ITO, Guna v. Sh. Banshilal Maheshwari, Guna

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI P.K. BANSAL ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER ITA NO.305/AGR/2009 ASST. YEAR: 2006-07 INCOME TAX OFFICER VS. SHRI BANSHILAL MAHESHWA RI GUNA (M.P.) RAGHOGARH DISTT. GUNA (M.P). (PAN : ACMPM 9232 E). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.K. SRIVASTAVA SR. D.R. RESPONDENT BY : SHRI R.C. JAIN & SHRI AJAY DAGA C .A. ORDER PER P.K. BANSAL A.M.: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) DATED 29.04.2009 BY TAKING THE FOLLOWING EFFECTIVE GROUND S OF APPEAL :- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (A) HAS ERRED N LAW IN 1. DELETING THE ADDITION OF ` 77 26 488/- ON ACCOUNT OF DISALLOWANCE MADE BY THE A.O. U/S. 40(A)(IA) OF THE INCOME TAX ACT. 2. DELETING THE ADDITION OF ` 2 10 487/- MADE BY THE A.O. U/S. 69 OF THE INCOME TAX ACT. 2. THE BRIEF FACTS IN RESPECT TO GROUND NO.1 ARE TH AT THE ASSESSEE BEING INDIVIDUAL DERIVED INCOME FROM PLYING OF OWN THREE TANKERS AND ONE TRU CK AND MAINTAINED REGULAR BOOKS OF ACCOUNTS. INCOME FROM THE ASSESSEE UNDER TANKER AN D TRUCK PLYING BUSINESS WAS SHOWN AS PER THE PROVISIONS OF SECTION 44AE OF THE INCOME-TAX ACT 1 961 (THE ACT HEREINAFTER) BUT THE AUDIT 2 UNDER SECTION 44AB WAS NOT CARRIED OUT FOR THIS BUS INESS. THE ASSESSEE ALSO DERIVED INCOME FROM COMMISSION RECEIVED ON PLYING THE VEHICLES OF OTHER OWNERS FOR WHICH REGULAR BOOKS WERE MAINTAINED WHICH WERE DULY AUDITED UNDER SECTION 44 AB OF THE ACT AS TURNOVER EXCEEDS ` 40 LACS. ALTHOUGH IN THE PRECEDING YEAR THE TURNOVER FROM THIS BUSINESS WERE LESS THAN ` 40 LACS AND THE INCOME EARNED WAS ALSO NOT MORE THAN ` 1 LAC THE ASSESSEE DECLARED THE INCOME AT ` 4 83 771/-. THE ASSESSING OFFICER DISALLOWED A SUM OF ` 77 26 488/- UNDER SECTION 40(A)(IA) HOLDING THAT THE ASSESSEE WAS LIABLE FOR DEDUCTION OF THE TDS AS PER THE PROVISIONS OF SECTION 194C. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A ). BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT THE ASSESSEE IS AN INDIVIDUAL AND TH E PROVISIONS OF SECTION 194C WERE NOT APPLICABLE IN HIS CASE AS HIS TURNOVER DID NOT EXCE ED ` 40 LACS SO FAR THE INCOME EARNED ON PLYING THE VEHICLES OF THE OTHER PARTIES ARE CONCERNED IN THE EARLIER ASSESSMENT YEAR AND THEREFORE THE ASSESSEE WAS NOT UNDER AN OBLIGATION TO GET HIS ACC OUNT AUDITED UNDER SECTION 44AB. THE OTHER CONTENTION TAKEN BY THE ASSESSEE WAS THAT THE ASSES SING OFFICER HAS PRESUMED THAT THE ASSESSEE HAS SUB-CONTRACTED THE WORK. HOWEVER THERE IS NOT HING ON RECORD TO SUGGEST THAT THERE IS ANY AGREEMENT EITHER ORAL OR WRITTEN EXECUTED BETWEEN T HE ASSESSEE OR ANY OTHER PARTIES TO WHOM THE FREIGHT PAYMENTS WERE MADE BY THE ASSESSEE. THE CI T(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE DISALLOWANCE MADE UNDER S ECTION 40(A)(IA). 3. BEFORE US THE LD. A.R. VEHEMENTLY CONTENDED THA T THE ASSESSEE HAS IN THE YEAR ENDED 31.03.2005 THE TOTAL FREIGHT RECEIPT OF ` 31 24 476/- ON THE VEHICLES TAKEN ON HIRE. THE ASS ESSEE HAS RECEIVED FROM OWN PLYING BUSINESS AMOUNTING TO ` 42 13 788/- ON WHICH HE HAS SHOWN PROFIT UNDER SECTION 44AE AT ` 2 13 702/- DURING THE YEAR. FOR THIS OUR ATTENTIO N WAS DRAWN TO PAGE NOS.3 & 4 OF THE PAPER BOOK. THUS HE CONTENDED TH AT SINCE THE ACTUAL FREIGHT RECEIPTS ON HIRING OF THE VEHICLES OF OTHER PARTIES WERE LESS THAN ` 40 LACS IN THE YEAR EARLIER TO THE A.Y. THEREFORE 3 THE PROVISIONS OF SECTION 44AB WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. REFERRING TO SECTION 194C OF THE ACT IT WAS CONTENDED THAT THE ASSESSEE WAS NOT UNDER OBLIGATION TO DEDUCT TDS AS HE IS AN INDIVIDUAL AND DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE IMPUGNED FINANCIAL YEAR THE AMOUNT PAID TO THE OTHER VEHICL E OWNERS WERE LESS THAN ` 40 LACS. THE ASSESSING OFFICER HAS IGNORED THE PROVISIONS OF SEC TION 44AB AND THEORETICALLY COMPUTED THE FIGURE OF THE FREIGHT EXCEEDING ` 40 LACS. THE ASSESSING OFFICER IS NOT EMPOWERED UN DER ANY PROVISIONS OF SECTION 44AB TO RECOMPUTE THE FIGURE OF THE GROSS RECEIPTS IN A THEORETICAL MANNER. THE CIT(A) RIGHTLY DELETED THE ADDITION. THE APPEA L IS FILED WITHOUT APPLYING THE MIND. EVEN ON MERIT IT WAS CONTENDED THAT THE CASE OF THE ASSESS EE IS DULY COVERED BY THE DECISIONS OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITED RICE LAND LIMITED 217 CTR (P&H) 332 AS WELL AS IN THE CASE OF CIT VS. BHAGWATI STEE LS 47 DTR (P&H) 75. 4. LD. D.R. RELIED ON THE ORDER OF THE ASSESSING OF FICER. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ALONG WITH THE ORDERS OF THE TAX AUTHORITIES BELOW. IT IS UNCONTROVERTED FACT THAT THE ASSESSEE IS AN INDIVIDUAL. THE EXPLANATION TO SECTION 194C DEFINES THE SPECIFIED PERSON FOR THE P URPOSE OF SECTION 194C(1). THE SAID EXPLANATION LAYS DOWN AS UNDER :- (L) ANY PERSON BEING AN INDIVIDUAL OR A HINDU UND IVIDED FAMILY OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS IF SUCH PERSON - (A) DOES NOT FALL UNDER ANY OF THE PRECEDING SUB-CL AUSES; AND (B) IS LIABLE TO AUDIT OF ACCOUNTS UNDER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAI D TO THE ACCOUNT OF THE CONTRACTOR. 4 6. ON THE PLAIN READING OF THE AFORESAID CLAUSE OF THE EXPLANATION IT IS APPARENT THAT AN INDIVIDUAL WHO IS LIABLE TO GET THE ACCOUNTS AUDITE D UNDER SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANCIAL YEAR IN WH ICH THE SUM IS CREDITED OR PAID TO THE CONTRACTOR IS THE SPECIFIED PERSON LIABLE TO DEDUCT THE TDS. IN THE CASE OF THE ASSESSEE IMMEDIATELY PRECEDING FINANCIAL YEAR IS F.Y. 2004-0 5 DURING THE YEAR ENDED 31.03.2005 THE FREIGHT RECEIVED BY THE ASSESSEE ON PLYING OF TRUCK TAKEN ON HIRE WAS ONLY ` 31 24 476/-. THE ASSESSING OFFICER HAS TOTALLY IGNORED THIS FIGURE B UT WITH A VIEW TO BRING THE ASSESSEE WITHIN THE CATEGORY OF SPECIFIED PERSON THEORETICALLY COMPUTED THE FIGURE OF RECEIPTS OF VEHICLES TAKEN ON HIRE FOR THE YEAR ENDED 31.03.2005 TO BE ` 42 42 581/- IGNORING THE PROVISIONS OF EXPLANATION TO SECTION 194C SO THAT ADDITIONS CAN BE MADE IN THE C ASE OF THE ASSESSEE. THIS SECTION CLEARLY LAYS DOWN THAT THE FIGURE HAS TO BE THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTACTOR. THE ACTUAL FIGURE CREDITED FOR THE HIRE OF THE TRUCK IS ` 31 24 476/-. THIS SECTION NOWHERE EMPOWERS THE ASSESSING OFFICER TO REWRITE THE PROVISIONS IN THE MANNER AS MAY BE SUITABLE TO THE ASSESSING OFFICER. THE ASSESSING OFFICER DOES NOT HAVE ANY P OWER TO REWRITE ANY PROVISIONS OF THE INCOME TAX ACT. HE IS AN AUTHORITY CREATED UNDER THE INCO ME TAX ACT AND HAS TO DISCHARGE HIS OBLIGATIONS BY EXERCISING HIS POWERS AS ARE ENTRUST ED UNDER THE VARIOUS PROVISIONS OF INCOME TAX ACT. EVEN THIS TRIBUNAL IS ALSO AN APPELLATE AUTHO RITY CREATED UNDER THE INCOME TAX ACT AND HAS TO DISCHARGE ITS FUNCTIONS WITHIN THE PROVISION S OF THE INCOME TAX ACT. WE HOLD THAT IN THIS CASE THE ASSESSING OFFICER HAS EXCEEDED HIS JURISDI CTION BY RECOMPUTING THE FIGURE OF THE AMOUNT CREDITED TO THE CONTRACTOR IN RESPECT OF VEHICLES T AKEN ON HIRE FOR THE YEAR ENDED 2005 IN A THEORETICAL MANNER WITHOUT BRINGING ANY MATERIAL OR EVIDENCE THAT THE ASSESSEE HAS ACTUALLY CREDITED OR PAID AMOUNT IN THE ACCOUNTS OF THE CONT RACTOR MORE THAN WHAT IS ACTUALLY CREDITED OR PAID IN THE BOOKS OF THE ASSESSEE SO THAT HE MAY AC HIEVE THE OBJECTS OF DISALLOWING THE EXPENDITURE WHICH IS OTHERWISE ALLOWABLE UNDER THE INCOME TAX ACT AND CREATED FICTITIOUS 5 DEMAND ON THE ASSESSEE WHICH IS NOT SUSTAINABLE UND ER THE LAW. THE ACTION OF THE ASSESSING OFFICER IN THIS CASE IN OUR OPINION IS TOTALLY IL LEGAL AND BEING A QUASI JUDICIAL AUTHORITY HE SHOULD ACT IN SUCH A MANNER SO THAT THE ASSESSEE MA Y NOT BE HARASSED UNNECESSARILY. THIS SHOWS HIGHHANDEDNESS OF THE ASSESSING OFFICER TOWARDS THE ASSESSEE. THE ASSESSING OFFICER SHOULD UNDERSTAND THAT WE ARE LIVING IN A DEMOCRATIC SET U P AND THE TAXPAYERS DESERVE TO BE RESPECTED FOR THEIR CONTRIBUTION IN THE NATIONAL DEVELOPMENT. IN THIS REGARD WE RELY ON THE OBSERVATION OF THE TRIBUNAL IN THE CASE OF RPG ENTERPRISES LIMITED VS. DCIT 251 ITR (AT) 20 (30) (MUMBAI) IN WHICH THE TRIBUNAL HAS OBSERVED AS UNDER :- WE ARE LIVING IN A DEMOCRATIC SET UP AND THE TAX P AYERS DESERVE TO BE RESPECTED FOR THEIR CONTRIBUTION IN THE NATIONAL DE VELOPMENT. PUBLIC SERVANTS ARE EXPECTED TO DISCHARGE THEIR FUNCTIONS DUTIFULLY BUT NOT UN-REASONABLY. THE OFFICERS ARE SUPPOSED TO WORK DILIGENTLY BUT NOT HA RASSINGLY. IT IS ABSOLUTELY NECESSARY FOR THE DEPARTMENT OF REVENUE TO GAIN PUB LIC TRUST AND CONFIDENCE BY ACTING JUDICIOUSLY AND AVOIDING UNDUE HARASSMENT. WE APPRECIATE THE SCHEME OF REWARDING HONEST AND DILIGENT OFFICERS OF THE DEPAR TMENT BUT ALSO FEEL THAT THERE IS A NECESSITY OF IDENTIFYING OVERZEALOUS OFFICERS HARASSING THE TAXPAYERS BY MISUSING THEIR POWERS. 7. THESE OBSERVATIONS OF THIS TRIBUNAL ARE CLEARLY APPLICABLE TO THE PRESENT CASE. IF THE ASSESSING OFFICER OR THE DEPARTMENT WILL CONTINUE T O MAKE SUCH TYPE OF ILLEGAL ADDITIONS/ DISALLOWANCES THE PUBLIC FAITH WILL GET SHAKEN AND THE REPUTATION OF THE DEPARTMENT WILL BE DESTROYED IN THE EYES OF PUBLIC AT LARGE. THE CIT( A) IN THIS CASE EVEN THOUGH RIGHTLY DELETED THE ADDITIONS THE CONCERNED CIT BEFORE FILING THE APPE AL WITH THE TRIBUNAL IT APPEARS ALSO DID NOT APPLY HIS MIND AND THE APPEAL WAS FILED IN A ROUTIN E MANNER. WE CANNOT EXPECT CIT(ADMN.) TO FILE APPEAL IN SUCH A MANNER BECAUSE IT ULTIMATELY AFFECTS THE PUBLIC EXCHEQUER IF SUCH SCRUPULOUS APPEALS ARE FILED WITHOUT APPLYING MIND. A LOT OF PRECIOUS MAN-HOURS ARE WASTED BECAUSE ALL THESE EXPENSES ARE ULTIMATELY METED OUT OUT OF THE PUBLIC EXCHEQUER. EVEN IN OUR OPINION THE DEPARTMENT SHOULD UNDERSTAND THAT WHATEVER EXPENDIT URE IS INCURRED BY THE ASSESSEE IN DEFENDING 6 SUCH ILLEGAL APPEAL FILED BY THE DEPARTMENT THE EX PENSES INCURRED BY THE ASSESSEE ON SUCH LITIGATION BY WAY OF FEES TO THE COUNSEL HIS TRAVE LLING EXPENSES ETC. WILL BE ALLOWED AS DEDUCTION TO THE ASSESSEE UNDER SECTION 37 OF THE ACT WHILE C OMPUTING HIS TAXABLE INCOME OF THE CONCERNED ASSESSMENT YEAR. WHATEVER MAY BE TAX SLAB OF THE A SSESSEE TO THAT EXTENT THESE EXPENSES STAND INCURRED OUT OF THE POCKET OF THE PUBLIC EXCHEQUER. IN OUR OPINION THIS IS A FIT CASE WHERE COST SHOULD BE AWARDED TO THE ASSESSEE. WE THEREFORE NOT ONLY CONFIRM THE ACTION OF THE CIT(A) DELETING THE ADDITION OF ` 77 26 488/- ONLY ON THIS BASIS BUT ALSO AWARD A COS T TO THE ASSESSEE AMOUNTING TO ` 5 000/- UNDER SECTION 254(2B) OF THE ACT AND ACCORD INGLY DIRECT THE ASSESSING OFFICER TO PAY A SUM OF ` 5 000/- TO THE ASSESSEE AND DEPOSIT IT WITH THE DEP ARTMENT AND THE ASSESSEE SHOULD BE ALLOWED CREDIT FOR THE SAME AMOU NT AS TAX PAID IN THE ASSESSMENT YEAR 2011- 12. 8. EVEN THOUGH WE HAVE ALREADY CONFIRMED THE ORDER OF THE CIT(A) ONLY ON THIS BASIS BUT SINCE THE LD. A.R. HAS ARGUED HIS CASE EXTENSIVELY WE THEREFORE DEAL WITH THE OTHER CONTENTION OF THE ASSESSEE WHICH IS THAT THERE IS NO SUB-CONTRACT BETWEEN THE ASSESSEE AND THE PERSONS FROM WHOM THE ASSESSEE HAS TAKEN THE VEHICLES ON HIRE. WE NOTED THAT ON THIS CONTENTION THE CASE OF THE ASSESSEE IS DULY COVERED BY THE DECISION OF THI S TRIBUNAL IN THE CASE OF MYTHRI TRANSPORT CORPORATION VS. ACIT 124 TTJ (VISAKHA) 970 IN WHIC H THE FACTS INVOLVED ARE THE SAME. IN THE SAID CASE THE TRIBUNAL HAS DECIDED THE ISSUE IN FA VOUR OF THE ASSESSEE BY HOLDING AS UNDER :- '8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE BEFORE US MAY BE DECIDED IF WE ANSWER FOLLOWING QUE STION: WHETHER THE VEHICLES HIRED BY THE ASSESSEE IN EXEC UTION OF THE TRANSPORT CONTRACT CAN BE TERMED AS A SUB-CONTRACT AND CONSEQUENTLY THE ASSESSEE IS LIABLE TO DEDUCT TAX FROM THE PAYMENT MADE FOR SUCH VEHICLES UNDER S.194C(2) OF THE ACT ? 7 IN THE INSTANT CASE THE ASSESSING OFFICER HAS INV OKED THE PROVISIONS OF S.40(A)(IA) TO DISALLOW THE PAYMENTS MADE FOR HIRED LORRIES AS ACCORDING TO HIM SUCH PAYMENTS REPRESENT PAYMENT TO SUB-CONTRACTORS LIA BLE FOR TDS UNDER S.194C(2) OF THE ACT AND THE ASSESSEE HAS FAILED TO DEDUCT TD S UNDER S.194C(2). SECTION 194C(2) OF THE ACT WHICH IS RELEVANT IN THIS CONTE XT READS AS UNDER : ANY PERSON (BEING A CONTRACTOR AND NOT BEING AN IN DIVIDUAL OR AN HUF) RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HER EAFTER IN THE SECTION REFERRED TO AS THE SUB-CONTRACTOR) IN PURSUANCE OF A CONTRAC T WITH THE SUB-CONTRACTOR FOR CARRYING OUT OR FOR THE SUPPLY OF LABOUR FOR CARRY ING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR OR FOR SUPPLY ING WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTRACTOR HAS UNDERTAKEN TO S UPPLY SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRA CTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN.' 8.1 ACCORDING TO OUR UNDERSTANDING S. 194C{2) IS ATTRACTED IF ALL THE FOLLOWING CONDITIONS ARE SATISFIED: (A) THE ASSESSEE SHOULD BE A CONTRACTOR. (B) THE ASSESSEE IN HIS CAPACITY AS A CONTRACTOR SHOULD ENTER INTO A CONTRACT WITH A SUB-CONTRACTOR FOR CARRYING OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR. (C) THE SUB-CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CONTRACTOR. (D) PAYMENT SHOULD BE MADE FOR CARRYING OUT THE WH OLE OR ANY PART OF THE WORK. 8.2. AS STATED EARLIER THE ASSESSEE HEREIN IS A TR ANSPORT CONTRACTOR AND HAS ENTERED INTO AN AGREEMENT WITH PARTIES WHEREBY THE ASSESSEE UNDERTOOK TO TRANSPORT BITUMEN TO VARIOUS POINTS AS PER THEIR DI RECTIONS. ACCORDING TO THE ASSESSEE THE LORRIES USED FOR THE SAID PURPOSE ARE SPECIALLY DESIGNED WITH PROPER HEATING ARRANGEMENTS. THE CLAIM OF THE ASSESSEE IS THAT SINCE IT DID NOT HAVE REQUIRED NUMBER OF LORRIES IT HAD TO HIRE LORRIES FROM OTHERS WHO SIMPLY PLACED THE VEHICLES AT THE DISPOSAL OF THE ASSESSEE. THE ASSESSEE ALONE UNDER ITS CONTROL AND SUPERVISION HAS EXECUTED WHOLE OF THE CONTRACT . ACCORDING TO THE ASSESSEE THE INDIVIDUAL LORRY OWNERS HAVE NOT CARRIED OUT AN Y PART OF THE WORK UNDERTAKEN BY THE ASSESSEE. 8.3 (I) THE FOLLOWING ARE THE BASIS OF THE AO TO C OME TO THE CONCLUSION THAT THE PAYMENT MADE FOR HIRED LORRIES IS A SUB-CONTRACT PA YMENT LIABLE FOR TDS UNDER S. 194C(2} OF THE ACT: 8 (A) THE ASSESSEE HAS ENTERED INTO A CONTRACT WITH THE PARTIES AND ALL PAYMENTS ARE MADE TO THE ASSESSEE ONLY. (B) THE ASSESSEE IS CLAIMING THE TOTAL TDS CREDIT FOR THE GROSS RECEIPT WHERE TDS WAS DEDUCTED. (C) THE LORRY OWNERS ARE IN NO WAY CONNECTED WITH THE PARTY WHO GIVES WORK TO THE ASSESSEE. AS THE ASSESSEE COULD NOT MANAGE THE WORK WITH ITS OWN LORRIES IT TOOK ON HIRE LORRIES BELONGING TO OTHER S ON SUB-CONTRACT TO CARRY OUT ITS CONTRACT WORK FOR WHICH PAYMENT IS MADE BY THE ASSESSEE. THERE IS NO CONTACT OR RELATIONSHIP OF ANY KIND BETWEEN THE CLIENT (PRINCIPAL COMPANY) AND THE SUB-CONTRACTOR. (II) LEARNED CIT(A) HAS CONFIRMED THE ORDER OF THE AO WITH FOLLOWING REASONINGS : (A) THE TANKER LORRIES TAKEN ON HIRE WERE UTILIZED FOR THE PURPOSES OF THE BUSINESS OF THE EXECUTION OF THE CONTRACT DURING TH E ENTIRE CONTRACT PERIOD. . (B) THE TANKER LORRY OWNERS WERE PAID ONLY AFTER R ECEIPT OF THE BILLS FROM THE CONTRACTEES AFTER RETAINING THE COMMISSION. (C) THE TANKER LORRY OWNERS ENABLED THE APPELLANT TO EXECUTE THE CONTRACT WORK. 8.4 THE ASSESSEE HAS PLACED A COPY OF WORK ORDER D T. 12 TH FEB. 2005 ISSUED BY A COMPANY NAMED 'RBM-PATI JOINT VENTURE'. WE HAVE G ONE THROUGH THE SAID WORK ORDER AND NOTICE THE FOLLOWING POINTS: (A) THE SCOPE OF WORK INCLUDES LOADING OF BITUMEN 60/70 AT VIZAG TRANSPORTATION AND DELIVERING AT RBMP CAMP SITE AT 56 KMS. AND 35 KMS. ON NH-6. AS SUCH THREE TYPES OF WORK ARE INCLUDED IN THE SCOPE OF WORK. (B) TANKER LORRY SHALL HAVE PROPER HEATING ARRANGE MENT. THE COMPANY RESERVES THE RIGHT TO ARRANGE ANY OTHER MEANS OF TR ANSPORTATION IN CASE OF NON-PLACEMENT/DELAY IN PLACEMENT OF LORRY. ANY EXT RA PAYMENT MADE FOR EXECUTION OF SUCH WORK WILL BE RECOVERED FROM THE A SSESSEE. (C) THE ASSESSEE SHALL NOT ENGAGE AND/OR ALLOW ITS PERSONNEL IN ANY FRAUDULENT ACTIVITY IN PERFORMING THE WORK ORDER. THE COMPANY IS AT LIBERTY TO DEDUCT ANY REASONABLE AMOUNT IF ANY FRAUD OR CHEATING IS DISCOVERED. (D) THE ASSESSEE IN ANY CIRCUMSTANCE SHOULD NOT DIVULGE OR MAKE PUBLIC IN ANY WAY ANY OF THE BUSINESS TRANSACTIONS TO OTHER PARTIES. (E) IN THE EVENT OF ANY UNREASONABLE DELAY OR IF T HE CONSIGNMENT IS NOT DELIVERED THE COMPANY SHALL BE ENTITLED TO DEDUCT ANY SUM AND/OR THE VALUE OF CONSIGNMENT FROM THE OUTSTANDING BILLS OF THE ASSESSEE. NO CLAIM 9 WHATSOEVER DUE TO IDLING OF LABOUR EQUIPMENT VEHI CLES AND ANY OTHERS SHALL BE ENTERTAINED BY THE COMPANY UNDER ANY CIRCU MSTANCE. . (F) THE ASSESSEE SHALL COMPLY WITH ALL EXISTING AC TS RULES REGULATIONS ETC. RELATING TO LABOUR TRAFFIC AND TRANSPORT. IN CASE OF ANY LIABILITY ARISING TO THE COMPANY AS PRINCIPAL EMPLOYER DUE TO FAILURE N EGLIGENCE OR/AND ACCIDENT BY TRANSPORTER THE SAME SHALL BE RECOVERA BLE FROM THE ASSESSEE. THE ABOVE STRINGENT CLAUSES SUGGEST THAT THE ASSESS EE IS SOLELY RESPONSIBLE FOR ALL THE ACTS AND DEFAULTS COMMITTED BY THE ASSESSEE AND /OR ITS EMPLOYEES . 8.5 IT IS NOT ESTABLISHED BY THE REVENUE THAT OTHE R LORRY OWNERS FROM WHOM THE VEHICLES WERE HIRED HAVE ALSO BEEN FASTENED WI TH ANY OF THE ABOVESAID LIABILITIES. IN A SUB-CONTRACT A PRUDENT CONTRACT OR WOULD INCLUDE ALL THE LIABILITY CLAUSES IN THE AGREEMENT ENTERED INTO BY HIM WITH T HE SUB-CONTRACTOR. THE ASSESSEE HAS ALSO CLAIMED BEFORE THE TAX AUTHORITIE S THAT THE RESPONSIBILITY IN THE WHOLE PROCESS LIES WITH IT ONLY. THOUGH THE PASSING OR LIABILITY IS NOT THE ONLY CRITERIA TO DECIDE ABOUT THE EXISTENCE OF SUB-CONTR ACT YET THIS CONTENTION OF THE ASSESSEE READ WITH THE LIABILITY CLAUSES OF THE WOR K ORDER CITED ABOVE SUPPORTS ITS SUBMISSION THAT THE INDIVIDUAL VEHICLE OWNERS ARE S IMPLE HIRERS OF THE VEHICLES. 8.6 AS PER THE PROVISIONS OF S. 194C(2) AS EXPLAI NED IN PARA 8.1 SUPRA THE SUB-CONTRACTOR SHOULD CARRY OUT THE WHOLE OR ANY PA RT OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE DICTIONARY MEANING OF THE WORDS 'CARRY OUT' IS TO 'CARRY INTO PRACTICE'; 'TO EXECUTE'; 'TO ACCOMPLISH'. IT SIGNI FIES A POSITIVE INVOLVEMENT IN THE EXECUTION OF THE WHOLE OR ANY PART OF THE MAIN WORK BY SPENDING HIS TIME MONEY ENERGY ETC. AND FURTHER TAKING THE RISKS IN CARRYI NG ON THE SAID ACTIVITY. IN THE INSTANT CASE THERE IS NO MATERIAL TO SUGGEST THAT THE OTHER LORRY OWNERS INVOLVED THEMSELVES IN CARRYING OUT ANY PART OF THE WORK UND ERTAKEN BY THE ASSESSEE BY SPENDING THEIR TIME ENERGY AND BY TAKING THE RISKS ASSOCIATED WITH THE MAIN CONTRACT WORK. IN THE ABSENCE OF THE ABOVESAID CHA RACTERISTICS ATTACHED TO A SUB- CONTRACT IN THE INSTANT CASE THE PAYMENT MADE TO T HE LORRY OWNERS STANDS AT PAR WITH THE PAYMENTS MADE TOWARDS SALARIES RENT. ETC. HENCE THE REASONING OF THE TAX AUTHORITIES WHICH IS STATED IN PARA 8.3 SUPRA TO HOLD THAT THE PAYMENT MADE FOR HIRED VEHICLES IS A SUB-CONTRACT PAYMENT IN OU R OPINION IS NOT CORRECT END NOT BASED ON RELEVANT CONSIDERATIONS. HENCE IN OUR CO NSIDERED OPINION IT CANNOT BE SAID THAT THE PAYMENTS MADE FOR HIRED VEHIC1ES WOUL D FALL IN THE CATEGORY OF PAYMENT TOWARDS A SUB-CONTRACT WITH THE LORRY OWNER S. IN THAT CASE THE ASSESSEE IS NOT LIABLE TO DEDUCT TAX AT SOURCE AS PER THE P ROVISIONS OF S. 194C(2) ON THE PAYMENTS MADE TO THE LORRY OWNERS FOR LORRY HIRE. CONSEQUENTLY THE PROVISIONS OF S. 40(A)(IA) SHALL NOT APPLY TO SUCH PAYMENTS. 8.7 AS WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR THE REASONS STATED ABOVE IN OUR OPINION CONSIDERATION OF OTHE R CONTENTIONS OF THE ASSESSEE AS WELL AS THE REVENUE IS NOT NECESSARY. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. 10 9. SIMILAR VIEW HAS BEEN TAKEN BY THIS TRIBUNAL IN THE CASE OF GOVIND SINGH MATHURA VS. ITO MATHURA IN TDSA NO.13/AGR/2007 FOR THE ASSESSM ENT YEAR 2005-06 IN WHICH ALSO THIS TRIBUNAL AFTER DISCUSSING THE PROVISIONS OF SECTIO N 194C HAS HELD AS UNDER :- THE CONTENTION OF LD. A.R. IS FOUND TO BE CORRECT. THE ASSESSEE IS THE CONTRACTOR QUA IOCL. THE ASSESSEE HAS TAKEN SOME V EHICLES ON HIRE SIMPLICITER FOR RUNNING OF WHICH THE DRIVERS THE FUEL AND THEI R MAINTENANCE WAS BEING DONE BY THE ASSESSEE HIMSELF. THE IOCL HAS DEDUCTED TDS OF THE ENTIRE PAYMENT. THERE IS NO FURTHER CONTRACT BETWEEN THE ASSESSEE A ND THESE FIVE PAYEES. IT IS IMMATERIAL IF THE VEHICLES ARE HIRED FOR THE ENTIRE YEAR OR FOR A DAY. THERE IS A SORT OF DRY UNDERSTANDING BETWEEN THE ASSESSEE AND THE OTHER FIVE PAYEES. SO THE ABOVE SECTION IS NOT ATTRACTED TO THIS CASE. HENCE WE ARE OF THE CONSIDERED OPINION THAT WHEN SECTION 194C IS NOT APPLICABLE T HE CONSEQUENTIAL SECTION I.E. 201(1) AND 201(LA) ARE ALSO NOT APPLICABLE. WE ALL OW THIS GROUND OF APPEAL AFTER SETTING ASIDE THE FINDING OF LD. CIT(A) AND DELETE/ CANCEL THE LEVY UNDER THESE SECTIONS. 10. THE DECISION OF THE CO-ORDINATE BENCH IS BINDIN G ON US. 11. WE HAVE ALSO GONE THROUGH THE DECISION AS RELIE D ON BY THE LD. A.R. IN THE CASE OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. UNITED RICE LAND LIMITED 217 CTR (P&H) 332 WHEREIN IT HAS BEEN HELD AS UNDER :- WE HAVE HEARD MR. SANJEEV KAUSHIK LEARNED COUNSEL FOR THE REVENUE AND HAVE PERUSED THE RECORD. AS PER PROVISIONS OF S. 194C OF THE IT ACT ANY PER SON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT SHALL AT THE TIME OF CREDIT OF SUCH SUM OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY CHEQUE DEDUCT A TAX THEREON AT A PRESCRI BED RATE. HOWEVER NO SUCH DEDUCTION AT SOURCE IS REQUIRED TO BE MADE IF THE SUM PAID OR CREDITED DOES NOT EXCEED ` 20 000. IN THE PRESENT CASE THE AO HAD HELD THE ASSESSEE LIABLE FOR DEDUCTION OF TAX ONLY ON THE ASSUMPTION THAT ASSESS EE WAS HAVING AGREEMENT WITH THE PARTIES THROUGH WHOM TRUCKS WERE ARRANGED FOR T RANSPORTATION OF GOODS. HOWEVER THE CIT(A) HAS RECORDED A FINDING OF FACT THAT THERE WAS NEITHER ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND TRANSPORTERS FOR CARRIAGE OF GOODS NOR IT HAS BEEN PROVED THAT ANY SUM OF MONEY REGARDING FREIGHT CHARGES WAS PAID TO THEM IN PURSUANCE OF A CONTRACT FOR SPE CIFIC PERIOD QUANTITY OR PRICE. THIS FINDING OF FACT WAS RECORDED BY THE CIT(A) AFT ER CONSIDERING THE CERTIFICATE FURNISHED BY THE TRANSPORTERS. THE TRIBUNAL HAS AL SO RECORDED A FINDING OF FACT 11 THAT THE DEPARTMENT HAS NOT CONTROVERTED THE SAID F INDING OF THE CIT(A) EVEN BEFORE THE TRIBUNAL. WHILE RECORDING THIS FINDING OF FACT THE TRIBUNAL HAS CLEARLY STATED THAT NOTHING HAS BEEN BROUGHT ON RECORD BY T HE AO TO PROVE THAT THERE WAS NO (SIC) WRITTEN OR ORAL AGREEMENT BETWEEN THE ALLE GED PARTIES FOR CARRIAGE OF THE GOODS. IN VIEW OF THE ABOVE WE ARE NOT INCLINED TO INTERF ERE IN THE FINDING OF FACT RECORDED BY THE TRIBUNAL. THE APPEAL BEING WITHOUT MERIT IS DISMISSED. 12. SIMILAR VIEW HAS BEEN TAKEN BY THE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT VS. BHAGWATI STEELS 47 DTR (P&H) 75. ON THIS BASIS AL SO WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLO WANCE OF ` 77 26 488/-. 13. GROUND NO.2 RELATES TO THE DELETION OF THE ADDI TION OF ` 2 10 487/- MADE BY THE ASSESSING OFFICER UNDER SECTION 69 OF THE ACT. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY CONSIDERED THE SAME. WE NOTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION UNDER S ECTION 69 OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE CORRECTLY. THE ASSESSEE HAS DULY DEBITED THE INTEREST IN HIS PROFIT &LOSS ACCOUNT PAID ON THE LOAN. EVEN THE INTEREST HAS DULY BEEN DEBITED IN THE INTEREST ON LOAN ACCOUNT AND CREDITED IN THE ACCOUNT OF THE RESPECTIVE PARTIES W HICH IS APPARENT FROM PAGE NOS. 16 17 19 & 20 OF THE PAPER BOOK. THE ASSESSING OFFICER ON ONE H AND HAS NOT REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE BUT ON THE OTHER HAND HE OBSERVED THAT THE AUDIT REPORT FURNISHED ALONG WITH RETURN WAS PREPARED IN A VERY CASUAL MANNER AND THU S NOT EXHIBITED CORRECT AND FULL PICTURE OF THE ACCOUNT MAINTAINED BY THE ASSESSEE. THERE IS NO FI NDING GIVEN BY THE ASSESSING OFFICER THAT THERE IS DIFFERENCE IN THE CONFIRMATION OF THE CRED ITORS AS FILED BY THE ASSESSEE WITH THE BALANCE OF THE CREDITORS SHOWN IN THE BOOKS OF THE ASSESSEE. IT APPEARS THIS ADDITION HAS ALSO BEEN MADE BY THE ASSESSING OFFICER WITHOUT APPLYING HIS MIND AND PROPERLY UNDERSTANDING THE FACTS AND PAPERS 12 ON RECORD. THE OBSERVATION AS HAS BEEN MADE BY US IN RESPECT OF GROUND NO.1 ARE ALSO CLEARLY APPLICABLE TO THIS GROUND ALSO. THEREFORE IN VIEW OF THESE FACTS WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND ORDER O F THE CIT(A) DOES NOT WARRANT OUR INTERFERENCE SO FAR IT RELATES TO THE DELETION OF ` 2 10 487/-. WE ACCORDINGLY CONFIRM THE ORDER OF THE CIT(A). 15. IN THE RESULT APPEAL FILED BY THE REVENUE STAN DS DISMISSED AND A COST OF ` 5 000/- IS IMPOSED ON THE ASSESSING OFFICER IN THE MANNER AS S PECIFIED WHILE DISPOSING OF GROUND NO.1. (ORDER PRONOUNCED IN THE OPEN COURT ON 25.02.2011). SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 25 TH FEBRUARY 2011 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY