Sunil Vaid, Delhi V. ITO, Gurgaon

ITA 5343/DEL/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5530 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 01-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Principle of natural justice
• Section: 194C; 201(1); 28

Judgement Text

1 ITA NO. 5343/DEL/2014 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI MS SUCHITRA KAMBLE, JUDICIAL MEMBER AND SH. PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5343/DEL/201 4 ( A.Y 2009-10) SUNIL VAID C/O. KAPIL GOEL ADV. F-26/124, SECTOR-7, ROHINI DELHI ADVPV9650R (APPELLANT) VS ITO WARD-II (3) GURGAON (RESPONDENT) APPELLANT BY SH. KAPIL GOEL, ADV RESPONDENT BY SH. KAUSHLENDRA TIWARI, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 22/07/2014 PASSED BY CIT(A)-II, FARIDABAD. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT- A ERRED IN NOT DELETING THE UNLAWFUL AND WRONGFUL A DDITION MADE BY LD. ASSESSING OFFICER/AO AMOUNTING TO RS. 103,09,809/- U/S 40(A)(IA) OF THE ACT FOR ALLEGED VIOLATION OF APPLICABLE TDS PROVISIONS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT- A ERRED IN NOT DELETING THE UNLAWFUL AND WRONGFUL A DDITION MADE BY LD. ASSESSING OFFICER/AO AMOUNTING TO RS 102,74,788 BEI NG HIRE CHARGES WITHOUT DATE OF HEARING 05.03.2018 DATE OF PRONOUNCEMENT 13.04.2018 2 ITA NO. 5343/DEL/2014 APPRECIATING FOLLOWING UNCONTROVERTED FACTS: A. ASSESSEE IS NOT OWNING ANY CAB IN ITS OWN NAME AND SERVICES ARE TAKEN FROM OUTSIDE CAB OWNERS FOR GIVING TO CLIENT (PARA 3.2) B. ASSESSEE IS MERELY AN INTERMEDIARY AND INTERFACE B ETWEEN CAB OWNER AND ULTIMATE CUSTOMER; C. BOOK ENTRIES (AUDITED OR NON AUDITED) ARE NOT SACR OSANCT AND ARE NOT CONCLUSIVE TO TAXATION (PARA 3.8); D. NO PERSON CAN EVEN EARN RS. 1.07 CRORES (APP) FROM RECEIPTS OF RS 2.21 CRORES IN ASSESSEES LINE OF TRADE WHICH IN TURN DE FIES ULTIMATELY ONLY INCOME CAN BE TAXED AND NOT RECEIPTS; E. THERE IS MARGINAL OR NIL TAXABILITY IN HANDS OF PA YEE (CAB OWNERS) LISTED AT PAGE 2 TO 7 OF IMPUGNED ASSESSMENT ORDER, WHICH GOE S TO ROOT OF THE MATTER AS PER SECOND PROVISO TO SECTION 40(A)(IA) HELD TO BE RETROSPECTIVE IN OPERATION; F. HIRE CHARGES CONSTITUTE OVERRIDING AND DIRECT COST S FALLING OUTSIDE SECTION 40(A)(IA); 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE AND IN LAW, THE LD CIT- A ERRED IN NOT DELETING THE UNLAWFUL AND WRONGFUL A DDITION MADE BY LD. ASSESSING OFFICER/AO AMOUNTING TO RS 45,021 ON PAYM ENT TO RELIANCE CAPITAL DEHORS SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT; 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LEARNED CIT-A ERRED IN SUSTAINING THE ORDER OF LD AO IN MAK ING DISALLOWANCE U/S 40(A) (IA) OF THE ACT WITHOUT APPRECIATING THAT AFT ER STATED DISALLOWANCE ASSESSEE'S TAXABLE PROFITS WILL BECOME ASTRONOMICAL AND MAGICAL WHICH WILL REACH NEAR TO TAXING GROSS RECEIPTS. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO, AMEND, MODIFY, RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STATED HEREI N ABOVE, EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. DURING THE YEAR, THE ASSESSEE WAS CARRYING ON TH E BUSINESS OF CAB SERVICE. THE TOTAL TURNOVER DURING THE YEAR WAS DEC LARED AT RS.2,21,88,937/- AGAINST WHICH NET PROFIT OF RS.4,67,859/- WAS SHOWN BY THE ASSESSEE. THE ASSESSEE DEBITED THE HIRE CHARGES OF RS.1,44,52,463 /-. THE ASSESSING OFFICER OBSERVED THAT UNDER THE PROVISIONS OF SECTION 194C. THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE ON THE HIRE CHARGES PAYMENT MA DE BY THE ASSESSEE. A NOTICE U/S 143(2) WAS ISSUED ON 19/24.08.2010, IN R ESPONSE TO THE NOTICE THE 3 ITA NO. 5343/DEL/2014 ADVOCATE OF THE ASSESSEE APPEARED BEFORE THE ASSESS ING OFFICER. FRESH NOTICES U/S 143(2)/142(1) ALONG WITH QUESTIONNAIRE WERE ISS UED. THE ASSESSING OFFICER MADE TOTAL DISALLOWANCES OF RS.1,02,64,788/- U/S 40 (A) (IA) OF THE INCOME TAX ACT, 1961. THE INTEREST AMOUNT OF RS.45,21,000/- W AS ALSO DISALLOWED U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. 4. AGGRIEVED BY THE SAME, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT THE AMOUNT BEING DIREC T COST U/S 28 (I) CANNOT COME UNDER THE PURVIEW OF SECTION 40(A)(IA). THERE IS A DIFFERENCE BETWEEN WORD PAYABLE AND PAID FOR THE PURPOSE OF SECTIO N 40(A)(IA) IN SO FAR AS HIRE CHARGES ARE CONCERNED. THERE IS MERE FACILITATION BETWEEN CAR OWNER AND CAR HIRED BY THE ASSESSEE. HENCE, THE ASSESSING OFFICE R AS WELL AS THE CIT(A) FAILED TO LOOK INTO THESE ASPECTS OF THE MATTER. THE LD. A R SUBMITTED THAT ASSESSEE IS AN AGGREGATOR AND HE HAS NOT PAID ANY SUM TO THE TA XI DRIVERS. THE LD. AR FURTHER SUBMITTED THAT EXPENSES INCURRED ARE HIT BY SECTION 40(A)(IA) ARE ONLY EXPENSES COVERED UNDER SECTION 30 TO 38 OF THE ACT . THESE PAYMENTS ARE FALLING U/S 28 OF THE ACT. THE LD. AR SUBMITTED THA T NO TAX IS REQUIRED TO BE DEDUCTED AS THE AMOUNTS WERE NOT SUBJECT TO PROVISI ONS U/S 40(A)(IA) OF THE ACT FOR PREVIOUS YEAR 194C(4) OF THE ACT. THE LD. AR FU RTHER SUBMITTED SECTION 201 IS NOT APPLICABLE AT ALL. THE LD. AR RELIED UPON TH E DECISION OF THE DELHI HIGH COURT IN CASE OF CIT VS. HARDARSHAN SINGH 350 ITR 4 27 AND THE HON'BLE SUPREME COURT DECISION IN CASE OF CIT(A) VS. M/S MO DI PON LTD. THE LD. AR ALSO RELIED UPON THE DECISION PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12 BEING ITA NO. 2414/DEL/2016. 6. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND THE CIT(A). 7. THE LD. AR WAS ALSO CONFRONTED WITH THE DECISION OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (P) LTD . [2015] 377 ITR 635 (DEL). 4 ITA NO. 5343/DEL/2014 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS REGARDS THE DISALLOWANCE MADE BY THE AS SESSING OFFICER IN RESPECT OF THE RECEIPTS WHETHER PAID TO THE ASSESSEE OR NOT HA S NOT BEEN VERIFIED PROPERLY BY THE ASSESSING OFFICER. WE REJECT THE ARGUMENT O F THE ASSESSEE THAT EVEN IF THE ASSESSSEE IS AN AGGREGATOR PROVISION OF SECTION 194C OF THE ACT APPLIES. AS THE PROVISION STANDS WITH THE WORDS ANY PERSON RES PONSIBLE FOR MAKING PAYMENTS IS COVERED UNDER THE AMBIT OF SECTION 194 C OF THE ACT. IN THIS CASE, WE DO NOT AGREE THAT AGGREGATOR IS ALSO RESPONSIBLE FOR PAYING SUM TO A CONTRACTOR. WE ALSO REJECT THE CONTENTION OF THE AS SESSEE THAT THE ASSESSEE SHOULD BE CONSIDERED AS ASSESSEE IN DEFAULT BEFOR E MAKING ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. IT IS PERTINENT TO NOTE THAT ORDER TO BE PASSED U/S 201(1) AS WITH REFERENCE TO VARIOUS PROVISIONS OF E NHANCEMENT, SHORTFALL AND PENALTY ETC. WITH RESPECT TO NON DEDUCTION OF TAX A T SOURCE. THUS SECTION DOES NOT RELATE TO COMPUTATION OF TOTAL INCOME UNDER THE HEAD BUSINESS AND PROFESSION. THE LD. AR ALSO SUBMITTED THAT A.O SHOU LD HAVE REJECTED THE TAX AMOUNTS OF THE ASSESSEE AND THEREFORE THE DISALLOWA NCE U/S 40(A)(IA) SHOULD NOT HAVE BEEN MADE. WE DO NOT AGREE WITH THE CONCL USION OF THE LD. AR FOR THE SPECIFIC REASON THAT MERELY AS OF CERTAIN EXPENDITU RE IF TAX IS NOT DEDUCTED CANNOT MAKE THE BOOKS OF ACCOUNTS DEFECTIVE. IN TH E PRESENT CASE, THE AO HAS STATED THAT EXPENDITURE IS OTHERWISE ALLOWABLE BUT FOR NON DEDUCTION OF THE SAME ON IT IS ALLOWED. COMING TO THE ISSUE WHETHER THE ASSESSEE IS A SPECIFIED PERSON WHO IS REQUIRED TO DEDUCT TAX AT SOURCE, IT WAS SUBMITTED THAT ACCORDING TO EXPLANATION (I) (L), THE BOOKS OF ACCO UNTS WERE NOT ATTRIBUTABLE FOR PREVIOUS YEAR, THEREFORE, HE IS NOT REQUIRED TO DED UCT TAX AT SOURCE. BEFORE US, NO SUCH DETAILS WERE PRODUCED TO SHOW THAT ASSESSEE IS OUT OF THE PURVIEW OF SPECIFIED PERSON. THEREFORE, WE SET ASIDE THE ARGU MENT OF THE ASSESSEE TO THE FILE OF AO TO REFER FIRST WHETHER ASSESSEE IS A SPE CIFIED PERSON U/S 194C OR NOT. EVEN IF THE ASSESSSEE IS A SPECIFIED PERSON IT IS H ELD BY HONBLE DELHI HIGH COURT IN CASE OF ANSAL LANDMARK P LTD. THAT THE SEC OND PROVISO TO SECTION 201 OF THE ACT APPLIES RETROSPECTIVELY, THEREFORE, BEF ORE MAKING ANY DISALLOWANCE THE ASSESSEE HAS TO SATISFY THE CRITERIA AS PER THE PROVISIONS AND ACCORDINGLY, 5 ITA NO. 5343/DEL/2014 THE BENEFIT MAY BE GRANTED TO ASSESSEE. FOR THIS AS SESSEE IS DIRECTED TO PRODUCE RELEVANT DOCUMENTS BEFORE THE ASSESSING OFFICER. TH US, THE ORDER OF THE CIT(A) IS SET ASIDE AND THE MATTER IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN OPPORTUN ITY OF HEARING BY FOLLOWING PRINCIPALS OF NATURAL JUSTICE. 9. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL, 2018 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 13/04/2018 R.N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 5343/DEL/2014 DATE 1. DRAFT DICTATED ON 06/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 07/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 13.04.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 13.04.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 5343/DEL/2014