ACIT, Circle - 50, Kolkata, Kolkata V. Govinda Chandra Pal, Kolkata

ITA 433/KOL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91947 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 27-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 14-03-2011
• Result in Favour of: Set Aside
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: S DASGUPTA
• Keywords: Unexplained investment; Depreciation; Business expenditure; Retrospective amendment; Corroborative evidences
• Section: 69; 139; 194C; 201(1)

Judgement Text

I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 1 OF 17 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.K. BANSAL , ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH , JUDICIAL MEMBER I.T.A. NO. 433 / KOL / 20 1 1 ASSESSMENT YEAR : 200 7 - 20 0 8 ASSISTANT COMMISSIONER OF INCOME TAX, ............. . . APPELLANT CIRCLE - 50 , KOLKATA, UTTARAPAN SHOPPING COMPLEX, MANICKTOLA CIVIC CENTRE, ULTADANGA, KOLKATA - 700 054 - VS. - GOVINDA CHANDRA PAL,...................................... ...... ..... . RESPONDENT 485, MUNICIPAL OFFICE LANE, KOLKATA - 700 074 [PAN : A GBPP 6114 D ] APPEARANCES BY: SHRI KALYAN NATH , JCIT, SR. D.R., FOR THE DEPARTMENT SHRI S . DASGUPTA , C.A. , FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : MAY 1 8 , 2 01 5 DATE OF PRONOUNCING THE ORDER : MAY 21 , 201 5 O R D E R PER P.K. BANSAL : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) - XXX I I, KOLKATA D ATED 2 0 . 09 .20 1 0 FOR THE ASSESSMENT YEAR 2007 - 08 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - ( 1 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.3,29,05,000/ - ON ACCOUNT OF LABOUR PAYMENT FOR NON - DEDUCTION OF TAX UNDER SECTION 40(A)(IA) OF I.T. ACT, 1961. ( 2 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.30,98,000/ - FOR PAYMENT TO VARIOUS PARTIES UNDER SECTION 194C READ WITH SECTION 40(A)(IA) OF THE I.T. ACT, 1961. ( 3 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.1,08,55,000/ - TO VARIOUS PARTIES ON ACCOUNT OF TRANSPORT CHARGES WITHOUT DEDUC TING TAX AT I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 2 OF 17 SOURCE UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. ( 4 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.20,39,240/ - ON ACCOUNT OF CAPITAL GAIN. ( 5 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.15,56,051/ - ON ACCOUNT OF PETROL AND DIESEL EXPENSES. ( 6 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELETING THE ADDITION OF RS.1,04,800/ - BEING INVESTMENT IN KOTAK MAHINDRA . ( 7 ) LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW IN DELET ING THE ADDITION OF RS.3,088/ - ON ACCOUNT OF MOTOR CAR DEPRECIATION. 2. GROUND NO. 1 RELATES TO THE DELETION OF THE ADDITION OF RS.3,29,05,000/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961. 3. BRIEF F ACTS RELATING TO THIS GROUND ARE THAT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD TRANSFERRED A SUM OF RS.3, 2 9,05,000/ - TO THE ACCOUNT OF SHRI DILIP KUMAR PAUL TO WHOM THE ASSESSING OFFICER TREATED TO BE A SUB - CONTRACTOR AND, THEREFORE, TOOK THE VIEW THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON SUCH AMOUNT AS PER THE PROVISIONS OF SECTION 194C(2) OF THE ACT. SINCE NO TAX WAS DEDUCTED AT SOURCE, THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SAID AMOUNT UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT . 4. WHEN THE MATTER WHEN IN APPEAL BEFORE THE LD. CIT(APPEALS), THE LD. CIT(APPEALS) FOUND FROM THE RECORD AND EVIDENCES FILED BY THE ASSESESE THAT SHRI DILIP KR. PAUL IS AN EMPLOYEE OF THE ASSESSEE. HE HAS DULY BEEN ASSESSED TO INCOME - TAX. THE ASSESSEE HAS ISSUED FORM NO. 16 TO SHRI DILIP KUMAR PAUL. THE ASSESSEE HAD TRANSFERRED MONEY TO SHRI DILIP KR. PAUL AS HE HAS BEEN EMPLOYED BY THE ASSESSEE TO SUPERVISE THE WORK AND MAINTENANCE OF THE SITE OFFICE. THE FUNDS WERE BEING TRANSFERRED BY THE ASSESSEE, OUT OF WHIC H THE WITHDRAWALS ARE MADE FOR LABOUR AND OTHER I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 3 OF 17 PAYMENTS AT SITE. AFTER CALLING FOR THE REMAND REPORT OF THE ASSESSING O FFICER, LD. CIT(APPEALS) ULTIMATELY DELETED THE DISALLOWANCE BY OBSERVING AS UNDER: - 2.7 . NOW COMING TO THE MERITS OF THE CLAIM OF THE ASSESSEE, AS ALREADY STATED ABOVE, THE A.O. HAS NOT OFFERED ANY COMMENTS REGARDING THE CONTENTS OF THE AFFIDAVIT OF SH. DILIP KR. PAUL. THE DEPOSITION OF SH. DILIP KR. PAUL THAT HE WAS AN EMPLOYEE OF THE ASSESSEE IS FOUND TO BE CORRECT FROM THE SUPPORTING EVIDENCES ON A.O.'S RECORD. THE A.O. HAS NOTED IN THE ASSESSMENT ORDER, AS ALSO IN HIS REMAND REPORT, THAT THE SALARY ACCOUNT ALONG WITH SALARY LEDGER WAS PRODUCED BEFORE HIM. FROM THE SALARY ACCOUNT IT IS OBSERVED THAT THE ASSESSEE HAD PAID SALARY TO SH. DILIP KR. PAUL DURING THE YEAR UNDER CONSIDERATION. THIS FACT COMBINED WITH THE AFFIDAVIT OF SH. DILIP KR. PAUL UNDISPUTEDLY ESTABLISHED THAT SH. PAUL WAS AN EMPLOYEE OF THE ASSESSEE. 2.8 . FROM THE ASSESSMENT ORDER IT IS NOT CLEAR AS TO HOW AND WHY THE A.O. ARRIVED AT A CONCLUSION THAT SH. DILIP KR. PAUL WAS A SUB - CONTRACTOR OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHEN THE A.O. RAISED QUESTION REGARDING THE PAYMENTS MADE TO SH. DILIP KR. PAUL, THE ASSESSEE HAD EXPLAINED TO HIM THAT SH. DILIP KR. PAUL WAS ENGAGED TO SUPERVISE THE ENTIRE WORK AND THE SITE OFFICE MAINTENANCE OF THE ASSESSEE AND THAT WHATEVER DEBITS THEREIN THE BANK ACCOUNT OF THE ASSESSEE THE SAME REPRESENTED CASH WITHDRAWALS FOR LABOUR AND OTHER PAYMENTS AT SITES, THE REFORE, THERE WAS NO QUESTION OF DEDUCTION OF TAX ON SUCH AMOUNT. IT IS ALSO OBSERVED THAT IN THE FIRST PARA OF PAGE - 7 OF THE ASSESSMENT ORDER THE A.O. HIMSELF HAS NOTED 'RATHER FROM CIRCUMSTANTIAL EVIDENCE IT IS PROVED BEYOND DOUBT THAT HE (SH. DILIP KR. PAUL) IS THE PERSON THROUGH WHOM A SUBSTANTIAL AMOUNT OF LABOUR PAYMENTS WERE MADE BY THE ASSESSEE'. (EMPHASIS SUPPLIED). 2.9 . THIS OBSERVATION OF THE A.O. THAT FROM THE CIRCUMSTANTIAL EVIDENCE IT IS PROVED BEYOND DOUBT THAT SH. DILIP KR. PAUL WAS THE PERSON THROUGH WHOM LABOUR PAYMENTS WERE MADE BY THE ASSESSEE, ESTABLISHES THAT SH. DILIP KUMAR PAUL WAS ONLY MAKING PAYMENTS TO LABOURERS ON BEHALF OF T HE ASSESSEE AND WAS NOT A LABOUR SUB - CONTRACTOR. IF SHRI DILIP KR. PAUL WAS A SUB - CONTRACTOR THEN HE WO ULD HAVE RECEIVED THE PAYMENT FOR HIMSELF AND ASSESSEE WOULD NOT HAVE MADE PAYMENTS TO LABOUR THROUGH HIM. THE FACTS AS DISCUSSED ABOVE DO NOT SUPPORT THE A.O.'S VIEW THAT SH. DILIP KR. PAUL WAS A SUB - CONTRACTOR, RATHER THEY PROVE THAT SH. DILIP KR. PAUL W AS ONLY AN EMPLOYEE OF THE ASSESSEE. SINCE SH. DILIP KR. PAUL WAS NOT A SUB - CONTRACTOR AND WAS ONLY AN EMPLOYEE OF THE ASSESSEE, THERE WAS NO LIABILITY ON THE ASSESSEE TO DEDUCT TAX AT SOURCE U/S.194C OF THE ACT FROM THE FUNDS TRANSFERRED TO SH. DILIP KR. PAUL. I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 4 OF 17 2.10 . ALSO, FOR THE PROVISION OF SECTION 194C TO BE APPLICABLE THE PAYMENTS SHOULD BE IN PURSUANCE OF A CONTRACT BETWEEN THE PAYER AND THE PAYEE. EXISTENCE OF CONTRACT HAS BEEN HELD TO BE OF ESSENCE FOR APPLICATION OF THE PROVISION OF SECTION 194C BY HON'BLE PUNJAB AND HARYANA HIGH COURT IN CIT - VS - UNITED RICE LAND LTD. (2008) 174 TAXMAN 286, BY KOLKATA ITAT, 'A' BENCH IN M / S. SAMANWAYA - VS - ACIT VIDE THEIR ORDER DATED 23/04/2009 IN ITA NO.4841K01L2008 AND IN RAKSHIT TRANSPORT - VS - ACIT VIDE ORDER DATED 11 / 09/2009 IN ITA NO.261 /KOL/ 2009 AND BY C U TTACK BENCH OF ITAT IN R . R . CARRYING CORPORATION - VS - ACIT IN ITA NO.179/C TK /09. IN ALL THOSE CASES IT HAS BEEN HELD THAT WHERE THERE WAS NEITHER ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE P AYEE NOR IT WAS PROVED THAT THE PAYMENT WAS MADE IN PURSUANCE OF A CONTRACT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S.194C FROM THE PAYMENTS MADE. 2.11 . IN THE INSTANT CASE, THERE IS NO F IN DING BY THE A.O. THAT THE IMPUGNED PAYMENT WAS MADE BY THE ASSESSEE TO SH. DILIP KR. PAUL IN PURSUANCE TO ANY CONTRACT BETWEEN HIM AND SH. DILIP KR. PAUL. THE FACTS OF THE CASE, AS DISCUSSED IN PRECEDING PARAS, ALSO DO NOT INDICATE EXISTENCE OF ANY CONTRACT BETWEEN THE ASSESSEE AND SH. DILIP KR. PAUL LAYING SH. DI LIP KR. PAUL TO BE A SUB - CONTRACTOR OF THE ASSESSEE. 2.12 . IN THE LIGHT OF THE ABOVE DISCUSSION THE DISALLOWANCE OF A SUM OF RS.3,29,05, 000/ - MADE BY THE A.O. IS FOUND TO BE MISCONCEIVED AND UNJUSTIFIED SINCE SH. DILIP KR. PAUL IS FOUND TO BE NOT A SUB - CONTRACTOR RATHER AN EMPLOYEE OF THE ASSESSEE. THEREFORE, THE SAID ADDITION IS DELETED AND GROUND NO.2 OF THE APPEAL IS ALLOWED . 5. BEFORE US, EVEN THOUGH THE LD. D.R. VEHEMENTLY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT THE ASSESSEE HAS NOT SUBMITTED ANY BOOKS OF ACCOUNTS, VOUCHERS AND BILLS BEFORE THE ASSESSING OFFICER. ALL WERE FILED BEFORE THE LD. CIT(APPEALS), BUT COULD NOT CONVINCE US AS WE NOTED THAT THERE IS A CLEAR - CUT FINDING GIVEN BY THE LD. CIT(APPEALS) THAT THE ASSESSEE H AS DULY PRODUCED THE BOOKS OF ACCOUNT AS WELL AS THE BILLS, ETC. BEFORE THE ASSESSING OFFICER AND EVEN THE EVIDENCES WERE FILED TO PROVE THAT SHRI DILIP KUMAR PAUL WAS THE EMPLOYEE OF THE ASSESSEE T O WHOM THE ASSESSEE HAD TRANSFERRED FUND S AND HE WAS NOT A SUB - CONTRACTOR. WE ALSO NOTED THAT THE LD. CIT(APPEALS) DULY CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER AND IN THE REMAND REPORT THE ASSESSING OFFICER DID NOT DENY THAT SHRI DILIP KUMAR PAUL WAS THE EMPLOYEE OF THE ASSESSEE , BUT ONLY OBJ ECTED THE ADMISSION OF THE FRESH EVIDENCES ON THE BASIS THAT THE ASSESSEE HAS NOT SUBMITTED THE COMPLETE I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 5 OF 17 SET OF BOOKS. LD. CIT(APPEALS) NOTED THAT EVEN HE HAS SENT BEFORE THE ASSESSING OFFICER THE AFFIDAVIT SUBMITTED BY SHRI DILIP KUMAR PAUL ALONG WITH THE EVIDENCES TO PROVE THAT SHRI DILIP KUMAR PAUL WAS THE EMPLOYEE OF THE ASSESSEE , BUT THE ASSESSING OFFICER DID NOT CONTRADICT THE SAME. BEFORE US ALSO, THE LD. D.R. SIMPLY RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT NO COGENT EVIDENCES OR MATERIAL WER E BROUGHT TO OUR KNOWLEDGE WHICH MAY COMPEL US TO TAKE A DIFFERENT VIEW FROM THE LD. CIT(APPEALS) . SINCE THE ASSESSEE HAS MADE THE PAYMENT TO THE LABOURERS THROUGH THE EMPLOYEE SHRI DILIP KUMAR PAUL, THEREFORE, WE DO AGREE WITH THE LD. CIT(APPEALS) THAT IT IS NOT A CASE WHERE THE PROVISIONS OF SECTION 194C CAN BE APPLIED. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT(APPEALS) DELETING THE ADDITION OF RS.3,29,05,000/ - . 6. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITION OF RS.30,98,000/ - MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT. 7. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS MADE PAYMENT FOR VEHICLE CHARGES AS WELL AS WATER CHARGES AND, THEREFORE, TOOK THE VIEW THAT THE EXPENSES ARE DULY COVERED BY THE PROVISIONS OF SECT ION 194C(2) AND, THEREFORE, IN THE ABSENCE OF DEDUCTION OF TAX BY THE ASSESSEE INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND DISALLOWED A SUM OF RS.30,98,000/ - . 8. WHEN THE MATTER WENT IN APPEAL BEFORE THE LD. CIT(APPEALS), LD. CIT(APPEALS) DELETED THE ADDITION BY TAKING THE VIEW THAT THE PROVISIONS OF SECTION 194C(2) WILL BE APPLICABLE ONLY WHEN A PAYMENT IS MADE BY A CONTRACTOR TO A SUB - CONTRACTOR IN PURSUANCE OF A CONTRACT. SINCE THERE WAS NEITHER ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE CONTRACTOR A ND THE SUB - CONTRACTOR NOR IT WAS PROVED THAT THE PAYMENT WAS MADE IN PURSUANCE OF A CONTRACT, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194C FROM THE PAYMENTS MADE. I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 6 OF 17 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALO NG WITH THE ORDER OF TAX AUTHORITIES BELOW. IN OUR OPINION, THE SAID ISSUE IS CLEARLY COVERED BY THE DECISION OF THIS TRIBUNAL IN ITA NO. 296/K OL /2012 IN THE CASE OF FIVE STAR SHIPPING AGENCY PVT. LIMITED OF EVEN DATE , IN WHICH THE TRIBUNAL HAS TAKEN A VIE W THAT CONTRACT NEED NOT BE IN WRITING. IT MAY INFER FROM THE CONDUCT OF THE PARTIES. IT MAY BE ORAL ALSO. RELEVANT PORTION OF THE ORDER IS REPRODUCED AS UNDER: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDE R OF THE TAX AUTHORITIES BELOW. THE PROVISIONS OF SECTION 40(A)(IA) ARE VERY CLEAR IF THE ASSESSEE FAILS TO DEDUCT THE TAX AT SOURCE OR AFTER DEDUCTION HAS NOT PAID BEFORE THE DUE DATE SPECIFIED IN SUB - SECTION (1) OF SECTION 139, THE SAME WILL NOT BE ALLOW ED IN COMPUTING THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION . THE CONTENTION OF THE ASSESSEE, HOWEVER, IS THAT THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE ON THE FACTS AS THERE IS NO AGREEMENT OR CONTRACT BETWEEN THE ASSESSE E AND THE PERSONS FROM WHOM THE TRUCKS HAVE BEEN HIRED. THE PROVISION OF SECTION 194C LAYS DOWN AS UNDER: - 194C - PAYMENTS TO CONTRACTORS. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACT OR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMEN T THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO (I)ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; (II)TWO PER C ENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, OF SUCH SUM AS INCOME - TAX ON INCOME COMPRISED THEREIN. (2) WHERE ANY SUM REFERRED TO IN SUB - SECTION (1) IS CREDITED TO ANY ACCOU NT, WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH INCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APP LY ACCORDINGLY. (3) WHERE ANY SUM IS PAID OR CREDITED FOR CARRYING OUT ANY WORK MENTIONED IN SUB - CLAUSE (E) OF CLAUSE (IV) OF THE EXPLANATION, TAX SHALL BE DEDUCTED AT SOURCE (I) ON THE INVOICE VALUE EXCLUDING THE VALUE OF MATERIAL, IF SUCH VALUE IS MEN TIONED SEPARATELY IN THE INVOICE; OR (II) ON THE WHOLE OF THE INVOICE VALUE, IF THE VALUE OF MATERIAL IS NOT MENTIONED SEPARATELY IN THE INVOICE. I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 7 OF 17 (4) NO INDIVIDUAL OR HINDU UNDIVIDED FAMILY SHALL BE LIABLE TO DEDUCT INCOME - TAX ON THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CREDITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUAL OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. (5) NO DEDUCTION SHALL BE MADE FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CR EDITED OR PAID TO THE ACCOUNT OF, OR TO, THE CONTRACTOR, IF SUCH SUM DOES NOT EXCEED 17 [THIRTY] THOUSAND RUPEES : PROVIDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED O R PAID DURING THE FINANCIAL YEAR EXCEEDS 18 [SEVENTY - FIVE] THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB - SECTION (1) SHALL BE LIABLE TO DEDUCT INCOME - TAX UNDER THIS SECTION. (6) NO DEDUC TION SHALL BE MADE FROM ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON FURNISHING OF HIS PERMANENT ACCOUNT NUM BER, TO THE PERSON PAYING OR CREDITING SUCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB - SECTION (6) SHALL FURNISH, TO THE PRESCRIBED INCOME - TAX AUTHORITY OR THE PERSON AUTHORISED BY IT, SUCH PARTICULARS , IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, (I) SPECIFIED PERSON SHALL MEAN, (A) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT; OR (B) ANY LOCAL AUTHORITY; OR (C) ANY CORPORATION ESTABLIS HED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT; OR (D) ANY COMPANY; OR (E) ANY CO - OPERATIVE SOCIETY; OR (F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYING THE NEED FOR HOUSING A CCOMMODATION OR FOR THE PURPOSE OF PLANNING, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FOR BOTH; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE I N ANY PART OF INDIA; OR (H) ANY TRUST; OR (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 195 6); OR (J) ANY GOVERNMENT OF A FOREIGN STATE OR A FOREIGN ENTERPRISE OR ANY ASSOCIATION OR BODY ESTABLISHED OUTSIDE INDIA; OR (K) ANY FIRM; OR I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 8 OF 17 (L) ANY PERSON, BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDI VIDUALS, IF SUCH PERSON, (A) DOES NOT FALL UNDER ANY OF THE PRECEDING SUB - CLAUSES; AND (B) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR; (II) GOODS CARRIAGE SHALL HAVE THE MEANING ASSIGNED TO IT IN THE EXPLANATION TO SUB - SECTION (7) OF SECTION 44AE; (III) CONTRACT SHALL INCLUDE SUB - CONTRACT; (IV) WORK SHALL INCLUDE (A) ADVERTISI NG; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTION OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT AC CORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FRO M A PERSON, OTHER THAN SUCH CUSTOMER. ] 7. A PLAIN READING OF THIS SECTION MAKES IT CLEAR THAT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON IS REQUIRED TO DEDUCT TAX AT SOURCE UNDER SECTION FROM THE AMOUNTS SO PAID OR PAYABLE. THERE IS NO DOUBT THAT THE ASSESSEE IN THIS CASE HAS MAD E THE PAYMENTS AS TRANSPORTATION CHARGES IN THE NATURE OF HIRING CHARGES FOR GOODS CARRIED VEHICLES. THE MAIN CONTENTION OF THE ASSESSEE IS, HOWEVER, THAT THE PAYMENTS HAVE NOT BEEN MADE IN PURSUANCE OF A CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. NOW THE QUESTION ARISES BEFORE US, WHETHER THERE IS CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE PERSONS TO WHOM THE ASSESSEE HAD MADE THE PAYMENTS IN THE NATURE OF HIRING CHARGES FOR GOODS CARRIED VEHICLES. IN OUR OPINION, A CONTRACT NEED NOT BE IN WRITING; EVEN AN ORAL CONTRACT IS GOOD ENOUGH TO INVOKE THE PROVISIONS OF SECTION 194C. AS HON BLE KARNATAKA HIGH COURT HAS OBSERVED IN THE CASE OF SMT J RAMA VS CIT (236 CTR 105), LAW DOES NOT STIPULATE THE EXISTENCE OF A WRITTEN CONTRACT AS A CONDIT ION PRECEDENT FOR ( INVOKING THE PROVISIONS OF SECTION 194 C WITH RESPECT TO) PAYMENT OF TDS . THE TRANSPORTERS HAVE RECEIVED THE PAYMENTS FROM THE ASSESSEE TOWARDS I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 9 OF 17 THE TRANSPORTATION CHARGES, THEREFORE, THE PRESUMPTION NORMALLY BE THAT ONE WOULD PROCEED O N THE BASIS THAT THERE WAS A CONTRACT FOR HIRING OF GOODS CARRIED VEHICLES. THEREFORE, IF THE ASSESSEE HAS MADE THE PAYMENT FOR HIRING THE GOODS CARRIED VEHICLES, THE PROVISIONS OF SECTION 194C ARE CLEARLY APPLICABLE. IN OUR OPINION, THE LD. CIT(APPEALS) W AS NOT CORRECT IN LAW THAT THE ASSESSEE WILL BE LIABLE TO DEDUCT THE TDS IF THE AMOUNT OF A SINGLE CONTRACT EXCEEDS RS.20,000/ - . THE CONTRACT HAS TO BE LOOKED INTO PARTY - WISE NOT ON THE BASIS OF THE INDIVIDUAL GR. IN OUR OPINION, ALL THE PAYMENTS MADE TO A TRUCK OWNER THROUGHOUT THE YEAR ARE TO BE AGGREGATED TO ASCERTAIN THE APPLICABILITY OF THE TDS PROVISION AS ALL THE PAYMENTS PERTAIN TO A CONTRACT. CONTRACT NEED NOT BE IN WRITING. IT MAY INFER FROM THE CONDUCT OF THE PARTIES. IT MAY BE ORAL ALSO. OUR AFO RESAID VIEW IS DULY SUPPORTED BY THE DECISION OF ITAT, A BENCH, KOLKATA IN THE CASE OF DCIT VS. - KAMAL KR. MUKHERJEE & CO. IN ITA NO. 199/KOL/2010. WE ALSO NOTED THAT UNDER SECTION 194C, SUB - SECTION (5) PROVISO THERETO, THE AGGREGATE AMOUNT OF ALL THE P AYMENTS OR CREDITED SHOULD EXCEED ONLY RS.50,000/ - , THEN THE ASSESSEE SHALL BE LIABLE TO DEDUCT INCOME - TAX AT SOURCE. 8. IN VIEW OF OUR ABOVE DISCUSSION, THE ORDER OF THE LD. CIT(APPEALS) HAS TO BE REVERSED. BUT BEFORE US, THE LD. A.R. HAS TAKEN A SUBMIS SION THAT THE 2 ND PROVISO TO SECTION 40(A)(IA) AS INSERTED BY FINANCE ACT, 2012 WOULD APPLY IN THE CASE OF THE ASSESSEE. ACCORDING TO HIM, 2 ND PROVISO IS CURATIVE IN NATURE INTENDED TO SUPPLY AN OBVIOUS OMISSION, TAKE CARE OF AN UNINTENDED CONSEQUENCE AND MAKE THE SECTION WORKABLE. SECTION 40(A)(IA) WITHOUT THE SECOND PROVISO RESULTED IN THE UNINTENDED CONSEQUENCE OF DISALLOWANCE OF LEGITIMATE BUSINESS EXPENDITURE EVEN IN A CASE WHERE THE PAYEE IN RECEIPT OF THE INCOME HAD PAID TAX, AND, THEREFORE, HE TOOK THE PLEA THAT THE SECOND PROVISO ALTHOUGH INSERTED W.E.F. 1 ST APRIL, 2013 BUT BEING CURATIVE IN NATURE H AS RETROSPECTIVE EFFECT AND ACCORDINGLY CONTENDED THAT THE ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER SO THAT THE ASSESSEE CAN PROVIDE ALL T HE DETAILS IN TERMS OF THE SECOND PROVISO TO SECTION 40(A)(IA) . 10. HOWEVER, WE NOTED THAT THE SECOND PROVISO TO SECTION 40(A)(IA ) WAS INSERTED BY THE FINANCE ACT, 2012 W.E.F. 1 ST APRIL, 2012 WILL APPLY IN THE CASE OF THE ASSESSEE. THE SAID VIEW HAS BEEN TAKEN BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL ( SMC BENCH) IN ITA NO. 1905/KOL/2014 FOR THE ASSESSMENT YEAR 2007 - 08, IN WHICH THIS TRIBUNAL VIDE ORDER DATED 04.03.2015 HAS HELD AS UNDER: - 5. I HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. I FIND FROM FIRST ARGUMENT MADE BY LD. COUNSEL FOR THE ASSESSEE THAT THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT INSERTED BY THE FINANCE ACT, 2012 WOULD APPLY IN THE INSTANT CASE. ACCORDING TO HIM, THE SECOND PROVISO IS CURATIVE IN NATURE INTENDED TO SUPPLY AN OBVIOUS OMISSION, TAKE CARE OF AN UNINTENDED CONSEQUENCE AND MAKE THE SECTION WORKABLE. SECTION 40(A)(IA) I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 10 OF 17 WITHOUT THE SECOND PROVISO RESULTED IN THE UNINTENDED CONSEQUENCE OF DISALLOWANCE OF LEGITIMATE B USINESS EXPENDITURE EVEN IN A CASE WHERE THE PAYEE IN RECEIPT OF THE INCOME HAD PAID TAX. ACCORDING TO HIM, IT HAS FOR LONG BEEN THE LEGAL POSITION THAT IF THE PAYEE HAS PAID TAX ON HIS INCOME, NO RECOVERY OF ANY TAX CAN BE MADE FROM THE PERSON WHO HAD FAI LED TO DEDUCT THE INCOME TAX AT SOURCE FROM SUCH AMOUNT. IN GRINDLAYS BANK V CIT , (1992) 193 ITR 457 (CAL) DECIDED ON SEPTEMBER 5, 1989, IT WAS HELD BY THE HON'BLE CALCUTTA HIGH COURT AS FOLLOWS AT PAGES 469 - 470 OF THE REPORTS: A POINT HAS BEEN MADE BY T HE ASSESSEE THAT AS A RESULT OF THIS DEDUCTION THE DEPARTMENT IS REALIZING THE TAX TWICE ON THE SAME INCOME. IT DOES NOT APPEAR THAT THIS POINT WAS AGITATED BEFORE THE TRIBUNAL. WE, HOWEVER, MAKE IT CLEAR THAT IF THE AMOUNT OF TAX HAS ALREADY BEEN REALISED FROM THE EMPLOYEES CONCERNED DIRECTLY, THERE CANNOT BE ANY QUESTION OF FURTHER REALISATION OF TAX AS THE SAME INCOME CANNOT BE TAXED TWICE. IF THE TAX HAS BEEN REALISED ONCE, IT CANNOT BE REALISED ONCE AGAIN, BUT THAT DOES NOT MEAN THAT THE ASSESSEE WILL NOT BE LIABLE FOR PAYMENT OF INTEREST OR ANY OTHER LEGAL CONSEQUENCE FOR THEIR FAILURE TO DEDUCT OR TO PAY TAX IN ACCORDANCE WITH LAW TO THE REVENUE. (EMPHASIS SUPPLIED) THAT SUCH WAS THE LEGAL POSITION WAS ACCEPTED BY THE CENTRAL BOARD OF DIRECT TAXES I N ITS CIRCULAR NO.275/201/95 - IT(B) DATED JANUARY 29, 1997. REFERENCE IN THIS BEHALF MAY ALSO BE MADE TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN HINDUSTAN COCA COLA BEVERAGE P. LTD. V CIT , (2007) 293 ITR 226 (SC) WHERE THE SAME VIEW WAS TAKEN. I FIND T HAT THE AFORESAID SETTLED POSITION IN LAW HAS ALSO BEEN LEGISLATIVELY RECOGNIZED BY INSERTION OF A PROVISO IN SUB - SECTION (1) OF SECTION 201 OF THE ACT BY THE FINANCE ACT, 2012. THUS, THE SETTLED POSITION IN LAW IS THAT IF THE DEDUCTEE/PAYEE HAS PAID THE T AX, NO RECOVERY CAN BE MADE FROM THE PERSON RESPONSIBLE FOR PAYING OF INCOME FROM WHICH HE FAILED TO DEDUCT TAX AT SOURCE. IN A CASE WHERE THE DEDUCTEE/PAYEE HAS PAID THE TAX ON SUCH INCOME, THE PERSON RESPONSIBLE FOR PAYING THE INCOME IS NO LONGER REQUIRE D TO DEDUCT OR DEPOSIT ANY TAX AT SOURCE. IN THE SIMILAR CIRCUMSTANCES, I FIND THAT THE FIRST PROVISO TO SECTION 40(A)(IA) INSERTED BY THE FINANCE ACT, 2010, WHICH HAS BEEN HELD TO BE CURATIVE AND THEREFORE, RETROSPECTIVE IN ITS OPERATION BY THE HON'BLE CA LCUTTA HIGH COURT IN ITAT NO. 302 OF 2011, GA 3200/2011 , CIT V VIRGIN CREATIONS DECIDED ON NOVEMBER 23, 2011 PROVIDES FOR ALLOWANCE OF THE EXPENDITURE IN ANY SUBSEQUENT YEAR IN WHICH TAX HAS BEEN DEDUCTED AND DEPOSITED. THE INTENTION OF THE LEGISLATURE CLE ARLY IS NOT TO DISALLOW LEGITIMATE BUSINESS EXPENDITURE. THE ALLOWANCE OF SUCH EXPENDITURE IS SOUGHT TO BE MADE SUBJECT TO DEDUCTION AND PAYMENT OF TAX AT SOURCE. HOWEVER, IN A CASE WHERE THE DEDUCTEE/PAYEE HAS PAID TAX AND AS SUCH THE PERSON RESPONSIBLE F OR PAYING IS NO LONGER REQUIRED TO DEDUCT OR PAY ANY TAX, LEGITIMATE BUSINESS EXPENDITURE WOULD STAND DISALLOWED SINCE THE SITUATION CONTEMPLATED BY THE FIRST PROVISO VIZ. DEDUCTION AND PAYMENT OF TAX IN A SUBSEQUENT YEAR WOULD NEVER COME ABOUT. SUCH UNINT ENDED CONSEQUENCE HAS BEEN SOUGHT TO BE TAKEN CARE OF BY THE SECOND PROVISO INSERTED IN SECTION 40(A) (IA) BY THE FINANCE ACT, 2012. THERE CAN BE NO DOUBT THAT THE SECOND PROVISO WAS INSERTED TO SUPPLY AN OBVIOUS OMISSION AND MAKE THE SECTION WORKABLE. THE INSERTION OF SECOND PROVISO WAS EXPLAINED BY MEMORANDUM EXPLAINING THE PROVISION IN FINANCE BILL, 2012, REPORTED IN 342 ITR (STATUTES)234 AT 260 & 261, WHICH READS AS UNDER: - E.RATIONALIZATION OF TAX DEDUCTION AT SOURCE (TDS) AND TAX COLLECTION AT SOURCE (TCS) PROVISIONS I. DEEMED DATE OF PAYMENT OF TAX BY THE RESIDENT PAYEE . I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 11 OF 17 UNDER THE EXISTING PROVISIONS OF CHAPTER XVII - B OF THE INCOME - TAX ACT, A PERSON IS REQUIRED TO DEDUCT TAX ON CERTAIN SPECIFIED PAYMENTS AT THE SPECIFIED RATES IF THE PAYMENT EXCEEDS SPECIFIED THRESHOLD. IN CASE OF NON - DEDUCTION OF TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER, HE IS DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) IN RESPECT OF THE AMOUNT OF SUCH NON - DEDUCTION. HOWEVER, SECTION 191 OF THE ACT PROVIDES THAT A PERSON SHALL BE DEEMED TO BE ASSESSEE IN DEFAULT IN RESPECT OF NON/SHORT DEDUCTION OF TAX ONLY IN CASES WHERE THE PAYEE HAS ALSO FAILED TO PAY THE TAX DIRECTLY. THEREFORE, THE DEDUCTOR CANNOT BE TREATED AS ASSESSEE IN DEFAULT IN RESPECT OF NON/SHORT DEDUCTION OF TAX IF THE PAYEE HAS DISCHARGED HIS TAX LIABILITY. THE PAYER IS LIABLE TO PAY INTEREST UNDER SECTION 201(1A) ON THE AMOUNT OF NON/SHORT DEDUCTION OF TAX FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE ON WHICH THE PAYEE HAS DISCHA RGED HIS TAX LIABILITY DIRECTLY. AS THERE IS NO ONE - TO - ONE CORRELATION BETWEEN THE TAX TO BE DEDUCTED BY THE PAYER AND THE TAX PAID BY THE PAYEE, THERE IS LACK OF CLARITY AS TO WHEN IT CAN BE SAID THAT PAYER HAS PAID THE TAXES DIRECTLY. ALSO, THERE IS NO CLARITY ON THE ISSUE OF THE CUT - OFF DATE, I.E., THE DATE ON WHICH IT CAN BE SAID THAT THE PAYEE HAS DISCHARGED HIS TAX LIABILITY. IN ORDER TO PROVIDE CLARITY REGARDING DISCHARGE OF TAX LIABILITY BY THE RESIDENT PAYEE ON PAYMENT OF ANY SUM RECEIVED BY HIM WITHOUT DEDUCTION OF TAX, IT PROPOSED TO AMEND SECTION 201 TO PROVIDE THAT THE PAYER WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX ON THE PAYMENT MADE TO A RESIDENT PAYEE SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEALT IN RESPECT OF SUCH TAX IF SUCH RESIDENT PAYEE - (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139 ; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME ; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND T HE PAYER FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY E PRESCRIBED. THE DATE OF PAYMENT OF TAXES BY THE RESIDENT PAYEE SHALL BE DEEMED TO BE THE DATE ON WHICH RETURN HAS BEEN FURNISHED BY THE PAYER. IT IS ALSO PROPOSED TO PROVIDE THAT WHERE THE PAYER FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX ON THE PAYMENT MADE TO A RESIDENT AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT OF TAXES BY THE SUCH RESIDENT, THE INTEREST UNDER SEC TION 201(1A)(I) SHALL BE PAYABLE FROM THE DATE ON WHICH SUCH TAX WAS DEDUCTIBLE TO THE DATE OF FURNISHING OF RETURN OF INCOME BY SUCH RESIDENT PAYEE. AMENDMENTS ON SIMILAR LINES ARE ALSO PROPOSED TO BE MADE IN THE PROVISIONS OF SECTION 206C RELATING TO TC S FOR CLARIFYING THE DEEMED DATE OF DISCHARGE OF TAX LIABILITY BY THE BUYER OR LICENSEE OR LESSEE. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST JULY, 2012. II. DISALLOWANCE OF BUSINESS EXPENDITURE ON ACCOUNT OF NON - DEDUCTION OF TAX ON PAYMENT TO RESIDENT PA YEE. I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 12 OF 17 A RELATED ISSUE TO THE ABOVE IS THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF CERTAIN BUSINESS EXPENDITURE LIKE INTEREST, COMMISSION, BROKERAGE, PROFESSIONAL FEE, ETC. DUE TO NON - DEDUCTION OF TAX. IT HAS BEEN PROVIDED THAT IN CASE THE TAX IS DEDUCTED I N SUBSEQUENT PREVIOUS YEAR, THE EXPENDITURE SHALL BE ALLOWED IN THAT SUBSEQUENT PREVIOUS YEAR OF DEDUCTION IN ORDER TO RATIONALIZE THE PROVISIONS OF DISALLOWANCE ON ACCOUNT OF NON - DEDUCTION OF TAX FROM THE PAYMENTS MADE TO A RESIDENT PAYEE, IT IS PROPOSED TO AMEND SECTION 40(A)(IA) TO PROVIDE THAT WHERE AN ASSESSEE MAKES PAYMENT OF THE NATURE SPECIFIED IN THE SAID SECTION TO A RESIDENT PAYEE WITHOUT DEDUCTION OF TAX AND IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER SECTION 201(1) ON ACCOUNT OF PAYMENT O F TAXES BY THE PAYEE, THE, FOR THE PURPOSE OF ALLOWING DEDUCTION OF SUCH SUM, IT SHALL BE DEEMED THAT THE ASSESSEE HAD DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE. THESE BENEFICIAL PROVISIONS A RE PROPOSED TO BE APPLICABLE ONLY IN THE CASE OF RESIDENT PAYEE. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2013 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2013 - 14 AND SUBSEQUENT ASSESSMENT YEARS. 1 1 . NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LD. D.R. BY R ESPECTFULLY FOLLOWING THE SAID DECISION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE ASSESSEE SHALL PROVIDE ALL THE DETAILS TO THE ASSESSING OFFICER WITH REGARD TO THE RECIPIENT S OF THE INCOME AND TAXES PAID BY THEM. THE ASSESSING O FFICER SHALL CARRY OUT NECESSARY VERIFICATION IN RESPECT OF THE PAYMENTS AND TAXES OF SUCH INCOME AND ALSO FILING THE RETURN BY THE RECIPIENT. IN CASE, THE ASSESSING OFFICER FINDS THAT THE RE CIPIENT HAS DULY PAID THE TAXES ON THE INCOME, THE ADDITION MADE BY THE ASSESSING OFFICER SHALL STAND DELETED. THUS THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS.1,08,55,000/ - ON ACCOUNT OF TRANSPORT C HARGES MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE I.T. ACT . 13. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED A SUM OF RS.1,08,55,000/ - IN THE PROFIT & LOSS A/C. UNDER THE HEAD TRANSPORT CHARGES . BUT THE ASSESSEE HAS NOT DE DUCT ED ANY TDS AS PER THE PROVISIONS I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 13 OF 17 OF CHAPTER XVII - B AND, THEREFORE, HE ADDED THE SAME IN THE INCOME OF THE ASSESSEE UNDER SECTION 40(A)(IA) OF THE ACT. 14. WHEN THE MATTER WENT IN APPEAL BEFORE THE LD. CIT(APPEALS), LD. CIT(APPEALS) DELETED THE DISALL OWANCE BY OBSERVING AS UNDER: - 5.1. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE HAS ASSAILED THE IMPUGNED DISALLOWANCE BY THE AO CONTENDING THAT THE TAX WAS DEDUCTED AT SOURCE FROM THE PAYMENTS OF TRANSPORT CHARGES AND FORMS NO. 15J IN TERMS OF RULE 29D READ WITH SECOND PROVISO OF SECTION 194C(3)(I) WERE DULY FILED WITH THE OFFICE OF THE JURISDICTIONAL COMMISSIONER OF INCOME TAX. THE COPIES OF FORMS 15J WERE ALSO SUBMITTED DURING THE APPELLATE PROCEEDINGS WHICH BEAR THE STAMP OF THE OFFICE OF THE JURISDI CTIONAL COMMISSIONER OF INCOME TAX EVIDENCING THAT THOSE FORMS WERE TIMELY FILED WITH THE JURISDICTIONAL COMMISSIONER OF INCOME TAX. THE EVIDENCES RELIED UPON BY THE LD. AR ALONG WITH HIS WRITTEN SUBMISSION WERE SENT TO THE AO FOR HIS COMMENTS. IN THIS REG ARD, THE AO REMAINED SILENT IN THE REMAND REPORT AND HAS NOT OFFERED ANY COMMENTS. SINCE THE ASSESSEE HAS ADDUCED EVIDENCE OF HAVING DEDUCTED TAX AT SOURCE FORM THE TRANSPORT CHARGES CLAIMED BY IT IN HIS PROFIT AND LOSS A/C. AND CONSIDERING THE FACT THAT T HE AO HAS NOT MADE ANY COMMENTS TO THAT EFFECT IN HIS REMAND REPORT, THE DISALLOWANCE MADE BY THE AO IS NEITHER JUSTIFIABLE NOR SUSTAINABLE. ACCORDINGLY, THE DISALLOWANCE OF RS.1,08,55,000/ - IS DELETED . 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT IT IS NOT DENIED BY THE LD. D.R. THAT THE ASSESSEE HAS SUBMITTED FORMS 15J IN TERMS OF RULE 29D READ WITH SECOND PROVISO OF SECTION 194C(3)(I). IN VIEW OF THIS FACT, WE DO NOT FIND THAT THIS GROUND WARRANTS OUR INTERFE RENCE IN THE ORDER OF LD. CIT(APPEALS). WE ACCORDINGLY DISMISS THIS GROUND. 16. GROUND NO. 4 RELATES TO THE DELETION OF THE ADDITION OF RS. 20,39,240/ - . FACTS RELATING TO THIS ADDITION ARE THAT THE ASSESSING OFFICER NOTED THAT THERE WAS DECREASE IN THE VAL UE OF ASSETS OF THE BALANCE - SHEET AS ON 31.03.2007 WHEN COMPARED TO THE BALANCE - SHEET AS ON 31.03.2006. BUT THE ASSESSEE HAS NOT SHOWN ANY RECEIPT AGAINST SALE OR LOSS, THEREFORE, HE INVOKED THE PROVISION OF SECTION 69 AND MADE THE I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 14 OF 17 ADDITION UNDER SECTION 6 9 OF THE ACT AS UNEXPLAINED INVESTMENT. WHEN THE MATTER WHEN IN APPEAL BEFORE THE LD. CIT(APPALS), LD. CIT(APPEALS) DELETED THE ADDITION. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME. WE NOTED THAT IT IS A CASE WHERE THE VALUE OF ASSETS GOT DECREASED. IT IS NOT A CASE WHERE THE VALUE OF THE ASSETS INCREASED SO THAT IT CAN BE SAID THAT THE ASSESSEE HAS MADE INVESTMENT. THE PROVISIONS OF SECTION 69 ARE APPLICABLE TO UNEXPLAINED INVESTMENT . THE ASSESSEE HAS MADE INVESTMENTS IN THE FINANCIAL YEAR, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE OF THE INVESTMENT OR THE EXPLANATION OFFERED BY HIM IS NOT IN THE OPINION OF ASSESSING OFFICER SATISFACTORY. THE DECREASE IN THE VALUE OF ASSETS BY NO STRETCH OF IMAGINATION CAN BE RE GA RDED TO BE AN INVESTMENT. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION OF RS.20,39,240/ - . 18. GROUND NO. 5 RELATES TO THE DELETION OF ADDITION OF RS.15,56,0 51/ - . IN FACT, WE NOTED THAT THE ASSESSING OFFICER HAD MADE A DISALLOWANCE OF RS.15,56,051/ - BUT THE LD. CIT(APPEALS) REDUCED IT TO RS.3,89,013/ - . THE ASSESSEE GOT RELIEF OF RS.11,67,038/ - . THE GROUND TAKEN BY THE REVENUE, THEREFORE, SHOULD BE ONLY RS.11,6 7,038/ - . THE ASSESSING OFFICER DISALLOWED 20% OF DIESEL AND PETROL EXPENSES FOR VERIFICATION BUT WHEN THE MATTER WENT IN APPEAL, LD. CIT(APPEALS) REDUCED THE DISALLOWANCE TO RS.3,89,013/ - . 19. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY CONSIDERED TH E SAME ALONG WITH THE ORDER OF TAX AUTHORITIES BELOW. WE NOTED THAT THE ASSESSEE HAS INCURRED TOTAL EXPENDITURE ON ACCOUNT OF DIESEL AND PETROL EXPENSES AT RS.77,88,254/ - . THE ASSESSING OFFICER DISALLOWED 20% OF THE EXPENDITURE BUT THE LD. CIT(APPEALS) FOU ND THAT THE ASSESSEE HAS MAINTAINED ALL THE BILLS AND VOUCHERS WHICH HE FORWARDED TO THE ASSESSING OFFICER FOR HIS COMMENTS. THE ASSESSING OFFICER DID NOT DOUBT I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 15 OF 17 THE GENUINITY OF THE BILLS AND VOUCHERS BUT STATED THAT THE ASSESSEE NEVER MAINTAINED THE LOG B OOK AND, THEREFORE, THE EXPENDITURE SO INCURRED DOES NOT RELATE TO THE BUSINESS OF THE ASSESSEE. LD. CIT(APPEALS) AFTER VERIFYING THE ENTIRE EXPENSES REDUCED THE DISALLOWANCE TO RS.3,89,013/ - AND ALLOWED RELIEF OF RS.11,67,038/ - RESTRICTING THE DISALLOWANC E TO 5% OF THE EXPENDITURE. IT IS NOT DENIED THAT THE SITE OFFICE WHERE THE ASSESSEE IS TO CARRY OUT THE WORK IS TOO FAR AWAY AND IS MAINLY IN SOUTH TRIPURA. THE ASSESSEE HAS TO MAINTAIN VEHICLES AND HAS TO SPEND ON DIESEL AND PETROL. THE EXPENSES SO INCUR RED DO NOT EXCEED 6.5% APPROXIMATELY OF THE RECEIPT. IN OUR OPINION, ONCE THE GENUINITY OF THE EXPENDITURE IS PROVED, THE ONUS IS ON THE REVENUE TO PROVE THAT THE EXPENDITURE HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS ESPECIALLY WHEN THE EXPENDITURE HAS BEEN INCURRED DURING THE COURSE OF CARRYING ON THE BUSINESS. LD. CIT(APPEALS), IN OUR VIEW, WAS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 5% OF THE EXPENDITURE AND IT CANNOT BE DENIED THAT SOME PART OF THE EXPENDITURES MIGHT HAVE NOT BEEN WHOLLY AN D EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. WE ACCORDINGLY CONFIRM THE ORDER OF LD. CIT(APPEALS). THUS THIS GROUND STANDS DISMISSED. 20. GROUND NO. 6 RELATES TO THE DELETION OF ADDITION OF RS.1,04,800/ - . THE ASSESSING OFFICER NOTED THAT THE ASSESS EE HAD PAID A SUM OF RS.1,04,800/ - IN FOUR INSTALMENTS OF RS.35,200/ - TO KOTAK MAHINDRA AND THIS AMOUNT HAS NOT BEEN SHOWN IN THE BALANCE - SHEET AS INVESTMENT. THE ASSESSING OFFICER, THEREFORE, ADDED A SUM OF RS.1,04,800/ - AS UNDISCLOSED INVESTMENT. 21. LD. CIT(APPEALS) DELETED THE ADDITION BY HOLDING THAT IN THE BANK ACCOUNT STATEMENT OF THE ASSESSEE THE AMOUNT OF RS.1,04,800/ - WAS SHOWN AS PAID TO M/S. KOTAK MAHINDRA BANK LTD. BY ITSELF DOES NOT ESTABLISH THAT SUCH AMOUNT WAS AN INVESTMENT. 22. IN VIEW O F THIS FACT, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF LD. CIT(APPEALS) ON THIS GROUND. THUS THIS GROUND STANDS DISMISSED. I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 16 OF 17 23. THE LAST GROUND RELATES TO THE DELETION OF THE ADDITION OF RS.3,088/ - ON ACCOUNT OF MOTOR CAR DEPRECIATION. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.20,585/ - AGAINST MOTOR CAR AND CORRESPONDINGLY CLAIMED AS ADDITION TO THE MOTOR CAR AMOUNTING TO RS.20,585/ - . THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE PROPORTIONATE DEPRECIATION , WHICH COMES TO RS.3,088/ - . 2 4 . WHEN THE MATTER WENT IN APPEAL BEFORE THE LD. CIT(APPEALS), LD. CIT(APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: - 9.1. IN HIS CONTEXT, THE AR OF THE ASSESSEE SUBMITTED DURING THE APPELLATE PROCEEDINGS THAT THE AM OUNT OF RS.20,585/ - REFERRED TO IN HIS ORDER BY THE AO AS ADDITION TO MOTOR CAR WAS IN FACT DEPRECIATION CALCULATED AT THE RATE OF 15% ON THE OPENING BALANCE OF RS.1,37,236/ - OF CARS. THIS CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT FROM THE PERUSAL O THE BALANCE SHEET OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE REMAND REPORT OF THE AO IS SILENT ON THIS ISSUE. CONSIDERING THE FACTS AS STATED ABOVE, THE DISALLOWANCE OF RS.3,088/ - MADE BY THE AO IS FOUND TO UNJUSTIFIED AND, THEREFORE, THE SAME IS D ELETED . 2 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDER OF TAX AUTHORITIES BELOW. IN OUR VIEW, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(APPEALS). LD. CIT(APPEALS) HAS RIGHTLY HELD THAT THE ADDI TION TO MOTOR CAR WAS, IN FACT, DEPRECIATION CALCULATED AT THE RATE OF 15% ON THE OPENING BALANCE OF RS.1,37,236/ - . EVEN THE ASSESSING OFFICER DID NOT MAKE ANY COMMENT IN THE REMAND REPORT. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(APPEALS) ON THIS POINT . 26. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 21 , 201 5 . SD/ - SD/ - MAHAVIR SINGH P.K. BANSAL ( JUDICIAL MEMBER) ( ACCOUNTANT MEMBER) KOLKATA, THE 21 ST D AY OF MAY , 201 5 I.T.A. NO . 433 / KOL ./20 1 1 A SSESSMENT YEAR: 200 7 - 200 8 PAGE 17 OF 17 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 50, KOLKATA, UTTARAPAN SHOPPING COMPLEX, MANICKTOLA CIVIC CENTRE, ULTADANGA, KOLKATA - 700 054 (2) GOVINDA CHANDRA PAL, 485, MUNIC IPAL OFFICE LANE, KOLKATA - 700 074 (3) COMMISSIONER OF INCOME - TAX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA B ENCHES, KOLKATA LAHA/SR. P.S .