ITO, Bhubaneswar V. M/s Sanjeeb Kumar Bala, Bhubaneswar

ITA 472/CTK/2012

• Counselvise Citation: 47222114 RSA 2012
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 17-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: D K MOHANTYC R JENA ARS
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 142(1); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 472/CTK/2012 / ASSESSMENT YEAR 2007 - 08 THE INCOME - TAX OFFICER, WARD 1(2), BHUBANESWAR. - - - VERSUS - M/S.SANJEEB KUMAR BALA, PLOT NO.PP - 18, ROAD NO.4, PANDAV NAGAR , TANKAPANI ROAD, BHUBANESWAR 751 014 PAN: ABAFS 3435 N ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI N.K.NEB, DR / FOR THE RESPONDENT: / SHRI D.K.MOHANTY/C.R.JENA,ARS / DATE OF HEARING: 17.12.2012 / DATE OF PRONOUNCEMENT: 21.12.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE ON THE SOLITARY ISSUE THAT THE LEARNED CIT(A) IS NOT JUSTIFIED IN LAW AS WELL AS FACTS IN HOLDING THAT PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF EXECUTION OF WORKS CON TRACT. THE ASSESSEE FIRM AS REQUIRED IN THE REGULAR COURSE OF BUSINESS ACTIVITIES MAINTAINS ALL BOOKS OF ACCOUNTS CONFIRMING TO THE PROVISIONS OF THE GUIDELINES ISSUED BY THE I NSTITUTE OF CHARTERED ACCOUNTANT OF INDIA SUCH AS CASH BOOK, LEDGER, JOURNAL REG ISTER, SUPPORTED WITH BILLS, VOUCHERS FOR EXPENSES ETC. THE TURNOVER OF THE ASSESSEE FIRM EXCEEDI NG RS. 40.00 LAKHS ARE AUDITED U/S. 44AB OF THE I .T ACT. THE RETURNS ARE FILED VOLUNTARILY. THE RETURNS FOR THE ASSESSMENT YEAR 2007 - 08 RELEVANT TO THE FINANCI AL YEAR 2006 - I.T.A.NO. 472/CTK/2012 2 07 WAS FILED ON 12.11 .2007 DISCLOSING THE TOTAL INCOME AT RS. 13,58,4 52/ - . THE RETURN WAS PROCESSED U /S. 14 3 (1) OF THE INCOME TAX ACT, 1961. SUBSEQUENTLY THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY. THE NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE FIXING THE CASE FOR HEARING. IN RESPONSE TO NOTICE U /S. 143(2) & 142(1) OF THE I.T. ACT, 1961, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FIRM APPEARED FROM TIME TO TIME WITH RELEVANT BOOKS OF ACCOUNTS, DOCUMENTS, LEDGER ACCOUNTS SUPPORTED WIT H VOUCHERS FOR EXPENSES ETC ON VARIOUS DATES. THE LD. A.O. ON PROPER APPRECIATION OF THE DOCUMENTS SUBMITTED, BOOKS OF ACCOUNTS PRODUCED, COMPLETED THE ASSESSMENT ON 21.1 2.2009 U/S. 143(3) OF THE I .T. ACT, DETERMINING THE TOTAL INCOME AT RS. 13,63,350/ - . S UBSEQUENTLY NOTICE U/S. 148 WAS ISSUED WITH THE BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASS ESSMENT. IN RESPONSE TO NOTICE U /S. 143(2) & 142(1) OF THE I.T. ACT, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME WITH RELEVAN T BOOKS OF ACCOUNTS, DOCUMENTS, LEDGER ACCOUNTS SUPPORTED WITH VOUCHERS FOR EXPENSES ETC., ON VARIOUS DATES. 2.1. IN C OURSE OF ASSESSMENT PROCEEDING U /S. 148 OF THE L.T. ACT, 1961, THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE ASSESSEE HAS DEDUCTED LOWER RATE OF TAX THAT THAN OF THE PREVAILING RATE IN THE CASE OF MACHINE HIRE CHARGES. IN OTHER WORDS, IT WAS STATED THAT INSTEAD OF DEDUCTING TAX @ 10. 3% ON THE PAYMENTS MADE TO MOHD. QUATABUDDIN UNDER THE HEAD MACHINE HIRE CHARGES, THE ASSESSEE DEDUCTED @ 1.12% AN D AS SUCH WHY THE EXPENSES UNDER THE HEAD SHALL NOT BE PROPORTIONATELY DISALLOWED INVOKING THE PROVISI ON OF SECTION 40(A)(IA) OF THE I .T. ACT, 1961. THE DETAILED EXHAUSTIVE WRITTEN NOTE OF SUBMISSION WAS FILED EXPLAINING THE FACT THAT IN THE INSTANT CASE M /S. SONJEEB KUMCIR BALA IS ONE OF THE SUB - CONTRACTOR TO THE PRINCIPAL CONTRACTOR, SR. MANAGER, CIVIL, ORISSA CONSTRUCTION CORPORATION, MANJORE I.T.A.NO. 472/CTK/2012 3 GROUP OF PROJECTS, MADHAPUR, ATHAMALIK. THE MEMORANDUM OF CONTRACTS EXECUTED BETWEEN THE PRINCIPAL CONTRACTOR AND THE SUBCONTRACTOR, TH E A SSESSEE WAS AGAIN SUBCONTRACTED TO MOHD. QUATABUDDIN ON BACK TO BACK BASIS. SINCE THE CONTRACT SO EXECUTED WAS ON TURNKEY BASIS AND INCLUDES HIRING OF MACHINERIES AND SUPPLY OF LABOUR FOR EXECUTION OF VARIOUS SITES OF MANJORE GROUP OF PROJECTS, MADHAPUR, ATHAMALIK AND THE SUB - CONTRACTOR TO THE ASSESSEE M/S. MOHD. QUATABUDDIN WAS ALSO EXECUTING THE AFORESAID WORK ON TURNKEY BASIS. AS ONE OF THE SUB - CONTRACTOR, THE ASSESSEE HAS ALSO DEDUCTED TAX AT SOURCE AS PROVIDED UNDER THE ACT TO BE DEDUCTED IN THE CASE OF SUB - CONTRACTORS. BESIDES, IF WAS ALSO RESPECTFULLY SUBMITTED THAT THE PROPOSITION OF PROPORTIONATE DISALLOWANCE UNDER THE PROVISION OF SECTION 40(A)(IA) ARE ALSO NOT PERMISSIBLE TO BE INVOKED. SINCE THE AFORESAID PROVISION PROVID ES ONLY IN THE CASE OF NON DEDUCTION OF TAX AT SOURCE AND OR AFTER DEDUCTION HAS NOT BEEN PAID, WHEREAS, IN THE PRESENT CASE, THE ASSESSEE HAS DEDUCTED TAX AT SOURCE, BUT HOWEVER, MAY BE LESSER DEDUCTION OF TAX AT SOURCE. BUT, IT NEITHER FALLS INTO THE AMB I T OF NON - DEDUCTION AND/OR AFTER DEDUCTION HAS NOT BEEN PAID. TO THE REQUIREMENT OF THE ASSESSING OFFICER THE ASSESSEE SUB - CONTRACTOR PROVIDED THE DETAILS OF PAYMENT OF THE TDS, DEDUCTED AT SOURCE IN THE CASE OF THE SUB - CONTRACTOR, M/S. MOHD. QUATABUDDIN. WITH THE AFORESAID SUBMISSION, IT WAS PRAYED TO DROP THE PROPOSITION AS ABOVE. BESIDES, IN COURSE OF APPEARANCE, THE ASSESSEE WAS ALSO ASKED TO PROVIDE THE DETAILS OF THE EXPENSES CLAIMED AS DEDUCTION UNDER THE HEAD DONATION AMOUNTING TO RS. 1,04,000/ - . IT WAS ALSO SUBMITTED THAT THE AFORESAID DETAILS WERE PRODUCED BEFORE THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT TO HIS REQUIREMENT ON 3.11.2009 AND ON BEING SATISFIED WITH SUCH EXPENDITURE SUPPORTED WITH THE VOUCHERS FOR EXPENSES AND THE GENUI NENESS OF SUCH EXPENDITURE IN RELATION TO THE BUSINESS OF THE I.T.A.NO. 472/CTK/2012 4 ASSESSEE WAS ALLOWED SUCH EXPENDITURE. THEREFORE, THE PRESENT REQUIREMENT TO PRODUCE THE VOUCHERS ONCE AGAIN LEADS TO CHANGE OF OPINION ON THE EXPENDITURE WHICH ARE ALREADY BEEN BROUGHT BY THE A SSESSING OFFICER ON PROPER APPRECIATION OF FACT. BUT HOWEVER, SINCE THE VOUCHERS WERE RELATED TO THE FINANCIAL YEAR 2006 - 07 AND MORE PARTICULARLY IN ABSENCE OF THE THEN ACCOUNTANT DEALING WITH THE ACCOUNTS, THE ASSESSEE SOUGHT FOR SOME TIME TO PRODUCE THE SAME. HOWEVER, NO TIME WAS ALLOWED. THE ASSESSING OFFICER COMPLETED THE REOPENED ASSESSMENT ON DATED 31.10.2011 U/S. 143/147 OF THE I .T. ACT, DETERMINING THE TOTAL INCOME AT RS. 1,42,33,040/ - D ISALLOWING EXPENSES UNDER THE HEAD MACHINE HIRE CHARGES PROPORT IONATELY U /S. 40(A)(IA) OF THE I .T. ACT AND ADDED THE SAME TO THE TOTAL INCOME AND FURTHER ALSO DISALLOWED THE SUBSCRIPTION AND DONATION ENTIRELY. 2.2. BEING AGGRIEVED WITH SUCH ASSESSMENT AND THE DEMAND OF TAX CALCULATED THEREON INCLUDING LEVY OF INTEREST U /S S . 234A, B, C & D, THE ASSESSEE IS PREFERRED APPEAL BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) CONSIDERED THE CASE OF THE ASSESSEE ON THE OBSERVATIONS AS IN PARAGRAPH 3.3. OF HIS ORDER, WHICH IS REPRODUCED AS UNDER : 3.3 . I HAVE CAREFULLY CONSIDE RED THE SUBMISSIONS OF THE APPELLANT. THE AC HAS NOT PROPERLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT THAT THE PAYMENTS MADE TO THE SUB - CONTRACTOR, MOHD. QUTABUDDIN IS ON TURN - KEY BASIS, HENCE, 194C IS APPLICABLE. NO FINDING HAS BEEN GIVEN THAT SECTION 194C IS NOT APPLICABLE IN THE INSTANT CASE. IN ANY CASE, EVEN IF THE TAX WAS DEDUCTIBLE U/S.194 I , THE PROVISIONS OF SECTION 40(A)(IA) WOULD NOT APPLY IN THE INSTANT CASE. SECTION 40(A)(IA) IS APPLICABLE FOR NON - DEDUCTION OF TAX AND NOT FOR LOWER DEDUCTION . THE APPELLANT HAS DEDUCTED TAX WHICH COULD HE CONSIDERED TO BE AT LOWER RATE APPLYING PROVISIONS OF SECTION 194I AND THE REMEDY FOR THE DEPARTMENT LIES WITH RAISING THE CORRECT AMOUNT OF DEMAND IF ANY, AND NOT DISALLOWING U/S.40(A)(IA). THE AD HAS APPLI ED SECTION 40(A)(IA) ONLY BECAUSE OF DIFFERENCE OF INTERPRETATION OF THE TDS SECTION, I.E. WHETHER 194C OR 194 I IS APPLICABLE. THE SHORTAGE OF TDS BY APPLYING THE PROVISIONS OF SECTION 194 I COULD HAVE BEEN MADE UP BY RAISING THE DEMAND U/S.194 I AND I.T.A.NO. 472/CTK/2012 5 NOT BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA). THE ASSESSEE HAS DEDUCTED TAX U/S.194C, HENCE IT IS NOT A QUESTION OF NON - DEDUCTION FOR WHICH SEC.40(A)(IA) HAS NO APPLICATION. THE DECISIONS CITED BY THE APPELLANT CLEARLY SUPPORT THE VIEW THAT SEC.40(A)(IA) C ANNOT BE INVOKED WHEN TAX IS DEDUCTED UNDER WRONG PROVISIONS OF TDS. IN VIEW OF THE SAME, THE ADDITION U/S.40(A)(IA) IS DIRECTED TO BE DELETED. 3. WE HAVE HEARD BOTH PARTIES AT LENGTH AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ON PERUSAL OF THE ORDER OF THE LEARNED CIT(A) WE DO NOT FIND ANY INFIRMITY THEREIN INSOFAR AS THE LEARNED COUNSEL OF THE ASSESSEE HAS ALSO SUPPORTED THE CONTENTION OF THE LEARNED CIT(A) RELYING ON THE ORDER OF THE ITAT, C BENCH, MUMBAI IN THE CASE OF DCIT V. M/S.CHANDABHOY & JAS SOBHOY IN ITA NO.20/MUM/2010 WHEN THE PROVISION FOR DISALLOWANCE U/S.40(A)(IA) COULD BE INVOKED IF THE TAX DEDUCTION AT SOURCE HAS NOT BEEN MADE ON THE EXPENDITURE IN ACCORDANCE WITH THE PROVISIONS OF THE I.T.ACT. THE LEARNED DR HAS THEREFORE SUBMITTED TH AT BECAUSE THE PROVISIONS FOR DEDUCTION OF TAX AT SOURCE AS GIVEN IN CHAPTER XVIIB OF THE I.T.ACT INDICATE THE RATE OF SUCH TAX WHICH SUCH TAX HAS TO BE CONSIDERED UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA) HAS BEEN MISINTERPRETED BY THE LEARNED C IT(A). TO THIS AS A REJOINDER, THE LEARNED COUNSEL OF THE ASSESSEE HAS SUBMITTED THE DECISION OF ITAT, KOLKATA IN THE CASE OF DCIT V. S.K.TEKRIWAL IN ITA NO.1135/KOL/2010 (COPY PLACED ON RECORD ), WHEREIN THE TRIBUNAL HELD AS UNDER : 6. .. .WE ARE OF T HE VIEW THAT THE CONDITIONS LAID DOWN U/S.40(A)IA) OF THE ACT FOR MAKING ADDITION IS THAT TAX IS DEDUCTIBLE AT SOURCE AND SUCH TAX HAS NOT BEEN DEDUCTED. IF BOTH THE CONDITIONS ARE SATISFIED THEN SUCH PAYMENT CAN BE DISALLOWED U/S.40(A)(IA) OF THE ACT BUT WHERE TAX IS DEDUCTED BY THE ASSESSEE, EVEN UNDER BONAFIDE WRONG IMPRESSION, UNDER WRONG PROVISIONS OF TDS, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE INVOKED . I.T.A.NO. 472/CTK/2012 6 IN VIEW OF THE ABOVE, CONSIDERING THE FACTS AND CIRCUMSTANCES AS NARRATED EARLIE R, WE HAVE NO HESITATION IN UPHOLDING THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN THE INSTANT CASE AND DISMISSING THE APPEAL BY THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. S D/ - S D/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 21.12.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : M/S.SANJEEB KUMAR BALA, PLOT NO.PP - 18, ROAD NO.4, PANDAV NAGAR, TANKAPANI ROAD, BHUBANESWAR 751 014 2 / THE RESPONDENT: THE INCOME - TAX OFFICER, WAR D 1(2), BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 17.12.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.12.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEM ENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.12.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON W HICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.