ASPHALT INDIA CORPORATION, MUMBAI V. ACIT 20(1), MUMBAI

ITA 8404/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100925 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S R WALIMBE
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI A BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PARTHASAR ATHY CHOUDHURY,JUDICIAL MEMBER /. ITA NO. 8404 /MUM/20 10 , / ASSESSMENT YEAR - 200 7 - 08 ASP H ALT INDIA CORPORATION 1 - B, VIMAL APARTMENTS A - WING, JUHU LANE, ANDHERI (W) MUMBAI - 400 0 58 . PAN: A AAFA 3614 L VS ACIT, 20(1) ROOM NO.6 03, PIRAMAL CHAMBERS PAREL, LALBAUG MUMBAI. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI VIJAY MEHTA / REV ENUE BY : SHRI S.R. WALIMBE / DATE OF HEARING : 01 - 09 - 2015 / DATE OF PRONOUNCEMENT : 04 - 0 9 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.30.09.2010 OF CIT(A) - 31, MUMBAI THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : BEING AGGRIEVED AGAI NST THE ORDER OF COMMISSIONER OF INCOME TAX (A) 31, MUMBAI, THIS APPEAL PETITION IS BEING FILED TO CONSIDER THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER: (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE GROUND OF APPEAL IN RESPECT OF INVOKING OF PROVISIONS UNDER SECTION 40(A)(IA) THOUGH THE SAID PROVISIONS ARE ULTRA - VIRUS AND UNCONSTITUTIONAL BAD - IN - LAW AND HARSH. THE PROVISIONS BEI NG ULTRA - VIRUS, BAD IN LAW AND HENCE THE SAME CANNOT BE INVOKED ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT. (2) WITHOUT PREJUDICE TO ABOVE, AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN CONFIRMING ADDITION OF AN AMOUNT OF RS.2,68,02,688/ - , THOUGH THE APPELLANT WAS NOT REQUIRED TO DEDUCT TDS ON THESE PAYMENTS. THE APPELLANT HAD DIRECTLY TRANSFERRED THE SAID CONTRACTS TO OTHER CONTRACTORS AND THE APPELLANT WAS ONLY ENTITLED TO C OMMISSION ON THE SAID CONTRACTS AND HENCE PROVISIONS OF S.40(A)(IA) WERE NOT APPLICABLE TO THE FACTS OF THE CASE. THE ADDITION ON THIS ACCOUNT IS BAD IN LAW AND BE DELETED. THE COMMISSIONER OF INCOME TAX(APPEAL) ERRED IN NOT CONSIDERING THIS GROUND OF APPE AL. (3) ON THE FACT AND CIRCUMSTANCES OF THE CASE THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE ADDITION MADE UNDER SECTION 40(A)(IA) THOUGH PROVISION OF SAID SECTION DOES NOT APPLICABLE. (4) WITHOUT PREJUDICE TO ABOVE, COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE MODIFICATION IN THE ORIGINAL GROUND NO.2 FOR WHICH REQUEST WAS MADE BY THE APPELLANT VIDE LETTER DATED 10 TH AUGUST 2010 DURING THE COURSE OF HEARING. IN THE ORIGINAL GROUND THE APPELLANT HAD BY MISTAKE TAKE N THE AMOUNT OF ADDITION OF RS.2,64,03,867/ - INSTEAD OF ACTUAL ADDITION OF RS.2,68,02,688/ - . (5) THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ACCEPTING THE FACT THAT THE APPELLANT HAD DEDUCTED TDS ONLY ON INSISTENCE BY THE AUDITOR AND IT DOES NOT AMOUNT TO ACCEPTANCE OF THE SAID DEFAULT. ITA/ 8404 /M/1 0 - ASPHALT INDIA 2 (6) THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY, SUBSTITUTE AND I OR CANCEL ANY OF THE GROUND OF THE APPEAL. THE ASSESSEE HAS ALSO FILED FOLLOWING ADDITIONAL GROUNDS VIDE HIS LETTER DT. 27.8.2015. 1. THE L D. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS NOT APPRECIATING THAT THE PAYMENT OF TDS WAS MADE BEFORE THE DUE DATE OF FILING THE RETURN AND HENCE NO DISALLOWANCE OF THE FOLLOWING EXPENSES IS WARRANTED VTS: 40(A)(IA) OF THE ACT: A) SUB - CONTRACT EXPENSES AMOUNTING TO RS. 2,68,02,688/ - B) INTEREST EXPENSES AMOUNTING TO RS.31, 500 / - 2. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS NOT APPRECIATING THAT THE DISALLOWANCE OF VARIOUS EXPENSES U/S.40(A)(IA) OF THE ACT CAN ONLY BE MADE IN RESPECT OF THE AMOUNT OUTSTANDING PAYABLE TO THE PARTIES AT THE END OF THE YEAR. 3. THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT IS WARRANTED IN THE PRESE NT CASE IN TERMS OF THE 2 ND PROVISO TO S. 40(A)(IA) OF THE ACT. ASSESSEE - FIRM, ENGAGED IN THE BUSINESS OF HOT MIX PLANT, ROAD CONSTRUCTION ETC., FILED ITS RE T URN OF INCOME30.10.07 DECLARING TOTAL INCOME 13.01 LACS.THE ASSESSING OFFICER( AO ) COMPLETED THE ASSESS MENT U/S. 143(3) OF THE ACT ON 24. 12 . 2009 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 2. 94CR ORES . 2. E FFECTIVE GROUND OF APPEAL IS ABOUT ADDITION OF RS.2.68 CR ORES ON ACCOUNT OF NON - PAYMENT OF TDS IN TIME. DURING THE ASS ESSMENT PROCEEDINGS , THE AO FOUND THAT THE ASSESSEE HAD MADE SUB - CONTRACT PAYMENTS, INTEREST AND PROFESSIONAL CHARGES ON WHICH TDS DEDUCTED WAS PAID INTO THE CENTRAL GOVT. A CCOUNT BEYOND THE DUE DATE PRESCRIBED BY THE PROVISIONS OF CH APTER XVII OF THE ACT, THAT THE TOTAL PAYMENT MADE INTO G OVT. ACCOUNT IN TIME UNDER THE HEAD SUB - CONTRACT AND INTEREST WORKED OUT TO RS.2.86 CR ORES ,(RS.2.85 CR ORES O N ACCOUNT OF SUB CONTRACT +RS.1.68 CR ORES ON ACCOUNT OF INTER E ST PAID), THAT ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE ON PROFESSIONAL CHARGES AMOUN TING TO RS.4.00 LACS.HE FURTHER OBSERVED THAT TDS DEDUCTION ON PAYMENT IN MONTH OF M ARCH AM OUNTING OF RS.2,273/ - WAS PAID TO THE GOVT. ACCOUNT BEFORE THE DUE DATE OF FILING OF RETURN,THE AO FURTHER FOUND THAT SIMILAR DEDUCTION AMOUNTING TO RS.3.99 LACS WA S DISALLOWED IN THE IMMEDIATELY PRECE D ING YEAR U/S.40(A)(IA) OF THE ACT. THE AO ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION, AMOUNTING TO RS.3.99 LACS THAT WAS MADE IN THE IMMEDIATELY PRECEDING AY ON ACCOUNT OF TDS ON PROFESSIONAL FEES. FINALLY, INVOKING THE PROVISIONS OF S.40(A)(IA) OF THE ACT, THE AO WORKED OUT NET DISALLOWANCE OF 2.64 CR ORES ON ACCOUNT OF SUB CONTRACT CHARGES. HE FURTHER DISALLOWED RS.3.72 LACS AND 31, 500 ON ACCOUNT OF PROF ESSIONAL FEES PAID AND INTER E ST PAID. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFERRED AN APPEAL BEFORE THE F IRST APPELLATE AUTHORITY (FAA). BEFORE HIM, IT WAS ARGUED THAT THE ASSESSEE WAS FACING FINANCIAL HARDSHIP AND THAT THE FUNDS WERE NOT AVAILABLE, THAT THE BANK ACCOUNTS HAD BECOME NON - OPERATIVE, THAT DUE T O THE DIFFICULTIES IT WAS COMPELLED TO PASS ON THE CONTRACT WORK TO OTHER CONTRACTORS/SUB C ONTRACTORS ON COMMISSION BASIS, THAT ON PASSING OF THE CONTRACTS IT WAS RECEIVING A NOMINA L AMOUNT BY WAY OF COMMISSION, THAT ENTIRE CONTRACT WAS PASSED ON TO THE PER SON EXECUTING THE CONTRACTS, THAT IT WAS NOT REQUIRED TO CARRY OUT ANY WORK, THAT THE PROVISIONS OF S.194C WERE NOT APPLICABLE ,T HAT THE AO WAS INCORRECT IN INVOKING THE PROVISIONS OF S.40(A) (IA). R EGARDING THE DISALLOWANCE MADE ON ACCOUNT OF PROFESSIONAL FE ES AND INTEREST PAID THE ASSESSEE DID NOT MAKE ANY SUBMISSION BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASS ESSMENT ORDER, THE FAA HELD THAT THE FACTS REGARDING THE PAYMENT OF SUB CONTRACT CHARGES, INTER E ST AND PROF ESSIONAL FE E AS DEBITED TO ITS P&L ACCOUNT WAS NOT DENIED OR DISPUTED BY IT , THAT THE SUBMISSION MADE BY THE ASSESSEE ABOUT ITA/ 8404 /M/1 0 - ASPHALT INDIA 3 SUB - CONTRACT CHARGES WERE NOT ACCEPTABLE, THAT IT WAS A WARDED THE CONTRACT BY VARIOUS G OVT, AGENCIES BASED ON TENDERS FILED DURING THE RELEVANT A . Y, THAT IT HAD PARTICIPATED IN THE TENDER PROCESS AND SAME WERE AWARDED TO IT, THAT IT HAD ACTED AS A CONTRACTOR BY ALLOCATING A SUB - CONTRACT TO DIFFERENT AGENCIES OR PARTIES FOR SUCCESSFUL COMPLETION OF THE CONTRACTS, THAT IT WAS REQUIRED TO DEDUCT TDS AS PER PROVISIONS OF SECTION 194C(2) OF THE ACT, THAT THE IT H A D DEDUCTED THE TAX BUT SAME WAS PAID BEYOND THE DUE DATE PRESCRIBED BY THE ACT, THAT THE AO WAS FULLY JUSTIFIED IN MAKING DISALLOWANCE BY INVOKING THE PROV. OF S.40A((IA) R.W.S. 194C(2) OF THE ACT. SIMILARLY, THE ENTIRE DISALLOWANCE MADE ON ACCOUNT OF DISALLOWANCE OF PROF ESSIONAL FEE AND INTEREST W A S ALSO CONFIRMED BY THE FAA, AS THE FACTS WERE NOT DISPUTED BY THE ASSESSEE . 4 . DURING THE COURSE OF HEARING BEFORE US, THE AUTHORISED REPRESENTATIVE ( A R ) CONTENDED THAT PAYMENTS WERE MADE BEFORE DUE DATE OF FILING OF RETURN OF INCOME. THAT THE ASSESSEE WAS MERELY ENTITLED TO COMMISSION ON THE SAID CONTRACTS, THAT THE ASSESSEE WAS FACING SEVERE FINANCIAL DIFFICULTIES, THE ASSESSEE RELIED UPON THE DECISION OF VIRGIN CREATIONS (ITA 302 OF 2011 DT.23.11. 2011 OF HONBLE CAL. HC), NARESH KUMAR & ORS (362 ITR 256), UNITY S&V JOINT VENTURE (ITA/ 1456/MUM/2013 AY 09 - 10 DT.24/3/15), PIYUSH C. MEHTA (52 SOT 271). WITH REGARD TO TDS ON PROF ESSONAL FEE RS.4.00 LACS, TH E AR STATED THAT NOTHING WAS PAYABLE ON THE LAST DATE OF RELEVANT ACCOUNTING YEAR, THAT THE CASE WAS COVERED BY DECISION OF MERLYN SHIPPING AND TRANSPORT [ 136 ITD 23 (SB) ] . THE DEPARTMENTAL REPRESENTATIVE ( DR ) SUPPORTED THE ORDER OF THE FAA. 5 . WE HAVE HE ARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD.WE FIND THAT THE FAA HAD CONFIRMED T H E ORDER OF THE AO AS IT WAS FOUND THAT TDS WAS NOT PAID BY THE ASSESSEE ON DUE DATES, AS ENVISAGE D BY THE PROVISIONS OF THE ACT, THAT THE ASSESSEE CONTENDED T HAT PAYMENTS WERE MADE BEFORE TH E DUE DATE OF FILING OF RETURN. AS FAR AS TDS ABOUT INTEREST PAYMENT AND PROF ESSIONAL FEES ARE CONCERNED, WE FIND THAT THE ASSESSEE HAS NOT MADE ANY SUBMISSION BEFORE THE FAA, HOWEVER, BEFORE US IT WAS STATED THAT PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF RETURN OR THAT AMOUNTS HAD BEEN PAID BY THE ASSESSEE BEFORE THE END OF THE PREVIOUS Y EAR. WE ARE OF THE OPINION THAT, IN THE INT EREST OF JUSTICE, THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATION PURPOSES. HE IS DIRECTED TO VERIFY THE CLAIMS MADE BY THE ASSESSEE IN LIGHT OF THE CASES RELIED UPON BY THE ASSESSEE BEFORE US WITH REGARD TO THE SUB CONTRACT PAYMENT AND INTEREST PAYMENTS.WITH REGARD TO PAYMENT OF TDS ON PROFESSIONAL FEE H E WOULD FOLLOW T HE DECISION OF THE SPECIAL B ENCH DELIVERED IN THE CASE OF MERLYN SHIPPING AND TRANSPORT (SUPRA). THE EFFECTIVE G ROUND OF A PPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE MANNER AFORESAID AS A RESULT,APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATIS TICAL PURPOSES . . ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER ,2015. 4 TH , 2015 SD/ - SD/ - ( / PARTHASARATHY CHOUDHURY) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 04 . 09 . 2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE C ONCERNED CIT / ITA/ 8404 /M/1 0 - ASPHALT INDIA 4 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.