THE ITO, WARD - 4, RAJAHMUNDRY, Rajahmundry V. M/s Associated Constructions, Rajahmundry

ITA 413/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2099 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: I SARISH KUMAR
• Keywords: Additional evidence
• Section: 142(1); 194C

Judgement Text

ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.413/VIZAG/2012 ( / ASSESSMENT YEAR : 2007-08) ITO, WARD-4, RAJAHMUNDRY VS. M/S. ASSOCIATED CONSTRUCTIONS RAJAHMUNDRY [ PAN: AAGFA 2543L] ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : SHRI I. SARISH KUMAR, DR #$ / RESPONDENT BY : SHRI G.V.N. HARI, AR ( / DATE OF HEARING : 22.01.2016 ( / DATE OF PRONOUNCEMENT : 05.02.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE REVENUE, IS DIRECTED AGAI NST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 30.8.2012 AND IT PERTAI NS TO THE ASSESSMENT YEAR 2007-08. ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 2 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF CIVIL CONT RACTS HAS FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 2.11.2007 DECLARING NIL TOTAL INCOME, AFTER CLAIMING SET OFF OF BROUGHT FORWARD LOSSES OF RS.55,93,178/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CAL LED AS THE ACT) ON 26.11.2008. SUBSEQUENTLY, THE CASE WAS SELECTED FO R SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICE U/S 143(2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED B OOKS OF ACCOUNTS, BILLS & INVOICES, ETC. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS MAD E SUB-CONTRACT PAYMENTS WITHOUT DEDUCTING TAX AT SOURCE U/S 194C O F THE ACT. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAS DEDUCTED TDS ON CERTAIN PAYMENTS, BUT NOT REMITTED THE AMOUNT WITHIN THE DU E DATE SPECIFIED UNDER THE ACT TO THE GOVERNMENT ACCOUNT. SINCE, TH E ASSESSEE HAS FAILED TO DEDUCT AND REMIT THE TDS AS PER PROVISION S OF SECTION 200 OF THE ACT, THE A.O. DISALLOWED THE AMOUNT U/S 40(A)(I A) OF THE ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. SI MILARLY, THE A.O. NOTICED THAT THE ASSESSEE HAS PAID INTEREST ON UNSE CURED LOAN WITHOUT DEDUCTION OF TAX AT SOURCE U/S 194A OF THE ACT. SI NCE, THE ASSESSEE HAS ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 3 NOT DEDUCTED TAX AT SOURCE, THE A.O. HAS DISALLOWED THE AMOUNT U/S 40(A)(IA) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE SUBMITTED THAT ALL THE AMOUNTS CLAIMED UNDER THE SUB CONTRACT EXPENSES HAVE BEEN PAID DURING THE SAME FINANCIAL YEAR AND NOTHING IS OUTSTANDING AS ON THE BALANCE SHEET DATE. THEREFORE, IN VIEW OF THE SPEC IAL BENCH DECISION OF THE ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT (2012) 136 ITD 23, NO DISALLOWA NCE CAN BE MADE U/S 40(A)(IA) OF THE ACT FOR THE AMOUNTS WHICH HAVE ALREADY BEEN PAID DURING THE FINANCIAL YEAR. SIMILARLY, WITH REGARD TO INTEREST PAYMENTS, THE ASSESSEE SUBMITTED THAT INTEREST IS PAID TO FIV E PERSONS, OUT OF WHICH IN THE CASE OF TWO PERSONS THE TDS HAS BEEN DEDUCTE D AND PAID INTO GOVERNMENT ACCOUNT ON 3-4-2007. IT IS FURTHER SUBMI TTED THAT THE INTEREST IS CREDITED IN THE LAST MONTH OF THE PREVI OUS YEAR, THE ASSESSEE HAVE TIME TO MAKE THE PAYMENT UP TO THE DATE OF FIL ING OF RETURN U/S 139(1). AS THE ASSESSEE HAS COMPLIED WITH THE TDS P ROVISIONS, NO DISALLOWANCE CAN BE MADE UNDER SEC. 40(A)(IA) OF TH E ACT. WITH REGARD TO REMAINING THREE PERSONS NO TAX HAS BEEN DEDUCTED FROM THESE PERSONS, AS ALL THE PARTIES WERE NOT ASSESSED TO IN COME TAX AND THEY ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 4 HAVE FILED DECLARATIONS IN FORM NO.15G & 15H. THER EFORE NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. 4. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FU RNISHED BY THE ASSESSEE HELD THAT THE ISSUE OF PAID AND PAYABLE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, BY THE SPECIAL BENCH DECISI ON OF ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA). HOWEVER, THE DETAILS OF PAYMENTS ARE FURNI SHED FOR THE FIRST TIME BEFORE THE CIT(A), THE A.O. IS DIRECTED TO VER IFY, WHETHER THE SAID AMOUNTS ARE PAID BEFORE 31 ST MARCH OR NOT. IN CASE, THE AMOUNTS ARE PAID, THEN THE SAME HAVE TO BE ALLOWED AND NO DISAL LOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. SIMILARLY, THE CIT(A ) HELD THAT WITH REGARD TO INTEREST PAYMENTS TO TWO PERSONS, THE AS SESSEE HAS CREDITED THE INTEREST ON 31-03-2007 AND TDS IS DEDUCTED AND REMITTED INTO GOVT. ACCOUNT ON 3-4-2007, WHICH IS WITHIN THE DUE DATES PRESCRIBED UNDER THE TDS PROVISIONS. AS FOR AS THE REMAINING THREE P ERSONS, THE DETAILS HAVE BEEN FILED FIRST TIME BEFORE THE APPELLATE AUT HORITY. AS THIS ASPECT WAS NOT VERIFIED BY THE A.O., THE MATTER IS REMITTE D BACK TO THE FILE OF A.O. FOR THE LIMITED PURPOSE OF EXAMINATION OF EVID ENCES. WITH THESE OBSERVATIONS, THE CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 5 5. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS THAT REMAINED PAYABLE AT THE END OF THE FIN ANCIAL YEAR. THE LD. D.R. FURTHER SUBMITTED THAT THE CIT(A) OUGHT NOT TO HAVE REMANDED THE ISSUE OF DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE IN VIEW OF THE FACT THAT THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT SHALL APPLY TO ALL PAYMENTS COVERED U/S 194C OF THE ACT, WHETHER OR NOT THEY HAVE ALREADY BEEN PAID OR REMAI NED PAYABLE AT THE END OF THE RELEVANT FINANCIAL YEAR. THE LD. D.R. F URTHER SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE SPECIAL BENCH D ECISION OF ITAT, VISAKHAPATNAM, IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA), AS THE DEPARTMENT HAS FILED APPEAL BEFORE THE HONBLE A.P. HIGH COURT AND THE HONBLE A.P. HIGH COURT HAS SUSPENDED THE OPERATION OF SPECIAL BENCH DECISION, THEREFORE DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS APPLICABLE EVEN IF THE AMOUNTS HAVE BEEN ALREADY PA ID DURING THE SAME FINANCIAL YEAR. AS FAR AS THE DISALLOWANCE OF INTE REST ON LOANS IS CONCERNED, THE LD. D.R. SUBMITTED THAT THE CIT(A) O UGHT TO HAVE GIVEN AN OPPORTUNITY TO THE A.O. AT THE TIME OF ADMISSION OF ADDITIONAL EVIDENCE IN RESPECT OF TDS MADE ON INTEREST PAYMENT S AND ALSO IN RESPECT OF FORM NO.15G & 15H FILED BY THE ASSESSEE BEFORE THE CIT(A) UNDER RULE 46A OF THE INCOME TAX RULES, 1962. THE LD. D.R. FURTHER ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 6 SUBMITTED THAT SINCE, THE ISSUE HAS NOT REACHED THE FINALITY BEFORE THE HONBLE HIGH COURT, THE A.O. WAS RIGHT IN DISALLOWI NG THE SUB CONTRACT PAYMENTS AS WELL AS INTEREST PAYMENTS U/S 40(A)(IA) OF THE ACT AND HIS ORDER SHOULD BE UPHELD. 6. ON THE OTHER HAND, THE LD. A.R. STRONGLY SUPPORT ED THE ORDER OF THE CIT(A). THE A.R. FURTHER SUBMITTED THAT THE IS SUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE SPECIAL BENCH DEC ISION OF ITAT, VISAKHAPATNAM IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT(SUPRA) AND ALSO BY THE DECISION OF ITAT, VISAK HAPATNAM IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTORS VS. ACIT IN ITA NO.657/VIZAG/2014. THEREFORE, THE ORDER OF THE CIT (A) SHOULD BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. DISALLOWED SUB CONTRACT PAYMENTS AND INTEREST PAYMENT U/S 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT AND REMI T TDS UNDER RESPECTIVE PROVISIONS OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF TDS, THEREFORE, DISALLOWANCE U/S 40(A)(IA) OF THE ACT IS APPLICABLE. THE CIT(A) REM ITTED THE ISSUE BACK TO THE FILE OF THE A.O. AND OBSERVED THAT THE ISSUE IS COVERED BY SPECIAL ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 7 BENCH DECISION OF ITAT, VISAKHAPATNAM IN THE CASE O F M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA). WE HAVE EXAMINED THE CASE LAW RELIED UPON BY THE A.R. IN THE LIGHT OF THE FACTS OF THE P RESENT CASE. THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF M/S. MERLYN SHIP PING & TRANSPORTS VS. ACIT (SUPRA), HAS HELD THAT NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT CAN BE MADE IN CASE, IF THE AMOUNTS HAVE ALREADY BE EN PAID DURING THE SAME FINANCIAL YEAR. WE HAVE ALSO CONSIDERED THE A RGUMENTS OF THE LD. D.R. IN THE LIGHT OF THE FACT THAT THE HON BLE AND HRA PRADESH HIGH COURT HAS SUSPENDED THE OPERATION OF SPECIAL BENCH DECISI ON OF MERLYN SHIPPING & TRANSPORTS VS. ACIT AND FIND THAT THE CO ORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF MUKUNDARA ENGINEERS & CONTRACTORS VS. ACIT (SUPRA), HAS CONSIDERED THE ISSUE AND AFTER CO NSIDERING THE REVENUE OBJECTION WITH REGARD TO THE SPECIAL BENCH DECISION OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) AND ALSO CONS IDERING THE RATIO OF HONBLE A.P. HIGH COURT DECISION IN THE CASE OF JAN APRIYA ENGINEERING SYNDICATE, DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERIN G SYNDICATE, WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 40A(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY P AID BEFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 8 AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 8. IN VIEW OF THE ABOVE AND ALSO CONSIDERING THE RA TIO OF THE COORDINATE BENCH DECISION MENTIONED (SUPRA), WE ARE OF THE OPINION THAT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE AC T FOR THE AMOUNTS WHICH HAVE BEEN ALREADY PAID DURING THE FINANCIAL Y EAR. THE CIT(A) HAS RIGHTLY CONSIDERED THE ISSUE AND REMITTED THE ISSUE BACK TO THE FILE OF THE A.O. WITH THE OBSERVATION THAT THE ISSUE IS COVERED BY SPECIAL BENCH DECISION IN M/S. MERILYN SHIPPING & TRANSPORTS (SUP RA). THERE IS NO ERROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A ). HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF CIT(A) AND REJECT T HE GROUND RAISED BY THE REVENUE. 9. SIMILARLY, THE A.O. DISALLOWED INTEREST PAYMENTS FOR NON DEDUCTION OF TDS UNDER THE PROVISIONS OF SECTION 194A OF THE ACT. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE OUGHT TO HAVE DEDUCTE D TDS, BUT FAILED TO DEDUCT AND REMIT TDS, THEREFORE DISALLOWANCE UNDER SEC. 40(A)(IA) IS APPLICABLE. THE ASSESSEE CONTENDED THAT IT HAS PAID INTEREST TO FIVE PERSONS, OUT OF WHICH IN THE CASE OF TWO PERSONS TH E TDS HAS BEEN DEDUCTED AND PAID INTO GOVERNMENT ACCOUNT ON 3-4-20 07. THE REMAINING 3 PERSONS HAVE FURNISHED DECLARATIONS IN FORM NO. 15G AND 15H, THEREFORE NO TDS HAS BEEN DEDUCTED. THE CIT(A) , AFTER CONSIDERING ITA NO.413/VIZAG/2012 M/S. ASSOCIATED CONSTRUCTIONS, RAJAHMUNDRY 9 THE DETAILS, REMITTED THE ISSUE BACK TO THE FILE OF A.O. FOR VERIFICATION OF EVIDENCES. THE FACTS REMAIN SAME EVEN BEFORE US. TH E REVENUE COULD NOT BROUGHT ON RECORD ANY EVIDENCE TO SHOW THAT THE FINDINGS OF CIT(A) WAS IN CORRECT. THEREFORE, WE ARE OF THE OPINION TH AT THE CIT(A) HAS RIGHTLY SET ASIDE THE ISSUE AND WE DO NOT SEE ANY R EASONS TO INTERFERE WITH HIS ORDER. HENCE, WE INCLINED TO UPHELD THE OR DER OF CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH FEB16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER , /VISAKHAPATNAM: 0 / DATED : 5.2.2016 VG/SPS # 2, 3,/ COPY OF THE ORDER FORWARDED TO :- 1. / THE APPELLANT THE ITO WARD-4, RAJAHMUNDRY 2. #$ / THE RESPONDENT M/S. ASSOCIATED CONSTRUCTIONS, D.NO.82-4-9/3, VIDYU T NAGAR, RAJAHMUNDRY 3. 5 / THE CIT, VISAKHAPATNAM 4. 5 () / THE CIT (A), VISAKHAPATNAM 5. , # :, ( : , , / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER