M/s. A.K.Patel & Co.,(Constn.) Pvt.Ltd.,, Surat v. The ACIT.,Circle-1,, Surat

ITA 2943/AHD/2009 | 2005-2006
Pronouncement Date: 08-07-2011 | Result: Dismissed

Appeal Details

RSA Number 294320514 RSA 2009
Assessee PAN MARCH2005U
Bench Ahmedabad
Appeal Number ITA 2943/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 10 day(s)
Appellant M/s. A.K.Patel & Co.,(Constn.) Pvt.Ltd.,, Surat
Respondent The ACIT.,Circle-1,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 08-07-2011
Date Of Final Hearing 04-07-2011
Next Hearing Date 04-07-2011
Assessment Year 2005-2006
Appeal Filed On 29-10-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI D. K. TYAGI JUDICIAL MEMBER AND SHRI A. K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.2943 3417/AHD/2009 & 1426/ AHD/2010 (ASSESSMENT YEARS 2005-06 2006-07 & 2007-08) A. K. PATEL & CO. (CONSTRUCTION) PVT. LTD. 401-2 B WING PRESIDENT PLAZA NEAR MAHAVIR HEART HOSPITAL RING ROAD SURAT 395001 VS. DCIT CIRCLE 1 SURAT PAN/GIR NO. : AACA8128Q I.T.A.NO. 3055/AHD/2009 (ASSESSMENT YEAR 2005-06) DCIT CIRCLE 1 VS. A. K. PATEL & CO. SURAT (CONSTRUCTION) PVT. LTD. 401-2 B WING PRESIDENT PLAZA NEAR MAHAVIR HEART HOSPITAL RING ROAD SURAT 395001 (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI KAMLESH N BHATT AR RESPONDENT BY: SHRI JAI RAJ KUMAR SR. DR O R D E R PER BENCH:- OUT OF THIS BUNCH OF FOUR APPEALS THREE APPEALS A RE FILED BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 2006-07 & 2007-08 IN I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 2 CONNECTION WITH DISALLOWANCE MADE BY THE A.O. U/S 4 0(A)(IA) OF THE INCOME TAX ACT 1961 IN THESE THREE YEARS WHEREAS REMAININ G ONE APPEAL IS FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF CIT(A) I SURAT DATED 10.09.2009 FOR THE ASSESSMENT YEAR 2005-06 IN RESPECT OF DELET ION OF PENALTY IMPOSED BY THE A.O. OF RS.3 22 257/- U/S 271(1)(C) OF THE ACT. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C OMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THREE APPEALS FILED BY THE ASSE SSEE INVOLVING SIMILAR GROUND OF APPEAL WHICH ARE IDENTICAL IN ALL THE THR EE YEARS IN RESPECT OF DISALLOWANCE MADE BY HT A.O. U/S 40(A)(IA) OF THE I NCOME TAX ACT 1961. ONE MORE GROUND WAS RAISED BY THE ASSESSEE IN ASSES SMENT YEAR 2005-06 IN RESPECT OF VALIDITY OF REASSESSMENT PROCEEDINGS IN THAT YEAR BEING GROUND NO.1 IN THAT YEAR BUT NO ARGUMENT WAS ADVANCED BY T HE LD. A.R. IN RESPECT OF THIS GROUND IN THAT YEAR AND HENCE THIS GROUND NO.1 IN ASSESSMENT YEAR 2005-06 IS REJECTED AS NOT PRESSED. 3. THE BRIEF FACTS OF THE CASE REGARDING THE ISSUE RELATING TO DISALLOWANCE U/S 40(A)(IA) IN ASSESSMENT YEAR 2005-06 ARE NOTED BY THE LD. CIT(A) IN PARA 2.1 TO 2.3 OF HIS ORDER WHICH ARE REPRODUCED BELOW : 2.1 THIS IS REGARDING DISALLOWANCE OF RS.37 89 063 /- U/S 40(A(IA). IN THE ASSESSMENT ORDER THE A.O. HAS STATED THAT SUMMARY OF TDS AMOUNT PERTAINING TO THE AMOUNT PAID TO SUB CONTRACTOR ARE AS UNDER:- DESCRIPTION AMOUNT IN RS. TDS AMOUNT AMOUNT RELATED TO THE SAME AMOUNT TO BE DISALLOWED SUBCONTRACT EXPENSES: AMOUNT OF THE DISALLOWANCE AS PER THE SHOW CAUSE 12 23 422 11 11 19 839 LESS: TDS P AID DURING THE F.Y. 2004 - 2005 4 97 193 4 50 99 021 I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 3 7 26 229 6 60 20 818 LESS: AMOUNT WHICH GETS REDUCED DUE TO THE AMENDMENT TO THE SECTION 40(A)(IA) AS PER WHICH THE TDS ON THE PAYMENT MADE IN MARCH CAN BE DEPOSITED TILL FILING OF THE RETURN 6 84 550 6 22 31 755 AMOUNT TO BE DISALLOWED 41 679 37 89 063 37 89 063 THE A.O. ASKED THE ASSESSEE AS TO WHY THE ABOVE SAI D AMOUNT BE NOT DISALLOWED. THE ASSESSEE REPLIED TO THE A.O. TH AT WITH RESPECT TO THE DETAILS OF TDS PAYMENT RELATABLE INDIVIDUAL PAY MENTS TO EACH PARTY THE LIABILITY OF TDS IN RESPECT OF SUB-CONTR ACTOR PAYMENT AS ALSO CARTING MUKADAM CHARGES FALLS UNDER THE PROVISIONS OF SECTION 194C. THE DAY-TO-DAY WORK OF DEDUCTION AND PAYMENT OF TDS IS LOOKED AFTER BY THE NON-TECHNICAL ACCOUNTING STAFF WHEREBY INADV ERTENTLY SOME TIMES TDS FOR A PARTICULAR MONTH MAY HAVE BEEN DEPOSITED LATE BY THE STAFF AND IN SUCH CASES MIGHT HAVE DEPOSITED EARLIER. THE ASSESSEE STATED THAT IF THE AMOUNT OF EXPENDITURE AND TDS U/S.194C IS VIEWED IN TOTALITY THE FOLLOWING POSITION WILL ARISE:- THE ASSESSEE FURTHER SUBMITTED THAT AS PER THE AMEN DED PROVISIONS OF SECTION 40(A}(IA) THE TOTAL TDS LIABILITY IN RES PECT OF EXPENDITURE UPTO 5. N HEAD OF TDS AMOUNT OF EXPENDITURE U/S 194C TDS LIABILITY U/S 194C APRIL TO FEB MARCH TOTAL APRIL TO FEB MARCH TOTAL 1 SUB- CONTRACTOR 3 35 97 200 7 75 22 639 11 11 19 839 3 69 569 8 53 853 12 23 422 2 CARTING MUKADAM 39 46 625 72 76 769 1 12 23 394 43 317 80 066 1 23 383 TOTAL 3 75 43 825 8 47 99 408 12 23 43 23 3 . 4 12 886 9 33 919 13.46 805 LESS: TDS PAID UPTO MARCH 2005 U/5.194C {EXCL. 201( 1A)> 4 97 089 4 97 089 TDS PAID UPTO 29 10.05 I.E. BEFORE FILING RETURN {EXCL. 201(1A)} -- 8 49 715 8 49 716 OUTSTANDING TDS LIABILITY AS ON 29.10.2005 NIL I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 4 THE MONTH OF FEBRUARY 2005 IS RS.4 12 886/- AS AGAI NST WHICH THE ASSESSEE COMPANY HAD PAID TOTAL TDS OF RS.4 97 089/ - UPTO 31.03.2005. THE TOTAL LIABILITY IN RESPECT OF EXPENDITURE INCUR RED IN THE MONTH OF MARCH 2005 IS RS.9 33 919/- OUT OF WHICH RS.84 203/ - IS PAID BEFORE 31.03.2005 AND THE BALANCE RS.8 46 716/- HAS BEEN P AID PRIOR TO 29.10.2005 I.E. UPTO THE DATE OF FILING OF RETURN OF INCOME. IN VIEW OF THE ABOVE THE ASSESSEE STATED THAT THERE WAS NO LATE D EPOSIT OF TDS AND THE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE. 2.2 THE A.O. DID NOT ACCEPT THE ABOVE EXPLANATION.. . STATED THAT IN RESPECT OF AMOUNT OF RS.37 89.0637- THERE W AS TPS LIABILITY OF RS 4 12.S86/- WHICH WAS DEDUCTED. THE ASSESSEE S HOULD HAVE PAID THIS TDS BY 31.03.20O5 BUT IT HAS BEEN PAID ON 12.0 4.2005 AND 30.06.2005 AND THEREFORE THIS AMOUNT NEEDS TO BE DISALLOWED U/S.40(AJ(IA). 2.3 THE ASSESSEE FURTHER SUBMITTED THAT WITH RESPEC T TO THE SUB- CONTRACT EXPENSES THE ASSESSEE'S INCOME IS THE COMM ISSION INCOME .AND HENCE NO DEDUCTION U/S.194C IS REQUIRED. THE A.O. D ID NOT ACCEPT THE ABOVE EXPLANATION AND STATED THAT THE ASSESSEE HAS ON A LARGE PORTION OF THIS PAYMENT DEDUCTED TDS AND PAID ON VARIOUS DATES. THE TDS PROVISIONS ARE INDEPENDENT AND IF THE ASSESSEE WANTS TO CLAIM THE PAYMENT PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY. HE THEREFORE MADE A DISALLOWANCE UNDER THIS ACT. 4. SIMILARLY THE FACTS FOR THE ASSESSMENT YEAR 200 6-07 ARE NTOED BY THE LD. CIT(A) IN PARA 2.1 OF HIS ORDER WHICH IS ALSO REPRODUCED BELOW: 2.1 THIS IS REGARDING DISALLOWANCE OF RS.6 63 177/- BEING THE SUM PAID TO THE SUB-CONTRACTORS. THE DISALLOWANCE HAS BEEN MADE U/S.40(A)(IA). IN THE ASSESSMENT ORDER THE A.O. HAS STATED THAT SUMMARY OF TDS AMOUNT- PERTAINING TO THE AMOUNT PAID TO SUB CONTRACTOR ARE AS UNDER:- I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 5 SR. NO. AMOUNT PAID/ CREDITED TDS LIABILITY DUE DATE DATE OF PAYMENT ALLEGED DEFAULT REMARKS NOT OAK ID TILL 1 2 95 262 3 248 31.03.06 DATE 2 95 262 'JF PARTY-WISE ENTRY-WISE DETAILS IS ENCLOSED IN ANNEXURE - I 2 3 67 915 4 047 31.03.06 18.07.06 3 67 915 - DO - 6 63 177 7 295 6 63 177 THE A.O. ASKED THE ASSESSEE AS TO WHY THE ABOVE SAI D AMOUNT BE NOT DISALLOWED. THE ASSESSEE REPLIED TO THE A.O. THAT W ITH RESPECT TO THE DETAILS OF TDS PAYMENT RELATABLE INDIVIDUAL PAYMENTS TO EAC H PARTY THE LIABILITY OF TDS IN RESPECT OF SUB-CONTRACTOR PAYMENT AS ALSO CARTING MUKADAM CHARGES FALLS UNDER THE PROVISIONS OF SECTION 194C. THE DAY-TO-DAY WORK OF DEDUCTION AND PAYMENT OF TDS IS LOOKED AFTER BY THE NON-TECHNICAL ACCOUNTING STAFF WHEREBY INADVERTENTLY SOME TIMES T DS FOR A PARTICULAR MONTH MAY HAVE BEEN DEPOSITED LATE BY THE STAFF AND IN SUCH CASES MIGHT HAVE DEPOSITED EARLIER. THE ASSESSEE FURTHER SUBMITTED T HAT WITH RESPECT TO THE SUB-CONTRACT EXPENSES THE ASSESSEE'S INCOME IS THE COMMISSION INCOME AND HENCE NO DEDUCTION U/S.194C IS REQUIRED. THE A. O. DID NOT ACCEPT THE ABOVE EXPLANATION. THE TDS PROVISIONS ARE INDEPENDE NT AND IF THE ASSESSEE WANTS TO CLAIM THE PAYMENT PROVISIONS OF SECTION 40(A)(IA) WOULD APPLY. HE THEREFORE MADE A DISALLOWANCE UNDER THIS ACT. 5. IN ASSESSMENT YEAR 2007-08 THE A.O. MADE DISALL OWANCE OF RS.18 87 229/- ON THE SAME BASIS AND HENCE WE ARE N OT REPRODUCING THE FACTS OF THIS YEAR WHICH ARE ADMITTED BY BOTH THE SIDES T O BE IDENTICAL. 6. THEREAFTER THE ASSESSEE CARRIED THE MATTER IN A PPEAL BEFORE LD. CIT(A) IN ALL THE THREE YEARS. IN ASSESSMENT YEAR 2005-06 IT WAS NOTED BY THE LD. CIT(A) IN PARA 2.3 OF HIS ORDER THAT THE AS SESSEE HAS ADMITTED THAT ON A SUB-CONTRACTORS PAYMENT OF RS.37 89 063/- TDS OF RS.40 845/- WAS DEDUCTED BUT WAS PAID AFTER THE DUE DATE OF FILING OF RETURN OF INCOME I.E. 31.10.2005 AND THE ASSESSEE HAS FAILED TO FURNISH A NY REASON AS TO WHY AFTER TDS HAS BEEN DEDUCTED THE SAME HAS NOT BEEN PAID I N TIME. ON THIS BASIS I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 6 LD. CIT(A) UPHELD THE ASSESSMENT ORDER ON THIS ISSU E IN ASSESSMENT YEAR 2005-06. 7. SIMILARLY IN ASSESSMENT YEAR 2006-07 IT IS NOT ED BY THE LD. CIT(A) THAT OUT OF TDS DEDUCTED BY THE ASSESSEE FROM THE P AYMENT TO SUB-CONTRACTOR OF RS.7295/- IN RELATION TO THE AMOUNT OF EXPENSES PAYABLE TO THE SUB- CONTRACTOR OF RS.6 63 177/- THE ASSESSEE HAS MADE PAYMENT OF PART AMOUNT OF TDS I.E. RS.4047/- ON 18.07.2006 WHEREAS REMAINI NG AMOUNT OF TDS OF RS.3248/- WAS NOT PAID BY THE ASSESSEE TILL THE DAT E OF THE ORDER OF LD. CIT(A) I.E. 16.11.2009. ON THIS BASIS HE UPHELD T HE ASSESSMENT ORDER ON THIS ISSUE IN ASSESSMENT YEAR 2006-07. ON SIMILAR BASIS LD. CIT(A) HAS UPHELD THE ASSESSMENT ORDER ON THIS ISSUE IN ASSESS MENT YEAR 2007-08 ALSO AND THE ASSESSEE IS IN FURTHER APPEAL BEFORE US FOR ALL THESE THREE YEARS. 8. IT IS SUBMITTED BY THE LD. A.R. BEFORE US THAT T HE ASSESSEE IS FOLLOWING THIS SYSTEM OF ACCOUNTING SINCE VERY BEGINNING THAT FOR THE PORTION OF CONTRACT NOT UNDERTAKEN BY THE ASSESSEE ITSELF BUT ASSIGNED TO SUB-CONTRACTOR THE ASSESSEE IS ELIGIBLE ONLY FOR AN AGREED AMOUNT OF COMMISSION AND ACCORDINGLY IN THE P & L ACCOUNT ALSO THE ASSESSE E IS DEDUCTING THE VALUE OF THAT PORTION OF THE CONTRACT WHICH IS GIVEN AWAY ON SUB-CONTRACT FROM THE GROSS INCOME ON ACCOUNT OF THE CONTRACT WORK. IN S UPPORT OF THIS CONTENTION OUR ATTENTION WAS DRAWN TO PAGE 21 OF THE PAPER BOO K CONTAINING P & L ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2006. HE AGAIN DRAWN OUR ATTENTION TO PAGE 24 OF THE PAPER BOOK AND POINTED OUT THAT THE ASSESSEE IS DECLARING INCOME ON ACCOUNT OF COMMISSION OF CONTRACT SUBLET TO THE EXTENT OF RS.16.38 LACS IN ASSESSMENT YEAR 2006-07 AND RS.16. 86 LACS IN ASSESSMENT I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 7 YEAR 2005-06 WHICH IS INCLUDED IN OTHER INCOME CRED ITED IN THE P & L ACCOUNT. IT IS SUBMITTED THAT THE PAYMENTS MADE/PA YABLES TO THE SUB- CONTRACTOR HAS NOT BEEN CLAIMED AS DEDUCTION BY THE ASSESSEE IN THE P & L ACCOUNT FOR ANY OF THESE THREE YEARS AND HENCE THI S DISALLOWANCE MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40(A )(IA) IN RESPECT OF PAYMENT TO SUB-CONTRACTOR IS NOT JUSTIFIED. A QUE RY WAS RAISED BY THE BENCH AS TO WHETHER LIABILITY OF THE ASSESSEE COMPA NY WITH THE PRINCIPAL HAS CONTINUED OR NOT IT WAS SUBMITTED THAT THE ASSESSE E REMAINED LIABLE TO THE PRINCIPAL ALTHOUGH THE WORK IS BEING UNDERTAKEN BY THE SUB-CONTRACTORS. ONE MORE QUERY WAS RAISED BY THE BENCH AS TO WHETHER TH E TDS WAS DEDUCTED BY THE ASSESSEE OR NOT FORM THE PAYMENTS TO SUB-CONTRA CTORS AND WHAT IS THE RATE OF TDS ON THAT ACCOUNT. IN REPLY IT WAS SUBMITTED BY THE LD. A.R. THAT THE ASSESSEE HAS MADE DEDUCTION OF TDS FORM THE PAYMENT S MADE TO SUB- CONTRACTORS IN ALL THE THREE YEARS @ 1% WHICH IS AP PLICABLE RATE FOR PAYMENT TO SUB-CONTRACTORS. BUT SOME OF THE PAYMENTS OF TD S WERE DELAYED AND THE DISALLOWANCE WAS MADE BY THE A.O. IN THIS RESPECT O NLY. ONE MORE QUERY WAS RAISED BY THE BENCH AS TO WHETHER AMOUNT DISALL OWED IN ONE YEAR WAS ALLOWED IN THE SUBSEQUENT WHEN PAYMENT OF TDS WAS M ADE BY THE ASSESSEE AND IN REPLY IT WAS SUBMITTED BY THE LD. A.R. THAT THE A.O. HAS ALLOWED DEDUCTION IN THAT SUBSEQUENT YEAR I.E. IN THE YEAR OF PAYMENT OF TDS AND HENCE THE DEDUCTION SHOULD BE WITHDRAWN IN THAT YE AR IF IT IS HELD THAT DEDUCTION IS ALLOWABLE IN THE YEAR IN WHICH EXPENSE S WERE INCURRED. 9. AS AGAINST THIS LD. D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 8 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS IS NOT THE CASE OF THE ASSESSEE THAT NO TDS IS DEDUCTIBLE BY THE ASSESSEE FORM THE PAYMENTS MADE BY THE ASSESSEE TO THE SUB-C ONTRACTORS OUT OF THE PAYMENTS RECEIVED BY IT FROM THE PRINCIPAL AFTER DE DUCTING ITS OWN COMMISSION AND OTHER AGREED DEDUCTIONS. THE ASSESS EE HAS IN FACT DEDUCTED THE TDS @ 1% FROM SUCH PAYMENTS MADE BY THE ASSESSE E TO THE SUB- CONTRACTORS. THE CLAIM OF THE ASSESSEE IS THAT SIN CE THE AMOUNT OF PAYMENT MADE TO THE SUB-CONTRACTOR HAS NOT BEEN DEBITED TO THE P & L ACCOUNT AND ONLY THE COMMISSION INCOME BEING 2% OF THE CONTRACT ED VALUE EARNED BY THE ASSESSEE ON THAT PORTION OF THE CONTRACT WHICH WAS AWARDED TO THE SUB- CONTRACTOR HAS BEEN DECLARED AS INCOME IN THE P & L ACCOUNT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT I N RESPECT OF THE PAYMENT MADE TO SUB-CONTRACTOR BECAUSE THE SAME HAS NOT BEE N CLAIMED BY THE ASSESSEE AS DEDUCTION BY WAY OF DEBITING TO THE P & L ACCOUNT. WITH REGARD TO THIS ARGUMENT WE ARE OF THE CONSIDERED OPINION THAT THIS IS BY NOW A SETTLED POSITION OF LAW THAT ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT CONCLUSIVE AND MERELY BECAUSE THE ASSESSEE HAS CLAIMED DEDUCTION OF GROSS VALUE OF SUB-CONTRACT FROM ITS GROSS INCOME F ORM CONTRACT AND HAS SHOWN COMMISSION INCOME SEPARATELY IN THE P & L ACC OUNT THIS CANNOT BE ACCEPTED THAT THE ASSESSEE HAS NOT DEBITED THE AMOU NT OF PAYMENTS MADE TO SUB-CONTRACTOR IN ITS P & L ACCOUNT. THE SAME FACT CAN BE ACCOUNTED FOR IN A DIFFERENT MANNER ALSO. INSTEAD OF SHOWING DEDUCTIO N OF RS.9 79 55 473/- FROM CONTRACT WORK INCOME AND DECLARATION OF COMMIS SION INCOME IN THAT YEAR FOR CONTRACT SUB LET OF RS.16 38 766/- AS HAS BEEN DONE BY THE ASSESSEE THE ASSESSEE COULD HAVE DEBITED RS.9 63 16 707/- (R S.9.79 55 473 I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 9 16 38 766/-) IN THE P & L ACCOUNT BY WAY OF PAYMENT TO SUB-CONTRACTOR AND IN THAT SITUATION ALSO THE PROFITS OF THE ASSESSEE WOULD HAVE BEEN THE SAME. HENCE MERELY BECAUSE A DIFFERENT METHOD OF ACCOUNT ING HAD BEEN FOLLOWED BY THE ASSESSEE THIS CLAIM IS NOT ACCEPTABLE THAT ASSESSEE HAD NOT DEBITED THE AMOUNT PAID TO SUB-CONTRACTOR AS EXPENSE IN THE P & L ACCOUNT BECAUSE THE ASSESSEE HAS DEDUCTED GROSS AMOUNT OF THE SUB CONTR ACT WORK OF RS.979.55 LACS FROM ITS INCOME AND HAS DECLARED ONLY RS.16.38 LACS AS COMMISSION INCOME AND HENCE IN NUTSHELL THE ASSESSEE HAS CLA IMED DEDUCTION OF PAYMENTS MADE TO SUB-CONTRACTOR OF RS.963.17 LACS. AS PER THE AGREEMENT OF THE ASSESSEE WITH THE SUB-CONTRACTOR WHICH IS AVAIL ABLE ON PAGES 53 TO 56 OF THE PAPER BOOK IT IS SEEN THAT IT HAS BEEN AGREED THAT THE 1 ST PARTY I.E. THE ASSESSEE IS LIABLE TO REMAIN PRESENT IN VARIOUS GOV ERNMENT OFFICES WHEREVER REQUIRED. IT IS ALSO AGREED BETWEEN THE ASSESSEE A ND THE SUB-CONTRACTOR THAT IF A DISPUTE ARISES WITH THE 2 ND PARTY AND/OR WITH THE GOVERNMENT DEPARTMENT AND IF THE 2 ND PARTY LEAVE OR STOPPED THE CONTRACT WORK OR EVEN I F ACTION IS TAKEN BY THE DEPARTMENT THE 1 ST PARTY I.E. THE ASSESSEE WILL TAKE CHARGE TO COMPLETE THE CONTRACT WORK AND 2 ND PARTY CANNOT CREATE ANY HINDRANCES. THESE CLAUSES OF AGREEMENT OF THE ASSESSEE COMPANY WITH THE SUB- CONTRACTORS SHOW THAT EVEN AFTER SUB-CONTRACTING TH E WORK THE PRIME RESPONSIBILITY IS OF THE ASSESSEE AND HENCE THE AS SESSEE IS THE OWNER OF THE ENTIRE INCOME RECEIVED AGAINST THE CONTRACT WORK AN D IT CAN CLAIM DEDUCTION ON ACCOUNT OF PAYMENTS MADE TO SUB-CONTRACTORS BUT THIS IS NOT ACCEPTABLE THAT THE ASSESSEE IS EARNING ONLY COMMISSION INCOME AND THE SAME SHOULD BE ACCEPTED AS COMMISSION INCOME ONLY INSTEAD OF GROSS INCOME BEING ASSESSED IN THE HANDS OF THE ASSESSEE AFTER ALLOWING DEDUCTI ON ON ACCOUNT OF PAYMENT TO SUB-CONTRACTOR TO THE EXTENT IT IS ALLOWABLE AS PER LAW. HENCE WE DO NOT I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 10 FIND ANY MERIT IN THESE CONTENTIONS OF THE ASSESSEE THAT SINCE THE PAYMENTS MADE TO SUB-CONTRACTORS HAS NOT BEEN DEBITED TO THE P & L ACCOUNT OF THE ASSESSEE SECTION 40(A)(IA) IS NOT APPLICABLE WITH REGARD TO SUCH PAYMENTS TO SUB-CONTRACTORS ALTHOUGH THE ASSESSEE ITSELF IS DED UCTING TDS @1% FROM THOSE PAYMENTS MADE TO SUB-CONTRACTORS. WE THEREF ORE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) IN ALL THE THREE YEARS. 11. NOW WE TAKE UP THE REMAINING ONE APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IN I.T.A. NO. 3055/AHD/2009 . THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1) ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S. 271(L)(C) OF THE ACT OF RS. 3 22 257 ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INC RESPECT OF LOW DISCLO SURE OF GP AS COMPARED TO IMMEDIATE EARLIER YEAR. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LEARNED CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSES SING OFFICER. 3) IT IS THEREFORE PRAYED THAT THE ORDER O F THE CIT(A) MAY BE SET- ASIDE AND THAT OF ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 12. THE BRIEF FACTS OF THE CASE IN THIS YEAR FOR TH IS ISSUE ARE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. MADE ADD ITION OF RS.7 91 850/- ON ACCOUNT OF FALL IN GROSS PROFIT. HE HAS MADE AD DITION OF RS.57 510/- ON ACCOUNT OF EXCESS CLAIM OF DEPRECIATION. IN ADDITI ON TO THIS HE MADE FURTHER ADDITION OF RS.31 303/- ON ACCOUNT OF CHARITY AND D ONATION WHICH WAS NOT ADDED BACK BY THE ASSESSEE IN THE COMPUTATION OF IN COME. IN THIS MANNER HE I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 11 MADE TOTAL ADDITION OF RS.8.80 663/-. HE HAS INITI ATED PENALTY PROCEEDINGS AND AFTER HEARING THE ASSESSEE IN PENALTY PROCEEDIN GS HE IMPOSED A PENALTY OF RS.3 22 257/-. AGAINST THIS PENALTY ORDER THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE PENALTY WITH REGAR D TO DISALLOWANCE OF RS.57 510/- ON ACCOUNT OF DEPRECIATION AND RS.31 30 3/- ON ACCOUNT OF CHARITY AND DONATION. WITH RESPECT TO GROSS PROFIT ADDITION LD. CIT(A) HAS DELETED THE PENALTY. NOW THE REVENUE IS IN APPEAL BEFORE US. 13. LD. D.R. SUPPORTED THE PENALTY ORDER WHEREAS TH E LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). IT IS ALSO SUBMITTED BY H IM THAT IN ASSESSMENT YEAR 2004-05 ALSO PENALTY WAS IMPOSED BY THE A.O. IN RE SPECT OF ADDITION OF RS.10 76 243/- MADE ON ACCOUNT OF LOW GP BUT THE SA ME WAS DELETED BY THE LD. CIT(A) AND APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) HAS BEEN DISMISSED BY THE TRIBUNAL IN I.T.A.NO. 356 6/AHD/2008 DATED 12.02.2010. HE SUBMITTED A COPY OF THE TRIBUNAL DE CISION AND DRAWN OUR ATTENTION TO PARA 60 AND 61 OF THIS TRIBUNAL ORDER WHICH IS A COMBINED ORDER FOR THE ASSESSMENT YEARS 2001-02 TO 2005-06. IT IS POINTED OUT THAT IN ASSESSMENT YEAR 2003-04ALSO SIMILAR ADDITION WAS M ADE BY THE A.O. OF RS.10 LACS FOR WHICH ALSO A PENALTY WAS IMPOSED BY THE A.O. OF RS.3 64 927/- WHICH WAS DELETED BY THE CIT(A) IN TH AT YEAR. THE APPEAL OF THE REVENUE AGAINST THE ORDER OF CIT(A) IN ASSESSME NT YEAR 2003-04 WAS ALSO DISMISSED BY THE TRIBUNAL IN I.T.A. NO. 308/AHD/200 9 DATED 12.02.2010 AND HE POINTED OUT THAT PARA 62 AND 63 OF THE TRIBUNAL ORDER ARE RELEVANT FOR THIS PURPOSE. I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 12 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL ORDER CITED BY THE LD. A.R. RENDERED IN TH E ASSESSEES OWN CASE. IN ASSESSMENT YEAR 2003-04 AND 2004-05 ALSO PENALTY W AS IMPOSED BY THE A.O. IN RESPECT OF THE ADDITION MADE BY THE A.O. ON ACCOUNT OF LOW G.P. IN THOSE TWO YEARS ALSO PENALTY WAS DELETED BY LD. CI T(A) AND THE APPEALS OF THE REVENUE IN THOSE TWO YEARS WERE ALSO DISMISSED BY THE TRIBUNAL. WE ARE OF THE CONSIDERED OPINION THAT ADDITION ON ACCOUNT OF LOW G.P. WAS MADE BY THE A.O. ONLY ON ESTIMATE BASIS AND FOR SUCH ADDITI ON WITHOUT BRINGING ON RECORD ANY SPECIFIC ADVERSE MATERIAL PENALTY IS NO T JUSTIFIED. THEREFORE THE TRIBUNAL ORDER IN EARLIER TWO YEARS I.E. ASSESSMENT YEAR 2003-04 AND 2004-05 ALSO SUPPORT THE CASE OF THE ASSESSEE AND HENCE BY RESPECTFULLY FOLLOWING THESE TRIBUNAL ORDERS WE DECLINE TO INTERFERE IN T HE ORDER OF LD. CIT(A) FOR THIS YEAR ALSO. 15. IN THE RESULT APPEAL OF THE REVENUE FOR THE AS SESSMENT YEAR 2005-06 STANDS DISMISSED. 16. IN THE COMBINED RESULT ALL THE THREE APPEALS O F THE ASSESSEE AND ONE OF THE REVENUE ARE DISMISSED. 17. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH JULY 2011. SD./- SD./- (D. K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 08 TH JULY 2011 SP I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 13 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR AHMEDABAD 6. THE GUARD FILE 1. DATE OF DICTATION 04/07/2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 05/07/2011 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .. I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 14 I.T.A.NO. 2943 3417 1426/AHD/2010 I.T.A.NO. 3055/AHD/2009 15 10.