SHAKUNTALA R. LAHOTI, MUMBAI V. ITO 20(3)(3), MUMBAI

ITA 5853/MUM/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3726 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; TDS; Set aside
• Section: 40(a)(ia); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI. BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO.5853/MUM/2008 (ASSESSMENT YEAR : 2005-06) SMT. SHAKUNTALA R. ;LAHOTI, 603-C, INDRALOK, NEAR SWAMI SAMARTHCIRCLE, LOKHANDWALA, ANDHERI (W), MUMBAI-400 099 PAN NO. AAAPL8620M VS. INCOME TAX OFFICER 20(3)(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI D. SONGATE PER V. DURGA RAO : THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, MUMBAI DT.29.4.2008. 2. THE BRIEF FACTS OF THE CASE PERTAINING TO GROUND NO. 2, WHICH IS MAIN GROUND, ARE THAT THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF GOODS CARRIAGE (TRANSPORT) AS A PROPRI ETARY CONCERN UNDER THE NAME AND STYLE OF M/S. NAVIN BHARAT TRANSPORT C OMPANY. THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING A TOT AL INCOME OF ` . 3,80,730. DURING THE ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER HAS NOTICED THAT THE ASSESSEE COMPANY HAD NOT DEDUC TED TDS ON FREIGHT PAID OF ` . 1,16,19,012. THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO FURNISH THE DETAILS IN RESPECT OF THE ABOVE AMOUNTS AND ALSO ASKED TO SHOW CAUSE AS TO WHY THE SAID PAYMENT S ON WHICH TAX HAS NOT BEEN DEDUCTED SHOULD NOT BE DISALLOWED AS A MOUNTS NOT DEDUCTIBLE FROM INCOME FROM BUSINESS AND PROFESSIO N. IN RESPONSE TO THE ABOVE QUERY, THE ASSESSEE FILED A LETTER DT.21. 12.2007 STATING THAT THEY HAVE NOT DEDUCTED TDS ON PAYMENT OF TRUCK FREI GHT AS ALL MARKET TRUCK FREIGHT PAYMENTS WERE BELOW ` . 50,000 AND OTHER PAYMENTS ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 2 MADE TO SISTER CONCERNS LIKE ARUN ROAD TRANSPORT, A RUN ROAD TRANSPORT CO. AND ARUN ROAD TRANSPORT CORPORATION. THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE AS SESSEE OBSERVED THAT THE FINANCE (NO.2) ACT, 2004 W.E.F. 1.4.2005 HAS SU BSTITUTED CLAUSES (I), (IA) AND (IB) AFTER SECTION 40(A). THE NEWLY INTRODUCED SECTION 40(A)(IA) STATES THAT ANY PAYMENTS SUCH AS INTEREST , COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SER VICES ETC OR AMOUNTS PAYABLE TO RESIDENT FOR CARRYING OUT ANY WORK, ON W HICH, TAX IS DEDUCTIBLE AND SUCH TAX HAS NOT BEEN DEDUCTED OR AF TER DEDUCTION HAS NOT BEEN PAID DURING THE PREVIOUS YEAR OR IN THE SU BSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SECT ION 200(1), THEN SUCH A PAYMENT CANNOT BE ALLOWED AS A DEDUCTION FRO M THE PROFITS AND GAINS OF BUSINESS AND PROFESSION. IN VIEW O F THE CLEAR CUT PROVISION IN THE ACT, SUCH EXPENDITURE ON WHICH TA X HAS NOT BEEN DEDUCTED OR THE DEDUCTED TAX HAS NOT BEEN PAID TO T HE CENTRAL GOVT. WITHIN THE DUE DATE CANNOT BE ALLOWED AS EXPENDITU RE. OUT OF PAYMENT OF ` . 1,16,10,012, MOST OF THE PAYMENTS ARE MADE TO THE SISTER CONCERNS VIZ. ARUN ROAD TRANSPORT CO. AMOUNT ING TO ` . 57,41,996; ARUN ROAD TRANSPORT CORPN. AMOUNTING TO ` . 27,19,017 AND ARUN ROAD TRANSPORT AMOUNTING TO ` . 10,94,544 AND THE BALANCE AMOUNT OF ` . 20,63,455/- HAS BEEN PAID TO MARKET TRUCKS. NO F URTHER DETAILS HAVE BEEN FILED BY THE ASSESSEE WITH REGARD TO MARKET TRUCKS AS TO THE IDENTIFICATION OF THE VEHICLES OR PARTIES , SO THAT A DECISION COULD BE TAKEN AS TO WHETHER THEY WERE COMING WITHI N THE PRESCRIBED LIMITS FOR DEDUCTION OF TDS. THE ASSESSING OFFICER WITH THE ABOVE OBSERVATIONS INVOKED THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT AND DISALLOWED THE SAME. ON BEING AGGRIEVED, THE ASSES SEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A). 3. BEFORE THE CIT(A), THE LEARNED AR OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE IS AN INDIVIDUAL, THEREFORE, THE PROVI SIONS OF SECTION 194C ARE NOT APPLICABLE TO THE CASE OF THE ASSESSEE . SINCE THE AMENDMENT BROUGHT BY THE FINANCE ACT, 2007 W.E.F. 1 .6.2007, THE ASSESSING OFFICER IS NOT JUSTIFIED DISALLOWING THE CLAIM OF THE ASSESSEE ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 3 BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE PAYMENT MADE TO THE PARTIE S IN EACH CASE DID NOT EXCEED MANDATORY LIMIT OF ` . 20,000, HENCE, TO THAT EXTENT OF SUCH PAYMENT, THE DISALLOWANCE CANNOT BE MADE. THE LEAR NED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALS O AFTER GETTING REMAND REPORT FROM THE AO IN RESPECT OF ADDITIONAL EVIDENCE FILED BY THE ASSESSEE WITH REGARD TO DETAILS OF PAYMENT MADE TO THE PARTIES OBSERVED THAT IN SO FAR AS PAYMENT MADE TO SISTER C ONCERNS VIZ. (I) ARUN TRANSPORT (II) ARUN TRANSPORT CO. AND (III) A RUN TRANSPORT CORPN. PRIOR TO 1.10.2004, ONLY INDIVIDUAL PAYMENT S DID NOT EXCEED ` . 20,000 ALTHOUGH THE AGGREGATE AMOUNT IS ABOVE ` . 50,000/-. HE FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 194 C WAS AMENDED W.E.F. 1.10.2004, THE SAME DO NOT APPLY TO THESE PA YMENTS SINCE THESE PAYMENTS WERE MADE PRIOR TO THE AMENDMENT. WHEN TH E ASSESSEE WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 40(A)(IA) IN SO FAR AS PAYMENTS MADE BEFORE 1.10.2004 AMOUNTING TO ` . 49,40,816/-, THE CIT(A) DELETED THE SAME. IN SO FAR AS THE PAYMENT OF ` . 20,63,455/- MADE TO THIRD PARTY TRUCKS NOT BELONGING TO GROUP CONCERN, IT IS SEEN FROM THE DETAILS THAT INDIVIDUAL PAYMENTS DID NOT EXCEED ` . 20,000. IT IS STATED THAT THE ASSESSEE ENGAGED THE TRUCKS DIRECTLY FROM THE MANDI / MARKET AS AND WHEN THE NEED ARISES. SINCE THESE TR UCKS BELONGING TO DIFFERENT PARTIES WHETHER BEFORE OR AFTER 1.10.2004 , THE AGGREGATE PAYMENT DURING THE YEAR IN RESPECT OF SINGLE TRUCK DOES NOT EXCEED ` . 50,000. THIS FACT WAS PROVED FROM THE DETAILS FILE D BY THE ASSESSEE. HENCE IT IS CLAIMED THAT EVEN AFTER 1.10.2004, INDI VIDUAL PAYMENTS IN RESPECT OF A SINGLE TRUCK DO NOT EXCEED ` . 20,000 AND AGGREGATE OF SUCH PAYMENTS IN RESPECT OF A SINGLE TRUCK IF THERE IS MORE THAN ONE PAYMENT DOES NOT EXCEED ` . 50,000/-, THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C(2) AND 194C(3) ARE NO T ATTRACTED IN RESPECT OF THIRD PARTY TRUCKS. THUS, THE LEARNED C IT(A) DELETED THE ADDITION MADE ON THIS COUNT. THE LEARNED CIT(A) H AS OBSERVED THAT IN SO FAR AS PAYMENTS MADE TO SISTER CONCERNS W.E.F. 1 .10.2004 IS LIABLE ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 4 TO DEDUCT TAX FROM THE PAYMENTS MADE TO SUCH TRUCKE RS, IF THE AGGREGATE PAYMENT MADE DURING THE FINANCIAL YEAR TO A SUB-CONTRACTOR EXCEED ` . 50,000 EVEN IF THE INDIVIDUAL PAYMENTS MADE DO N OT EXCEED ` . 20,000/-. FROM THE DETAILS FURNISHED ON 28.4.200 8, IT IS SEEN THAT AGGREGATE PAYMENTS MADE TO THREE SISTER CONCERNS I. E. (I) ARUN TRANSPORT CORPORATION (II) ARUN ROAD TRANSPORT AND ARUN ROAD TRANSPORT CO. DURING THE YEAR ON OR AFTER 1.10.200 4 AND UP TO THE END OF FINANCIAL YEAR EXCEEDS ` . 50,000/- ALTHOUGH THE PAYMENTS ARE LESS THAN ` . 20,000/-, HENCE, TAX WAS LIABLE TO BE DEDUCTED. AS THE ASSESSEE FAILED TO DEDUCT THE TAX ON SUCH PAYMENTS OF ` . 46,14,741/-, PROVISIONS OF SECTION 40(A)(IA) ARE ATTRACTED TO TH E EXTENT OF THIS AMOUNT. THE ADDITION WAS CONFIRMED ON THIS COUNT AN D THE APPEAL FILED BY THE ASSESSEE WAS PARTLY ALLOWED BY THE LEA RNED CIT(A). AGAINST THE ORDER OF THE LEARNED CIT(A), THE ASSESS EE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL WITH REGARD TO ADDITION IN RESPECT OF ` . 46,14,741/-. THE REVENUE HAS NOT CARRIED THE MAT TER IN APPEAL IN RESPECT OF DELETION OF ADDITIONS MADE BY THE ASS ESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE HAS ALREADY OWNED SOME VEHICLES, HOWEVER, WHENEVER VEHICLES ARE REQUIRED, HE USED TO TAKE THE VEHICLES FROM THE SISTER CONCERNS AND THERE IS NO RELATIONSHIP BETWEEN THE A SSESSEE AND THE SISTER CONCERNS AS A CONTRACTOR AND SUB-CONTRACTOR. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT WIT HOUT EXAMINING THE FACTS OF THE CASE, THE AO INVOKED THE PROVISIONS OF SECTION 194C(2) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE CONTE NDED THAT THE ONUS LIES ON THE REVENUE IN SO FAR AS APPLICATION OF PRO VISIONS OF SECTION 194C(2) OF THE ACT, IS CONCERNED. THE LEARNED COUNS EL FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING CASES IN SUPPORT OF A SSESSEES CASE:- 1. MYTHRI TRANSPORT CORPORATION VS. ACIT, 124 TTJ 9 70 (VISAKHA) 2. RR CARRYING CORPORATION VS. ACIT, 126 TTJ 240 (C TK) 3. CHANDRAKANT THACKAR V. ACIT, 129 TTJ 1 (UO) (CTK ) ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 5 5. THE LEARNED DR, ON THE OTHER HAND, HAS RELIED UP ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D REPRESENTATIVES OF THE PARTIES AND PERUSED THE MATE RIAL ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. THE AS SESSEE, AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF GOODS CARRIA GE (TRANSPORT) AS A PROPRIETARY CONCERN UNDER THE NAME AND STYLE OF M/S . NAVIN BHARAT TRANSPORT COMPANY. THE CASE OF THE AO IS THAT THE A SSESSEE WAS NOT DEDUCTED TAX ON THE PAYMENTS MADE TO OTHER PARTIES, THEREFORE, HE INVOKED SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE AMOUNT OF ` . 1,16,10,012/-. THE CIT(A) AFTER CONSIDERING THE SUB MISSIONS OF THE ASSESSEE AND AFTER GETTING REMAND REPORT FROM THE A O, SUSTAINED THE DISALLOWANCE RELATING TO SISTER CONCERNS, NAMELY, ( I) ARUN TRANSPORT (II) ARUN TRANSPORT CO. AND (III) ARUN TRANSPORT CO RPN., AMOUNTING TO ` . 46,14,741/-. THE ONLY DISPUTE BEFORE US IS WHETHE R THE PROVISIONS OF SECTION 194C(2) OF THE ACT APPLY TO THE ASSESSEE S CASE OR NOT. AFTER CAREFUL CONSIDERATION OF THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND THAT NO FACTS ARE AVAILABLE ON RECORD TO DECIDE THE ISSUE THAT WHETHER THERE IS ANY RELATIONSHIP BETWEEN THE ASSESSEE AND ITS SISTER CONCERNS AS CONTRACTOR AND SUB-CONTRACTOR, WHICH IS REQUIRED TO INVOKE PROVISIONS OF SECTION 194C(2) OF THE ACT. THE CIT( A) WITHOUT DISCUSSING THE FACTS RELATING TO THE ISSUE INVOKED SECTION 194C(2) OF THE ACT AND, EVEN, THE ASSESSING OFFICER HAS NOT DI SCUSSED THE SAME. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE CIT(A) ONLY WITH REGARD TO THE ADDITION OF ` . 46,14,741/- SUSTAINED BY HIM IN RELATION TO THE PAYMENTS MADE TO SISTER CONC ERNS AND REMIT THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECT ION TO RE-DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER TO THE ASS ESSEE. ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 6 7. GROUND NO. 1 IS GENERAL IN NATURE, WHICH IS NOT REQUIRED TO BE ADJUDICATED BY US. GROUND NO. 3 IS REGARDING CHARGI NG OF INTEREST U/S 234A, 234B, 234C, AND 234D OF THE ACT. CHARGING OF INTEREST UNDER THE SAID SECTIONS IS CONSEQUENTIAL IN NATURE, THERE FORE, THE AO IS DIRECTED ACCORDINGLY. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF DECEMBER, 2010. SD/- SD/- (R.S. SYAL) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT. 16 TH DECEMBER, 2010. *GPR COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI. KV ITA NO. 5853/M/08 SHAKUNTALA R. LAHOTI 7 S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 13/12/10 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 15/12/10 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER