JANARDAN PRASAD,PATNA V. CIT (A), PATNA

ITA 371/PAT/2023

AI Insights

This case involves an appeal by Janardan Prasad against the order of the Commissioner of Income Tax (Appeals), Patna-3, concerning disallowances made under sections 40A(3) and 40(a)(ia) of the Income Tax Act, 1961, for the assessment year 2009-10. The primary issues were the disallowance of payments made to suppliers without deduction of TDS and the application of section 40A(3) to payments made by bearer cheques. The Tribunal found that the provisions of Rule 6DDJ applied, as there were no bank branches in the villages where the suppliers operated, thus deleting the disallowance under section 40A(3). The matter concerning section 40(a)(ia) was remanded back to the Assessing Officer to verify the tax compliance of the payment recipients.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32375 (ITAT-PATNA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Other Referred Cases: Hindusthan Coca Cola Beverage (P) Ltd. vs. 163 Taxman 355 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHWANI KR. SINGAL
• Assessee Lawyers: SOUMITRA CHOUDHURY; PRANABESH SARKAR
• Keywords: TDS
• Section: 250; 40A(3); 40(a)(ia)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH VIRTUAL HEARING AT KOLKATA BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No. 371/PAT/2023 Assessment Year: 2009-10 Janardan Prasad Capital Tower, Fraser Road, Patna-800001. (PAN: AAUPP9710E) Vs ACIT, Central Circle-4, Patna. (Appellant) (Respondent) Present for: Appellant by : Shri Soumitra Choudhury, Advocate & Shri Pranabesh Sarkar, Advocate Respondent by : Shri Ashwani Kr. Singal, JCIT Date of Hearing : 25.02.2025 Date of Pronouncement : 25.02.2025 O R D E R Per Bench : This is an appeal filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), Patna-3 [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/APL/S/250/2023-24/1057473295(1) dated 28.10.2023 passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2009-10. 2. Shri Soumitra Choudhury, Advocate and Shri Pranabesh Sarkar, Advocate appeared on behalf of the assessee and Shri Ashwani Kr. Singal, JCIT appeared on behalf of the revenue. 3. It was submitted by the Ld. AR that this is a second round of litigation. It was a submission that two issues are involved – one is a 2 ITA No.371/Pat/2023 Shri Janardan Prasad, AY: 2009-10 disallowance made in respect of the payments made to the suppliers of material in the assessee’s contract business by applying the provisions of section 40A(3) of the Act to an extent of Rs.52,61,916/-. The second issue was against the action of the Ld. CIT(A) in confirming the disallowance made by invoking the provisions of section 40(a)(ia) in respect of the non- deduction of TDS on the payment made to the Mangla Planners for map design to an extent of Rs.2,95,000/-. It was the submission that the amount of Rs. 1,00,000/- was paid to Mangla Planners and the balance of Rs.1,95,000/- was paid to some other persons for the map and design of water cover. It was the submission that in respect of the disallowance u/s. 40A(3) of the Act though the issues have been restored to the file of the Assessing Officer for re-adjudication and the Assessing Officer in the second round has recorded that the assessee had not provided the details the Ld. AR drew our attention to page 3 of the paper book which was the tracking record of the first notice and the said track consignment reads as under: 3 ITA No.371/Pat/2023 Shri Janardan Prasad, AY: 2009-10 4. It was a submission that the notice was received on 21.11.2018. In regard to the second notice, the Ld. AR drew our attention to page 7 which was the tracking consignment, which reads as follows : 5. And the notice is seen to be served on 06.12.2018. It was the submission that both the notices were served after the date of hearing. A perusal of the assessment order in para 5 shows that the notice was issued on 19.11.2018 for compliance on 26.11.2018. However, a perusal of the tracking consignment shows that the notice was despatched only on 26.11.2018. Similarly, the second notice is dated 29.11.2018 and compliance date is given as 04.12.2018. The notice has been despatched only on 03.12.2018 as per the track consignment. Thus, no fault in respect of the normal presentation can be placed on the folder of the assessee. It was the argument of the Ld. AR in respect of the disallowance u/s. 40A(3) 4 ITA No.371/Pat/2023 Shri Janardan Prasad, AY: 2009-10 that the payments have been made by bearer cheques to various individuals for supply of material and the necessary certificates from the Mukhias of the relevant Gram Panchayat had also been produced before the Assessing Officer in the course of the original proceedings itself wherein it has been categorically admitted that there is no branch of any bank in the village where the suppliers were operating. Copy of one of the certificates issued reads as follows: 5 ITA No.371/Pat/2023 Shri Janardan Prasad, AY: 2009-10 6. It was a submission that in view of the provisions of Rule 6DDJ as there was no bank account in the relevant village, the provisions of section 40A(3) of the Act could not be applied on the limited issue of disallowance as the assessee could not be expected to do an act which was impermissible in law. It was also the submission that the total purchase of the assessee was to an extent of Rs.7,77,93,578/- and the gross profit declared by the assessee itself was 18% and the net profit at 7.5%. It was the submission that the disallowance as made by the Assessing Officer and confirmed the Ld. CIT(A) may be deleted. 7. In reply, the Ld. Sr. DR vehemently supported the orders of the Assessing Officer and the Ld. CIT(A). It was the submission that adequate opportunity has been granted to the assessee and the assessment order was passed only on 10.12.2018 and nothing estopped the assessee from complying with the notice even, if the same was received late. It was the submission that there has been a trend in not complying with notices just by saying it has been received late. It was the submission that it is only on account of the non-cooperation by the assessee that the addition has made. 8. We have considered the rival submissions. Without going into the issue as to who is responsible for the non-compliance but considering only the facts, it is clear that even, in the course of the original proceedings, the certificate issued by the Mukhia of the relevant villages were available. Obviously, the Mukhias are the Gram Pradhan who were elected representatives and who know the facts and the ground reality. They represented to the Government also in their respective villages. Such Mukhias have specifically confirmed that there are no banks or any branch of banks operating in the respective villages. Thus, obviously, the provisions of Rule 6DDJ would come into play and no disallowance can be made in respect of the payment made by bearer cheques to the various suppliers of material. This being so, the addition as made by the Assessing 6 ITA No.371/Pat/2023 Shri Janardan Prasad, AY: 2009-10 Officer and confirmed by the Ld. CIT(A) to the extent of Rs.52,62,916/- stands deleted. 9. In respect of the addition made by invoking the provisions of section 40(a)(ia) of the Act, it was submitted by the ld. AR that in view of the principles laid down by the Hon’ble Supreme Court in the case of Hindusthan Coca Cola Beverage (P) Ltd. reported in 163 Taxman 355 (SC) the issue could be restored to the file of the Assessing Officer for verification as to whether the recipients of the amount of Rs.2,95,000/- being Rs. 1,00,000/- paid to Mangalam Planners and the amount of Rs.1,95,000/- paid to the different persons for the design and planning of the water towers have been offered by the recipients to tax as their income. The Assessing Officer will also consider the fact as to whether the recipients are liable to tax or whether their incomes are below the taxable limit. 10. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court. Sd/- Sd/- (Sanjay Awasthi) (George Mathan) Accountant Member Judicial Member Dated: 25th February, 2025 JD, Sr. P.S. Copy to: 1. The Appellant: Shri Janardan Prasad 2. The Respondent. ACIT, Central Circle-4, Patna 3. CIT(A), Patna-3 4. Pr. CIT 5. DR, ITAT, Patna Bench, Patna 6. Guard file. True Copy By Order Assistant Registrar ITAT, Patna "