The ACIT, Circle-2,, Bhavnagar v. Shri Suresh Ratilal Sheth, Bhavnagar

ITA 1742/AHD/2009 | 2005-2006
Pronouncement Date: 25-01-2011 | Result: Dismissed

Appeal Details

RSA Number 174220514 RSA 2009
Assessee PAN AGBPS6608K
Bench Ahmedabad
Appeal Number ITA 1742/AHD/2009
Duration Of Justice 1 year(s) 7 month(s) 28 day(s)
Appellant The ACIT, Circle-2,, Bhavnagar
Respondent Shri Suresh Ratilal Sheth, Bhavnagar
Appeal Type Income Tax Appeal
Pronouncement Date 25-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-01-2011
Date Of Final Hearing 07-01-2011
Next Hearing Date 07-01-2011
Assessment Year 2005-2006
Appeal Filed On 27-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA J.M. & HON' BLE SHRI N.S. SAINI A.M. ) I.T.A. NO. 1742/AHD./2009 ASSESSMENT YEAR : 2005-2006 ASSISTANT COMMISSIONER OF INCOME TAX -VS.- SU RESH RATILAL SHETH BHAVNAGAR CIRCLE-2 BHAVNAGAR (PAN : AGBPS 6608 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. MADHUSUDAN S R. D.R. RESPONDENT BY : SHRI TUSHAR P. HEMANI O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 11.02.2009 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XX AHMEDABAD FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN THE AFORESAID GROUNDS OF APPEAL ARE THAT FOR THE ASSESSMENT YEAR UNDER APPEAL THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 29.11.2007. IN THIS ASSESSMENT ORDER THE ASSESSING OFFICER APPLIED THE NET PROFIT RATE OF 5% AND MADE THE ADDITION OF RS.17 97 536/-. SUBS EQUENTLY THE ASSESSING OFFICER IN HIS RECTIFICATION ORDER DATED 10.10.2008 UNDER SECTION 154 OF THE INCOME TAX ACT DISALLOWED RS.90 08 010/- BY APPLYING SECTION 40(A)(IA) OF THE INCOME TAX ACT 1961. IN APPEAL AGAINST THE ORDER DATED 10.10.2008 UNDER SECTION 154 THE ASSESS EE CHALLENGED THE JURISDICTION OF ASSESSING OFFICER IN PASSING THE ORDER UNDER SECTION 154 AT A STAGE WHERE THE ASSESSED INCOME WAS CLEARLY DETERMINED BY THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) AND THE SECOND APPEAL WAS PENDING BEFORE THE ITAT. IT WAS ARGUED THAT DOCTRIN E OF MERGER IS APPLICABLE IN THE CASE; AND ONCE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ADJUDICATED UPON THE APPEAL ARISING OUT OF THE ASSESSMENT ORDER THE SAME CANNOT BE SUB SEQUENTLY SUBJECTED TO RECTIFICATION BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE INCOME T AX ACT 1961. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IT WAS ALSO P LEADED THAT THE ASSESSEE BEING AN INDIVIDUAL WAS NOT REQUIRED TO DEDUCT TDS UNDER SEC TION 194C OF THE INCOME TAX ACT 1961 BECAUSE THE RELEVANT AMENDMENT MADE WAS EFFECTIVE F ROM 1.7.2006. IT HAS NO APPLICATION IN THE 2 ITA NO. 1742-AHD-2009 FINANCIAL YEAR 2004-05. FINALLY IT WAS ARGUED THAT THIS BEING A DEBATABLE ISSUE REQUIRED INVESTIGATION OF FACTS CANNOT BE RECTIFIED UNDER S ECTION 154 OF THE INCOME TAX ACT 1961. 3. AFTER CONSIDERING THE AFORESAID SUBMISSIONS IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT SECT ION 194C WAS NOT APPLICABLE IN CASE OF INDIVIDUAL IN THE ASSESSMENT YEAR UNDER APPEAL. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE PLEA OF THE ASSESSEE THAT TH E MISTAKE RECTIFIED BY THE ASSESSING OFFICER NEEDS INVESTIGATION OF FACTS. AGGRIEVED WITH THE OR DER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE REVENUE IS IN APPEAL BEFORE THE TRIB UNAL ON THE FOLLOWING GROUNDS :- 1. THAT THE LD. CIT(A.)-XX AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.90 08 010/- MADE BY THE A.O. U/S. 40(A)(IA) OF THE I.T. ACT WITHOUT PROPERLY APPRECIATING THE FAC TS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE A.O. 1.2. IN DOING SO THE LD. CIT(A.)-XX AHMEDABA D HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ASSESSEE WAS UNDER NO LEGAL OBL IGATIONS TO DEDUCT TAX AT SOURCE WITHOUT APPRECIATING THAT THE PROVISO TO SUB-SECTIO N (2) OF SECTION 194C OF THE ACT IS CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE A ND AS PER THE SAID PROVISO THE ASSESSEE WAS UNDER LEGAL OBLIGATION TO DEDUCT TAX A T SOURCE FROM THE PAYMENTS MADE TO SUB-CONTRACTORS. 1.3. IN DOING TO THE LD. CIT(A.)-XX AHMEDABAD HAS ERRED IN LAW OF FACTS IN NOT APPRECIATING THAT AS PER ANNEXURE-VII TO THE AUDIT REPORT IN FORM NO. 3CB THE ASSESSEE HAD DEDUCTED TAX AT SOURCE @ 1.02% ON PAYM ENTS MADE TO SUB- CONTRACTORS AND SINCE THE SAID TAX WAS NOT DEPOSITE D IN THE GOVERNMENT A/C. WITHIN THE TIME ALLOWED U/S. 200(1) OF THE ACT THE SAID D ISALLOWANCE WAS RIGHTLY MADE BY THE A.O. U/S. 40(A)(IA) BY INVOKING THE PROVISIONS OF SECTION 154 OF THE ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A.) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE CIT( A.) BE SET ASIDE AND THAT OF A.O. BE RESTORED TO THE ABOVE EXTENT. 4. AT THE TIME OF HEARING BEFORE US ON BEHALF OF R EVENUE SHRI K. MADHUSUDAN LD. SR. D.R. APPEARED AND CONTENDED THAT PROVISO TO SUB-SECTION (2) OF SECTION 194C WAS INSERTED BY THE FINANCE ACT 2002 WITH EFFECT FROM 1.6.2002. AS PER THIS PROVISO ASSESSEE AN INDIVIDUAL WHOSE TOTAL RECEIPTS EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OF SECTION 44AB DURING THE ASSESSMENT YEAR RELEVANT TO THE IMMEDIATELY FINANCI AL YEAR IN WHICH SUM WAS CREDITED OR PAID TO THE ACCOUNT OF SUB-CONTRACTOR WAS LIABLE TO DEDUCT INCOME-TAX UNDER THIS SUB-SECTION. THUS 3 ITA NO. 1742-AHD-2009 DISALLOWANCE UNDER SECTION 40(A)(IA) MADE BY THE AS SESSING OFFICER WHILE PASSING THE ORDER UNDER SECTION 154 OF THE INCOME TAX ACT 1961 IS VA LID. THE LD. D.R. POINTED OUT THAT IN THE IMPUGNED ORDER THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) COMMITTED MISTAKE OF LAW THEREFORE HIS ORDER BE SET ASIDE AND THE ADDITION OF RS.90 08 010/- MADE BY THE ASSESSING OFFICER BE RESTORED. 5. ON THE OTHER HAND SHRI TUSHAR P. HEMANI LD. CO UNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT IN THE ASSESSMENT ORDER TH E ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 29.11.2007 WHEREIN HE APPL IED NET PROFIT RATE OF 5% AND MADE THE ADDITION OF RS.17 97 536/-. FURTHER ON APPEAL BY T HE ASSESSEE THE ITAT A BENCH AHMEDABAD VIDE ORDER DATED 24.09.2010 IN ITA NO. 3246/AHD/200 8 FOR THE ASSESSMENT YEAR 2005-06 DIRECTED THE ASSESSING OFFICER TO APPLY NET PROFIT RATE OF 3.76% AS AGAINST 5% CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). ON THE SE FACTS THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ONCE INCOME OF THE ASSESSEE IS ESTIM ATED BY APPLYING NET PROFIT RATE NO FURTHER DISALLOWANCE CAN BE MADE. ON THIS BASIS HE SUBMITT ED THAT THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE UPHELD. FOR RAISING THIS PLEA THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE RULE 27 OF THE INCOME TAX RU LES WHICH PROVIDES THAT RESPONDENT CAN SUPPORT THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE DECIDED AGAINST HIM. IN REJOINDER THE LD. D.R. SUBMITTED T HAT THE ASSESSEE IS A CONTRACTOR AND GETTING PART OF THE WORK EXECUTED FROM SUB-CONTRACTORS. HE WAS R EQUIRED TO DEDUCT TAX @ 1% FROM THE PAYMENT MADE TO SUB-CONTRACTOR. HE DEDUCTED TDS BUT NOT PAID TO THE GOVERNMENT. WHEN THIS EXPENDITURE WAS DISALLOWED UNDER SECTION 40(A)(IA) NOW THE ASSESSEE TRIED TO TAKE SHELTER UNDER SECTION 194C(1) OF THE ACT DISREGARDING THE FACT TH AT HE HIMSELF IS A CONTRACTOR. HE SUBMITTED THAT THE ASSESSEE IS NOT PRINCIPAL/ SPECIFIED PERSON AS PER THE ACT AS MENTIONED IN SECTION 194C(1) BUT A CONTRACTOR HIMSELF. THEREFORE HE WAS LIABLE TO D EDUCT TAX AT 1% UNDER SECTION 194C(2) WHICH HE DEDUCTED BUT FAILED TO DEPOSIT IN THE GOVERNMENT ACCOUNT AS PER SECTION 200 OF THE INCOME TAX ACT 1961. THESE BEING THE FACTS ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 154 OF THE ACT IN ORDER AND LEARNED COMMISS IONER OF INCOME TAX (APPEALS) CLEARLY ERRED IN DELETING THE ADDITION OF RS.90 08 010/- MA DE BY THE ASSESSING OFFICER BY PASSING THE ORDER UNDER SECTION 154 OF THE INCOME TAX ACT 1961 . 4 ITA NO. 1742-AHD-2009 6. HAVING HEARD BOTH THE SIDES WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT FOR THE ASSESSM ENT YEAR UNDER APPEAL THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) ON 29.11 .2007 WHEREIN HE APPLIED N.P. RATE OF 5% ON GROSS PAYMENT RESULTING IN ADDITION OF RS.17 97 536/-. THE AFORESAID ADDITION WAS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN QUANTUM APPEAL. ON FURTHER APPEAL BY THE ASSESSEE ITAT A BENCH AHMEDABAD VIDE ORDER DATED 24.09.2010 (SUPRA) DIRECTED THE ASSESSING OFFICER TO APPLY NET PROFIT RATE AT 3.76% AS AGAINST 5% CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). IT IS A WELL S ETTLED LAW THAT ONCE INCOME IS ESTIMATED BY APPLYING NET PROFIT RATE NO FURTHER ADDITION/ DISA LLOWANCE CAN BE MADE. EVEN IF THERE IS ANY DEBATE OR DOUBT ON THIS PROPOSITION OF LAW IN OUR CONSIDERED OPINION THIS CANNOT BE RECTIFIED BY INVOKING THE PROVISIONS CONTAINED IN SECTION 154 OF THE INCOME TAX ACT 1961. ON THIS GROUND ALONE WE UPHOLD THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE ADDITION OF RS.90 08 010/- MADE BY THE ASSESSING OF FICER UNDER SECTION 154 BY INVOKING THE PROVISIONS CONTAINED IN SECTION 40(A)(IA) OF THE IN COME TAX ACT 1961. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25.01.20 11 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.