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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM]
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : KOLKATA [Before Hon’ble Sri N.V.Vasudevan, JM & Dr.Arjun Lal Saini, AM] Assessment Year : 2007-08 South Point Housing Developers Pvt.Ltd. -vs.- I.T.O., Ward-28(3) & Madhumita Enterprise, Kolkata Kolkata [PAN : AAAAS 9789 D] (Respondent) (Appellant) For the Appellant : Shri Monoj Dutt, FCA For the Respondent : None (Sr.DR) Date of Hearing : 10.07.2017. Date of Pronouncement : 14.07.2017. ORDER Per N.V.Vasudevan, JM
This is an appeal by the Assessee against the order dated 11.12.2013 of C.I.T.(A)-XIV, Kolkata relating to A.Y.2007-08.
The grounds of appeal
raised by the assessee read as follows :-
1. For that the CIT(A) was unjustified in dismissing the ground of appeal without proper explaining the reason in spite of his admission that the expenses were in the nature of purchase. The appellant could not understand the reasons for confirming the addition made by the A.O. and seems to be contradictory. The CIT(A) ought to have considered the contention of the appellant as question of applicability of sec. 194C not at all tenable.
2. The appellant further prays before your honour that the addition u/s. 40(a)(i) as made by the A.O., confirmed by CIT(A) has no justification and bad in law and hence should be deleted 3. For that other ground of appeal may be urged at the time of bearing.
The Assessee is a company engaged in the business of land development. In the course of assessment proceedings the AO noticed that the assessee has claimed land
2 South Point Housing Developers Pvt. Ltd. & Madhumita Enterprise A.Yr.2007-08 development expenses of Rs.2,23,775/- and had claimed the same as deductible expenditure while computing the income from business. The AO further noticed that the assessee had paid the aforesaid sum of Rs.2,23,775/- to the following three persons, viz., a sum of Rs.78,775/- to M/s. B.S.Enterprise, a sum of Rs.55,000/- to Sri Nitai Patra and a sum of Rs.90,000/- to M/s.Bajrangbali Construction. The aforesaid payments were made by the assessee for purchase of rubbish for use in his business of land development to level the land. According to the AO the aforesaid amount paid not only included cost of rubbish but also labour charges. According to the AO the assessee therefore ought to have deducted tax at source on the aforesaid payments u/s 194C of the Income Tax Act, 1961 (hereinafter referred to as the Act) being a payment for execution of a contract of work. Since the assessee had not deducted tax at source, the AO invoking the provision of section 40(a)(ia) of the Act, disallowed a sum of Rs.2,23,775/- which was payments made without deducting tax at source (Rs.78,775/- + Rs.55,000/- + Rs.90,000/-). The aforesaid sum of Rs.2,23,775/- was added by the AO to the total income of the assessee.
Before CIT(A) the assessee submitted the bills evidencing payment of the sum was disallowed by the AO. The assessee contended that the amount in question was made for purchase of materials and therefore no tax was deductible at source u/s 194C of the Act as it was not a payment for execution of a contract of work. The CIT(A) did not express any opinion on the aforesaid contention raised by the assessee but nevertheless confirmed the order of the AO for the reason that the expenses in question were not supported by proper receipts or vouchers. Thus the basis of CIT(A) confirming the disallowance made by the AO was that expenses were not properly vouched and not on the basis of non deduction of tax at source u/s 194C r.w.s. 40(a)(ia) of the Act. The following were the relevant observations of the CIT(A):- “4.1 I have carefully perused observation of the AO in the impugned order of assessment. Shri R. S. Mukhopadhyay, Ld. AR of the appellant appeared before me without any written arguments. He filed four bills dated 12.03.2007, 21.02.2007, 2
3 South Point Housing Developers Pvt. Ltd. & Madhumita Enterprise A.Yr.2007-08 02.03.2007 and 14.01.2007. These bills were also submitted before the A.O. On a careful examination of these bills, it is seen that these bills are not proper, excepting bill dated12.03.2007, all these bills were above Rs.20,000/- and without any money receipts/vouchers. The appellant contended that these bills on purchase of materials do not attract any TDS. In my opinion, even if these do not attract T08, the expenses were not properly vouched.”
Aggrieved by the order of CIT(A) the assessee has filed the present appeal before the Tribunal.
We have heard the submissions of the ld. Counsel for the assessee. None appeared on behalf of the department. It is clear from the order of AO that disallowance was made by the AO only for non deduction of tax at source u/s 194C of the Act. The AO never raised an objection that the expenses in question were not supported by proper receipts or vouchers. From the fact that the AO has invoked the provision of section 40(a)(ia) of the Act it is clear that the AO was thoroughly satisfied about the genuineness of the expenses in question. The CIT(A) in exercise of his powers u/s 251 of the Act therefore could not have sustained the disallowance on the ground that the expenses in question were not genuine. Copy of the bills evidencing the purchase of rubbish is placed at pages 5 to 10 of the assessee’s paper book. A perusal of the same shows that the amounts in question had been paid only for purchase of rubbish. The provisions of section 194C of the Act are not attracted when the payments are made for purchase of materials. In the circumstances we are of the view that the disallowance made by the AO u/s 40(a)(ia) of the Act cannot be sustained and the same ought to have been deleted by CIT(A). We therefore hold that the amount disallowed u/s 40(a)(ia) of the Act should be deleted. The appeal of the assessee is accordingly allowed.
In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 14.07.2017.