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Income Tax Appellate Tribunal, AHMEDABAD “ C ” BENCH
Before: Smt Annapurna Gupta & Shri T.R. Senthil Kumar
आदेश/ORDER PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER
This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-V, Vadodara [hereinafter referred to as ‘Ld.CIT(A)’] for the Assessment Year (AY) 2005-06. This is the second round of appeal before this Tribunal and before we take up the grounds raised by the assessee, it will be relevant to recapitulate the facts of the case.
The return of income for AY 2005-06 was filed by the assessee on 29/10/2005 declaring total income of Rs.4,32,113/-. The
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
2 assessment was completed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 20/12/2007 determining total income of Rs.1,07,48,150/-. The issue before the Tribunal, in the first round of appeal, was the disallowance of Rs.1,01,72,971/- made u/s.40(a)(ia) of the Act. The assessee is a transporter, carting contractor and tankers were given on hire to M/s.Gujarat Alkalies and Chemicals Ltd.(GACL). The assessee had also utilized the services of sub-contractors in its transport contract. The Assessing Officer found that the assessee had not deducted TDS on the payment of freight charges made to transport sub-contractors u/s.194C of the Act. Accordingly, a payment of Rs.1,01,72,971/- claimed as expenditure by way of payment to the truck-owners for sub-contract work was added to the income u/s.40(a)(ia) of the Act for the failure of non-deduction of TDS u/s.194C of the Act.
2.1. In the first round of appeal, the disallowance of Rs.1,01,72,971/- made u/s.40(a)(ia) of the Act was deleted by the Ld.CIT(A), against which the Department had filed appeal before this Tribunal. The said appeal was decided vide ITA No.2036/Ahd/2009 dated 02/03/2012 and the matter was restored to the file of the Assessing Officer with a direction to verify the facts of the quantum involved in each payment made to the sub-contractors. The direction issued by the Co-ordinate Bench of the Tribunal is reproduced below:
“4. We have considered rival submissions and have perused the orders of the AO and the CIT(A) We find that the aggregate limit to individual sub-contractors for the purpose of TDS was introduced by amendment in law w.e.f. 1-10-2004, and therefore, does not apply on the payment made by the assessee upto 30-9-2004. However, there
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
3 is no finding in the assessment order on the issue that whether each individual payment to the sub-contractors was less than Rs.20,000/- or otherwise. The assessee has claimed that it has filed necessary evidences before the CIT(A) and he has verified the same while allowing relief to the assessee. In these facts of the case, we are of the view that it shall be in the interest of justice that the issue in the ground of appeal of the Revenue is restored to the file of the AO with direction to verify these facts and in case each payment made to the sub-contractors out of total amount of Rs.1,01,72,971/- representing the transportation charges upto 30-9-2004 is less than Rs.20,000/- then to allow the same and not to make any disallowance on this issue. We direct accordingly.”
2.2. In the set aside assessment completed by Assessing Officer u/s.143(3) r.w.s.254 of the Act dated 20/03/2013, the disallowance of Rs.1,01,72,971/- u/s.40(a)(ia) of the Act was repeated for the reason that assessee was unable to submit evidence to substantiate his claim that the payment was made before 30/09/2014 and that each payment did not exceed Rs.20,000/-. The Ld.CIT(A) vide order dated 14/08/2014 has upheld the disallowance made by the Assessing Officer for the reasons that the assessee has failed to furnish any details before the Assessing Officer in the set aside proceedings. It is against this order, that the assessee is now in appeal before us.
The assessee has raised the following Grounds of Appeal:
“Under the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred both in law and facts, 1. Confirming the addition to the total income made by A.O. Ignoring facts and legal aspects of the matter. And as per the facts of the case the appellant was not liable to make TDS. 2. Holding that legal issues and reliance on judgments applicable to the facts of appellant case cannot be raised before him.
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
Not granting the relief by ignoring the territorial tribunal judgment and other judgments squarely applicable to facts of appellant's case. 4. Not considering the submission of appellant That Sec 40 (a)(ia) was brought by finance Act (No 2) 2004 which got the assent of the President on 10.9.2004. It was made effective from 1.10.2004. Therefore as per section 294 any payment accrued and credited in the books prior to 30.9.2004 would not attract the provision of section 40(a)(ia). This view is upheld by ITAT Ahmedabad bench in case of Shri Jivrajbhai D Patel ITA No. 2479/Ahd/2008. The appellant craves leave to amend, alter or delete any of the above grounds of appeal.” 4. The Ld.AR of the assessee submitted that the entire records of the assessee were destroyed in an incident of fire in the office of the assessee that occurred on 02/06/2012. This fact was brought to the notice of the Assessing Officer in the set aside proceedings and the copy of the Panchnama and FIR made by the Police Authority were also filed. This fact has also been acknowledged by the Assessing Officer in the set aside assessment order. The Ld.AR for the assessee further submitted that it was also brought to the notice of the Assessing Officer that in the original assessment, all the details were submitted on the basis of which the Assessing Officer had worked out the payment details made to sub-contractors and, accordingly, had made the disallowance. Further that, the details were also filed before the Ld.CIT(A) in the first round of appeal and after examining the same, the Ld.CIT(A) had allowed relief to the assessee. As the original documents were destroyed due to incident of fire, the Department was requested to verify the facts with
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
5 reference to the details already filed before the Assessing Officer and the Ld.CIT(A) in the first round of assessment and appeal.
The Ld.DR, on the other hand, submitted that the matter was restored to the file of the Assessing Officer with a specific direction to verify whether the individual payment to the sub-contractors was less than Rs.20,000/- or otherwise. In order to comply with the direction, it was necessary for the Assessing Officer to verify the individual payment with reference to the books of accounts, vouchers, etc. Since the assessee was unable to produce any such evidence, the Assessing Officer had rightly made the disallowance which has been upheld by the Ld.CIT(A).
We have carefully considered the submissions of both the sides. As already mentioned earlier, the matter was restored to the file of the Assessing Officer with a direction to verify whether each individual payment made by the assessee to the sub-contractors was less than Rs.20,000/- or otherwise. In the set aside proceeding, no evidences were produced before the Assessing Officer and, therefore, he has repeated the addition as made in the original assessment. It is, however, found from the original assessment made u/s.143(3) of the Act dated 20/12/2007 that all such details were filed before the Assessing Officer based on which he had issued a detailed show- cause notice identifying the payments which were liable for disallowance u/s.40(a)(ia) of the Act. The list of payments as identified by the Assessing Officer in the original assessment order is found to be as under:
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
6 “Lorry Freight Expenses- Party Wise 2005-06 Sl.No. Party Name Amount Rs. Bhikha Patel 1. 5,01,896/- 2. Vinod B. Patni 5,92,849/- Sagar B. Patni 3. 3,44,531/- 4. Raj Rajeshwari Transport 7,98,914/- Soyab Dhilawala 5. 3,35,934/- Shree Krishna Transport 6. 2,13,168/- 7. Ram Singh Thakor 1,20,118/- 8. Karansingh Padiyar 3,75,306/- 9. Aashapura Transport 89,662/- 10. Manoj Chauhan 1,89,069/- 11. Hardev Singh 4,23,729/- 12. Jagdish bhai 64,050/- D.M. Rathod 13. 2,93,732/- 14. Chirag Chemical Corporation 3,39,968/- 15. P.P. David 1,92,270/- 16. Sailesh Patel 9,21,679/- 17. Raju Marwadi 7,98,773/- 18. Ganesh Nagre 6,31,135/- 19. Jayesh Thakkar 1,57,032/- Hari om Transport 20. 1,67,066/- Kanu Solanki 21. 2,33,615/- 22. Harish Pathiyar 98,813/- 23. Sukhvindar Singh 52,425/- 24. GJ 5 V 3135 91,634/- 25. Jignesh Parmar 1,29,480/- 26. Joshef Raju 1,12,746/- 27. Rajesh Nagre 1,47,587/- Katak Transport 28. 62,399/- Vaishali Acid Movers 29. 12,42,877/- 30. Jagasingh 81,001/-
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
7 31. Ramdev Bulk Carrier 3,69,513/- Total 1,01,72,971/-
Sr.No. Party Name Amount Rs. 32. Sukha Singh 21,465/- 33. Baba Transport 20,500/- 34. Sukhwani Trasnport 40,900/- 35. Shree Ganesh Cargo 45,325/- 36. Amarsingh A Raj 26,400/- 37. Umiya Roadlines 40,170/- 38. Darshan Roadlines 38,424/- 39. Nilesh Patel 22,183/- 40. GQB 5448 21,773/- 41. Jirmal Singh 26,954/- 42. Shreeji Transport 46,722/- 43. Balvinder Singh 36,241/- 44. GJ7 U 5215 20,050/- 45. GRQ 6835 24,670/- 46. GJ5 V 3522 20,000/- 47. GJ5 V 8022 29,220/- 48. Mahesh Desai 23,500/- 49. Umiya Transport 21,248/- 50. GQB 5758 27,432/- 51. GJ6 Y 5888 23,940/- 52. Dayalbhai 27,347/- 53. Triloknath Sani 38,505/- 54. GJ3 U 6329 29,100/- 55. GJ6 Y 6615 38,661/- 56. MH 04 H 1287 20,400/- 57. GJ 20 T 3708 24,100/- 58. Panjab National Roadlines 24,200/-
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
8 59. Maruti Cargo Carriers 28,640/- 60. Hindustan Roadlines 35,400/- 61. Sojat Feight Carriers 38,350/- 62. Shab Singh 46,622/- 63. Sukhdev Singh 35,375/- 64. Suraj Transport 37,330/- 65. GJ6 U 5470 20,000/- 66. GJ6 W 8128 27,061/- 67. GJ7 T 8026 22,000/- 68. Aditya Roadlines 42,821/- 69. MH 04 AL 7742 28,800/- 70. Surjeet Singh 35,000/- Total 11,76,829/- Grand Total : Rs.1,01,72,971/- + 11,76,829/- = 1,13,49,800/-”
6.1. The Assessing Officer had issued show-cause notice to the assessee for disallowance of Rs.1,13,49,800/- u/s.40(a)(ia) of the Act. But after excluding the payments below Rs.20,000/- in individual case and not exceeding Rs.50,000/- in aggregate, addition of Rs.1,01,72,971/- only was made u/s.40(a)(ia) of the Act. The working as made by the Assessing Officer in the original assessment could not have been possible without the details of individual payments being filed by the assessee. Thus, all the required details were already available with the Assessing Officer in the original assessment record. The details in respect of addition of Rs.1,01,72,971/- was also verified by the Ld.CIT(A) in the first round of appeal. Thus, the details as required by the Assessing Officer to comply with the directions of the ITAT in the set aside proceedings were already available with the Assessing Officer and the Ld.CIT(A).
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
9 When the original records of the assessee were destroyed in fire, the assessee could not have been produced before the Assessing Officer in the set aside proceeding. The Assessing Officer has also not doubted the claim of fire in the office of the assessee and FIR filed by the Police Authorities. Under the circumstances, repeating the addition u/s.40(a)(ia) of the Act on the pretext of non-production of evidences, without verifying the evidences which were already filed before the Assessing Officer in the original assessment proceedings, cannot be held to be compliance to the directions vide order dated 02/03/2012 and the addition as made by the Assessing Officer cannot be upheld.
6.2. Further, it is seen that the Ld.CIT(A) had given a categorical finding in the first round of appeal as under:
“4.3. I have considered the facts of the case and the submissions made by the AR. It is the established fact that the appellant has paid an amount of Rs.1,01,72,971/- for various transportation charges upto 30.09.2004 to sub-contractors and in terms of the provisions contained in section 194C upto that date, it was not obliged to deduct tax at source. In view of the legal position, I am of the opinion that the AO was not justified in making the disallowance of Rs.1,01,72,971/- paid to contractors/sub-contractors upto 30.09.2004. Hence, the AO is directed to delete the addition made of Rs.1,01,72,971/- accordingly.”
In the first round of appeal, Co-ordinate Bench of this Tribunal restored the matter back to the file of the Assessing Officer for the reason that there was no finding in the assessment order on the issue whether each individual payment to the sub-contractors was
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
10 less than Rs.20,000/- or otherwise. In the set aside assessment, the Assessing Officer has failed to bring on record any evidence that the finding as given by the Ld.CIT(A) was not correct. The Assessing Officer has merely taken a pretext that no evidences were filed by the assessee before him. Thus, the Assessing Officer has neither verified the evidences filed before the Ld.CIT(A) in the first round of appeal nor has called for and examined the same. Under the circumstances, we have no other option but to uphold the finding of the Ld.CIT(A) as given in the first round of appeal. In view of categorical finding as recorded by the Ld.CIT(A) in the first round of appeal, the disallowance of Rs.1,01,72,971/- made u/s.40(a)(ia) of the Act is hereby deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 10-04-2024
Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 10/04/2024 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
ITA No. 2877/Ahd/2014 Shri Chirag P.Patni vs. ITO Asst.Year 2005-06
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. संबं�धत आयकर आयु�त / Concerned CIT 3. आयकर आयु�त ( अपील ) 4. / The CIT(A)-V, Baroda 5. �वभागीय ��त�न�ध , अ�धकरण आयकर अपील�य , राजोकट/DR,ITAT, Ahmedabad, 6. गाड� फाईल /Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपील�य अ�धकरण, ITAT, Ahmedabad