SHREE TRADERS, MUMBAI V. ITO WD 22(2)3, MUMBAI

ITA 777/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5080 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 18-11-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Keywords: Rectification of order; Difference of opinion; Change of opinion
• Section: 143(3); 194C; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI , , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 777/MUM/2011 ( ( ( ( ( / ASSESSMENT YEAR : 2005-06 M/S. SHREE TRADERS, C-52, PARAS DARSHAN, JAGDUSHA NAGARM GHATKOPAR (W), MUMBAI-400086 THE ITO, WARD-22(2)3, MUMBAI ) !& ./ * ./PAN/GIR NO. : ABAFS 3973 ( )+ /APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY : ` SHRI KIRIT SANGHVI ,-)+ / . ! /RESPONDENT BY : SHRI PITAMBER DAS / 01& / DATE OF HEARING :18.11.2013 23( / 01& / DATE OF PRONOUNCEMENT : 20.11.2013 !4 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-33, MUMBAI DT.12.11.2010 PERTAINING TO A.Y. 2005-06. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE RECTIFICATION ORDER PASSED BY THE A O U/S. 154 DISALLOWING PAYMENT ON LABOUR CHARGES OF RS. 21.75 LAKHS U/S. 40A(IA) FOR NON ITA NO. 777/M/2011 2 DEDUCTION OF TAX U/S. 194C OF THE ACT. GROUND NO. 2 IS AN ALTERNATIVE PLEA TO GROUND NO. 1 BY WHICH THE ASSESSEE HAS CONTESTED THE DISALLOWANCE OF LABOUR CHARGES OF RS. 21.75 LAKHS U/S. 40A(IA) OF T HE ACT. 3. FACTS ON RECORD SHOW THAT IN THIS CASE THE ASSES SMENT U/S. 143(3) OF THE ACT WAS MADE ON 28.11.2007 WHEREIN THE RETURNED INCOME WAS INCREASED BY DISALLOWANCES ON ACCOUNT OF LABOUR CHA RGES AND SUNDRY EXPENSES. THE SAID ASSESSMENT WAS SUBJECTED TO RECT IFICATION U/S. 154 OF THE ACT BECAUSE THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS PAID LABOUR CHARGES TO M/S. SAI CONSTRUCTION AT RS. 11 L AKHS AND TO M/S. VENUS CONSTRUCTIONS AT RS.10.75 LAKHS WITHOUT DEDUCTING T AX AT SOURCE AS PER PROVISIONS OF SEC. 194C OF THE ACT. ACCORDING TO T HE AO, THIS WAS A MISTAKE APPARENT FROM RECORD AND OUGHT TO BE RECTIF IED U/S. 154 OF THE ACT. A NOTICE U/S. 154 OF THE ACT WAS ISSUED TO TH E ASSESSEE. THE ASSESSEE STRONGLY CONTENDED THAT BOTH THE ABOVE PAR TIES HAVE FILED THEIR RETURN OF INCOME AND PAID THEIR TAXES DUE THEREFORE NO DISALLOWANCE NEED TO BE MADE U/S. 40A(IA) OF THE ACT. THE SUBMISSION S OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO WHO WENT ON TO DISALLOW RS. 21.75 LAKHS U/S. 40A(IA) OF THE ACT. 4. BEFORE THE LD. CIT(A) THE ASSESSEE STRONGLY CONT ENDED THAT THE ORDER U/S. 154 OF THE ACT IS BAD IN LAW INASMUCH AS THERE WAS NO MISTAKE APPARENT FROM RECORD AND THE AO HAS ERRED IN DISALL OWING RS. 21.75 LAKHS U/S. 40A(IA) OF THE ACT FOR NON DEDUCTION AND PAYME NT OF TDS U/S. 194C OF THE ACT. THE LD. CIT(A) DID NOT ACCEPT THE CONT ENTION OF THE ASSESSEE. THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT BY NOT D EDUCTING TAX AT SOURCE ON PAYMENT OF LABOUR CHARGES TO M/S. SAI CONTRUCTI ON AND M/S. VENUS CONSTRUCTION, THE ASSESSEE HAS VIOLATED THE PROVISI ONS OF SEC. 194C AND THEREFORE THERE IS NO ERROR IN THE ORDER OF THE AO. THE ASSESSEE ALSO CONTENDED BEFORE THE LD. CIT(A) THAT IT IS NOT A MI STAKE APPARENT FROM ITA NO. 777/M/2011 3 RECORD BUT MERELY A CHANGE OF OPINION. THIS PLEA W AS ALSO REJECTED BY THE LD. CIT(A) AND WENT ON TO CONFIRM THE ADDITIONS MAD E BY THE AO. 5. AGGRIEVED BY THIS, ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS ALL DETAILS RELATING TO THE PAYMENT OF LABOUR CHARGES WERE FURNISHED BEFORE THE AO AND AFTER CONS IDERING THE DETAILS, THE AO MADE AN ADHOC DISALLOWANCE OF 1% OUT OF LABO UR CHARGES. THE ASSESSMENT ORDER WAS ACCEPTED AND NO APPEAL WAS PRE FERRED. ONCE THE AO HAS APPLIED HIS MIND, THEN THE SAME ISSUE CANNOT BE TAKEN U/S. 154 OF THE ACT AS THERE WAS NO MISTAKE APPARENT FROM RECOR D. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE , STRONGLY SUPPORTING THE FINDINGS OF THE LD. CIT(A) , SUBMITT ED THAT THE AO HAS OVERLOOKED MANDATORY PROVISIONS OF THE ACT AND THER EFORE THERE WAS A CLEAR MISTAKE APPARENT FROM RECORD AND THE AO HAS V ERY RIGHTLY RECTIFIED THE MISTAKE BY MAKING DISALLOWANCES AS PER PROVISIO NS OF THE LAW. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. WE HAVE ALSO THE BENEFIT OF THE ASSESSMENT ORDER PASS ED U/S. 143(3) OF THE ACT DT. 28.11.2007. IT IS AN UNDISPUTED FACT THAT IN THE ASSESSMENT ORDER PASSED U/S. 143(30 OF THE ACT, ADHOC DISALLOWANCE O F 1% WAS MADE OUT OF LABOUR CHARGES WHICH MEANS THAT THE DETAILS OF LABO UR CHARGES WAS BEFORE THE AO. IT IS ALSO AN UNDISPUTED FACT THAT TOTAL 10 PARTIES WERE PAID LABOUR CHARGES. THE AO HAS SELECTED ONLY TWO PARTI ES FOR DISALLOWANCE U/S. 40A(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE AS PER PROVISIONS OF SEC. 194C OF THE ACT. A PERUSAL OF THE ORDER U/S . 154 OF THE ACT SHOWS THE FOLLOWING FINDINGS OF THE AO: FURTHER THE ASSESSEE HAS STATED THAT BOTH THE ABOV E PARTIES HAVE BEEN FILED RETURN OF INCOME AND PAID THEIR TAX DUES THE ITA NO. 777/M/2011 4 SAID SUM SHOULD NOT BE DISALLOWED U/S. 40A(IA) OF T HE ACT. THE ASSESSEES EXPLANATION IS NOT ACCEPTABLE ACCORD INGLY, THIS BEING A MISTAKE APPARENT FROM RECORD IS RECTIF IED U/S. 154 OF THE ACT. 8. THIS FINDING OF THE AO ITSELF SHOWS THAT THE ISS UE IS DEBATABLE WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SO URCE ONCE THE PAYEE HAS FILED THE RETURN OF INCOME AND HAS PAID TAXES THERE ON. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF HINDUSTAN COCACOLA BREVERAGE PVT. LTD. VS CIT 29 3 ITR 226. IT IS A SETTLED PROPOSITION OF LAW THAT A DEBATABLE ISSUE C ANNOT BE SUBJECTED TO RECTIFICATION U/S. 154 OF THE ACT NOR ANY ISSUE WHI CH COULD BE DECIDED BY LONG DRAWN REASONING CAN BE MADE A SUBJECT MATTER O F RECTIFICATION U/S. 154 OF THE ACT. THEREFORE, IN OUR CONSIDERATE VIEW THE ORDER U/S. 154 DESERVES TO BE SET ASIDE . REVERSING THE FINDINGS OF THE LD. CIT(A) , THE ORDER U/S. 154 OF THE ACT IS QUASHED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2013 . !4 / 3( &! 5 6 7 20.11.20133 / = SD/- SD/- ( VIJAY PAL RAO ) ( N.K. BILLAIYA ) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 6 DATED / /2013 . . ./ RJ , SR. PS ITA NO. 777/M/2011 5 !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 !4 / ,0 >!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. ? ( ) / THE CIT(A)- 4. ? / CIT 5. @= ,0 , , / DR, ITAT, MUMBAI 6. =A B / GUARD FILE. !4 !4 !4 !4 / BY ORDER, -0 ,0 //TRUE COPY// C CC C / D D D D (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI