M/s S. D. Gupta, Burdwan V. ACIT CIR-2, BURDWAN, Burdwan

ITA 542/KOL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6336 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 29-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Business expenditure
• Section: 194C

Judgement Text

1 ITA NO. 542/KOL/2016 S. D. GUPTA, AY 2010-11 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NO. 542/KOL/2016 ASSESSMENT YEAR: 2010-1 M/S. S. D. GUPTA (PAN: ABAFS5810K) VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, BURDWAN. APPELLANT RESPONDENT DATE OF HEARING 13.02.2018 DATE OF PRONOUNCEMENT 09.05.2018 FOR THE APPELLANT SHRI SHUVO CHAKRABORTY, ADVOCATE FOR THE RESPONDENT SHRI SAURABH KUMAR, ADDL. CIT, S R. DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF LD. CIT(A), BURDWAN, DATED 27.01.2016 FOR AY 2010-11. 2. GROUND NOS. 1 AND 2 ARE AGAINST THE ACTION OF T HE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE ON HIRE CHARGES U/S. 194I OF THE INCOM E-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WHEREAS THE AO DISALLOWED U/S. 194C O F THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED TH AT ASSESSEE DEBITED RS.14,26,500/- AS HIRE CHARGES FOR MACHINERY IN THE P&L ACCOUNT. THE AO HAS REPRODUCED THE CHART OF THE DETAILS OF MACHINERY HIRE CHARGES AS UNDER: SL. NO. NAME OF THE PARTIES AMOUNT PAID (RS.) 1. 2. 3. 4. 5. GANESH PATRA (RS.157260 + RS.123950) NIPEN CHANDRA SAKRAR (RS.46600 + RS.244600) JHARNA PATRA (RS.169330 + RS.196790) MIRA HAZRA (RS.47300 + RS.43550) SANKAR GHOSH (RS.35000 + RS.178200) TOTAL 281210/- 291200/- 366120/- 90850/- 213200/- 1242580/- ACCORDING TO AO, THE AFORESAID PAYMENTS FALL WITHIN THE AMBIT OF SEC. 194C OF THE ACT. THEREAFTER, THE AO DISALLOWED AN AMOUNT OF RS.12,42 ,580/- SINCE THE ASSESSEE DID NOT 2 ITA NO. 542/KOL/2016 S. D. GUPTA, AY 2010-11 DEDUCT TAX AT SOURCE AS REQUIRED UNDER SEC. 194C OF THE ACT, THE AO INVOKED SEC. 40(A)(IA) OF THE ACT AND ADDED THE AMOUNT BACK TO THE INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A), WHO ACC EPTED THE CONTENTION OF THE ASSESSEE THAT IN THE FACTS OF THE CASE, SEC. 194C OF THE ACT IS N OT APPLICABLE, SINCE THE PAYMENTS WERE NOT MADE BY THE ASSESSEE TO THE CONTRACTOR OR SUB-CONTR ACTOR. HOWEVER, DURING THE APPELLATE PROCEEDINGS, THE LD. CIT (A) AFTER GIVING NOTICE TO THE ASSESSEE AS TO WHY SEC. 194I OF THE ACT SHOULD NOT BE ATTRACTED IN PLACE OF SEC. 194C O F THE ACT AND AFTER HEARING THE ASSESSEE ON THIS ISSUE, THE LD. CIT (A) WAS PLEASED TO HOLD THA T THERE IS VIOLATION OF SEC. 194I OF THE ACT AND, THEREFORE, HE CONFIRMED THE ACTION OF THE AO. AGGRIEVED, ASSESSEE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEES MAIN GRIEVANCE I S THAT THE AO HAD DISALLOWED THE EXPENSES CLAIMED FOR MACHINE HIRING CHARGES BECAUSE OF VIOLATION OF SEC. 194C OF THE ACT, HOWEVER, ON APPEAL, THE LD. CIT (A) CONFIRMED THE O RDER NOT FOR VIOLATION OF SEC. 194C BUT FOR VIOLATION OF SECTION 194I OF THE ACT. WE NOTE THAT THE LD. CIT(A) HAS CO-TERMINUS AND PLENARY POWERS AND HE CAN DO WHAT THE AO CAN DO DUR ING ASSESSMENT PROCEEDINGS. THE APPELLATE PROCEEDING BEFORE THE FIRST APPELLATE AUT HORITY IS AN EXTENSION OF THE ASSESSMENT PROCEEDINGS. THE ASSESSEES GRIEVANCE BEFORE THE L D. CIT (A) THAT THE AO WAS WRONG IN APPLYING SEC. 194C OF THE ACT WAS ACCEPTED BY HIM. HOWEVER, THE LD. CIT (A) TAKING NOTE OF THE FACT THAT THE ASSESSEE HAS HIRED JCB AND HAS EXPENDED RS.12,42,580/- HAS COME TO THE CONCLUSION AFTER HAVING GIVEN NOTICE TO THE ASSESSE E AS TO WHY SEC. 194I OF THE ACT IS NOT ATTRACTED IN ASSESSEES CASE AND HAS PASSED A SPEAK ING ORDER AND CONFIRMED THE ORDER OF THE AO BY APPLYING SEC. 194I READ WITH SEC. 40(A)(IA) O F THE ACT. WE NOTE THAT RENT FOR HIRING VEHICLE WOULD BE COVERED U/S. 194I W.E.F. AY 2007-0 8. PRIOR TO THAT, RENT FOR LETTING OUT OF VEHICLE WAS NOT SUBJECTED TO TDS. WHEN THE VEHICLE IS OWNED AND MAINTAINED BY THE CONTRACTOR, PROVISION OF SECTION 194C OF THE ACT E XPLANATION (III) SUB CLAUSE (C) IS APPLICABLE AND NOT THE PROVISION OF SECTION 194I OF THE ACT. WHEREAS IF THE VEHICLE IS LEASED AND THE LESSEE IS RESPONSIBLE FOR REGULAR EXPENSES LIKE DRIVER, OIL, FUEL ETC. IT WILL BE A CASE OF LEASING OF PLANT AND MACHINERY AND WILL BE GOVERNED BY SEC. 194I OF THE ACT. THE PROVISION OF THIS SECTION COULD BE APPLICABLE WHEN IT IS SHOW N THAT THERE WAS HIRING OF MACHINERY/VEHICLE FOR FIXED RENT FOR THE FINANCIAL YEAR AND THE TOTAL PAYMENT TO ONE PERSON EXCEEDED RS.1,20,000/- DURING THE YEAR THEN TDS AS PROVIDED UNDER THIS SECTION NEED TO BE DEDUCTED. FURTHER, THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT SHOULD BE INVOKED WHERE THE 3 ITA NO. 542/KOL/2016 S. D. GUPTA, AY 2010-11 LIABILITY TO DEDUCT TAX IS CLEAR AND UNAMBIGUOUS. WE NOTE THAT IN CASE OF PAYMENT MADE TO MITA HAZRA THE TOTAL PAYMENT IS RS.90,850/- SO THE SAID PAYMENT AS PER 1 ST PROVISO TO SEC. 194I FOR THE SAID AMOUNT NOT BREACHING THE LIMIT PR ESCRIBED BY THE ACT, NO TDS IS TO BE MADE. SO, THE ASSESSEE SHOULD BE GIVEN PARTIAL REL IEF TO THAT EXTENT. FOR THE REST, THE ASSESSEE HAS FAILED TO GIVE THE PAN OR OTHER DETAIL S OF PAYMENT MADE TO THE OTHER PARTIES, THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT(A) F OR THE REST OF THE AMOUNT PAID TO HIRE THE JCB. THESE GROUNDS OF ASSESSEES APPEAL ARE PARTLY ALLOWED. 5. COMING TO GROUND NOS. 3 AND 4 IS AGAINST THE ACT ION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF LABOU R CHARGES. 6. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED TH AT THE ASSESSEE HAS CLAIMED EXPENSES TOWARDS LABOUR CHARGES TO THE TUNE OF RS.70,69,775/ -. THE ASSESSEE WAS ASKED TO FURNISH NAMES AND ADDRESSES OF THE LABOURERS TO WHOM PAYMEN TS HAVE BEEN MADE FOR VERIFICATION. ACCORDING TO AO, THE ASSESSEE COULD NOT PRODUCE THE BILLS, VOUCHERS AND ADDRESSES OF THE LABOURS BUT SUBMITTED COPY OF THE MUSTER ROLL AS EV IDENCE FOR PAYMENT OF LABOUR CHARGES. ACCORDING TO THE AO, SINCE THE ASSESSEE COULD NOT F URNISH THE BILLS, VOUCHERS AND ADDRESS OF THE LABOURERS OR HE COULD PRODUCE THE LABOURERS IN PERSON FOR VERIFICATION, THE AO DOUBTED THE GENUINENESS OF THE CLAIM. THEREFORE, HE WAS OF THE OPINION THAT THE ASSESSEE MIGHT HAVE INFLATED THE LABOUR CHARGES TO REDUCE ITS INCOME AN D THUS THE GENUINENESS OF THE PAYMENT COULD NOT BE VERIFIED BY HIM, THEREFORE, HE MADE A DISALLOWANCE OF 20% OF RS.70,69,775/- ON LABOUR CHARGES WHICH COMES TO RS.14,13,955/-. A GGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE SAME. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT STATUTORY AUDIT IS CONDUCTED IN THE ASSESSEES BUSINESS. THE AO HAS NOT FOUND ANY FAULT WITH THE BOOKS OF ACCOUNT MAINTAINE D IN THE REGULAR COURSE OF BUSINESS BY THE ASSESSEE. WITHOUT REJECTING THE BOOKS OF ACCOU NT, THE AO OUGHT NOT TO HAVE VENTURED TO MAKE THE ESTIMATION OF THE DISALLOWANCE. THE AO HA S NOT POINTED OUT ANYTHING WRONG IN THE MUSTER ROLL MAINTAINED BY THE ASSESSEE. WE NOTE TH AT THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE AO THE MUSTER ROLL WHICH IS PLACED FROM PAGE S 16 TO 40 OF THE PAPER BOOK. WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT OR ANY ADVERSE MATERIAL BROUGHT ON RECORD BY AO, THE DISALLOWANCE CANNOT BE MADE ON SUSPICION . IT SHOULD BE REMEMBERED THAT SUSPICION HOWSOEVER GRAVE CANNOT TAKE THE PLACE OF PROOF. DISALLOWANCE HAS BEEN MADE ON 4 ITA NO. 542/KOL/2016 S. D. GUPTA, AY 2010-11 AD HOC BASIS OUT OF THE TOTAL CLAIM BY THE ASSESSEE . THE AO HAS NOT POINTED OUT FOR WHICH OF THE SPECIFIC ITEMS EITHER VOUCHERS/RECEIPTS ARE NOT MAINTAINED BY THE ASSESSEE OR THE EXPENSES ARE VERIFIABLE. WITHOUT DOING SO, NO AD H OC DISALLOWANCE OUT OF GENUINE BUSINESS EXPENDITURE CLAIMED BY THE ASSESSEE CAN BE MADE BY THE AO. WE FIND THAT THE DISALLOWANCE HAS BEEN MADE ON ESTIMATE BASIS BY THE AO. SUCH A DISALLOWANCE CANNOT BE SUSTAINED IN LAW. FURTHER THE ONLY SUSPICION IS THAT THE ASSES SEE IS TRYING TO INFLATE THE EXPENSES TO REDUCE ITS INCOME. THIS IS ONLY A SUSPICION WHICH HAS NO MATERIAL TO SUPPORT. THE ASSESSEE HAS DISCHARGED ITS ONUS BY PRODUCING THE MUSTER ROL L OF THE LABOURERS. IN THE LINE OF CONTRACT WORK EXECUTED BY THE ASSESSEE, IT IS NOT ALWAYS POS SIBLE TO GET THE ADDRESSES OF LABOURERS CASUALLY EMPLOYED BY THE ASSESSEE IN SITE WORK IN R EMOTE AREAS. THESE ARE TEMPORARY LABOURERS WHO MIGRATE FROM OTHER STATES TO WORK IN SOME PROJECTS OF ASSESSEE AND RESIDE IN TEMPORARY SHEDS NEAR WORK-SITES AND THEN THEY GO BA CK TO THEIR VILLAGE. IN SUCH A SCENARIO, WITHOUT FINDING THE EXPLANATIONS GIVEN BY THE ASSES SEE AS INCORRECT OR WITHOUT BRINGING ANY ADVERSE MATERIAL TO SUGGEST THAT MUSTER ROLL MAINTA INED BY THE ASSESSEE WAS FORGED, IT IS DIFFICULT TO JUSTIFY OUTRIGHT DISALLOWANCE OF 20% W HICH IS PER SE ARBITRARY AND, THEREFORE, CANNOT BE SUSTAINED, THEREFORE, WE DIRECT DELETION OF THE AD HOC ADDITION MADE ON THIS ACCOUNT. THESE GROUNDS OF ASSESSEES APPEAL ARE ALL OWED. 8. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2018. SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9TH MAY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. S. D. GUPTA, GUSHKARA COLLEGE M ORE, P.O. GUSHKARA, BURDWAN-713128. 2 RESPONDENT ACIT, CIRCLE-2, BURDWAN. 3. THE CIT(A) , BURDWAN. 4. 5. CIT , BURDWAN DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY