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Income Tax Appellate Tribunal, “SMC-B” BENCH : BANGALORE
Before: SHRI ARUN KUMAR GARODIA
O R D E R
Per Shri A.K. Garodia, Accountant Member
This is an assessee’s appeal directed against the order of ld. CIT(A) – Davangere dated 05.05.2017 for Assessment Year 2009-10.
The grounds raised
by the assessee are as under.
1. The assessing officer and CIT(A)was not justified in assessing the total income of the appellant at Rs. 7,89,760/- as against the returned income of the appellant.
2. The Commissioner of Income Tax (Appeals) was not justified in confirming an addition of Rs.50,000/- towards gross profit on the facts and circumstances of the case.
The Commissioner of Income Tax (Appeals) failed to appreciate that, the addition of 50,000/- was without any basis and the said addition by the assessing officer was also not based on any credible material and the assessing officer and the first appellant has accepted all the accounts as maintained by the appellant hence the addition was bad in law on the facts and circumstance of the case.
4. The Commissioner of Income Tax (Appeals) was not justified in confirming an addition of Rs.3,02,380/- under section 40(a (ia) on the facts and circumstances of the case.
The Commissioner of Income Tax (Appeals) was not justified in confirming an addition of Rs.80,271/- being equal to 1/3rd of car expenses on the facts and circumstances of the case.
The appellant crave the leave of the court to add and substitute such grounds as relevant during the time of hearing. 7. The appellant prays that this Hon'ble tribunal be pleased to allow the appeal of in the interest of justice and equity.” 3. It is submitted by ld. AR of assessee that ground no. 5 is not pressed and accordingly this ground is rejected as not pressed. He also submitted that ground nos. 1, 6 and 7 are general for which no separate adjudication is called for.
Regarding ground nos. 2 and 3, he submitted that only one issue is involved as per these two grounds regarding addition made by the AO of Rs. 1,00,000/- which has been reduced by CIT(A) to Rs. 50,000/-. He submitted that the addition partly upheld by CIT 9A) is not justified. The ld. DR of revenue supported the order of CIT(A).
5. I have considered the rival submissions. I find that as per the assessment order, the AO made addition of Rs. 1,00,000/- by alleging that the GP shown by the assessee in the present year is low as compared to the immediately preceding year and he observed that such lower G.P. is on Diesel, Tea Chocolate & Minto, Sun Feast Biscuits, Ashirwad Salt, Stationary Note Books, Soaps & Shampoo. But this addition was made by the AO mainly on this basis that wastage of 1,700 litres of Diesel and 255 litres in respect of Turbo Diesel claimed by the assessee is high. The CIT(A) has reduced this addition from Rs. 1,00,000/- to Rs. 50,000/- on this basis that to serve the interest of justice, full addition is restricted to Rs. 50,000/- i.e. 50% of the addition made by the AO. The CIT(A) also noted in para no. 4a of the impugned order that this was submitted by assessee before him that the AO has not pointed out any defects in the Books of accounts and also not rejected the books. It is also submitted before CIT(A) that petrol and diesel sent by HPC Ltd. from Mangalore to Sagar has to pass through high temperatures of Mangalore and Udupi and hence, drainage is more and drainage and wastage is incidental in running the Page 3 of 5 business of petrol pump. I find that the AO and CIT(A) has not mentioned the quantum of wastage of diesel and turbo diesel of the earlier years and what is the norms being accepted percentage of such transit loss and that the claim of the assessee of transit loss is unreasonably high as com[pared to norms and the addition was made purely on ad hoc basis without giving any cogent reason or basis. In my considered opinion, such an ad hoc addition is not justified and hence, I delete the same. Accordingly ground nos. 2 and 3 are allowed.
6. Regarding ground no. 4, the ld. AR of assessee placed reliance on a judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Sri Marikamba Transport Company in dated 13.04.2015 copy submitted and kept on record. My attention was drawn to page no. 6 of this judgement and it was pointed out that it was held by Hon'ble Karnataka High Court that exemption provided under Sub-section(3) of Section 194C from the liability to deduct tax at source under sub-section (2) would be complete, the moment the requirements contained therein are satisfied and once the declaration forms are filed by the sub-contractor, the liability of the assessee to deduct tax on the payments made to the sub-contractor would not arise. He submitted that in the present case, the relevant form was submitted by the sub-contractor to the assessee copy of which is available on page 2 of the paper book. He pointed out that as per this form no. 15J, the amount mentioned is Rs. 24,57,624/- and the AO has made disallowance of Rs. 3,02,380/- being the difference between the actual amount payable on account of transportation charges of Rs. 27,60,004/- to Shri Rajashekar and the amount mentioned in form no. 15J Rs. 24,57,624/-. He submitted that hence, it is undisputed that the relevant form 15J was duly submitted by sub-contractor to the assessee contractor. As per the judgement of Hon'ble Karnataka High Court, no disallowance is justified. The ld. DR of revenue supported the order of CIT(A).
I have considered the rival submissions. The second proviso to sub section 3 of section 194C is relevant and hence, I reproduce the same herein below as was in the statute book during the relevant period before amendment by Finance Act, 2009 w.e.f. 01.10.2009. The same is as under.
“Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the sub- contractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified In the prescribed manner and within such time as may be prescribed, if such subcontractor is an individual who has not owned more than two goods carriages at any time during the previous year:”
From the above proviso reproduced from the statute book, it is seen that the basis of this exemption from deducting TDS in respect of payment to sub- contractors is this that if the sub-contractor is an individual who has not owned more than 2 goods carriages at any time during the previous year and relevant and prescribed form is submitted within time. This is not the dispute that this form was duly furnished by sub-contractor to the assessee being contractor and such sub-contractor was complying with the required conditions that he is an individual who has not owned more than two goods carriages at any time during the previous year because the AO himself has accepted the claim of the assessee that for the expenditure of Rs. 24,57,624/-, TDS is not required to be deducted. In my considered opinion, simply because the amount mentioned in the form no. 15J is incorrect, it cannot be held that TDS is not required to be deducted to the extent of that amount only and not to the extent of entire amount payable to sub-contractor who is fulfilling all the conditions of second proviso to sub-section (3) of section 194C. By respectfully following the judgement of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Sri Marikamba Transport Company(supra), I delete the disallowances made by the AO. Accordingly ground no. 4 is allowed.