Shree Ram Engineering Company, Bharuch V. The Income tax Officer,Ward-2, Bharuch

ITA 707/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76679 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-04-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: M K PATEL
• Keywords: Retrospective amendment
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.707/AHD/2010 A.Y. 2006-07 SHREE RAM ENGINEERING COMPANY, A-59, NAR NARAYAN BUNGALOWS, BHOLAV, BHARUCH-392001 VS ITO, WARD-2, BHARUCH. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. , ASSESSEE(S) BY : SHRI M.K. PATEL, AR / DATE OF HEARING : 10/04/2014 / DATE OF PRONOUNCEMENT: 17/04/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-VI, BARODA, DATED 07.12.2009. THE ON LY GROUND RAISED BY THE ASSESSEE IS AS UNDER: THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIO NS MADE U/S. 40(A)(IA) OF THE ACT TO THE EXTENT OF RS.4,69,269/- AND RS.20,01 ,907/- TOTAL AGGREGATING TO RS.24,71,176/-. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143 DATED 26.12.2008 WERE THAT THE ASSES SEE-FIRM IS IN THE BUSINESS OF CIVIL CONSTRUCTION AND STRUCTURAL WORK FOR INDUSTRIAL UNITS. IT WAS NOTED BY THE AO THAT THE ASSESSEE-FIRM CAME INT O EXISTENCE W.E.F. 01.10.2005. IT IS WORTH TO MENTION THAT THE FIRM HA S CLOSED ITS ACCOUNTS FOR THAT PERIOD AS ON 31 ST MARCH, 2006. THE AO HAS FURTHER NOTED THAT FOR THE PERIOD FROM 01.04.2005 TO 30.09.2005 IT WAS A P ROPRIETORSHIP CONCERN ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 2 - OF ONE SRI DINESHBHAI CHUNAWALA. THERE WERE TWO ADD ITIONS U/S.40(A)(IA), ONE WAS OF RS.20,01,907/- AND OTHER WAS OF RS.4,69,269/- TOTALING RS.24,71,176/-. IN RESPECT OF FIRST ONE, I T WAS NOTED BY THE AO THAT IN RESPECT OF LABOUR CHARGES OF RS.20,01,907 /- THE ASSESSEE HAS NOT PAID THE TDS WITHIN THE SPECIFIED TIME BUT IT WAS P AID ON 21 ST OF AUGUST, 2006. IT WAS ALSO NOTED BY THE AO THAT THE ENTIRE F INANCIAL YEAR 2005-06 HAD TWO PERIODS, I.E., FIRST PERIOD OF 01.04.2005 T O 30.09.2005 WAS UNDER THE PROPRIETORY CONCERN AND THE SECOND PERIOD FROM 01.10.2005 TO 31.03.2006 WAS UNDER THE ASSESSEE-FIRM. FIRST PART OF THE PERIOD WAS ASSESSED SEPARATELY BY ITO, WARD-5, BHARUCH. SINCE, THE TDS WAS NOT PAID ON THE 7 TH DAY OF THE NEXT MONTH BUT IT WAS PAID IN THE MONTH OF AUGUST, 2006, THEREFORE, THE AO HAS TAXED IN THE HA NDS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF IT ACT. 3. IN THIS REGARD, WHEN THE MATTER WAS CARRIED BEFO RE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE HAS EXPLAINED THA T DUE TO THE AMENDMENT IN THE LAW AND AS DECIDED BY SEVERAL COUR TS IF THE AMOUNT OF TDS IS DEPOSITED BEFORE THE DUE DATE OF FILING OF T HE RETURN THEN THE SAME SHOULD BE TREATED AS PAID WITHIN TIME. HOWEVER, LEA RNED CIT(A) WAS NOT CONVINCED AND AFFIRMED THE ACTION OF THE AO AFTER A SSIGNING FOLLOWING REASONS: 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A R AND FACTS OF THE CASE. IT IS NO DOUBT TRUE THAT THE TDS WAS DEPOSITED IN THE SUBSEQUENT FINANCIAL YEAR. HOWEVER, THE LAW IS VERY CLEAR ON THIS POINT AND TH E APPELLANT FIRM IS ENTITLED TO CLAIM DEDUCTION IN THE YEAR OF PAYMENT OF TDS, W HICH IS THE SUBSEQUENT YEAR. HOWEVER, NO DEDUCTION CAN BE ALLOWED IN THE F Y 2005-06, AS THE TDS AMOUNT HAS IN FACT BEEN DEPOSITED TO THE CREDIT OF THE GOVERNMENT ACCOUNT IN THE SUBSEQUENT YEAR. THIS IS NOTWITHSTANDING THE FA CT THAT THE APPELLANT-FIRM DID MAKE AN UNSUCCESSFUL ATTEMPT TO DEPOSIT THE TAX BUT COULD NOT DO SO IN THE ABSENCE OF TAN AT THAT RELEVANT POINT IN TIME. TO T HIS END, NO DISCRETION IS AVAILABLE BEFORE THE TAXING AUTHORITIES OR EVEN THE JUDICIAL AUTHORITIES TO ADD AND READ ADDITIONAL WORDS INTO A STATUTORY ORDER AS WOULD TRANSGRESS THE ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 3 - LIMITS OF SUCH ORDER AND THE SCHEME. THE STATUTE IS VERY CLEAR AND THE TEST OF REASONABLENESS CANNOT BE APPLIED HERE. THE OBJECT O F ALL THE RULES OF INTERPRETATION IS TO GIVE EFFECT TO THE OBJECT OF T HE ENACTMENT HAVING REGARD TO THE LANGUAGE USED. THE INTENTION OF PARLIAMENT IN E NACTING SECTION 40(A)(IA) CAN BE GLEANED FROM THE MEMORANDUM EXPLAINING THE P ROVISIONS OF THE FINANCE BILL. I THEREFORE CONFIRM THE ACTION OF THE AO IN MAKING THE DISALLOWANCE OF RS.20,01,907/- U/S. 40(A)(IA) OF TH E ACT. 4. WITH THESE BRIEF FACTUAL BACKGROUND, WE HAVE HEA RD BOTH THE SIDES. FROM THE SIDE OF THE ASSESSEE, LEARNED AR HAS PLACE D RELIANCE ON AN ORDER OF HONBLE ITAT D BENCH AHMEDABAD PRONOUNCED IN T HE CASE OF ITO VS. M/S. SHREEJI CORPORATION (ITA NO.2823/AHD/2011, A.Y. 2007-08 DATED 22.06.2012, WHEREIN A RELIANCE WAS PLACED ON CERTAIN DECISION OF THE TRIBUNAL AND THEREAFTER IT WAS HELD AS UNDER: 6. THE ABOVE FINDINGS OF LD. CIT(A) HAS EXCLUDING IN THE CASE OF SHRI ARVIND BHAI HIMAT BHAI AND RAJPUT UMEDBHAI GANSINGH HAD DEPOSITED THE TAX IN GOVERNMENT ACCOUNT BEFORE FILING OF RETURN I S NOT CONTROVERTED BY THE LD. DR. THIS ISSUE HAS BEEN ALREADY DECIDED BY THE HON BLE HIGH COURT OF CALCUTTA IN THE MATTER OF COMMISSIONER OF INCOME TA X KOLKATA-XI VS. VIRGIN CREATIONS IN G.A. NO.3200/2011. THE AFORESAID DECIS ION OF THE HONBLE HIGH COURT HAS BEEN FOLLOWED BY THE HONBLE CO-ORDINATE BENCH IN ITA NO.673/A/2011 IN THE CASE OF SHRI SURESH C. PATEL V S. INCOME TAX OFFICER AND IN ITA NO.2869/A/2011 IN THE CASE OF M/S. ALPHA PRO JECTS VS. DCIT. IN THIS VIEW OF THE MATTER RESPECTFULLY FOLLOWING THE RATIO LAID IN THE CASE OF CIT VS. VIRGIN CREATIONS (SUPRA) AS FOLLOWED IN SHRI SURESH C. PATEL VS. ITO IN ITA NO. 673/A/2010 THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. 4.1 THE ASSESSEE HAS ALSO PLACED RELIANCE ON AN ORD ER OF HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF CIT VS . STANDARD BUILDCON, 41 TAXMANN. COM 155 (GUJ.), WHEREIN IT WA S HELD THAT THE AMENDMENT U/S.40(A)(IA) BROUGHT OUT BY FINANCE ACT, 2008 W.E.F. 1 ST APRIL, 2010 WHICH HAD RETROSPECTIVE EFFECT, THEREFO RE, IF THE TAX DEDUCTED IS DEPOSITED BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF THE RETURN. THE SAME IS REQUIRED TO BE GIVEN CREDIT IN THAT VER Y ASSESSMENT YEAR. ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 4 - 4.2 FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., MR. O.P. BATHEJA APPEARED AND PLACED RELIANCE ON AN ORDER OF HONBLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. SIKANDARKHAN N. T UNVAR, 33 TAXMANN.COM 133 (GUJ). FOR THE LEGAL PROPOSITION, T HE PROVISIONS OF SECTION 40(A)(IS) WOULD COVER NOT ONLY AMOUNTS WHIC H ARE PAYABLE AS ON 31 ST MARCH OF A PARTICULAR YEAR BUT ALSO WHICH ARE PAYA BLE AT ANY TIME DURING THE YEAR. ACCORDING TO LEARNED DR, THE ASSES SEE WAS REQUIRED TO PAY THE TDS EVERY MONTH WHEN THE TAX WAS DEDUCTED. 5. HAVING HEARD THE SUBMISSION OF BOTH THE SIDES, W E ARE OF THE VIEW THAT THE MATTER SHOULD GO BACK TO LEARNED CIT(A) BE CAUSE ONE OF THE VITAL FACT WAS NOT BROUGHT ON RECORD THAT WHETHER THE ENT IRE AMOUNT OF RS.20,01,907/- PERTAINED TO THE PERIOD IN WHICH THE ASSESSEE-FIRM CAME INTO EXISTENCE, OR PART OF THE AMOUNT PERTAINED TO THE PERIOD WHICH WAS UNDER THE PROPRIETORSHIP OF ONE SRI DINESHBHAI CHUN AWALA. SO THE LEARNED CIT(A) IS REQUIRED TO FIRST ASCERTAIN WHETH ER THE ENTIRE EXPENDITURE WAS CLAIMED BY THE FIRM IN ITS BOOKS OF ACCOUNT OR PART OF THE EXPENDITURE WAS CLAIMED BY THE SAID PROPRIETOR. NEE DLESS TO SAY, THE PROVISIONS OF SECTION 40(A)(IA) ARE TO BE APPLIED O NLY IN A SITUATION WHEN AN EXPENDITURE IS CLAIMED OF THE IMPUGNED AMOUNT ON WHICH TDS WAS REQUIRED TO BE DEPOSITED. AFTER ASSIGNING THIS FACT , THEREAFTER, LEARNED CIT(A) IS DIRECTED TO APPLY THE CORRECT POSITION OF LAW AS ON DATE AS PER THE INTERPRETATION OF THE AMENDED PROVISIONS OF IT ACT IN RESPECT OF SECTION 40(A)(IA) BY VARIOUS HONBLE COURTS, ESPECI ALLY, THE HONBLE GUJARAT HIGH COURT. LEARNED CIT(A) IS EXPECTED TO P ASS A REASONED ORDER AFTER ANALYZING THE JUDGMENTS PRONOUNCED BY RESPECT ED HIGHER FORUM ON THE SUBJECT. WE, THEREFORE, RESTORE THIS PART OF THE ISSUE AS RAISED IN THE ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 5 - GROUNDS OF APPEAL BACK TO LEARNED CIT(A) FOR DENOVO CONSIDERATION AS PER THE DIRECTIONS. 6. NOW WE ARE LEFT WITH THE OTHER PORTION OF THE AD DITION OF RS.4,69,269/- WHICH WAS IN RESPECT OF ALLEGED NON-D EDUCTION OF TDS IN RESPECT OF THE FOLLOWING PARTIES. 1. AVON FABRICATION RS.70,684/- 2. JAGIRSHINGH CONTRACTOR RS.1,95,585/- 3. PAYAL TRANSPORT RS.2,03,000/- TOTAL RS.4,69,269/- 6.1 THE EXPLANATION OF THE ASSESSEE WAS THAT TAN WA S APPLIED BUT THE SAME WAS ISSUED IN THE MONTH OF AUGUST, 2006; HENCE , THE TDS WAS DEPOSITED THEREAFTER ONLY. HOWEVER, THE AO WAS NOT CONVINCED AND TAXED THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE. 7. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, AT THE OUTSET, WE HAVE BEEN INFORMED THAT THE LEARN ED CIT(A) HAS NOT ADJUDICATED THE POINTS WHICH WERE RAISED IN THE FOL LOWING MANNER: IT IS HUMBLY SUBMITTED THAT INSOFAR AS THE PAYMENT TO AVON FABRICATORS IS CONCERNED, NO PAYMENTS HAVE BEEN EFFECTED. A PERUSA L OF THE COPY OF ACCOUNT ENCLOSED AT PAGE 34 OF THE PAPER-BOOK WOULD EVIDENC E THAT THERE ARE TWO CREDIT ENTRIES IN RESPECT OF BILLS RAISED BY THE SA ID PARTY AND THE ENTIRE AMOUNT OF RS.70,684/- IS SHOWN AS OUTSTANDING. THERE WERE SOME DISPUTES WITH THIS PARTY IN REGARD TO THE QUALITY OF WORK DONE AND THE REFORE, THE PAYMENTS WERE WITHHELD, PENDING SATISFACTORY COMPLETION OF WORK A ND THEREFORE, NO TDS WAS DEDUCTED. IT IS SUBMITTED THAT THE APPELLANT-FIRM HAD ENGAGED DIFFERENT PERSONS FOR EXECUTING ITS WORK AND THERE IS NO CONTRACT BETWEEN THE APPELLANT-FIRM AND THE SAID PARTY. UNDER THE CIRCUMSTANCES, SINCE THERE WA S NO CONTRACTOR AND SUB- CONTRACTOR RELATIONSHIP BETWEEN THE APPELLANT-FIRM AND THE AVON FABRICATORS, THE APPELLANT-FIRM WAS NOT LIABLE TO DEDUCT TAX UND ER SECTION 194C FROM THE AMOUNTS PAYABLE AND THEREFORE SAME COULD NOT BE DIS ALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THE PROPOSITION, RELIANCE IS ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 6 - PLACED ON THE RECENT DECISION OF THE HONBLE ITAT, CUTTACK BENCH IN RR CARRYING CORPORATION VS. ACIT, 126 TTJ 240. IN REGARD TO JAGIRSINGH CONTRACTOR, KIND REFERENCE IS INVITED TO PAGE 35 OF THE PAPER-BOOK, WHICH WILL ESTABLISH THAT THE SAID AMO UNT OF RS.1,95,585/- IS IN FACT OPENING BALANCE AS ON 1.10.2005, THE DATE OF C REATION OF THE FIRM. IT MAY BE PERTINENT TO STATE HERE THAT THE FIRM HAS COME I NTO EXISTENCE W.E.F. 1.10.2005 AND BEFORE THAT, IT WAS THE PROPRIETORY C ONCERN OF SHRI DINESH M CHUNAWALA, WHO IS NOW A PARTNER IN THE FIRM. COPY O F THE ASSESSMENT ORDER IN CASE OF SHRI DINESH M CHUNAWALA FOR THE ASSESSMEN T YEAR 2006-07 (PERIOD 1.04.2005 TO 30.09.2005) IS ENCLOSED AT PAGES 31 TO 33 OF THE PAPER-BOOK SUBMITTED BEFORE YOUR HONOUR. SINCE THE CONCERN W AS A PROPRIETORY CONCERN IN THE FIRST PERIOD, THAT IS,1 ST APRIL 2005 TO 30 TH SEPTEMBER 2009, NO TDS WAS REQUIRED TO BE MADE. THEREFORE, NO DISALLOWANCE C AN BE MADE IN THE HANDS OF THE APPELLANT-FIRM. IN RESPECT OF PAYAL TRANSPORT, IT IS TO SUBMIT THAT THERE IS AN OPENING BALANCE OF RS.72,700/- WHICH PERTAINS TO AN EARLIER PERIOD WHEN THE FIRM WAS NOT IN EXISTENCE. DURING THE PERIOD 1 ST OCTOBER 2005 AND ONWARDS, AMOUNT OF RS.1,30,450/- HAS BEEN CREDITED, ON WHICH ADMITTEDL Y NO TDS HAS BEEN MADE. BASICALLY THE APPELLANT-FIRM HAD ENGAGED DIFFERENT TRANSPORTERS FOR EXECUTING ITS DIFFERENT WORK. THEREFORE, SINCE NO CONTRACTOR AND SUB-CONTRACTOR RELATIONSHIP BETWEEN THE APPELLANT-FIRM AND PAYAL T RANSPORT, THE APPELLANT- FIRM WAS NOT LIABLE TO DEDUCT TAX UNDER SECTION 194 C FROM THE AMOUNTS PAYABLE AND THEREFORE SAME COULD NOT BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THE PROPOSITION, RELIANCE IS PLACED ON THE RECENT DECISION OF THE HON'BLE ITAT, CUTTACK BENCH IN RR CARYYING CORPORATION V ACIT, 126 TTJ 240. 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES. WE HAVE NOTED THAT THE LEARNED CIT(A) HAS NOT DEALT WITH AFORE-RE PRODUCED EXPLANATION OF THE ASSESSEE. IT APPEARS THAT LEARNED CIT(A) HAS ONLY DEALT WITH THE LEGAL ASPECT BUT REMAINED SILENT ON THE FACTUAL ASP ECT OF THE MATTER. IN SUCH SITUATION, WE DEEM IT PROPER AS WELL AS JUSTIF IABLE TO RESTORE THIS PART OF THE ISSUE AS WELL BACK TO LEARNED CIT(A) TO CONS IDER BOTH THE FACTUAL AS WELL AS LEGAL ASPECT OF THE ISSUE, NEEDLESS TO SAY AFTER PASSING A WELL REASONED ORDER. RESULTANTLY, THE ENTIRE GROUND IS T O BE DECIDED DENOVO BY LEARNED CIT(A); HENCE, MAY BE TREATED AS ALLOWED FO R STATISTICAL PURPOSE ONLY. ITA NO.707/AHD/2010 SHREE RAM ENGINEERING COMPANY VS. ITO, WARD-2, BHAR UCH A.Y.2006-07 - 7 - 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (N.S. SAINI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 17/04/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD