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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Sri N.V.Vasudevan, JM & Shri Waseem Ahmed, AM]
ORDER Per N.V.Vasudevan, JM
This is an appeal by the assessee against the order dated 30.08.2013 of CIT(A)- XXXVI, Kolkata relating to AY 2005-06.
Grounds of appeal
raised by the assessee reads as follows :- “1. That on the facts and in the circumstances of the case, the ld. AO erred in adding back Rs.853351 u/s 40(a)(ia) read with section 194C of the Income Tax Act, 1961.
2. The Appellant craves leave to adduce additional grounds on or before the hearing of the appeal.”
The assessee is a partnership firm. It is engaged in the business of rendering advertising agency services. The return of income for AY 2005-06 was filed by the Assessee on 28.10.2005 showing total income of Rs.128876/-. The case was originally completed u/s.143(3) of the Income Tax Act, 1961 (Act) computing total income Rs.28,59,540/- on 28.12.2007. Subsequently, the assessee went on appeal and was allowed certain reliefs by the Ld. CIT (A)-XXXVI, Kolkata vide Order dated
Sampark A.Yr.2005-06 31.08.2009 and effect to the said order was given on 12.10.2009 revising total income at Rs.1885480/-. Thereafter, Ld. ClT, Kolkata-XXI, Kolkata passed u/s.263 on 3.11.2009 to redecide the issue of debit amount of Rs.85.26 lakhs on Hoarding hire, sales of Rs.1.41 crores and Sundry Creditors of Rs.29.48 lakhs. Departmental appeal filed against the CIT(A)-XXXVI, Kol.'s, order dated 31.8.2009 before Tribunal was also allowed for statistical purpose by setting aside the said order of CIT(A) and remanding the issue raised therein for consideration afresh as some other issues were also referred back to AO in an order passed u/s.263 of the Act.
In the assessment proceedings pursuant to the order of the Tribunal, the AO examined the reply to the enquiry letter u/s 133(6) of purchase ledger and found that the assessee has shown Rs.8,53,3511- on account of iron purchase from M/s.Ashok Kumar Bros. In the original assessment completed u/s.143(3) of the Act, the AO had disallowed a sum of Rs.6,57,371/- u/s.40(a)(ia) of the Act for non-deduction of tax u/s.194C of the Act, before payment to the party M/s. Ashok Kumar & Bros. On appeal by the Assessee against the original order of assessment, the CIT(A)-XXXVI, Kolkata held that the payment to the aforesaid person was composite in nature and should be subject to deduction of tax at source u/s.194C of the Act and confirmed the addition made in the original assessment u/s.143(3) of the Act. In the proceedings pursuant to the order of the Tribunal remanding the issue to the AO for fresh consideration, the assessee furnished the ledger copy of M/s. Ashok Kumar & Bros. From perusal of the same, the AO noticed that the sum payable to the aforesaid party was Rs.8,53,351/- and this sum ought to have been disallowed and added to the total income u/s.40(a)(ia) of the Act.
When the above aspect was brought to the notice of the Assessee, the Assessee contended that the assessee had purchased the iron materials for the purpose of erection of advertisement board and there is no provision for deduction of tax at source for purchase of materials. The AO however rejected the contention as not tenable at this 2
Sampark A.Yr.2005-06 stage as the assessee has not raised the question during the appellate stage in the original proceedings and had accepted the decision of the Ld. CIT(A) in the matter. The AO therefore disallowed the remaining of Rs.2,05,980/- (Rs.8,53,351 – Rs.6,57,377) and added back the said sum to the total income u/s.40(a)(ia).
On appeal by the assessee the CIT(A) upheld the order of AO by observing as follows :-
“I have carefully consider the appellant's submission. I have perused the facts available in record. As has been discussed earlier, in the first ground of appeal, the CIT(A) had concluded that the payment made to M/s. Ashok Kumar & brothers was in the nature of composite contract, for supply of material and labour which attracted TDS u/s 194C of the LT. Act. As no TDS was done, the entire sum was disallowed u/s 40(a)(ia) of the LT. Act. The appellant has implicitly accepted the above finding, by not preferring any appeal against the order of CIT(A). Therefore the addition to the extent of Rs.6,57,377/- has reached a finality. As regards the balance addition made out for the payment made, but wrongly not considered in original assessment, the facts being same, I concur with the finding of the earlier CIT(A), that the payment was for a composite contract, which attracted TDS u/s 194C of the I.T. Act. As no TDS was done, the expense needs to be disallowed u/s. 40(a)(ia) of the I.T. Act. Therefore, the A.O.'s disallowance upto the extent of [8,53,351-6,57,377] = Rs.1,95,974/- is confirmed, the balance being allowed, being an arithmetic mistake of the A.O.”
7. Aggrieved by the order of CIT(A) the assessee has preferred the present appeal before the Tribunal.
We have heard the submissions of the ld. Counsel for the assessee, who filed before us a copy of the bills evidencing purchase of steel by the assessee from Ashok Kumar & Brothers. There are in all about 34 bills. Perusal of the bills so produced shows that all of these bills evidence purchase of M.S.Angle, M.S Channel, R S Joist etc. It is clear from the bills that the conclusions of the revenue authorities that the payments made by the assessee to M/s. Ashok Kumar & Brothers was of a composite nature consisting of purchase of iron material as well as for services rendered by Ashok Kumar & Brothers, was an erroneous conclusion. It cannot be disputed that there is no obligation to deduct tax at source when materials are purchased. The payment in question therefore does not 3
Sampark A.Yr.2005-06 fall within the parameters of section 194C of the Act. We therefore are of the view that the addition made by invoking the provision of section 40(a)(ia) of the Act by the revenue authorities cannot be sustained. The same is directed to be deleted and the appeal of the assessee is allowed.
In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 20.07.2016.