TOMAR AND BROTHERS,ETAWAH vs. INCOME TAX OFFICER, WARD-2(2)(5), ETAWAH
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Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SMT. ANNAPURNA GUPTA & SHRI SUNIL KUMAR SINGH
per past history, as reproduced in the written submission filed by the
assessee, the net profit assessed in various assessment years right from
the assessment year 2004-05 to assessment year 2013-14, varies from
6% to 11% with rate of 8% being applied in majority of the years. Further,
his contention was that the case law relied upon by learned CIT(Appeals)
to justify the rate of 11.8% of the Hon’ble Punjab & Haryana High Court
in the case of CIT vs. Prabhat Kumar (2010) 323 ITR 675 (P&H) could
not be relied in preference to the past history of the appellant itself.
Learned counsel, therefore, pleaded adequate relief on this issue.
Learned DR, however, supported the order of ld. CIT(Appeals)
pointing out that the ld. CIT(Appeals) has been just enough in reducing
the disallowance made by the Assessing Officer from 10% to 7.5%. He
contended that submissions of the assessee relating to past history of
the net profit rate assessed of the assessee require no consideration.
We have heard the contentions of both the parties and we find
merit in the contention of the ld. Counsel for the assessee. Undisputedly,
in the absence of proper books of accounts maintained by the assessee, 3 | P a g e
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the Revenue has resorted to an adhoc disallowance of expenses being
made. Though, admittedly, the assessee has no justification for the
expenses claimed by it, but be that so, any adhoc exercise by the
revenue authorities has to be justified and cannot be an arbitrary
exercise. Even the ld. CIT(Appeals) has in so many words stated so but
while applying a just and reasonable rate of disallowance, he has
referred and relied upon the decision of Hon’ble Punjab & Haryana High
Court in the case of CIT vs. Prabhat Kumar (supra) for applying rate of
7.5% for disallowance of expenses. Learned counsel for the assessee
has rightly pointed out that the said case is not applicable to the facts of
the present case .As noted in the order of ld. CIT(Appeals) himself in the
case of CIT vs. Prabhat Kumar (supra), Hon’ble High Court had
approved a net profit rate of 12% in a similar activities carried out by the
assessee and the Ld. CIT(A) ,noting that assessee’s profit would come
to 11.8% of the gross turnover after disallowance of 7.5% of the
expenses,he accordingly applied rate of 7.5% to the adhoc disallowance.
But be that so, there cannot be a standard net profit rate applicable to all
persons working in a similar activity. The assessee has pointed out to us
that as per its past history, net profit rate assessed on average rate of 8%
We, therefore, consider it fit to reduce the disallowance to 5% of the
expenses. 4 | P a g e
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Ground No. 1, 2 & 3, raised by the assessee are partly allowed in above
terms.
Ground No. 4 relates to disallowance u/s. 40(a)(ia) of the Act
amounting to Rs.9,53,000/- on account of non-deduction of tax at source
on various expenses, which are mentioned in the ground reading as
under :
BECAUSE, disallowance of Rs. 9,53,000/- made under section 40(a)(ia) of the Act in respect of rent paid for hiring of JCB Porcelain, Roller, Tractor and Tanker is unwarranted, without any evidence brought on records to conclude that any payment was made to any individual in excess of the threshold limit of Rs. 1,80,000/- under the said section.”
Both the authorities below had noted several expenses incurred by
the assessee to be without TDS and in absence of any cooperation from
the assessee in this regard, disallowance of these expenses were made
u/s. 40(a)(ia) of the Act amounting in all to Rs.9,53,000/-. The expenses
which attracted impugned disallowance are as under :
Expenses towards JCBPoclane, Roller & Tractor rent : Rs.7,42,600/- Expenses towards Water tanker rent : Rs.2,10,400/-
Above expenses are found mentioned in the assessment order.
Before us, the contention of the ld. Counsel is that the authorities
below had noted an incorrect fact that no details had been furnished by
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the assessee. He contended that two replies were filed by the assessee
on 09.09.2022 and 09.09.2023 on the e-portal vide e-acknowledgement
No. 479853791090922 and 240859541090923 of the assessee and a
chart was furnished providing the details of all the payments made for
JCB, Poclane, Roller and tractor rent. He contended that it was evident
from the details of all the payments were below Rs.1,20,000/- which is
the limit provided for TDS. With respect to the payment of water tanker
rent amounting to Rs.2,10,400/-, learned counsel fairly admitted that no
details were submitted. Written submission of the assessee in this regard
is reproduced hereunder :
“Assessee respectfully submits that such a view of the authorities below is unsustainable. Vide Reply dated 09.09.2022 & 09.09.2023 furnished on e-portal...vide e-acknowledgement No. 479853791090922 & e- acknowledgement No. 240859541090923 the following Chart vide Page-84 providing details of payment made against JCB, Pocklane, Roller and Tractor Rent was furnished which shows that payment of Rs. 7,42,600/- were made to 14 individuals and payments were less than Rs.1,20,000/- which is the limit provided for TDS. Though no details against payment of water tank rent amounting to Rs. 2,10,400/- was furnished.
M/S TOMAR & BROTHERS, 43-A, MOTIJHEEL COLONY, ETAWAH. Break up of JCB Rent, Tractor Rent, Roller &Poclane Rent. (01.04.2013 to 31.03.2014)
DATE PARTICULARS AMOUNT 18.04.2014 SHRI HUKUM SINGH TRACTOR 18500.00 BHARTHANA 12.05.2013 SHRI RAM SINGH TRACTOR 42600.00 CHHATA MATHURA 06.06.2013 ASHOK MISHRA, JCB 75600.00 FRIENDS COLONY ETAWAH 6 | P a g e
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16.06.2013 APPU TOMAR NIMAISH TRACTOR 18500.00 CHAURAHA ETAWAH 18.06.2013 TILLU TANK, SUBHASH ROLLER 43000.00 CHAUK BHIND MP 16.11.2013 TILLU TANK, SUBHASH ROLLER 48000.00 CHAUK BHIND MP 06.07.2013 MANOJ GUPTA POCLANE 45000.00 09.07.2013 MANSINGH BHIND TRACTOR 28000.00 20.09.2013 RAVI SHARMA ROLLER 42000.00 12.11.2013 PRAVEEN SINGH JCB 45000.00 CHAUHAN 18.11.2013 PRAVEEN SINGH JCB 32600.00 20.01.2014 RAVI SHARMA ROLLER 32000.00 29.01.2014 SATISH YADAV, TRACTOR 35000.00 SARANGPURA, ETAWAH 03.02.2014 SATISH YADAV, TRACTOR 45000.00 SARANGPURA, ETAWAH 15.01.2014 KALLU KAUSHIK JCB 45000.00 23.12.2013 SABIR, GANDHI ROLLER 48000.00 NAGAR, ETAWAH 18.07.2013 RATAN MODI POCLANE 45000.00 20.09.2013 RATAN MODI POCLANE 53800.00 TOTAL 742600.0 0
6.1 Therefore, Assessee again submits that the payment for Tractor Rent & other machine Rent u/s 40(a) (ia) of the 'Act' for alleged non- deduction of TDS aggregating to Rs. 9,53,000/- is uncalled for. The authorities below had made the disallowance on mere doubt, despite the audit-report clearly stating that the assessee was not liable for tax deduction at source under any provision of the 'Act'. The 'appellant 'had also furnished details of payees of machinery, rent vide reply dated 28- 12-2016 before the AO and Ld. CIT(A). As could be seen from the details filed, none of them had been paid rent beyond threshold limit of Rs. 1,80,000/- stipulated for the year in question. The 'AO' had no tangible material to make the disallowance under section 40A(ia) of the 'Act' and your honour, therefore, may kindly delete the same.”
Learned DR, however, reiterated that in absence of any details
submitted by the assessee as noted by the revenue authorities, the
disallowance needs to be confirmed.
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Having heard the contention of both the parties, we find that the
assessee has submitted as a matter of fact that the details of payment
amounting to Rs.7,42,600/- which were visited with the disallowance u/s.
40(a)(ia) of the Act for non-deduction of tax at source, were submitted
before the authorities below vide two replies. Even e-acknowledgement
of submission made were furnished. Learned DR is unable to controvert
this fact. The details submitted as reproduced above, supports the
contention of ld. Counsel that none of the payments made exceeded
Rs.1,20,000/-, which is a limit for tax deduction at source. The DR was
unable to point out any counter to the facts and position of law. In view of
the same, we hold that the payment of Rs.7,42,600/- could not be visited
with the disallowance in terms of provision of section 40(a)(ia) of the Act.
We have noted contention of the ld. Counsel that even the tax audit
report stated that the assessee was not liable to any TDS under the
provisions of the Act. The details submitted by the assessee of the
payment of Rs.7,42,600/- corroborated with the tax audit report submitted
by the Accountant, support the assessee’s claim of no disallowance
being warranted on the impugned payment u/s. 40(a)(ia) of the Act. As
for the payment of water tax rent of Rs.2,10,400/- without tax deducted at
source, as per admission of the ld. Counsel himself, the assessee has no
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case with respect to disallowance u/s. 40(a)(ia) on the same and
therefore, this disallowance is confirmed. Ground No. 4 is partly allowed.
Appeal of the assessee is partly allowed.
Order pronounced in the open court on 24.04.2025.
Sd/- Sd/- (SUNIL KUMAR SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24.04.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra
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