M/s. Easwari Murugan Constructions, Theni V. Income tax Officer, Theni

ITA 447/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58082 (ITAT-CHENNAI)
• Duration Of Justice: 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N DEVANATHAN
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO.447(MDS)/2012 ASSESSMENT YEAR: 2007-08 AND S.P. NO.39(MDS)/2012 IN ITA NO.447(MDS)/2012 M/S.EASWARI MURUGAN CONSTRUCTIONS, AUNDIPATTI, THENI DISTRICT. PAN AABFE9814B. VS. THE INCOME-TAX OFFICER, WARD I(1), THENI. (APPELLANT/PETITIONER) (RESPONDENT) APPELLANT BY : SHRI N.DEVANATHAN, ADVOCAT E RESPONDENT BY :SHRI G.NARESHKUMAR, JT.COMMIS SIONER OF IT DATE OF HEARING :16 TH MARCH, 2012 DATE OF PRONOUNCEMENT :16 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL FILED BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2007-08. THE APPEAL IS DIRECTED AG AINST THE REVISION ORDER PASSED BY THE COMMISSIONER OF INCOME -TAX-I AT - - ITA 447 OF 2012 2 MADURAI, ON 25-4-2011, EXERCISING HIS POWERS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS A FIRM OF FIVE PARTNERS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT WORKS. THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YE AR 2007-08, ADMITTING AN INCOME OF ` 4,99,660/-. INITIALLY, THE RETURN WAS PROCESSED UNDER SECTION 143(1). LATER ON, REGULAR ASSESSMENT WAS COMPLETED UNDER SECTION 143(3), DETERMINING THE TOTAL INCOME AT ` 40,04,760/-, AGAINST THE RETURNED INCOME OF ` 4,99,660/-. IN THE COURSE OF ASSESSMENT, THE ASSE SSING OFFICER HAS MADE A DISALLOWANCE OF ` 30,64,000/- UNDER SECTION 40(A)(IA) FOR THE REASON OF NON DEDUCTION OF TDS. HE HAS ALS O MADE AN ADDITION OF ` 3 LAKHS AGAINST DISALLOWANCE OF SELF-MADE VOUCHERS . ANOTHER DISALLOWANCE OF ` 1,41,102/- WAS MADE AS DISALLOWANCE OF INTEREST TO PARTNERS ACCOUNTS. 3. THE DISALLOWANCE AND THE ADDITIONS HAVE BEEN TAKEN IN FIRST APPEAL BY THE ASSESSEE. 4. WHILE THE MATTER WAS RESTING SO, THE COMMISSION ER OF INCOME-TAX, ON AN EXAMINATION OF THE RECORDS OF THE CASE, FOUND THAT THE TOTAL SUB-CONTRACT PAYMENTS CREDITED WAS - - ITA 447 OF 2012 3 ` 1,45,50,000/-, WHEREAS THE SUB-CONTRACT AMOUNT PAI D WAS ` 30,64,000/- AND INSTEAD OF MAKING A DISALLOWANCE O F THE ENTIRE SUM OF ` 1,45,50,000/-, THE ASSESSING AUTHORITY HAS MADE A DISALLOWANCE OF ` 30,64,000/- ALONE. HE, THEREFORE, HELD THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. WHEN NOTICE WAS SERVED, THE ASSESSEE EXPLAINED BEFORE THE COMMISSIONER OF INCOME-TAX THAT EVERY SI NGLE PAYMENT MADE TO THE SUB-CONTRACTOR WAS IN FACT MADE TO THE LABOURERS AND SUCH AMOUNT OF SINGLE PAYMENT DID NOT EXCEED ` 20,000/- AND ALSO THE OVERALL PAYMENT DID NOT EXCE ED ` 50,000/- AND IN SUCH CIRCUMSTANCES THE PROVISION O F TDS DID NOT APPLY IN THE CASE OF THE ASSESSEE. THE COMMISS IONER OF INCOME-TAX REJECTED THE ABOVE CONTENTION ON THE GRO UND THAT THE ASSESSEE HAD SHOWN ` 1,63,251/- AS TDS PROVISION FOR SUB- CONTRACT PAYMENT. HE REJECTED THE CONTENTION ADVA NCED BY THE ASSESSEE AND SET ASIDE THE ASSESSMENT ORDER. HE DI SALLOWED A FURTHER AMOUNT OF ` 1,13,22,749/- AND ADDED THE SAME BACK TO THE INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT ` 1,53,27,510/-. HE DIRECTED THE ASSESSING OFFICER TO CALCULATE THE TAX AND ISSUE A FRESH DEMAND NOTICE. - - ITA 447 OF 2012 4 5. IT IS AGAINST THIS THAT THE ASSESSEE HAS COME I N APPEAL BEFORE US. 6. ON GOING THROUGH THE ASSESSMENT ORDER, WE FIND THAT THE ASSESSING OFFICER HAS CONSIDERED THE ISSUE OF TDS IN A DETAILED MANNER IN HIS ASSESSMENT ORDER. IN FACT T HIS ISSUE ALONE WAS DISCUSSED BY THE ASSESSING OFFICER IN A DETAILE D MANNER IN HIS ASSESSMENT ORDER. HE HAS GONE THROUGH THE ACCO UNTS OF THE ASSESSEE AND ALSO THE AUDIT REPORT FILED IN FORM NO .3CB AND NO.3CD. IT IS AFTER EXAMINING ALL THESE DOCUMENTS THAT THE ASSESSING OFFICER HAS MADE A DISALLOWANCE OF ` 30,64,000/- UNDER SECTION 40(A)(IA). 7. NOW, IT IS THE CASE OF THE COMMISSIONER OF INCO ME- TAX THAT THE ASSESSEE HAS MADE SUB-CONTRACT PAYMENT OF ` 1,45,50,000/- AND NO TDS WAS ACCOUNTED FOR SUCH PA YMENT AND, THEREFORE, THE ENTIRE AMOUNT OF ` 1,45,50,000/- SHOULD HAVE BEEN DISALLOWED UNDER SECTION 40(A)(IA), AS AGAINST THE AMOUNT OF ` 30,64,000/- DISALLOWED BY THE ASSESSING OFFICER. IT IS IN THIS CONTEXT THAT THE ASSESSEE HAS EXPLAINED BEFORE HIM THAT THOSE PAYMENTS, POINTED OUT BY THE COMMISSIONER OF INCOME -TAX AS NOT CONSIDERED BY THE ASSESSING OFFICER, WERE IN FA CT MADE TO - - ITA 447 OF 2012 5 LABOURERS, WHERE A SINGLE PAYMENT DID NOT EXCEED ` 20,000/- AND THE TOTAL PAYMENT DID NOT EXCEED ` 50,000/-. THE ASSESSEE EXPLAINED THAT, THEREFORE, THE PROVISIONS OF TDS DI D NOT APPLY IN ITS CASE. 8. THE ABOVE CRUCIAL ARGUMENT OF THE ASSESSEE HAS BEEN REJECTED BY THE COMMISSIONER OF INCOME-TAX WIT HOUT EXAMINING THE MERITS OF THAT CONTENTION. HE HAS NO T EXAMINED WHETHER SUCH PAYMENTS WERE MADE IN A MANNER WHERE I NDIVIDUAL PAYMENT WAS LESS THAN ` 20,000/- AND CUMULATIVE PAYMENT WAS LESS THAN ` 50,000/-. WITHOUT EXAMINING THIS CRUCIAL ASPECT, HE REJECTED THE CONTENTION OF THE ASSESSEE ON A TECHNI CAL REASON THAT IF THE ARGUMENTS OF THE ASSESSEE WERE TRUE, TH E ASSESSEE WOULD NOT HAVE SHOWN A PROVISION FOR TDS FOR SUB-CO NTRACT PAYMENT, AMOUNTING TO ` 1,63,251/-. THE COMMISSIONER OF INCOME-TAX OVERLOOKED THE FACT THAT WHAT HAS BEEN C REDITED BY THE ASSESSEE WAS ONLY A PROVISION TOWARDS A POSSIBL E LIABILITY. THAT LIABILITY MAY BE AN ACTUAL LIABILITY OR A CONT INGENT LIABILITY OR THE PROVISION MUST HAVE BEEN MADE AS A RESULT OF AM PLE PRECAUTION BY THE ASSESSEE. THE FACT THAT THE ASSE SSEE HAS MADE A PROVISION FOR TDS IN ITS ACCOUNTS DOES NOT I N FACT DECIDE - - ITA 447 OF 2012 6 THE ISSUE WHETHER THE ASSESSEE WAS BOUND BY THE PRO VISIONS OF TDS OR NOT. SECTION 40(A)(IA) WOULD APPLY ONLY TO A CASE WHERE THE ASSESSEE IS BOUND BY TDS PROVISIONS AND SUCH DE DUCTION IS NOT MADE BY THE ASSESSEE. TDS PROVISIONS WOULD APP LY WHEN THE ASSESSEE ACTUALLY MAKES PAYMENT OR CREDITS THE ACCOUNTS OF THE PARTIES. IN THE PRESENT CASE THE COMMISSIONER OF INCOME-TAX HAS NOT MADE ANY FINDING THAT THE ASSESSEE HAS MADE PAYMENTS IN EXCESS OF THE MANDATORY LIMIT PRESCRIBED FOR TDS OR THE ASSESSEE HAS CREDITED THE ACCOUNTS OF THE SUB-CONTR ACTORS WITH COMMENSURATE AMOUNTS. 9. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE FIND THAT THE ONLY ANCHOR OF THE COMMISSIO NER OF INCOME-TAX IS THE PROVISION MADE BY THE ASSESSEE FO R TDS PAYABLE. AS ALREADY STATED, THE PROVISION FOR TDS IS NOT RELEVANT IN DECIDING THE LIABILITY UNDER TDS PROVISION. 10. IN FACT, THE ASSESSMENT ORDER HAS EXAMINED THE QUESTION OF TDS AND IT IS AFTER EXAMINING THOSE DET AILS THAT THE ASSESSING OFFICER HAS COME TO THE CONCLUSION THAT I T WAS IN RESPECT OF ` 30,64,000/- THAT TDS WAS NOT MADE BY THE ASSESSEE. - - ITA 447 OF 2012 7 11. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE REVISION ORDER PASSED BY THE COMMISSIONER OF INCOME- TAX IS ERRONEOUS AND NOT SUSTAINABLE IN LAW. IT IS SET ASIDE. 12. AS THE APPEAL FILED BY THE ASSESSEE ITSELF IS DECIDED, THE STAY PETITION FILED BY THE ASSESSEE IS DISMISSE D AS INFRUCTUOUS. ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MARCH, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.