The Income-tax Oficer, Jammu V. M/s. Soma TRG Joint Venture, Jammu

ITA 472/ASR/2012

• Counselvise Citation: 47220914 RSA 2012
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-02-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 21-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: P N ARORA
• Keywords: Diversion of income; TDS
• Section: 234B; 40(a)(ia); 194C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 472(ASR)/2012 ASSESSMENT YEAR:2004-05 PAN :AABAS3756K INCOME TAX OFFICER, VS. M/S. SOMA TRG JOINT VENTUR E, WARD 1(3), JAMMU. JAMMU. (APPELLANT) (RESPONDENT) C.O. NO.01(ASR)/2013 (ARISING OUT OF I.T.A. NO. 472(ASR)/2012) ASSESSMENT YEAR:2004-05 PAN :AABAS3756K M/S. SOMA TRG JOINT VENTURE VS. INCOME TAX OFFICER, JAMMU. WARD 1(3), JAMMU. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH.R.L.CHHANALIA, DR RESPONDENT BY:SH. P.N.ARORA, ADVOCATE DATE OF HEARING: 28/02/2013 DATE OF PRONOUNCEMENT:19/03/2013 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JAMMU, DATED 18.10.2012 FOR THE ASSESSMENT YEAR 200 4-05. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: ITA NO..472(ASR)/2012 CO NO.1(ASR)/2013 2 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE U/S 40(A)( IA) OF THE INCOME TAX ACT, 1961 AS WHEN THE ASSESSMENT WAS MADE IN T HE CASE OF THE ASSESSEE, THE SAID SECTION U/S 40(A)(IA) WAS IN FO RCE. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN DELETING THE DISALLOWANCE MADE U/S 40(A)( IA) OF THE INCOME TAX ACT, 1961 WHEN THE LD. CIT(A) HAS HELD THAT T HE CONTRACT PAYMENTS OF RS.1,19,45,588/- PERTAINS TO THE ASSES SEE AND UPHELD THE NET PROFIT RATE OF 10% APPLIED BY THE REVENUE. 3. THE APPELLANT CRAVES TO AMEND OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 2. THE ASSESSEE HAS ALSO FILED C.O. BY RAISING FOL LOWING GROUNDS: 1. THAT THE LD. CIT(A) HAS GROSSLY ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE INCOME OF THE APPELLANT AT RS.1 1,94,558/-. 2. THAT THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE INVOKING AND ISSUING NOTICE U/S 147 OF THE INCOME T AX ACT. 2.2. THAT AS THE ISSUE OF NOTICE WAS NOT LEGAL, ALL OTHE R PROCEEDINGS AND ADDITIONS ARE NOT WARRANTED. 2.3. THAT THE REASON FOR REOPENING DID NOT SURVIVE, OTHE R ADDITIONS MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ARE NOT JUSTIFIED. 3. THAT WHILE CONFIRMING THE ABOVE DETERMINATION OF IN COME, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT, IT WAS A CASE OF DIVERSION OF INCOME BY OVERRIDING TITLE AND NOT A C ASE OF APPLICATION OF INCOME SINCE NO INCOME HAD ACCRUED T O THE APPELLANT IN THE FINANCIAL YEAR UNDER CONSIDERATION AS THE PROJECT AND UNDISPUTEDLY BEEN EXECUTED BY THE JOINT VENTURE S IN INDIVIDUAL CAPACITY AND, NOT THE ASSESSEE-AOP IN A CCORDANCE WITH THE JOINT VENTURE AGREEMENT READ WITH SIDE AGR EEMENTS. ITA NO..472(ASR)/2012 CO NO.1(ASR)/2013 3 3.1 THAT THE LD. CIT(A) HAS ALSO FAILED TO APPRECIATE THAT, MERE ALLOTMENT OF CONTRACT IN THE NAME OF THE APPELLANT OR CREDIT OF RECEIPTS IN THE BANK ACCOUNT OF APPELLANT DOES NOT RESULT INTO ACCRUAL OF INCOME. 3.2 THAT THE LD. CIT(A) HAS FURTHER FAILED TO APPRECI ATE THAT THE VARIOUS JUDICIAL DECISIONS RELIED UPON BY THE APPE LLANT WERE FULLY APPLICABLE TO THE FACTS OF THE CASE OF THE A SSESSEE, WHICH HAVE NOT BEEN CONSIDERED BY HIM. 3.3 THAT THE LD. CIT(A) HAS ALSO TO APPRECIATE THAT, NO REAL INCOME ACCRUED ONLY TO THE JOINT VENTURES AND, NOT TO TH E APPELLANT JOINT VENTURE AND HENCE, THE A.O. WAS HIGHLY UNJUSTIFIED IN CONFIRMING THE IMPUGNED ADDITION BY HOLDING THAT, THE RECEIPTS FROM THE EXECUTION OF THE PROJECTS HAS ACCRUED TO THE APPELLANT. 4. THAT THE AO HAS FURTHER ERRED IN THE LEVY OF INT EREST U/S 234B AND 234C OF THE ACT. 5. THE ASSESSEE CRAVES LEAVE TO ADD OR AMEND THE GR OUNDS OF APPEAL. 3. THE BRIEF FACTS IN THE APPEAL OF THE REVENUE ARE THAT DURING THE ASSESSMENT YEAR, THE ASSESSEE HAD RECEIVED PAYMENT OF RS.1,19,45,558/- FROM THE RAILWAY AUTHORITIES ON ACCOUNT OF EXECUTIO N OF CONTRACT. OUT OF THIS, AN AMOUNT OF RS.3,58,366/- WAS PAID TO M/S. SOMA ENTERPRISES LTD. AND AN AMOUNT OF RS.1,15,87,220/- WAS PAID TO M/S. TRG INDUSTRIES PVT. LTD. THESE PAYMENTS WERE REFLECTED IN THE RECEIPT AND PAYMENT A/C AND NO PROFIT AND LOSS ACCOUNT WAS FURNISHED BY THE ASSES SEE WITH THE RETURN OF INCOME. IT WAS OBSERVED THAT THE ASSESSEE HAS FAIL ED TO APPLY THE PROVISIONS OF SECTION 194C OF THE ACT IN RESPECT OF PAYMENTS M ADE TO M/S. TRG ITA NO..472(ASR)/2012 CO NO.1(ASR)/2013 4 INDUSTRIES LTD. WHICH WERE SUBJECT TO TAX AND ACCO RDINGLY MADE AN ADDITION U/S 40(A)(IA) OF THE ACT. 4. THE LD. CIT(A) VIDE PARA 3.4 OF HIS ORDER, KEEPI NG IN VIEW THE ORDER OF THE ITAT, AMRITSAR BENCH FOR THE ASSESSMENT YEA RS 2005-06 & 2006-07 IN ASSESSEES OWN CASE HELD THAT THE AO HAS POINTE D OUT SIMILAR ADDITIONS FOR THE ASSESSMENT YEARS 2005-06 & 2006-07, WHICH H AVE BEEN UPHELD IN FAVOUR OF THE DEPARTMENT BY THE ITAT, AMRITSAR BENC H. THEREFORE, THE INCOME SHOULD NOT ONLY BE ASSESSED BUT SHOULD BE AS SESSED IN THE RIGHT HANDS, FOLLOWING THE DECISION OF THE ITAT, AMRITSAR FOR THE ASSESSMENT YEAR 2005-06 & 2006-07. ACCORDINGLY, NET PROFIT RATE OF 10% ON GROSS RECEIPTS OF RS.1,19,45,588/- WAS CONSIDERED AS REASONABLE AND J USTIFIED AND ACCORDINGLY, HE CONFIRMED THE ADDITION. THE LD. CIT(A) FURTHER HELD THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CAME INTO EFFECT W. E.F.01.04.2005, WHICH CANNOT BE APPLIED IN THE INSTANT CASE DESPITE FAVO URABLE FINDINGS BY THE ITAT, AMRITSAR BENCH IN THE SUBSEQUENT YEAR. ACCORD INGLY. ADDITION OF RS.1,19,45,588/- WAS DELETED AND ADDITION OF RS.11, 94,558/- WAS CONFIRMED. 5. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE ASSESSING OFFICER. ITA NO..472(ASR)/2012 CO NO.1(ASR)/2013 5 6. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N. ARORA , RELIED UPON THE ORDER OF LD. CIT(A) AND PRAYED THAT NO ADDITION OF NET PROFIT RATE @ 10% ON THE GROSS RECEIPTS CAN BE MADE. 7. WE HAVE PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE PROVISIONS OF SECTION 40(A)(IA) CAME INTO EFFECT W.E.F. 01.04.2005 FOR THE RELEVANT ASSESSMENT YEAR 2005-06 AND THEREF ORE, NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE EVEN IF THE ASSESSEE HAS CON TRAVENED THE PROVISIONS OF SECTION 194C OF THE ACT, I.E. TDS PROVISIONS IN TH E IMPUGNED YEAR I.E. ASSESSMENT YEAR 2004-05. THEREFORE, IN THE FACTS AN D CIRCUMSTANCES OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS PASSED A WELL REASONED ORDER AND HAS RIGHTLY ALLOWE D THE APPEAL OF THE ASSESSEE. THUS, ALL THE GROUNDS OF THE REVENUES AP PEAL ARE DISMISSED. 8. AS REGARDS C.O. NO.01(ASR)/2013 OF THE ASSESSEE , THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N. ARORA HAS TAKEN ALTERNATE PL EA FOR NOT CONFIRMING THE ADDITION MADE BY THE A.O. IN THE FORM OF CROSS OBJE CTION AND WE FIND NO BASIS FOR THE SAID C.O. RAISED BY THE ASSESSEE BEF ORE US AND ACCORDINGLY, THE SAME IS DISMISSED. ITA NO..472(ASR)/2012 CO NO.1(ASR)/2013 6 8. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE IN ITA NO.472(ASR)/2012 AND C.O. NO.1(ASR)/2013 OF THE ASSESSEE ARE DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH MARCH, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 19TH MARCH, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. SOMA TRG JOINT VENTURE, JAMMU. 2. THE WAD 1(3), JAMMU. 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.