M/s. Om Construction Co., Bhavnagar V. The ACIT., Circle-2, Bhavnagar

ITA 525/AHD/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9060 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 02-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: NEMISH J SHAH
• Keywords: Business expenditure; Non-deduction of tax; TDS
• Section: 143(3); 40(a)(ia)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.525/AHD/2017 (ASSESSMENT YEAR : 2012-13) OM CONSTRUCTION CO., 303, SURABHI MALL, WAGHAWADI ROAD, BHAVNAGAR 364 001. VS. ACIT, CIRCLE 2, BHAVNAGAR. [PAN NO. AAJFA 2779 D] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI NEMISH J. SHAH, A.R. RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. DATE OF HEARING 13/11/2018 DATE OF PRONOUNCEMENT 13/12/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINS T THE ORDER DATED 30.12.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 6, AHMEDABAD ARISING OUT OF THE ORDER DATED 23.05.2015 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) FOR THE ASSESSMENT YEAR 2012-13 WITH THE FOLLO WING GROUNDS: GROUND I: DISALLOWANCE OF LABOUR CONTRACT CHARGES OF RS. 1,06,8007-FOR NOT DEDUCTING TDS 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 40A(IA) OF THE ACT OF RS. 1,06,800/- FOR FAILURE TO DEDUCT TDS ON CONTRACT CHARGES PAID. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE CONTRACTOR DID NOT FI LE RETURN OF INCOME SINCE HIS TAXABLE INCOME WAS BELOW THE EXEMPT THRESHOLD L IMIT. HENCE, THE APPELLANT SATISFIED THE CONDITIONS MENTIONED IN THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT. - 2 - ITA NO.525/AHD/2017 OM CONSTRUCTION CO. VS. ACIT ASST.YEAR 2012-13 3. THE APPELLANT PRAYS THAT THE DISALLOWANCE U /S 40(A)(IA) OF THE ACT OF RS. 1,06,800/- BE DELETED. GROUND II: DISALLOWANCE OF TRANSPORT EXPENSES OF RS . 1,00,000/- ON LUMP SUM BASIS 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,00,00 0/- FOR TRANSPORT EXPENSES ON LUMP SUM BASIS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT: A. THERE ARE MORE THAN ONE WORKING SITES DURI NG THE YEAR UNDER CONSIDERATION; B. THE WORKING SITES ARE FAR FROM THE BASE OF THE APPELLANT; AND C. THERE IS CONSIDERABLE MOVEMENT OF EMPLOYEES F OR THE MANAGEMENT OF THE WORKS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE PERCENTAGE OF TRANSPO RTATION EXPENSE TO THE TURNOVER HAS DECREASED BY 1.50% AS COMPARED TO THE PREVIOUS YEAR. 4. THE APPELLANT PRAYS THAT THE LUMP SUM DISALL OWANCE OF RS. 1,00,000/- BE DELETED BY ALLOWING IT AS BUSINESS EXPENDITURE. GROUND III: 1. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL AT THE TIME OF HEARING OR BEFORE. 2. THE FIRST GROUND RELATES TO THE DISALLOWANCE OF RS.1,06,800/- U/S 40A(IA) OF THE ACT FOR NON DEDUCTION OF TDS ON CONTRACT CHARGES PAID. 3. DURING THE ASSESSMENT PROCEEDINGS, IT APPEARED T HAT THE ASSESSEE HAS MADE LABOUR PAYMENT TO THE TUNE OF RS.3,05,300/- TO ONE SHRI RA MSUBHAI C. MAVI. THE ASSESSEE HAD DEDUCTED TAX FOR PAYMENT OF RS.1,98,500/- WHEREAS N O TAX WAS DEDUCTED ON THE BALANCE PAYMENT OF RS.1,06,800/-. THE SAID PAYMENT OF RS.1, 06,800/- MADE TO MR. RAMSUBHAI C. MAVI THOUGH ON WHICH TAX WAS DEDUCTIBLE BUT SINCE N OT DEDUCTED BY THE ASSESSEE - 3 - ITA NO.525/AHD/2017 OM CONSTRUCTION CO. VS. ACIT ASST.YEAR 2012-13 EXPLANATION WAS CALLED FOR BY THE LEARNED ASSESSING OFFICER AS TO WHY SUCH PAYMENT SHOULD NOT BE DISALLOWED. IN THE ABSENCE OF ANY EXP LANATION FOR SUCH FAILURE ON THE PART OF THE ASSESSEE THE AMOUNT OF LABOUR PAYMENT OF RS.1,0 6,800/- ON WHICH TDS WAS DEDUCTIBLE WAS DISALLOWED AND ADDED TO THE TOTAL IN COME OF THE ASSESSEE. 4. IN APPEAL, THE ASSESSEE SUBMITTED BEFORE THE LEA RNED CIT(A) THAT THE PARTY THOUGH INFORMED THAT CERTIFICATE OF NON-DEDUCTION OF TAX A T SOURCES WOULD BE PROVIDED TO THE ASSESSEE FAILED TO PROVIDE THE SAME AND THUS THE AS SESSEE HAS FAILED TO DEDUCT TAX AT SOURCE. FURTHER THAT THE ASSESSEE WAS PROVIDED WITH FORM NO.26AS BY THE SAID PARTY AND WAS TOLD THAT HE HAS NOT FILED RETURN OF INCOME. IN SUPPORT OF HIS CONTENTION, THE ASSESSEE SUBMITTED THE CERTIFIED LEDGER ACCOUNT OF THE PARTY ALONG WITH SAID FORM NO.26AS AND ALSO THE AFFIDAVIT FOR NON-FILING OF RETURN OF INCO ME TAX BY THE SAID PARTY. HOWEVER, THE LEARNED CIT(A) CONFIRMED THE ORDER PASSED BY THE LE ARNED ASSESSING OFFICER IN THE ABSENCE OF LOWER DEDUCTION OF TAX CERTIFICATE SUBMI TTED BY THE APPELLANT. THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT TO THE T UNE OF RS.1,06,800/- WAS CONFIRMED. HENCE, THE INSTANT APPEAL. 5. AT THE TIME OF HEARING OF THE APPEAL, THE LEARNE D COUNSEL SUBMITTED BEFORE US THAT THE PARTY UPON WHOM THE PAYMENT HAS BEEN MADE IS NO T LIABLE FOR INCOME TAX THEREFORE HE HAS NOT FILED THE RETURN OF INCOME. HE FURTHER CONT ENTED THAT THE ASSESSEE HAS DISCHARGED ITS TAX LIABILITY WHICH IS EVIDENT FROM THE EXPLANA TION GIVEN BY HIM BEFORE THE FIRST APPELLATE AUTHORITY. ON THE OTHER HAND, LEARNED DEP ARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER PASSED BY THE AUTHORITIES BELOW. 6. WE FIND NO MERIT IN THE SUBMISSIONS MADE BY THE LEARNED AR. NEITHER THE ASSESSEE PRODUCED THE TAX CERTIFICATE NOR THE RETUR N OF INCOME OF THE PARTY. WE ARE UNABLE TO COME TO A CONCLUSION THAT THE PARTY IS NOT LIABL E FOR INCOME TAX AND THEREFORE THE ASSESSEE HAS DISCHARGED ITS LIABILITY TO DEDUCT TA X AT SOURCE WHILE MAKING SUCH LABLOUR - 4 - ITA NO.525/AHD/2017 OM CONSTRUCTION CO. VS. ACIT ASST.YEAR 2012-13 PAYMENT. THEREFORE, IN THE ABSENCE OF COGENT DOCUME NT IN SUPPORT OF THE ARGUMENT MADE BY THE LEARNED AR WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE AUTHORITIES BELOW. HENCE, GROUND OF APPEAL OF THE ASSESSEE IS DISMISSE D. 7. THE SECOND ISSUE RELATES TO THE LUMP SUM DISALLO WANCE OF RS.1,00,000/- REGARDING TRANSPORT EXPENDITURE INCURRED BY THE ASSESSEE DURI NG THE YEAR UNDER ASSESSMENT. 8. THE ASSESSEE ENGAGED IN GOVERNMENT CONTRACT WORK INCURRED TRANSPORTATION EXPENSES TO THE TUNE OF RS.18,50,792/- DURING THE Y EAR UNDER ASSESSMENT. SUCH EXPENSES IS INEVITABLE PART OF SUCH BUSINESS AS CLAIMED BY T HE ASSESSEE. FURTHER THAT THE SITE OF CONSTRUCTION WORK LOCATED AT OKHA, DWARKA, RAJKOT A ND SURENDRANAGAR ARE FAR AWAY FROM THE PLACE OF THE ASSESSEE COMPANY. THERE WAS CONSID ERABLE MOVEMENT OF EMPLOYEES FOR MANAGEMENT OF THE WORKS FOR WHICH EXPENSES WAS INCU RRED BY THE ASSESSEE. TAKING INTO CONSIDERATION THE WELFARE TO THE EMPLOYEES THE SAME IS AN ALLOWABLE EXPENDITURE UNDER THE ACT AS ALSO ARGUED BY THE LEARNED REPRESENTATIV E OF THE ASSESSEE BEFORE US AT THE TIME OF THE HEARING OF THE APPEAL. IT WAS FURTHER ARGUED BY THE LEARNED AR THAT THE AO HAS DISALLOWED THE EXPENDITURE ONLY BECAUSE, SOME OF TH E BILLS/VOUCHERS DO NOT BEAR THE TRUCK NUMBER, NAME OF THE DRIVERS, OR GOODS TRANSPORTED W HICH MADE VOUCHERS DOUBTFUL. THE LEARNED AR FURTHER ARGUED THAT ONLY BECAUSE THE BIL LS DO NOT CONTAIN TRUCK NUMBER OR THE NAME OF THE DRIVERS, THE TRANSPORT EXPENSES CANNOT BE SAID TO BE INGENUINE AND/OR NOT INCURRED BY THE ASSESSEE. HE, THUS, PRAYED FOR DELE TION OF SUCH ADDITION OF LUMP SUM AMOUNT OF RS.1,00,000/- MADE BY THE LEARNED AO, CON FIRMED BY THE LEARNED CIT(A). ON THE CONTRARY THE LEARNED DR RELIED UPON THE ORDER P ASSED BY THE AUTHORITIES BELOW. 9. WE HAVE HEARD THE RESPECTIVE PARTIES, PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LEARNED AO IN HIS ORDER OBSERVED T HAT MANY OF THE BILLS DO NOT BEAR TRUCK NUMBER OR NAME OF DRIVERS WHEREAS THE FIRST A PPELLATE AUTHORITY IN THE ORDER IMPUGNED OBSERVED THAT NO PROPER BILLS OR VOUCHERS WERE PRESENTED BY THE ASSESSEE FROM - 5 - ITA NO.525/AHD/2017 OM CONSTRUCTION CO. VS. ACIT ASST.YEAR 2012-13 WHICH THE DETAILS OF TRUCK NUMBER OR THE DRIVERS N AME OR GOODS TRANSPORTED WAS EVIDENT. IT ALSO APPEARS FROM THE RECORDS THAT THE TRANSPORT ATIONS EXPENSE FOR THE YEAR UNDER ASSESSMENT HAS DECREASED @ 1.50% IN COMPARISON WITH THE PRECEDING ASSESSMENT YEAR FACT OF WHICH WAS ALSO BROUGHT TO THE NOTICE OF THE FIRST APPELLATE AUTHORITY BY THE ASSESSEE AS IT APPEAR FROM THE ORDER IMPUGNED AS AL READY BEEN ARGUED BY THE LEARNED REPRESENTATIVE OF THE ASSESSEE BEFORE US. WE FIND T HAT MERELY BECAUSE SOME OF THE VOUCHERS DO NOT BEAR THE TRUCK NUMBER OR DRIVERS N AME THE EXPENSES CANNOT BE TERMED AS INGENUINE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. FURTHERMORE, THE DETAILS WHEREOF AS GIVEN BEFORE THE LEARNED CIT(A) OR THE N ECESSITY AS EXPLAINED FOR SUCH EXPENSES INCURRED BY THE ASSESSEE TOTALLY CANNOT BE BRUSHED ASIDE. WE, THEREFORE, TAKING INTO CONSIDERATION THE EXPENSES BEING REALLY SMALL AMOUNT WE RESTRICT THE DISALLOWANCE TO THE TUNE OF RS. 40,000/- ONLY. 10. THE 3 RD GROUND RELIED BY THE ASSESSEE IS GENERAL IN NATURE . THUS NO ORDER NEED PASSED. THUS, THE APPEAL PREFERRED BY THE ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13/12/2018 SD/- SD/- ( PRAMOD KUMAR ) ( MS. MADHUMITA ROY ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 13/12/2018 PRITI YADAV, SR.PS - 6 - ITA NO.525/AHD/2017 OM CONSTRUCTION CO. VS. ACIT ASST.YEAR 2012-13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-6, AHMEDABAD. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD