ACIT, Bangalore v. Sri. M.G. Vishwanath Reddy, Bangalore

ITA 660/BANG/2011 | 2008-2009
Pronouncement Date: 30-03-2012 | Result: Dismissed

Appeal Details

RSA Number 66021114 RSA 2011
Assessee PAN AAYPV2165M
Bench Bangalore
Appeal Number ITA 660/BANG/2011
Duration Of Justice 9 month(s) 15 day(s)
Appellant ACIT, Bangalore
Respondent Sri. M.G. Vishwanath Reddy, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-03-2012
Assessment Year 2008-2009
Appeal Filed On 14-06-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A BANGALORE BEFORE SMT. P. MADHAVI DEVI JUDICIAL MEMBER AND SHRI JASON P. BAOZ ACCOUNTANT MEMBER I.T.A. NO.660(BANG.)/2011 ( ASSESSMENT YEAR : 2008-09) THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-3(1) BANGALORE. APPELLANT VS SHRI M.G.VISHWANATH REDDY PROP: M/S EXOTIC GRANITES & MARBLES 5 LALBAGH HO SUR ROAD BANGALORE-560 027 RESPONDENT PAN NO.AAYPV2165M REVENUE BY : SHRI B. SARAVANAN JCIT APPELLANT BY : SHRI S. RANGANATH CA DATE OF HEARING ON : 28-03-2012 DATE OF PRONOUNCEMENT : 30-03-2012 O R D E R PER SMT.P.MADHAVI DEVI JM; THIS IS REVENUES APPEAL FOR THE ASSESSMENT YEAR : 2008-09. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL; 1. THE ORDERS OF THE CIT(A) IS CONTRARY TO THE FACTS OF THE CASE 2. THE CIT(A) IS NOT CORRECT IN DELETING THE ADDITION OF RS.18 80 085/- MADE BY THE AO AS THE ASSESSEE HAD BELATEDLY DEDUCTED TAX FROM APRIL 2007 TO FEBRUARY 2008 IN THE MONTH OF MARCH 2008 AND DEPOSITED THE SAME BEFORE THE DUE DATE OF FILIN G ITA NO.660(B)/2011 2 THE RETURN U/S 139(1) BUT NOT BEFORE THE END OF THE PREVIOUS YEAR I.E 31-03-2008. 3. THE CIT(A)S DECISION THAT SEC.40(A)(IA) IS NOT ATTRACTED WHERE THE TAX HAS BEEN DEDUCTED AT SOURCE ON AN EXPENDITURE INCURRED OR PAYMENT MADE IN THE MONTH OF THE RELEVANT PREVIOUS YEAR BUT DEPOSITED T O THE GOVT. ACCOUNT ON OR BEFORE THE DUE DATE OF FILI NG OF RETURN IS NOT ACCEPTABLE. 4. THE TAX DEDUCTABLE DURING THE PERIOD OTHER THAN THAT OF THE LAST MONTH OF THE YEAR IS COVERED BY PROVISO B OF SEC.40(A)(IA) ACCORDING TO WHICH THE DUE DATE FOR REMITTING THE TAX DEDUCTED WOULD BE THE LAST DAY OF THE PREVIOUS YEAR IN ORDER TO AVOID DISALLOWANCE U/S 40(A)(IA) OF THE ACT. 2. 1 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRADIN G IN GRANITES AND MARBLES FILED HIS RETURN OF INCOME ON 26-09-2008 D ECLARING AN INCOME OF RS.41 41 090/-. THERE WAS SEARCH U/S 132 OF THE IT ACT IN THE PREMISES OF THE ASSESSEE ON 08-03-2007. THEREAFTER THE ASSESSEES RETURN WAS SELECTED FOR SCRUTINY AND DURING THE ASS ESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT VARIOUS DETAIL S WERE CALLED FOR. IN RESPONSE TO NOTICE ISSUED BY THE AO THE ASSESSEE AP PEARED AND PRODUCED THE BOOKS OF ACCOUNTS AND ALSO FURNISHED T HE DETAILS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED RS.41 762/- AS TAX DE DUCTED AT SOURCE ITA NO.660(B)/2011 3 IN HIS PROFIT AND LOSS ACCOUNT WITHOUT ACTUALLY DED UCTING THE SAME FROM THE PAYMENTS AND WHEN THIS WAS POINTED OUT TO ASSESSEES REPRESENTATIVE THE REPRESENTATIVE OF THE ASSESSEE REQUESTED TO DISALLOW THE SAME AND THEREFORE THE AO DISALLOWED THE SAME AND ADDED IT TO THE TOTAL INCOME OF THE ASSESSEE. THE AO FURTHER O BSERVED THAT THE ASSESSEE HAS MADE PAYMENTS BEFORE 1 ST MARCH 2008 TO VARIOUS PERSONS WITHOUT DEDUCTION OF TAX AND THAT THE ASSE SSEE VIDE HIS SUBMISSION DATED 30-11-2010 HAS STATED THAT THE ASS ESSEE HAS INCURRED A SUM OF RS.19 85 500/- TOWARDS LABOUR CHA RGES PAID ON VARIOUS WORKS AND THE ASSESSEE WAS NOT ABLE TO DEDU CT THE TDS ON THESE CHARGES AND AS PER THE PROVISIONS OF SEC.195A OF THE IT ACT WHERE THE TDS HAS TO BE BORNE BY THE ASSESSEE HIMSE LF THE AMOUNT HAS TO GROSSED UP AND THUS THE ASSESSEE HAS BORNE THE TDS AND MADE THE PROVISIONS FOR THE SAME IN THE MONTH OF MA RCH 2008 AND TDS WAS REMITTED BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME AND THAT IN THE CASE OF BAPU SAHEB NANASAHEB DHUMAL WHEREIN THE BOMBAY BENCH OF ITAT IN ITA NO.6628/MUM/2009 DATED 25-06-2010 FOR THE AY: 2005-06 HAS GIVEN A FINDING THAT SEC.40 A)(IA) CANNOT BE INVOKED IF THE ASSESSEE REMITTED THE TDS WITHIN THE DUE DATE OF FILING OF THE RETURN PRESCRIBED U/S 139(1) OF THE IT ACT. THE AO WAS HOWEVER NOT CONVINCED WITH THE SAID EXPLANATION OF THE ASSE SSEE AND HELD THAT FOR THE PURPOSE OF SEC.194C 194H & 194J THE TAX HA S TO BE DEDUCTED ITA NO.660(B)/2011 4 AT THE TIME OF CREDIT OR PAYMENT THEREOF IN CASH OR BY ISSUE OF CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER AND WHERE SUCH CREDIT IS MADE IN THE BOOKS OF ACCOUNTS IT SHALL B E DEEMED TO BE CREDIT OF SUCH ACCOUNT OF THE PAYEE AND PROVISIONS OF SEC. 194C SHALL APPLY ACCORDINGLY. HE HELD THAT THE ASSESSEE WAS PAYING L ABOUR CHARGES MONTHLY/PERIODICALLY TO THE RECIPIENTS BUT HAS FAI LED TO DEDUCT TAX AT THEREON AND THEREFORE THE PROVISIONS OF SEC.40(A)( IA) ARE ATTRACTED. WITH REGARD TO THE RULING OF THE TRIBUNAL AT MUMBAI BENCH HE HAS STATED THAT THE SAID DECISION HAS NOT REACHED THE F INALITY AND THEREFORE HE DOES NOT ACCEPT THE CONTENTION OF THE ASSESSEE. HE ACCORDINGLY DISALLOWED A SUM OF RS.18 80 085/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED THE ASSES SEE PREFERRED AN APPEAL BEFORE THE CIT(A) REITERATING THE SUBMISSION S MADE BEFORE THE AO AND ALSO PLACED RELIANCE UPON THE PROVISIONS OF SEC.195A OF THE IT ACT. 3. AFTER CONSIDERING THE ASSESSEES CONTENTIONS TH E CIT(A) OBSERVED THAT THE ASSESSEE HAS MADE PAYMENTS TOWARD S LABOUR CHARGES TO NINE PARTIES BETWEEN APRIL 2007 TO FEBR UARY 2008. HE OBSERVED THAT AS PER SEC.40(A)(IA) OF THE IT ACT WH EN THE TAX IS DEDUCTIBLE AT SOURCE ON THE PAYMENTS MADE UNDER CHA PTER XVII AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION H AS NOT BEEN PAID THEN THE SAID DEDUCTION IS NOT ALLOWABLE. HE FURTH ER OBSERVED THAT AS ITA NO.660(B)/2011 5 PER SUB-CLAUSE-A OF CLAUSE-(IA); IF THE TAX IS DEDU CTED DURING THE LAST MONTH OF PREVIOUS YEAR AND PAID ON OR BEFORE THE DU E DATE OF FILING OF RETURN AS PER THE PROVISIONS OF SEC.139(1) THEN SUC H SUM SHALL BE ALLOWED AS DEDUCTION. HE ALSO CONSIDERED THE DECIS ION OF THE ITAT AT MUMBAI BENCH IN THE CASE OF BAPU SAHEB NANASAHEB DH UMAL VS ACIT IN ITA NO.6628/MUM/2009 DATED 25-06-2010 FOR T HE AY: 2005- 06 AND HELD THAT THE AO IS NOT JUSTIFIED IN DISALLO WING THE AMOUNT OF RS.18 80 085/- DEBITED TO THE PROFIT & LOSS ACCOUNT AS LABOUR CHARGES. ACCORDINGLY HE ALLOWED THE ASSESSEES APPEAL. 3.1 AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4. THE LEARNED DR SHRI SARAVANAN WHILE PLACING REL IANCE UPON THE ORDER OF THE AO DREW OUR ATTENTION TO THE PROVI SIONS OF SEC.40(A)(IA) AND ALSO SECS.194C 19H AND 194J OF THE IT ACT TO DE MONSTRATE THAT TAX IS TO BE DEDUCTED AT THE TIME OF PAYMENT AND NO T AT THE END OF THE YEAR. HE SUBMITTED THT THE TDS IS DEEMED TO BE DEDU CTED WHEN THE PAYMENT IS CREDITED TO THE ACCOUNT OF THE PARTY AND IN SUCH A CASE THE ASSESSEE IS BOUND TO REMIT THE SAID AMOUNT TO THE G OVERNMENT ACCOUNT WITHIN THE PRESCRIBED TIME LIMIT. ACCORDI NG TO HIM THE CIT(A) HAS ERRED IN ACCEPTING THE ASSESSEES CONTENTION TH AT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE IN MARCH 2008 WHEREAS THE A SSESSEE IN FACT HAD MADE THE PROVISION FROM ITS OWN ACCOUNT AND HAS NOT DEDUCTED ITA NO.660(B)/2011 6 TAX FROM THE PAYMENTS. THUS ACCORDING TO HIM THE ORDER OF THE CIT(A) HAS TO BE SET ASIDE AND THE ORDER OF THE AO HAS TO BE RESTORED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S. RAN GANATH ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A) A ND ALSO DREW OUR ATTENTION TO THE PROVISIONS OF SEC.40(A)IA) AND SUB -CLAUSE A OF CLAUSE- (IA) THEREOF WHEREIN IT HAS BEEN HELD THAT IN THE C ASE WHERE THE TAX WAS DEDUCTIBLE AND SO WAS DEDUCTED DURING THE LAST MONT H OF THE PREVIOUS YEAR ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-CLA USE-A OF SEC.139 SUCH SUM HAS TO BE ALLOWED AS DEDUCTION IN COMPUTIN G THE INCOME OF THE PREVIOUS YEAR BUT ALLOWED IN THE PREVIOUS YEAR IN WHICH THE SAID TAX HAS BEEN PAID. HE ALSO DREW OUR ATTENTION TO PAGE-10 OF THE PAPER BOOK WHICH IS THE LEDGER ACCOUNT OF TDS ON CONTRACT ORS WAS FOR THE PERIOD 01-04-02007 TO 31-03-2008 WHEREIN THE ENTRY DATED 31-03- 2008 IS GIVEN REFLECTING THAT THE TDS ON CONTRACTOR S NOT DEDUCTED BUT NOW PROVIDED ON COMPANY ACCOUNT OF RS.41 762/- IS G IVEN. HE ALSO DREW OUR ATTENTION TO PAGE-11 OF PAPER BOOK WHEREIN THE SAID AMOUNT HAS BEEN DEBITED TO GOVERNMENT ACCOUNT ON 25-09-200 8. THE LEARNED COUNSEL FOR THE ASSESEEE ALSO DREW OUR ATTENTION TO THE DECISION OF THE VARIOUS BENCHES OF THE TRIBUNAL WHICH ARE FILED IN THE PAPER BOOK AND ALSO DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS M/S VIRGIN CREATIONS IN SUPPORT OF HIS CONTENTIONS. ITA NO.660(B)/2011 7 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THE RIVAL CONTENTIONS WE FIND THAT BY VIRTUE OF SEC.194C OF THE IT ACT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDE NT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CON TRACTOR AND A SPECIFIED PERSON SHALL AT THE TIME OF CREDIT OF SU CH SUM TO THE ACCOUNT OF THE CONTRACTOR 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 HAS TO DEDUCT TAX AT SOURCE. SEC.195A PROVIDES THAT IN A CASE OTHER THAN THAT REFERRED TO IN SUB-SEC.(1A) OF SEC.192 WHERE UNDER AN AGREEMENT OR OTHER ARRANGEMENT THE TAX CHARGEABLE ON ANY INCOME REFERRED TO IN THE FOREGOING PROVISIONS OF THIS CHAPTER IS TO BE B ORNE BY THE PERSON BY WHOM THE INCOME IS PAYABLE THEN FOR THE PURPOSE S OF DEDUCTION OF TAX UNDER THOSE PROVISIONS SUCH INCOME SHALL BE INC REASED TO SUCH AMOUNT AS WOULD AFTER DEDUCTION OF TAX THEREON AT THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH SUCH INCOME IS PAYA BLE BE EQUAL TO THE NET AMOUNT PAYABLE UNDER SUCH AGREEMENT OR ARRANGEM ENT. SEC.40(A)(IA) PROVIDES THAT WHERE ANY AMOUNT PAYAB LE TO A CONTRACTOR FOR CARRYING OUT ANY WORK IS PAID WITHOUT DEDUCTING TAX AT SOURCE UNDER CHAPTER-XVII(B) AND ALSO EVEN AFTER DEDUCTION IT HAS NOT BEEN PAID ON OR BEFORE THE DUE DATE SPECIFIED IN SUB-SEC .(1) OF SEC.139 AND SUCH AMOUNT WILL NOT BE ALLOWED AS A DEDUCTION. ITA NO.660(B)/2011 8 6.1 IN THE CASE BEFORE US THE ASSESSEE WAS LIABLE TO PAY LABOUR CHARGES TO VARIOUS PARTIES AND MADE THE PAYMENT WIT HOUT DEDUCTING TAX AT SOURCE. HOWEVER AT THE END OF THE FINANCIA L YEAR THE ASSESSEE HAS MADE A PROVISION FOR TAX DEDUCTIBLE AT SOURCE A ND HAS REMITTED TO THE GOVERNMENT ACCOUNT BEFORE THE DUE DATE OF FILIN G OF RETURN U/S 139(1) OF THE IT ACT. THE QUESTION BEFORE US IS WH ETHER THE ASSESSEE HAS TO DEDUCT THE TAX FROM THE PAYMENTS MADE TO CON TRACTORS ONLY OR CAN BE MAKE A PROVISION FOR THE SAME FROM HIS OWN I NCOME. ACCORDING TO LEARNED COUNSEL FOR THE ASSESSEE SEC.195A ALLOW S THE ASSESSEE TO MAKE SUCH A PROVISION. FOR THE PURPOSE OF CLARITY THE PROVISION OF SEC.195A IS RE-PRODUCED HERE UNDER; SEC.195A WHERE UNDER AN AGREEMENT OR OTHER ARRANGEMENT THE TAX CHARGEABLE ON ANY INCOME REFERRED TO IN THE FOREGOING PROVISIONS OF THIS CHAPTER IS TO BE BORNE BY THE PERSON BY WHOM THE INCOME IS PAYABLE THEN FOR THE PURPOSES OF DEDUCTION OF TAX UNDER THOSE PROVISIONS SUCH INCOME SHALL BE INCREASED TO SUCH AMOUNT AS WOULD AFTER DEDUCTION OF TAX THEREON AT THE RATES IN FORCE FOR THE FINANCIAL YEAR IN WHICH SUCH INCOME I S PAYABLE BE EQUAL TO THE NET AMOUNT PAYABLE UNDER SUCH AGREEMENT OR ARRANGEMENT. 6.2. FROM THE LITERAL READING OF THE ABOVE PROVISI ON IT IS CLEAR THAT THE PROVISION FOR GROSSING UP OF THE TAX CAN B E MADE ONLY IF THE ITA NO.660(B)/2011 9 SAME FORMS PART OF THE INCOME CONCERNED WHERE THER E IS AN AGREEMENT OR ARRANGEMENT TO PAY THE INCOME-TAX BY THE PRAYER ITSELF. IN THE CASE BEFORE US THE ASSESSEE HAS NOT STATED ANYWHERE THA T THE LABOUR CHARGES TO BE PAID ARE AGREED TO BE PAID TAX FREE O R THAT THE ASSESSEE HAS TO BEAR THE TAXES. ANOTHER ASPECT OF THE ISSUE BEFORE US IS WHERE THE ASSESEE HAS PAID THE TDS AMOUNT INTO THE ACCOUN T OF THE GOVERNMENT BEFORE THE DUE DATE OF FILING OF THE RET URN WHETHER THE DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. IN THE P ROVISIONS OF SEC.195A THERE IS REFERENCE TO AGREEMENT OR ARRANGEMENT FOR THE PAYMENT OF TAX FREE INCOME. HOWEVER IT IS NOT CLEAR AS TO WHETHER SUCH AN AGREEMENT OR ARRANGEMENT HAS TO BE IN WRITING. IN THE ABSEN CE OF SPECIFIC PROVISION FOR THE ARRANGEMENT OR AGREEMENT TO BE IN WRITING IT CAN BE PRESUMED THAT THE AGREEMENT OR ARRANGEMENT CAN BE O RAL ALSO. FROM THE FACT THAT THE ASSESSEE HAS FAILED TO DEDUCT THE TAX AT SOURCE AND HAS MADE THE PROVISION FOR SUCH PAYMENT OF TAX AT T HE END OF THE YEAR IT IS TO BE PRESUMED THAT THERE IS AN ARRANGEMENT F OR PAYING TAX FREE INCOME TO THE LABOURERS. THE SECOND ASPECT I.E WHE THER THE TAX DEDUCTED AT SOURCE AT THE END OF THE YEAR CAN BE DE POSITED BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME WE FIND THAT THIS ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL AT MUMBAI IN THE CASE OF BAPU SAHEB NANASAHEB DHUMAL VS ACIT IN ITA NO.6628/MUM/2009 DATED 25-06-2010 FOR THE AY: 2005- 06 CITED SUPRA ITA NO.660(B)/2011 10 ON WHICH THE CIT(A) HAS PLACED RELIANCE FOR ALLOWIN G THE ASSESSEES APPEAL AND DELETING THE ADDITION. AS THE LEARNED CIT(A) FOLLOWED THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL W HICH IS A PRECEDENT ON THE ISSUE AND THE LEARNED DR HAS NOT BEEN ABLE T O REBUT THIS FINDING OF THE TRIBUNAL WITH ANY OTHER CONTRARY DEC ISION WE DO NOT SEE ANY REASON TO TAKE ANY OTHER VIEW. IN VIEW OF THE SAME THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 30 TH MARCH 2012. SD/- SD/- (JASON P BOAZ) (SM T. P. MADHAVI DEVI) ACCOUNTANT MEMBER J UDICIAL MEMBER PLACE: BANGALORE DATED: 30-03-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR ITAT BANGALORE