Shripad Shridhar Bapat, Pune V. ITO,Wd.1(3), Pune

ITA 547/PUN/2010

• Counselvise Citation: 54724514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-09-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Assessee Lawyers: S N DOSHI
• Keywords: Opportunity of being heard; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 194C; 147; 148; 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDER KUMAR YADAV JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 547 & 548/PN/2010 (ASSTT.YEARS : 2005-06 AND 2006-07) SHRIPAD SHRIDHAR BAPAT, FLAT NO. 4, SINHAGAD ROAD, PUNE - 411051 .. APPEL LANT PAN NO. AFUPN 1636D VS. INCOME TAX OFFICER, WARD 1(3), PUNE. .. RESPONDENT ASSESSEE BY : SRI S.N. DOSHI RESPONDENT BY : SRI ALOK MISHRA DATE OF HEARING : 13-04-2012 DATE OF PRONOUNCEMENT : 30-05-2012 ORDER PER R.K. PANDA, AM THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE ORDER DATED 30-11-2009 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEARS 2005-06 AND 2006-07 RESPECTIVELY. SINCE COMMON GROUNDS HAV E BEEN TAKEN BY THE ASSESSEE IN BOTH THESE APPEALS, THEREFORE, THESE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO. 547/PN/2010 (ASSESSMENT YEAR 2005-06) : 2. GROUND OF APPEAL NO. 1 BY THE ASSESSEE RELATES T O THE ORDER OF THE CIT(A) IN UPHOLDING THE RE-ASSESSMENT PROCEEDINGS INITIATE D UNDER SECTION 147 OF THE I.T. ACT. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION IN THE NAME AND STYLE OF M/S. GB ASSOCIATES AS A PROPRIETARY CONCERN. ORIGINAL RETURN OF INCOME IN THIS CASE WAS FILED ON 28-10- 2005 DECLARING TOTAL INCOME OF RS. 3,32,538/-. THE RETURN WAS PROCESSED U/S. 2 143(1) ON 28-02-2006. SUBSEQUENTLY, THE AO ISSUED NOTICE U/S. 148 ON 07-09- 2007 ON THE GROUND THAT THE ASSESSEES ACCOUNTS BEI NG AUDITED U/S. 44AB, THE ASSESSEE WAS SUPPOSED TO DEDUCT TDS FROM VARIOUS PA YMENTS AS WELL AS TO DEPOSIT THE SAME INTO CENTRAL GOVERNMENTS ACCOUNT BEFORE THE STIPULATED TIME. HOWEVER, THE ASSESSEE HAD FAILED TO DEPOSIT TDS MAD E WITHIN SUCH DATE AND THEREBY HAS VIOLATED THE PROVISIONS OF SECTION 40(A )(IA) R.W.S.194C OF THE I.T. ACT. SINCE THE ASSESSEE HAS CLAIMED DEDUCTION OF A N AMOUNT OF RS. 55,82,188/- WHICH IS NOT LIABLE FOR DEDUCTION AS PER THE PROVIS IONS OF SECTION 40(A)(IA), THEREFORE, HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE AMOUNTING TO RS. 55,82,188/- FOR THE ASSESSMENT YEAR 2005-06 HAS ESC APED ASSESSMENT. HE, THEREFORE, ISSUED NOTICE U/S. 148 OF THE I.T. ACT. 4. BEFORE THE CIT(A) THE ASSESSEE CHALLENGED THE RE -ASSESSMENT PROCEEDINGS ON THE GROUND THAT ASSESSMENT IS RE-OPENED ON THE B ASIS OF CHANGE OF OPINION AND THEREFORE THE NOTICE ISSUED U/S.148 IS BAD IN LAW. IT WAS SUBMITTED THAT THE FACT OF NON PAYMENT OF TDS ON THE BASIS OF WHICH THE ASSESS MENT WAS RE-OPENED WAS REPORTED AND EXPLAINED IN THE AUDIT REPORT FILED AL ONG WITH THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT THE ASSESSEE HIMSELF HAD MADE AN ADDITION OF RS. 53,564/- ON ACCOUNT OF NON PAYMENT OF TDS. SINCE THERE WAS ABSOLUTELY NO SUPPRESSION OF ANY FACTS NO R IT CAN BE SAID THAT BY NOT FILLING OF THE RETURN OF INCOME OR BY NON-DISCLOSUR E OF THE TRUE INCOME THERE HAS CAUSED AN ESCAPEMENT OF INCOME, THEREFORE, THE RE-A SSESSMENT PROCEEDINGS ARE BAD IN LAW. RELYING ON A COUPLE OF DECISIONS IT WA S SUBMITTED THAT THOUGH THE RETURN WAS PROCESSED U/S.143(1)(A) STILL IT CANNOT BE RE-OPENED U/S. 147. 5. HOWEVER, THE LEARNED CIT(A) WAS NOT CONVINCED WI TH THE ARGUMENTS ADVANCED BY THE ASSESSEE. RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. REPORTED IN 3 291 ITR 500 HE HELD THAT THE INTIMATION U/S. 143(1) (A) IS NOT AN ORDER OF ASSESSMENT AND THEREFORE THE QUESTION OF CHANGE OF OPINION DOES NOT ARISE. ACCORDING TO HIM, THE FAILURE TO DEDUCT AND DEPOSIT THE TDS WITHIN THE SPECIFIED TIME ATTRACTS THE PROVISION OF SECTION 40(A)(IA). THEREFORE, THE AO HAD REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. FURTHER, T HERE WAS NO ASSESSMENT U/S. 143(3) AND THE NOTICE HAS BEEN ISSUED WITHIN FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, THERE IS NO I NFIRMITY OR ILLEGALITY IN RE- OPENING THE ASSESSMENT FOR THE YEAR UNDER CONSIDERA TION. HE ACCORDINGLY UPHELD THE ORDER OF THE AO IN RE-OPENING THE ASSESSMENT. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER B OOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSMENT IN TH IS CASE WAS MADE U/S.143(1)(A) AND NOT U/S.143(3). THE RE-ASSESSMENT NOTICE HAS B EEN ISSUED BY THE AO WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) THE RE-ASSES SMENT PROCEEDINGS INITIATED BY THE AO AND UPHELD BY THE CIT(A) IS JUSTIFIED AND LE GALLY VALID. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE . ACCORDINGLY, FIRST GROUND RAISED BY THE ASSESSEE IS DISMISSED. 4 7. GROUND APPEAL NO. 2 BY THE ASSESSEE AND THE ADDI TIONAL GROUND READ AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND WITHOUT PREJUDICE TO THE ABOVE GROUND THE CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 50,99,998/- MADE U/S. 40(A)(IA) OVERLOOKING THE FACT THAT THE APPELLANT CANNOT BE CONSIDERED AS A PERSON LIABLE TO DEDUCT THE TAX U/S. 194C. ADDITIONAL GROUND : ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. 1 AND 2 AND IF AT A LL DISALLOWANCE IS WARRANTED U/S. 40(A)(IA) THE DISALLOWANCE CAN ONLY BE MADE OF RS. 9,35,083/- THAT BEING THE AMOUNT PAYABLE AS ON 31-0 3-2005. 8. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS ADDE D TDS UNPAID AT RS. 53,564/-. ACCORDING TO THE AO SUCH AMOUNT SHOULD H AVE BEEN RS. 56,90,998/- AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE I .T. ACT. ON BEING QUESTIONED BY AO, IT WAS SUBMITTED THAT PROVISIONS OF SECTION 40( A)(IA) ARE ATTRACTED ONLY IN RESPECT OF AMOUNTS PAYABLE TO A RESIDENT OR TO A SU B-CONTRACTOR AND NOT TO AN AMOUNT WHICH IS ALREADY PAID. 8.1 HOWEVER, THE CONTENTIONS OF THE ASSESSEE WERE R EJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE LIABILITY U/S. 194C ARISES WHEN THE SUM SPECIFIED THEREIN ARE CREDITED OR PAID INTO THE ACCOUNT OF TH E CONTRACTOR/SUB-CONTRACTOR AND ONCE THERE IS FAILURE TO COMPLY WITH THE PROVISIONS OF SEC.194C, PROVISIONS OF SEC. 40(A)(IA) ARE ATTRACTED. THE VERSION OF THE A SSESSEE THAT HE IS NOT A CONTRACTOR IN TERMS OF THE VARIOUS WORKS FOR WHICH HE DEPLOYED CERTAIN PERSONS WAS ALSO REJECTED BY THE ASSESSING OFFICER ON THE GROUND THA T THE ASSESSEE HAD UNDERTAKEN VARIOUS WORKS, WHICH WERE SUB-CONTRACTED TO THIRD P ERSONS AND THEREFORE, THOSE 5 PERSONS WERE SUB-CONTRACTORS IN RESPECT OF SUCH WOR KS AND ACCORDINGLY, PROVISIONS OF SEC. 194C(2) ARE ATTRACTED. BASED ON THESE OBSERVATIONS, THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE INCURR ED AMOUNTING TO RS. 50,99,998/- IN RESPECT OF WHICH TAX WAS NOT DEDUCTE D/DEPOSITED WITHIN THE STIPULATED TIME U/S. 40(A)(IA) OF THE I.T. ACT. 9. BEFORE THE CIT(A) THE ASSESSEE MADE ELABORATE SU BMISSIONS CHALLENGING THE ADDITION MADE BY THE AO U/S. 40(A)(IA) OF THE I .T. ACT. HOWEVER, THE CIT(A) ALSO WAS NOT CONVINCED WITH THE ARGUMENTS MADE BY T HE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 10. LEARNED COUNSEL FOR THE ASSESSEE REQUESTED FOR ADMISSION OF THE ADDITIONAL GROUND. REFERRING TO THE DECISION OF THE VISAKHAPA TNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSP ORT VS. ACIT VIDE ITA NO. 427/VIZAG/2008 FOR ASSESSMENT YEAR 2005-06 DATED 09 -04-2012 HE SUBMITTED THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE UNDERTAKEN TO DISALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID D URING THE PREVIOUS YEAR WITHOUT DEDUCTION OF TDS. 11. REFERRING TO THE SUMMARY OF CREDITORS OUTSTANDI NG AS ON 31-03-2005 ON WHICH TDS WAS DEDUCTED BUT NOT PAID, (A COPY OF WHI CH IS PLACED AT PAPER BOOK AT PAGE 36) HE SUBMITTED THAT SUCH AMOUNT OF CREDI TORS AMOUNT TO RS.9,35,083/- ONLY. THEREFORE, ALTHOUGH THE ASSESSEE WAS NOT LIAB LE TO DEDUCT TAX AT ALL SINCE THE ASSESSEE IS AN INDIVIDUAL AND IS A SUB-CONTRACTOR, STILL AT THE BEST ONLY THE AMOUNT PAYABLE AS ON 31-03-2005 CAN BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6 12. LEARNED D.R. ON THE OTHER HAND HEAVILY RELIED O N THE ORDER OF THE CIT(A) AND SUBMITTED THAT SINCE THE ADDITIONAL GROUND IS N OT ARISING OUT OF THE ORDER OF THE CIT(A) THE SAME SHOULD NOT BE ADMITTED FOR ADJU DICATION. 12.1 THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS RE JOINDER SUBMITTED THAT THE GROUND WAS TAKEN BEFORE THE AO AS WELL AS THE CIT(A ). BOTH OF THEM HAVE DISCUSSED THE ISSUE AND THEREFORE THIS BEING A LEGA L GROUND THE SAME SHOULD BE ADMITTED FOR ADJUDICATION. 13. AFTER HEARING BOTH THE SIDES, WE FIND THE CIT(A ) AT PARA 3.1.1 OF HIS ORDER HAS MENTIONED BEFORE THE ASSESSING OFFICER THE CONTENTION OF THE APPELLANT WAS THAT THE PROVISIONS OF SECTION 40(A)( IA) ARE ATTRACTED ONLY IN RESPECT OF AMOUNTS PAYABLE TO A RESIDENT OR TO A SUB-CONTRACTOR AND NOT AN AMOUNT WHICH IS ALREADY PAID. THEREFORE, THE FACTS BEING ALREADY ON RECORD AND THE ADDITIONAL GROUND BEING A LEGAL ONE, WE ADMIT THE SAME FOR ADJUDICATION. WE FIND THE VISAKHAPATNAM SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT (SU PRA) HAS HELD THAT PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE ONLY TO AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON 31 ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID D URING THE PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS. WE, THEREFORE, RESTORE T HE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE ACCOUNTS AND DISALLO W THE AMOUNT WHICH IS PAYABLE AS ON 31 ST MARCH OF THE IMPUGNED ASSESSMENT YEAR IN THE LIGHT OF THE DECISION OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL CIT ED (SUPRA). NEEDLESS TO SAY THE AO SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHILE 7 DETERMINING SUCH DISALLOWANCE. ADDITIONAL GROUND R AISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 548/PN/2010 (ASSESSMENT YEAR 2006-07) : 14. THE ONLY GROUND RAISED BY THE ASSESSEE AND THE ADDITIONAL GROUND ARE AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO THE ABOVE GROUND THE CIT(A) HAS ERRED IN SUSTAIN ING THE DISALLOWANCE OF RS. 26,80,857/- MADE U/S. 40(A)(IA) OVERLOOKING THE FACT THAT THE APPELLANT CANNOT BE CONSIDERED AS A PERSON LIABLE T O DEDUCT THE TAX U/S. 194C. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND WITHOUT PREJUDICE TO GROUND NO. 1 AND IF AT ALL DISALLOWANCE IS WARRANTE D U/S. 40(A)(IA) THE DISALLOWANCE CAN ONLY BE MADE OF RS. 6,79,170/- THA T BEING THE AMOUNT PAYABLE AS ON 31-03-2006. 15. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS ARE IDENTICAL TO GROUND APPEAL NO. 2 AND THE ADDITIONAL GROUND RAISE D IN ITA NO. 547/PN/2010. WE HAVE ALREADY RESTORED THE ISSUE TO THE FILE OF T HE AO WITH A DIRECTION TO VERIFY THE ACCOUNTS AND RESTRICT THE DISALLOWANCE ONLY TO THE EXTENT OF AMOUNT PAYABLE AS ON 31 ST MARCH OF THE RELEVANT ASSESSMENT YEAR IN THE LIGHT OF THE VISAKHAPATNAM SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (SUPRA). FOLLOWING THE SAME RATIO, WE DIRECT THE AO TO VERIFY THE ACCOUNTS AND DETERMINE THE DISALLOWANCE IN THE LIGH T OF THE DECISION CITED ABOVE. ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ACCORDI NGLY ALLOWED FOR STATISTICAL PURPOSE. 8 16. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY-ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH MAY 2012. SD/- SD/- (SHAILENDER KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 30 TH MAY 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A), I PUNE 4. CIT CONCERNED 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER PRIVATE SECRETARY ITAT, PUNE BENCH, PUNE