ACIT, Shimla V. Shri Mahesh Chander Puri, Shimla

ITA 647/CHANDI/2013

• Counselvise Citation: 64721514 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-08-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D S SIDHU
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 647/CHD/2013 ASSESSMENT YEAR: 2007-08 THE ACIT, CIRCLE, VS. M/S MAHESH CHANDER PURI SHIMLA SHIMLA PAN NO. ADJPP7094H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. D.S. SIDHU RESPONDENT BY : SH. RAJIV SOOD DATE OF HEARING : 10.09.2015 DATE OF PRONOUNCEMENT : 16.10.2015 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A) SHIMLA DATED 25.3.2013 RELATING TO ASSESSMENT YEAR 2007-08. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS:- 1, 'ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCES TO THE EXTENT OF RS. 4.50.000/- MADE BY THE A.O UNDER SECT ION 40(A)(IA) OF THE I.T. ACT ON THE PAYMENTS ACTUALLY MADE BY THE ASSESSEE TO M/S SHESH SHAKTI CONSTRUCTION.' 2. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A ) HAS FURTHER ERRED IN DELETING THE DISALLOWANCE TO T HE EXTENT 2 OF RS, 26,58.222/- MADE BY THE A.O UNDER SECTION 40 (A)(IA) OF THE I.T. ACT ON THE PAYMENTS ACTUALLY MADE BY TH E ASSESSEE TO LABOUR THROUGH FRIENDS, WELLWISHERS AND LOCAL PEOPLE. 3. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) HA S FURTHER ERRED IN DELETING THE DISALLOWANCE TO THE E XTENT OF RS. 9,15,000/- MADE BY THE A.O. UNDER SECTION 4Q(A) (IA) OF THE I.T.ACT ON THE PAYMENTS ACTUALLY MADE BY THE AS SESSEE AS HIRING CHARGES. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE IS A CIVIL CONTRACTOR AND HAD RETURNED INCOME FROM CONSTRUCTION OF ROADS AND ALLIED WORKS ON CONTRACT BASIS. THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD MADE PAYMENTS OF RS. 4.5 LAKHS TO ONE SHESH SHAKTI CONSTRUCTION WITHOUT DEDU CTING ANY TAX AT SOURCE IN CONTRAVENTION OF SECTION 194C OF THE INCOME-TAX ACT , 1961, THEREFORE, ADDITION OF RS. 4.5 LAKHS WAS MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAD PA ID WAGES TO DIFFERENT PERSONS AMOUNTING TO RS. 26,58,222/- WITHOUT DEDUCTING ANY TAX AT SOURCE. THESE PAYMENTS WERE MADE IN CONTRAVENTION OF PROVISIONS O F SECTION 194C OF THE ACT AND, THEREFORE, THE ASSESSING OFFICER DISALLOWED TH E SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE U/S 40(A)(IA) OF THE A CT. FURTHER, ASSESSEE HAD PAID HIRING CHARGES TO THE TUNE OF RS. 9,15,000/- WITHOU T DEDUCTING ANY TAX AT SOURCE. ACCORDING TO ASSESSING OFFICER, THESE PAYMENTS WERE MADE IN CONTRAVENTION TO SECTION 194C AND RULE 29-D OF THE IT RULES, 1962 TH EREFORE, A SUM OF RS. 9,15,000/ WAS ADDED TO THE TOTAL INCOME OF THE ASSE SSEE U/S 40(A)(IA) OF THE ACT. 4. ON APPEAL, THE CIT(A) FOLLOWING THE ORDER OF ITA T VISKHAPATNAM (SPECIAL BENCH) IN THE CASE OF MERILYN SHIPPING AND TRANSPOR T VS. CIT 136 ITD 23 / 70 DTR/81 HELD THAT THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT SHALL NOT BE 3 APPLICABLE IN RESPECT OF THE PAYMENTS ACTUALLY MADE AND SHALL BE APPLICABLE ONLY IN RESPECT OF AMOUNTS STILL PAYABLE. IN THAT VIEW O F THE MATTER, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO VERIFY FROM THE RELEVANT RECORDS, THE PAYMENT UNDER THE GIVEN HEADS ACTUALLY MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND TO ALLOW THE SAME. HE FURTHER DIR ECTED THE ASSESSING OFFICER THAT THE PAYMENTS WHICH WERE STILL OUTSTANDING AND HAD NOT BEEN MADE DURING THE YEAR SHOULD BE DISALLOWED AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN ACCORDANCE WITH THE ORDER OF ITAT, VISKHAPATNAM (SB ) REFERRED TO ABOVE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE VERY OUTSET, SHRI D.S. SIDHU, LD. DR INVITED OUR ATTENTION TO THE JUDGMENT OF THE HON'BLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF P.M.S. DIESELS & OTHERS VS. CIT [2015] 374 ITR 5 62 (P&H) & OTHERS, WHEREIN THE HON'BLE HIGH COURT VIDE ITS ORDER DATE D 29.4.2015 HELD THE REQUIREMENT TO DEDUCT TAX AT SOURCE IS MANDATORY AN D THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT APPLY TO ASSESSEE WHO IS FOLLOWING THE CASH SYSTEM AS WELL AS WHO IS FOLLOWING THE MERCANTILE SYSTEM. THE HON'BLE HIGH COURT FURTHER HELD THAT IF AN ASSESSEE IS LIABLE TO DEDUC T AND PAY TDS U/S 194C OF THE ACT AND IF ASSESSEE FAILS TO DO SO, THE PAYMENTS IN RESPECT OF WHICH THE TDS WAS TO BE DEDUCTED AND PAID HOWEVER ARE TO BE DISALLOWE D IN VIEW OF SECTION 40A(IA) OF THE ACT. THE HON'BLE HIGH COURT HAS CATEGORICAL LY HELD THAT THE LIABILITY TO DEDUCT TAX AT SOURCE UNDER THE PROVISIONS OF CHAPTE R XVII IS MANDATORY. A PERSON RESPONSIBLE FOR PAYING ANY SUM IS ALSO BEEN LIABLE TO DEPOSIT THE AMOUNT IN THE GOVERNMENT ACCOUNT. ALL THE SECTIONS IN CHAPTER XVI I-B REQUIRE A PERSON TO DEDUCT TAX AT SOURCE AT THE RATES SPECIFIED THEREIN . THE REQUIREMENT IN EACH OF THE SECTIONS IS PROCEED BY THE WORD SHALL. THE HON'BL E HIGH COURT OBSERVED THAT THE PROVISIONS ARE THEREFORE, MANDATORY. THE HON'BLE H IGH COURT HAS ALSO REFERRED TO THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. CRESCENT 4 EXPORT SYNDICATE (2013) 216 TAXMAN 258 (CAL), WHERE IN IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION UNDER 194C AND SECTION 40(A)( IA) ARE MANDATORY PROVISIONS AND APPLICABLE TO THE ENTIRE SUM CONTEMPLATED UNDER THE RESPECTIVE SECTIONS. THE HON'BLE PUNJAB & HARYANA HIGH COURT HAS ALSO REFER RED TO THE JUDGMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V S IKANDAR KHAN N. TUNWAR AND OTHERS [2013] 357 ITR 312 (GUJ.) WHEREIN THE HON'B LE GUJARAT HIGH COURT HAS HELD THAT DECISION OF THE SPECIAL BENCH OF THE TRIB UNAL IN THE CASE OF MEARILYN SHIPPING & TRANSPORT VS. ACIT (SUPRA) DOES NOT LAY DOWN CORRECT LAW. THE HON'BLE PUNJAB & HARYANA HIGH COURT AGREED WITH T HE CONCLUSION AND REASONING OF THE DECISION RENDERED BY HON'BLE GURJARAT HIGH COURT IN THE CASE OF CIT V SIKANDAR KHAN N. TUNWAR AND OTHERS (SUPRA). THE R ATIO LAID DOWN BY THE HON'BLE GUJARAT HIGH COURT IS THAT SECTION 40(A)(IA ) OF THE ACT WOULD COVER NOT ONLY THE AMOUNT WHICH ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. IT IS ALSO RELEVANT TO OBSERVE HERE THAT HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CA SE OF P.M.S. DIESELS & OTHERS V CIT (SUPRA) DID NOT AGREE WITH THE VIEW TA KEN BY THE DIVISION BENCH OF HON'BLE ALLAHABAD E HIGH COURT IN CASE OF CIT VS. M/S VECTOR SHIPPING SERVICES (P) LTD.,[2013] 262 CTR (ALL.) 545. IN V IEW OF THE DECISIONS OF THE HONBLE PUNJAB & HARYANA HIGH COURT, HON'BLE CALCUT TA HIGH COURT AND HON'BLE GUJARAT HIGH COURT REFERRED TO ABOVE, WE SET ASIDE THE ORDER OF CIT(A) IN TOTO AND UPHOLD THE ORDER OF ASSESSING OFFICER. IN OTHE R WORDS, THE ORDER OF THE ASSESSING OFFICER IS RESTORED. 6. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2015 SD/- SD/- (ANNAPURNA MEHROTRA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 16 TH OCTOBER, 2015 RKK 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR