ACIT CIR 25(3), MUMBAI V. SHANTAREDDY K KODAMNALLI, NAVI MUMBAI

ITA 5681/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3028 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 29-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Keywords: Business income
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / I .TA NO. 5681/MUM/2012 ( / ASSESSMENT YEAR: 2009-10 THE ACIT - 25(3), 308, C-11, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. SHRI SHANT A REDDY K. KODAMNALLI, E/403, SUYOG SMHA CHS LTD., SECTOR-8, SANPADA, NAVI MUMBAI-400 06 ./ ./ PAN/GIR NO.AKSPG 4142P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI J. SARAVANAN / RESPONDENT BY: NONE / DATE OF HEARING :04.07.2016 ! / DATE OF PRONOUNCEMENT :21 .09.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF THE LD. CIT(A)-35, MUMBAI DATED 7.6.2012 PERTAINING TO ASSE SSMENT YEAR 2009-10. 2. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHA LF OF THE ASSESSEE. WE FURTHER OBSERVED FROM THE RECORD THAT ON EARLIER OCCASIONS ALSO WHEN THE NOTICES WERE ISSUED BY REGI STERED POST, THEY CAME BACK UNSERVED WITH THE ENDORSEMENT OF THE POST AL AUTHORITIES ITA NO. 5681/M/2012 2 THAT THE ADDRESSEE HAD LEFT THE PREMISES. THEREFOR E, WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND DISPOSED OFF THIS A PPEAL ON MERIT. 3. THE FIRST ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE U/S. 40(A)(IA) IN RESPECT OF TH E PAYMENTS MADE TO LABOURERS. 4. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE ASSESSMENT ORDER SUBMITS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED LABOUR CHARGES PAID TO VARIOUS LABOUR CONTRACTORS/SUPERVISORS AMOUNTING TO RS. 56, 60,115/- FOR THE REASON THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON S UCH LABOUR CHARGES PAID. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS SU BMITTED THAT THE NATURE OF BUSINESS OF THE ASSESSEE IS SUCH THAT THE Y HAVE TO SEARCH FOR THE WORKERS WHICH WERE NOT EASILY AVAILABLE AND THE REFORE THEY HAVE MOBILIZED WORKERS THROUGH SUPERVISOR AND PAYMENTS W ERE MADE TO SUPERVISORS WHO IN TURN MADE PAYMENTS TO THE WORKER S AND SINCE THE TOTAL AMOUNT PAID TO THE INDIVIDUAL LABOUR NEVER EX CEEDED THRESHOLD LIMIT FOR DEDUCTING TDS, NO TDS WAS MADE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE CONTENTIONS OF THE ASSESSEE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AND BY INVOKING THE PROVISIONS OF SEC. 40(A)(IA), THE ASSESSING OFFICER DISALLOWED TH E LABOUR CHARGES FOR NON DEDUCTION OF TDS ON THESE PAYMENTS MADE TO LABOUR CONTRACTORS. THE LD. DEPARTMENTAL REPRESENTATIVE S UBMITS THAT THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING THAT SINCE THRESHOLD LIMIT FOR DEDUCTING TDS ON THE SAID AMOUNTS NOT E XCEEDED IN THE ITA NO. 5681/M/2012 3 CASE OF AN INDIVIDUAL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. THE LD. DE PARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF T HE ASSESSING OFFICER. 5. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE I SSUE IN APPEAL HAS BEEN ELABORATELY CONSIDERED BY THE LD. CIT(A) WITH REFERENCE TO THE AVERMENTS OF THE ASSESSING OFFICER AND THE SUBMISSI ONS MADE BY THE ASSESSEE AND CONCLUDED THAT THE PAYMENTS WERE MADE THROUGH GROUP LEADERS, FAMILY HEAD, MUKADAMS, JAMADARS, SUPERVISO RS ETC., TO THE LABOURERS ONLY ON BEHALF OF THE ASSESSEE AND THE A SSESSEE UNDER HIS CONTROL AND SUPERVISION EXECUTED WHOLE OF THE CONTR ACT WORK. THUS HE DELETED THE DISALLOWANCE OBSERVING AS UNDER: 4.1. THE A.O. FOUND THAT THE APPELLANT CLAIMED PA YMENTS TOWARDS LABOUR CHARGES PAID TO 15 PARTIES TOTALING TO RS. 56,60,115/-. THE A.O. WAS OF THE OPINION THAT THE A PPELLANT WAS LIABLE TO DEDUCT TAX AT SOURCE AS THE APPELLANT HAS AWARDED CONTRACTS TO THOSE PARTIES. THE A.O. HAS NOT ACCEPT ED THE SUBMISSION OF THE APPELLANT THAT THE PAYMENTS HAVE BEEN MADE TO GROUP LEADERS/ MUKADAMS/ JAMADARS/ SUPERVISORS E TC. AND INDIVIDUALLY IN THE HANDS OF LABOURS, THE AMOUNTS O F LABOUR CHARGES NEVER EXCEEDS THE THRESHOLD LIMIT APPLICABL E FOR TDS. 4.2. AT THE TIME OF HEARING, THE AUTHORISED REPRESE NTATIVE SUBMITTED THAT THE ALL THE FACTS AND DETAILS HAVE B EEN FURNISHED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS. THE A.R. ALSO CONTENDED THAT THERE ARE AT LEAST 10- 15 WORKERS WORKING UNDER ONE JAMADAR OR SUPERVISORS AND BECAUSE OF UNAVAILABILITY OF TIME AND MANAGEMENT AN D THIS ARRANGEMENT IS NECESSARY TO CONTROL THE LABORERS. I N SUCH A SITUATION, THE APPELLANT MAKES THE PAYMENTS TO SUPE RVISORS TO DISTRIBUTE THE SAME TO WORKERS FALLING UNDER THEIR GROUPS AND ACCORDINGLY THE PAYMENT TO INDIVIDUAL WORKER DOES N OT EXCEED THE LIMIT OF RS. 30,000/- P.A. AND AS SUCH THE APP ELLANT WAS NOT ITA NO. 5681/M/2012 4 LIABLE TO DEDUCT TAX AT SOURCE. THE A.R. HAS ALSO C ONTENDED THAT THE SIMILAR ISSUE HAS ALREADY BEEN DECIDED IN FAVOU R OF THE APPELLANT IN A.Y. 2007-08 VIDE APPELLATE ORDER DATE D 30/01/2012. 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE AUTHOR ISED REPRESENTATIVE AND THE STAND TAKEN BY THE A.O. I FU LLY AGREE WITH THE SUBMISSION OF THE REPRESENTATIVE THAT IN THE CA SE OF APPELLANT THE GROUP LEADERS, FAMILY HEAD, MUKADAMS, JAMADARS, SUPERVISORS ETC. MADE PAYMENTS TO THE LABOURERS ONL Y ON BEHALF OF THE APPELLANT AND THE APPELLANT UNDER HIS CONTROL A ND SUPERVISION EXECUTED WHOLE OF THE CONTRACT AND AS S UCH THE ULTIMATELY IF IN THE HANDS OF INDIVIDUAL LABOUR, IF THE AMOUNT DOES NOT EXCEED THE THRESHOLD LIMIT OF RS. 30,000/-, THE APPELLANT IS NOT LIABLE TO DEDUCT TAX AT SOURCE. ACCORDINGLY, THE A. O. IS NOT JUSTIFIED IN DISALLOWING THE LABOUR CHARGES U/S. 40 (A)(IA) AND AS SUCH THE ADDITION OF RS. 56,60,115/- IS DELETED. 6. ON GOING THROUGH THE ORDER OF THE LD. CIT(A), WE DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). THEREFORE, WE REJECT THE GROUND RAISED BY THE REVEN UE AND SUSTAIN THE ORDER OF THE LD. CIT(A). 7. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS T HAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S. 40A (3) OF THE ACT. 8. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRING TO THE ASSESSMENT ORDER SUBMITS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED RS. 9,57,253/- BEING 20% OF THE PAYMENTS MADE TO THE LABOUR CONTRACTORS AMOUNTI NG TO RS. 47,86,265/- U/S. 40A(3) FOR WANT OF PROPER VERIFICA TION AS THE PAYMENTS TO LABOUR CONTRACTORS SUPPORTED ONLY BY SE LF MADE VOUCHERS AND BILLS AND NOT POSSIBLE TO VERIFY WHETH ER THE ASSESSEE HAS PAID THE AMOUNTS TO LABOUR CONTRACTORS IN CASH. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE LD. CI T(A) DELETED THE ITA NO. 5681/M/2012 5 DISALLOWANCE HOLDING THAT THE ASSESSING OFFICER FAI LED TO ESTABLISH THAT THE PAYMENTS EXCEEDING RS. 20,000/- HAS BEEN M ADE IN CASH ON A SINGLE OCCASION TO A PARTICULAR PERSON WHICH CAN ATTRACT THE PROVISIONS OF RS. 40A(3) OF THE ACT. THE LD. DEPAR TMENTAL REPRESENTATIVE SUPPORTS THE ORDER OF THE ASSESSING OFFICER. 9. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A SSESSEE BEFORE THE LD. CIT(A) AND THE FINDINGS OF THE LD. C IT(A) THEREIN. THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UN DER: 5.1. THE ASSESSING OFFICER NOTICED THAT THE APPELLA NT HAS MADE THE PAYMENTS TO TWO PARTIES NAMELY 1) DEV REDD Y RS. 19,19,865/- AND 2) BHAGYASHREE ENTERPRISES RS. 28,6 6,400/- TOTALING TO RS. 47,86,285/- IN CASH AND ACCORDINGLY ADDED RS. 9,57,253/- U/S. 40A(3) BEING 20% OF THE TOTAL AMOUN T PAID IN CASH FOR WANT OF VERIFICATION OF RECORDS. 5.2. AT THE TIME OF HEARING, THE REPRESENTATIVE SUB MITTED THAT THE A.O, HAS MADE THE ADDITIONS IN SPITE OF TH E FACT THAT THE APPELLANT HAS SUBMITTED LEDGER ACCOUNTS OF BOTH THE CREDITORS PARTIES REFLECTING THE ENTRIES OF CASH PAYMENTS DUL Y SIGNED AND CONFIRMED BY THEM. THESE PARTIES HAVE AGREED TO HAV E RECEIVED THE PAYMENTS OF RS.20,000/- OR LESS ON MULTIPLE SEV ERAL DATES. THE ALLEGATION OF THE A.O. IS PREJUDICIAL BECAUSE THE E NTRIES ARE SUPPORTED BY THE CONFIRMATIONS FROM THE THIRD PARTY AND NOT BY THE SELF MADE VOUCHERS ONLY AND HENCE NO FURTHER VE RIFICATION IS REQUIRED. 5.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE REPRESENTATIVE OF THE APPELLANT AND THE STAND TAKEN BY THE A.O. AND FIND NO HESITATION TO SAY THAT THE A.O. HAS FAI LED TO ESTABLISH THE FACT THAT THE PAYMENTS EXCEEDING RS.20,000/- HA S BEEN MADE IN CASH ON A SINGLE OCCASION TO A PARTICULAR PERSON WHICH CAN ATTRACT PROVISIONS OF SECTION 40A(3) OF THE I.T. AC T, 1961. ACCORDINGLY, THE DISALLOWANCE MADE U/S. 40A(3) OF R S. 9,57,253/- IS DELETED. ITA NO. 5681/M/2012 6 10. AS COULD BE SEEN FROM THE ABOVE, IT IS THE FIND ING OF THE LD. CIT(A) THAT THE ASSESSEE HAS SUBMITTED LEDGER ACCOU NTS OF BOTH THE CREDITOR PARTIES REFLECTING THE ENTRIES OF CASH PAY MENTS DULY SIGNED AND CONFIRMED BY THEM AND THESE PARTIES HAVE AGREED TO HAVE RECEIVED THE PAYMENTS OF RS. 20,000/- OR LESS ON SE VERAL DATES. THUS, THE LD. CIT(A) DELETED THE DISALLOWANCE HOLDING THA T THE CREDITORS HAVE CONFIRMED THAT THEY RECEIVED CASH OF RS. 20,00 0/- OR LESS ON SEVERAL OCCASIONS AND THE ASSESSING OFFICER HAS FAI LED TO ESTABLISH THAT THE PAYMENTS MADE BY THE ASSESSEE EXCEEDED RS. 20,000/- IN CASH ON A SINGLE OCCASION. THEREFORE, WE DO NOT SE E ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) . THIS GROUND O F THE REVENUE IS DISMISSED. 11. THE LAST ISSUE IN THE APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 17,02, 569/- BY ADMITTING FRESH EVIDENCE IN CONTRAVENTION OF RULE 46A. 12. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THA T THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT A DDED RS. 17,02,569/- AS BUSINESS INCOME OF THE ASSESSEE ON T HE GROUND THAT AS PER AIR INFORMATION THERE IS DIFFERENCE IN THE CO NTRACTUAL RECEIPTS SHOWN BY BHARATI AIRTEL LTD., AND THE RECEIPTS SHOW N BY THE ASSESSEE IN HER BOOKS OF ACCOUNTS/RECONCILIATION STATEMENT. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE LD. CI T(A) DELETED THE DISALLOWANCE OBSERVING THAT ADDITION WAS MADE BASED ONLY ON AIR INFORMATION AVAILABLE ON RECORDS AT THE TIME OF ASS ESSMENT PROCEEDINGS AND THIS INFORMATION WAS REVISED WHICH RESULTED IN REVERSAL OF SAID AMOUNT WHICH WAS WRONGLY REPORTED BY BHARATI ITA NO. 5681/M/2012 7 AIRTEL LTD. THE LD. DEPARTMENTAL REPRESENTATIVE SU PPORTED THE ORDERS OF THE ASSESSING OFFICER. 13. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) AND THE FINDINGS OF THE LD. C IT(A) THEREIN. THE LD. CIT(A) DELETED THE DISALLOWANCE OBSERVING AS UN DER: THE ASSESSING OFFICER NOTICED THAT AS PER AIR INFO RMATION AVAILABLE ON RECORDS, THE CONTRACT RECEIPTS FROM BH ARTI AIRTEL IS 1,57,79,280/ - AND AS PER THE RECONCILIATION STATEM ENT SUBMITTED BY THE ASSESSEE, THE SAME IS RS. 1,40,76,711/- RESU LTING SHORT FALL OF RS. 17,02,569/-. ACCORDINGLY THE A.O. HAS ADDED THE SAME ON ACCOUNT OF UNDER REPORTING OF CONTRACT RECEIPTS. 6.2 AT THE TIME OF HEARING, THE REPRESENTATIVE SUBM ITTED THAT THE A.O. HAS MADE THE ADDITIONS ONLY BASED ON THE AIR INFORMATION AVAILABLE ON RECORDS. THE FORM 26AS WHI CH KEEPS CHANGING ON THE BASIS OF TDS RETURNS UPLOADED BY TH E THIRD PARTY CANNOT BE RELIED PURELY WHILE ADDING SUCH SUMS WITH OUT GIVING ANY PROPER FINDINGS OR WITHOUT PROVING ANYTHING CON TRARY. IT HAS ALSO BEEN SUBMITTED THAT BHARTI AIRTEL HAS REVISED ITS TDS RETURN ON 10/11/2011 AND REVERSED THE SAID AMOUNT OF RS. 1 7,02,569/-. AS A RESULT OF REVISION OF TDS STATEMENT, THE DIFFE RENCE IS COMING TO RS. 37,35,574/- AND THE SAME IS DUE TO THE FA CT THAT THE BHARTI AIRTEL HAS REPORTED THE CONTRACT RECEIPTS PE RTAINING TO F.Y. 2009-10 ON THE SAME AMOUNT. THE APPELLANT HAS ALS O ACCOUNTED THE SAID AMOUNT OF RS. 37,35,574/- AS CONTRACT RECE IPTS IN F.Y. 2009-10 AND AS SUCH THE SAME CANNOT BE ACCOUNTED TW ICE. THE A.R. HAS ALSO FURNISHED COPY OF LEDGER ACCOUNT REFL ECTING THE SAID ENTRY IN F.Y. 2009-10. 6.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE REPRESENTATIVE OF THE APPELLANT AND THE STAND TAKEN BY THE A.O. AND FIND NO HESITATION TO SAY THAT THE A.O. HAS MAD E THE ADDITION ONLY BASED ON AIR INFORMATION AVAILABLE ON RECORDS AT THE TIME OF ASSESSMENT PROCEEDINGS. I AGREE WITH THE FACT THAT THE REVISION IN AIR INFORMATION RESULTED IN REVERSAL OF THE SAID AM OUNT WHICH WAS REPORTED WRONGLY BY BHARTI AIRTEL AND AS SUCH H E QUESTION OF DIFFERENCE IN CONTRACT RECEIPTS DOES NOT ARISE. AS FAR AS ACTUAL DIFFERENCE OF RS. 37,35,574/- IS CONCERNED, THE APP ELLANT HAS ITA NO. 5681/M/2012 8 ALREADY ACCOUNTED THE SAME IN F.Y. 2009-10 AND AS S UCH NO ADDITION IS JUSTIFIED ON THAT ISSUE TOO. HENCE THE ADDITION OF RS. 17,02,569/- IS AT ALL NOT JUSTIFIED AND ACCORDINGLY DELETED. 14. ON GOING THROUGH THE ORDER OF THE LD. CIT(A), W E DO NOT FIND ANY VALID REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST SEPTEMBER, 2016. SD/- SD/- (RAJENDRA) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $ %' /JUDICIAL MEMBER MUMBAI; (' DATED 21 ST SEPTEMBER, 2016 . % . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+ ,%%-. , -.! , / DR, ITAT, MUMBAI 6. , /01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI