M/s. Sona Internet Services Private Ltd., New Delhi V. ITO, New Delhi

ITA 4353/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6729 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-11-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 24-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHORE B
• Assessee Lawyers: A K JAIN
• Keywords: Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.4353/DEL/2010 ASSESSMENT YEAR : 2007 - 08 SONA INTERNET SERVICES PVT. LTD., H-5/44, SECTOR 11, ROHINI, NEW DELHI. PAN : AAICS0557P VS. ITO, WARD 9 (1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.K. JAIN, CA REVENUE BY : SHRI KISHORE B., DR ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 30 TH AUGUST, 2010 FOR ASSESSMENT YEAR 2007- 08. GROUNDS OF APPEAL READ AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.29,21,288/- U/S 40 (A)(IA) OF INCOME TAX ACT, 1961. IN THIS REGARD ALL OF HIS OBSERVATION ARE WRONG AND AGAINST THE FACTS AND LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE IMPUGNED ASSESSMENT ORDER WHICH WAS PASSED BY THE LEARNED ASSESSING OFFICER WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE AND IS AGAINST THE ITA NO.4353/DEL/2010 2 PRINCIPLES OF NATURAL JUSTICE. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN REJECTING THE CLAIM OF THE APPELLANT THAT PAYMENT OF RS.29,21,288/- WERE MADE TO THE VARIOUS SUPPLIERS OF GOODS TOWARDS MATERIALS PURCHASED FROM THEM AND USED IN CIVIL WORK CONTRACT EXECUTED BY THE ASSESSEE HENCE SUCH PAYMENTS WERE NOT LIABLE FOR TAX DEDUCTION AT SOURCE UNDER CHAPTER XVII-B OF IT ACT, 1961. THE ACTION OF THE ASSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) ARE AGAINST THE LAW AND MATERIAL/EVIDENCE ON RECORD. THEREFORE, THE ASSESSMENT ORDER IN QUESTION SHALL BE QUASHED. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ASSESSMENT OF INCOME AT RS.28,51,172/- AS AGAINST RS.NIL DECLARED BY THE ASSESSEE. 5. THAT THE IMPUGNED ASSESSMENT ORDER DATED 29.12.2009 U/S 143 (3) IS BAD IN LAW AND AGAINST THE FACTS OF THE CASE AND MATERIAL/EVIDENCE PLACED ON RECORD. THEREFORE, THE IMPUGNED ORDER BE QUASHED. 6. THE ABOVE GROUND OF APPEAL IS WITHOUT PREJUDICE TO ONE ANOTHER. 7. THE APPELLANT CRAVES THE RIGHT TO ADD, AMEND, AL TER, WITHDRAW OR FORGO ANY GROUND OR GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. ACCORDING TO THE FACTS PLACED BEFORE U S, IT ENTERED INTO A CONTRACT WITH M/S CHANDRA EDUCATIONAL AND WELFARE SO CIETY FOR CIVIL CONSTRUCTION WORK OF BOUNDARY WALL AND LAND FILLING OF ITS PLOT OF LAND ON WHICH THE SCHOOL BUILDING WAS TO BE CONSTRUCTED. THE TOTAL VALUE OF THE CONTRACT WAS ` 81,50,000/-. THE AFOREMENTIONED CONTRACT OF THE ASSESSEE WITH M/S CHANDRA EDUCATIONAL AND WELFARE SOCIET Y WAS INCLUSIVE OF ALL MATERIAL VIZ., MITTI, CEMENT, BRICK S, RORI, BADARPUR, ETC. TO BE CONSUMED FOR EXECUTION OF THE WORK. IN THE YE AR UNDER CONSIDERATION, THE ASSESSEE EARNED JOB WORK INCOME OF ` 69, 50,000/- ITA NO.4353/DEL/2010 3 FROM THE ABOVE MENTIONED SOCIETY AND THE DIRECT EXP ENSES AS INCURRED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WERE OF A SUM OF ` 59,43,947/- THE DETAILS OF WHICH ARE AS UNDER:- I) LABOUR & WAGES 29,09,989.00 II) CONSUMPTION OF CONSTRUCTION MATERIAL 29,21,288.00 (MITTI, CEMENT, BRICKS, RORI, BADARPUR, ETC.) III) LABOUR WELFARE 1,12,670.00 TOTAL 59,43,947.00 3. SO AS IT RELATES TO ITEM NO.1 AND 3, THERE IS NO D ISPUTE. THE ASSESSING OFFICER IS OF THE OPINION THAT CONSUMPTION OF C ONSTRUCTION MATERIAL SHOWN BY THE ASSESSEE AT ` 29,21,288/- WAS A JOB WORK FURTHER SUBLET BY THE ASSESSEE AND, THEREFORE, THE ASSESSEE WAS LIABL E FOR DEDUCTION OF TAX ON THE SAID AMOUNT. THEREFORE, APP LYING THE PROVISIONS OF SECTION 40 (A) (IA), LD. ASSESSING OFFICER HAS DISALLOWED THE AFOREMENTIONED AMOUNT. THE SECTION 40 (A)(IA) READS AS UNDER:- 40. AMOUNTS NOT DEDUCTIBLE . NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SECTIONS 30 TO 3 8, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTI NG THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION. (A) IN THE CASE OF ANY ASSESSEE (I) (IA) ANY INTEREST, COMMISSION OR BROKERAGE, RENT, ROYA LTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SER VICES PAYABLE TO THE RESIDENT, OR AMOUNTS PAYABLE TO A CONTRACTOR OR SUB- CONTRACTOR, BEING RESIDENT, FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK), ON WHIC H TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID. 4. THUS, IT IS THE CASE OF THE ASSESSING OFFICER THAT AS TH E ASSESSEE DID NOT DEPOSIT TDS WITH RESPECT TO PAYMENTS MADE BY I T FOR THE MATERIAL, THEREFORE, THE SAID AMOUNT IS TO BE DISALLOW ED U/S 40 (A)(IA). ITA NO.4353/DEL/2010 4 5. BEFORE CIT (A), IT WAS PLEADED THAT THE SAID PAYME NTS WERE NOT ON ACCOUNT OF JOB WORK, BUT THEY WERE ON ACCOUNT OF CONSUMPTION OF CONSTRUCTION MATERIAL AND, THEREFORE, THE ASSESSEE WAS NO T AT ALL LIABLE FOR DEDUCTION OF TAX. LD. CIT (A) DID NOT BELIEVE SUCH CONTENTION OF THE ASSESSEE AND ON PERUSAL OF P&L ACCOUNT HE OBSERVED THAT IT CLEARLY ESTABLISHED THAT THESE PAYMENTS WERE MADE ON ACCOUNT O F JOB WORK AND THE AUDITOR AND DIRECTORS OF THE COMPANY WERE AL SO CERTIFYING THE PROFIT & LOSS ACCOUNT. IT IS THE CASE OF THE CIT (A) T HAT THE ASSESSEE BEFORE THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT THESE WERE THE PAYMENTS ON ACCOUNT OF JOB WORK AND AFTER A LONG LAP SE OF TIME ONE CANNOT BE SURE ABOUT THE AUTHENTICITY OF THE VOUCHER S WHICH ARE BEING PRODUCED BY THE ASSESSEE AT THE APPELLATE STAGE. SINCE THE AUDITORS HAVE STATED THESE PAYMENTS IN THE NATURE OF JOB WORK, THE COUNSEL OF THE ASSESSEE HAS CHANGED THE STAND BEFORE THE CIT (A) WHI CH IS NOT SUSTAINABLE. LD. CIT (A) HAS ALSO OBSERVED THAT IF IT W AS SO, THE COMPANY SHOULD HAVE SUBMITTED A RECTIFIED P & L ACCOU NT BEFORE THE ASSESSING OFFICER WHICH WAS NEVER DONE. IN THIS MANNER, CIT (A) HAS UPHELD THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED, HENC E, IN APPEAL. 6. AFTER NARRATING THE FATS, IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT MERELY ON THE BASIS OF STATEMENT IN THE ACCOUNTS THAT THE PAYMENT IS ON ACCOUNT OF JOB WORK, IT CANN OT BE HELD THAT THE ASSESSEE IS LIABLE FOR DEDUCTION OF TAX. HE SUBMITTED TH AT THE ASSESSEE HAS ENCLOSED THE DETAILS OF THE ENTIRE SUM OF ` 29,21,2 88/- AT PAGE 20 OF THE PAPER BOOK. HE CONTENDED THAT ALL THE COPIE S OF THE VOUCHERS RELATING TO THESE PAYMENTS ARE PLACED AT PAGES 21 TO 3 9 OF THE PAPER BOOK. CARRYING US THROUGH THOSE PAPERS IT WAS SUBMITTED THAT ALL THESE VOUCHERS CLEARLY SHOW THAT THEY ARE THE PAYMENTS MAD E IN RESPECT OF PURCHASE OF MATERIAL AND PAYMENT FOR SOIL. HE SUBMITT ED THAT THIS IS NOT IN THE NATURE OF PAYMENT RELATING TO SUB-CONTRAC T. HE SUBMITTED THAT NONE OF THESE DETAILS FALLS WITHIN THE PURVIEW OF SECTION 40 (A)(IA) ITA NO.4353/DEL/2010 5 OR THE PROVISIONS RELATING TO DEDUCTION OF TAX. THESE ARE THE SIMPLE TRANSACTIONS OF PURCHASE OF MATERIAL AND THE ASSESSING OFF ICER, WITHOUT APPLYING HIS MIND, HAS HELD THAT THE ASSESSEE IS LIABLE FOR DEDUCTION OF TAX. SIMILARLY, HE CONTENDED THAT THE CIT (A) ALSO, WITHOUT GOING INTO THE SUBSTANCE OF THESE VOUCHERS, HAS REJECTED THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS NOW OBTAINED RE VISED CERTIFICATE FROM THE CHARTERED ACCOUNTANT AS SUGGESTE D IN THE ORDER OF THE CIT (A) WHEREIN HE HAS CERTIFIED THAT THE COMPAN Y HAS PURCHASED BUILDING MATERIAL FOR ` 29,29,282/- FROM HIS SUPPLIE RS AND CONSUMED THE SAME IN THE CIVIL CONSTRUCTION WORK UNDERTAKEN BY M/S CHANDRA EDUCATIONAL AND WELFARE SOCIETY. THE SAID EXPENSES AR E DEBITED BY THE COMPANY IN ITS BOOKS OF ACCOUNT UNDER THE HEAD JOB W ORK PURCHASE ACCOUNT AND SHOWN THE SAME IN SCHEDULE IV TO THE AUD ITED PROFIT & LOSS ACCOUNT AS JOB WORK AND IT IS FURTHER CERTIFIED BY THEM THAT THE NATURE OF EXPENSES DEBITED IN THE SAID ACCOUNT ARE E XPENSES INCURRED FOR BUILDING MATERIAL PURCHASE AND CONSUMED IN RESPECT OF JOB WORK (CIVIL CONSTRUCTION WORK) UNDERTAKEN BY THE ASSESSEE FOR M/S CHANDRA EDUCATIONAL AND WELFARE SOCIETY WITH REGARD TO CONST RUCTION OF ITS SCHOOL BUILDING. SINCE THE AFOREMENTIONED BUILDING MATERIAL WERE CONSUMED FOR THE JOB WORK UNDERTAKEN BY THE COMPANY, HENCE, THOSE EXPENSES WERE SHOWN AS JOB WORK PURCHASE WHICH ARE BASICA LLY OF THE NATURE OF MATERIAL PURCHASE AND CONSUMED IN RESPECT OF JOB WORK INCOME OF ` 69,50,000/- EARNED BY THE COMPANY IN FI NANCIAL YEAR 2006- 07. HE FURTHER PLACED RELIANCE UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KEDAR NATH JUTE MANUFACTURING C O. LTD. VS. CIT 82 ITR 363 WHEREIN IT HAS BEEN HELD THAT WHETHER THE A SSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPEND ON THE PROVISIONS OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKEN OF IT AS RIGHT NOR CAN THE EXISTENCE OR ABSENCE OF ENTRIE S IN THE BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MATTER. THU S, IT WAS PLEADED ITA NO.4353/DEL/2010 6 BY LD. AR THAT THE DISALLOWANCE HAS WRONGLY BEEN SUSTAI NED BY THE CIT (A) AND THE ADDITION SHOULD BE DELETED. 7. ON THE OTHER HAND, RELYING ON THE ORDER OF ASSESSING OFFICER AND CIT (A) IT WAS THE SUBMISSION OF LD. DR THAT THE ASSESSEE MADE THESE PAYMENTS AS JOB WORK GOT DONE BY IT AND, HENCE, LD. C IT (A) WAS RIGHT IN HOLDING THAT THOSE PAYMENTS WERE LIABLE FOR DEDUC TION OF TAX. AS THE ASSESSEE FAILED TO DEDUCT TAX, THE AMOUNT HAS RIGHTLY B EEN DISALLOWED BY THE ASSESSING OFFICER AND, THUS, IT WAS PLEADED BY LD. DR THAT THE ADDITION SUSTAINED BY THE LD. CIT (A) SHOULD BE UPHELD . 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE HAVE CAREFULLY GO NE THROUGH THE DETAILS SUBMITTED BY THE ASSESSEE AT PAGE 20 OF THE PAPER BOOK AND THE VOUCHERS RELATING THERETO WHICH ARE PLACED AT PA GES 21 TO 39 OF THE PAPER BOOK. THE NATURE OF THESE EXPENSES ARE FOR THE SOIL FILLING BRICKS, CEMENT BAGS. THE PURCHASE OF SOIL AND BRICKS AND CEMEN T BAGS CANNOT BE SAID TO BE A JOB WORK GOT DONE BY THE ASSESSEE. IT I S FURTHER OBSERVED THAT THE ASSESSEE HAS INCURRED ANOTHER SUM OF ` 29,09,989/- ON ACCOUNT OF LABOUR PAYMENT. FROM THAT IT IS CLEAR THAT THE ASSESSEE HAS DONE ALL CIVIL CONSTRUCTION WORK ON ITS OWN FOR TH AT THE LABOUR PAYMENTS HAVE BEEN MADE SEPARATELY AND THE PAYMENTS OF ` 29,21,288/- RELATES TO PURCHASE OF CONSTRUCTION MATER IAL WHICH WAS CONSUMED DURING THE EXECUTION OF THE WORK DONE BY TH E ASSESSEE. IT HAS NOT BEEN SPECIFICALLY SHOWN BY THE ASSESSING OFFICER O R CIT (A) THAT WHAT WAS THE REAL OBLIGATION OF THE ASSESSEE FOR DE DUCTION OF TAX. NO SUB-CONTRACT, ETC. HAS BEEN BROUGHT ON RECORD TO SH OW THE EXACT LIABILITY OF THE ASSESSEE REGARDING DEDUCTION OF TAX. ALL THE VOUCHERS WERE PLACED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER COULD HAVE VERIFIED FROM THOSE PARTIES WHETHER THOSE PAYMENTS WERE MADE BY THE ASSESSEE WITH RESPECT TO ANY SUB-CONTRACT, E TC. NO ITA NO.4353/DEL/2010 7 MATERIAL HAS BEEN BROUGHT ON RECORD. AS AGAINST THAT IT IS THE CASE OF THE ASSESSEE THAT DESPITE SHOWING IT AS JOB WORK NO JOB WO RK WAS INVOLVED AS IT WAS A SIMPLE PURCHASE OF MATERIAL CONSU MED DURING THE EXECUTION OF THE WORK. WE DO NOT FIND ANY MATERIAL ON RECORD TO SUGGEST THAT THE EXPENSES CLAIMED BY THE ASSESSEE AMOUNTIN G TO ` 29,29,288/- WERE IN THE NATURE OF PAYMENTS WHICH IN VOLVES DEDUCTION OF TAX UNDER THE PROVISIONS OF INCOME-TAX ACT, 1961. IN THE ABSENCE THEREOF, WE ARE OF THE OPINION THAT THE ASSESSEE HAS WRO NGLY BEEN HELD TO BE LIABLE FOR DEDUCTION OF TAX ON THESE PAYMENTS. ONCE IT IS NOT SHOWN THAT THE ASSESSEE IS LIABLE FOR DEDUCTION OF TAX ON THESE PAYMENTS, THEN, PROVISIONS OF SECTION 40(A)(IA) WILL N OT BE APPLICABLE. THEREFORE, DISALLOWANCE HAS WRONGLY BEEN MADE BY THE ASSESSING OFFICER AND IT HAS WRONGLY BEEN SUSTAINED BY THE CIT (A). THE DISALLOWANCE IS DELETED AND THE APPEAL FILED BY THE A SSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.201 0. SD/- SD/- [A.K. GARODIA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 30.11.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES