Mukundara Engineers & Constructions, Visakhapatnam V. THE ACIT, Visakhapatnam

ITA 657/VIZ/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94093 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA SR
• Section: 2

Judgement Text

ITA NO.657/VIZAG/2014 MUKUNDARA ENGINEERS & CONTRACTORS, VSKP IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN , ACCOUNTANT MEMBER ITA NO.657/VIZAG/2014 ASSESSMENT YEAR : 2010-11 MUKUNDARA ENGINEERS & CONTRACTORS VISAKHAPATNAM VS. ACIT CIRCLE-5(1) VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AAQFM 9732P ASSESSEE BY: SHRI G.V.N. HARI, ADVOCATE REVENUE BY: SMT. D. KOMALI KRISHNA, SR.AR DATE OF HEARING : 22.07.2015 DATE OF PRONOUNCEMENT : 22.07.2015 ORDER PER D. MANMOHAN, VICE PRESIDENT:- THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED B Y THE CIT(A), VISAKHAPATNAM AND IT PERTAINS TO THE ASSESSMENT YEA R 2010-11. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF ENGINEE RING AND CONTRACT WORKS. FOR THE YEAR UNDER CONSIDERATION, IT DECLARED TOTAL INCOME OF RS.19,17,040/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE A SSESSEE DEBITED A SUM OF RS.13,88,500/- TOWARDS PROCLAINE HIRE CHARGES AND A N AMOUNT OF RS.9,80,000/- WAS DEBITED TOWARDS PROCLAINE RENT CH ARGES. BUT THE ASSESSEE DID NOT SUBMIT DETAILS OF TDS PAYMENTS ON THE AMOUN TS PAYABLE. SIMILARLY, ASSESSEE DEBITED AN AMOUNT OF RS.3,20,000/- TOWARDS CRANE HIRE CHARGES PAID TO CH. MAHESWARA RAO BUT DID NOT FURNISH TDS DETAIL S. IT WAS ALSO NOTICED THAT THE ASSESSEE DEBITED AN AMOUNT OF RS.3,29,234/ - TOWARDS HYDRA HIRE CHARGES PAID TO SHRI K. RAGHUNATHA KURUP. BUT TDS DETAILS WERE NOT FURNISHED. WHEN CALLED UPON TO EXPLAIN AS TO WHY S ECTION 40(A)(IA) OF THE INCOME-TAX ACT SHOULD NOT BE APPLIED IN THE INSTANT CASE, THE ASSESSEE SUBMITTED THAT ONLY A SUM OF RS.3,70,000/- IS PAYAB LE AT THE END OF THE YEAR REFERABLE TO PROCLAINE HIRE CHARGES AND BALANCE AMO UNT WAS PAID BEFORE ITA NO.657/VIZAG/2014 MUKUNDARA ENGINEERS & CONTRACTORS, VSKP 2 31 ST MARCH; HENCE PROVISIONS OF SECTION 40(A)(IA) OF TH E ACT CANNOT BE MADE APPLICABLE IN VIEW OF THE DECISION OF THE ITAT SPEC IAL BENCH VISAKHAPATNAM IN THE CASE OF MERILYN SHIPPING (136 ITD 23). SIMILAR LY WITH REGARD TO THE CRANE HIRE CHARGES, IT WAS SUBMITTED THAT A SUM OF RS.32, 000/- IS OUTSTANDING/PAYABLE AT THE END OF THE YEAR AND THE REMAINING IS PAID BEFORE 31 ST MARCH. AS REGARDS HYDRA HIRE CHARGES, IT WAS SUBM ITTED THAT THE ENTIRE AMOUNT WAS PAID BEFORE 31 ST MARCH AND HENCE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE NOT APPLICABLE IN THE LIGHT OF THE D ECISION OF THE SPECIAL BENCH (SUPRA). 2. THE ASSESSING OFFICER HOWEVER STATED THAT THE DE CISION OF THE ITAT VISAKHAPATNAM SPECIAL BENCH WAS CONSIDERED BY THE H ONBLE A.P. HIGH COURT AND THE JUDGEMENT WAS SUSPENDED BY THE HONBLE COUR T. THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT ARE APPL ICABLE EVEN WITH REGARD TO THE AMOUNT PAID. HE ACCORDINGLY COMPLETED THE ASSE SSMENT. 3. LD. CIT(A) OBSERVED THAT THOUGH THE DECISION OF THE ITAT SPECIAL BENCH IS IN FAVOUR OF THE ASSESSEE, THE CIRCULAR IS SUED BY CBDT CLARIFIED THAT THE PROVISIONS OF SECTION 40(A)(IA) WOULD COVER NOT ONLY THE AMOUNTS WHICH ARE PAYABLE AS ON 31 ST MARCH OF THE PREVIOUS YEAR BUT ALSO AMOUNTS WHICH ARE PAYABLE AT ANY TIME DURING THE YEAR. HE ALSO RELIE D UPON THE DECISION OF THE ITAT LUCKNOW BENCH IN THE CASE OF JASMINDER SINGH T O OBSERVE THAT THE DISALLOWANCE MADE BY THE A.O. U/S 40(A)(IA) IS IN A CCORDANCE WITH LAW. 4. FURTHER AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, LD. COUNSEL SUBMITTED TH AT SUBSEQUENT TO THE FIRST INTERIM ORDER PASSED BY THE HONBLE HIGH COUR T, VIDE ANOTHER ORDER DATED 24.6.2015 THE HONBLE A.P. HIGH COURT HAD AN OCCASI ON TO CONSIDER THIS PARTICULAR ISSUE IN THE CASE OF M/S. JANAPRIYA ENGI NEERING SYNDICATE WHEREIN THE COURT OBSERVED AS UNDER:- WE ARE OF THE VIEW THAT UNTIL AND UNLESS THE DECISI ON OF THE SPECIAL BENCH IS UPSET BY THIS COURT, IT BINDS SMALLER BENC H AND COORDINATE BENCH OF THE TRIBUNAL. UNDER THE CIRCUMSTANCES, IT IS NOT O PEN TO THE TRIBUNAL, AS ITA NO.657/VIZAG/2014 MUKUNDARA ENGINEERS & CONTRACTORS, VSKP 3 RIGHTLY CONTENDED BY MR. NARASIMHA SARMA, LEARNED C OUNSEL, TO REMAND ON THE GROUND OF PENDENCY ON THE SAME ISSUE BEFORE THI S COURT, OVERLOOKING AND OVERRULING, BY NECESSARY IMPLICATION, THE DECISION OF THE SPECIAL BENCH. WE SIMPLY SAY THAT IT IS NOT PERMISSIBLE UNDER QUASI J UDICIAL DISCIPLINE. UNDER THE CIRCUMSTANCES, WE SET ASIDE THE IMPUGNED JUDGEMENT AND ORDER, AND RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL WHICH WILL D ECIDE THE ISSUE IN ACCORDANCE WITH LAW AND IT WOULD BE OPEN TO THE TRIBUNAL EITHE R TO FOLLOW THE SPECIAL BENCH DECISION OR NOT TO FOLLOW. IF THE SPECIAL BEN CH DECISION IS NOT FOLLOWED, OBVIOUSLY REMEDY LIES ELSEWHERE. 6. THE LD. COUNSEL THEREFORE SUBMITTED THAT THE DEC ISION OF THE SPECIAL BENCH IS BINDING ON THE DIVISION BENCH OF VIZAG UNL ESS THE SPECIAL BENCH ORDER IS UPSET BY THE JURISDICTIONAL HIGH COURT. H E ALSO SUBMITTED THAT AN IDENTICAL VIEW WAS TAKEN BY THE HONBLE ALLAHABAD H IGH COURT IN THE CASE OF VECTOR SHIPPING SERVICES AND THE SAME WAS CONFIRMED BY THE APEX COURT BY NOT ADMITTING THE SPECIAL LEAVE PETITION AND THUS T HE VIEW TAKEN BY THE SPECIAL BENCH CAN ATLEAST BE SAID TO BE ONE POSSIBL E VIEW ON THE MATTER IN WHICH EVENT A VIEW WHICH IS IN FAVOUR OF THE ASSESS EE SHOULD BE TAKEN. THE LD. COUNSEL EMPHASISED MORE ON THE FACT THAT THE H ONBLE A.P. HIGH COURT, IN THE CASE OF JANAPRIYA ENGINEERING SYNDICATE, OBS ERVED THAT UNTIL THE DECISION OF THE SPECIAL BENCH IS UPSET BY THE HONB LE A.P. HIGH COURT, IT BINDS SMALLER BENCHES AND COORDINATE BENCHES OF THE TRIBU NAL. SINCE THE HONBLE JURISDICTIONAL HIGH COURT HAS NOT TAKEN ANY ADVERSE VIEW ON THIS MATTER, THE DECISION OF THE SPECIAL BENCH, RENDERED FROM VISAKH APATNAM, IS BINDING ON THE VISAKHAPATNAM BENCH. HE SUBMITTED THAT THOUGH IN GROUND NO.3 THE ASSESSEE CONTENDS THAT THE ENTIRE PROCLAINE HIRE CH ARGES AND CRANE HIRE CHARGES ARE ALLOWABLE AS DEDUCTION BUT AS PER THE D ECISION OF THE SPECIAL BENCH, THE ASSESSEE IS ENTITLED TO THE BENEFIT TO T HE EXTENT OF PAYMENTS ACTUALLY MADE BEFORE 31 ST MARCH. IT WAS SUBMITTED THAT IN THE INSTANT CASE, THE DISALLOWANCE CAN BE RESTRICTED TO RS.3,70,000/- (PROCLAINE HIRE CHARGES) RS.32,000/- (CRANE HIRE CHARGES). 7. LD. D.R. ON THE OTHER HAND STRONGLY RELIED UPON THE ORDERS PASSED BY THE TAX AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. CONSISTENT WITH THE VIEW TAKEN BY THE ITAT SPECIAL BENCH VISAKHAPATNAM AND ALSO IN THE LIGHT OF THE VIEW EXP RESSED BY THE HONBLE A.P. HIGH COURT IN THE CASE OF JANAPRIYA ENGINEERING SYN DICATE, WE ARE OF THE ITA NO.657/VIZAG/2014 MUKUNDARA ENGINEERS & CONTRACTORS, VSKP 4 OPINION THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT CANNOT BE MADE APPLICABLE IN RESPECT OF THE AMOUNTS ALREADY PAID B EFORE 31 ST MARCH. IN OTHER WORDS, THE A.O. IS DIRECTED TO RESTRICT THE DISALLO WANCE TO THE AMOUNTS PAYABLE AFTER 31 ST MARCH. WITH THESE OBSERVATIONS, GROUND NO.3 OF TH E ASSESSEE IS TREATED AS PARTLY ALLOWED. 9. GROUND NOS.1 & 4 ARE GENERAL, WHEREAS GROUND NO. 2 IS WITH REGARD TO THE ADDITION OF RS.10 LAKHS SUSTAINED BY THE ASSESS ING OFFICER REFERABLE TO THE CLAIM OF PAYMENT OF WAGES. THE ASSESSEE DEBITED A TOTAL AMOUNT OF RS.2.29 CRORES TOWARDS WAGES UNDER DIFFERENT HEADS SUCH AS WAGES, CASUAL LABOUR CHARGES, CIVIL WORK LABOUR CHARGES, ETC., WHICH IS MORE THAN 57% OF THE GROSS RECEIPTS OF THE ASSESSEE. THE ASSESSEE HAS NOT MAI NTAINED PROPER REGISTERS AND MOST OF THE PAYMENTS ARE MADE IN CASH. SINCE T HE CLAIM IS NOT VERIFIABLE, THE ASSESSING OFFICER WAS OF THE OPINION THAT EXPEN DITURE SHOULD BE REASONABLE WITH REFERENCE TO THE GROSS RECEIPTS OF THE ASSESSEE. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE HE DISALLOW ED ONLY 10% OF THE TOTAL CLAIM OF THE ASSESSEE, WHICH WAS ALSO UPHELD BY THE LD. CIT(A). EVEN BEFORE US, NO MATERIAL WAS PLACED TO INDICATE THAT THE EXP ENDITURE INCURRED BY THE ASSESSEE WAS REASONABLE AND NOT EXCESSIVE. HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) IS REASONABLE AND HENCE DOES NOT CALL FOR ANY INTERFERENCE AT THIS STAGE. WE THEREFORE, REJECT GROUND NO.2 OF THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE FIRM IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2015 SD/- SD/- (B.R. BASKARAN) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT VISAKHAPATNAM, DATED 22 ND JULY, 2015 VG/SPS ITA NO.657/VIZAG/2014 MUKUNDARA ENGINEERS & CONTRACTORS, VSKP 5 COPY TO 1 MUKUNDARA ENGINEERS & CONTRACTORS, 508, SECTOR-2, OPP. DUVVADA RAILWAY STATION, VISAKHAPATNAM 2 ACIT, CIRCLE-5(1), VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM. 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER ASST. REGISTRAR INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM