Shri M.Narsi Reddy, Satara V. ACIT, Satara

ITA 752/PUN/2010

• Counselvise Citation: 75224514 RSA 2010
• Duration Of Justice: 1 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 19-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S P JOSHI SHRI; MRS KIRTI JOSH I
• Keywords: Depreciation; Opportunity of being heard
• Section: 40A(3); 143(3); 194C; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 752/PN/10 (ASSTT. YEAR 2006-07) M NARSI REDDY .. APPELLANT 1 AKSHAYKRUPA SOCIETY, KRISHNA NAGAR, SATARA PAN ABYPM 5357K VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDENT SATARA CIR. SATARA APPELLANT BY: MRS KIRTI JOSH I & SHRI S P JOSHI RESPONDENT BY: SHRI S K AMBASTHA DATE OF HEARING : 04.10.2011 DATE OF PRONOUNCEMENT : 24 .10.2011 ORDER PER G.S. PANNU, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATED 25.02.2010, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE INCOM E-TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 2. ALTHOUGH THE ASSESSEE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT ESSENTIALLY THE APPELLANT HAS PRESSED TWO GROUNDS, NAMEL Y, ONE RELATING TO THE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT, AND SECONDL Y, THE DISALLOWANCE OF RS 1,30,000/-MADE UNDER SECTION 40A(IA) OF THE ACT. AT THE TIME OF HEARING, THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE RELATING TO T HE VALIDITY OF NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT IS NOT BEING PRESSED AND ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 2 3. IN SO FAR AS THE DISALLOWANCE UNDER SECTION 40A(3) O F THE ACT IS CONCERNED, THE BRIEF FACTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE M ADE PAYMENTS OF RS 3,76,177/- IN VIOLATION OF SECTION 40A(3) OF THE ACT AND ACCORDINGLY, A DISALLOWANCE OF RS 75,235/- WAS MADE. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALSO SUSTAINED THE DISALLOWANCE. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ASSESSEE WISHES TO CHALLENGE ONLY THE DISALLOWANCE MADE WITH RESPECT TO THREE PAYMENTS MADE TO SHRI HIRACHAND MANIKCHAND FOR CEMENT P URCHASES AS DETAILED IN PARA 5.1 OF THE ASSESSMENT ORDER: SR. NO NAME OF THE PERSON TO WHOM PAYMENT MADE PURPOSE OF PAYMENT DATE OF PAYMENT AMOUNT (RS) 1 SHRI HIRACHAND MANIKCHAND CEMENT PURCHASE 14.6.2005 70,000/- 2. -DO- -DO- 25.7.2005 39,000/- 3. -DO- -DO- 26.7.2005 39,000/- THE ONLY PLEA RAISED TO ASSAIL THE DISALLOWANCE IS THAT T HE SAID AMOUNT PAID COMPRISES OF MULTIPLE PAYMENTS OF LESS THAN RS 10,000/- EACH, THOUGH MADE ON THE SAME DAY AND, THEREFORE, FOLLOWING THE JUDGMENT OF THE HONBLE ORISSA HIGH COURT IN THE CASE OF CIT V. ALOO SUPPLY CO 121 ITR 6 80 (ORI), THE DISALLOWANCE IS NOT SUSTAINABLE. ACCORDING TO THE APPELLANT, SINCE INDI VIDUAL PAYMENTS ARE BELOW THE LIMIT PRESCRIBED UNDER SECTION 40A(3) OF THE ACT, TH E SAME SHOULD NOT SUFFER DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. THE LEARN ED COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT THE SAID PLEA WAS HITHERTO NOT RAISED BEFORE THE LOWER AUTHORITIES, BUT IS CLEARLY EMERGING FROM THE RE CORDS OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE WILL BE SATISFIED, IF THE MA TTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER TO BE APPRECIATED AFRESH ON THIS SCORE. 5. THOUGH THE LEARNED DEPARTMENTAL REPRESENTATIVE HA S DEFENDED THE DISALLOWANCE ON THE BASIS OF THE ORDERS OF THE AUTHORITI ES BELOW, HOWEVER, WITH 3 REGARD TO THE PLEA OF THE ASSESSEE FOR CONSIDERING THE MA TTER AFRESH ON THE BASIS OF THE PLEA NOW RAISED, THE SAME HAS NOT BEEN SERIOUSLY OPPOSED. 6. SECTION 40A(3) EMPOWERS AN ASSESSING OFFICER TO DISALLO W 20% OF THE EXPENDITURE IF THE PAYMENTS IN EXCESS OF THE LIMITS PRESCR IBED THEREIN HAVE BEEN MADE OTHERWISE THAN BY CROSSED PAYEE CHEQUE. THE ASSESSEE DOES NOT DISPUTE THAT THE IMPUGNED PAYMENTS HAVE BEEN MADE IN CASH, SO, HOWEVER, IT IS CONTENDED THAT SECTION 40A(3) WOULD NOT APPLY BECAUSE MO RE THAN ONE PAYMENT HAS BEEN MADE ON THE SAME DAY, AS RECORDED IN THE ACCOUN T BOOKS AND INDIVIDUAL PAYMENT IS BELOW THE PRESCRIBED LIMIT. IN S UPPORT OF THE SAID PROPOSITION, RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF THE HONBLE ORISSA HIGH COURT IN THE CASE OF ALOO SUPPLY CO. (SUPRA). IN OUR CO NSIDERED OPINION, ON THIS LIMITED ASPECT, THE MATTER BE SENT BACK TO THE FILE OF THE ASSESSING OFFICER TO BE EXAMINED AFRESH AND ADJUDICATED IN THE LIGHT OF THE P RECEDENT CITED. THE ASSESSING OFFICER SHALL EXAMINE THE PLEA OF THE ASSESSEE AND THEREAFTER ADJUDICATE IN ACCORDANCE WITH LAW AFTER ALLOWING THE ASSE SSEE A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER. THUS, ON T HIS GROUND THE ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 7. THE SECOND GROUND RAISED RELATES TO A DISALLOWANCE OF RS 1,30,000/- MADE UNDER SECTION 40A(IA) OF THE ACT ON THE GROUND TH AT THE SAID PAYMENT ATTRACTED DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT, WHICH WAS INDEED NOT DEDUCTED BY THE ASSESSEE. BRIEFLY PUT THE FA CTS ARE THAT THE ASSESSEE WAS FOUND TO HAVE MADE PAYMENT TO ONE SHRI D B KURAD E A CONTRACTOR FOR SUPPLY OF LABOUR. SINCE NO TAX WAS DEDUCTED ON SUCH PAYMENT, I T WAS CONSIDERED AS A VIOLATION OF PROVISIONS OF SECTION 194C OF THE ACT. THE SAID AMOUNT WAS DISALLOWED UNDER SECTION 40A(IA) OF THE ACT. THE COMMI SSIONER OF INCOME-TAX (APPEALS) HAS ALSO AFFIRMED THE DISALLOWANCE. 8. BEFORE US, THE ONLY PLEA RAISED BY THE ASSESSEE WAS T HAT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. 2006-07, THERE W AS NO OBLIGATION ON 4 THE ASSESSEE FOR DEDUCTING TAX AT SOURCE UNDER SECTION 194 C OF THE ACT, AS IT DOES NOT COVER AN INDIVIDUAL PAYER. 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE HAS OPPOSED THE SAID PLEA BY RELYING ON THE PROVISIONS APPLICABLE F OR THE ASSESSMENT YEAR UNDER CONSIDERATION. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE ALSO PERUSED THE APPLICABLE PROVISIONS. FOR THE ASSESSMENT YEAR 2006-07, THE PROVISO BELOW SUB-SECTION 194C, WHICH WAS INSERTED BY THE FINANCE ACT 2002 WITH EFFECT FROM 1.6.2002 PROVIDES THAT AN INDIVIDUAL, WHOSE TOTA L SALES EXCEED THE MONETARY LIMITS SPECIFIED IN CLAUSES (A) OR (B) OF SECTION 44AB SHALL BE LIABLE TO DEDUCT TAX AT SOURCE IN CASE ANY SUM IS CREDITED OR PAID BY HIM TO T HE ACCOUNT OF THE SUB- CONTRACTOR. IN THE PRESENT CASE, THE ASSESSEE IS A CIVIL CO NTRACTOR AND THE IMPUGNED PAYMENTS ARE MADE TO A SUB-CONTRACTOR FOR SUPPL Y OF LABOUR AND, THEREFORE, EVEN IF THE ASSESSEE IS AN INDIVIDUAL IN TE RMS OF THE PROVISO TO SECTION 194C(2), HE IS LIABLE TO DEDUCT TAX AT SOURCE AS THERE I S NO DISPUTE THAT THE TURNOVER OF THE ASSESSEE EXCEEDS THE LIMIT PRESCRIBED IN CLAUSE (A) OF SECTION 44AB OF THE ACT. THEREFORE, THE PLEA OF THE ASSESSEE RA ISED BEFORE US IS UNTENABLE HAVING REGARD O THE STATUTORY PROVISIONS. A PART THEREFROM, THERE IS NO OTHER PLEA RAISED BY THE ASSESSEE IN SUPPORT OF HIS CASE AN D, THEREFORE, THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS HEREBY SUST AINED. 11. THE LAST GROUND RELATES TO CONFIRMATION OF DISALLO WANCE BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TO THE EXTENT OF 10% AS AGAINST 20% MADE BY THE ASSESSING OFFICER OUT OF VARIOUS EXPENSES CLA IMED BY THE ASSESSEE. THE ASSESSEE HAD DEBITED A TOTAL AMOUNT OF RS 7,81,288/- UNDER THE HEADS OF TRAVELLING EXPENSES, TELEPHONE EXPENSES, DIESEL PURCHASES FOR MOTOR CARS AND DEPRECIATION ON CARS. ACCORDING TO THE ASSESSING OFFICER, N O SEPARATE LOG BOOK/CALL REGISTER WAS MAINTAINED BY THE ASSESSEE IN RESPE CT OF MOVEMENT OF VEHICLES AND USE OF TELEPHONES. CONSIDERING THE PERSONAL ELEMENT INCLUDED IN 5 SUCH EXPENDITURE, THE ASSESSING OFFICER DISALLOWED 20% OF T HE AFORESAID EXPENSES ON ESTIMATE BASIS WHICH RESULTED INTO A DISALLOWA NCE OF RS 1,56,257/- . IN APPEAL, THE COMMISSIONER OF INCOME-TAX (APPEALS) HEL D THAT SINCE USE OF FACILITIES LIKE TELEPHONE AND VEHICLES FOR PERSONAL PURPO SES COULD NOT BE RULED OUT, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING PART DISALLO WANCE OUT OF SUCH EXPENSES. HOWEVER, HE RESTRICTED SUCH DISALLOWANCE TO 10% AS AGAINST 20% MADE BY THE ASSESSING OFFICER. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF TH E CONSIDERED OPINION THAT FOR PERSONAL USE OF THE FACILITIES NOTED BY THE CO MMISSIONER OF INCOME-TAX (APPEALS), A DISALLOWANCE OF RS 25,000/- WOULD MEET THE ENDS OF JUSTICE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO MAKE A DISALLOWA NCE OF RS 25,000/- ON THIS ACCOUNT AND DELETE THE BALANCE. THE ASSESSEE PART LY SUCCEEDS ON THIS GROUND. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF OCTOBER, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 24 TH OCTOBER, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT(A)-III, PUNE 4. THE CIT-III, PUNE 5. THE D.R, A BENCH, PUNE 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE 6