The ACIT, Circle-1, RAJKOT-GUJARAT V. Shri Mahesh Savjibhai Katariya, RAJKOT-GUJARAT

ITA 493/RJT/2012

• Counselvise Citation: 49324914 RSA 2012
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV RANADE DR WES
• Assessee Lawyers: DM RINDANI
• Section: 143(3); 6

Judgement Text

I , IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT. . . R . . BEFORE SHRI T. K. SHARMA JM AND SHRI D. K. SRIVASTAVA AM ITA NO. 4 9 3 /RJT/2012 W W / ASSESSMENT YEAR 200 7 - 08 THE ASS ISTANT . COMMISSIONER OF INCOME - TAX, CIRCLE - 1 , RAJKOT. ( / APPELLANT) SHRI MAHESH SAVJIBHAI KATARIA , TAL: KOTADA SANGANI, POST BHAVA, VILLAGE SAR. PAN : AKJPK35 72G / RESPONDENT 6 S / REVENUE BY SHRI RAJIV RANADE , DR WES / ASSESSEE BY SHRI D. M. RINDANI, CA S / DATE OF HEARING 2 1 - 06 - 2013 S / DATE OF PRONOUNCEMENT 12 - 0 7 - 2013 / ORDER . . , R / T. K. SHARMA, J. M. : THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER DATED 27 - 06 - 2012 OF CIT (A) - I, RAJKOT FOR THE ASSESSMENT YEAR 200 7 - 08 . 2. T HE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL. FOR THE ASSESSMENT YE AR UNDER APPEAL, HE FILED THE RETURN OF INCOME ON 12 - 10 - 2007 DECLARING THE INCOME OF RS.6,15,460/ - . AO FRAMED THE ASSESSMENT U/S. 143(3) OF THE I.T. ACT, 1961 ON 28 - 04 - 2009 AT TOTAL INCOME OF RS.6,80,460/ - . SUBSEQUENTLY, THIS ASSESSMENT WAS REOPENED U/S. 148 BY ISSUING NOTICE ON 22 - 03 - 2011 . THEREAFTER, AO FRAMED THE ASSESSMENT U/S.143(3), R.W.S. 147 OF THE I. T. ACT ON 19 - 10 - 2011AT TOTAL INCOME OF RS.2,17,24,703/ - AS UNDER: - RS. TOTAL INCOME AS PER ORDER U/S. 143(3) DT. 28/04/2009 6,80,460/ - LES S: LUMP SUM DISALLOWANCE MADE OUT OF LABOUR EXPENSES IN THE ASSESSMENT ORDER DT.28/04/09 50,279/ - 6,30,460/ - ADD: 1)ADDITION U/S.40(A)(IA) OF THE I.T. ACT AS DISCUSSED IN PARA - 4 ABOVE. 2,10,94,243/ - TOTAL ASSESSED INCOME 2,17,24,703/ - R OUNDED OFF: RS.2,17,24,700/ - ITA 4 9 3 - 201 2 2 IN THE ASSESSMENT ORDER U/S.143(3) R.W.S. 147 OF THE I.T. ACT, 1961, AS CAN BE SEEN FROM THE ABOVE, AO DISALLOWED LABOUR EXPENSES OF RS.2,10,94,243/ - BEING PAYMENT MADE TO THE MUKADDAM/LABOUR SUPPLIERS BY INVOKIN G THE PROVISIONS CONTAINED IN SEC.40(A)(IA) OF THE I.T. ACT, 1961. THE REASONING GIVEN BY AO IS THAT IN CLAUSE 27(A) OF FORM NO.3CD REGARDING COMPLIANCE OF THE PROVISIONS OF CHAPTER XVII - B, THE ACCOUNTANT HAD REPORTED THAT NO TAX WAS DEDUCTED AT SOURCE. I N TH IS TAX AUDIT REPORT ITSELF IT WAS STATED THAT EVEN THOUGH CREDIT WAS SHOWN IN THE NAMES OF LABOUR SUPPLIERS, THE PAYMENTS WERE MADE DIRECTLY TO THE LABOURERS AND NOT TO THE LABOUR SUPPLIERS. 3 . ON APPEAL, IN THE IMPUGNED ORDER THE LD. CIT (A) DELETED THE AFORESAID ADDITION OF RS.2,10,94,243/ - FOR THE DETAILED REASON GIVEN IN PARA - 4.2, WHICH READS AS UNDER: - 4.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF THE APPELLANT. IT HAS BEEN HELD BY TH E HONBLE ITAT, AHMEDABAD IN THE CASE OF LAXMI PROTEIN PRODUCTS PVT. LTD. (3 ITR 768) (2010) THAT WHEN THE PAYMENTS MADE TO LABOURER THROUGH THEIR REPRESENTATIVE AND SINGLE PAYMENT DOES NOT EXCEED RS.20,000/ - , TAX NEED NOT BE DEDUCTED AT SOURCE. IN THE INS TANT CASE, THE PAYMENTS WERE MADE TO LABOURERS THROUGH MUKADAM WHICH IS EVIDENT FROM THE LEDGER ACCOUNT OF LABOUR EXPENSES AND SINGLE PAYMENT DOES NOT EXCEED RS.20,000/ - . MOREOVER, THE PROVISIONS OF S.40(A)(IA) ARE NOT APPLICABLE IF THE PAYMENT OF EXPENDI TURE HAS ALREADY BEEN MADE OR THE EXPENDITURE IS NOT OUTSTANDING AT THE END OF THE FINANCIAL YEAR. RELIANCE CAN ALSO BE PLACED ON THE DECISION IN THE CASE OF MERILYNE SHIPPING & TRANSPORT V. ACIT (2012) 136 ITS 23 (VISHAKHAPATNAM (SB) / 20 TAXMAN 244. THE REFORE, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE AND THE LEGAL POSITION IN THE CASES OF LAXMI PROTEIN PRODUCTS P. LTD. (SUPRA) & MERILYNE SHIPPING & TRANSPORT (SUPRA) THE DISALLOWANCE OF RS.2,10,94,243/ - IS HEREBY DIRECTED TO BE DELET ED. AGGRIEVED WITH THE ORDER OF LD. CIT (A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUND: - 1 . THE LEARNED CIT (A) - I, RAJKOT ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION RS.2,10,94,243/ - ON ACCOUNT OF DEDUCTION CLAIMED U/S.40( A)(IA) OF THE I.T. ACT. 4 . AT THE TIME OF HEARING BEFORE US, SHRI RAJIV RANADE, DR APPEARED FOR THE REVENUE POINTED OUT THAT THE ASSESSEE MADE PAYMENT TO LABOURER THROUGH MUKADAM AS IS EVIDENT FROM THE LEDGER ACCOUNT OF LABOUR EXPENSES , THEREFORE THE ASSE SSEE OUGHT TO HAVE DEDUCTED THE TAX AT SOURCE . SINCE, THE ASSESSEE HAS NOT ITA 4 9 3 - 201 2 3 DEDUCTED THE TDS, THE AO RIGHTLY INVOKED THE PROVISIONS CONTAINED IN SEC.4 0(A)(IA) OF THE I. T. ACT, 1961 AND DISALLOWED RS.2,10,94,243/ - . WITH REGARD TO DECISION OF ITAT(SB) (VI SHAKHAPATNAM) IN THE CASE OF MERILYNE SHIPPING & TRANSPORT, THE LD. DR POINTED OUT THAT THIS DECISION IS NO MORE GOOD LAW AS PER LATEST JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIKANDARKHAN N. TUNVAR REPORTED IN [2013] 33 TAXMANN.CO. 13 3(GUJ.). 5 . ON THE OTHER HAND, SHRI D. M. RINDANI, CA APPEARED FOR THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT (A). THE COUNSEL OF THE ASSESSEE POINTED OUT THAT THE LD. CIT (A) DELETED THE ADDITION FOR TWO REASONS NAMELY; FIRST THE PAYMENTS AS A MATTER OF FACT WERE MADE DIRECTLY TO THE LABOURER THROUGH THEIR REPRESENTATIVE. THE COUNSEL OF THE ASSESSEE FURTHER CLARIFIED THAT THE REPRESENTATIVE OF THE LABOUR IS IN FACT NOT AN INDEPENDENT CONTRACTOR BUT HE IS REPRESENTATIVE THE ASSESSEE AND SINCE INDIVIDUAL PAYMENT NEVER EXCEEDED RS.20,000/ - , THE TAX WAS NOT DEDUCTED AT SOURCE. IN SUPPORT OF THIS, HE POINTED OUT THAT THE LD. CIT (A) FOLLOWED THE JUDGMENT OF ITAT , AHMEDABAD BENCH IN THE CASE OF LAXMI PROTEIN PRODUCTS PVT. LTD. (2010) 3 ITR 768. T HE SECOND REASON GIVEN BY LD. CIT (A) IS RELIANCE ON THE SP ECIAL BENCH OF VISHAKHAPATNAM DECISION IN THE CASE OF ME RILYNE SHIPPING & TRANSPORT (SU TRA). THE LD. DR FAIRLY CONCEDED THAT THE VIEW TAKEN BY SPECIAL BENCH IN THIS DECISION IS NO T MORE GOOD IN LA W IN VIEW OF THE JUDGMENT OF OUR HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SIKANDARKHAN N. TUNVAR (SUPRA) RELIED BY LD. DR. CONTINUING HIS ARGUMENT, HE POINTED OUT THAT SINCE ASSESSEE WAS NOT OBLIGED TO DEDUCT TDS, THEREFORE VIEW TAKEN BY LD . CIT (A) DELETING THE DECISION FOLLOWING THE JUDGE OF ITAT, AHMEDABAD IN THE CASE OF LAXMI PROTEIN PRODUCTS PVT. LTD. (SUPRA) BE UPHELD. 6 . HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDER S OF AUTHORITIES BELOW. ADMITTEDLY, AS PER LATEST JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIKANDARKHAN N. TUNVAR (SUPRA), THE VIEW TAKEN BY THE ITAT, VISHAKHAPATNAM (SB) THAT SEC.40(A)(IA) WOULD COVER ONLY AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF A P ARTICULAR YEAR IS NOT MORE A GOOD LAW. HOWEVER, IN OUR CONSIDERED OPINION, THE VIEW TAKEN BY LD. CIT (A) DELETING THE ITA 4 9 3 - 201 2 4 DISALLOWANCE MADE U/S.40(A)(IA) DESERVES TO BE UPHELD BECAUSE THE ASSESSEE HAS MADE THE PAYMENT TO THE LABOURER THROUGH THEIR REPRESENTATIVES AND SINGLE PAYMENT DOES NOT EXCEED RS.20,000/ - . THE REVENUE HAS NOT PRODUCED ANY EVIDENCE TO DISPROVE THIS FINDING OF FACT REPORTED BY LD. CIT (A) IN THE IMPUGNED ORDER. WE THEREFORE, INCLINED TO UPHELD THE ORDER OF LD. CIT (A) KEEPING IN VIEW THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF LAXMI PROTEIN PRODUCTS PVT. LTD. (SUPRA). RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7 . THIS O RDER IS PRONOUNCED IN OP EN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( . . 6 D. K. SRIVASTAVA ) ( . . W / T. K. SHARMA) RDER / ACCOUNTANT MEMBER 6 / JUDICIAL MEMBER / ORDER DATE 12 - 0 7 - 2013. /RAJKOT NVA/ - 2 RJO RO / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - THE ASSISTANT COMMISSIONER OF INCOME - TAX , CIR - 1, RAJKOT. 2 . / RESPONDENT - SHRI MAHESH SAVJIBHAI KATARIA, TAL: KOTADA SANGANI, POST BHAVA, VILLAGE SAR. 3 . I T / CONCERNED CIT - I, RAJKOT. 4 . T - / CIT (A ) - I, RAJKOT. . 5 . I , I , / DR, ITAT, RAJKOT 6 . W / GUARD FILE. / BY ORDER TRUE COPY. PRIVATE SECRETARY, ITAT, RAJKOT