ITO, Ward-3, Warangal V. Smt. M. Bhagyalaxmi, Warangal

ITA 857/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66316 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PHANI KISHORE
• Assessee Lawyers: MANIKYA PRASAD
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.857/HYD/2011 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICAER, WARD-3, WARANGAL. .... APPELLANT VS. SMT. M. BHAGYALAXMI, WARANGAL. RESPONDENT PAN:AJCPB 8676 N APPELLANT BY : SHRI PHANI KISHORE RESPONDENT BY : SRI MANIKYA PRASAD DATE OF HEARING : 01-10-2012 DATE OF PRONOUNCEMENT : 05 -10-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 28-2-2011 PASSED IN APPEAL NO.189/CIT(A)/TR/VJA/10-11 AND IT PERTAINS TO THE A SSESSMENT YEAR 2006-07. 2. THE SOLE ISSUE ARISING IN THE PRESENT APPEAL OF THE D EPARTMENT IS WHETHER THE CIT (A) WAS JUSTIFIED IN HOLDING THAT TH E ASSESSEE WAS NOT LIABLE TO DEDUCT TAX U/S 194C OF THE ACT. ITA NO.857 OF2011 SMT. M. BHAGYALAXMI, WARANGAL. 2 3. BRIEFLY, THE FACTS ARE THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRANSPORTING LATERITE FOR INDIA CEMENTS LI MITED FROM QUERIES SITUATED AT MALLAPALLY, WARANGAL DISTRICT. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED A RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.1,75,630. THE ASSESSMENT WAS INITIALLY COMPLETED U/S 143(3) OF THE ACT. HOWEVER, THE CIT EXERCISING HIS JURISDICTION U/S 263 OF THE ACT SET ASIDE THE ASSESSMENT FOR DOING IT AFRESH . IN CONSEQUENCE TO THE DIRECTION OF THE CIT, ASSESSMENT PROCEEDI NGS WERE AGAIN INITIATED. IN THE COURSE OF THE ASSESSMENT PROCEEDI NGS, THE AO AS HAS BEEN OBSERVED BY HIM IN THE ASSESSMENT ORDER ASKED T HE ASSESSEE TO PRODUCE EVIDENCE REGARDING DEDUCTION OF TAX A T SOURCE ON THE HIRE CHARGES OF RS.96,73,187/- PAID DURING THE YEA R. AS ALLEGED BY THE AO SINCE THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE WIT H REGARD TO THE FACT THAT SHE IS NOT LIABLE TO DEDUCT TAX AT SOUR CE, THE ENTIRE AMOUNT OF RS.96,73,187/- BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE BEING AGGRIEVED OF T HE ASSESSMENT ORDER, FILED AN APPEAL BEFORE THE CIT (A). 4. IN COURSE OF HEARING BEFORE THE CIT (A), THE ASSESSE E CONTENDED THAT SINCE SHE DID NOT OWN ANY LORRY OF HER OWN, SHE U SED TO HIRE LORRIES FROM LOCAL MARKET ON DAY TO DAY BASIS AND ALL THE LOR RY OWNERS WERE INDIVIDUALS AND PAYMENTS MADE TO THEM AT A TIME WAS LE SS THAN RS.20,000/-. THAT APART FROM AGGREGATE PAYMENT MADE TO ANY INDIVIDUAL LORRY OWNERS WAS LESS THAN RS.50,000/- PER YE AR. IT WAS FURTHER CONTENTION OF THE ASSESSEE BEFORE THE FIRST APPEL LATE AUTHORITY THAT AMENDMENT TO SECTION 194C WAS BROUGHT BY FINANCE A CT, 2007 TO INCLUDE PAYMENTS MADE BY INDIVIDUALS AND HUFS ONLY W.E.F . 1-6-2007 WHICH IS RELEVANT TO THE ASSESSMENT YEAR 2008-09. THEREF ORE, THE ITA NO.857 OF2011 SMT. M. BHAGYALAXMI, WARANGAL. 3 ASSESSEE CONTENDED THAT THE PROVISIONS OF SECTION 194C BEIN G NOT APPLICABLE TO THE ASSESSEE FOR ASSESSMENT YEAR 2006-07,THE A SSESSEE IS NOT REQUIRED TO DEDUCT ANY TAX AT SOURCE ON PAYMENT OF HIRE CHARGES AND THEREFORE NO DISALLOWANCE COULD HAVE BEEN MADE U/S 40(A)(IA) OF THE ACT. THE CIT (A) AFTER CONSIDERING THE CONTENTIONS RAISED BY THE ASSESSEE UPHELD THE SAME BY HOLDING THAT THE AMENDMENT T O SECTION 194C BRINGING WITHIN ITS AMBIT PAYMENTS MADE BY INDIV IDUALS AND HUF WAS MADE EFFECTIVE ONLY FROM 1-6-2007 AND THEREFORE W ILL NOT BE APPLICABLE TO THE ASSESSMENT YEAR 2006-07. THE CIT (A) ACCEPTING THE CONTENTION OF THE ASSESSEE HELD THAT NO LIABILITY U/S 194 C CAN BE FASTENED ON TO THE ASSESSEE AS THE PAYMENTS WERE MADE TO I NDIVIDUALS. ON THE AFORESAID FINDING THE CIT (A) DELETED THE DISA LLOWANCE MADE U/S 40(A)(IA). AGAINST THE ORDER OF THE CIT (A), THE DE PARTMENT IS IN APPEAL BEFORE US. 5. THE LEARNED DR SUBMITTED BEFORE US THAT THE ASSESSEE H AVING NOT PRODUCED ANY EVIDENCE WITH REGARD TO THE DETAILS OF PA YMENTS MADE TOWARDS HIRE CHARGES AND NON REQUIREMENT OF DEDUCTION O F TAX AT SOURCE, THE AO WAS JUSTIFIED IN DISALLOWING THE EXPENDIT URE CLAIMED U/S 40(A)(IA) SINCE THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT. 6. THE LEARNED AR, ON THE CONTRARY, SUBMITTED THAT T HE ASSESSEE IS AN INDIVIDUAL AND THE PAYMENTS WERE ALSO MADE TO INDI VIDUAL LORRY OWNERS. THE LEARNED AR SUBMITTED THAT EARLIER THE PA YMENT MADE BY THE INDIVIDUALS WERE NOT WITHIN THE PURVIEW OF SECTION 194C OF THE ACT. INDIVIDUALS AND HUFS WERE BROUGHT WITHIN THE AMBIT OF SECTION194C BY VIRTUE OF AMENDMENT TO THE FINANCE ACT 2007 W.E.F. 1 -6-2007. THEREFORE, THE AMENDMENT TO THE PROVISION WILL NOT B E APPLICABLE TO THE ITA NO.857 OF2011 SMT. M. BHAGYALAXMI, WARANGAL. 4 ASSESSMENT YEAR 2006-07. THE LEARNED AR CONTENDED THAT THERE BEING NO LIABILITY U/S 194C OF THE ACT ON THE ASSESSEE TO DEDU CT TAX, THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AND THEREFORE NO D ISALLOWANCE COULD BE MADE U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE U/S 194C. 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. THE SOLE ISSUE BEFORE US IS AS TO WHETHER THE ASSE SSEE BEING AN INDIVIDUAL WAS AT ALL REQUIRED TO DEDUCT TAX U/S 194 C OF THE ACT. THUS, FOR ARRIVING AT PROPER CONCLUSION THE PROVISION AS CONTAI NED UNDER SECTION 194C PREVAILING DURING THE RELEVANT ASSESSMENT YE AR UNDER DISPUTE HAS TO BE LOOKED INTO. AFTER GOING THROUGH T HE PROVISION AS IT STOOD AT THE RELEVANT PERIOD, WE FIND THAT PAYMENTS M ADE BY INDIVIDUALS AND HUFS TO A CONTRACTOR WERE NOT WITHIN TH E PURVIEW OF SECTION 194C(1) OF THE ACT. FINANCE ACT, 2007 AMENDED T HE PROVISIONS OF SECTION 194C BY SUBSTITUTING THE EARLIER SUB-SECTION (1 ) WITH EFFECT FROM 1-6-2007. UNDER THE NEW PROVISION BROUGHT TO T HE STATUTE UNDER SUB-SECTION (1) OF SECTION 194C, PAYMENT MADE BY INDIVID UALS AND HUF WERE ALSO BROUGHT WITHIN THE AMBIT OF THE PROVISION U /S 194 C (1) (K) OF THE ACT. THE AFORESAID PROVISIONS WERE BROUGHT TO THE STATUTE W.E.F. 1- 6-2007. THEREFORE, THE AMENDED PROVISION OF SECTION 1 94C(1) REQUIRING THE INDIVIDUALS AND HUFS TO DEDUCT TAX AT SOUR CE ON PAYMENT MADE TO CONTRACTORS WILL ONLY BE APPLICABLE W.E.F. 1-6 -2007 THAT MEANS FROM ASSESSMENT YEAR 2008-09 AND CANNOT BE APPLIED FOR T HE ASSESSMENT YEAR 2006-07. IN THE AFORESAID VIEW OF THE M ATTER, THE CIT (A) IS CORRECT IN HOLDING THAT THE ASSESSEE BEING NOT LIA BLE TO DEDUCT TAX AT SOURCE U/S 194C, NO DISALLOWANCE U/S 40(A)(IA) COULD HA VE BEEN MADE. ACCORDINGLY, WE UPHOLD THE DECISION OF THE CIT (A ) AND DISMISS THE GROUND RAISED BY THE DEPARTMENT. ITA NO.857 OF2011 SMT. M. BHAGYALAXMI, WARANGAL. 5 8. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 05 -10-2012. SD/- SD/- (SANJAY ARORA) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 5 TH OCTOBER, 2012. COPY TO:- 1) SRI B. RAGHU KIRAN, INCOME-TAX OFFICER, WARD-3, WARANGAL.. 2)SMT. M. BHAGYALAXMI, 1-7-15560, BALASAMUDRAM, HANMAKONDA, WARANGAL. 3) THE CIT (A), VIJAYAWADA. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* ITA NO.857 OF2011 SMT. M. BHAGYALAXMI, WARANGAL. 6