The ACIT, Circle-6, Ahmedabad V. Shri Popatlal Joitaram Patel, Ahmedabad

ITA 470/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9227 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 17-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MRS SONIA KUMAR
• Keywords: Bogus purchase; Opportunity of being heard; Additional evidence
• Section: 143(3); 194C; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI KUL BHARAT, JM & SHRI MANISH BORAD, AM ITA NO.470/AHD/2011 ASSTT. YEAR: 2007-08 ACIT, CIRCLE-6, AHMEDABAD. VS. SHRI POPATLAL JOITARAM PATEL, B. K. TENAMENTS, NR. PRIYA CINEMA, KRISHNANAGAR, AHMEDABAD. PAN AGOPP 6431A (APPELLANT) (RESPONDENT) ASSESSEE BY : MRS. SONIA KUMAR, SR.DR REVENUE BY : NONE DATE OF HEARING : 27/01/2016 DATE OF PRONOUNCEMENT: 15/03/2016 / O R D E R O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-XI, AHMEDABAD DATED 14.12.2010 VIDE APPEAL N O.CIT(A)- XI/1089/09-10 PASSED UNDER SECTION 143(3) OF IT ACT , 1961 (IN SHORT THE ACT). ASSESSMENT WAS FRAMED ON 24.12.2009 BY AC IT, CIRCLE-6, AHMEDABAD. REVENUE HAS RAISED FOLLOWING GROUNDS IN THIS APPEAL : 1. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRE D IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.62,62,863/-MAD E ON ACCOUNT OF CESSATION OF LIABILITY U/S,41(L) OF THE INCOME TAX ACT, 1961. ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 2 2. THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.17,79,855/- MA DE ON ACCOUNT OF DISALLOWANCE OF LABOUR CHARGES.. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. IT IS , THEREFORE , PRAYED THAT THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASS ESSING OFFICER BE RESTORED. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF MANUFACTURING OF ELECTRIC MOTOR STAMPING AND HE HAS FILED HIS RETURN OF INCOME 23.10.2007 DECLARING TOTAL INCOME AT RS.1 4,33,570/-. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTIC E U/S 143(2) OF THE ACT WAS ISSUED ON 22.09.2008 AND SERVED UPON TH E ASSESSEE ON 30.09.2008. ASSESSMENT WAS COMPLETED BY ASSESSING T HE INCOME AT RS.94,76,288/- AFTER MAKING FOLLOWING ADDITIONS :- 1. CESSATION OF LIABILITY U/S 41(1) OF THE ACT AT PER PARA NO.3 RS.62,62,863/- 2. LABOUR CHARGES U/S 40(A)(IA) OF THE ACT AS PER PARA NO.4 RS.17,79,855/- TOTAL RS.80,42, 718/- AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A ) WHO DELETED THE ADDITION FOR CESSATION OF LIABILITY U/S 41(1) O F THE ACT AR RS.62,62,863/- AND PARTLY DELETED THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT BY SUSTAINING IT TO RS.5,33,965/- AT THE PL ACE OF RS.17,79,855/- ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 3 AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE THE TRIB UNAL. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER , WE DECIDE THE APPEAL ON THE BASIS OF SUBMISSIONS MADE BY LD. DR AND GOING THROUGH THE MATERIAL AVAILABLE ON RECORD. 4. FIRST WE TAKE UP GROUND NO.1 WHICH RELATES TO D ELETION OF ADDITION OF RS.62,62,863/- MADE ON ACCOUNT OF CESSA TION OF LIABILITY U/S 41(1) OF THE ACT. DURING THE COURSE OF ASSESSME NT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT IN CASE OF 31 SUNDR Y CREDITORS AMOUNT WAS DUE TO BE PAID SINCE LAST THREE YEARS AN D MORE AND THE ONLY REASON GIVEN BY THE ASSESSEE DURING THE ASSESS MENT PROCEEDINGS FOR NON-PAYMENT OF SUCH SUNDRY CREDITOR S WAS DUE TO THE DISPUTE WITH SUPPLIER ON ACCOUNT OF QUALITY OF GOOD S SUPPLIED BY THEM. THE LD. ASSESSING OFFICER WAS NOT CONVINCED WITH TH E REPLY OF ASSESSEE BECAUSE IN THE NORMAL COURSE OF BUSINESS S UPPLIER CANNOT WAIT SO LONG FOR RECEIVING MONEY FOR SALES MADE BY HIM AND AS THE ASSESSEE HAS CLAIMED THE AMOUNT OF PURCHASES MADE F ROM SUCH SUNDRY CREDITORS IN PREVIOUS YEARS AND NOTHING HAS BEEN PAID IN LAST THREE YEARS AND ALSO IN LIEU OF THE FACT THAT ASSES SEE AGREED FOR THE PROPOSED ADDITION FOR THE UNPAID CREDITOR FOR RS.62 ,62,863/- VIDE NOTE SHEET DATED 22.12.2009 AS A RESULT OF WHICH LD. ASS ESSING OFFICER WENT AHEAD TO MAKE THE ADDITION U/S 41(1) OF THE AC T. FURTHER LD. CIT(A) DELETED THE ADDITION U/S 41(1) OF THE ACT MA DE BY LD. ASSESSING OFFICER ON ACCOUNT OF CESSATION OF LIABIL ITY OF RS.62,62,863/- BY OBSERVING AS UNDER:- ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 4 3. THE SECOND GROUND OF APPEAL IS DIRECTED AGAINST THE ADDITION OF RS.62,62,863/- ON ACCOUNT OF CESSATION OF LIABILITY U/S. 41(1} OF THE ACT. IT WAS NOTICED BY THE ASSESSING OFFICER THAT IN THE BALANCE SHEET, THERE WERE 31 CR EDITORS OUTSTANDING FOR MORE THAN THREE YEARS AS DETAILED AT PARA-3 OF THE ASSESSMENT ORDER. IT WAS OBSERVED BY THE A. O. THAT THESE LIABILITIES ARE SHOWN OUTSTANDING FOR ABNORMALLY PROLONG PERIOD. ACCORDING TO THE ASSESSING OFFICER THESE LIABILITIE S ARE UNDER THE AMBIT OF SECTION 41(1) OF THE I. T. ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON BEING ASKED BY THE ASSESSING OFFICER TO SHOW CAUSE AS 1O WHY THE SUM OF RS. 62,62,8637- SHOULD NOT BE TREATED THE INCOME FOR THE YEAR UNDER CONSIDERATION AS PER THE PROVISIONS OF SECTION 41(1) OF THE ACT, THE APPELLA NT FILED REPLY WHICH WAS REPRODUCED BY THE A.O. AT PARA-3.7 OF THE ASSESSMENT ORDER. HO WEVER, THE REPLY FILED BY THE APPELLANT WAS NOT CONSIDERED BY THE ASSESSING OFFICER TO BE SATISFACTORY. THER EFORE, WHILE MAKING THE ABOVE ADDITION T PARA-3.9 OF THE A SSESSMENT ORDER, THE A.O. OBSERVED AS UNDER :- '3.9 . .IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THOUGH THE ASSESSEE HAS NOT WRITTEN OFF THE ABOVE CREDITORS IN ITS BOOKS OF ACCOUNT, HOWEVER, THE FACTS AND THE SURROUNDING CIRCUMSTANCES DO SUGGEST THAT T HESE LIABILITIES ARE NO MORE REQUIRED TO BE PAID, THEREFORE, THE PROVISIONS OF SECTION 41(1) CLEARLY ; / APPLY ON SUCH TRANSACTIONS. ALSO THE ASSESSEE VIDE NOTE SHEET DATED 22-12- 2009 AGREED FOR THE PROPOSED ADDITION. ACCORDINGLY AN ADDITION OF RS.62,62,863/- IS MADE TO THE TOTAL INCOME OF THE A SSESSEE. 3.1. WITH REGARD TO THE ABOVE ADDITION, IN THE WRIT TEN SUBMISSIONS IT IS SUBMITTED BY THE A. R. OF THE APPELLANT AS UNDER :- 'DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) OF I . T. ACT, 1961 BEFORE THE ID. ITO, FOR THE CREDITORS SHOWN IN THE BALANCE SHE ET AS AT 31-03-2007, WE HAD SUBMITTED CONFIRMATION OF THE CREDITORS AMOUNTI NG TO RS. 30,90,3827- AND FOR THE REMAINING AMOUNT OF CREDITORS, WHICH WERE O F OUT STATION, WE HAD DEMANDED THE CONFIRMATION FROM OUR OWN SIDE AND FUR THER REQUESTED THE ID. ITO TO CALL FOR THE DIRECT CONFIRMATION FROM THE CR EDITORS AS PROVIDED UNDER SECTION 133 OF THE I. T. ACT, 1961. BUT DUE TO LAST WEEK OF MONTH FOR COMPLETION OF ASSESSMENT, THE ID. A.O. HAD MADE THE ADDITION WITHOUT CONSIDERING THE CONCERNED FACT. SO IN THIS REGARD, IF YOU THINK IT FIT AND WISH TO CONSIDER THE ADDITIONAL EVIDENCES, WE ARE READY TO PROVIDE THE CONFIRMATION IN RESPECT OF REMAINING AMOUNT OF CREDITORS WHICH WERE OUTSTANDING AND PAYA BLE BY ASSESSEE ON 31- 03-2007. AS THE CONFIRMATION IN RESPECT OF THE REMA INING CREDITORS HAD BEEN OBTAINED, AND AS THE LIABILITY OF THE SAME WERE GEN UINE, WE WOULD LIKE TO REQUEST YOU TO ALLOW THE SAME. ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 5 3.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. THE ADDITION WAS MADE BY THE A. O. SIMPLY ON THE GROUND THAT THE LIA BILITY CONTINUES TO BE OUTSTANDING FOR MORE THAN THREE YEARS. THE PROVISIONS OF SEC. 4 1(1) COME INTO PLAY WHEN THE ASSESSEE OBTAINS IN CASH OR IN KIND ANY AMOUNT OUT OF THE EXPENDITURE ALLOWED EARLIER. ALTERNATIVELY THE ASSESSEE MUST HAVE OBTAI NED BENEFIT BY WAY OF REMISSION OR CESSATION OF TRADING LIABILITY. THE THIRD SCENARIO IN THE PROVISIONS CAN BE INVOKED IS WHEN THE ASSESSEE UNILATERALLY WRITES-OFF THE LIABI LITY. IN THE INSTANT CASE NONE OF THE ABOVE-MENTIONED EVENTS TOOK PLACE. THEREFORE INVOCA TION OF THE PROVISIONS OF SEC. 41 (1) IS NOT IN ACCORDANCE WITH LAW. ADDITION IS U NWARRANTED. IT IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. LD. DR HEAVILY RELIED ON THE ORDER OF ASSESSING OFFICER. 6. WE HAVE HEAD THE CONTENTIONS MADE BY LD. DR AND GONE THROUGH THE MATERIAL PLACED ON RECORD. FROM GOING T HROUGH THE ASSESSMENT ORDER, WE FIND THAT ASSESSEE HAS SHOWN A LIST OF SUNDRY CREDITORS OF RS.62,62,863/- UNDER THE HEAD CURRENT LIABILITIES IN RELATION TO 31 PARTIES REMAINING UNPAID SINCE LAST THREE YEA RS OR MORE. IN THE NORMAL COURSE OF BUSINESS DEPENDING ON THE TYPE OF GOODS SOMEONE IS DEALING IN THERE IS ALWAYS A PAYMENT CYCLE FOR R ECOVERING AMOUNT FROM DEBTORS AS WELL AS PAYING AMOUNT TO SUPPLIER O F GOODS WHICH NORMALLY BY NO CANON CAN BE MORE THAN A YEAR EXCEPT FOR SOME EXCEPTIONAL CIRCUMSTANCES. THIS DOES NOT SEEM TO BE A CASE OF ASSESSEE BECAUSE OUT OF TOTAL 31 SUNDRY CREDITORS O F RS. 62,62,863/- OUTSTANDING FOR MORE THAN THREE YEARS MEANS THAT TH IS AMOUNT HAS BEEN CLAIMED AS PURCHASES IN PREVIOUS YEARS BEFORE THREE YEARS AGAINST ITS GROSS REVENUE AND FURTHER NO CONCRETE E VIDENCE HAS BEEN PLACED ON RECORD TO PROVE THAT THERE ACTUALLY WERE SOME DISPUTES WITH THESE PARTIES AND WHAT WAS THE CORRESPONDENCE FOR S UCH DISPUTES AND FINALLY THE OUTCOME OF THE DISPUTES AS TO WHETH ER ASSESSEE HAS BEEN ABLE TO GET SOME DISCOUNT OR COMPLETE LIABILIT Y HAS BEEN WAIVED ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 6 OF OR IT HAS BEEN PARTIALLY WAIVED OF. ASSESSEE CAN NOT GO AWAY WITH A PLEA THAT HE HAS NOT WRITTEN OF THE BALANCE IN HIS BOOKS OF ACCOUNT BECAUSE THERE IS EVERY POSSIBILITY THAT SOME OF THE SUNDRY CREDITORS ARE NOT GENUINE AND HAPPEN TO BE A BOGUS PURCHASE F OR WHICH NO AMOUNT WAS ACTUALLY REQUIRED TO BE PAID AND IF THIS BE A SITUATION THEN THERE ACTUALLY ARISE A CESSATION OF LIABILITY. 7. WE OBSERVE THAT IN THE ASSESSMENT ORDER LD. ASSE SSING OFFICER RECORDED FOLLOWING AT PARA 3.9 WHICH READS AS UNDER :- 3.9 IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD TH AT THOUGH THE ASSESSEE HAS NOT WRITTEN OFF THE ABOVE CREDITORS IN ITS BOOK S OF ACCOUNT, HOWEVER, THE _ FACTS AND THE SURROUNDING CIRCUMSTANCES DO SU GGEST THAT THESE LIABILITIES ARE NO MORE REQUIRED TO BE PAID, THEREF ORE, THE PROVISIONS OF SECTION 41(1) CLEARLY APPLY ON SUCH TRANSACTIONS. A LSO THE ASSESSEE VIDE NOTE SHEET DATED 22.12.2009 AGREED FOR THE PROPOSED ADDITION. ACCORDINGLY AN ADDITION OF RS.62,62,863/- IS MADE TO THE TOTAL INCOME OF THE ASSESSEE. PENAL PROCEEDINGS UNDER SECTION 271(L )(C) OF THE INCOME TAX ACT ARE BEING INITIATED SEPARATELY FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. 8. FROM THE ABOVE PARA WE UNDERSTAND THAT ASSESSEE HAS AGREED TO THE PROPOSED ADDITION TO BE MADE BECAUSE ASSESSE E WAS UNABLE TO PROVIDE THE REQUISITE INFORMATION IN ORDER TO PR OVE THE GENUINENESS OF THE SUNDRY CREDITORS. ASSESSEE HAS MENTIONED BEF ORE THE LOWER AUTHORITIES THAT SOME OF THE CONFIRMATIONS WERE REC EIVED BY THE ASSESSEE AND SOME OF THE PARTIES HAVE NOT REPLIED T O THE LETTERS OF ASSESSEE, BUT IN OUR VIEW SUCH REPLY CREATES SERIOU S DOUBT THAT HOW CAN A PERSON, WHO SUPPLIES GOODS TO THE ASSESSEE AN D IS RELUCTANT TO TAKE HIS MONEY BACK TOWARDS GOODS SUPPLIED AND EVEN THEN NOT REPLYING TO THE LETTERS OF ASSESSEE. AS REGARDS THE CONTENTION OF ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 7 ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE LIAB ILITY HAS NOT BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT, WE FIND THAT H ON. SUPREME COURT IN THE CASE OF SUTLES COTTON MILLS 116 ITR 1 HAS UP HELD THAT THE PASSING OF ACCOUNTING ENTRIES OR OTHERWISE HAS NO R ELEVANCE TO DECIDE THE MATTER IN A PARTICULAR MANNER AND ONLY THE RELEVANT FACTS AND CIRCUMSTANCES ARE REQUIRED TO BE TAKEN INTO CON SIDERATION TO JUDGE THE REAL CHARACTER OF THE ISSUE UNDER CONSIDE RATION AND ALSO HON. SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT 214 ITR 801 HAS HELD THAT IN ABSENCE OF ANY DIRECT EVIDENCES, T HE SURROUNDING CIRCUMSTANCES AND OTHER RELEVANT FACTORS WOULD BE P ROPER BASE TO JUDGE OR DECIDE ANY ISSUE UNDER TAXATION MATTER. 9. FROM GOING THROUGH THE ABOVE REFERRED DECISIONS OF HON. SUPREME COURT WE ARE OF THE VIEW THAT IT IS INCUMBE NT ON THE PART OF THE ASSESSEE TO PROVE THAT THE LIABILITY ON ACCOUNT OF SUNDRY CREDITORS EXISTS WHICH HAVE BEEN RECORDED AS EXPENDITURE ON P URCHASE IN PREVIOUS YEARS AND IS UNPAID FOR ABNORMAL PERIOD TH AN IT IS ACCEPTED IN THE NORMAL COURSE OF BUSINESS (WHICH IN THE CASE OF ASSESSEE IS DUE FOR THREE YEARS OR MORE) THEN IT IS THE ASSESSE E TO PROVE ABOUT THE ACTUAL STATUS OF SUCH SUNDRY CREDITORS BY PLACI NG ON RECORD PROPER CONFIRMATIONS AS WELL AS OUTCOME OF THE DISPUTES AN D FINAL TREATMENT IN THE BOOKS OF ACCOUNT IN THE YEAR UNDER APPEAL OR IN THE FOLLOWING YEARS. 10. WE FURTHER OBSERVE THAT ASSESSEE HAS HIMSELF AG REED FOR THE ADDITION VIDE NOTE SHEET DATED 22.12.2009 IN THE FI LE OF LD. ASSESSING OFFICER BUT THE SAME HAS NOT BEEN GIVEN ANY COGNIZA NCE BY THE LD. ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 8 CIT(A) IN HIS APPELLATE ORDER. WHEN THE ASSESSEE HI MSELF IS AGREEING TO THE ADDITION IN THE GIVEN CIRCUMSTANCES, WHEN TH E SUNDRY CREDITORS OF RS.62,62,863/- WERE OUTSTANDING FOR SOME THREE Y EARS OR MORE THEN THIS ASPECT SHOULD HAVE BEEN EXAMINED IN DEPTH BY THE LD. CIT(A) BY WAY OF PASSING A SPEAKING ORDER ON THIS G ROUND. WE, THEREFORE, ARE OF THE VIEW THAT IN THE FACTS AND CI RCUMSTANCES OF THE CASE INCLUDING THE ACCEPTANCE OF ASSESSEE FOR AGREE ING TO THE PROPOSED ADDITION, MATTER NEEDS TO BE RELOOKED BY T HE LD. CIT(A) BY WAY OF PASSING A SPEAKING ORDER IN LIGHT OF OUR FIN DINGS AND WE ACCORDINGLY SET ASIDE THE ISSUE TO THE FILE OF LD. CIT(A). ACCORDINGLY, THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL P URPOSES. 11. NOW WE TAKE UP GROUND NO.2 WHICH RELATES TO DEL ETION OF ADDITION OF RS.17,79,855/- MADE ON ACCOUNT OF DISAL LOWANCE OF LABOUR CHARGES. QUESTION WAS RAISED BY LD. ASSESSING OFFIC ER THAT LABOUR CHARGES OF RS.17,79,855/- HAS BEEN DEDUCTED TO THE PROFIT AND LOSS ACCOUNT DURING THE YEAR WITHOUT DEDUCTING TAX U/S 1 94C OF THE ACT AND IN REPLY TO THE SAME VIDE LETTER DATED 18.12.2009 A SSESSEE SUBMITTED AS UNDER :- 'YOU HAVE REQUESTED TO FURNISH EXPLANATION REGARDIN G LABOR CLAIMED DURING THE YEAR. WE HAVE ACCEPTED ORDER FOR SUPPLY OF SPEC IAL SEIZED STAMPING. WE WERE NOT FULLY EQUIPPED TO MANUFACTURE SPECIAL S IZED STAMPING DURING THE YEAR UNDER CONSIDERATION AS WELL AS MANUFACTURI NG THEREOF WAS NOT ECONOMICALLY VIABLE AS IT IS GOING TO DISTURB OUR N ORMAL ' BUSINESS AND HENCE THE MANUFACTURING OF THE SAME WAS ENTRUSTED T O DIFFERENT PRIVATE PARTIES. THIS FACT WAS EXPLAINED VIDE OUR EARLIER S UBMISSION. PARTIES TO WHOM WORK WAS ENTRUSTED HAVE RAISED BILLS ON US FOR LABOR WORK DONE BY THEM, THE WORK AND PAYMENT FOR LABOR IS NOT CONTRAC TUAL PAYMENT BUT IT IS LABOR PURCHASE. THESE FACTS WILL BE EVIDENT FROM TH E VERIFICATION OF STATEMENT OF ACCOUNTS OF ALL PARTIES FILED HEREWITH FOR YOUR CONSIDERATION. SINCE THIS NOT CONTRACTUAL PAYMENT BUT IT IS PAYMEN T FOR LABOR PURCHASE AND HENCE NO DEDUCTION OF TAX IS REQUIRED TO BE MAD E AT SOURCE.' ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 9 HOWEVER, LD. ASSESSING OFFICER WAS NOT CONVINCED WI TH THE REPLY OF ASSESSEE AS HE COULD NOT PUT FORTH ANY EVIDENCE IN SUPPORT OF CLAIM OF MAKING SUCH LABOUR CHARGES AND IN THE RESULT LAB OUT CHARGES OF RS.17,79,855/- WERE DISALLOWED AND ADDED TO THE INC OME OF ASSESSEE. 12. ON APPEAL, LD. CIT(A) GRANTED PART RELIEF TO TH E ASSESSEE BY SUSTAINING THE DISALLOWANCE OF RS.5,33,965/- BY OBS ERVING AS UNDER :- 4.2. IT IS CONTENDED BY THE LEARNED A. R. THAT THE JOB WORK PAYMENTS INCLUDED THE COST OF MATERIAL ALSO ON WHICH NO DEDUCTION OF TAX NEED B E DONE. AS EVIDENCED BY THE INVOICES, PURCHASE OF ARTICLES WAS MADE BY THE APPELLANT, ON WHICH SALES-TAX WAS PAID. IT IS FURTHER CONTENDE D THAT THE LABOUR COMPONENT OF THE WORK IS AROUND 30% OF THE TOTAL PA YMENT AND THEREFORE THE DISALLOWANCE MAY BE RESTRICTED TO 30% OF THE PAYMEN TS. HAVING CONSIDERED THE 'ACTS OF THE CASE, I AM INCLINED TO ACCEPT APPE LLANT'S CONTENTIONS. DISALLOWANCE OF RS. 5,33,965/- (BEING 30% OF THE TO TAL PAYMENT] IS UPHELD. BALANCE DISALLOWANCE IS DELETED. THIS GROUND OF APPEAL IS P ARTLY ALLOWED. 13. LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER . AFTER CONSIDERING THE SUBMISSIONS OF LD. DR AND GOING THR OUGH THE MATERIAL ON RECORD, WE OBSERVE THAT THE ISSUE IN THIS GROUND IS RELATING TO PAYMENT OF LABOUR CHARGES OF RS.17,79,855/- WHEREIN PROVISIONS OF SECTION 194C(1) OF THE ACT APPLY. IT IS NOT IN DISP UTE THAT ASSESSEE IS COVERED UNDER THE PROVISIONS FOR DEDUCTION OF TAX A T SOURCE. AS FAR AS LIABILITY TO DEDUCT TAX AT SOURCE ON PAYMENT OF LAB OUR CHARGES IS CONCERNED THE SAME NEEDS TO BE EXAMINED ON THE BASI S OF ACTUAL FIGURE I.E. THE AMOUNT OF WORK CONTRACT AS WELL AS INDIVIDUAL BILL OF LABOUR CONTRACT CHARGES AND ALSO THE PARAMETER OF T OTAL LABOUR CONTRACT CHARGES PAID/PAYABLE TO A SINGLE PERSON D URING THE YEAR. IN ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 10 CASE IF THE BILLS OF LABOUR CONTRACT CHARGES ARE SE PARATELY DEPICTING VALUE OF GOODS AND THE VALUE OF SERVICES THEN BIFUR CATED DETAILS OF THESE AMOUNTS NEEDS TO BE ASCERTAINED. BUT IN NO CA SE CAN IT BE ESTIMATED AS THE WAY LD. CIT(A) HAS DONE BY OBSERVI NG THAT THE LABOUR PAYMENT OF THE WORK IS OF 30% OF THE TOTAL P AYMENT AND HAS RESTRICTED THE DISALLOWANCE FROM RS.17,79,855/- TO RS.5,33,965/-. 14. WE ALSO OBSERVE THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS PROPER INFORMATION AND EVIDENCES WERE N OT SUPPLIED BEFORE THE ASSESSING OFFICER FOR EXAMINING THE APPL ICABILITY OF PROVISIONS OF SECTION 194C OF THE ACT ON THE LABOUR CONTRACT CHARGES OF RS.17,79,855/- AS TO WHETHER THE COMPLETE AMOUNT OF RS.17,79,855/- IS LIABLE FOR TAX DEDUCTION AT SOURC E U/S 194C OF THE ACT OR THERE WAS ANY BIFURCATION OF THE AMOUNT ON W HICH THERE WAS NO LIABILITY FOR TDS U/S 194C OF THE ACT OR TDS OF 1 % OR 2% WAS APPLICABLE AND ALSO TO THE ISSUE ABOUT THE VALUE OF GOODS SEPARATELY SHOWN IN THE BILLS SHOWN UNDER THE HEAD LABOUR CONT RACT CHARGES. 15. WE ARE, THEREFORE, OF THE VIEW THAT THIS NEEDS TO BE SET ASIDE TO THE FILE OF LD. ASSESSING OFFICER BEFORE WHOM ASSES SEE WILL PROVIDE COMPLETE DETAILS WITH BIFURCATION OF LABOUR CONTRAC T CHARGES OF RS.17,79,855/- AND ALSO CLASSIFY THE RESPECTIVE HEA DS I.E. TDS NOT REQUIRED TO BE DEDUCTED/ TDS TO BE DEDUCTED @ 1%/TD S DEDUCTED @ 2%/VALUE OF GOODS SOLD WRONGLY MENTIONED UNDER TH E HEAD LABOUR CONTRACT CHARGES. LD. ASSESSING OFFICER HAS TO ENSU RE THAT THE PROPER OPPORTUNITY OF BEING HEARD IS GIVEN TO THE ASSESSEE AND TO FURNISH REQUISITE DETAILS AND ACCORDINGLY DECIDE AS TO WHET HER THE PROVISIONS ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 11 OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ON T HE ASSESSEE AND IF SO THEN THE DISALLOWANCE OF THE SAME CAN BE MADE AN D THAT TOO IF ASSESSEE IS UNABLE TO PROVE THAT DEDUCTEE HAS TRULY DISCLOSED THE IMPUGNED AMOUNT IN ITS INCOME-TAX RETURN DULY SUPPO RTED BY A CERTIFICATE OF CHARTERED ACCOUNTANT TO THIS EFFECT. THIS GROUND OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH MARCH, 2016 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 15/03/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 470/AHD/2011 ASST. YEAR 2007-08 12 1. DATE OF DICTATION: 109/03/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 14/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 5/3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: