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Income Tax Appellate Tribunal, AGRA BENCH: AGRA
Before: SHRI A. D. JAIN, & DR. MITHA LAL MEENA
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
ITA No. 154/Agra/2016 (ASSESSMENT YEAR: 2008-09)
M/s R.K. Bajpai, Vs..DCIT,Circle-1, Dibiyapur, Auraiya. Agra. PANNo.AAFFR8521G (Assessee) (Revenue)
Assessee by Shri Deependra Mohan, AR. Revenue by Shri Waseem Arshad, Sr. DR.
Date of Hearing 13.03.2018 Date of Pronouncement 16.05.2018 ORDER PER, A. D. JAIN, JUDICIAL MEMBER:
This is assessee’s appeal for A.Y. 2008-09, raising the following grounds:
“1. That the Learned Commissioner of Income Tax (Appeals) -1, Agra has erred in law and on facts in ignoring the fact that the original assessment order was passed by the Ld. AO after thorough inquiry and examination and after taking a conscious decision on the allowability of expenses and estimation of income.
That the Ld. Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on facts in treating payments
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made to amani labour (daily wages) as amount paid to contractors for supply of labour and transportation and confirming disallowance of Rs. 86,65,626/- u/s 40a(ia) of the Income Tax Act, 1961.
That the Ld. Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on facts in confirming disallowance of the claim of write off of temporary structures at Rs.13,82,300/-.
That the Ld. CIT has erred in law and on facts in confirming disallowance under section, 40a(ia) the Income Tax Act, 1961 of a sum of Rs.4,92,250/- debited towards rent of equipment.
That the Hon'ble ITAT, Agra vide order dated 26.04.2016 has already held that the order passed u/s 263 of the Income Tax Act, 1961 is invalid in respect of Ground no. 2 and 3 above. Any other relief or reliefs deemed fit in the facts and circumstances of the case may be granted. The appellant craves leave to add, alter or vary the ground(s) of appeal before or at the time of hearing.”
The facts are that during the course of assessment proceeding, assessee filed return of income on 26.09.2008 declaring total income at Rs.10,19,330/-. Assessment was completed at total income of Rs.22,19,330/- after making
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estimated addition of Rs.12,00,000/- as the bills and vouchers produced by the
assessee were not verifiable. Subsequently it was observed by the CIT(A) in order
passed u/s 263 that the assessee had made payments to the contractors for supply
of labour and transportation to the tune of Rs.86,65,626/- without deducting TDS
on the same and hence the same should have been disallowed u/s 40(a)(ia) of the
Act. Based on these observations of CIT, AO made further enquiries and made
disallowances u/s 40(a)(ia), addition towards unvouched expenses incurred on
temporary structures and the rent of the equipment, assessing total income at
Rs.1,28,29,943/-.
Ground No. 1, is not sustainable. The order under appeal has not been
passed by invoking the revisional jurisdiction of the CIT. It is an order whereby
additions made by the AO in consequence of an order passed u/s 263 of the IT Act
by the ld. CIT(A), have been confirmed. Accordingly, Ground No.1 is rejected.
Apropos Ground Nos. 2, 3 and 5, the ld. CIT(A) has confirmed the addition
of Rs.86,65,626/- made u/s 40(a)(ia) of the Act (impugned order, page 4, para 6 to
page 12, para 6.4.2) and the disallowance of Rs.13,82,300/- representing claim of
write off of temporary structures has been confirmed (impugned order, page 13,
para 7.1 to page 14, para 7.3). These additions were made by the AO in
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consequence of order dated 26.03.2013 passed by the ld. CIT(A) u/s 263 of the Act. This order has since been set aside on both counts by the ITAT, vide order dated 26.04.2016 (APB 1-12).
On the first issue, the Tribunal has held (page 10, para 6 of the order) as follows:
“We hold that the impugned payments of Rs. 86,65,626/- on account of labour and transportation was not made to contractors and therefore provision of section 194C of the Act were not violated by the assessee. There was therefore no error in the order of the AO so as to cause prejudice to the Revenue and the revisionary proceedings-on this issue are therefore set aside.”
Qua the second issue, it has been held (page 25, para 12 of the order) by the Tribunal as under:
“In such circumstances it could not be said that there was any error in the order of the AO, so as to give revisionary power for the same to Held, "Undeniably the issue of tax deduction at source on legal expenses & Rent was not examined during assessment proceedings. Even before the Ld. CIT the assessee though furnished an explanation for not deducting tax at source but failed to
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substantiate the same with copies of ledger accounts, bills and voucher. In view of the same we hold that the assessee has not been able to establish categorically before the ld. CTT that it was not required to deduct tax at source in the payments of rent and legal expenses and the same having not been examined during assessment proceedings also, the Ld. CIT had rightly held the order of the AO to be erroneous as to cause prejudice to the Revenue.”
The Tribunal order was passed on 26.04.2016, subsequent to the impugned order, which is dated 22.01.2016. Thus, the ld. CIT(A) did not have the benefit of the Tribunal order. The order passed by the ld. CIT on 26.03.2013, u/s 263 of the Act having been set aside by the Tribunal, both the additions forming the subject matter of Ground Nos. 2 and 3, respectively before us, do not survive any longer. Accordingly both these additions are deleted.
So far as regards Ground No.4, the AO made addition on the following observations:
“5. During the course of assessment proceeding, it is found that on perusal of P&L Account, c sum of Rs.4,92,250/- has been debited towards rent equipment and Rs.34,l50/- as legal expenses but failed to deduct TDS as per
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provision of sec. 1941 and 194J, therefore, a show cause given to assessee that why may not be Rs.5,26,400/- is added in your income. In response to this assessee submitted as under :-
"A sum of Rs.4,92,250/- has been debited towards rent of equipment and Rs.34,150/- as legal expense and no TDS has been made as per the provisions of Section 1941 and 194J of the Income Tax Act, 1961. Whereas, these payments have been made to different persons and no single payment or aggregate of payments made to a single person is outside the limit prescribed u/s 1941 and 194J of the Income Tax Act, 1961. In the account rent of equipment the name of Gorelal Mishra is appearing alongwith other persons to whom the payments have been made. All the transactions are duly supported with payment vouchers in which the name of all such persons are appearing. The copy of ledger account indicating payment made to different persons and copy of bills/vouchers are enclosed herewith."
The reply of the assessee is considered. During assessment proceeding assessee fail to furnish any books of account, ledger etc. list filed by assessee is without any address, so, same is not verifiable and disallowed u/s 40a(ia) of the IT Act, 1961.”
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Disallowance of local expenses of Rs.34,150/- is not under challenge before this Bench. The ld. CIT, while confirming the disallowance has observed that:
“8.3.1 In the case of assessee total payment of Rs. 4,92,250/- towards rent is made to Mr. Gorelal Mishra which is evident from the account ledger maintained by the assessee in this regard. There are other names that are apparently used by the assessee just to divide this amount in different hands. The entries in the books of accounts and payment details clearly shown that payment of Rs. 4,92,250/- has been made to only one person i.e. Shri Gorelal Mishra. If he is further making payment to other persons by getting bills raised by them, it cannot be treated as separate payment to them by the assessee. It's Shri Gorelal who is arranging all the JCB & tractors on rent by coordinating with other persons. He himself may also get part of rent, but on part of assessee it is consolidated rent paid for hiring of equipment. Hence AO is correct in holding that assessee's case is covered under the provisions of section 194-1, and he is correct in law in making disallowance of Rs.4,92,250/- u/s 40(a)(ia).”
The ld. Counsel for the assessee has contended that before the AO, in the subsequent assessment proceedings, the assessee submitted the ledger copy and
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copies of bills and vouchers (APB 137 to 151) to prove that no new payment
exceeding Rs.1,80,000/- was made to any single person during the year and so, the
assessee was not obliged to make TDS u/s 194-I of the IT Act.
The ld. DR has placed strong reliance on the impugned order.
The AO has held that the list filed by the assessee was without any address
and so, it was not verifiable. The ld. CIT(A) has observed that Mr. Gorelal Mishra,
who was co-operating with other persons for arranging the JCB and Tractors, had
received the amount and that so, TDS ought to have been deducted.
The list at APB 37 and 38 was filed before the Authorities below. It shows
all the persons mentioned therein to have never received the amounts. This is also
evident from the vouchers (APB 140-151) which were filed before the Taxing
Authorities. APB 139 is a copy of the ledger account filed before the Taxing
Authorities. It shows that payments were made to all different persons, though
through Gorelal Mishra. As such, it remains undisputed that all payments have
been made to different persons and not to a single person. The factum of the
payments having been received by Gorelal Mishra for all the persons nowhere goes
to dispute that new payments below the cap of Rs.1,80,000/- have been made, all
to different persons, during the year. This does not invite deductibility of tax at
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source u/s 194-I of the IT Act. As such, no disallowance u/s 40(a)(ia) of the Act is
called for. The disallowance made is, accordingly, deleted.
In the result, the appeal is partly allowed.
Order pronounced in the open court on 16/05/2018.
Sd/- Sd/- (DR. MITHA LAL MEENA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16 /05/2018 *AKV* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR