Dy.CIT, Circle-15(1), Hyderabad V. M/s PCL Intertech Lenhydro Consortium JV, Hyderabad

ITA 409/HYD/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82612 (ITAT-HYDERABAD)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-12-2014
• Assessment Year: 2011-2012
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRADR
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Reasonable cause
• Section: 201(1)

Judgement Text

ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BBENCH, HYDERABAD BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.408 TO 410/HYD/2014 (ASSESSMENT YEAR: 2011-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 15(1), ROOM NO.442, 4 TH FLOOR, D BLOCK, IT TOWERS, HYDERABAD VS. M/S. PCL INTERTECH LENHYDRO CONSORTIUM JV, 701, RAGHAVARATNA TOWERS, ABIDS, HYDERABAD PAN: AAGFP 1664 B (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RAJAT MITRA,(DR) ASSESSEE BY: SHRI V. RAGHAVENDRA RAO,ADVOCATE DATE OF HEARING: 16/12/2014 DATE OF PRONOUNCEMENT: 19/12/2014 O R D E R PER J. SUDHAKAR REDDY, A.M. ALL THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED ON 16.12.2013 BY THE LD CIT (A)-II, HYDERABAD U/S 201(1) AND 201(1A) AND AN ORDER PASSE D BY THE CIT (A) ON 17.12.2013 CANCELLING THE PENALTY LEVIED U/S 221 OF THE ACT IN CONNECTION WITH THE ORDERS PASSED U/S 20 1(1). 2. AS THE ISSUES IN ALL THESE APPEALS ARE COMMON, F OR THE SAKE OF CONVENIENCE, THEY WERE HEARD TOGETHER AND ARE DE CIDED BY WAY OF THIS COMMON ORDER. THE AO PASSED AN ORDER U/S 20 1(1) BY OBSERVING THAT THE ASSESSEE FAILED TO DEDUCT THE TA X ON CONTRACT WORKS. THE FACTS IN BRIEF ARE THAT, THE ASSESSEE IS CARRYING OUT WORK RELATING TO HYDRO ELECTRICITY PROJECT IN UTTAR ANCHAL FOR TEHRI ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 2 OF 6 HYDRO DEVELOPMENT CORPORATION (THDC). A SURVEY U/S 33A WAS CONDUCTED ON 7.12.2011 AND THE AO CONSEQUENTLY PASS ED ORDER U/S 201 AND 201(1A) ON 3.12.2012. AGGRIEVED THE AS SESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY AND THE LD CIT (A) ALLOWED THE APPEAL PARTLY. AGGRI EVED THE REVENUE IS BEFORE US BY RAISING THE FOLLOWING GROUN DS: U/S 201 (1) AND U/S 201(1A): 1. THE LD CIT (A) ERRED IN REMITTING THE MATTER BA CK TO THE FILE OF THE AO EVEN THOUGH THE ASSESSEE FAIL ED TO PRODUCE ANY DOCUMENT BEFORE HER TO INVOKE THE JUDGMENT IN THE CASE OF M/S HINDUSTAN COCA COLA BEVERAGES. 2. IN THE ABSENCE OF ANY EVIDENCE HAVING BEEN PRODUCED EITHER BEFORE HER OR EVEN BEFORE THE AO AS THE ASSESSEE WAS HELD LIABLE FOR TDS U/S 201(1). 3. IN ADDITION TO THE ORDERS PASSED U/S 201(1) & 20 1(1A), THE AO LEVIED A PENALTY U/S 221 OF THE ACT DATED 8.8.20 11. THIS PENALTY WAS ALSO CANCELLED BY THE LD CIT (A). AGGRI EVED THE REVENUE HAS FILED THE FOLLOWING GROUNDS: U/S 221 1. THE LD CIT (A) ERRED IN DELETING PENALTY LEVIED U/S 221 OF RS.50 LAKHS ON THE GROUND OF FINANCIAL CONSTRAINTS. 2. THE LD CIT (A) FAILED TO APPRECIATE THAT THE UNP AID DEMAND OF RS.2,35,02,810/- REPRESENTED TDS MADE OUT OF THE PAYMENTS TO SUB-CONTRACTORS AND THAT DEDUCTOR DESPITE HAVING DEDUCTED SUCH TDS HAD NOT REMITTED THE SAME INTO GOVT. ACCOUNT. 3. THE LD CIT (A) ERRED IN EQUATING THE DEMAND ON ACCOUNT OF TDS DEDUCTED BY THE ASSESSEE WITH THE DEMAND ARISING AS A TAX ON INCOME OF THE ASSESSEE ITSELF. ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 3 OF 6 4. THE LD CIT (A) FAILED TO APPRECIATE THAT THE REASONABLE CAUSE OF FINANCIAL CONSTRAINTS COULD HAVE BEEN APPLICABLE ONLY TO THE OWN FUNDS OF THE ASSESSEE AND NOT TO THE SUMS COMPRISING OF THE TDS OF INCOME OF OTHER PERSONS, AS THE ASSESSEE WAS ONLY A CUSTODIAN OF SUCH FUNDS. 5. THE LD CIT (A) ERRED IN RELYING ON THE DECISION IN THE CASE OF CIT VS. MUNNI LAL & CO.(2006) 204 CTR (RAJ.) 529 (SC) AS IN THE SAID CASE THE ASSESSEE DEDUCTOR HAD NOT DEDUCTED TDS AS REQUIRED BY THE SECTION 194C(2). 4. AS THE ISSUES ARISING IN ALL THESE APPEALS ARE C OMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY THIS COMMON ORDER. 5. WE HAVE HEARD MR. RAJAT MITRA, LD SR. DEPARTMENT AL REPRESENTATIVE AND SHRI V. RAGHAVENDRA RAO, LD COUN SEL FOR THE ASSESSEE. 6. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND ON A PERUSAL OF THE PAPERS ON RECOR D AND THE ORDERS OF THE AUTHORITIES BELOW, AS WELL AS THE CAS E LAW CITED, WE HOLD AS FOLLOWS. THE FIRST APPELLATE AUTHORITY IN H ER ORDER MADE THE FOLLOWING FACTUAL FINDINGS: 5.1 THE APPELLANT IS A JOINT VENTURE COMPANY WITH TWO CONSTITUENTS M/S. PROGRESSIVE CONSTRUCTIONS LTD (PC L) AND M/S. INTERTECH LEN HYDRO CONSORTIUM (ITLHC) EXECUTING THE CONTRACT WORK FOR SETTING UP OF HYDRO ELECTRICITY PROJECT IN UTTARANCHAL FOR THE TEHRI HY DRO DEVELOPMENT CORPORATION (THDC). 5.2 THE JOINT VENTURE ENTERED INTO A CONTRACT WITH TEHRI HYDRO DEVELOPMENT CORPORATION ON 14.11.2002. SUBSEQUENTLY, THE JOINT VENTURE ENTERED INTO SUB-CO NTRACT ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 4 OF 6 WITH RITHWIK PROJECTS LTD (RPL) ON 1.4.2008. THE IMPORTANT POINTS OF THIS SUB-CONTRACT ARE: A) THAT THE RITHWIK PROJECTS LTD (RPL) UNDERTAKES T O EXECUTE THE PROJECT AS PER THE TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT BETWEEN THE JOINT VENTURE AND TEH RI HYDRO DEVELOPMENT CORPORATION (THDC). B) WITH REFERENCE TO PAYMENTS OF BILLS, CLAUSE 7 & 8 OF THE AGREEMENT READS AS UNDER: 7. THE RPL SHALL PRESENT THE EMPLOYER (THDC) WITH RUNNING ACCOUNT BILLS IN A TIMELY MANNER. THE AMOUN TS DUE AFTER DEDUCTING THE FOLLOWING ENUMERATED BELOW FROM THE GROSS AMOUNT OF RUNNING ACCOUNT BILLS SHAL L BE PASSED ON TO RPL UPON THE EMPLOYER RELEASING THE DU E MONIES: I) ALL TAXES/DUTIES/LEVIES AS MAY BE APPLICABLE INCLUDING INCOME TAX DEDUCTED AT SOURCE. II) THE VALUE OF MATERIALS ETC., IF ANY, SUPPLIED BY TH E PRINCIPAL OR THE EMPLOYER: III) AMOUNTS DEDUCTIBLE TOWARDS MOBILIZATION ADVANCE, MACHINERY ADVANCE, INCLUDING INTEREST THEREON, SECURED ADVANCE DEPOSITS, COMMISSIONS ETC. IV) ALL OTHER DEDUCTIONS DEDUCTIBLE UNDER THE ORIGINAL CONTRACT AND THIS AGREEMENT. 8. THE PRINCIPAL (JV) SHALL TRANSFER TO RPL (AFTER DEDUCTING APPLICABLE TDS) ALL AMOUNTS RECEIVED BY I T UNDER AND PURSUANT TO THE ORIGINAL CONTRACT, WHETHE R RELATING TO PAST, PRESENT OR FUTURE CLAIMS AND INCL UDING ALL AMOUNTS RELATING TO PRICE ESCALATION, ADVANCES ETC., BY WAY OF ISSUING SUITABLE INSTRUCTIONS TO BANK. 5.2.1 FROM THIS AGREEMENT DATED 01.04.2008 BETWEEN THE JOINT VENTURE AND RITHWIK PROJECTS LTD., IT IS VERY EVIDENT THAT THE JOINT VENTURE HAD SUB-CONTRACTED O UT THE PROJECT WORK TO RITHWIK PROJECTS LTD. IT IS ALSO PE RTINENT TO MENTION THAT THDC IS NOT PARTY TO THIS SUB-CONTR ACT AGREEMENT. 7. ON A QUERY FROM THE BENCH, THE LD DR FILED A LET TER DATED 11.12.2014 IN F. NO.DCIT/CIRCLE-2(1)ITAT/2014-15 TH E DY. ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 5 OF 6 COMMISSIONER OF INCOME TAX (TDS) TDS CIRCLE 2(1) HY DERABAD WHEREIN IT WAS CONFIRMED BY HIM THAT THERE IS NO EV IDENCE TO SUBSTANTIATE THAT THE ASSESSEE JOINT VENTURE HAS SU B CONTRACT WORK IT RECEIVED FROM THE THDC ON CONTRACT. 8. FURTHER THE LD CIT (A) RECORDED THAT THE ASSESSE E DID NOT MAKE ANY PAYMENT EITHER IN CASH OR IN CHEQUE, TO PC L PROJECTS LTD, THEREFORE, THE QUESTION OF DEDUCTION OF TDS DO ES NOT ARISE. IT WAS THDC WHICH MADE PAYMENTS DIRECTLY TO RITHWIK PR OJECTS LTD. THERE IS ALSO A FINDING THAT M/S. THDC DEDUCTE D THE TAX ON THE JOINT VENTURE AND THAT THE JOINT VENTURE ADMITT ED THE GROSS RECEIPTS AND TOOK CREDIT OF TDS AND CLAIMED REFUND ALSO. THESE FACTS ARE NOT DISPUTED BY THE REVENUE IN THE GROUND S OF APPEAL. 9. ON THIS FACTUAL MATRIX, WHEN THE ASSESSEE HAS AD MITTEDLY NOT PAID ANY AMOUNT TO M/S RITHWIK PROJECTS LTD AND WHEN THE ASSESSEE HAS ACCOUNTED FOR ONLY THE COMMISSION, THE QUESTION OF THE ASSESSEE DEDUCTING THE TAX AT SOURCE DOES NOT A RISE. UNDER THE CIRCUMSTANCES, WE FIND NO MERIT IN THE APPEAL O F THE REVENUE. THUS, WE DISMISS APPEAL IN ITA NO.408/H/20 14 WHEREIN THE COMMISSIONER HAD CANCELLED THE ORDER PA SSED U/S 201(1). 10. COMING TO ITA NO.409/H/2014, IN VIEW OF OUR DEC ISION IN ITA NO.408/H/2014, NO INTEREST U/S 201(1A) CAN BE L EVIED AS THIS IS A CONSEQUENTIAL LEVY AND HENCE WE DISMISS T HIS APPEAL OF REVENUE ALSO. ITA NOS.408 TO 410 OF 2014PCL INTERTECH LENHYDRO CO NSORTIUM JV, HYDERABAD. PAGE 6 OF 6 11. SIMILARLY IN ITA NO.410/H/2014, PENALTY U/S 221 WAS LEVIED FOR NONPAYMENT OF TDS DEMAND RAISED U/S 201( 1). IN VIEW OF THE FACTS, WE HAVE UPHELD THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL OF THE REVENUE ON THE ISSUE OF ORDERS PASSED U/S 201(1) AND ORDERS PASSED U/S 201( 1A), WE HAVE TO NECESSARILY DISMISSED THE REVENUE APPEAL AS THE PENALTY IS BASED ON THOSE PARTICULAR YEAR. HENCE ALL THE AP PEALS OF THE REVENUE ARE DISMISSED. 12. IN THE RESULT, APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2014. SD/ - SD/ - (SAKTIJIT DEY) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH DECEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER