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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri P.M.Jagtap, AM & Sri S.S.Viswanethra Ravi, JM ]
Per P.M.Jagtap, AM
This appeal by the Assessee is directed against the order of CIT(A)-7, Kolkata dated 24.11.2015 whereby he upheld the order passed by AO u/s 154 of the Income tax Act, 1961 rejecting the application of the assessee filed for rectification on the issue of disallowance of Rs.1,12,73,815/- made u/s 40(a)(ia) of the Income tax Act, 1961.
The assessee in the present case is an individual, who is engaged inter alia in the business of transportation of oil for Indian Oil Corporation. During the course of this business, he takes tanker on hire from other parties. During the year under consideration, he had paid charges for taking such tanker on hire aggregating to Rs.1,12,73,615/-. As noticed by the AO during the course of assessment proceedings, no tax at source was deducted by the assessee from the payment of such tanker hire charges as required by the provision of section 194 C. He therefore invoking the provision of section 40(a)(ia) of the Act and made disallowance of Rs.1,12,73,615/- on account of tanker hire charges in the assessment completed u/s 143(3) vide order dated
2 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 18.12.2007 whereby he assessed the total income at Rs.1,32,96,153/-. Against the said order, an appeal was preferred by the assesee before ld. CIT(A) disputing inter alia the disallowance made by AO u/s 40(a)(ia) and the same was disposed off by ld. CIT(A) vide order dated 16.01.2009 whereby he confirmed the disallowance made by AO u/s 40(a)(ia). Thereafter assessment for the year under consideration was reopened by the AO and in the return filed in response to the notice issued by the AO u/s 148, additional income of Rs.2,74,469/- was offered by the assesee on account of undisclosed investment with interest thereon. In the assessment completed u/s 143(3) r.w.s.147 vide order dated 24.12.2010, further addition of Rs.93,038/- was made by AO on account of undisclosed bank interest and the total income of the assessee was finally determined by him at Rs.1,35,13,044/-. Thereafter an application u/s 154 was moved by the assessee before AO on 12.11.2014 claiming that the payments made on account of tanker hire charges not being in pursuance of any contractual obligation, section 194C had no application and the order of AO passed u/s 143(3)/147 in not considering this aspect was wrong. The AO did not find any merit in the application filed by the assessee u/s 154 for rectification. According to him, the issue relating to disallowance u/s 40(a)(ia) on account of tanker hire charges having been decided in the assessment by the AO, after having applied his mind to all the facts and circumstances of the case and such disallowance having been already confirmed by CIT(A), there was no case of rectification on this issue u/s 154, scope of which is limited in as much as it does not permit the review of order on any point. Accordingly the application moved by the assessee u/s 154 was rejected by the AO vide his order dated 12.12.2014.
Against the order passed by the AO u/s 154, an appeal was preferred by the assessee before ld. CIT(A) and the following submissions were made on behalf of the assessee in support of its case for rectification on the issue of disallowance u/s 40(a)(ia). “The assessment was first made u/s 143(3) on 18.12.2007. This was disputed in appeal before CIT(A)-XXXIII and in writ proceeding before Calcutta High Court. The appeal 2
3 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 was disposed of by CIT(A)-XXXIII by his order dated 16.01.09 during pendency of writ proceeding. After this, the CIT(A) order was not disputed in ITAT in view of pendency of writ. The writ was subsequently withdrawn from Calcutta High Court and an appeal before ITAT Kolkata was preferred. This befome futile because the order u/» 143(3) was defaced by an reassessment order subsequently. The assessment was subsequently reopened and a reassessment order u/» 147/143(3) dated 24.12.2010 was passed. This order contained apparent mistake in taking the assessed income figure from the earlier order u/ s 143(3). The assessee prayed for rectification of mistake of the impugned order dated 24.12.2010. This rectification prayer was refused by the AO by his order dated 12.12.2014. The present appeal is against this order of rectification dated 12.12.2014.
In the impugned order u/s 147/143(3) dated 24.12.2010; the AO has taken the assessed income u/ s 143(3) as reduced by relief granted by CIT(A)-XXXIII in his order, as the base to begin with.. This is not a correct procedure as it does not indicate independence of finding or order. The Ld AO should have reworked the assessed income in scheduler matter showing breakup of head of income, additions made, reasons therefore and quantum thereof in the newly framed order u/s 147. In doing so, it was permissible for him to be guided by the Ld CIT(A) order passed against order u/ s 143(3), in choosing whether to add or not to add those items which were added in the 143(3) order but deleted by CIT(A). In not doing so, the first step/pedestal of the reassessment order u/ s 147/143(3) suffers from technical and apparent mistake defect.
In any case, the assessed income u/s 147/143(3) contains the amount of disallowance made u/s 40(a)(ia) of Rs.1,12,73,815/- being alleged payment for works contract. Thus, this reassessment order can be rectified to remedy any anomaly arising out of apparent mistake of law or fact, existing in the impugned order and concerning the impugned addition. In the impugned order u/s 154 dated 12.12.2014, the AO held that the order u/s 147/143(3) dated 24.12.2010 could not be rectified as the AO and CIT(A) applied their mind for disallowing the expenditure. The AO actually made the mistake which is sought to be rectified. Therefore, application of mind of AO cannot stand in the way of rectification of mistake apparent from record.
Before the CIT(A) in appeal against order u/ s 143(3) it was mainly argued that section 40(a)(ia) is not applicable in the A. Y. 2005-06 and the provisions of that section are unconstitutional. No other issue was argued before the CIT(A) and thus was not discussed or dealt with by the CIT(A). Thus the issue of apparent mistake in considering hire charges as exigible u/ s 194C was not considered at all by the CIT(A) and hence cannot be said to have vetted by CIT(A). The AD's other contention that the order passed u/ s 147 is not to grant relief to the assessee, cannot hold good because rectification of mistake is permissible in all circumstances and if such rectifications works out to a lesser tax liability of assessee, then that cannot be overlooked. There is no estoppels against law and there is no law to prevent rectifications of mistake apparent from record.”
4 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 4. The above submissions made by the assessee did not find favour with the ld. CIT(A), who proceeded to uphold the order passed by AO u/s 154 rejecting the application filed by the assessee for rectification on the issue of disallowance u/s 40(a)(ia) for the following reasons given in para 1.2. and 1.3. of his order :- “1.2 I have gone through the submissions made by the appellant, Order under section 143(3) dated 18.12.2007 and the order under section 143(3) read with section 147 dated 24.12.2010. The Assessing Officer made the addition of Rs.1, 12,73,815/- under section 40 (a)(ia) holding the payments made to the transport contractors as contract payments under section 194C of the Income Tax Act, 1961. The assessee went on appeal. CIT(Appeal) confirmed the addition and in the second appeal before the ITAT the appellant has withdrawn the appeal. Therefore, the order passed by the Assessing Officer under section 143(3) dated 18.12.2007 has became final to the extent of the additions made in the cited order and to the extent of the assessed income. Subsequently the assessing officer passed order u/s 143(3) r.w.s.147 on 24/12/2010. The appellant has made petition under section 154 for deletion of addition made under section 40 (a)(ia) on 13.12.2013.The addition u/s 40(a)(ia) was made in the order passed u/s 143(3) dt. 18.12.2007 but not in the order passed on 24/12/2010. Therefore the appellant's petition u/s 154 was relevant to the order passed u/s 14(3) dated 18/12/2007.As per the provisions of section 154 of Income Tax Act, 1961 the time limit for passing the order under section 154 is four years from the end of relevant Financial year in which the order sought to be amended was passed. In the appellant's case the appellant has made application for amendment of order under section 154, for amendment of order under section 143(3) dated 18.12.2007 on 13.12.2013 which was beyond the time limit allowed under section 154. Therefore the application made by the appellant under section 154 is barred by limitation. Accordingly there is no case for the amendment of the order under section 143(3) dated 18.12.2007. Therefore the assessee's request for amendment is rightly rejected by the A. O. Secondly, the application u / s 154 was made for amendment of the order under section 143(3) read with section 147 dated 24th December 2010 requesting the Assessing Officer to delete the addition made under section 40(a)(ia) amounting to Rs. 1,12,73,815/-. If the application was considered to be relating to the order passed u/s 143(3) r.w.s.147 dated 24/12/2010,the Assessing Officer has not made any such addition in the assessment order dated 24.12.2010. Therefore, the appellant's contention that the addition made under section 40(a)(ia) required to be rectified u/s 154 does not arise, since there is no mistake in the order which require rectification. The third argument of the appellant's authorized representative was that the order passed u/s 143(3) dated 18/12/2007 got merged with the order passed u/s 143(3) r.w.s 147 dated 24/12/2010 by the theory of doctrine of merger and the time limit for rectification should be reckoned from the date of passing the reassessment order dated 24/12/2010 not from the date of original assessment. The appellant contended that order passed under section 143(3) dated 18.12.2007 steps into the shoes of the order under section under section
5 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 143(3) read with section 147 dated 24.12.2007 and the time limit starts for making rectification under section 154 commenced from the relevant financial year of 2010-11. I have gone through the submissions made by the authorized representative of the appellant. The words used in the section 154 is orders sought to be revised. The order ought to be revised according to me is the order passed on 18.12.2007 where in the addition was made u/s 40a(ia) for which the time limit has already has been expired. Where as per the appellant it was the order under section143(3) read with section 147dated 24/12/2010. Whether the issue related to the rectification was the order passed under section 143(3) or the order u/s 143(3) read with section 147 dated 24/12/2010 itself requires explanations. clarifications and clearly debatable issue which cannot be decided under section 154. On this count also the assessee's request for amendment of order under section 154 is not tenable. 1.3 Lastly the Assessing Officer made addition under section 40(a)(ia) holding that the payment were made to transport contractors and the assessee was liable for deduction of TDS tinder section 194C. The assessment was confirmed before CIT(Appeal) and the appellant has withdrawn the appeal at the second appeal stage. Now the appellant contended that the TDS required to be deducted on transport contractors under section 1941 and not under section 194C. Whether the TDS required to be deducted or not, under which section the TDS was applicable is based on the facts. On analysis of the facts and the explanation offered by the appellant the Assessing Officer held that the TDS was required to be deducted under section 194C which was accepted by the appellant by withdrawing the appeal. Now the appellant contention that the TDS was not deductible under section 194C but applicable under section 1941 is a debatable issue which cannot be adjudicated upon under section 154 of Income Tax Act, 1961.
Aggrieved by the order of CIT(A), the assessee has preferred this appeal before the Tribunal.
We have heard the arguments of both the parties and also perused the relevant materials available on record. The learned counsel for the assesseee has vehemently argued the case of the assessee on merit on the issue of disallowance made u/s 40(a)(ia) on account of tanker hire charges by raising various contentions. The main plank of his argument is that the payments made by the assessee on account of tanker hire charges were in the nature of rent as envisaged in section 194I and not in the nature of works contract covered u/s 194C as taken by the AO and since the expenditure incurred on rent was not covered by the provision of section 40(a)(ia) as applicable to the year under consideration, the disallowance made by AO u/s 40(a)(ia) was patently wrong. 5
6 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 According to him, there was thus a mistake apparent from records in the order of AO which is liable to be rectified u/s 154. We are unable to accept this contention of the learned counsel for the assessee for the reasons more than one. Firstly the disallowance u/s 40(a)(ia) on account of tanker hire charges was made by AO in the order passed u/s 143(3) on 18.12.2007 and not in the order passed u/s 143(3)/147 on 24.12.2010 and as rightly held by CIT(A), the application filed by the assessee for rectification u/s 154 of the order passed by AO on 18.12.2007 was clearly barred by limitation as per sub- section (7) of section154 which provides that no amendment u/s 154 shall be made after expiry of four years from the end of the financial year in which the order sought to be amended was passed. In this regard, the contention raised on behalf of the assessee before CIT(A) as well as before us is that order passed u/s 143(3) by the AO was merged with the order passed by him subsequently on 24.12.2010 u/s 143(3)/147 and therefore the application filed u/s 154 was well within the time limit stipulated in the statute. We find no merit in this argument raised on behalf of the assessee. The assessment made by AO u/s 143(3)/147 is independent and separate from the order passed u/s 143(3) in as much as the scope of such assessment is limited to bringing to tax the income which has escaped assessment made originally inter alia u/s 143(3) and the theory of doctrine of merger does not apply in the case of assessment made u/s 143(3) originally and the assessment made subsequently u/s 143(3)/147. Both these assessments stand independently on their own footing. We therefore find ourselves in agreement with ld. CIT(A) that the application filed by the assessee for rectification u/s 154 was barred by limitation and the action of AO in rejecting the same was justified on this ground also.
Moreover, as rightly held by AO as well as by ld. CIT(A), the issue as to whether the amount paid by the assessee on account of lorry hire charges is in the nature of works contract as covered by section 194C or in the nature of rent as envisaged u/s 194I is highly a debatable issue and the rectification of the same is beyond the purview 6
7 ITA No.01/Kol/2016 Gopinath Ghorai A.Yr.2005-06 of section 154, the scope of which is very limited. We, therefore do not find any infirmity in the impugned order of ld. CIT(A) upholding the order passed by AO whereby he rejected the application of the assessee for rectification on the issue of disallowance u/s 40(a)(ia) and upholding the same, we dismiss this appeal of the assessee.
In the result the appeal of the assessee is dismissed.
Order pronounced in the Court on 29.04.2016.
Sd/- Sd/- [S.S.Viswanethra Ravi] [P.M.Jagtap] Judicial Member Accountant Member
Dated : 29.04.2016. [RG PS]
Copy of the order forwarded to:
1.Sri Gopinath Ghorai, Vill. Barisha P.O.Kolaghat, Dist. Purba Medinipur, PIN:721134. 2. A.C.I.T., Circle-27, Haldia. 3. CIT(A)-7, Kolkata 4. CIT-9, Kolkata. 5. CIT(DR), Kolkata Benches, Kolkata.