THE ACIT, Kakinada V. Tirumala Constructions, Kakinada

ITA 562/VIZ/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6409 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDAM
• Keywords: Additional evidence; Non-deduction of tax
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI G. MANJUNATHA, HONBLE ACCOUNTANT MEMBER ITA NO S . 561 & 562 / VIZ /201 4 (ASST. YEAR S : 2007 - 08 & 20 10 - 1 1 ) ACIT, CIRCLE - 1, KAKINADA. V . M/S. TIRUMALA CONSTRUCTIONS, 8 - 24 - 21, SUBBARAO STREET, GANDHINAGAR, KAKINADA . PAN NO. AADFT 6862 C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI T. SATYANANDAM SR. DR DATE OF HEARING : 06 / 03 /201 7 . DATE OF PRONOUNCEMENT : 28/ 0 3 /201 7 . O R D E R PER G. MANJUNATHA , ACCOUNTANT MEMBER THESE TWO APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) , VISAKHAPATNAM , DATED 18/08/2014 FOR THE ASSESSMENT YEARS 2007 - 08 & 2010 - 11. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMM ON, THEY ARE CLUBB ED, HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACTS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2007 - 08 & 2010 - 11 DECLARING TOTAL INCOME OF 2 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) 19,08,580/ - & 73,17,450/ - RESPECTIVELY . THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08 WAS ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT ) ON 29/10/2007 DETERMINING THE TOTAL INCOME OF 25,47,303/ - , INTER ALIA BY MAKING AN ADDITION OF 3 L AC TOWARDS ADHOC DISALLOWANCE OF CERTAIN EXPENDITURE AND FURTHER ADDITION OF 3,38,723/ - TOWARDS DISALLOWANCE OF TAX PAID UNDER SECTION 40(A)( II ) OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08 WAS SET ASIDE UNDER SECTION 263 BY THE COMMISSIONER OF INCOME TAX , RAJAHMUNDRY VIDE HIS ORDER DATED 09/03/2012 . THE ASSESSING OFFICER , CONSEQUENT TO REVISION OF ASSESSMENT BY THE COMMISSIONER OF INCOME TAX, HAS REOPENED AND COMPLETED ASSESSMENT UNDER SECTION 143(3) R.W.S. 263 OF THE ACT AND DETERMINED THE TOTAL INCOME OF 68,61,770/ - , INTER ALIA BY MAKING ADDITIONS TOWARDS DISALLOWANCE OF HIRE CHARGES UNDER SECTION 40(A)(IA) OF THE ACT AND FURTHER DISALLOWANCE OF ADHOC DISALLOWANCE OF EXPENDITURE AND TAXES PAID IN THE EARLIER ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE ACT. THE ASSESSMENT FOR THE ASSE SSMENT YEAR 2010 - 11 HAS BEEN COMPLETED UNDER SECTION 143(3) ON 18/03/2013 DETERMINI N G THE TOTAL INCOME OF 1,20,21,060/ - BY MAKING ADDITIONS TOWARDS DISALLOWANCE OF HIRE CHARGES UNDER SECTION 40(A)(IA) OF 18,17,833/ - AND THE DIFFERENCE IN GROSS RECEIPTS OF 26,90,462/ - . 3 . AG G RIEVED BY THE ASSESSMENT ORDER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) , WHERE 3 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) ASSESSEE FILED WRITTEN SUBMISSIONS. IN RESPECT OF DISALLOWANCE OF HIRE CHARGES UNDER SECTION 40(A)(IA) OF THE ACT, THE ASSESSEE CONTENDED TH A T THE EXPENDITURE INCURRED UNDER THE HEAD HIRE CHARGES DO NOT COME UNDER THE PURVIEW OF WORKS CONTRACT DEFINED UNDER SECTION 194 - C , AS THE ASSESSEE HAS TAKEN THE TIPPERS /TRACTORS/WATER TANKERS ON SIMPLY HIRE, WHICH FALLS UNDER THE PROVISIONS OF SECTION 194 - I OF THE ACT. SINCE , THE AGGREGATE PAYMENTS MADE TO A SINGLE PERSON, DOES NOT EXCEED THE PRESCRIBED LIMITS PROVIDED UNDER SECTION 194 - I , T HE ASSESSEE HAS NOT DEDUCTED TDS, T HEREFORE, APPLICATION OF THE PROVISIONS OF SECTION 194 - C TO THE IMPUGNED PAYMENTS IS INCORRECT. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF KRANTHI ROAD TRANSPORT PVT. LTD. VS. ACIT IN ITA NO. 358/VIZ/2008 . INSOFAR AS THE ADDITIONS TOWARDS DIFFERENCE IN GROSS RECEIPTS, THE ASSESSEE CONTENDED THAT THE DIFFERENT IN GROSS RECEIPTS BETWEEN THE BOOKS OF ACCOUNT AND THE TDS CERTIFICATE REPRESENTS AMOUNT WITHH E LD EARLIER AND RELEASED BY THE CONTRACTEES , WHICH WAS CONSIDERED IN THE EARLIER YEARS AS RECEIPTS , THEREFORE, THE SAME HAS BEEN EXCLUDED FROM THE GROSS RECEIPTS FOR THE CURRENT FINANCIAL YEAR. 4 . THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE , HELD THAT THE PAYMENTS MADE FOR HIRE OF TIPPERS/TRACTORS/ WATER TANKERS ETC. ARE NOT MADE FOR EXECUTION OF ANY PART OF WORK. THE IMPUGNED PAYMENTS DO NOT FALL WITHIN THE PURVIEW OF SECTION 194 - C AND THE RATIO LAID DOWN IN THE ABOVE REFERRED DECISION 4 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) WOULD BE APPLICABLE . AS A RESULT, IT IS HELD THAT THERE IS NO REQUIREMENT TO DEDUCT TDS ON THE IMPUGNED PAYMENT S AND HENCE, THE ASSESSING OFFICER WAS DIRECTED TO DELETED THE ADDITIONS MADE TOWARDS DISALLOWANCE ON HIRE CHARGES UNDER SECTION 40(A)(IA) OF THE ACT. I NSOFAR AS ADDITIONS TOWARDS DIFFERENCE IN GROSS TURNOVER BETWEEN THE TURNOVER ADMITTED IN THE BOOKS OF ACCOUNT AND THE TURNOVER AS PER THE TDS CERTIFICATES, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE DIFFERENCE REPRESENTS AMOUNT WITHHELD EARLIER AND RELEASED FOR PAYMENT NOW , BUT WHICH WAS ALREADY OFFERED TO TAX AS PART OF GROSS RECEIPTS. THE ASSESSING OFFICER OVERLOOKED THE FACTS THAT THE AMOUNT S WITHHELD EARLIER AND RELEASED SUBSEQUENTLY WERE EXCLUDED FROM THE GROSS AMOUNT REFERRED IN TH E TDS CERTIFICATES . IT IS SEEN THAT THE DEDUCTION TOWARDS CESS, TDS ETC. WERE MADE WITH REFERENCE TO THE NET AMOUNTS , WHICH CLEARLY SHOWS THAT THE CONTRACT RECEIPTS ADMITTED BY THE ASSESSEE AFTER REDUCING THE WITHHELD AMOUNT RECEIVED IS CORRECT AND JUSTIFIED . WITH THESE OBSE RVATIONS , DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITIONS MADE TOWARDS DIFFERENCE IN GROSS RECEIPTS. 5. AGGRIEVED BY THE COMMISSIONER OF INCOME TAX (APPEALS)S ORDER , THE REVENUE IS IN APPEAL BEFORE US. 6 . THE FIRST ISSUE CAME UP FOR CONSIDERATION IS THAT DISALLOWANCE ON HIRE CHARGES PAID FOR TIPPERS/TRACTORS/WATER TANKERS UNDER SECTION 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENDITURE TOWARDS HIRE CHARGES FOR TIPPERS/TRACTORS / 5 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) WATER TANKERS, BUT FAILED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - C OF THE ACT. THE ASSESSING OFFICER FURTHER OBSERVED THAT AS PER THE PROVISIONS OF SECTION 194 - C READ WITH EXPLANATION - ( IV ) WORK INCLUDES CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS . THE ASSESSEE HAS ENGAGED TIPPERS/TRACTORS/ WATER TANKERS FOR TRANSPORT OF GOODS AND HENCE, THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. THEREFORE, ISSUED A SHOW - CAUSE NOTICE AND ASKED THE ASSESSEE A S TO WHY THE IMPUGNED P AYMENT SHALL NOT BE DIS A L LOWED UNDER SECTION 40(A)(IA) OF THE ACT. FOR FAILURE TO DEDUCT TDS UNDER SECTION 194 - C OF THE ACT. 7. IN RESPONSE TO SHOW - CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT WE DO NOT E NGAGE TIPPERS/TRACTORS/ WATER TANKERS BY AWARDING WORKS CONTRACT TO THEM FOR APPLICATION OF THE PROVISIONS OF SECTION 194 - C . THE TIPPERS/TRACTORS/ WATER TANKERS ARE HIRED WITHOUT ANY CONTRACTUAL AGREEMENTS BUT THEY ARE TAKEN ONLY ON SIMPLE HIRE , T HEREFORE, THE IMPUGNED PAYMENTS ARE NOT LIABLE FOR TDS UNDER SECTION 194C OF THE ACT. IT WAS FURTHER CONTENDED THAT THE ASSESSEE HAS TAKEN THESE EQUIPMENTS ON HIRE FOR ITS OWN USE AND HENCE, THE PAYMENTS ARE FALLS UNDER THE PROVISIONS OF SECTION 194 - I, BUT NOT UNDER THE PROVISIONS OF 194 - C OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON THE DECISION OF THE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF KRANTHI ROAD TRANSPORT PVT. LTD. (SUPRA ) AND ALSO THE DECISION OF ITAT, AMRITSAR BENCH IN THE CASE OF D CIT VS. SATISH AGGARWAL & CO. [2009] 317 ITR 6 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) (AT) 196 (AMRITSAR). THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE , BY RELYING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ASSOCIATED CEMENT COMPANY LTD. [201 ITR 435 (SC)] HELD THAT A TRANSPORT CONTRACT FALLS WITHIN THE AMBIT OF SUB - SECTION (1) OF SECTION 194 - C OF THE ACT AND THEREFORE, TAX DEDUCTION AT SOURCE HAS TO BE MADE ON SUCH PAYMENTS UNDER SECTION 194 - C, BUT NOT UNDER SECTION 194 - I OF THE ACT. 8 . THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE O F HIRE CHARGES UNDER SECTION 40(A)(IA) FOR CONTRAVENING THE PROVISIONS OF SECTION 194 - C OF THE ACT . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS ENGAGED TIPPERS/TRACTORS/ WATER TANKERS FOR THE PURPOSE OF EXECUTION OF WORKS CONTRACT, THEREFORE, THE IMPUGNED PAYMENT S ARE FALLS WITHIN THE AMBIT OF SECTION 194 - C OF THE ACT . S INCE THE ASSESSEE FA ILED TO DEDUCT TDS ON THE IMPUGNED PAYMENTS, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE AMOUNTS UNDER SECTION 40(A)(IA) OF THE ACT AND HIS ORDER SHOULD BE UPHELD. 9 . ON THE OTHER HAND , THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED TH A T THE TRANSACTION BETWEEN THE ASSESSEE AND THE VEHICLE OWNERS IS A SIMPLE HIRE, BUT NOT A WORK CONTRACT AS DEFINED UNDER SECTION 194 - C. THE ASSESSEE HAS TAKEN THE TIPPERS/TRACTORS/ WA TER TANKERS ON HIRE WITHOUT ANY CONTRACTUAL AGREEMENT AND HENCE, 7 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) THE QUESTION OF APPLICATION OF THE PROVISIONS OF SECTION 194 - C ON THE IMPUGNED PAYMENTS DOES NOT ARISE. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE , REFERRING TO THE ORDER OF THE COMMISSIONER OF INCOME TAX IN 263 PROCEEDINGS , SUBMITTED TH A T THE COMMISSIONER OF INCOME TAX HAS TAKEN UP THE ISSUE TO EXAMINE THE APPLICABILITY OF THE PROVISIONS OF SECTION 194 - I TO THE IMPUGNED PAYMENTS, WHEREAS THE ASSESSING OFFICER HAS DISALLOWED THE A MOUNT FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - C OF THE ACT. SINCE THE AMOUNT INCURRED BY THE ASSESSEE IS LESS THAN THE AMOUNT PRESCRIBED FOR DEDUCTION AT SOURCE UNDER SECTION 194 - I, THE QUESTION OF DEDUCTION AT SOURCE ON THE IMPUGNED PAYMENT S DOES NOT ARISE. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE RELEVANT FACTS RIGHTLY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER AND HIS ORDER SHOULD BE UPHELD. 10 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD . THE ASSESSING OFFICER DISALLOWED HIRE CHARGES UNDER SECTION 40(A)(IA) OF THE ACT, FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - C OF THE ACT. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE IMPUGNED PA YMENTS ARE FALLS WITHIN THE AMBIT OF SECTION 194 - C OF THE ACT. THE ASSESSING OFFICER REFERRING TO THE PROVISIONS OF SECTION 194 - C READ WITH EXPLANATION - ( IV ) , OBSERVED THAT THE EXPRESSION OF WORK INCLUDES CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS . THE ASSESSING OFFICER WAS OF THE FURTHER OPINION THAT SINCE THE PROVISIONS OF SECTION 194 - C 8 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) COVERS THE TRANSPORT CONTRACTS W.E.F. 01/07/1995 , THE ASSESSEE OUGHT TO HAVE DEDUCT ED THE TAX AT SOURCE ON SUCH PAYMENTS. SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - C, THE ASSESSING OFFICER DISALLOWED THE IMPUG NED PAYMENTS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF ACT. IT IS THE CONTENTION OF THE ASSESSEE THAT THE IMPUGNED PAYMENTS ARE NOT FALLS U NDER THE AMBIT OF SECTION 194 - C OF THE ACT. THE ASSESSEE FURTHER CONTENDED T H A T IT HAS TAKEN TIPPERS/TRACTORS/ WATER TANKERS ON SIMPLE HIRE WITHOUT ANY CONTRACTUAL AGREEMENTS AND HENCE, THE PROVISIONS OF SECTION 194 - C HAS NO APPLICATION. 1 1 . THE ONLY ISSUE HAS TO BE DECIDED IS WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HIRE CHAR G ES INCURRED FOR HIRING OF TIPPERS/TRACTORS/WATER TANKERS FALLS WITHIN THE MEANING OF WORK AS DEFINED IN SECTION 194 - C OR RENT AS DEFINED IN SECTION 194 - I OF THE ACT. THE DEFINITION OF WORK HAS BEEN DEFINED UNDER SECTION 194 - C . AS PER EXPLANATION - ( IV ) , THE EXPRESSION OF WORK SHALL ALSO INCLUDES CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS . SIMILARLY, THE WORD RENT HAS BEEN DEFINED IN SECTION 194 - I. AS PER EXPLANATION - (I) 'RENT' MEANS ANY PAYMENT, BY WHATEVER NAME CALLED, UNDER ANY LEASE, SUB - LEASE, TENANCY OR ANY OTHER AGREEMENT OR ARRANGEMENT FOR THE USE OF ANY LAND OR BUILDING OR LAND APPURTENANT TO A BUILDING OR MACHINERY OR PLANT OR EQUIPMENT OR FURNITURE OR FITTINGS. ON PLAIN READING OF BOTH THE DEFINITIONS OF WORK AND RENT AS PER THE RESPECTIVE PROVISIONS OF THE ACT, THERE IS A DIFFERENCE IN BOTH THE 9 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) MEANINGS , INASMUCH AS THE WORK INCLUDES CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS . THE WORD RENT HAS A LIMITED MEANING WHICH CLEARLY SAYS THAT F O R THE USE OF ANY ASSET INCLUDING PLANT AND MACHINERY ETC. T HEREFORE, TO DECIDE WHETHER A PARTICULAR TRANSACTION FALLS WITHIN THE DEFINITION OF WORK OR RENT , ONE HAS TO EXAMINE THE NATURE OF TRANSACTION, BUT NOT NOMENCLATURE GIVEN BY THE TAX - PAYER TO DEFINE THE TRANSACTION . IF THE TRANSACTION IS IN THE NATURE OF WORK CONTRACT , DEFINITELY THE PAYMENTS ARE COMING WITHIN THE AMBIT OF WORK AS DEFINED UNDER SECTION 194 - C . I F THE ASSESSEE ENGAGED TIPPERS/TRACTORS/ WATER TANKERS FOR THE PURPOSE OF USE OF THOSE ASSETS WITHOUT DRIVER, FUEL AND MAINTENANCE EXPENDITURE, DEFINITELY THE TRANSACTION W OULD FALL UNDER THE DEFINITION OF RENT AS DEFINED UNDER SECTION 194 - C OF THE ACT. IN OTHER WORDS , IF THE TIPPERS/TRACTORS/WATER TANKERS ARE TAKEN ON SIMPLE HIRE WITHOUT DRIVER AND RELATED MAINTENANCE EXPENDITURE, THEN THE TRANSACTION IS A PAYMENT OF RENT FOR USE OF THOSE ASSETS WHICH COMES UNDER THE DEFINITION OF RENT AS DEFINED UNDER SECTION 194 - I AND IF THE TIPPERS/TRACTORS/WATER TANKERS ARE TAKEN ON HIRE WITH DRIVER AND RELAT ED MAINTENANCE EXPENDITURE, THEN THE TRANSACTION WOULD FALL UNDER THE DEFI NITION OF WORKS CONTRACT AS DEFINED UNDER SECTION 194 - C OF THE ACT. 1 2 . IN THE PRESENT CASE, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND T H A T THE ASSESSEE IS IN THE BUSINESS OF EXECUTION OF WORK CONTRACT. IN THE PROCESS , THE ASSESSEE HAS ENGAGED TIPPERS/TRACTORS/ 10 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) WATER TANKERS FOR EXECUTION OF WORK AS DEFINED UNDER SECTION 194 - C. THE ASSESSEE FAILS TO BRING ON RECORD ANY EVIDEN CE TO PROVE TH A T IT IS A SIMPLE HIRE OF TIPPERS/TRACTORS/WATER TANKERS, BUT NOT WORK . THOUGH, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PRESSED UPON THE FINDINGS OF THE COMMISSIONER OF INCOME TAX , IN THE REVISION PROCEEDINGS, ON PERUSAL OF THE ORDER OF THE COMMISSIONER OF INCOME TAX, WE FIND THAT THE COMMISSIONER OF INCOME TAX HAS NOT GIVEN AN Y FINDINGS WITH REGARD TO NATURE OF TRANSACTION , TO COME TO A CONCLUSION THAT THE PAYMENTS ARE COM ING UNDER SECTION 194 - I . T HEREFORE, WE ARE OF THE VIEW THAT HIRE CHARGES INCURRED BY THE ASSESSEE FOR HIRING THE TIPPERS/TRACTORS/ WATER TANKERS IS COMING WITHIN THE MEANING OF TERM WORK AS DEFINED IN EXPLANATION - (IV) OF SECTION 194 - C OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT ANY REASON, SIMPLY OBSERVED TH A T THE IMPUGNED PAYMENTS ARE MADE FOR HIRE OF TIPPERS/TRACTORS/ WATER TANKERS ETC. AND SUCH PAYMENTS ARE NOT MADE FOR EXECUTION OF WORKS CONTRACT. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND UPHELD THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS DISALLOWANCE OF HIRE CHARGES UNDER SECTION 40(A)(IA) , FOR FAILURE TO DEDUCT TAX AT SOURCE UNDER SECTION 194 - C OF THE ACT, FOR BOTH YEARS. 1 3 . THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS THAT THE DIFFERENCE IN GROSS TURNOVER AS PER THE BOOKS OF ACCOUNT AND AS PER THE TDS CERTIFICATES. D U R ING THE COURSE OF ASSESSMENT PROCEEDINGS , THE 11 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) ASSESSING OFFICER OBSERVED THAT THERE IS A DIFFERENCE IN GROSS TURNOVER DECLARED IN THE BOOKS OF ACCOUNT AND TURNOVER AS PER TDS CERTIFICATES. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO RECONCILE THE DIFFER ENCE WITH NECESSARY EVIDENCE . IN RESPONSE, THE ASSESSEE CONTENDED THAT THE GROSS RECEIPTS INCLUDES WITHHELD AMOUNT REFUNDED BY THE CONTRACTEE. THE ASSESSEE FURTHER CONTENDED TH A T WITHHELD AMOUNT AND RETENTION MONEY WAS ACCOUNTED ON ACCRUAL BASIS AND SHOWN AS RECEIVABLE IN THE BALANCE SHEET . T HE CONTRACTEES HAVE DEDUCTED TAX AT SOURCE ON RETENTION MONEY AND WITHHELD AMOUNT WHEN THE AMOUNT S RELEASED BY THE RESPECTIVE CONTRACTEES. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANA TION AND RECONCILIATION FILED BY THE ASSESSEE , HELD THAT THERE IS A DIFFEREN CE BETWEEN THE TURNOVER ADMITTED IN THE BOOKS OF ACCOUNT AND T URN OVER AS PER THE TDS CERTIFICATES. THE ASSESSING OFFICER HAS EXTRACTED THE DETAILS OF TDS CERTIFICATES ISSUED BY TH E CONTRACTE E S. THE ASSESSING OFFICER OBSERVED THAT THE CONTRACTEES HAVE DEDUCTED TDS ON THE GROSS AMOUNT INCLU D IN G WITHHELD AMOUNT. THE ASSESSEE OUGHT TO HAVE CONSIDERED THE ENTIRE GROSS RECEIPTS FOR TAXATION , INSTEAD OF NET AMOUNT EXCLUDING WITHHELD AMOUNT. THEREFORE, OPINED THAT THERE IS A DIFFERENCE BETWEEN THE TURNOVER AS PER THE BOOKS OF ACCOUNT AND TDS CERTIFICATES. ACCORDINGLY , DIFFERENCE OF 26,90,462/ - HAS BEEN ADDED TO THE RETURNED INCOME. 14 . THE DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ANALYSING THE FACTS OF 12 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) THE WITHHELD AMOUNT APPEARING IN THE TDS CERTIFICATE WITH CORRESPONDING ASSESSMENT YEAR TO WHICH IT RELATES . THE DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ENTERTAINING THE ADDITIONAL EVIDENCE OF RECONCILIATION STATEMENTS WITHOUT M A KING ANY REFERENCE TO THE ASSESSING OFFICER AS PER RULE 46 - A OF THE I.T. RULES. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE RECONCI LIATION FILED BY THE ASSESSEE SUBMITTED THAT WITHHELD AMOUNT IS A PART OF GROSS TURNOVER , ON WHICH THE CONTRACTEES HAVE DEDUCTED TDS. THEREFORE, THE ASSESSEE OUGHT TO HAVE CONSIDERED THE GROSS RECEIPTS IN THE BOOKS OF ACCOUNT , WHEREAS THE ASSESSEE HAS TAK EN NET AMOUNT EXCLUDING WITHHELD AMOUNT WHICH IS CONTRARY TO THE ACCEPTED PRINCIPLES OF ACCOUNTING . 15 . ON THE OTHER HAND, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE STRONGLY SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGH T LY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER AFTER CONSIDERING THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE, WHEREIN THE ASSESSEE HAS EXPLAIN ED THE DIFFERENCE IN TURNOVER BETWEEN THE BOOKS OF ACCOUNT AND TDS CERTIFICATES. THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE DIFFERENCE AMOUNT REPRESENTS THE WITHHELD AMOUNT BY THE CONTRACTEES WHICH WAS C ONSIDERED AS RECEIPTS IN THE EARLIER PERIOD ON ACCRUAL BASIS HOWEVER, THE CONTRACTEES HAVE DEDUCTED TDS ON SUCH RETENTION MONEY ON 13 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) PAYMENT BASIS WHICH FACT HAS BEEN EXPLAINED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACTS, SIMPLY MADE ADDITIONS WHICH AMOUNTS TO DOUBLE TAXATION , WHICH IS NOT P ERMISSIBLE UNDER THE EYES OF LAW. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE DETAILS , RIGHTLY DELETED THE ADDITIONS MADE TOWARDS DIFFERENCE IN THE TURNOVER AND HIS O R DER SHOULD BE UPHELD. 1 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD . THE ASSESSING OFFICER MADE ADDITIONS OF 26,90,462/ - TOWARDS DIFFERENCE IN TURNOVER IN THE BOOKS OF ACCOUNT AND TURNOVER AS PER TDS CERTIFICATES. ACCORD I NG TO THE ASSESSING OFFICER, THE ASSESSEE OUGHT TO HAVE CO NSIDERED THE TURNOVER AS PER THE TDS CERTIFICATES , WHEREAS THE ASSESSEE HAS ACCOUNTED FOR NET TURNOVER EXCLUDING WITHHELD AMOUNT . THE ASSESSING OFFICER FURTHER OBSERVED THAT THE WITHHELD AMOUNT IS A PART OF GROSS TURNOVER , ON WHICH CONTRACTEES HAVE DEDUCTED TDS. IT IS THE CONTENTION OF THE ASSESSEE THAT THE DIFFERENCE IN TURNOVER REPRESENTS WITHHELD AMOUNT BY THE CONTRACTEES WHICH WAS OFFERED AS INCOME IN THE EARLIER PERIOD ON ACCRUAL BASIS, WHEREAS THE CONTRACTEES HAVE DE DUCTED TDS ON WITHHELD AMOUNT ON PAYMENT BASIS . THE ASSESSEE FURTHER CONTENDED TH A T IT HAS FILED DETAILED , RECONCILIATION STATEMENT AND EXPLAINED DIFFERENCE BETWEEN THE TURNOVER AS PER THE BOOKS OF ACCOUNT AND TDS CERTIFICATES. 1 7 . HAVING HEARD BOTH THE PARTIES AND CONSIDERED THE MATERIAL ON RECORD , W E FIND THAT THERE IS A DIFFERENCE OF 26,90,462/ - IN THE 14 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) TURNOVER AS PER THE BOOKS OF ACCOUNT AND TDS CERTIFICATES RECEIVED FROM THE CONTRACTEES. THE ASSESSEE HAS FILED A DETAILED RECONCILIATION STATEMENT EXPLAINING THE DIFFERENCE BETWEEN THE TURNOVER . ON PERUSAL OF THE RECONCILIATION FILED BY THE ASSESSEE WHICH WAS EXTRACTED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER AT PAGE NO. 7 , WE FIND TH A T THERE IS A DIFFERENCE OF 13,10,200/ - IN THE TDS CERTIFICATE RECEIVED FROM THE EXECUTIVE ENGINEER (EE) , R & B KAKINADA. AS PER THE TDS CERTIFICATE , CONT R ACTEE HAS PAID AMOUNT OF 2,19, 64,982/ - , WHEREAS THE ASSESSEE HAS CONSIDERED AN AMOUNT OF 2,06,63,782/ - THEREBY , THERE IS A DIFFERENCE OF 13,01,200/ - . THE ASSESSEE CLAIMS THAT THE DIF F ERENCE OF 13,01,200/ - REPRESENTS PAYMENT OF WITH HELD AMOUNT FROM THE BILLS DATED 12/03/2010 FOR AN AMOUNT OF 6,09,124/ - AND 6,92,076/ - . ON FURTHER VERIFICATION OF THE RECONCILIATION STATEMENT , WE FIND THAT THE CONTRACTEE HAS DEDUCTED RETENTION AMOUNT FROM THE GROSS RECEIPTS AND DEDUCTED TAX AT SOURCE ON GROSS AMOUNT INCLUDING THE AMOUNT WITHHELD FOR RETENTION MONEY. WE FURTHER OBSERVE TH A T IT IS A USUAL PRACTICE IN THIS LINE OF BUSINESS THAT THE CONTRACTEES WOULD DEDUCT TDS ON GROSS AMOUNT BEFORE MAKING ANY RECOVERY INCLUDING AMOUNT WITHHELD FOR RETENTION MONEY . WHEN RETENTION MONEY IS RELEASED AFTER SUCCESSFUL COMPLETION OF THE CONTRACT PERIOD, THE AMOUNT WILL BE RELEASED WITHOUT THERE BEING ANY DEDUCTION TOWARDS TDS. 18. IN THIS CASE, THE ASSESSEE CLAIMS TO H A VE EXECU T ED WITHHELD AMOUNT FROM THE GROSS BILLS ON THE GROUND TH A T THE CONTRACTEES HAVE 15 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) DEDUCTED TDS ON NET AMOUNT EXCLUDING TDS , WHICH IS QUITE CONTRARY TO THE GENERAL PROCEDURE FOLLOWED IN THIS LINE OF BUSINESS. THE ASSESSING OFFICER HAS BROUGHT OUT CLEAR FACTS THAT AS PER THE TDS CERTIFICATE, THE CONTRACTE E S HAVE DEDUCTED TAX AT SOURCE ON GROSS AMOUNT INCLUDING WITHHELD AMOUNT. THOUGH, THE ASSESSEE CLAIMS THAT IT IS RECONCILED THE DIFFERENCE , FAILED TO EXPLAIN HOW WITHHELD AMOUNT HAS BEEN EXCLUD ED FROM THE GROSS RECEIPTS WITH NECESSARY CALCULATIONS. ON THE OTHER HAND, THE ASSESSING OFFICER HAS CLEARLY BROUGHT OUT THE FACTS TO THE EFFECT THAT THE AMOUNT MENTIONED IN THE TDS CERTIFICATE AND RECOVERIES MADE TOWARDS TDS, WITHHELD AMOUNT AND OTHER DEDUCTIONS IS TALLIED WITH THE GROSS AMOUNT CERTIFIED BY THE CONTRACTEE S . T HEREFORE , WE ARE OF THE VIEW THAT THE ASSESSING OFFICER WAS RIGHT IN MAKING ADDITIONS TOWARDS DIFFERENCE IN TURNOVER AS PER BOOKS OF ACCOUNT AND TDS CERTIFICATES. THE COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT APPRECIATING THE FACTS , SIMPLY OBSERVED THAT THE DIFF ERENCE REPRESENTS AMOUNT WITHHELD EARLIER AND RELEASED FOR PAYMENT NOW, BUT WHICH WAS ALREADY OFFERED TO TAX AS PART OF GROSS RECEIPT S. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) AND UPHELD THE ADDITIONS MADE BY T HE ASSESSING OFFICER TOWARDS DIFFERENCE IN TURNOVER AS PER BOOKS OF ACCOUNT AND TDS CERTIFICATES. 16 ITA NO. 561 & 562/VIZ/2014 (M/S. TIRUMALA CONSTRUCTIONS, KAKINADA) 1 9 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON TH IS 2 8 T H DAY OF MARCH , 201 7 . S D / - S D / - ( V. DURGA RAO ) ( G. MANJUNATHA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 2 8 T H MARCH , 201 7 . VR/ - COPY TO: 1 . THE ASSESSEE - M/S. TIRUMALA CONSTRUCTIONS, 8 - 24 - 21, SUBBARAO STREET, GANDHINAGAR, KAKINADA. 2 . THE REVENUE - ACIT, CIRCLE - 1, KAKINADA. 3 . THE CIT, RAJAHMUNDRY . 4 . THE CIT(A) , VISAKHAPATNAM. 5 . THE D.R . 6 . GUARD FILE. BY ORDER S E N I O R P R I V A T E S E C R E T A R Y I.T.A.T., VISAKHAPATNAM