M/s. Orient Builders, Surat V. The Income tax Officer,Ward-3(4), Surat

ITA 620/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60590 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: M K PATEL
• Section: 194C

Judgement Text

ITA NO 620/ AHD/2010 A.YR.. 2005 -06 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO. 62 0 /AHD/2010. (ASSESSMENT YEAR: 2005-06 ) M/S.ORIENT BUILDERS A-302,YOGI COMPLEX, OPP. PATEL WADI, NEW RANDER ROAD, SURAT. (APPELLANT) VS. THE INCOME TAX OFFICER, WARD 3(4), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAAFO 4669H APPELLANT BY : MR. M.K. PATEL RESPONDENT BY : MR. B.L. YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 2-7-2012 DATE OF PRONOUNCEMENT : 13-7-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT (A)- II, SURAT DATED 24-2-2009 FOR THE ASSESSMENT YEAR 2 005-06. 2. THE REGISTRY HAS INFORMED THAT THIS APPEAL WAS B ELATEDLY FILED BY 305 DAYS. AS PER CONDONATION PETITION THE ASSESSEE HAS INFORMED THAT THE DELAY IN FILING THE APPEAL WAS FOR THE REASON THAT ASSESS EE WAS UNAWARE OF THE PROVISIONS OF THE LAW AND ITS RIGHT OF FILING SECON D APPEAL. IN THE CASE OF COLLECTOR, LAND ACQUISITION VS. MST. KATIJI & ORS ( 1987) 167 ITR 471 (SC), THE HONBLE SUPREME COURT HAS HELD THAT ORDINARILY A LITIGANT DOES NOT STAND ITA NO 620/ AHD/2010 A.YR.. 2005 -06 2 TO BENEFIT BY LODGING AN APPEAL LATE. REFUSING TO C ONDONE DELAY CAN RESULT IN A MERITORIOUS MATTER BEING THROWN OUT AT THE VER Y THRESHOLD AND CAUSE OF JUSTICE BEING DEFEATED. AS AGAINST WHEN DELAY IS C ONDONED, THE HIGHEST THAT CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING THE PARTIES. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY OR ON ACCOUNT OF CULPABLE NEGLIGENCE OR ON ACCOUNT OF MALAFIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT, HE RUNS A SERIOUS RISK. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMS TANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE SUPREME COURT DECISION W E HEREBY CONDONE THE DELAY AND ADMIT THE APPEAL. 3. THE ASSESSEE RAISED IN ITS APPEAL TWO GROUNDS OF APPEAL BUT GROUND NO.2 IS NOT PRESSED DURING THE COURSE OF HEARING OF APPEAL ON 2-7-2012 AND THEREFORE THE SAME IS NOT ADJUDICATED UPON. THE ONL Y GROUND NO.1 IS ADJUDICATED UPON, WHICH READS AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS ON THE SUBJECT, THE LD. CIT (A) HAS ERRED IN CONFIRMIN G THE ACTION OF THE A.O. IN MAKING ADDITION OF RS.17,48,997/- ON ACCOUN T OF DISALLOWANCE OF LABOUR PAYMENT U/S. 40(A)(IA). 4. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F CONSTRUCTION ACTIVITY. IT FILED ITS RETURN OF INCOME ON 31-10-20 05 DECLARING TOTAL INCOME AT RS.1,53,145/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. OBSERVED THAT ASSESSEE HAD PAID RS.17,16,000/- TO SHRI RAJESH PARMAR AND RS.17,997/ - TO SHRI GAEKWAD AGGREGATING TO RS.17,48,997/-. FOR THIS PAYMENT THE ASSESSEE HAD NOT DEDUCTED TDS AS REQUIRED U/S. 194C. THE A.O. HELD THAT THE FIRM HAD ITA NO 620/ AHD/2010 A.YR.. 2005 -06 3 COMMITTED DEFAULT IN TERMS OF SECTION 40(A)(IA) OF THE ACT AND THEREFORE, THE WHOLE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT WA S NOT ELIGIBLE FOR DEDUCTION AS PER THE PROVISIONS OF I.T. ACT. HE ACC ORDINGLY, DISALLOWED RS.17,48,997/- U/S.40(A)(IA) OF THE ACT. 5. AGGRIEVED BY THE ACTION OF THE A.O. ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT (A). BEFORE THE CIT (A), ASSESSEE CO NTENDED THAT THE PROVISIONS OF SECTION 40(A) (IA) ARE APPLICABLE TO PAYMENTS WHICH ARE PAYABLE ON THE BALANCE SHEET DATE AND NOT TO THE PA YMENTS MADE DURING THE PREVIOUS YEAR. SINCE THE SUM OF RS.17,48,997/- WAS FULLY PAID DURING THE YEAR AND NO SUM HAD REMAINED OUTSTANDING AT THE END OF THE YEAR, THEREFORE, NO DISALLOWANCE COULD BE MADE U/S. 40(A) (IA) OF THE ACT. THE CIT (A) DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE ORDER OF THE A.O. BY HOLDING AS UNDER:- 5.2. SEC. 194C PROVIDES THAT ANY PERSON RESPONSIBL E FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK INCLU DING THE SUPPLY OF LABOUR IN PURSUANCE OF A CONTRACT BETWEEN A CONTRAC TOR AND THE PARTIES LISTED THEREUNDER IN CLAUSES (A) TO (J), SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO - (I) ONE PER CENT IN CASH OF ADVERTISING, (II) IN ANY OTHER CASE TWO PER CENT. THUS, EVERY TIME A SUM WAS CREDITED TO THE ACCOUNT OF THE CONTRACTOR AND/OR SUB-CONTRACTOR, AND EVERY TIME TH E PAYMENT WAS DISBURSED TO THE CONTRACTOR OR SUB-CONTRACTOR, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX FROM SUCH PAYMENTS. SIMILAR DEDUCTION WAS TO ITA NO 620/ AHD/2010 A.YR.. 2005 -06 4 BE MADE WHILE CREDITING OR ACTUALLY PAYING ANY FEES FOR PROFESSIONAL OR TECHNICAL SERVICES. THE ASSESSEE WAS REQUIRED TO DEDUCT TDS U/S. 194J.THESE PROVISIONS CLEARLY STIPULATES THAT WHET HER OR NOT THE ASSESSEE HAD ACTUALLY PAID ANY SUM OR CREDITED ANY SUM, TAX WAS TO BE DEDUCTED AT SOURCE EVEN ON THE SUMS WHICH WERE N OT ACTUALLY PAID DURING THE YEAR BUT WERE ONLY CREDITED TO THE ACCOU NT OF THE CONTRACTOR/SUB-CONTRACTOR. IT WOULD ALSO INCLUDE TH E SUM OUTSTANDING AT THE END OF THE YEAR. SEC. 40(A)(IA) MAKES A CLEA R REFERENCE TO THE VARIOUS TYPES OF PAYMENTS ON WHICH TAX IS DEDUCTIBL E UNDER CHAPTER XVII-B UNDER WHICH FALLS THE SECTIONS 194C AND 194J . THE ASSESSEE HAD DEFAULTED IN NOT DEDUCTING TAX AT SOURCE FROM T HE PAYMENTS, WHETHER ACTUALLY PAID DURING THE YEAR OR WHICH HAD REMAINED UNPAID AT THE END OF THE YEAR, AND CONSEQUENTLY, THE PROVI SIONS OF SEC. 40(A)(IA) BECAME CLEARLY APPLICABLE. THE A.O. WAS F ULLY JUSTIFIED IN MAKING THE DISALLOWANCE UNDER THE SAID SECTION AND CONSEQUENTLY, THE ADDITION OF THE SUM OF RS.17,48,997/- WOULD STA ND CONFIRMED. 6. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSES SEE IS NOW IN APPEAL BEFORE US. BEFORE US THE LD. A.R. SUBMITTED THAT T HE SUM OF RS.17,48,997/- HAS BEEN PAID TO THE CONTRACTORS DURING THE PREVIOU S YEAR AND NO SUM HAD REMAINED OUTSTANDING AT THE END OF THE YEAR. HE FUR THER SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) ARE APPLICABLE TO C ONTRACTORS WHICH ARE PAYABLE ON THE BALANCE SHEET DATE AND NOT PAID DURI NG THE PREVIOUS YEAR. SINCE IN THE ASSESSEES CASE ALL THE SUMS HAS BEEN PAID BEFORE THE YEAR END, NO DISALLOWANCE U/S. 40(A)(IA) CAN BE MADE. FO R THIS PROPOSITION THE LD. AR. RELIED ON THE DECISION OF SPECIAL BENCH IN THE CASE OF M/S. MERILYN SHIPPING & TRANSPORTS VS. ACIT IN ITA NO.477/VIZ./2 008. 7. ON THE OTHER HAND D.R. SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE IS A CON TRACTOR AND HAS PAID ITA NO 620/ AHD/2010 A.YR.. 2005 -06 5 RS.17,48,997/- TO THE CONTRACTOR BEFORE YEAR END. A S PER THE BALANCE SHEET NO SUM HAS REMAINED OUTSTANDING AS AT THE END OF TH E YEAR. THIS FINDING OF FACT HAS NOT BEEN CONTROVERTED BY THE LD. D.R. 9. IN THE RECENT JUDGMENT OF SPECIAL BENCH IN THE C ASE OF M/S. MERILYN SHIPPING & TRANSPORTS (SUPRA) IT HAS BEEN HELD AS U NDER: ..THAT PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPLICABLE ONLY TO THE AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON THE DATE OF 31ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED T O DISALLOW WHICH HAD BEEN ACTUALLY PAID DURING THE PREVIOUS YEAR WIT HOUT DEDUCTION OF TDS. 10. IN THE PRESENT CASE, ALL THE AMOUNTS HAVE BEEN PAID BEFORE THE YEAR END AND THERE IS NO AMOUNT OUTSTANDING AT THE YEAR END. RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), WE ARE OF THE VIEW THAT NO DISA LLOWANCE CAN BE MADE IN THE PRESENT CASE. ACCORDINGLY WE DIRECT THE DELETIO N OF THE ADDITION MADE BY THE A.O. AND SUSTAINED BY LD. CIT (A) BY INVOKIN G THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. HENCE THIS GROUND OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 -7 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO 620/ AHD/2010 A.YR.. 2005 -06 6 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-II, SURAT. 4. THE CIT CONCERNED. 5. THE DR. ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 3 - 7 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 4 / 7 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 10 - 7 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 13 - 7 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 13 - 7 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 3 - 7 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..