Sri M Sanyasi Raju, Visakhapatnam V. The Ad CIT, Range-5, Visakhapatnam

ITA 407/VIZ/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50132 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR

Judgement Text

ITA NO 407 OF 2009 M SANYASI RAJU, VISAKHAPATNAM PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 407 /VIZAG/20 09 ASSESSMENT YEAR: 2006 - 07 M. SANYASI RAJU, VIS AKHAPATNAM VS. ACIT, RANGE - 5, VISAKHAPATNAM (APPELLANT) PAN NO:ADOPM 7868 F (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI J. SIRI KUMAR, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17-06-2009 PASSED BY LD CIT(A), VISAKHAPATNAM AND I T RELATES TO THE ASSESSMENT YEAR 2006-07. 2. DURING THE COURSE OF HEARING THE LD A.R DID NOT PRESS THE GROUNDS NUMBERED AS 2 AND 3 RELATING TO THE DISALLO WANCE OF RS.1.50 LAKHS EACH FROM OUT OF THE EXPENDITURE RELATING TO METAL, SAND BRICKS PURCHASE AND LABOUR CHARGES. ACCORDINGLY THE SAID GROUNDS ARE DISMISSED AS WITHDRAWN. THE GROUNDS NUMBERED AS 1 AND 5 ARE GENERAL IN NATURE AND HENCE THEY REQUIRE NO ADJUDIC ATION. IN THE RESULT, WE ARE LEFT ONLY WITH THE CONSIDERATION FOL LOWING GROUND ONLY: THE COMMISSIONER OF INCOME TAX (APPEALS) IS GROSSL Y ERRED IN SUSTAINING DISALLOWANCE OF RS.22,61,549/- MADE ITA NO 407 OF 2009 M SANYASI RAJU, VISAKHAPATNAM PAGE 2 OF 4 U/S 40(A)(IA) OF I.T. ACT BY UPHOLDING THE ACTION O F ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC . 40(A)(IA) BY TREATING THE SAID AMOUNTS AS PAYMENTS TO SUB-CONTRACTORS.. 3. THE FACTS RELATING TO THE SAID ISSUE ARE STA TED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXECUTION OF CIVIL CONTRACT WORKS. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PAID A SUM OF RS.17,18,826/- TO SRI K.SRIDHAR AND RS.5,42,723/- TO M/S SAI MARUTI C ONSTRUCTIONS FOR EXECUTION OF CERTAIN WORKS. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE HAD PAID FOLLOWING AMOUNT AS PROFIT MA RGIN TO THESE TWO PERSONS AND DEBITED THE SAME UNDER THE HEAD SITE S ADAR EXPENSES. SRI K.SRIDHAR RS.76,812/- M/S SAI MARUTHI CONSTRUCTIONS RS.37,658/- ACCORDINGLY THE ASSESSING OFFICER TOOK THE VIEW THA T THE PAYMENTS MADE TO THESE PERSONS REPRESENT SUB-CONTRACT PAYMEN TS. SINCE THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE ON THESE TWO PAYMENTS AS PER THE PROVISIONS OF SEC.194C, THE ASSESSING OFFICER D ISALLOWED THEM BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA) OF THE AC T. IN THE APPEAL, THE ASSESSEE DID NOT GET ANY FAVOUR FROM LD CIT(A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE MOOT QUESTION IS WHETHER THERE WAS ANY SUB-CONTRACT RELATIONSHIP BETWEEN THE ASSESSEE AND THE TWO PERSO NS CITED ABOVE. IT WAS STATED THAT SHRI K.SRIDHAR IS AN EMPLOYEE OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE IS THAT HE HAS INCURRED CERTAIN EXPENSES ITA NO 407 OF 2009 M SANYASI RAJU, VISAKHAPATNAM PAGE 3 OF 4 LIKE LABOUR CHARGES, PURCHASE OF CONSTRUCTION MATER IALS, MACHINERY HIRE ETC. THROUGH THESE TWO PERSONS. THUS ACCORDIN G TO THE ASSESSEE, THERE WAS NO SUB-CONTRACT BETWEEN HIM AND THE ABOVE SAID TWO PERSONS. IT WAS ALSO STATED THAT THESE TWO PERSONS HAVE OBTAINED CERTAIN BILLS IN THE NAME OF THE ASSESSEE ONLY AND THE SAID FACT ALSO CLEARLY PROVE THAT THERE WAS NO SUB-CONTRACT RELATI ONSHIP. 5. THERE CANNOT BE ANY DISPUTE THAT, IN A SUB-C ONTRACT, THE NATURE OF WORK SO CONTRACTED OUT IS CLEARLY SPECIFIED. FU RTHER IN A SUB- CONTRACT, THE SUB-CONTRACTOR WOULD EXECUTE THE WORK INDEPENDENTLY BY INCURRING ALL THE EXPENSES ON HIS OWN BY TAKING THE RISK AND RESPONSIBILITY ATTACHED TO THE WORK. IN THE INSTA NT CASE, IT IS NOT SHOWN THAT THE TWO PERSONS CITED ABOVE HAVE CARRIED OUT ANY SPECIFIC CONTRACT WORKS ON THEIR OWN RISK BY INCURRING ALL T HE EXPENSES. ON THE CONTRARY, WE FIND FROM THE ASSESSMENT ORDER THA T THE ASSESSEE HAS INCURRED CERTAIN EXPENSES LIKE LABOUR CHARGES, PURCHASE OF CONSTRUCTION MATERIALS, MACHINERY HIRE ETC THROUGH THESE TWO PERSONS. IT IS ALSO STATED THAT THE BILLS FOR PUR CHASE OF CERTAIN MATERIALS WERE OBTAINED IN THE NAME OF THE ASSESSEE . THUS, WE NOTICE THAT THE INGREDIENTS ATTACHED WITH A SUB-CON TRACT DO NOT EXIST IN THE FACTS OF THE CASE. THUS IT COULD BE INFERRED THAT THESE TWO PERSONS HAVE ONLY ACTED ON BEHALF OF THE ASSESSEE H EREIN AND THEY HAVE RECEIVED PAYMENT ONLY FOR THE SERVICES RENDERE D BY THEM TO THE ASSESSEE. HENCE, WE ARE UNABLE TO AGREE WITH THE V IEWS OF LD CIT(A) ON THIS MATTER. ACCORDINGLY, WE REVERSE THE ORDER OF LD CIT(A) AND ITA NO 407 OF 2009 M SANYASI RAJU, VISAKHAPATNAM PAGE 4 OF 4 DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION OF RS.22,61,549/- MADE U/S 40(A)(IA) OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE: 13-04-2011 COPY TO 1 SHRI M. SANYASI RAJU, D.NO. 27 - 3 - 200, OFFICIAL COLONY, SRIN AGAR, GAJUWAKA, VISAKHAPATNAM 2 THE ADDITIONAL CIT, RANGE - 5, VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM