DCIT, Sirsa V. M/s Jandu Construction Co., Sirsa

ITA 774/CHANDI/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6643 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 04-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Rectification of order; Charitable institution; Audit objection; Bonafide belief; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 147; 148; 54; 154; 15; 143(3); 142(1); 80G; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH A, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND DR.B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 774/CHD/20 14 ASSESSMENT YEAR : 2007-08 THE DCIT, VS M/S JANDU CONSTRUCTION CO., SIRSA. SIRSA. PAN : AAFFJ6392M (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. CHANDRA KANTA, SR.DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 06.09.2017 DATE OF PRONOUNCEMENT : 14.11. 2017 ORDER PER DIVA SINGH,JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 23.06.2014 ON THE FOLLOWING GROUNDS : 1. THE LD. CIT(A) ERRED IN QUASHING THE RE-OPENING OF ASSESSMENT U/S 147 DESPITE THE FACTS THAT THERE WAS SUFFICIENT MATERIA L AVAILABLE ON RECORDS FOR FORMING THE BELIEF THAT THE INCOME TO THE EXTENT OF RS. 1,0 1,91,230/- ESCAPED ASSESSMENT ON ACCOUNT OF APPLICABILITY OF PROVISIONS U/S 40(A)(IA ) AS THERE WAS DEFAULT IN DEDUCTION OF IDS. 2. THE LD. CIT(A) ERRED IN QUASHING THE RE-OPENING OF ASSESSMENT U/S 147 WITHOUT APPRECIATING THE FACT THAT ITO, WARD-2, FAT EHABAD, WHO COMPLETED THE ORIGINAL ASSESSMENT HAD NOT CONSIDERED THE ISSUE OF DEFAULT IN DEDUCTION OF TDS IN RESPECT OF THE MACHINERY RENT PAID / SHOWN PAYABLE AS WELL AS SHUTTERING EXPENSES. 3. THE CIT(A) ERRED IN LAW IN HOLDING THE PROCEEDINGS INITIATED BY AO U/S 147 AS NULL AND VOID WITHOUT APPRECIATING THE SETTLED POSI TION OF LAW THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT, JURISDICTION TO RE-OPEN THE ASSESSMENT IS CONFERRED AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF THE ASSTT. COMMISSIONER OF INCOME TAX VS. RAKESH JHAVERI STOCK BROKER (P) LTD. 291 ITR 500. 4. THE CIT(A) ERRED IN REACHING TO THE CONCLUSION THAT THE NATURE OF CONTRACT AGAINST WHICH THE PAYMENT FOR 'MACHINERY RENT' IS SHOWN IS THAT OF HIRING OF MACHINERY. 2. THE LD. SR.DR INVITING ATTENTION TO THE IMPUGNED ORDER SUBMITTED THAT THE DECISION OF THE CIT(A) IN QUASHING THE RE-OPENING AS WELL AS THE DELETION OF THE ADDITION ON MERIT HAS BEEN ASSAILED BY THE REVENUE IN THE PRESENT PROCEEDINGS. FOR THE ASSUMPTION OF JURISDICTIO N, IT WAS SUBMITTED, THAT THE DEPARTMENT IS PLACING RELIANCE UPON TH E FACT THAT RE-OPENING HAS BEEN DONE ON THE BASIS OF AUDIT OBJECTION POINTED OUT IN ITA 774/CHD/2014 A.Y. 2007-08 PAGE 2 OF 19 THE SCRUTINY ASSESSMENT ORDER PASSED U/S 143(3) DATED 10.12.2009. IT WAS HER SUBMISSION THAT THE REASONS HAVE BEEN RECORDED AND OBJECTIONS TO THE SAME HAVE BEEN PLACED ON RECORD BY THE ASSESS EE. THESE OBJECTIONS, IT WAS SUBMITTED, HAVE BEEN DISPOSED OFF BY THE AO BY WAY OF A SPEAKING ORDER, COPY OF THIS, IT WAS SUBMITTED, HAS BEE N PLACED AT PAGES 167 TO 174. ACCORDINGLY, IT WAS HER SUBMISSION THAT RE-OPENING ON FACTS WAS JUSTIFIED AND HEAVY RELIANCE WAS PLACED BY TH E REVENUE UPON THIS ORDER. IT WAS CLARIFIED THAT THE RE-OPENING HAS BEEN DONE WITHIN FOUR YEARS. IT WAS ALSO HER SUBMISSION THAT THE AO HAD ISSUED NOTICE U/S 154 AND THEREAFTER IT WAS DROPPED. COPY OF TH E SAID ORDER AVAILABLE WITH THE LD. SR.DR WAS SHOWN TO THE BENCH. LD. A R SUBMITTED THAT THE SAME IS PLACED AT PAGE 140 OF THE PAPER BOOK FILED AND THUS, IS AVAILABLE ON RECORD. 2.1 REVERTING BACK TO THE ARGUMENTS, IT WAS SUBMITTED BY THE LD. SR.DR THAT THE PROCEEDINGS HAVE BEEN INITIATED U/S 148 AFTER DROPPING THE PROCEEDINGS U/S 154 OF THE ACT. THE DEPARTMENT, IT W AS SUBMITTED, PLACES HEAVY RELIANCE ON THAT ALSO AS THE OBJECTIONS POS ED BY THE ASSESSEE HAD BEEN CONSIDERED AND REJECTED BY THE AO. ACCORDINGLY, IT WAS SUBMITTED, THE OCCASION TO STILL BE AGGRIEVED DID NOT EXIT. 2.2 ON MERITS, IT WAS SUBMITTED, THAT THOUGH THE AO IN THE PRESENT PROCEEDINGS HAS HELD THAT THE ASSESSEE HAS ENTERED INT O A JOB WORK CONTRACT AND IT IS NOT A CONTRACT FOR RENT. ATTENTION W AS INVITED TO ASSESSMENT ORDER DATED 26.03.2013 PASSED U/S 143(3)/147 PAGE 8 PARA 8 WHEREIN THE ASSESSEE'S EXPLANATION OFFERED HAS BEEN HE LD TO BE NOT TENABLE AS THE ASSESSEE HAD NOT FURNISHED ANY BILLS OR SU PPORTING EVIDENCES TO PROVE ITS CONTENTIONS. THE DECISIONS RELIED UPON IN THE FACTS OF THE PRESENT CASE BY THE AO, IT WAS SUBMITTED, AR E FULLY APPLICABLE. 2.3 THE FINDING OF THE CIT(A) THAT IT WAS A CASE OF CHANGE OF OPINION ON FACTS IS AN INCORRECT FINDING AS IT IGNORES THE DETAILED REJE CTION OF ASSESSEE'S OBJECTIONS BY THE AO. THE FACT ON RECORD THAT THE AO DURING THE SCRUTINY ASSESSMENT PROCEEDINGS HAD NOT EVEN CARE D TO VERIFY ANY FACTS, IT WAS SUBMITTED, HAS BEEN IGNORED. THE IMPUGNED OR DER, IT WAS SUBMITTED, MAY BE REVERSED. RELIANCE WAS PLACED UPON CI T VS P. V.S. BEEDIES (P) LTD (1999) 237 ITR 13 (SC). REFERRING TO THE SAID DECISION, IT WAS SUBMITTED THAT THE APEX COURT HAS UPHELD THAT RE- OPENING BASED ITA 774/CHD/2014 A.Y. 2007-08 PAGE 3 OF 19 ON FACTUAL INFORMATION GIVEN BY THE AUDIT PARTY IS FULLY MAIN TAINABLE AND IN THE FACTS OF THE PRESENT CASE, RE-OPENING HAS BEE N DONE SPECIFICALLY ON THE BASIS OF OBJECTIONS OF THE AUDIT PARTY. ACCORDINGLY, IT WAS ARGUED THAT THE DECISIONS RELIED UPON TO THE CONTRA RY BY THE ASSESSEE AND THE CIT(A) HAVE NO RELEVANCE. 2.4 IN VIEW OF THESE ARGUMENTS AND SUBMISSIONS, IT WAS HER PRAYER THAT RE-OPENING WAS MAINTAINABLE UNDER LAW AND THE FINDINGS OF THE CIT(A) ON THE JURISDICTIONAL ISSUE AS WELL AS ON MERIT WERE NOT MAINTAINABLE. 3. THE LD. AR HEAVILY RELYING UPON THE IMPUGNED ORDER SUBMITTED THAT THE PRESENT CASE WAS A FIT CASE WHEREIN CHANGE OF OPINION WAS DEMONSTRATED ON THE FACE OF THE RECORD ITSELF. RELIANCE WA S PLACED UPON THE SYNOPSIS FILED. THE FACTUAL HISTORY OF THE ISSUE STATED T O HAVE BEEN ADDRESSED IN PAGE 2 OF THE SAME, IT WAS SUBMITTED BRINGS OUT THE FACT THAT EACH AND EVERY ASPECT OF THE ISSUE HAS BEEN EXAM INED AND VERIFIED BY THE AO IN THE SCRUTINY PROCEEDINGS. IN ORDER TO DEM ONSTRATE THIS FACT, ATTENTION WAS INVITED TO PAPER BOOK PAGE 18 WHEREIN DETAILED REPLY ON QUERY BY THE AO WAS ADDRESSED TO THE AO ON THE IS SUES PARA 9 AND 10 WOULD DEMONSTRATE THIS FACT. ATTENTION WAS INVITED TO ANOTHER REPLY PLACED AT PAGE 21 OF THE PAPER BOOK WHERE IN PARAS 3 A ND 4 ARE AGAIN DETAILED REPLY ON THE AFORESAID ISSUE WHICH WAS MADE AVAILA BLE ON QUERY TO THE AO BY THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS BY THE ASSESSEE. INVITING ATTENTION TO PAPER BOOK PAGE 23, IT W AS SUBMITTED THAT COPY OF ACCOUNTS OF MACHINERY RENTED FROM VARIOUS P ARTIES HAD BEEN ATTACHED AT PAPER BOOK PAGE 24 TO 122 REPLY O F THE ASSESSEE AT PAGE 23 PARA 3, TYPED COPY OF THE SAME, IT WAS SUBMITTED , IS PLACED AT PAPER BOOK PAGE 124. ATTENTION WAS INVITED TO THE ORDE R DATED 10.12.2009 OF THE AO AND IT WAS SUBMITTED THAT THE ORD ER WAS PASSED AFTER CONSIDERING THE DETAILED REPLIES ON THIS VERY ISSUE. CO PY OF THE ORDER, IT WAS SUBMITTED, IS PLACED AT PAGES 125-128. A PE RUSAL OF THE SAME, IT WAS SUBMITTED, WOULD SHOW THAT WHEN AT PAGE 12 5 PARAS 2 AND 3 OF THE SAME ARE READ ALONGWITH THE LAST 4-5 LINES IN PAR A 4, IT WOULD DEMONSTRATE THAT ULTIMATELY THE AO CONSIDERING THESE SP ECIFIC FACTS AND AFTER GOING THROUGH VARIOUS REPLIES OF THE ASSESSEE FINALLY MADE AN ADDITION OF RS. 1,60,000/-. THE SAID ORDER, IT WAS SUBMITTED , WAS DATED 10.12.2009. ITA 774/CHD/2014 A.Y. 2007-08 PAGE 4 OF 19 3.1 IT WAS SUBMITTED THAT THE MATTER DID NOT REST T HERE. THE AO, THEREAFTER, PROBABLY ON ACCOUNT OF CHANGE OF AO OR THE SAME AO AGAIN CONSIDERING THE FACT THAT THE VERY SAME ISSUE MAY HAVE BEEN OVERLOOKED ON 21.09.2010 WHILE PASSING THE ORDER ISSUED NOTICE U/S 1 54 DATED 21.09.2010 ON THE FOLLOWING GROUNDS : I) A SUM OF RS, 10496430/- DEBITED IN PROFIT & LOSS A/ C ON ACCOUNT OF MACHINERYRENT; OUT OF WHICH RS, 9995660/- SHOWN AS PAYABLE IN THE BALANCE SHEET. NO TAX HAS BEEN DEDUCTED AT SOURCE. AS PER PROVISIO NS OF SECTION 40(A)(IA) DUE TO NON DEDUCTION OF TDS THE SAME IS DISALLOWABLE AND N EEDED TO BE ADD BACK IN YOUR INCOME, II) A SUM OF RS, 765520/-DEBITED IN PROFIT & LOSS A /C ON ACCOUNT OF SHUTTERING CHARGES. NO TAX HAS BEEN DEDUCTED AT SOURCE. AS PER PROVISIONS OF SECTION 40(A)(IA) DUE TO NON DEDUCTION OF TDS THE SAME IS D ISALLOWABLE AND NEEDED TO BE ADD BACK IN YOUR INCOME. 3.2 THE ASSESSEE, IT WAS SUBMITTED, THIS TIME ALSO ON THE SAME ISSUE FILED A DETAILED REPLY ON THE VERY SAME ISSUE AS IN THE 14 7/148 PROCEEDINGS TO THE AO. COPY OF THIS, IT WAS SUBMITTED, IS PLACED AT PAG ES 130-131 OF THE PAPER BOOK. 3.3 REFERRING TO THE SAID PAGES, IT WAS SUBMITTED, THAT O N THE FIRST ISSUE, THE FOLLOWING REPLY OF THE ASSESSEE, WAS FILED.: 'MACHINERY RENT HAS BEEN CLAIMED AT RS. 10496430/- OUT OF WHICH A SUM OF RS. 9995660/- REMAINED PAYABLE. DURING THE LAST QUARTER OF YEAR THE ASSESSEE UNDERTOOK SUBCONTRACT WORK OF GAWARD CONSTRUCTION COMPANY FOR CONSTRUCTION OF ROAD. FOR THE PURPOSE THE ASSESSEE HAD TO ENGAGE JCB/TRACTOR FOR DIGGING OF MITI AND LIFTING AND BRINGING OF MITI AND MATERIAL. DETAILS OF MACHINERY RENT PAYABLE ARE SUBMITTED HEREWITH. IT MAY BE SUBMITTED HERE THAT THE ENTIRE PAYMENT WAS MADE IN SUBSEQUENT MONTHS AFTER RECEIPT OF THE PAYMENT FROM GAWARD CON STRUCTION COMPANY. FORM THE SUBMISSIONS MADE, IT IS CLEAR THAT THE PAY MENTS, IN QUESTION WERE MADE ON ACCOUNT OF RENT OF JCB MACHINE/TRACTORS AND ALSO FO R PURCHASES OF MATERIAL I.E. MITTI/WATER ETC. REQUIRED FOR CONSTRUCTION OF ROAD. PROVISIONS OF SEC. 194C RELATING TO TAX DEDUCTION FORM PAYMENT OF CONTRACTORS/SUB-CONTR ACTORS ARC APPLICABLE ONLY WHERE CONTRACT IS EITHER A WORK CONTRACT OR A CONTRACT FO R SUPPLY OF LABOUR FOR CONTRACT. THESE PROVISIONS ARE, THEREFORE, NOT APPLICABLE FOR PAYMENTS MADE UNDER CONTRACT FOR SALE OF GOODS. IN VIEW OF THIS, THE PROVISIONS OF S EC 194C ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AS EITHER THE PAYMENT HAS BEEN MADE FOR PURCHASE OF MATERIAL I.E. MITTI/WATER ETC OR ON ACCOUNT OF RENT OF JCB MACHIN ES AND TRACTORS. WEF. 13/07/2006 SUCH PAYMENTS ARE COVERED U/S 1941 OF THE INCOME TA X ACT, 1961 I.E. TDS FORM RENT PAYMENT. THE PROVISIONS ARE APPLICABLE ONLY WHERE T HE AMOUNT OF SUCH PAYMENTS EXCEED RS. 120000/- IN THE ACCOUNT OF EACH PAYEE. T HE COPIES OF ACCOUNT OF ALL THESE PERSONS/PARTIES TO WHOM PAYMENTS WERE MADE OR CREDI TED ON ACCOUNT OF PURCHASE OF MATERIAL (WHICH DO NOT FALL UNDER THE TDS PROVISION S), RENT FOR TRACTOR/JCB MACHINES/ SHUTTERING ARE ENCLOSED. YOUR HONOUR WILL APPRECIAT E THAT OUT OF TOTAL CLAIM MADE FOR RS. 10496430/- -ON ACCOUNT OF MACHINERY RENT, MATER IAL PURCHASE IS FOR RS. 3311565/- AND RENT FOR ROAD-ROLLER, JCB MACHINE AND TRACTOR E TC. AT RS. 7184865/- AND THE PAYMENT IN NONE OF THE CASES EXCEED RS. 120000/- AN D HENCE THE PROVISIONS OF SEC. 1941 OF THE INCOME TAX ACT. 1961 ARE ALSO NOT APPLI CABLE. ITA 774/CHD/2014 A.Y. 2007-08 PAGE 5 OF 19 3.4 ON THE NEXT ISSUE, THE FOLLOWING REPLY WAS FILED BY THE ASSESSEE. THE RELEVANT EXTRACT HEAVILY RELIED UPON AT PAGE 131 OF THE PAPER BOOK IS REPRODUCED HEREUNDER: REGARDING SHUTTERING CHARGES OF RS. 765520/-, IT IS SUBMITTED THAT THESE PAYMENTS ARE NOT ONLY ON ACCOUNT OF RENT OF MACHINERY BUT PAYMEN TS ARE ALSO MADE FOR PURCHASES OF RASSI, KASSI, BHATAL, GANTI, DURMUT, PHATTA, BAL LI, PIPE ETC. (SHUTTERING ITEMS), WHICH ARE OF PERISHABLE AND CONSUMABLE NATURE. ALL THESE ITEMS ARE BEING USED BY LABOUR AND MOST OF THE ITEMS ARE LOST OR DAMAGED. S INCE THE PAYMENTS WERE MADE FOR PURCHASE OF CONSUMABLE AND PERISHABLE SHUTTERING IT EMS, THE TDS PROVISIONS ARE NOT APPLICABLE. THE PHOTO COPIES OF PURCHASE BILLS ARE ENCLOSED FOR YOUR KIND PERUSAL. FURTHER, THE RENT PAID TO EACH PAYEE DOES NOT EXCEE D RS. 120000-, TDS PROVISIONS U/S 1941 ARE ALSO NOT APPLICABLE. COPIES OF ACCOUNT OF THESE PARTIES GIVING BIFURCATION FOR PURCHASE OF MATERIAL AND RENT ARE ALSO ENCLOSED. 3.5 AFTER CONSIDERING THESE REPLIES, IT WAS SUBMITTED, THE A O PROCEEDED TO DROP THE 154 PROCEEDINGS. THE SAMPLE COP IES OF THE RENTED MACHINERY WHICH WERE MADE AVAILABLE AGAIN TO THE A O IN THE 154 PROCEEDINGS, IT WAS SUBMITTED, ARE AVAILABLE AT PAGES 132 TO 137 OF THE PAPER BOOK. ACCORDINGLY, IT WAS HIS SUBMISSION THAT TWICE TWO DIFFERENT AOS AT TWO DIFFERENT POINTS OF TIME HAVE LOOKED AT THE VER Y SAME ISSUE AND SINCE IN 143(3) PROCEEDINGS, ADDITION OF RS. 1,60,000/- STO OD MADE, NO ERROR WAS FOUND BY THE AO IN THE 154 PROCEEDINGS. 3.6 THE FACT THAT THE RE-OPENING WAS DONE ON THE BAS IS OF AUDIT OBJECTIONS, IT WAS SUBMITTED, IS AN ADMITTED FACT. ATTENTION FOR THE SAID PURPOSE WAS INVITED TO PAPER BOOK PAGE NO. 141 TO 147. ATTENTION WAS INVITED TO THE FACT THAT THIS SPECIFIC INFORMATION WAS CONVEY ED TO THE AO BY THE AUDIT PARTY. THE AO HAS ADDRESSED THIS INFORMATION IN VERY CATEGORIC TERMS. COPY OF THE SAID REPLY IS PLACED AT PAG ES 146 TO 147. THE SAID DOCUMENT WAS REFERRED TO SO AS TO EMPHASIZE T HE FACT THAT THE AUDIT MEMO WAS DATED 01.05.2012, AUDIT OBJECTION WAS DATE D 30.04.2012 AND REPLY AS PER THE SIGNATURE THEREON WAS DATED 24.09.2012. REFERRING TO THE REASONS MENTIONED BY THE AO WHEREIN IT IS ALREADY MENTIONED THAT IT IS THE AUDIT OBJECTION WHICH POS ITION HAS NOT BEEN DISPUTED BY THE LD. SR.DR ALSO BRINGS OUT THE FACT T HAT THE ENTIRE BASIS FOR RE-OPENING IS THE VERY SAME ISSUE. DESPITE THIS, IN THE NOTICE U/S 148, IT WAS SUBMITTED, THE AO IS STATING INCORRECT FACT S. ATTENTION WAS INVITED TO PAGE 138 OF THE PAPER BOOK. ON THE BASIS OF THESE FACTS, IT WAS HIS SUBMISSION THAT IT IS A CASE OF CHANGE OF OPINION, AS SUCH THE ISSUE HAD BEEN CORRECTLY DECIDED BY THE CIT(A). ITA 774/CHD/2014 A.Y. 2007-08 PAGE 6 OF 19 3.7 FOR THE LEGAL PROPOSITION RELIED UPON IN SUPPORT OF T HE SAID ASSERTION, ATTENTION WAS INVITED TO THE PAPER BOOK NUMBERING 130 PAGES WHICH CONTAINED THE JUDGEMENTS RELIED UPON. INVITING ATT ENTION TO THE CASE OF INDIAN & EASTERN NEWSPAPER SOCIETY V CIT 119 I TR 996 (S.C), IT WAS SUBMITTED, THAT THE COURT HAS CATEGORICALLY HELD THA T THE OPINION OF THE INTERNAL AUDIT PARTY ON A POINT OF LAW DOES NOT CONST ITUTE INFORMATION. RELIANCE WAS ALSO PLACED UPON THE CASE OF CIT VS SANT RAM MANGAT RAM 312 ITR 100 (P&H). INVITING ATTENTION TO SPECIFIC PAGE 4 OF THE PAPER BOOK, IT WAS SUBMITTED, IT IS AGAIN FOR THE P ROPOSITION THAT ASSESSMENT CAN NOT BE REOPENED MERELY UPON THE ADVICE OF THE AUDIT PARTY BECAUSE SUCH AN ACT WOULD AMOUNT TO CHANG E OF OPINION. ATTENTION WAS INVITED TO N K ROADWAYS PVT. LTD. VS ITO (O SD) 362 ITR 522 (GUJ) SPECIFIC PAGE 8 OF THE PAPER BOOK, AGAIN FOR THE P ROPOSITION THAT RE-OPENING BASED ONLY ON THE OBJECTION RAISED BY THE AUDIT PARTY WITHOUT ANY INDEPENDENT BELIEF OF THE AO COMING OUT FROM TH E REASONS RECORDED WOULD MAKE THE ASSUMPTION OF JURISDICTION VULNERABLE. 3.8 IN THE FACTS OF THE PRESENT CASE, IT WAS SUBMITT ED, AFTER ENQUIRING INTO THE ISSUE AT LENGTH, ORDER U/S 143(3) HAS BEEN PASS ED. THE SAID SCRUTINY ORDER WAS FURTHER SUBJECTED TO PROCEEDINGS U/S 15 4 ON THE VERY SAME ISSUE AND AFTER INITIATION AND ENQUIRING INTO THE VERY SAME ISSUES AGAIN, THEY WERE DROPPED. SIMILARLY RELYING UPON THE DECI SION OF THE GUJRAT HIGH COURT IN THE CASE OF CIT VS SHILP GRAVURES LTD. 220 TAXMAN 382 (GUJ) AND ANOTHER DECISION OF THE SAME HIGH CO URT IN RAAJRATNA METAL INDUSTRIES LTD. V ACIT 371 ITR 222 AND ORDER OF THE ITAT IN ITO VS ESSENTIAL MOTO 17 DTR (CHD-TRIB) 281 AND A DANI EXPORTS V DCIT 240 ITR 224 ANOTHER DECISION OF THE GUJ RAT HIGH COURT, IT WAS SUBMITTED THAT CONSIDERING THE CBDT ORDER NO. 828 DATED 24.02.1975 WHEREIN RE-OPENING ON THE BASIS OF AUDIT OBJECT ION HAVE BEEN UNILATERALLY AND CONSTANTLY FROWNED UPON BY THE CO URTS. ACCORDINGLY, IT WAS HIS SUBMISSION THAT BY DISMISSING THE AP PEAL OF THE REVENUE, THE ORDER MAY BE UPHELD. RELIANCE WAS ALSO PLAC ED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS SIMBHAOLI SUGAR MILLS LTD. (ITA NO. 1391/2009, HIGH COURT OF DE LHI, NEW DELHI). RELYING ON THE SAME, IT WAS SUBMITTED, THAT TH E ENTIRE LEGAL ISSUE HAS BEEN SETTLED BY THE HON'BLE DELHI HIGH COURT B Y MAKING THE FOLLOWING OBSERVATION : 12. THE SUM AND SUBSTANCE OF DISCUSSION IS THAT R EASSESSMENT PROCEEDINGS UNDER ITA 774/CHD/2014 A.Y. 2007-08 PAGE 7 OF 19 SECTION 147 READ WITH 148 OF THE ACT CANNOT BE I NITIATED MERELY BASED ON THE AUDIT REPORT . AN AUDIT IS PRINCIPALLY INTENDED FOR THE P URPOSE OF SATISFYING THE AUDITOR WITH REGARD TO SUFFICIENCY OF RULES AND PROCEDURES PRESC RIBED FOR THE PURPOSE OF SECURING AN EFFECTIVE CHECK ON THE ASSESSMENT, COLLECTION AND P ROPER ALLOCATION OF REVENUE. AS PER PARA (3) OF THE CIRCULAR ISSUED BY THE BOARD ON JUL Y 28, 1960, ALSO AN AUDIT DEPARTMENT SHOULD NOT IN ANY WAY SUBSTITUTE ITSELF FOR THE REVENUE AUTHORITIES IN THE PERFORMANCE OF THEIR STATUTORY DUTIES. 3.9. RELIANCE WAS ALSO PLACED UPON THE CASE OF SYMBOLICS L TD. V ACIT 370 ITR 119 (GUJ) FOR THE PROPOSITION THAT INDEPENDENT APPLICATION OF MIND SHOULD BE EVIDENT FROM THE REASONS RECORDED. R EFERRING TO THE HEAD-NOTE OF THE SAID DECISION, IT WAS SUBMITTED, T HAT THE ORDER DESERVES TO BE UPHELD. THE RELEVANT EXTRACT HEAVIL Y RELIED UPON READS AS UNDER IT IS NOT NECESSARY TO ENTER INTO ARENA OF JUDGING WHETHER AO HAD ISSUED NOTICE ON STRENGTH OF HIS OWN B ELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT UPO N ISSUE BEING POINTED OUT BY REVENUE AUDIT PARTY OR THAT IN PLAIN TERMS, IT WAS OPINION OF REVENUE AUDIT PARTY UPON WHICH AO HAD ACT ED WITHOUT INDEPENDENT APPLICATION OF MINDIMPUGNED NOTICE QUASHED PETITION ALLOWED. 3.10 IN THE FACTS OF THE PRESENT CASE, IT WAS SUB MITTED THAT IT IS A CASE OF CHANGE OF OPINION. INVITING ATTENTION TO T HE DECISIONS RELIED UPON, IT WAS SUBMITTED, THAT CHANGE OF OPINION CANN OT BE THE BASIS FOR RE-OPENING. ATTENTION WAS INVITED TO THE CASE OF A RONI COMMERCIALS LTD. V DCIT 88 CCH 62 (MUM-HC) WHEREIN HON'BLE COUR T HAS HELD THAT VERY BASIS OF REASONS FOR RE-OPENING WAS EXAMINED DUR ING COURSE OF ASSESSMENT PROCEEDINGS, LEADING TO ASSESSMENT ORDE R AND THUS, PRESENT NOTICE FOR RE-OPENING WAS ONLY ON ACCOUNT OF C HANGE OF OPINION. FOR SIMILAR PROPOSITION, RELIANCE WAS PLACED UPON O RDER OF THE ITAT IN AUDCO INDIA LTD. VS ITO 39 SOT (MUM-TRIB) 481 FOR T HE PROPOSITION , SCOPE OF S. 147 IS NOT FOR REVIEWING ITS EARLIER ORDER SUO MOTU IRRESPECTIVE OF THERE BEING ANY MATERIAL TO COME TO A DIFFERENT CONCLUSION APART FROM JUST HAVING SECOND THOUGHTS ABOUT THE INFE RENCES DRAWN EARLIER-RE-OPENING NOT VALID. . ATTENTION WAS ALSO INVITED TO DECISION OF THE GUJRAT HIGH COURT IN THE CASE OF H.K.BUILDCO N LTD. V ITO 339 ITR 535 (GUJ) FOR THE PROPOSITION THAT IN THE ABSEN CE OF ANY NEW MATERIAL, WHERE SPECIFIC QUERIES WERE RAISED BY THE AO. IN THE FACTS OF THE PRESENT CASE, IT WAS SUBMITTED THAT IT IS EVIDE NT FROM THE RECORD ITSELF THAT SPECIFIC QUERY WAS RAISED BY THE AO IN RELATION TO THE VERY SAME ISSUE WHICH FORMS THE BASIS OF REASONS RECORDE D AND THE ITA 774/CHD/2014 A.Y. 2007-08 PAGE 8 OF 19 ASSESSEE HAD REPLIED TO THE SAME IN RESPONSE TO NOT ICE UNDER S. 142(1) IN THE ASSESSMENT STAGE BEFORE THE ORIGINAL ORDER WAS FRAMED. IT WAS SUBMITTED THAT THE COURT HAD NOTED THAT THE SUCCESSOR AO HAS COME TO FORM A DIFFERENT OPINION ON THE SAME SET OF FACTS AND MATERIAL ON RECORD WITHOUT ESTABLISHING ANY LAPSE ON THE PAR T OF THE ASSESSEE OR ANY FRESH INFORMATIONTHEREFORE, IMPUGNED NOTICE UNDER S.148 AND THE CONSEQUENTIAL REASSESSMENT ORDER WAS QUASHE D. 3.11 REFERRING TO ANOTHER DECISION OF THE GUJRAT HIGH COU RT IN PARIXIT INDUSTRIES PVT. LTD. VS ACIT 352 ITR 349 (GUJ) IT WAS SU BMITTED THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL, THE RE-OPENING HAS T O BE QUASHED. THE COURT HAD CLEARLY HELD IN THE FACTS OF THE SAID CASE THAT, IN THE ABSENCE OF EXISTENCE OF ANY TANGIBLE MATERIAL TO COM E TO THE CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT , THE AO EXCEEDED HIS AUTHORITY TO REOPEN THE AT MERELY ON THE BASIS O F A CHANGE OF OPINION APPLICATION ALLOWED. FOR SIMILAR PROPOSITION, RELIANCE WAS PLACED UPON CIT VS KELVINATOR OF INDIA LTD. 320 ITR 561 (S.C) AND ACIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. 348 ITR 299 (S.C). INVITING ATTENTION TO DCIT VS VIKAS SHARMA 34 ITR (TRIB) 617 (CHD-TRIB), IT W AS SUBMITTED THAT WHERE ON FACTS, INFORMATION WAS ALWAYS AVAILABLE AT TH E TIME OF COMPLETION OF ORIGINAL ASSESSMENT, WHICH HAD BEEN COMPLETED AFTER DUE ENQUIRY BY AN ORDER U/S 143(3) AS IN THE FACTS OF THE PRE SENT CASE AND THE REASONS RECORDED ACCORDINGLY REFERRING TO THE SAME FACTS, RE- ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED, HAVE BEEN HELD TO BE WRONGLY INITIATED. 3.12 SIMILARLY, IT WAS SUBMITTED THAT BY VARIOUS OTHER DEC ISIONS NAMELY; COMMISSIONER OF INCOME TAX V/S KELVINATOR OF INDIA LTD. 320 ITR 561 (SC); ACIT V/S ICICI SECURITIES PRIMARY DEALER SHIP LTD 348 ITR 299 (SC); DEPUTY COMMISSIONER OF INCOME TAX V/S VIKAS S HARMA 34 ITR (TRIB) 617(CHD-TRIB); RAAJRATNA METAL INDUSTRIES V/ S ASSISTANT COMMISSIONER OF INCOME TAX 371 ITR 222 GUJ-HC; PURI TY TECH TEXTILE (P) LTD. V/S ASSISTANT COMMISSIONER OF INCOME TAX 325 I TR459 MUM-HC SUNIL GAVASKAR V/S INCOME TAX OFFICER (INTERNATIONA L TAXATION) 47 ITR (TRIB) MUM-TRIB, INCOME TAX OFFICER V/S EVERLON SYN THETICS PVT. LTD. 47 CCH 113 MUM-TRIBUNAL; BBF INDUSTRIES LTD V/S THE JOINT COMMISSIONER OF INCOME TAX (OSD) ITA NO.1162/CHD/2012, ITA T, CHANDIGARH BENCH, CHANDIGARH BALDEV SINGH V/S THE INCOME TAX ITA 774/CHD/2014 A.Y. 2007-08 PAGE 9 OF 19 OFFICER ITA NO.293/CHD/2012, ITAT, CHANDIGARH BENCH, CHAND IGARH THE COURTS HAVE CONSISTENTLY FROWNED UPON RE-OPENING C ONCLUDED ASSESSMENTS WITHOUT ADEQUATE REASONS WHICH FULLY APPLY TO THE FACTS OF THE PRESENT CASE AND THESE DECISIONS WERE HEAVILY RELIED UPON. SPECIFIC ATTENTION WAS INVITED TO THE ORDER DATED 20.11.2014 OF IT AT CHANDIGARH BENCH, CHANDIGARH IN BBF INDUSTRIES LTD. VS JCIT (OSD) ITA NO. 1162/CHD/2012 AND ORDER DATED 26.02.2016 IN BALDEV SIN GH VS ITO ITA 293/CHD/2012. RELIANCE WAS ALSO PLACED UPON ORDER D ATED 28.08.2017 IN ITA 1252/CHD/2016 ALONGWITH C.O. AND OTHERS IN ACIT VS NIKKA MAL JEWELLERS, 318 ITR 295 (DEL) IN CARLTON OVERSEAS (P) LTD. V ITO & ORS. AND 372 ITR 762 (BOM) IN CIT VS JET SPEED AU DIO P.LTD. RELIANCE WAS ALSO PLACED UPON DECISION OF ITAT CHANDIGARH B ENCH IN DHARMINDER SHARMA V DCIT ITA 775/CHD/2015 DATED 30.03 .2016 (SPECIFIC PAGES 21-22) AND VINOD MALHOTRA V ACIT IN ITA 334/CHD/2014 DATED 28.09.2015 (SPECIFIC PAGE 42) IN SUPPORT OF ITS CLAIM. COPY OF THE CIRCULAR NO. 681 DATED 08.03.1994 PARA 7 (III) WAS ALSO RELIED UPON. ACCORDINGLY, ON THE BASIS OF THESE SUBMIS SIONS, ARGUMENTS AND DECISIONS OF DIFFERENT COURTS AND TRIBUNAL O RDERS, IT WAS SUBMITTED, THAT THE IMPUGNED ORDER DESERVES TO BE UPHELD. 3.13 REITERATING THE ARGUMENTS ADVANCED BEFORE THE CIT (A) ON MERIT WHICH HAVE NOT BEEN ASSAILED BY THE REVENUE, IT WAS SUBM ITTED THAT HEAVY RELIANCE IS PLACED THEREON. THE CIT(A), IT WAS SUBMIT TED, HAS DEALT WITH THE ISSUE ON MERITS AT LENGTH AND EVEN ON WITH OUT PREJUDICE ARGUMENTS THAT SECTION 194C ITSELF WAS NOT APPLICABLE WHICH HAVE NOT BEEN ASSAILED BY THE REVENUE. HOWEVER, HEAVY RELIANCE, IT W AS SUBMITTED, HAS BEEN PLACED THEREON BY THE ASSESSEE. 3.14 ADDRESSING THE DECISION OF THE APEX COURT RELIED UPON BY THE LD. SR.DR NAMELY PVS BEEDIES, IT WAS SUBMITTED THAT THE APEX COURT IN THE FACTS OF THE SAID DECISIONS PASSED THE ORDER CONSIDERING T HE FACTS WHERE IN THE ORIGINAL ASSESSMENT ORDER THE AO HAD GRANTED DEDU CTION U/S 80G IGNORING THE FACTUAL MISTAKE THAT THE RECOGNITION GRANTED TO THE CHARITABLE TRUST STOOD WITHDRAWN. THUS, SINCE IN THE ORIGIN AL PROCEEDINGS, THE FACTUAL INACCURACY WAS POINTED OUT BY TH E AUDIT OBJECTION HAD NOT BEEN NOTED, IT IS ONLY IN THESE PECULIAR CIRCUMSTANCES THAT THE RE-OPENING WAS UPHELD WHICH IS NOT A FACT IN THE PRESENT PROCEEDINGS. IT WAS HIS SUBMISSION THAT THE FACTUAL ERRO R POINTED OUT ITA 774/CHD/2014 A.Y. 2007-08 PAGE 10 OF 19 BY THE AUDIT PARTY HAD BEEN OVERLOOKED DOES NOT RECOG NIZE THE PRINCIPLE THAT ALL AUDIT OBJECTIONS NECESSITATE A RE-OPENING. ACCOR DINGLY, IT WAS SUBMITTED THAT THE SUBMISSIONS OF THE LD. SR.DR THAT THE D ECISIONS RELIED UPON TO THE CONTRARY HAVE NO RELEVANCE, WAS A MIS TAKEN APPRECIATION OF LAW AND THESE DECISIONS ARE FULLY APPLICABLE. 4. THE LD. SR.DR SOUGHT PERMISSION TO CLARIFY THE FACT THA T THE RELIANCE PLACED BY THE LD. AR ON THE REPLY TO THE AUDIT O BJECTION IS ACTUALLY A REPLY OF THE ITO AND NOT BY THE AO. IT WAS HER SUBMISSION THAT AT BEST, IT CAN BE SAID TO BE AN OPINION OF THE ITO AND NOT THE REASON OF THE AO. IN THE FACTS OF THE PRESENT CASE, IT WAS HER SUBMISSION THAT THE REASONS HAVE BEEN RECORDED BY THE AO AND IT IS NOT A CASE OF CHANGE OF OPINION. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE ASSESSEE IN THE FACTS OF THE PR ESENT CASE DERIVES INCOME FROM CIVIL CONTRACTOR BUSINESS. THE RETURN FILED ON 31.10.2007 HAVING BEEN PROCESSED U/S 143(1) WAS SUBJECTE D TO A SCRUTINY ORDER U/S 143(3) ON 10.12.2009 WHEREIN THE RETUR NED INCOME OF RS. 4,48,260/- WAS ASSED AT AN INCOME OF RS. 11,08,260/- WHEREIN THE FOLLOWING ADDITIONS ADMITTEDLY STOOD MADE BY THE AO : 5.1 IT IS FURTHER BORNE OUT FROM THE RECORD THAT NOTICE U/S 154 DATED 21.09.2010 WAS ISSUED REQUIRING THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER PASSED IN THE CASE BE NOT RECTIFIED AS IT SUFFERED FROM CERTAIN APPARENT MISTAKES. FOLLOWING MISTAKES WERE POINTED OUT IN THE SAID NOTICE : I) A SUM OF RS. 1,04,96,430/- DEBITED IN PRO FIT AND LOSS ACCOUNT ON ACCOUNT OF MACHINERY RENT, OUT OF WHICH RS. 99,95,660/- SHO WN AS PAYABLE IN THE BALANCE SHEET. NO TAX HAS BEEN DEDUCTED AT SOURCE. AS PER PROVISIONS OF SECTIONS 40(A)(IA) DUE TO NON-DEDUCTION OF TDS THE SAME IS DISALLOWABLE AND NEEDED TO BE ADD BACK IN YOUR INCOME. I OUT OF MACHINERY RENT EXPENSES VIDE PARA NO. 2 OF THE ASSESSMENT ORDER DATED 10.12.2009 300000.00 II OUT OF LABOUR EXPENSES VIDE PARA NO. 3 OF THE ASSESSMENT ORDER DATED 10.12.2009 200000.00 III OUT OF MATERIAL, LABOUR AND OTHER EXPENSES VIDE PAR A NO. 4 OF THE ASSESSMENT ORDER DATED 10.12.2009 160000.00 TOTAL 660000.00 ITA 774/CHD/2014 A.Y. 2007-08 PAGE 11 OF 19 II) A SUM OF RS. 7,65,520/- DEBITED IN PROFIT & LOSS ACCOUNT ON ACCOUNT OF SHUTTERING CHARGES. NO TAX HAS BEEN DEDUCTED AT SOU RCE. AS PER PROVISIONS OF SECTION 40(A)(IA) DUE TO NON DEDUCTION OF TDS, THE SAME IS DISALLOWABLE AND NEEDED TO BE ADDED BACK IN YOUR INCOME.' 5.2 THE ASSESSEE'S REPLY VIDE LETTER DATED 25.10.2010 ON BOTH THE ISSUES HAS ALREADY BEEN EXTRACTED IN PARA 3.1 TO 3.3 OF THIS ORDER. REPETITION IS REFRAINED FROM. ON THE BASIS OF THESE SUBMISSION S, THE ASSESSEE PUT-FORTH THE FOLLOWING PRAYER : SINCE THE ASSESSEE FIRM WAS NOT REQUIRED TO DEDUCT TAX EITHER U/S 194C OR U/S 194I OF THE INCOME TAX ACT,1961, YOUR HONOUR IS REQUIRED TO KINDLY VACATE THE NOTICE AND OBLIGE. FROM THE ABOVE SUBMISSIONS, IT IS CLEAR THAT THE AS SESSEE DULY EXPLAINED THE POSITION THAT OUT OF TOTAL CLAIM MADE AT RS. 1,04,9 6,430/-, A SUM OF RS. 33,11,565/- RELATES TO PURCHASE OF MATERIAL ON WHIC H TDS PROVISIONS ARE NOT APPLICABLE. THE REMAINING AMOUNT IS IN RESPECT OF R ENT/HIRE CHARGES FOR TRACTOR/JCB MACHINE ETC ON WHICH ON WHICH TAX AT SO URCE WAS NOT REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT AND THOUGH TDS P ROVISIONS U/S 1941 WERE APPLICABLE W.E.F. 13.07.2006 YET THE ASSESSEE WAS N OT REQUIRED TO DEDUCT TAX UNDER THAT SECTION EITHER AS PAYMENT TO INDIVIDUAL PAYEE DID NOT EXCEED THE LIMIT OF RS. 1,20,000/- WARRANTING DEDUCTION OF TAX AT SOURCE. 5.3 PERUSAL OF THE IMPUGNED ORDER SHOWS THAT CONSIDERING THESE SUBMISSIONS, THE CIT(A) PROCEEDED TO CONSIDER THE FACTS IN THE FOLLOWING MANNER : THE ABOVESAID REPLY WAS SUBMITTED ON 25.10.2010 AN D THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE THEN AO WAS SATISFIED WITH THE SUBMISSIONS MADE BEFORE HIM BECAUSE NO ORDER U/S 154 OF THE INCOME TAX ACT, 1961 WAS PASSED BY THE DEPTT. SERVED UPON THE ASSESSEE. THEREAFTER, NO ORDER SEEMS TO HAVE BEEN PASSED IN PURSUANCE OF NOTICE U/S 154. 5.2 THAT, AFTER LAPSE OF 17 MONTHS FROM THE SUBMISS ION OF REPLY IN RESPONSE TO NOTICE U/S 154, THE AO INITIATED RE-ASS ESSMENT PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 ON 05.03.2012 ON TH E FOLLOWING GROUNDS:- (I) 'THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCO ME DECLARING AN INCOME OF RS. 448260/- ON 31.10.2007. THE SAME WAS PROCESSED U/S 143(1) ON 03.03.2009. ASSESSMENT IN THIS CASE HAS BEEN COMPLE TED U/S 143(3) ON 10.12.2009 AT A TOTAL INCOME OF RS. 1108260/-. LATE R ON IT WAS NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 10496430/ - IN THE PROFIT 85 LOSS ACCOUNT UNDER THE HEAD MACHINERY RENT, OUT OF WHICH RS. 9995660/- HAS BEEN SHOWN AS PAYABLE TO VARIOUS PERSON FORM THE REPLY OF THE ASSESSEE DATED 02.12.2009, IN WHICH THE ASSESSEE STATED THAT 'DURING THE LAST QUARTER OF YEAR. THE A SSESSEE UNDERTOOK SUB- CONTRACT WORK OF GAWAR CONSTRUCTION COMPANY OF CONS TRUCTION OF ROAD. FOR THE PURPOSE, THE ASSESSEE HAD TO ENGAGE JCB/TRACTOR S FOR DIGGING OF MITTI, LIFTING AND BRINGING OF MITTI'. IT IS CLEAR THAT TH E ASSESSEE ENGAGED THE JCB AND TRACTOR FOR EXCAVATION OF MITTI BRINGING OF MIT TI AND MATERIAL, WHICH COMES UNDER THE TERM OF 'EXECUTION OF WOK'. THE PAY MENT MADE TOWARDS EXCAVATION WORK, CANNOT BE TERMED AS RENT BUT IT COMES UNDER T HE WORK CONTRACT PAYMENT IN VIEW OF SECTION 194-C OF THE ACT. THE ASSESSEE HAS MADE PAYMENT IN EACH CASE EXCEEDIN G RS. 50,000/-WITHOUT DEDUCTION TAX AT SOURCE. SINCE THE ASSESSEE HAS NOT DEDUCTED THE TAX ON PAYMENT OF ABOVE CHARGES, THE WHOLE OF AMOUNT OF RS. 10,49, 6,430/- IS LIABLE TO BE DISALLOWED AND ADDED U/S 40(A)(IA) OF THE ACT. ITA 774/CHD/2014 A.Y. 2007-08 PAGE 12 OF 19 II) FURTYHER THE ASSESSEE HAD PAID SHUTTERING CHARG ES AMOUNTING TO RS. 765520/- AS PER DETAILS GIVEN BELOW : BALAJI STEEL SHUTTERING RS. 285200/- JAI MAA SHUTTERING STORE RS. 283750/- KUNDU SHUTTERING STORE RS. 196570/- THE PAYMENTS OF SHUTTERING CHARGES ARE NOTHING BUT THE RENT FOR USE OF EQUIPMENTS/FITTING/PLANTS WHICH IS COVERED WITHIN T HE DEFINITION OF RENT IN VIEW OF EXPLANATION OF SECTION 194-1 OF THE ACT. TH E ASSESSEE SHOULD HAVE DEDUCTED TAX AT SOURCE ON PAYMENT OF THESE CHARGES. SINCE THE ASSESSEE HAS NOT DEDUCTED THE TAX ON PAYMENT OF ABOVE CHARGE S, THE WHOLE OF AMOUNT OF RS. 765520/- IS LIABLE TO BE DISALLOWED AND ADDE D U/S 40(A)(IA) OF THE ACT.' 5.3. THE INITIATION OF RE-ASSESSMENT PROCEEDINGS U/S 147 WERE OBJECTED TO BY THE APPELLANT IN VIEW OF THE FOLLOWING FACTS AND LEGAL POSITION:- 'I) THE ASSESSEE IS A CIVIL CONTRACTOR AND DURING T HE YEAR, THE ASSESSEE UNDER TOOK CONTRACT AND SUB-CONTRACT FROM M/S GAWAR CONSTRUCTION COMPANY FOR CONSTRUCTION OF ROADS. FOR EXECUTION OF SUCH TYPE OF CONTRACT WORK MAIN MATERIAL SUCH AS RETTA/STONE/WATER IS REQ UIRED. THE WORK OF LABOUR IS LEVELING OF MITTI ETC. AS SUBMITTED ABOVE , THE ASSESSMENT WAS COMPLETED VIDE ORDER U/S 143(3) DATED 10.12.2009 ON TOTAL INCOME OF RS. 1108260/- AS AGAINST RETURNED INCOME OF RS. 448260/ -. AFTER COMPLETION OF THE ASSESSMENT, THE ASSESSEE RECEIVED A NOTICE U/S 154 DATED 21.09.2010, PERHAPS ON THE BASIS OF OBJECTION OF THE AUDIT PART Y, REFERRED TO ABOVE. (II) THE NOTICE U/S 154 OF INCOME TAX ACT, 1961 WAS DULY REPLIED VIDE REPLY DATED 25.10.2010 AS EXPLAINED ABOVE. THEREAFTER, NO COMMUNICATION WAS RECEIVED BY THE AS SESSEE TILL THE DATE PROCEEDINGS INITIATED U/S 154, SUPRA. FROM THESE FA CTS, IT IS CLEAR THAT THE DEPARTMENT WANTED TO RECTIFY THE MISTAKES, MENTIONE D IN THE NOTICE U/S 154, THOUGH THERE WAS NO MISTAKE OF FACTS OR LAW; AND IN THE PENDENCY OF PROCEEDINGS U/S 154, INITIATION OF RE-ASSESSMENT PR OCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961 IS NOT IN ORDER IN THE EYES OF LAW. RECTIFICATION OF MISTAKE APPARENT FROM THE RECORD C ANNOT BE EQUATED WITH THE POWER OF REOPENING UNDER SECTION 147 AND 148 WH ICH IS CONFERRED ON THE ASSESSING OFFICER TO REOPEN THE CASES UNDER ASS ESSMENTS WHEN THE CONDITIONS MENTIONED IN THE SAID SECTIONS ARE SATIS FIED. THE OBJECT AND PURPOSE OF THE TWO PROVISIONS IS SEPARATE AND THE PRECONDITIONS AND REQUIREMENTS ARE DIFFEREN T. THE WORDS 'REASONS TO BELIEVE' WHEN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT HAS A DIFFERENT CONNOTATION AND REQUIREM ENTS AND CANNOT BE EQUATED WITH THE POWER UNDER SECTION 154 TO RECT IFY THE MISTAKES APPARENT FROM THE RECORD'. IN SUPPORT OF THE ABOVE SUBMISSIONS, THE A PPELLANT HAS RELIED UPON VARIOUS JUDGMENTS OF THE RONNIE COURTS AND ITAT'S. 5.4. THE A.R. ALSO SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. REQUIRED THE ASSESSEE TO FURN ISH THE DETAILS OF MACHINERY RENT PAID BY THE APPELLANT INCLUDING THE DETAILS OF OUTSTANDING LIABILITIES AND ALSO TO FURNISH DOCUMENTARY EVIDENC ES WITH REGARD TO DISCHARGING OF OUTSTANDING LIABILITIES ON ACCOUNT O F MACHINERY RENT AFTER 31,03.2007 AS MENTIONED AT PARA NO.2 OF THE A SSESSMENT ORDER. IN COMPLIANCE OF THIS QUERY, THE APPELLANT DULY FURNIS HED ALL THE REQUISITE DETAILS RELATED TO MACHINERY RENT LIKE COPY OF ACCO UNT OF ALL THE PARTIES TO WHOM THE RENT ON ACCOUNT OF HIRING OF MACHINERY I.E . ROAD ROLLER, JCB MACHINES AND TRACTORS ETC. WAS PAID. IT IS WAS ALSO SUBMITTED THAT MACHINERY RENT WAS INCLUSIVE OF EXPENSES ON ACCOUNT OF PURCHASES OF MATERIAL AMOUNTING TO RS.33,11,565/-. ALL THE BOOKS OF ACCOUNTS AND VOUCHERS SHOWING THE PAYMENT ON ACCOUNT OF MACHINER Y RENT & PURCHASES OF MATERIAL WERE ALSO PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. AFTER EXAMINING ALL THE DETAI LS REGARDING MACHINERY RENT PAID BY THE APPELLANT DISALLOWED A SUM OF RS.3,00,000/- AS MENT IONED AT PARA NO.2 OF THE ASSESSMENT ORDER. ITA 774/CHD/2014 A.Y. 2007-08 PAGE 13 OF 19 THE SAID DISALLOWANCE WAS MADE ON THE GROUND THAT T HE ASSESSEE FIRM ITSELF HAVING MACHINERY OF THE SAME TYPE WHICH HAS BEEN SH OWN AS TAKEN ON RENT AND THE ASSESSEE FAILED TO FURNISH COMPLETE DETAILS /ADDRESSES OF THE PERSONS TO WHOM PAYMENTS ON THIS ACCOUNTS WERE MADE . THEREFORE, FROM THE ABOVE FACTS, IT IS VERY MUCH CL EAR THAT THE A.O. HAD FULLY EXAMINED THE ISSUE OF MACHINERY RENT PAID BY THE AP PELLANT AT THE TIME OF MAKING THE ORIGINAL ASSESSMENT. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSEE DULY DISCLOSED ALL MATERIAL FACTS BEFORE THE A.O. DURING THE ASSESSMENT PROCEED INGS BY FURNISHING ALL THE DETAILS, PRODUCING BOOKS OF ACCOUNTS AND THE A.O. D ULY EXAMINED THOSE DETAILS AND BOOKS OF ACCOUNTS AND HAD THE TDS PROVISION BEEN AP PLICABLE ON SUCH PAYMENTS, HE WOULD NOT HAVE DISALLOWED A SUM OF RS.3,00,000/- OUT OF MACHINERY RENT PAID BY THE APPELLANT. IT IS PERTINENT TO MENTION HERE T HAT NO NEW MATERIAL HAS COME ON RECORD WHICH GOES TO SHOW THAT THESE PAYMENTS AR E TO BE DISALLOWED U/S 40(A) (IA) OF THE INCOME TAX ACT, 1961. IT IS JUST A CHAN GE OF OPINION AND THEREFORE, INITIATION OF PROCEEDINGS U/.S 147 OF THE INCOME TA X ACT, 1961 IS NOT IN ACCORDANCE WITH THE PROVISION OF LAW. IN SUPPORT OF THE ABOVE SUBMISSIONS, THE APPELLANT SUBMITTED VARIOUS JUDGMENTS OF THE HON'BLE COURTS AND ITAT'S. 6. THE A.O. REJECTED ALL THE OBJECTIONS RAISED BY T HE ASSESSEE AGAINST INITIATION OF RE-ASSESSMENT PROCEEDINGS ON THE GROU ND THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ABOVE EXPENSES WITH RE GARD TO PROVISION OF TAX DEDUCTION AT SOURCE I.E. DISALLOWANCE U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961. HENCE, THERE IS NO CHANGE OF OPINION. CHANGE OF OPI NION COMES TO THE RESCUE OF THE ASSESSEE ONLY WHEN ASSESSING OFFICER HAS TAKEN ONE OF THE PERMISSIBLE VIEWS AT THE TIME OF ORIGINAL PROCEEDING. A WRONG APPLICATIO N OF LAW CAN NOT BE HELD AS A PERMISSIBLE VIEW AND THAT CAN ALWAYS BE CHANGED FOR APPRECIATING LAW AND IN SUPPORT OF HIS FINDING THE A.O. CITED VARIOUS JUDGM ENTS OF THE HON'BLE COURTS AND ITAT'S. 5.4 IT IS SEEN TAT THE SR.DR HAS NOT MADE ANY ARGUMENT S TO ASSAIL THAT THE FACTUAL CONSIDERATION OF THE ISSUE, THE CIT(A) HAS EITHER IGNORED A FACT OR HAS TAKEN A FACT INTO CONSIDERATION WHOSE EXIST ENCE WAS IN DOUBT. THUS, NO INFIRMITY IN THE FACTS BEING CONSIDERED BY TH E CIT(A) HAS BEEN POINTED OUT BY THE REVENUE. REVERTING BACK TO THE ORDER UNDER CHALLENGE, IT IS SEEN THAT ON CONSIDERING THE FACTS IN THE AFOREMENTIONED MANNER, THE CIT(A) CONCLUDED THE ISSUES VIDE PARA 7, 8 AND 8.1 ON THESE FACTS HOLDING AS UNDER : 7. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS OF THE APPELLANT AND THE ASSESSMENT ORDER. FROM THE FACTS NARRATED IN TH E PARAGRAPHS ABOVE IT IS SEEN THAT AFTER FRAMING THE ASSESSMENT U/S 143(3 ), A NOTICE U/S 154 WAS ISSUED ON TWO GROUNDS AND BOTH THE GROUNDS ARE ALSO SUBJECT MATTER OF 'REASONS RECANTED ''FOR REOPENING THE CASE U/S. 147. THIS INTER ALIA MEANS THAT NOT ONLY DID THE RETURN OF INCOME ASSESS ED BUT ALSO THE PROCEEDINGS U/S 154 HAVE BEEN CONCLUDED AFTER THE A SSESSEE HAS SUBMITTED ITS REPLY. AFTER ALL THESE STAGES REOPENING U/S 147 OF THE ACT HAS BEEN INITIATED BY ISSUANCE OF NOTICE U/S!48. ON THIS BAC KGROUND, THE VALIDITY OF THE PROCEEDINGS U/S 147 HAS BEEN CHALLENGED BEFO RE ME. 8. IT IS A SETTLED PRINCIPLE OF LAW THAT UNDER SECT ION 147, THE PROCEEDINGS FOR THE REASSESSMENT CAN BE INITIATED ONLY IF THE A .O. HAS 'REASONS TO BELIEVE' THAT THE INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE QUESTION WHETHER THE A.O. HAD 'REASONS TO BELIEVE' IS NOT A QUESTION OF LIMITATION ONLY, BUT IT IS A QUES TION OF JURISDICTION, A VITAL THING WHICH CAN ALWAYS BE INVESTIGATED AND LOOKED U PON BY THE APPELLATE ITA 774/CHD/2014 A.Y. 2007-08 PAGE 14 OF 19 AUTHORITIES. HERE IN THIS CASE, FROM A BARE PERUSAL OF THE 'REASONS RECORDED' IT IS EVIDENT THAT THE SAME IS BASED ON T HE REASONING GIVEN IN THE NOTICE U/S. 154 ISSUED EARLIER BY THE A.O. AND NO NEW MATERIAL HAS BEEN BROUGHT ON RECORD SHOWING ANY LIVE LINK OR NEXUS WI TH THE INCOME CHARGEABLE TO TAX WHICH CAN BE SAID TO HAVE ESCAPED ASSESSMENT. THERE ARE TWO ISSUES WHICH HAVE BEEN RAISED IN THE 'REASONS RECORDED', FIRSTLY, REGARDING DISALLOWANCE OF MACHINERY RENT U /S 40(A)(IA) AMOUNTING TO RS. 1,04,96,430/- FOR NOT DEDUCTING TDS U/S 194- C AND SECONDLY DISALLOWANCE OF SHUTTERING CHARGES U/S 40(A) (IA) AMOUNTING TO RS. 7,65,520/- FOR NOT DEDUCTING TDS U/S 194-1. THE ANSWER TO THESE ISSUES HAD ALREADY BEEN PLACED BY THE ASSESSEE BEFORE THE A.O. VIDE LETTER DATED 25.10.2010 IN PURSUANCE OF NOTICE U/S. 154. BESIDES THAT THERE IS O OTHER GROUND OR REASON IN THE 'REASONS RECORDED'. 8.1. ON THESE FACTS, IT CANNOT BE HELD THAT THE A.O . ENTERTAINED ANY 'REASON TO BELIEVE' TO ACQUIRE JURISDICTION IN THIS CASE FOR REOPENING THE ASSESSMENT U/SL47. THE WORDS 'REASON TO BELIEVE' AR E STRONGER THAN THE WORDS 'IS SATISFIED'. THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE AN ARBITRARY OR IRRATIONAL. IT MUST BE BASED ON THE REASONS WHICH ARE RELEVANT AND MATERIAL. THE 'REASONS TO BELIEVE' DOE S NOT MEAN PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE ASSESSIN G OFFICER. THE BELIEF MUST BE HELD IN A GOOD FAITH AND IT CANNOT BE MERELY PRE TENCE FOR REOPENING THE CASE U/S 147 IN A CASUAL MANNER OR ON EXTRANEOUS FA CTOR. NOT ONLY THIS, THE REASON TO BELIEVE SHOULD HAVE A RATIONAL CONNECTION AND RELEVANT BEARING ON THE FORMATION OF THE BELIEF HAVING LIVE LINK OR NEX US WITH THE INCOME CHARGEABLE TO TAX ESCAPING THE ASSESSMENT. IT SHOUL D NEITHER BE EXTRANEOUS NOR IRRELEVANT. NOWHERE FROM THE 'REASON S RECORDED' BY THE ASSESSING OFFICER CAN A REASONABLE BELIEF BE ENTERT AINED IN THIS CASE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT PRI MARILY ON THE GROUND THAT FIRSTLY, THE ISSUE REGARDING MACHINERY RENT HAS ALR EADY BEEN CONSIDERED VIDE PARA NO.2 OF THE ORIGINAL ASSESSMENT ORDER MADE 'U/ S 143(3) IN WHICH AN ADDITION OF RS.3,00,000/- HAS ALREADY BEEN MADE, SE CONDLY, THE APPELLANT EXPLAINED THE SAME DURING THE COURSE OF PROCEEDINGS U/S 154. ON THESE FACTS OF THE ASSESSEE'S CASE, IT CANNOT BE HELD THA T THE A.O. CAN ENTERTAIN THE 'REASON TO BELIEVE' FOR INCOME CHARGEABLE TO TA X ESCAPING ASSESSMENT. THUS BASED ON SUCH 'REASONS RECORDED', IT CANNOT BE HELD THAT THE A.O. CAN ACQUIRE A JURISDICTION FOR REOPENING THE CASE U /S. 147 AND ACCORDINGLY, ON THIS GROUND ALONE THE PROCEEDINGS U/S. 147 IS QU ASHED. 5.5 A PERUSAL OF THE IMPUGNED ORDER FURTHER BRINGS OUT TH E FACT THAT RELYING UPON DECISION OF THE APEX COURT IN THE CASE OF C IT V KELVINATOR OF INDIA LTD. (2010) 320 ITR 561, SATNAM OVERSEAS LTD. V ADDL. CIT (2010) 188 TAXMAN 172 (DEL), CIT-VI NEW DELHI V USHA INTERN ATIONAL LTD. (2012) 210 TAXMAN 188/25 TAXMAN.COM 200 (DELHI)(FB), CIT V M/S ASAHI ALPHA LTD. FARIDABAD (2010) 43 I.T.REPS 495 (P&H), BERGER PAINS LTD. V ACIT (2010) 322 ITR 369 (CAL), ADDL. CIT VS SHRE YAS GRAMIN BANK (2012) 210 TAXMAN 276 (S.C)/(2012) 25 TAXMANN.CO M 282 (S.C), ITAT MUMBAI BENCH DECISION IN THE CASE OF NAWANY CORP. (I) LTD. V ITO (2012) 21 TAXMAN.COM 217 (MUM).,CIT LUDHIANA-II V THE DEPUTY CHIEF ACCOUNTS OFFICER,MARKFED, KHANNA (2008) 173 TAXM AN 149 (P&H). AND CIT VS HINDUSTAN LEVER LTD. (2008) 306 ITR 25 (GUJ) THE CIT(A) FURTHER PROCEEDED TO CONSIDER THE CLAIM OF THE ASSESSEE EVE N ON MERITS IN PARA 9 OF HIS ORDER. HE FURTHER WENT ON TO CONSIDER THAT WITHOUT ITA 774/CHD/2014 A.Y. 2007-08 PAGE 15 OF 19 PREJUDICE TO THE ABOVE EVEN OTHERWISE, PROVISIONS OF SECT ION 194C WERE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE ON ACCOU NT OF THE FACT THAT RENT OF RS. 1,04,96,430/- SHOWN IN THE PROFIT & LOSS A CCOUNT UNDER THE HEAD TRAVEL AND IN VIEW OF THE FOLLOWING FACTS ON RECORD : I) THAT ASSESSEE IS A CIVIL CONTRACTOR AND DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE ALSO TOOK CONTR ACT FORM.M/S GAWAR CONSTRUCTION CO. FOR CONSTRUCTION OF ROADS AND THE ASSESSEE'S MAIN WORK WAS TO PREPARE PAD BASE LEVEL. FOR THE PURPOSE, THE ASSESSEE WAS REQUIRED TO PURCHASE MITTI/WATER ETC FOR EXECUTION OF WORK. OUT OF PAYMENTS SHOWN UNDER THE HEAD 'MACHINERY RENT', THE ASSESSEE HAD PURCHASED RNITTI/WATER FROM A NUMBER OF PERSONS FOR A SUM OF RS. 3311565/-. THE ASSESSEE PURCHASED THE SAID MATERIAL FROM NEARBY VILLAGERS WHO OWNED TRACTORS AND THE MATERIAL WAS S UPPLIED BY THOSE PERSONS ON FOR BASIS. THE LEVELING OF MITTI ETC WAS GOT DONE THROUGH THE ASSESSEE'S OWN LABOUR WHICH WAS DEPLOYED ON DAILY W AGES BASIS FOR WHICH EXPENSES OF RS. 16871507/- HAVE BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT. IT IS A COMMON KNOWLEDGE 'AND PRA CTICE THAT MITTI IS PURCHASED FROM THE PERSONS WHO ARE RESIDING NEARBY SITE OF WORK/ CONTRACT. THE TRACTOR OWNERS SUPPLY MITTI TO THE CO NTRACTORS AT THE SITE AND THE SUPPLIERS OF MITTI DO NOT INVOLVE THEMSELVE S IN LEVELING OF THE SITE OR MITTI. THE EXPENDITURE OF RS. 3311565/- SHO WN UNDER THE HEAD IS ONLY ON ACCOUNT OF PURCHASE OF MATERIAL I.E. MITTI ETC WHICH HAS BEEN SUPPLIED BY THE SELLING PARTIES ON FOR BASIS. EVEN THE CONTRACTORS SOMETIME PURCHASE SUCH MATERIA L FROM THE PERSONS WHO BRING SUCH MATERIAL AT THE SITE WITHOUT ORDER F ROM THE CONTRACTORS. SINCE THE ASSESSEE HAS PAID AMOUNT FOR PURCHASE OF MATERIAL ONLY, THERE WAS NO REQUIREMENT OF THE ASSESSEE TO DEDUCT TAX AT SOURCE. 5.6 NOTING THE FACT THAT THE REMAINING EXPENDITURE OF RS .7184865/- (10496430-3311565) RELATED TO PAYMENT ON ACCOUNT OF HIRING OF MACHINERY AND EQUIPMENT REQUIRED FOR EXECUTION OF C ONTRACT WORK WHERE THE ASSESSEE TOOK SUBCONTRACT FROM M/S GAWAR CONSTRUCTION CO. FOR CONSTRUCTION OF ROADS/MAINLY UPTO PAD LEVEL AND CONSIDERING THE ARGUMENT ON FACTS THAT FOR COMPLETION OF CONTRA CT WORK WITHIN THE STIPULATED PERIOD, THE ASSESSEE REQUIRED MACHIN ERY SUCH AS TRACTOR/JCB MACHINES AND ROAD-ROLLERS WHICH IT TOOK ON HIRE/RENT, HE ACCEPTED THE ARGUMENT THAT COMPLETE RIGHT TO USE THE SAID MACHINERY ACCORDINGLY WAS TRANSFERRED TO THE ASSESS EE FIRM AND THE TRANSFERORS HAVE NO CONTROL THEREAFTER TILL THE MACHINERY WAS RETURNED TO THEM. ALL THE RUNNING EXPENSES, ACCORDI NGLY, WERE BORN BY THE ASSESSEE AFTER THE MACHINERY/EQUIPMENT WAS TAKEN ON HIRE/RENT. THE FOLLOWING DETAILS GIVEN WERE ACC ORDINGLY, CONSIDERED: A. LABOUR WAGES-INCLUDING SALARY/WAGES 16871507/ - PAID FOR RUNNING OF JCB/TRACTORS ETC. B. DIESEL EXPS. 9805220/- ITA 774/CHD/2014 A.Y. 2007-08 PAGE 16 OF 19 5.7 IT HAS ALSO BEEN ARGUED BEFORE THE CIT(A) AN D CONSIDERED BY HIM THAT ALL THE PAYMENTS TO THE TRANSFEROR OF MACHINER Y WERE MADE AS A RENT WITH RESPECT TO THE NUMBER OF MONTHS/DAYS/HOUR S USED BY THE APPELLANT FIRM. THE MACHINERY WAS COMPLETELY UN DER THE CONTROL AND POSSESSION OF THE ASSESSEE FIRM AND WAS USED IN THE BUSINESS ACCORDING TO THE DIRECTIONS OF THE ASSESSE E FIRM. THE TRANSFEROR OF THE MACHINERY HAD NO INTERFERENCE, CO NTROL OR POSSESSION OF ANY KIND TILL THE COMPLETION OF THE P ERIOD OF RENT. IN VIEW OF THESE FACTS, IT WAS SUBMITTED BEFORE THE CI T(A) AND IT HAS BEEN CONSIDERED BY HIM THAT IT IS VERY MUCH CLEAR T HAT ALL THE MACHINES/EQUIPMENT WERE TAKEN ON RENT/HIRE AND PAYM ENT OF RENT/HIRE CHARGES DO NOT FALL WITHIN THE AMBIT OF P ROVISION OF SECTION 194C OF THE INCOME TAX ACT, 1961 AS EXPLAINED BELOW:- TO COME WITHIN MEANING OF LIMB (A) OF SECTION 194C , A CONTRACT MUST INVOLVE THE CARRYING OUT OF ANY WORK- WHETHER TANGIBLE OR I NTANGIBLE AND THAT IN THE CASE OF A CONTRACT FOR CARRYING OUT INTANGIBLE WORK (SERVIC E CONTRACT) WITH THE HELP OF ANY MACHINERY, THE TEST IS THAT THERE IS, FIRSTLY, AN OBLIGATION TO CARRY OUT A SPECIFIED WORK AND SECONDLY THE COMMAND, CONTROL AN D POSSESSION OF THE MACHINERY REMAIN WITH THE CONTRACTOR. ON THE OTHER HAND, IN A MACHINERY HIRE CONTRACT, T HERE WILL BE NO OBLIGATION OF THE LENDER TO CARRY OUT ANY SPECIFIED WORK AND SECONDLY, THE CONTROL COMMAND AND POSSESSION OF THE MACHINERY WIL L TEMPORARILY PASS ON TO THE HIRER. IN THE ASSESSEE'S CASE THE COMMAND, CONTROL AND POSSESSION OF THE MACHINERY/EQUIPMENT REMAINED WITH THE ASSESSEE AND PAYMENTS WERE NOT MADE W.R.T. THE QUANTUM OF WORK. 5.8 NO INFIRMITY IN THE AFORESAID CONCLUSION OR F OR THAT MATTER ON FACTS HAS BEEN POINTED OUT BY THE REVENUE. THE LD. AR IN THE FACTS OF THE PRESENT CASE, ON THE CONTRARY DREW SPECIFIC ATT ENTION TO THESE SUBMISSIONS BEFORE THE CIT(A) WHERE THE ASSESSEE HA D ARGUED AND IT WAS SUBMITTED THAT IT HAS BEEN CONSIDERED AS THE AS SESSEE HAD SUCCESSFULLY DEMONSTRATED THAT THE RUNNING COST OF THESE EQUIPMENTS WERE BORNE BY THE ASSESSEE. THE SAID FINDINGS, IT W AS SUBMITTED, HAVE NOT BEEN ASSAILED BY THE REVENUE. IN VIEW OF T HESE FACTS, EVEN OTHERWISE THE CASE OF THE ASSESSEE DOES NOT FALL UN DER THE PROVISIONS OF SEC. 194C. IT CAN FALL UNDER THE PROVISION OF SE CTION 194-1 OF THE INCOME TAX ACT, 1961. RELYING ON THE ORDER, IT HAS BEEN ARGUED THAT IN ASSESSEE'S CASE THE CONTRACT UNDER REFERENCE WAS NOT FOR CARRYING OUT ANY SPECIFIED WORK-TANGIBLE OR INTANGIBLE- WITH OR WITHOUT THE HELP OF MACHINERY. RATHER THE MACHINERY/EQUIPMENT W ERE TAKEN ON HIRE AFTER TAKING THEIR POSSESSION/CONTROL FOR USE IN THE ASSESSEE'S BUSINESS AT ASSESSEE'S DISCRETION AND THE COMMAND, CONTROL AND ITA 774/CHD/2014 A.Y. 2007-08 PAGE 17 OF 19 POSSESSION OF THE MACHINERY REMAINED WITH THE ASSES SEE DURING THE PERIOD OF HIRE. THE PAYMENT TO THE PERSONS FROM WHO M THEIR MACHINERY/EQUIPMENT TAKEN WAS MADE WITH REFER ENCE TO THE TIME, LENGTH OF USAGE OF THE MACHINES AND NOT W.R.T THE QUANTUM OF ANY WORK DONE. ON THE BASIS OF THESE ARGUMENTS WITH OUT PREJUDICE TO THE ARGUMENT ON THE ISSUES OF JURISDICTION AND E VEN ON MERITS, IT HAS BEEN ARGUED THAT SECTION 194C WAS NOT ATTRACTE D. THESE ARGUMENTS, IT HAS BEEN POINTED OUT, HAVE NOT BEEN R EBUTTED BY THE REVENUE. ON BEHALF OF THE TAX PAYER, IT HAS BEEN C ANVASSED BEFORE THE CIT(A) AND REITERATED BEFORE US THAT BY ALL TES TS AND CONSIDERATIONS, THE CONTRACT UNDER REFERENCE WAS MA CHINERY HIRE CONTRACT AND NOT A CONTRACT FOR CARRYING OUT ANY WO RK WITHIN THE MEANING OF LIMB (A) OF SECTION 194C OF THE ACT. IT HAS ALSO BEEN ARGUED BEFORE CIT(A) AND ACCEPTED BY THE CIT(A) THA T EVEN THE CONTRACT UNDER REFERENCE COULD NOT BE HELD AS A CON TRACT FOR SUPPLY OF LABOUR WITHIN THE MEANING OF LIMB (B) OF SECTION 19 4C OF THE INCOME TAX ACT, 1961 BECAUSE NO LABOUR WAS SUPPLIED BY THE PERSONS FROM WHOM MACHINERY WAS TAKEN ON RENT. THE ASSESSEE HAS ARGUED AND DEMONSTRATED THE ARGUMENT ON FACTS BEFORE THE CIT(A ) WHICH FINDING HAS NOT BEEN ASSAILED BY THE REVENUE THAT THE LABOU R OF THE ASSESSEE DEPLOYED BY THE ASSESSEE ON DAILY WAGES BA SIS WERE USED FOR RUNNING THESE MACHINES/EQUIPMENTS. IT WAS POINT ED OUT THAT EVEN WHERE THE MACHINES WERE TAKEN ON HIRE WITH OPE RATORS, SECTION 194C DOES NOT COME INTO PICTURE BECAUSE THE PROVISI ON OF MEN TO OPERATE THE HIRED MACHINES WAS INCIDENTAL AND SUBSE RVIENT TO THE HIRING OF MACHINES AND COULD NOT BE SEPARATE AND IN DEPENDENT FORM THE HIRING OF MACHINES. THE MACHINES COULD NOT BE H IRED WITHOUT THE OPERATING PERSONNEL, AS IN THAT CASE THEY WOULD BE USELESS AND SERVE NO PURPOSE OF THE ASSESSEE. IN THE CONTEXT OF THE AFOREMENTIONED FACTS, RELIANCE HAS BEEN PLACED UPON VARIOUS DECISIONS AND CIRCULARS OF THE CBDT NAMELY CIRCULAR NO. 681 DATED 08.03.94 , DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT V POOMPUHAR SHIPPING CORP. LTD. (2006) 153 TAXMAN 486, ITAT DELHI F DECISION IN DCIT, HALDWANI V RAJ LUXMI STONE CRUSHER (2012) 21 TAXMAN.COM 475 (DEL), ITAT AMRITSAR DECISION IN DCIT V SATIS H AGGARWAL &CO. (2010) 122 ITD 35 (ASR.), DELHI HIGH COURT DECIS ION IN CIT V BMR ASSOCIATES (2011) 12 TAXMAN.COM 201 (DELHI), MADRA S HIGH ITA 774/CHD/2014 A.Y. 2007-08 PAGE 18 OF 19 COURT DECISION IN CIT-1 TRICCHIRAPALLI V D.RATHINAM (2011) 197 TAXMA N 486/9 TAXMAN.COM 239 (MAD) CONSIDERING WHICH THE CIT(A) H AS CONCLUDED THE ISSUE ON MERIT ALSO IN FAVOUR OF THE ASSESSE E HOLDING AS UNDER : 9.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND HAVE GONE THROUGH THE AO'S ORDER AND THE SUBMISSIONS OF THE APPELLANT . THE UNDISPUTED FACTS ARE THAT THE LD. A.O. VIDE PARA NO.2 OF THE ORIGINAL AS SESSMENT ORDER MADE U/S 143(3) HAS OBSERVED THAT ASSESSEE FIRM ITSELF IS HAVING MA CHINERY OF THE TYPE THAT IS HYWA, DENFER ETC. WHICH HAS BEEN SHOWN AS TAKEN ON RENT. FURTHER, DURING THE COURSE OF PROCEEDINGS U/S 154, THE APPELLANT SUBMIT TED THE COPY OF ACCOUNTS OF THE PARTIES/PERSONS FROM WHOM MATERIAL WAS PURCHASE D AND MACHINERY RENT WAS PAID/PAYABLE. ALL THE MACHINERY I.E. TRACTOR, JCB A ND ROAD ROLLER ETC. RUNNING EXPENSES LIKE SALARY AND DIESEL ETC. AS CLAIMED BY THE APPELLANT WERE ALLOWED AS SUCH WHILE FRAMING THE ASSESSMENT U/S 147. IN VIEW OF THE ABOVE FACTS THE CONTRACT UNDER REFER ENCE WAS PURELY A CONTRACT FOR THE HIRING OF MACHINERY & EQUIPMENT AND THE OBL IGATION OF THE LENDER UNDER THE CONTRACT WAS LIMITED TO SUPPLYING SPECIFIC MACH INES, HIS CONTRACTUAL OBLIGATION STOOD DISCHARGED WITH THE HANDING OVER O F TEMPORARY POSSESSION OF THE MACHINES TO THE HIRER AND HE WAS NOT RESPONSIBLE TH EREAFTER FOR THE PERFORMANCE OR DISPOSAL OF ANY SPECIFIC WORK AND THAT THE MACHI NES WERE UTILIZED IN THE BUSINESS OF THE ASSESSEE AT ITS OWN DISCRETION AND THE PAYMENTS UNDER THE CONTRACT ACCRUED WITH REFERENCE TO THE TIME LENGTH OF USAGE OF THE MACHINES AND NOT WITH REFERENCE TO THE QUANTUM OF ANY WORK DONE. SO THE LENDER NEITHER HAD ANY WORK OBLIGATION NOR ANY COMMAND, CONTROL AND PO SSESSION OF THE MACHINES AFTER THEY WERE TEMPORARILY HANDED OVER TO THE HIRE R. THE PROVISIONS OF SECTION 194C OF THE ACT IS HAVING TWO LIMBS; (A) CARRYING OUT ANY WORK OR (B) FOR SUPPLY OF LABOUR FOR CARRYING OUT A NY WORK AND IN ORDER TO FALL WITHIN THE MEANING OF LIMB (A) OF SECTION 194C OF T HE ACT, A CONTRACT MUST INVOLVE THE CARRYING OUT OF ANY WORK, WHETHER TANGIBLE 'OR 'INTANGIBLE' AND IN THE CASE OF A CONTRACT FOR CARRYING OUT INTANGIBLE WORK (SERVICE CONTRACT) WITH THE HELP OF ANY MACHINERY, THE TEST IS THAT THERE IS, FIRSTLY, AN O BLIGATION TO CARRY OUT A SPECIFIED WORK, AND SECONDLY, THE COMMAND, CONTROL AND POSSES SION OF THE MACHINERY REMAIN WITH THE CONTRACTOR, ON THE OTHER HAND, IN A MACHINERY HIRE CONTRACT, THERE WILL BE NO OBLIGATION OF THE LENDER TO CARRY OUT ANY SPECIFIC WORK AND SECONDLY, THE CONTROL, COMMAND AND POSSESSION OF TH E MACHINERY WILL TEMPORARILY PASS TO THE HIRER. THE CONTRACT UNDER REFERENCE WAS NOT FOR CARRYING O UT ANY SPECIAL WORK TANGIBLE OR INTANGIBLE, WITH OR WITHOUT THE HELP OF MACHINERY, THE CONTRACT WAS FOR TAKING TEMPORARY POSSESSION OF MANNED & MAINTAINED MACHINES TO BE USED BY THE ASSESSEE IN ITS BUSINESS AT ITS DISCRETION AND THE COMMAND, CONTROL AND POSSESSION OF THE MACHINES DURING THE PERIOD OF THE HIRE PASSED TO THE ASSESSEE AND FURTHER THE PAYMENTS UNDER THE CONTRACT ACCRUED WITH REFERENCE TO THE TIME LENGTH OF USAGE OF THE MACHINES AND NOT WITH R EFERENCE TO THE QUANTUM OF ANY WORK DONE. THEREFORE, THE WORK UNDER REFERENCE WAS A MACHINERY HIRE CONTRACT, AND NOT A CONTRACT FOR CARRYING OUT ANY WORK WITHIN THE MEANING OF LIMB (A) OF SECTION 194C OF THE ACT. THE CONTRACT UNDER REFEREN CE COULD NOT BE SAID TO BE CONTRACT FOR THE SUPPLY OF LABOUR WITHIN THE MEANIN G OF LIMB (B) OF SECTION 194C OF THE ACT BECAUSE THE CONTRACT WAS ESSENTIALLY FOR TH E HIRING OF MACHINERY AND NOT FOR THE SUPPLY OF LABOUR. AS IN THE PRESENT CASE, THERE WERE PURCHASES OF MAT ERIAL AND CONTRACT WAS A MACHINERY HIRE CONTRACT AND NOT A CONTRACT FOR CARR YING OUT ANY WORK, THEREFORE, THE PROVISIONS OF SECTION 194C OF THE ACT WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 5.9 WE FIND THAT THESE MATERIAL FINDINGS ON FACTS STAND UNR EBUTTED ON RECORD. ITA 774/CHD/2014 A.Y. 2007-08 PAGE 19 OF 19 6. ACCORDINGLY, IN THE PECULIAR FACTS AND CIRCUMSTANCES, WH ICH WE HAD ELABORATED AT LENGTH IN THE EARLIER PART OF THIS ORDER , WE FIND THAT THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. THE DETA ILED FINDING ON THE JURISDICTION ISSUE BY ITSELF IS SUFFICIENT TO ADDRESS THE D EPARTMENTAL GRIEVANCE, HOWEVER, SINCE THE PARTIES HAVE ARGUED IN DETA IL ON MERITS ALSO WHICH ISSUE HAS ALSO BEEN DEALT BY THE CIT(A), WE FIND T HAT EVEN ON MERITS, THE REVENUE HAS NO CASE AS NOT ONLY THE ISSUE HAS BEEN CONSIDERED BY THE AO IN THE FIRST ROUND AND THEN IN THE 154 PROCEEDINGS, EVEN ON MERITS, THE REVENUE HAS FAILED TO MAK E OUT ANY CASE IN ITS FAVOUR. BEING SATISFIED WITH THE REASONING AND C ONCLUSION ARRIVED AT BY THE CIT(A) ON THE FACTS AS THEY STAND, THE DEPARTMENTAL APPEAL IS DISMISSED. 6.1 BEFORE PARTING, WE DEEM IT APPROPRIATE TO OBSERVE THA T THE MATTER BEING PURELY FACTUAL HAS BEEN DECIDED ON THE BASIS OF FAC TS ON RECORD. THE DECISIONS RELIED UPON BY THE PARTIES FOR THE PROPOSITIO N/PRINCIPLE OF LAW THEY ADDRESS, HAVE BEEN CONSIDERED, REFERENCE THERET O IS REFRAINED FROM AS THE MATTER IS PURELY FACTUAL ON WHICH THE SETTLE D LEGAL PRINCIPLES APPLY. REFERENCE TO PVS BEEDIES RELIED UPON BY THE REV ENUE IS CONSIDERED NECESSARY SO AS TO HIGHLIGHT THAT THE SAID DE CISION DOES NOT LAY DOWN A BLANKET PRINCIPLE THAT IN EACH AND EVERY CASE OF AUDIT OBJECTION, RE-OPENING IS WARRANTED. THE SAID DECISION IS FA CT SPECIFIC AND THE PRINCIPLE LAID DOWN THEREIN CANNOT BE SAID TO BE A UNIVERSAL PRINCIPLE TO BE APPLIED FOR EVERY RE-OPENING BASED ON AUDIT OBJECTION. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOV.,2017. SD/- SD/- ( DR.B.R.KUMAR) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT/CHD