ACIT Circle - I, Warangal V. M/s. Sri V.B. Construction, Warangal

ITA 5/HYD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3113 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-01-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T VENKAT REDDY
• Assessee Lawyers: K V CHALAMAIAH
• Keywords: TDS; Set aside
• Section: 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.5/HYD/2010 : ASSTT. YEAR : 2005-2006 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, WARANGAL. VS. M/S SHRI V.B.CONSTRUCTIONS, HANAMKONDA PAN AAGFS4266A (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI T.VENKAT REDDY, CIT-DR RESPONDENT BY : SHRI K.V.CHALAMAIAH, CA O R D E R PER CHANDRA POOJARI , ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORD ER OF THE CIT(A) VI, HYDERABAD DT.14-10-2009 FOR ASSESSMENT YEAR 2 005-06. 2. REVENUE RAISED THE FOLLOWING GROUNDS IN APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDE R OF THE CIT(A) IS ERRONEOUS BOTH IN LAW AND ON FACTS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CI T(A) ERRED IN IGNORING THE FACT AND CIRCUMSTANCES FOR THE DISAL LOWANCE US 40(A)(IA)/194C BROUGHT ON RECORD BY THE ASSESSING OFFI CER. (RS.79,8,554) 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CI T(A) ERRED IN RELYING ON INAPPLICABLE DECISION RENDERED BY THE ITAT IN THE CASE OF M/S N.RAMACHANDRA REDDY (ITA NO.1372/HYD/07 DT.6- 3-2009). 2 3. THE ASSESSEE IS A CIVIL CONTRACTOR. HE DECLARED A TOTAL I NCOME OF RS.12,79,350 ON GROSS CONTRACT RECEIPTS OF RS.5,99,62,916. THE ASSESSING OFFICER AFTER MAKING VARIOUS ADDITIONS INTER ALI A, MADE DISALLOWANCE OF EXPENDITURE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 (THE ACT) AT RS.79,08,554 AND DETERMINED THE INCOME O F THE ASSESSEE AT RS.1,17,30,780. NOW THE DISPUTE BEFORE US IS WITH REG ARD TO DELETION OF THE ADDITION MADE U/S 40(A)(IA) OF THE ACT. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS CLAIMED LABOUR CHARGES OF RS.2,16,00,095 PAYABL E TOWARDS EARTH WORK CHARGES, STONE CUTTING CHARGES, CONSTRUCTION OF O .H.S.R.S. LAYING UP HDP PIPES, LAYING OF PVC PIPES AND OTHER LA BOUR CHARGES. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT ASKED THE ASSESSE E TO FURNISH COMPLETE BREAK-UP OF THIS EXPENDITURE WITH DE TAILS OF LABOUR CHARGES INCURRED ALONG WITH PARTICULARS OF TDS WHEREVER IT IS APPLICABLE. THE ASSESSEE FAILED TO FURNISH THE SAME. ON CROSS EXAMINAT ION OF COLUMN NO.27(A) OF FORM NO.3CD ENCLOSED WITH THE RETUR N OF INCOME SHOWED AS TAX DEDUCTED AT SOURCE AT NIL. IN THE ABSENC E OF REQUISITE INFORMATION IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO EXAMINE WHETHER LABOUR CHARGES WERE PAID DIRECTLY TO LABOURERS OR ANY OTHER PERSON. HE SUBMITTED THAT WHILE MAKING ASSESSMENT OF ANOT HER ASSESSEE M/S KAVERI POLYMERS IDA, WARANGAL, FOR THE ASSESSMEN T YEAR 2005-06, IT CAME TO THE KNOWLEDGE OF THE ASSESSING OFFICE R THAT THE PRESENT ASSESSEE BEFORE US WAS HAVING CERTAIN TRANSACTION DE ALING WITH M/S KAVERI POLYMERS. IT WAS OBSERVED THAT CERTAIN AMOUN TS WERE ADVANCED AND WERE ALSO RECEIVED BACK. AS PER LEDGER AC COUNT OF M/S KAVERI POLYMERS THE PRESENT ASSESSEE M/S V.B.CONSTRUCTIONS R ECEIVED TOTAL AMOUNT OF RS.79,08,554 IN THE ASSESSMENT YEAR UND ER CONSIDERATION. SINCE THE ASSESSEE HAS NOT FURNISHED THE D ETAILS, THE 3 ASSESSING OFFICER GATHERED INFORMATION AS FURNISHED BY M /S KAVRI POLYMERS. HOWEVER, THE ASSESSEE HAS NOT PRODUCED THE DETAI LS OF TDS DETAILS ON THIS AMOUNT. HE SUBMITTED THAT THE ASSESSING O FFICER HAVING NO OTHER OPTION MADE THE ADDITION FOR CONTRAVENTION OF THE PROVISIONS OF SEC.194C READ WITH SEC.40(A)(IA) OF THE ACT. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) WITHOUT THOROUGH PROBE OF THE FACTUAL SITUATIO N CAME TO THE HURRIED CONCLUSION THAT PROVISIONS OF SEC.40(A(IA) OF THE ACT ARE NOT APPLICABLE TO THE CASE ON HAND. HE SUBMITTED THAT THE CIT(A) HAS NOT GIVEN ANY SPECIFIC FINDINGS AS APPLICABLE TO THE FACTS O F THE CASE. INSTEAD OF THIS, HE REPRODUCED THE FINDINGS OF THE TRI BUNAL GIVEN IN THE CASE OF M/S M.RAMACHANDRA REDDY IN ITA NO.1372/HYD/07 D T.6-3-2009. HE PRAYED TO SET ASIDE THE MATTER TO THE FILE OF THE A SSESSING OFFICER FOR DISPOSAL AFRESH IN ACCORDANCE WITH LAW. 6. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSE E SUBMITTED THAT THERE IS NO CONTRACT RELATIONSHIP BETWEEN THE ASSES SEE AND M/S KAVERI POLYMERS. THE MONEY WAS SENT TO KAVERI POLYMER AT WARANGAL TO TO MEET DAY TO DAY EXPENDITURE OF THE ASSESSEE. THERE I S NO QUESTION OF APPLICABILITY OF SEC.194C AS WELL AS SEC.40(A0(IA) OF THE ACT. 7. WE HAVE HEARD BOTH SIDES AND PERUSED THE MATERIAL O N RECORD. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE COMPLETE BREAK-UP AND OTHER DETAILS OF LAB OUR CHARGES INCURRED ALONG WITH PARTICULARS OF TAX DEDUCTED AT SOURCE WHEREVER APPLICABLE. HOWEVER, THERE WAS NO RESPONSE FROM THE ASSESSE E. LATER ON, THE ASSESSING OFFICER GATHERED CERTAIN INFORMATION AN D CAME TO THE CONCLUSION THAT THERE IS VIOLATION OF THE PROVISIONS OF SE C.40(A)(IA) READ WITH SEC.194C OF THE ACT TO THE AMOUNT FOUND RECEIVED BY THE ASSESSEE FROM KAVERI POLYMERS. THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN 4 FURNISHING THE REQUIRED INFORMATION. AS SUCH, THE ASSESSIN G OFFICER HAS NOT CARRIED OUT DETAILED ENQUIRY AND BASED HIS CONCLUSION ON THE BASIS OF A FAX LETTER DT.17-12-2007 SUBMITTED BY MS KAVERI PLY MERS BEFORE THEIR ASSESSING OFFICER, WHEREIN THE PRESENT ASSESSEE, M/S V.B.CONSTR UCTION HAD IN ITS LETTER DT.NIL ADDRESSED TO THE ADDL.COMMI SSIONER OF INCOME TAX, WARANGAL REGARDING THE PAYMENT MADE BY IT TO M /S KAVERI POLYMERS, STATED AS FOLLOWS: WITH REFERENCE TO THE SUBJECT CITED ABOVE, WE SUBMIT THA T, THE PAYMENTS MADE TO M/S KAVERI POLYMERS, WARANGAL, THROU GH CHEQUES DURING THE FINANCIAL YEAR 204-05 ARE CONFIRMED. FUR THER, WE SUBMIT THAT, THE ABOVE PAYMENTS WERE AGAIN PAD TO OUR AGENT S AT OUR SITE AS PER OUR INSTRUCTIONS ONLY TO MEET THE DAY TO DAY EXPEN DITURES AT OUR SITE, AS WE ARE NOT SAYING A WARANGAL. SO THIS IS OUR CO NFIRMATION REGARDING PAYMENTS MADE TO OUR AGENTS FOR MAKING PAY MENTS TO LABOUR AND OTHER EXPENDITURES FOR EXECUTION OF THE CIVIL WORK S. 8. THE ASSESSING OFFICER SOLELY BASED HIS CONCLUSION ON THE BASIS OF THE ABOVE LETTER WITHOUT CARRYING OUT PROPER ENQUIRY ON THE ISSUE. IN OUR OPINION, IN THIS CASE, THOROUGH ENQUIRY IS REQUIRED RE GARDING THE APPLICABILITY OF SEC.194C READ WITH SEC.40(A)(IA) OF TH E ACT AND THE CIT(A) HAS ALSO FAILED TO EXAMINE THE ISSUE PROPERLY. IN THE INTERESTS OF JUSTICE, WE SET ASIDE THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR DISPOSAL OF THE CASE AFRESH IN ACCORDANCE WITH LAW. 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FO R STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON: 18 .6.2010. SD/- SD/- N.R.S. GANESAN CHANDRA POOJARI JUDICIAL MEMBER ACCOUNTANT MEMBER. DT/- 18 -6-2010. 5 *VNR COPY FORWARDED TO: 1. M/S KRISHNA SAI CONSTRUCTIONS, SIDDHARTHA APTS., PLOT NO.22, FLAT NO.2, MEHDIPATNAM, HYDERABAD. 2 ITO, WARD 7(1), HYDERABAD 3. 4 CIT(A)-, VI, HYDERABAD CIT, HYDERABAD. 4. THE D.R., ITAT, HYDERABAD.