THE ITO, WARD - 2(2), Vijayawada V. M/s Kolli Brothers, Vijayawada

ITA 86/VIZ/2013

• Counselvise Citation: 8625314 RSA 2013
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.86/VIZ/2013 ASSESSMENT YEAR :2009 - 2010 ITO, WARD 2(2), CENTRAL REVENUE BUILDING, M,G.ROAD, VIJAYAWADA. VS KOLLI BROTHERS, D.NO.74 - 22 - 8, ASHOK NAGAR, PATAMATA, VIJAYAWADA PAN/GIR NO. : AAEFK 0495 P ( APPELLANT ) .. ( RESPONDENT ) C.O.NO.55/VIZ/2013 (ARISING OUT OF I.T.A. NO.86/VIZ/2013 ASSESSMENT YEAR :2009 - 2010 KOLLI BROTHERS, D.NO.74 - 22 - 8, ASHOK NAGAR, PATAMATA, VIJAYAWADA VS ITO, WARD 2(2), CENTRAL REVENUE BUILDING, M,G.ROAD, VIJAYAWADA. PAN/GIR NO. : AAEFK 0495 P ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI K.V.N.CHARYA CROSS OBJECTOR BY : SHRI C.SUBRAHMANYAM DATE OF HEARING : 0 9/12/2013 DATE OF PRONOUNCEMENT : 11 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2009 - 2010 AGAINST ORDER DATED 11.12.2012 OF LD CIT(A) - VIJAYAWADA AND THE ASSESSEE HAS ALSO FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF THE CIT(A). 2 2. GROUNDS TAKEN BY THE DEPARTMENT IN (A) AND (F) ARE GENERAL IN NATURE, HENCE, REQUIRE NO ADJUDICATION. 3. IN GROUND NO S .(B) TO (D ) , DEPARTMENT HAS DISPUTED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS.4,75,51,774/ - ON THE GROUND THAT ASSESSEE HAS FAILED TO COMPLY WITH THE SECOND PROVISO TO SUB - SECTION (3) OF SECTION 194C OF THE ACT. 4. BRIEFLY STATED THE FACTS RELATING TO TH IS ISSUE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED I N THE BUSINESS OF TRANSPORT COMMISSION. IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.7,86,047/ - . DURING THE SCRUTINY ASSESSMENT PROCEE DINGS, THE AO ON EXAMINATION OF PROFIT AND LOSS ACCOUNT, NOTED THAT T HE ASSESSEE DEBITED AN AMOUNT OF RS.5,05,48,611/ - BEING FREIGHT CHARGES PAID. ON BEING QUERIED BY THE AO, THE ASSESSEE EXPLAINED THAT IT HAS MADE FREIGHT PAYMENTS TO THE PARTIES WHO OWNE D LESS THAN 2 VEHICLES AND , THEREFORE , THE TDS WAS NOT MADE AS THE PARTIES HAVE SUBMITTED DECLARATIONS IN FORM NO. 15 - I AND THE FREIGHT CHARGES PAID TO SUCH PARTIES AMOUNTED TO RS. 4,75,51,774/ - . IT WAS SUBMITTED BY THE ASSESSEE THAT HE HAD FILED THE RELEVANT FORM NO.15 - BEFORE THE COMMISSIONER OF INCOME TAX, VIJAYAWADA ON 13.7.2009 MENTIONING THE NAMES AND ADDRESSES OF THE PARTIES ALONG WITH THE LORRY NUMBERS FROM WHOM THE DECLARATIONS IN FORM NO.15 - I WERE OBTAINED. THE ASSESSEE ENCLOSED A COPY OF THE ACKNOWLEDGEMENT IN TOKEN OF HAVING SUBMITTED THE FORM S BEFORE THE COMMISSIONER OF INCOME TAX, VIJAYAWADA ALONG WITH COPIES OF DECLARATIONS SUBMITTED BY THE ABO VE LORRY OWNERS IN FORM NO. 15 - I. THE AO ON EXAMINING THE DETAILS SUBMITTED BY THE ASSESSEE NOT ED THAT ON GOING THROUGH 'ACTION POINTS' IN FORM NO. 15 - J , IT IS NOTICED THAT THE ASSESSEE IS UNDE R OBLIGATION TO SUBMIT THE FORM N O. 15 - J ON OR BEFORE 30.6 .2009 BEFORE THE COMMISSIONER OF INCOME TAX, VIJAYAWADA. HOWEVER, IT WAS SEEN THAT ASSESSEE HAD S UBMITTED THE SAID FORM NO. 15 - J ON 13.7.2009 AS AGAINST DUE DATE FOR THE RELEVANT FINANCIAL YEAR BEING 30.6.2009. THE AO SPECIFICALLY REFERRING TO SUB - RULE (4) OF RULE 29D OPINED THAT THE SUBMISSION OF FORM 15 - J BEFORE THE CIT ON DUE DATE IS A MANDATOR Y PROVISION. AGAIN REFERRING TO SECTION 194C(3)(I) OF THE ACT, THE AO OPINED THAT THE ASSESSEE IS REQUIRED TO FULFILL ALL THE CONDITIONS CUMULATIVELY AS ENUMERATED IN THE PROVISO UNDER THE SAID SUB - SECTION. HE THUS CONCLUDED 3 THAT THE ASSESSEE SHOULD NOT ON LY OBTAIN FORM NO.15 - I FROM THE SUB - CONTRACTORS BUT SHOULD ALSO SUBMIT FORM NO.15 - J TO THE COMMISSIONER OF INCOME TAX ACT WITHIN THE SPECIFIED TIME AND IF BOTH THE CONDITIONS ARE SATISFI ED THEN ONLY THE ASSESSEE IS TO BE TREATED AS THE ASSESSEE IN DEFAU LT. THOUGH THE ASSESSEE TRIED TO EXPLAIN THAT ONCE THE TRANSPORTER FURNISHED DECLARATION IN FORM NO.15 - I, THEN THERE IS NO REQUIREMENT OF DEDUCTION OF TAX U/S.40(A)(IA) OF THE ACT AND THE DELAY IN FILING THE FORM NO.15 - J BEFORE THE CIT WOULD NOT ENTAIL TH E DISALLOWANCE U/S. 40(A)(IA) OF THE ACT AND IN SUPPORT OF SUCH CONTENTION, ASSESSEE RELIED ON CERTAIN DECISIONS OF THE ITAT. THE AO, HOWEVER, REJECTED THE CONTENTIONS OF THE ASSESSEE AND CAME TO THE CONCLUSION THAT SINCE THE ASSESSEE HAS NOT SATISFIED THE THIRD PROVISO TO SEC TION 194C(3)(I) , BECOMES LIA BLE TO DEDUCT TAX AT SOURCE. HE, THEREFORE, TREATED THE ASSESSEE AS ASSESSEE IN DEFAULT, AND DISALLOWED THE ENTIRE AMOUNT OF RS.4,75,51,774/ - UNDER SECTION 40(A)(IA) OF THE ACT. 5. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE CIT(A), WHO RELYING UPON THE DECISION O F THE ITAT IN THE CASE OF VALIB HAI KHANBHAI MANKAD VS DCIT, 46 SOT 469(AHD) HELD THAT MERE NON - SUBMISSION OF FORM NO.15 - J WITHIN THE PRESCRIBED TIME LIMIT CANNOT PAVE THE WAY FO R DISALLOWANCE OF EXPENSES UNDER SECTION 40(A)(IA) OF THE ACT AND, THEREFORE, DELETED THE ADDITION. THE FINDINGS OF THE CIT(A) IN THIS REGARD IS EXTRACTED HERE UNDER : 5B. SECOND ISSUE RELATES TO SUBMISSION OF FORMS NO. 15J IN THE OFFICE OF THE CIT, NOT W ITHIN THE FINANCIAL YEAR, BUT BEYOND 13 DAYS AND CONSEQUENT DISALLOWANCE OF TRANSPORTATION CHARGES PAID TO LORRY OWNERS AMOUNTING TO RS. 4,86,80,909 BY INVOKING PROVISIONS OF SECTION 40(A)(IA). HERE, IT MAY BE NOTED THAT THE APPELLANT IS A TRANSPORT CONTRA CTOR, WHO HIRES LORRIES AND TRANSPORTS GOODS AS PER THE REQUIREMENT OF GOODS OWNERS AND COLLECTS HIS COMMISSION. THE MAIN JOB OF THE APPELLANT IS THAT HE IS A PLAYER IN THE MARKET, WHO RENDERS SERVICE TO OWNERS OF GOODS BY TRANSPORTING THEM TO THE PLACES O F DESTINATION BY CONTACTING LORRY OWNERS AND TRANSPORTING GOODS AT HIS RESPONSIBILITY AND AFTER THE OWNERS OF GOODS SATISFIED THAT THE GOODS REACHED THEIR DESTINATION SAFELY AND UPON RECEIVING THE LORRY RECEIPTS TO THAT EXTENT, PAYS THE AGREED PRICE TO THE TRANSPORT CONTRACTOR, WHO THEREUPON DEDUCTS HIS CHARGES AND PAYS THE REMAINING AMOUNT TO LORRY OWNERS. THUS, THERE IS NO CONTRACT BETWEEN THE TRANSPORT CONTRACTOR/ OWNER OF GOODS WITH OWNERS OF VEHICLES. WHILE THIS IS HOW A TRANSPORT CONTRACTOR OPERATES, THE ISSUE BEFORE THE UNDERSIGNED IS THAT THE LORRY OWNERS GAVE HIM FORMS NO 15 - I, INDICATING THAT INCLUDING THE LORRY RECEIPTS, THE TOTAL INCOME ACCRUING TO THEM FOR 4 THE RELEVANT YEAR ENDING IS BELOW TAXABLE LIMITS AND AS SUCH TAX NEED NOT BE DEDUCTED WHIL E PAYING LORRY HIRE CHARGES TO THEM. UPON RECEIPT OF SUCH FORMS, THE APPELLANT IS REQUIRED TO SUBMIT SUCH DETAILS IN FORM NO 15 J IN THE OFFICE OF THE CIT WITHIN THE CONCERNED FINANCIAL YEAR. BUT, HOWEVER, THE APPELLANT HAS SUBMITTED SUCH DETAILS IN FORM N O 15.1 BELATEDLY BY 13 DAYS, FOR WHICH DEFAULT THE AO HAS NOT ALLOWED THE EXPENDITURE OF THE CHARGES PAID TO THE LORRY OWNERS BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). NOW THE GENERAL ISSUE IS WHETHER EXPENSES OF A CONTRACTOR CAN BE DISALLOWED ONLY ON THE BASIS OF NON - SUBMISSION OF FORM NO. 15J WITHIN PRESCRIBED TIME - LIMIT IS AN ISSUE BEFORE THE CONTRACTORS, WHICH IS RESOLVED BY THE AHMADABAD TRIBUNAL IN THE CASE OF VALIBHAI KHANBHAI MANKAD VS. DCIT, REPORTED IN [2011] 46 SOT 469 (AHD), WHEREIN, IT H AS BEEN HELD THAT MERE NON SUBMISSION OF FORM NO. 15J (HAVING RECEIVED FORM NO. 151 FROM HIS SUBCONTRACTOR FOR NON DEDUCTION OF TDS) UNDER RULE 29D TO THE AO WITHIN PRESCRIBED TIME LIMIT CANNOT PAVE WAY FOR DISALLOWANCE OF EXPENSES UNDER SECTION 40(A)(IA). SINCE THE FACTS OF THE PRESENT CASE AND THE CASE OF VALIBHAI KHANBHAI MANKAD IS SAME, I AM OF THE OPINION THAT THE AO IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 40(A)(IA) AND ACCORDINGLY HE IS DIRECTED TO DELETE THE SAME. 6. WE HAVE CONSIDERED SUBMISSIONS OF LD REPRESENTATIVES OF PARTIES AND ORDERS OF A UTHORITIES BELOW . IT IS THE SOLE CONTENTION OF LD D.R. BEFORE US THAT SINCE FORM NO.15 - J WAS NOT SUBMITTED BY THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME TAX ON DUE DATE I.E. 30.6.2009, THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA) WAS JUSTIFIED AS THE PROVISIONS CONTAINED UNDER SECTION 194C(3)(I) R.W. RULE 29D ARE MANDATORY IN NATURE. WHEREAS, IT IS THE CONTENTION OF THE ASSESSEE THAT THE ISSUE HAS NOT ONLY BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISIONS OF THE DIFFERENT BENCHES OF THE TRIBUNA L BUT DIFFERENT HIGH COURTS HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THIS CONTEXT, LD A.R. RELIED UPON THE DECISION DATED 5.7.2012 OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJESH KUMAR GARG IN ITAT 95 OF 2012 GA 1369 OF 2012. LD A.R. ALSO RELIED UPON THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF VALIBHAI KHANBHAI MANKAD VS DCIT (ITA NO.2228/VIZ/2009). IT IS NOT DISPUTED BY THE DEPARTMENT THAT THE TRANSPORTERS, WHO HAD PROVIDED THE TRUCKS ARE NOT HAVING MORE T HAN TWO TRUCKS. IT IS ALSO NOT DISPUTED THAT SUCH TRANSPORTERS TO WHOM AMOUNT OF RS.4,75,51,774/ - WAS PAID HAVE SUBMITTED DECLARATION IN FORM NO.15 - I TO THE ASSESSEE. THEREFORE, AS PER THE STATUTORY PROVISIONS, ONCE THE DECLARATIONS WERE SUBMITTED TO THE ASSESSEE BY THE PAYEES, THE ASSESSEE WAS DUTY BOUND NOT TO DEDUCT TAX AT SOURCE ON SUCH PAYMENTS. THE AO HAS NOT ACCEPTED THE ASSESSES 5 CONTENTION ONLY ON THE GROUND THAT FORM NO.15 - J ALONGWITH THE DECLARATION IN FORM NO.15 - I WAS NOT SUBMITTED BEFORE THE CIT ON DUE DATE .E. 30.6.2009. IT IS FURTHER RELEVANT TO NOTE THAT THE AO DOES NOT DISPUTE THE FACT THAT THE CONCERNED PERSONS WERE OWNING NOT MORE THAN TWO TRUCKS AND THEY HAVE SUBMITTED THE DECLARATION IN FORM NO.15 - I. IN THESE CIRCUMSTANCES, SUBMISSI ON OF FORM 15 - J BEFORE THE CIT AFTER A DELAY OF 13 DAYS CANNOT BE CONSIDERED TO BE FATAL ENOUGH SO AS TO ENTAIL DISALLOWANCE U/S.40(A)(IA) OF THE ACT. IN THIS CONTEXT, IT IS RELEVANT TO NOTE THE OBSERVATION S MADE BY THE ITAT AHMEDABAD BENCH IN THE CASE OF BALIBHAI KHANBHAI MANKAD (SUPRA) AS UNDER: . IT IS AT THIS POINT OF TIME SECOND PROVISO WOULD COME INTO PLAY AND WHEN FORM NO.15 I ARE SUBMITTED BY THE SUB - CONTRACTORS TO THE CONTRACTOR THEN CONTRACTOR IS NOT REQUIRED TO DEDUT TAX FROM SUCH PAYMENTS. ON CE DEDUCTIBILITY OF TAX DEPENDS UPON SUBMISSIONS OR NON - SUBMISSION OF FORM NO.15 - I FROM THE SUB - CONTRACTOR TO THE ASSESSEE THEN NON - COMPLIANCE OF THIRD PROVISO BECOMES MERELY TECHNICAL WITHOUT AFFECTING IN SUBSTANCE THE DEDUCTIBILITY OR NON - DEDUCTIBILITY O F TAX ON PAYMENTS MADE BY THE ASSESSEE TO THE SUB - CONTRACTORS. THEREFORE, IN OUR CONSIDERED VIEW NON - COMPLIANCE OF THIRD PROVISO BECOMES MERELY A TECHNICAL DEFAULT, WHICH EVEN IF, REMAINED NON - COMPLIED WOULD NOT AFFECT THE OPERATION OF SECTION 40(A)(IA). 7 SIMILARLY, THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAJESH KUMAR GARG(SUPRA) HAS APPROVED THE AFORESAID DECISION OF THE AHMEDABAD ITAT. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) IN DELETING THE ADDITION OF RS. 4,75,51,774/ - MADE BY THE AO. HENCE, GROUND NO.(B) TO (D) RAISED BY THE REVENUE ARE DISMISSED. 8. THE NEXT ISSUE TAKEN BY THE DEPARTMENT IN GROUND NO.(E) IS WITH REGARD TO DELETION OF ADDITION OF RS.11,29,135/ - WHICH WAS DISALLOWED BY THE AO BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 9. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT OUT OF TOTAL AMOUNT OF RS.5,05,48,611/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT TOWARDS FREIGHT CHARGES, ASSESSEES CLAIM IS NOT LIAB LE FOR DEDUCTION OF TAX AT SOURCE ON AN AMOUNT OF RS.4,75,51,774/ - ON THE GROUND THAT PAYEES HAVE SUBMITTED THE DECLARATION IN FORM NO.15 - I. SO FAR AS THE REMAINING AMOUNT OF RS.29,96,837/ - , CONSISTED OF FREIGHT PAYMENTS OF RS.18,67,702/ - WHERE THE 6 AGGREGA TE AMOUNT IN EACH CASH DID NOT EXCEED RS.50,000/ - IS CONCERNED, THE LIABILITY OF TDS DID NOT ATTRACT. HOWEVER, THE AO NOTED THAT BALANCE AMOUNT OF RS.11,29,135/ - SINCE WAS NOT SUBJECTED TO TDS, THE SAID AMOUNT WAS LIABLE FOR DISALLOWANCE U/S.40(A)(IA) OF THE ACT AND, ACCORDINGLY, ADDED THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE. THE ADDITION WAS CHALLENGED BEFORE THE CIT(A) BY THE ASSESSEE. 10. IN THE COURSE OF HEARING OF APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED BY THE ASSESSEE THAT PAYMENTS TO LORRY OWNERS IS NOT A SUB - CONTRACT, HENCE, TDS PROVISIONS ARE NOT APPLICABLE. IT WAS CONTENDED BY THE ASSESSEE THAT ASSESSEE HIMSELF EXECUTED THE CONTRACT OF TRANSPORTATION AND THE LORRY OWNERS HAVE SIMPLE PLACED THE VEHICLE AT THE DISPOSAL OF THE ASSESSEE WIT HOUT INVOLVING THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE CIT(A), THEREFORE, FOLLOWING THE DECISION OF ITAT VISAKHAPATNAM BENCH IN THE CASE OF MYTHRI TRANSP ORT CORPORATION VS ACIT, 124 ITD 40(VIS) DIRECTED THE AO TO DE LETE THE ADDITION AS THE PAYMENTS MADE BY THE ASSESSEE TO LORRY OWNERS IS NOT TOWARDS ANY SUB - CONTRACT. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES IN THE CONTEXT OF MATERIALS AVAILABLE ON RECORD. ON A PERUSAL OF THE ORDER OF THE CIT(A), IT IS Q UITE EVIDENT THAT ON EXAMINING THE NATURE OF PAYMENT, THE CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE LORRY OWNERS IS NOT IN THE NATURE OF SUB - CONTRACT. THE ASSESSMENT ORDER IS ALSO COMPLETELY SILENT ON THIS ASPEC T. NEITHER THE AO HAS BROUGHT ANY MATERIAL ON RECORD TO SHOW THE EXISTENCE OF SUB - CONTRACT BETWEEN THE ASSESSEE AND THE LORRY OWNERS NOR THERE IS ANY FINDINGS IN THAT REGARD BY THE AO. IN THE AFORESAID CIRCUMSTANCES, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY UPHELD. 12. WITH REGARD TO CROSS OBJECTION FILED BY THE ASSESSEE, AT THE TIME OF HEARING, LD A.R. EXPRESSED HIS INTENTION FOR WITHDRAWING THE CROSS OBJECTION, EVEN OTHERWISE ALSO, IN VIEW OF OUR FINDINGS IN REVENUE S APPEAL, THE ISSUE RAISED IN THE CROSS OBJECTION ARE ACADEMIC IN NATURE. THEREFORE, CONSIDERING THE SUBMISSION OF LD A.R. THE C.O. IS DISMISSED AS WITHDRAWN. 7 13 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OB JECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 /12/2013 . SD/ - S D/ - (B. RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 11 / 12/2013 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : ITO, WARD 2(2), CENTRAL REVENUE BUILDING, M,G.ROAD, VIJAYAWADA. 2. THE CROSS OBJECTOR - ASSESSEE: KOLLI BROTHERS, D.NO.74 - 22 - 8, ASHOK NAGAR, PATAMATA, VIJAYAWADA 3. THE CIT(A) - VIJAYWADA 4. CIT , VIJAYAWADA 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//