Gopal Singh Shekhawat, JAIPUR V. ITO, NAGAUR

ITA 85/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82910 (ITAT-JODHPUR)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: DINESH VIJAY
• Section: 40A(3); 194C

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 85/JODH/2014 (A.Y. 200 9 - 1 0 ) SHRI GOPAL SINGH SHEKHAWAT , S/O SHRI NARAYAN SINGH SHEKHAWAT, PROP. M/S. VISHNU GA S AGENCY, NEAR PUBLIC PARK, KUCHERY ROAD, MERTA CITY, NAGAUR. VS. ITO, WARD - 1 , NAGAUR. PAN NO. ACUP S 5590 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DINESH VIJAY . DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 15 / 0 7 /201 4 . DATE OF PRONOUNCEMENT : 28 /0 8 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11 /12 /2013 OF L D . CIT(A), J ODHPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: - 2 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) , JODHPUR HAS ERRED IN FACTS AND IN LAW SUSTAINING THE ADDITION OF RS. 5,16,000/ - U/S. 40(A)(IA) OF THE I.T. ACT MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - DEDUCTION OF TDS ON PAYMENTS TO VARIOUS PERSONS FOR DELIVERY AND SUPPLY. THE LD. CIT(A), JODHPUR HAS ALSO ERRED IN FACTS AND IN LAW SUSTAINING THE ASSESSING OFFICERS ACTION COVERIN G THE SAID PAYMENTS FOR DISALLOWANCE U/S. 40A(3) OF THE I.T. ACT. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) , JODHPUR HAS ERRED IN FACTS AND IN LAW SUSTAINING THE DISALLOWANCE OF RS. 26,000/ - OUT OF GODOWN REPAIRS EXPENSES MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - DEDUCTION OF TDS. THE LD. CIT(A), JODHPUR HAS ALSO ERRED IN FACTS AND IN LAW SUSTAINING THE ASSESSING OFFICERS ACTION COVERING THE SAID PAYMENTS FOR DISALLOWANCE U/S. 40A(3) OF THE I.T. ACT. 3. THE ASSES SEE CRAVES THE RIGHT TO ADD, AMEND AND ALTER THE GROUND ON OR BEFORE THE HEARING. 2 VIDE GROUND NO. 1 , THE GRIEVANCE OF THE ASSESSEE RELATES TO THE SUSTENANCE OF ADDITION OF RS. 5,16,000/ - MADE BY THE ASSESSING OFFICER U/S. 40 (A)(IA) OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . 3. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME ON 30/09/2009 DECLARING AN INCOME OF RS. 2,27,821/ - BESIDES AGRICULTURAL INCOME OF RS. 85,800/ - . THE ASSESSE E WAS ENGAGED IN THE BUSINESS OF SUPPLY OF LPG BEING AGENT OF INDIAN OIL CORPORATION . THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD MADE PAYMENT AMOUNTING 3 TO RS. 5,16,000/ - FOR DELIVERY AND SUPPLY OF GAS TO VARIOUS PERSONS , DETAILS OF WHICH IS GIVEN BY THE ASSESSING OFFICER AT PAGE NO.2 OF THE ASSESSMENT ORDER , FOR THE COST OF REPETITION, THE SAME IS NOT REPRODUCED HEREIN. THE ASSESSING OFFICER NOTICED THAT ON THOSE PAYMENTS, NO TDS U/S. 1 94C OF THE ACT WAS DEDUCTED AND THAT THE ASSESSEE HAD A LSO VIOLATED THE PROVISIONS OF SECTION 40 A (3) OF THE ACT AS CASH PAYMENTS TO THOSE PERSONS WERE EXCEEDING TO RS. 20,000/ - . ACCORDINGLY, THE ASSESSING OFFICER ISSUED NOTICE DATED 21/11/2011 TO THE ASSESSEE TO SHOW - CAUSE AS TO WHY THE AMOUNT OF RS. 5,16,000/ - MAY NOT BE DISALLOWED U/S. 40 (A)(IA) OF THE ACT . THE ASSESSEE SUBMITTED THAT THE SAID PAYMENT HAD BEEN MADE TO SOME JEEP DRIVERS AND HELPERS THROUGH AGENTS AND RELATIVES, WHO THEMSELVES WHERE THE HEAD OF THE GROUP. THE ASSESSING OFFICER, HOWEV ER, DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND OBSERVED THAT PAY M ENTS OF RS. 86,000/ - , RS. 43,000/ - , RS. 86,000/ - AND RS. 3,01,000/ - TO SHRI SHRINIWAS, SHRI MUNNALAL, SHRI KARIM BUX AND SHRI SHIVPAL SINGH RESPECTIVELY , WERE MADE BY THE ASSESSEE HIMSELF AND COVERED U/S. 194C OF THE ACT, THEREFORE, THE TDS WAS DEDUCTABLE. HE ALSO POINTED OUT THAT PAYMENTS MADE TO THOSE PERSONS WERE IN CASH EXCEEDING THE LI M IT SPECIFIED IN SECTION 40A(3) OF THE ACT. ACCORDINGLY, A SUM OF RS. 5,16, 000/ - WAS 4 DISALLOWED U/S. 40 (A)(IA) OF THE ACT, HOWEVER, NO FURTHER ADDITION U/S. 40A(3) OF THE ACT WAS MADE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND THE SUBMISSIONS AS INCORPORATED IN PARA 3.2 OF THE IMPUGNED ORDER WERE AS UNDER: - THE LD AO HAS DISALLOWED THE DELIVERY & SUPPLY EXPENSES OF RS. 5,16,000/ - ARBITRARILY AND JUST ON THE BASIS OF HIS OWN ASSUMPTION AND PRESUMPTION WITHOUT CONSIDERING THE MATERIAL ON RECORD. IT MAY BE SUBMITTED THAT THE ASSESSEE HAS PAID THE DELIVERY & SUPPLY EXPENSES TO DIFFERENT JEEP DRIVERS AND HELPERS THROUGH HIS TRUSTWORTHY PERSONS, WHO WERE THE SENIOR HELPER OR HEAD HELPER. THE ASSESSEE DID NOT EXECUTE ANY CONTRACT OR AGREEMENT WITH THE SAID PERSONS THEREFORE THE SA ID PAYMENT WAS NOT COVERED U/S 194C OF THE IT ACT AND THEREFORE THE TDS WAS NOT DEDUCTIBLE ON THE SAME. THE ASSESSEE HAS MADE THE PAYMENT TO DIFFERENT PERSONS BUT WHILE MAKING THE PAYMENT OUT OF THOSE PERSONS, HE APPOINTED HIS TRUSTWORTHY PERSON AS HIS AGE NT FOR THE CONVENIENCE AND MADE THE PAYMENT TO DIFFERENT PERSONS THROUGH THAT PERSON. THAT PERSON WAS ALSO A HELPER BUT LOOKING TO THE LONG ASSOCIATION WITH THE ASSESSEE THAT PERSON WAS A TRUSTWORTHY PERSON OF THE ASSESSEE, TO WHOM THE ASSESSEE CALLED HEAD - HELPER AND THEREFORE THE PAYMENT WAS MADE TO JEEP DRIVERS AND HELPERS THROUGH THAT PERSON. AS SUCH THOSE PERSONS HAVE ACTED AS AN AGENT OF THE ASSESSEE AND NOT AS CONTRACTOR. THE SAID PERSONS WHILE MAKING PAYMENTS TO JEEP DRIVERS AND HELPERS GOT SIGNATUR ES OF SUCH PAYEES ON THE PRINTED PAYMENT VOUCHERS OF THE ASSESSEES PROPRIETARY FIRM M/S VISHNU GAS AGENCY AND RETURNED BACK SUCH PAYMENT VOUCHERS TO THE ASSESSEE. AS SUCH IN THE BOOKS OF ACCOUNT THOUGH THE PAYMENT HAS BEEN SHOWN AS TO HAVE BEEN MADE TO TH E ALLEGED PERSONS BUT IN ACTUAL THE PAYMENT HAVE BEEN MADE TO DIFFERENT JEEP DRIVERS AND HELPERS AND THE ASSESSEE KEPT SUCH VOUCHERS IN HIS RECORD AS PROOF OF SUCH PAYMENT. THE ALLEGED PERSONS HAS NOT RAISED THEIR OWN BILL TO THE ASSESSEE WHICH ALSO ESTABL ISHES THAT THEY HAVE NOT WORKED AS CONTRACTOR TO THE ASSESSEE BUT AS AN AGENT OF THE ASSESSEE. THEREFORE THE PROVISIONS OF SEC 194C OF THE IT ACT ARE NOT APPLICABLE ON SUCH PAYMENTS. THEY HAVE BEEN PAID THE AMOUNT TO BE PAID TO THE JEEP DRIVERS AND THE HEL PERS. RS. 5000/ - HAS 5 BEEN PAID TO THOSE PERSONS TOWARDS THEIR SERVICES AS HEAD - HELPER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED SOME AFFIDAVITS FROM JEEP DRIVERS BEFORE THE LD. AO IN WHICH ALSO THE JEEP DRIVERS AFFIRMED THAT THEY H AVE BEEN HIRED ON MONTHLY RENT OF RS. 14,000/ - BY THE ASSESSEES FIRM ON ASKING BY THE HEAD - HELPERS AND THEY HAVE RECEIVED PAYMENTS FROM THE FIRM. THE EXPENSES OF DIESEL WAS BORN BY THE FIRM. THE COPIES OF AFFIDAVITS ALSO FILED . THE DETAIL OF PAYMENTS M ADE TO THOSE PERSONS AND THE PAYMENT MADE BY THEM TO DIFFERENT JEEP DRIVERS AND HELPERS ARE ALSO FURNISHED. WITHOUT PREJUDICE TO THE ABOVE, EVEN OTHERWISE THE PAYMENT MADE TO THE ALLEGED PERSONS CANNOT BE DISALLOWED U/S 40A(IA) OF THE IT ACT BECAUSE SEC . 40A(IA) IS APPLICABLE ONLY IN RESPECT OF TDS DEFAULTS IF AMOUNT IS PAYABLE. IF AMOUNT IS ACTUALLY PAID AND TAX IS NOT DEDUCTED UNDER THE ABOVE SECTIONS, SECTION 40(A)(IA) IS NOT APPLICABLE. SECTION 40(A)(IA) HAS TO BE SUBJECTED TO STRICT INTERPRETATION. GO ING BY THE RULE OF STRICT INTERPRETATION, THE DEFAULT WITH REFERENCE TO ACTUAL PAYMENT OF EXPENDITURE WOULD NOT ENTAIL DISALLOWANCE. THIS OBSERVATION HAS NOW BEEN UPHELD BY A FEW TRIBUNALS RULINGS IN MERILYN SHIPPING & TRANSPORTS V. CIT [2012] 136 ITD 23 (VISAKHAPATNAM)(SB), S.S. WARAD V CIT[2012] 19 ITR (TRIB.) 35 (BANG.) T.T. KURUVI LL A V. CIT[2012] 149 TTJ (COCH.) 533, EMDEE APPARELS V. CIT[2012] 54SOT 600 (BANG ), BARTRONICS INDIA LTD. V. CIT [2012] 52 SOT 188 (HYD.), TEJA CONSTRUCTIONS V. CIT [2010 ] 39 SOT 13 (HYD.). AS THE ASSESSEE HAS ALREADY MADE THE PAYMENT TO THOSE PERSONS AND NO ANY AMOUNT IS PAYABLE AS ON 31.03.2009, THE DISALLOWANCE U/S 40A(IA) OF THE ACT CANNOT BE MADE. IT MAY FURTHER BE SUBMITTED THAT THE LD. AO HAS ALSO ERRED IN DISALLOW ING THE ABOVE PAYMENTS U/S 40A(3) OF THE ACT CONSIDERING THE PAYMENT MADE IN EXCESS OF LIMITS SPECIFIED U/S 40A(3) I.E. RS. 20,000/ - .AS EXPLAINED EARLIER THAT THE ALLEGED PERSONS HAS MADE THE PAYMENTS TO DIFFERENT JEEP DRIVERS AND HELPERS ACTING AS AN AGENT OF THE ASSESSEE, SUCH PAYMENTS ARE CLEARLY COVERED UNDER CLAUSE (K) OF RULE 6DD OF THE IT RULES AS EXCEPTIONAL CASES AND CIRCUMSTANCES WHERE PAYMENT EXCEEDING RS. 20,000/ - IS ALLOWABLE AS PER LAW. IT MAY ALSO BE SUBMITTED THAT NO INDIVIDUAL PAYMENT HAS BEEN MADE IN VIOLA TION OF SEC 40A(3) OF THE IT A CT. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAS MADE THE PAYMENT OF DELIVERY & SUPPLY EXPENSES TO THOSE PERSONS A S AN AGENT OF THE ASSESSEE AND NOT AS CONTRACTOR AND THER EFORE THE PROVISIONS OF SEC 194C OF THE ACT ARE NOT APPLICABLE AND ACCORDINGLY TDS IS NOT REQUIRED TO BE DEDUCTED ON SUCH PAYMENTS. EVEN OTHERWISE THE SAID PAYMENTS CANNOT BE DISALLOWED U/S 40A(IA) AS THE SAME HAS ALREADY BEEN PAID AND NOT PAYABLE. THE CASH PAYMENTS OF THE SAID EXPENSES ARE CLEARLY COVERED UNDER 6 CLAUSE(K) OF R ULE 6DD OF THE IT RULES AND NO PAYMENTS TO A SINGLE PERSON IS MADE IN E XCE SS OF 20,000/ - , THEREFORE THE PAYMENT IS ALSO NOT DISALLOWABLE U/S 40A(3) OF THE IT ACT. THUS, IT WAS SUBMITTED UNDER THE ABOVE FACTS AND CIRCUMSTANCES THE DISALLOWANCE OF DELIVERY & SUPPLY EXPENSES OF RS. 5,16,000/ - IS UNJUSTIFIED, ILLEGAL, UNWARRANTED AND BE DELETED. RELIANCE WAS ALSO PLACED ON THE FOLLOWING CASE - LAWS: - ARISTOCON ENGINEERS CO - OPER ATIVE SOCIETY LTD. VS. DCIT 024 ITR (TRIB.) 0042 (KOLK) 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT THE FUNDAMENTAL CONDITIONS WHICH DESERVED TO BE SATISFIED FOR APPLICATION OF SECTION 194C R.W.S. 40(A)(IA) WAS THAT A CONTRACTUAL LIABILITY MUST BE EXISTING BETWEEN TWO PERSONS AT THE TIME OF PAYMENT OF MONEY AS A PRINCIPAL AND AN AGENT WHERE LIABILITY TO DEDUCT THE TDS RESTS UPON THE PRINCIPAL . ACCORDING TO HIM , IN THE PRESENT CASE THERE WAS A CONTRACTUAL LIABILITY BETWEEN THE ASSESSEE AS A PRINCIPAL AND HIS AGENT AT THE TIME OF PAYMENT OF MONEY . HE ALSO MENTIONED THAT THOUGH IN THE INSTANT CASE, THERE WAS NO EXISTENCE OF FORMAL CONTRACT, BUT THERE WAS AN ORAL CONTRACT BETWEEN THE ASSESSEE AND HIS SAID TRU STWORTHINESS PERSONS. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE THAT IT HAD NOT ENTERED INTO ANY CONTRACT WITH THE TRANSPORTERS AND THEREFORE, THE TDS WAS NOT DEDUCT ABLE AND OBSERV ED 7 THAT EACH LORRY RECEIPT WAS A SEPARATE CONTACT IN ITSELF AND THE CONTRACT COULD NOT BE IN WRITING . REFERENCE WAS MADE TO THE CBDT CIRCULAR NO. 715 & 443 . THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTION OF THE ASSESSEE THAT THE DECISION OF THE ITAT , SPECIAL BENCH, VISHAK H APATNAM IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT REPORTED IN 136 ITD 23 , WAS APPLICABLE TO THE ASSESSEES CASE BY OBSERVING THAT THE SAID DECISION HAD BEEN DISTINGUISHED BY THE CALCUTTA HIGH COURT AND GUJARAT HIGH COURT IN THE FOLLOWING CASES. 1. CIT VS. CRESCENT EXPORT SYNDICATE [85 CCH 056 KOL HC] 2. CIT VS. MD. JAKIR HOSSAIN MANDAL (CAL) ; AND CIT VS. SIKANDARKHAN N. TUNVAR [87 DTR (GUJ.) 137 ] 6 . THE LD. CIT(A) ALSO MENTIONED THAT THE HON'BLE ALLAHABAD HIGH COURT IN THE CAS E OF VECTOR SHIPPING SERVICES (P) LTD. WITHOUT DEALING WITH THE DECISION OF CALCUTTA & GUJARAT HIGH COURT HAD HELD THAT FOR MAKING THE DISALLOWANCE OF EXPENDITURE ON WHICH TAX HAD NOT BEEN DEDUCTED THE AMOUNT SHOULD HAVE BEEN PAYABLE AND NOT WHICH HAD ALREADY BEEN PAID BY THE END OF THE YEAR . THE LD. CIT(A) ACCORDINGLY, SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER AND MENTIONED THAT THE ASSESSEE ALTHOUGH STATED THAT HIS CASE FALLS UNDER CLAUSE (K) OF RULE 6DD BUT HE 8 UPHELD THE OBSERVATION OF THE ASSE SSING OFFICER THAT THERE WAS A VIOLATION OF SECTION 40A(3) OF THE ACT . NOW THE ASSESSEE IS IN APPEAL. 7 . LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND ALSO FURNISHED THE WRITTEN SUBMISSION WHICH IS PLACED ON RECORD AND READ AS UNDER: - 1. THE LD. AO HAS DISALLOWED THE DELIVERY & SUPPLY EXPENSES OF RS. 5,16,000/ - ARBITRARILY AND JUST ON THE BASIS OF HIS OWN ASSUMPTION AND PRESUMPTION WITHOUT CONSIDERING THE MATERIAL ON RECORD. 2. IT MAY BE SUBMITTED THAT THE ASSESSEE HAS PAID THE DELIVERY & SUPPLY EXPENSES TO DIFFERENT JEEP DRIVERS AND HELPERS THROUGH HIS TRUSTWORTHY PERSONS, WHO WERE THE SENIOR HELPERS OR HEAD HELPERS/WORKERS. THE RELATION BETWEEN THE ASSESSEE AND THOSE PERSONS WERE OF EMPLOYER - EMPLO YEE RELATION AND NOT OF THE AWARDER - CONTRACTOR. THE ASSESSEE HAS TO DISTRIBUTE THE LPG CYLINDERS IN THE DIFFERENT VILLAGES/TAHSILS OR THE DIFFERENT PARTS OF NAGAUR DISTRICT AND FOR THAT PURPOSE HE APPOINTED DIFFERENT JEEP DRIVERS AND HELPERS AND MADE 4 - 5 T EAMS OF SUCH WORKERS TO DISTRIBUTE THE CYLINDERS IN DIFFERENT AREAS. ALL PERSONS WERE APPOINTED BY THE ASSESSEE SEPARATELY IN THE CAPACITY OF HELPERS/WORKERS AND THE ASSESSEE DID NOT EXECUTE ANY TYPE OF ORAL OR WRITTEN CONTRACT OR AGREEMENT WITH ANY SINGLE PERSON TO EXECUTE THE SUPPLY WORK IN A COMPOSITE MANNER THEREFORE THE RELATIONSHIP BETWEEN THEM WAS OF EMPLOYER - EMPLOYEE AND NOT THE AWARDER - CONTRACTOR, AS SUCH THE SAID PAYMENT WAS NOT COVERED U/S 194C OF THE IT ACT AND THEREFORE THE TDS WAS NOT DEDUCTIB LE ON THE SAME. 3. THE ASSESSEE HAS MADE THE PAYMENT TO DIFFERENT PERSONS BUT AS THE DIFFERENT TEAMS OF THOSE PERSONS WERE LOCATED IN DIFFERENT PARTS OF NAGAUR DISTRICT, WHILE MAKING THE PAYMENT, HE HANDOVER THE CASH TO HIS HEAD HELPERS WHO WERE HIS TRUSTWORTHY PERSONS AMONG THOSE HELPERS/WORKERS TO DISTRIBUTE THE PAYMENT TO DIFFERENT JEEP DRIVERS AND HELPERS FOR THE SAKE OF CONVENIENCE. THAT PERSON WAS ALSO A HELPER/WORKER BUT LOOKING TO THE LONG ASSOCIATION WITH THE ASSESSEE 9 THAT PERSON WAS A TRUSTWORTHY PERSON OF THE ASSES SEE, TO WHOM THE ASSESSEE CALLED HEAD - HELPER AND THEREFORE THE PAYMENT WAS MADE TO JEEP DRIVERS AND HELPERS THROUGH THAT PERSON. 4. AS SUCH THOSE PERSONS HAVE ACTED AS A CASHIER OF THE ASSESSEE AND NOT AS CONTRACTOR. THIS IS A SIMILAR CASE WHERE AN ORGANISAT IONS OFFICE DELIVERS CASH TO HIS CASHIER/FACTORY MANAGER FOR INCURRING OF DIFFERENT EXPENDITURE AT ITS FACTORY. THE SAID CASHIER/FACTORY MANAGER INCURS DIFFERENT EXPENDITURE, MAKES PAYMENT TO DIFFERENT PERSONS OR EVEN HE CHARGES HIS OWN SALARY AND SUBMITS THE ACCOUNT TO THE OFFICE/OWNER OF THE ORGANIZATION. IN SUCH TYPE OF THE TRANSACTION, THAT CASHIER/FACTORY MANAGER CANNOT BE SAID THE CONTRACTOR. HE WILL REMAIN THE EMPLOYEE OF THE ORGANIZATION. SAME WAS THE CASE HERE. 5. THE SAID PERSONS WHILE MAKING PAYME NTS TO JEEP DRIVERS AND HELPERS GOT SIGNATURES OF SUCH PAYEES ON THE PRINTED PAYMENT VOUCHERS OF THE ASSESSEES PROPRIETARY FIRM M/S VISHNU GAS AGENCY AND RETURNED BACK SUCH PAYMENT VOUCHERS TO THE ASSESSEE. AS SUCH IN THE BOOKS OF ACCOUNT THOUGH THE PAYME NT HAS BEEN SHOWN AS TO HAVE BEEN MADE TO THE ALLEGED PERSONS BUT IN ACTUAL THE PAYMENT HAVE BEEN MADE TO DIFFERENT JEEP DRIVERS AND HELPERS AND THE ASSESSEE KEPT SUCH VOUCHERS IN HIS RECORD AS PROOF OF SUCH PAYMENT. 6. THE ALLEGED PERSONS DID NOT RECEIVE TH E WHOLE PAYMENT AS THEIR GROSS RECEIPT AND DID NOT RAISE THEIR OWN BILL TO THE ASSESSEE WHICH ALSO ESTABLISHES THAT THEY HAVE NOT WORKED AS CONTRACTOR TO THE ASSESSEE BUT THEY WORKED AS AN EMPLOYEE/CASHIER OF THE ASSESSEE. THEREFORE THE PROVISIONS OF SEC 1 94C OF THE IT ACT ARE NOT APPLICABLE ON SUCH PAYMENTS. THEY HAVE BEEN PAID THE AMOUNT BY THE ASSESSEE FOR PAYMENT TO BE MADE TO THE JEEP DRIVERS AND THE OTHER HELPERS. RS. 5000/ - WAS KEPT BY THOSE PERSONS TOWARDS THEIR SERVICES AS HEAD - HELPER/WORKER. THEY WERE NOT PAID FOR SERVICES OF MAKING PAYMENTS TO JEEP DRIVERS OR OTHER HELPER BUT THEY WERE PAID FOR THEIR WORK OF DELIVERY AND SUPPLY OF LPG. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED SOME AFFIDAVITS FROM JEEP DRIVERS BEFORE THE LD. AO IN WHICH ALSO THE JEEP DRIVERS AFFIRMED THAT THEY HAVE BEEN HIRED ON MONTHLY RENT OF RS. 14,000/ - BY THE ASSESSEES FIRM ON ASKING BY THE HEAD - HELPERS AND THEY HAVE RECEIVED PAYMENTS FROM THE FIRM. THE EXPENSES OF DIESEL WAS BORN BY THE FIRM. THE COPIES OF AFFIDAVITS ARE AT PB NO.21 - 25. 10 7. THE DETAIL OF PAYMENTS MADE TO THOSE PERSONS AND THE PAYMENT MADE BY THEM TO DIFFERENT JEEP DRIVERS AND HELPERS IS AT PB NO.26 - 27. THE COPIES OF VOUCHERS OF SUCH PAYMENTS ARE AT PB NO.28 - 57. YOUR HONOUR MAY OBSERVE FROM THE S TATEMENT AT PB NO. 26 AT S.NO. 1 THAT MR. SHRINIVAS THE HEAD HELPER WAS PAID RS. 43,000/ - FOR DISTRIBUTING THE PAYMENT TO JEEP DRIVERS AND OTHER HELPERS. THE ACCOUNT OF RS. 43,000/ - WAS SUBMITTED BY MR. SHRINI VAS TO THE ASSESSEE WITH PAYMENT VOUCHERS OF FIRMS. HE SUBMITTED HIS OWN VOUCHER IN SUPPORT OF RECEIPT OF DELIVERY AND SUPPLY CHARGES OF RS. 5000/ - . FROM THE VOUCHERS ITSELF YOUR HONOUR MAY OBSERVE THAT FOR PAYMENT TO JEEP DRIVERS AND OTHER HELPERS THE DET AIL MENTIONED ON THE VOUCHERS CLEARLY SHOWS PAYMENT THROUGH SHRINIVAS. ON SUCH VOUCHERS MR. SHRINIVAS HAS SIGNED AS CASHIER/MANAGER. PLEASE REFER THE VOUCHERS AT PB NO.28 - 29. ON PAYMENT VOUCHER OF MR. SHRINIVAS THE FACT IS CLEARLY MENTIONED THAT HE IS HEAD HELPER. PLEASE REFER THE COPY OF VOUCHER AT PB NO.30. SIMILARLY THE OTHER HEAD - HELPERS HAVE ALSO MADE THE PAYMENTS ON BEHALF OF THE ASSESSEE ACTING AS A CASHIER/MANAGER OF THE ASSESSSEE. 8. THAT IN ARISTOCON ENGINEERS CO - OPERATIVE SOCIETY LTD. V. DEPUTY COMMISSIONER OF INCOME - TAX [2013]024 ITR(TRIB) 0042 ITAT(KOLK) HAS ALSO BEEN HELD THAT THE SARDAR OF LABOURER (HEAD - LABOURER) CANNOT BE SAID TO BE A CONTRACTOR AND THEREFORE THE PROVISIONS OF SEC 194C ARE NOT APPLICABLE IN THAT CASE. THE FACTS OF OUR CA SE ARE ALSO MORE OR LESS IDENTICAL WITH THE SAID CASE. 9. THE LD. CIT(A) HAS ERRED IN CONCLUDING THAT THE AGENTS OR SO CALLED TRUSTWORTHY PERSONS TO WHOM PAYMENT IN CASH HAS BEEN MADE ARE NOT THE SARDAR OR LABOURER - HEAD, THAT IS TO SAY, THAT THEY ARE NOT THE ONES FROM JEEP OR DELIVERY LORRY DRIVERS OR LABOURERS. WHEREAS IN ACTUAL THE SAID PERSONS WERE AMONG THE HELPERS AND ON THEIR PAYMENT VOUCHERS THEY HAVE BEEN CLEARLY SHOWN AS HELPER - HEAD. THE SAID HELPER - HEADS WERE NOT PAID RS. 5000/ - SEPARATELY FOR ARRANGING DELIVERY VEHICLES FOR THE APPELLANT AS CONCLUDED BY THE LD. CIT(A) BUT THEY HAVE BEEN PAID FOR THEIR DELIVERY AND SUPPLY SERVICES AS HELPER/WORKER. 10. AS SUCH ON THE FACTS OF THE CASE IT IS CLEAR THAT ALL THOSE PERSONS THROUGH WHOM THE ASSESSEE MADE THE PAYMENT OF DELIVERY AND SUPPLY CHARGES WERE HELPERS/WO RKERS/EMPLOYEES OF THE ASSESSEE AND NOT ANY CONTRACTORS. THE ASSESSEE MADE THE PAYMENT THROUGH THEM 11 TO JEEP DRIVERS AND OTHER HELPERS JUST FOR THE SAKE OF CONVENIENCE. THEY ACTED AS CASHIER/MANAGER OF THE ASSESSEE AND SUBMITTED THE ACCOUNT TO THE ASSESSEE AFTER MAKING PAYMENTS TO JEEP DRIVERS, OTHER HELPERS AND THEMSELVES. AS SUCH THEY DID NOT ACTED AS CONTRACTORS AND PAYMENT MADE TO THEM WAS NOT COVERED U/S 194C OF THE ACT AND THEREFORE THE TDS WAS NOT REQUIRED TO BE DEDUCTED. ACCORDINGLY THE DISALLOWANCE U/S 40A(IA) OF THE ACT CANNOT BE MADE. 11. IT MAY FURTHER BE SUBMITTED THAT THE LD. AO HAS ALSO ERRED IN DISALLOWING THE ABOVE PAYMENTS U/S 40A(3) OF THE ACT CONSIDERING THE PAYMENT MADE IN EXCESS OF LIMITS SPECIFIED U/S 40A(3) I.E. RS. 20,000/ - . AS EXPLAINED EARLIER THAT THE ALLEGED PERSONS HAS MADE THE PAYMENTS TO DIFFERENT JEEP DRIVERS AND HELPERS ACTING AS CASHIER/MANAGER OR AN AGENT OF THE ASSESSEE, SUCH PAYMENTS ARE CLEARLY COVERED UNDER CLAUSE (K) OF RULE 6DD OF THE IT RULES AS EX CEPTIONAL CASES AND CIRCUMSTANCES WHERE PAYMENT EXCEEDING RS. 20,000/ - IS ALLOWABLE AS PER LAW. 12. IT MAY ALSO BE SUBMITTED THAT NO INDIVIDUAL PAYMENT HAS BEEN MADE TO A SINGLE PERSON IN VIOLATION OF SEC 40A(3) OF THE IT ACT. PLEASE REFER THE VOUCHERS AT PB NO.28 - 57. AS SUCH THE PAYMENT CAN ALSO NOT BE DISALLOWED U/S 40A(3) OF THE ACT. THUS UNDER THE ABOVE FACTS AND CIRCUMSTANCES THE DISALLOWANCE OF DELIVERY & SUPPLY EXPENSES OF RS. 5,16,000/ - IS UNJUSTIFIED, ILLEGAL, UNWARRANTED AND BE DELETED. 8 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW . 9 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE , IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER DISALLOWED THE IMPUGNED AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE 12 ACT AND NO DISALLOWANCE HAD BEEN MADE U/S. 40A(3) OF THE ACT, THEREFORE, WE ARE CONCERNED ONLY TO THE DISALLOWANCE MAD E BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN THE INSTANT CASE, IT IS NOTED THAT THE LD. CIT(A) HIMSELF ADMITTED IN THE IMPUGNED ORDER THAT THERE WAS NO FORMAL CONTRACT BETWEEN THE ASSESSEE AND HIS AGENTS/RELATI VES, BUT THERE WAS AN ORAL CONTRACT . HOWEVER, IT IS NOT CLEAR HOW THE LD. CIT(A) CAME TO THE CONCLUSION THAT THERE WAS AN ORAL CONTRACT WHEN NOTHING IS AVAILABLE ON THE RECORD TO SUBSTANTIATE THE SAME, NEITHER THE ASSESSING OFFICER STATED THAT THERE WAS ORAL CONTRACT BETWEEN THE ASSESSEE AND HIS TRUSTWORTHY PERSONS. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE MADE THE PAYMENTS ON ACCOUNT OF HIRING OF THE VEHICLES FOR TRANSPORTATION AND NOTHING WAS PAYABLE A T THE END OF THE YEAR . 10 . ON A SI MILAR ISSUE , THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICE (P) LTD. REPORTED AT (2013) 357 ITR 642 HELD THAT FOR DISALLOWING EXPENSES FROM BUSINESS AND PROFESSION ON THE GROUND THAT TDS HAD NOT BEEN DEDUCTED THE AMOUNT SHOULD BE PAYABLE AND NOT WHICH HAD BEEN PAID BY THE END OF THE YEAR . AGAIN S T THE SAID JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT , THE DEPARTMENT FILED AN 13 SLP BEFORE THE HON'BLE SUPREME COURT WHICH HAD BEEN DISMISSED VIDE ORDER DATED 02/07/2014 IN C.C.NO. 806/2014 . IN THE PRESENT CASE , IT IS AN ADMITTED FACT THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE AGENTS/RELATIVES TO WHOM PAYMENT FOR HIRING THE VEHICLES HAD BEEN MADE AND NOTHING WAS PAYABLE AT THE END OF THE YEAR . THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. ACCORDINGLY, THE SAME IS DELETED. 11 . THE NEXT ISSUE VIDE GROUND NO . 2 RELATES TO THE SUSTENANCE OF DISALLOWANCE OF RS. 26,000/ - OUT OF THE GODOWN REPAIR EXPENSES. 12. FACTS RELATING TO THIS ISSUE, IN BRIEF, ARE THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE MADE A CASH PAYMENT OF RS. 26,000/ - TO ONE SHRI GAFAR BHAI TOWARDS GODOWN REPAIR CHARGES ON 28/12/2008 . ACCORDING TO HIM, THE SAID PAYMENT WAS COVERED U/S. 194C OF THE ACT AND THEREFORE, TDS WAS DEDUCTABLE. HE ALSO POINTED OUT THAT THE PAYMENT WAS MADE IN CASH EXCEEDING LIMIT SPECIFIED IN SECTION 40A(3) OF THE ACT . ACCORDINGLY, HE DISALLOWED RS. 26,000/ - . 13 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: - 14 1 . THE LD. AO HAS DISALLOWED THE GODOWN REPAIRS CHARGES OF RS. 26,000/ - ARBITRARILY AND JUST ON THE BASIS OF HIS OWN ASSUMPTION AND PRESUMPTION WITHOUT CONSIDERING THE MATERIAL ON RECORD. 2. IT MAY BE SUBMITTED THAT THE PAYMENT MADE TO THE SAID PERSON CANNOT BE DISALLOWED U/S 40A(IA) OF THE IT ACT BECAUSE SEC. 40A(IA) IS APPLICABLE ONLY IN RESPECT OF TDS DEFAULTS IF AMOUNT IS PAYABLE. IF AMOUNT IS ACTUALLY PAID AND TAX IS NOT DEDUCTED UNDER THE ABOVE SECTIONS, SECTION 40(A)(IA) IS NOT APPLICABLE. SECTION 40(A)(IA) HAS TO BE SUBJECTED TO STRICT INTERPRETATION. GOING BY THE RULE OF STRICT INTERPRETATION, THE DEFAULT WITH REFERENCE TO ACTUAL PAYMENT OF EXPENDITURE WOULD NOT ENTAIL DISALLOWANCE. THIS OBSERVATION HAS NOW BEEN UPHELD BY A FEW TRIBUNALS RULINGS IN MERILYN SHIPPING & TRANSPORTS V. C I T [2012] 136 ITD 23 (VISAKHAPATNAM)(SB), S.S. WARAD V. CIT[2012] 19 ITR (TRIB.) 35 (BANG.), KURUVILLA V. CIT[2012] 149 TTJ (COCH.) 533, EMDEE APPARELS V. [2012] 54SOT 600 (BANG.), BARTRONICS INDIA LTD. V. CIT [2012] 52 SOT (HYD.), TEJA CONSTRUCTIONS V. C IT [2010] 39 SOT 13 (HYD.). AS THE A SSE SSE E HAS ALREADY MADE THE PAYMENT TO THAT PERSON AND NO ANY AMOUNT IS PAYABLE AS ON 31.03.2009, THE DISALLOWANCE U/S 40A(IA) OF THE ACT CANNOT BE MADE. 3. IT MAY FURTHER BE SUBMITTED THAT THE LD. AO HAS ALSO ERRED I N DISALLOWING THE ABOVE PAYMENTS U/S 40A(3) OF THE ACT CONSIDERING THE PAYMENT MADE IN EXCESS OF LIMITS SPECIFIED U/S 40A(3) I.E. RS. 20,000/ - .IT MAY BE SUBMITTED THAT THE SAID PAYMENT HAS BEEN MADE ON 28.12.2008 WHICH IS SUNDAY AND AS SUCH BANK HOLIDAY AN D THEREFORE THE SAME IS CLEARLY COVERED UNDER CLAUSE (J) OF RULE 6DD OF THE IT RULES AS EXCEPTIONAL CASES AND CIRCUMSTANCES WHERE PAYMENT EXCEEDING RS. 20,000/ - IS ALLOWABLE AS PER LAW. THE CLAUSE (J) OF RULE 6DD SPEAKS THAT WHERE THE PAYMENT WAS REQUIRE D TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE. THE ASSESSEE HAD TO MAKE THE PAYMENT AS THE SAID PERSON WAS REQUIRED URGENTLY THE MONEY TO PURCHASE THE BUILDING MATERIAL LIKE CEMENT ETC. FOR THE REPAIRING WORK. IN VIEW OF THE ABOVE IT IS CLEAR THAT THE SAID PAYMENT OF GODOWN REPAIRS EXPENSES CANNOT BE DISALLOWED U/S 40A(IA) AS THE SAME HAS ALREADY BEEN PAID AND NOT PAYABLE. THE CASH PAYMENTS OF THE SAID EXPENSE IS ALSO CLEARLY COVERED UNDER CLAUSE(J) OF RULE 6DD OF THE IT RULES, THEREFORE THE PAYMENT IS ALSO NOT DISALLOWABLE U/S 40A(3) OF THE IT ACT. THUS UNDER THE ABOVE FACTS AND CIRCUMSTANCES THE DISALLOWANCE OF GODOWN REPAIRS EXPENSES OF RS. 26,000/ - IS UNJUSTIFIED, ILLEGAL, UNWARRANTED AND BE DELETED. 15 14 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING THAT SECTION 40(A)(IA) OF THE ACT WAS APPLICABLE IN RESPECT OF ALL THE EXPENSES PAID, HOWEVER, LD. CIT(A) HELD THAT THE SAID PAYMENT WAS NOT HIT BY SECTION 40A(3) OF THE ACT AS THE SAME WAS COVERED UNDER RULE 6DD(J) BECAUSE THE TRANSACTION TOOK PLACE ON 28/12/2008 WHICH WAS SUNDAY , SO T HIS CASE FALLS UNDER THE EXCEPTION GIVEN IN THE RULE 6DD (J) . 15 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES ON THIS ISSUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOTICED THAT THE LD. CIT(A) CATEGORICALLY STATED THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE NOT APPLICABLE TO THE IMPUGNED AMOUNT , THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT WERE APPLICABLE BECAUSE PAYMENT WAS MADE ON SUNDAY , THE BANKS WERE CLOSED ON ACCOUNT OF HOLIDAY . IN THE PRESENT CASE, SINCE THE AMOUNT WAS NOT PAYABLE AS ON 31/03/2009, THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WERE NOT APPLICATION AS PER THE RATIO LAID DOWN BY THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING SERVICES (P) LTD. (SUPRA) . WE THE REFORE, DELETE THIS ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) . 16 16 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ( ORDER PRONOUNCED IN THE COURT ON 28 TH AUGUST , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH AUGUST , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .