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Income Tax Appellate Tribunal, BENCH ‘A’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM]
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH ‘A’ KOLKATA [Before Hon’ble Shri J.Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM] ITA No.633/Kol/2014 Assessment Year : 2007-08
Samanawaya -versus- A.C.I.T., Circle-2, Hooghly. Burdwan (PAN: ABAFS 5412 P) (Appellant) (Respondent)
For the Appellant: Shri Somnath Ghosh, Advocate For the Respondent: Shri Sallong Yaden, Addl. CIT
Date of Hearing : 24.08.2017. Date of Pronouncement : 31.10.2017.
ORDER PER J.SUDHAKAR REDDY, AM: This is an appeal by the Assessee directed against the order of the Commissioner of Income Tax-(A)-Durgapur relating to A.Y. 2007-08.
The assessee is a contractor and filed its return of income on 31.10. 2007 declaring total loss of Rs.51,97,722/-. The AO completed the assessment u/s 143(3) of the Act on 29.12.2009 making certain disallowance.
The assessee carried the matter on appeal. The First Appellate Authority deleted all the ad-hoc disallowances. But he invoked his co-extensive power with that of the AO and made disallowance u/s 40(a)(ia) r.w.s. 194C of the Income Tax Act, 1961 (Act) of Rs.1,55,540/- and u/s 40(a)(ia) r.w.s. 194I of Rs.2,68,000/-.
Aggrieved the assessee is in appeal before us on the following grounds :-
“1. FOR THAT none of the conditions precedent required to be satisfied for the assumption of jurisdiction u/s 251 of the Income Tax Act, 1961 existed and/ or have been complied with and/ or fulfilled in the instant case by the Ld. Commissioner of Income Tax (Appeals) Durgapur and the basis of the enhancement resorted to in that respect without adhering to the mandatory
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provisions of s. 251 (1) of the Income Tax Act, 1961 there under is therefore ab initio void, ultra vires and ex-facie null in law.
FOR THAT the Ld. Commissioner of Income Tax (Appeals) Durgapur acted unlawfully in upholding the alleged disallowance on a different parameter from the ground originally resorted to by the Ld. Assistant Commissioner of Income Tax, Circle 2, Burdwan which amounted to enhancing the disallowance being increased to Rs. 1,55,540/- and Rs. 2,68,000/- respectively on account of carriage inward and hire charges and such adverse finding reached on extraneous considerations not germane to the issue is altogether unfounded, unjustified and untenable in law
FOR THAT on the facts and in the circumstances of the instant case, the Ld. Commissioner of Income Tax (Appeals) Durgapur gravely erred in enhancing the disallowances by increasing them to Rs. 1,55,540/- and Rs. 2,68,000/- in respect of carriage inward and hire charges respectively on the specious application of s. 40 (a)(ia) of the Income Tax Act, 1961 which is extraneous to the conclusion reached by the Ld. Assistant Commissioner of Income Tax, Circle 2, Burdwan in the assessment order passed u/ s. 143(3) of the Income Tax Act, 1961 and the purported action on that behalf is wholly illegal, illegitimate and infirm in law.”
After hearing the rival submissions, we hold that this is not a case of enhancement as claimed by the assessee. No new source of income has been brought to tax. It was only a case of determination of income from the same source i.e. contracts. This ground no.l of the assessee is dismissed.
Coming to the merits of disallowance, we find that there is no whisper in the order of the ld. CIT(A) that there is a written contract or sub-contract between the assessee and the parties to whom the amounts in question were paid. As the relationship between the assessee and the truck drivers is not one of a contract, the provision of section 194C(1) of the Act are not applicable. The payments were made directly to truck drivers on delivery of goods. The issue stands covered in favour of the assessee by the decision of the Hon’ble Punjab and Haryana High Court in the case of CIT vs Unit 322 ITR 594 (P&H) and the decision of the Hon’ble Gujarat High Court in the case of CIT vs Prashant H.Shah (2013) 216 Taxman 287 (Guj.). As there is no written contract in this case between the assessee and the lorry owners, the
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conclusion of the ld. CIT(A) that there was violation of section 194C of the Act consequently disallowance has to be made u/s 40(a)(ia) of the Act, is not correct.
The expenses incurred to the tune of Rs.1,55,540/-, in respect of two lorries bearing no. WB 23A5 977 & WB 37A7 865, respectively, are in the nature of cost of transportation.
7.1. In the case of Spot Mix payment of a sum of Rs.1,48,618/- to M/s. Uma Engineering and Rs.1,20,000/- to Shri Prasanta K. Nayek, aggregating to Rs.2,68,618/-, for the purpose of carrying out the contract of laying of the Barrackpore-Barasat Road, was also not a payment in pursuance to a written or oral contract. Hence, there is no legal liability to deduct tax at source u/s 194C of the Act, on account of these payments.
7.1.1. The assessee had paid an amount of Rs.1,20,000/- to Shri Prasanta K. Nayek and this amount is in dispute. As the payment did not exceed Rs.1,20,000/-, Section 194I, is not attracted. Consequently, the provisions of Section 40(a)(ia) of the Act are not attracted. This issue is covered in favour of the assessee by the decision of the Kolkata Bench of the Tribunal in the case of Dutta Automobiles vs. DCIT (2014) 66 SOT 62 (Kol). Moreover, the provision requiring deduction of tax at source on rental payments for machineries was inserted in the statute w.e.f. 01/06/2007 for previous year 2007-08, relevant to the Assessment Year 2008-09. Since the payment made by the assessee for the previous year 2006-07, the provisions of Section 194I of the Act, would not be attracted. Hence the disallowance of Rs.2,68,000/-, is hereby deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 31st October, 2017.
Sd/- Sd/- [S.S.Viswanethra Ravi] [ J.Sudhakar Reddy ]Judicial Member Accountant Member Dated :.31.10.2017. [RG Sr.PS]
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Copy of the order forwarded to: 1.Samanawaya, C/o Somnath Ghosh, Advocate, Seven Brothers Lodge, P.O.Buroshibtala, P.S. Chinsurah, Dist. Hooghly. Pin-712 105. 2. A.C.I.T., Circle-2, Burdwan. 3. C.I.T.(A)-Durgapur 4. C.I.T-Durgapur. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order,
Senior Private Secretary Head of Office/D.D.O, ITAT Kolkata Benches