACT. LEARNED COUNSEL FOR THE ASSESSE E HAS POINTED OUT TO THE CBDT CIRCULAR NO. 1/2009, DATED 27.03.2009 CONTAINI NG THE EXPLANATORY NOTES ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 TO THE PROVISIONS OF THE FINANCE ACT, 2008 BY WAY O F PARA 33.1 TO 33.3 WHICH HAS EXPLAINED THAT THE PROVISIONS OF SECTION 194C(1 ) OF THE ACT HAVE BEEN AMENDED TO SPECIFICALLY REQUIRE CERTAIN ENTITIES NA MELY (AOP) OR BODY OF INDIVIDUALS (BOI) TO DEDUCT TAX AT SOURCE UNDER THE SAID SECTION. IT HAS ALSO BEEN CLARIFIED THAT SUCH AMENDMENT HAS BEEN MADE AP PLICABLE W.E.F. 01.06.2008. 8. ON THE BASIS OF THE AFORESAID, THE POINT RAISED BY THE ASSESSEE IS THAT IT IS MERELY A JOINT VENTURE BETWEEN M/S SEW CONSTRUCT ION LTD., HYDERABAD AND M/S PRECISION TECHNOFAB & ENGINEERING PVT. LTD., KA RAD, DIST.- SATARA AND THAT THERE IS NO PARTNERSHIP AGREEMENT AND THEREFORE IT IS TO BE RIGHTLY ASSESSED IN THE STATUS OF AN AOP. IF THE ASSESSEE IS ASSESSED I N ITS CORRECT STATUS OF AOP, CLEARLY FOR THE ASSESSMENT YEAR UNDER CONSIDERATION , THE PROVISIONS OF SECTION 194C OF THE ACT ARE NOT APPLICABLE AND THEREFORE TH E RIGORS OF SECTION 40(A)(IA) OF THE ACT DO NOT COVER THE ASSESSEE. 9. AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID ISSUE WAS RAISED BEFORE THE CIT(A) BUT SIN CE THE ASSESSEE SUCCEEDED ON THE BASIS OF THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF M/S TEJA CONSTRUCTIONS (SUPRA), THIS PARTIC ULAR ISSUE WAS NOT STRESSED DURING THE APPEAL PROCEEDINGS. WE FIND THAT IN PARA 5 OF THE IMPUGNED ORDER OF THE CIT(A) HAS NOTED THAT ASSESSEE HAS OBJECTED TO THE ACTION OF THE ASSESSING OFFICER IN TREATING THE STATUS OF THE ASS ESSEE AS FIRM AGAINST ASSESSEES STAND OF BEING TREATED AS AN AOP BY WA Y OF GROUND NO. 1. THE SAID GROUND HAS BEEN DISMISSED BY THE CIT(A) IN PAR A 5.1 AS NOT PRESSED. 10. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINT ED OUT THAT THOUGH ASSESSEE MADE A MISTAKE WHILE FILING A RETURN OF IN COME BY MENTIONING THE STATUS AS A FIRM, BUT HAVING REGARD TO THE EXPLIC IT POSITION OF LAW, ASSESSEE CANNOT BE ASSESSED IN THE STATUS OF A FIRM AND HA S TO BE ASSESSED AS AN ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 AOP ALONE. THE LEARNED COUNSEL SUBMITTED THAT EVE N IF ASSESSEE HAD WRONGLY ADMITTED ITS STATUS AS A FIRM, THE ASSESS ING OFFICER WAS FULLY AWARE OF THE COMPLETE FACTS AND SHOULD HAVE CORRECTED THE MI STAKE IN TERMS OF THE REASONING CONTAINED IN THE CBDT CIRCULAR NO.14 (XI- 35) DATED 11.04.1955 WHERE THE CBDT HAS STATED THAT THE OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF ASSESSEE AS TO HIS RIGHTS ; AND, THAT IT IS THE RESPONSIBILITY OF THE OFFICERS OF THE DEPARTMENT TO ADVISE THE ASSESSEE TO ADOPT THE PROPER COURSE OF ACTION. IT HAS ALSO BEEN SUBMITTED THAT THERE IS NO ESTOPPEL AGAINST LAW AND THAT IT IS OPEN FOR THE AS SESSEE TO RESILE FROM ITS MISTAKEN POSITION, AND SHOW THAT THE CORRECT STATUS WAS AOP. 11. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL R EPRESENTATIVE HAS DEFENDED THE ACTION OF THE LOWER AUTHORITIES BY POI NTING OUT THAT ASSESSEE ITSELF HAD FILED A RETURN OF INCOME STATING ITS STATUS AS A FIRM AND THEREFORE THE ASSESSMENT FINALIZED IN THE STATUS OF THE FIRM IS NOT WRONG. 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. SECTION 184 OF THE ACT CONTAINS PROVISIONS FOR ASSESSMENT AS A FIRM. SUB-SECTION (1) OF SECTION 184 PRESCRIBES INTER-ALIA, THAT A FIRM SHALL BE ASSESSED AS A FIRM FOR THE PURPOSE OF THIS ACT IF THE PARTNERSHIP IS EVIDENCED BY AN INSTRUMENT AND THE INDIVIDUAL SHARES OF THE PARTNERS ARE SPECIFIED IN SUCH INSTRUMENT. SUB-SECTION (2) OF SECTION 184 ALSO PRESCRIBES THAT A CERTIFIED COPY OF THE INSTRUMENT OF PARTNERSHIP REFERRED TO IN SUB-SECTION OF (1) SHALL ACCOMPANY THE RETURN OF INCOME FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESS MENT YEAR COMMENCING ON OR AFTER 01.04.1993 IN RESPECT OF WHICH ASSESSMENT AS A FIRM IS FIRST SOUGHT. SECTION 184 CONTAINS OTHER SUB-SECTIONS ALSO WHICH DEAL WITH THE MANNER OF MAKING OF ASSESSMENT AS A FIRM. FOR THE PRESENT P URPOSE, IT WOULD BE SUFFICIENT TO NOTICE THAT A FIRM IS LIABLE TO BE AS SESSED AS A FIRM FOR THE PURPOSES OF THIS ACT IF THE PARTNERSHIP IS EVIDENCE D BY AN INSTRUMENT OF PARTNERSHIP, WHEREIN THE INDIVIDUAL SHARES OF THE P ARTNERS ARE SPECIFIED IN SUCH ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 AN INSTRUMENT. IN THIS CONTEXT, THE PLEA RAISED BY THE ASSESSEE IS THAT NO PARTNERSHIP AGREEMENT EXISTS IN THIS CASE; AND, THE REFORE, IT CANNOT BE ASSESSED IN THE STATUS OF A FIRM. THE PLEA OF THE ASSESSEE CANNOT BE LIGHTLY BRUSHED-ASIDE, THOUGH IN THE RETURN OF INCOME FILED BY THE ASSESSEE THE STATUS HAS BEEN MENTIONED AS FIRM. WE SAY SO FOR THE REA SON THAT THE ASSESSING OFFICER WAS FULLY AWARE OF THE ARRANGEMENT IN TERMS OF WHICH ASSESSEE WAS CARRYING ON BUSINESS INASMUCH AS IN PARA 3 OF THE A SSESSMENT ORDER, IT HAS BEEN SPECIFICALLY NOTED THAT ASSESSEE IS A JOINT VE NTURE BETWEEN TWO CONCERNS, WHICH IS CREATED FOR A SPECIFIC PURPOSE. THEREFORE, THE PLEA OF THE ASSESSEE DESERVES TO BE APPROPRIATELY ADDRESSED, ESPECIALLY FOR THE REASON THAT IT INVOLVES A POINT OF LAW. 13. THERE CANNOT BE AN ESTOPPEL IN LAW, AND THE FAC TUM OF ASSESSEE HAVING DECLARED STATUS OF A FIRM IN THE RETURN FILED CAN NOT BE FATAL, AND THE RESILED POSITION OF THE ASSESSEE IS TO BE ADJUDICATED IN TH E LIGHT OF THE APPLICABLE LEGAL POSITION. THE EXERCISE TO DETERMINE THE CORRECT STA TUS OF THE ASSESSEE BECOMES ALL THE MORE IMPORTANT IN THIS CASE BECAUSE IT HAS A BEARING ON THE ULTIMATE TAX LIABILITY OF THE ASSESSEE. IF THE CLAI M OF THE ASSESSEE THAT ITS STATUS IS AN AOP IS ACCEPTED, THEN FOR THE ASSESSMENT YE AR UNDER CONSIDERATION, SECTION 194C OF THE ACT BECOMES INAPPLICABLE TO THE ASSESSEE, AND THE CONSEQUENTIAL DISALLOWANCE MADE UNDER SECTION 40(A) (IA) OF THE ACT WOULD NOT SURVIVE. IF ASSESSEES CLAIM OF BEING AN AOP IS N OT ACCEPTED, THEN THE PROVISIONS OF SECTION 194C BECOME APPLICABLE FOR TH E INSTANT ASSESSMENT YEAR AND CONSEQUENTIALLY THE IMPUGNED DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT WOULD BE JUSTIFIED. THEREFORE, DETERMINATION OF THE CORRECT STATUS IN THE PRESENT CASE IMPACTS THE ULTIMATE TAX LIABILITY AND IN SUCH A SITUATION EVEN AS PER THE PARITY OF REASONING LAID DOWN BY THE HONBL E SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (19 98) 229 ITR 383 (SC), SUCH AN ISSUE CAN BE ADMITTED FOR THE FIRST TIME BE FORE THE TRIBUNAL EVEN IF IT WAS NOT RAISED BEFORE THE LOWER AUTHORITIES. ITA NO.04/PN/2012 C.O. NO.05/PN/2013 M/S SEW PRECISION JOINT VENTURE A.Y. 2006-07 14. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE CONTENTION OF THE ASSESSEE THAT ITS CORRECT STATUS IS THAT OF AN AOP DESERVES TO BE APPROPRIATELY CONSIDERED IN ACCORDANCE WITH L AW. FOR THE AFORESAID PURPOSE, WE THEREFORE, DEEM IT FIT AND PROPER TO RE STORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL CONSIDER TH E AFORESAID PLEA OF THE ASSESSEE ON ITS MERITS AS PER LAW, UNINFLUENCED BY THE FACT THAT THE ASSESSEE HAD STATED ITS STATUS AS A FIRM IN THE RETURN OF INCOME. IN THE ENSUING REMAND PROCEEDINGS, THE ASSESSING OFFICER SHALL ALLOW THE ASSESSEE A REASONABLE OPPORTUNITY TO PUT-FORTH MATERIAL OR EVIDENCE IN SU PPORT OF ITS STAND AND THEREAFTER, THE ASSESSING OFFICER SHALL PASS AN ORD ER AFRESH DETERMINING THE CORRECT STATUS OF THE ASSESSEE AS PER LAW. 15. ACCORDINGLY, THE CROSS OBJECTION FILED BY THE A SSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSES. 16. RESULTANTLY, WHEREAS THE APPEAL OF THE REVENUE IS ALLOWED THAT OF THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO ALLOW ED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 25 TH JUNE, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, NASHIK; 4) THE CIT-I, NASHIK; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE