ITO, Trichy v. Shri R.Dhakshinamoorthy,, Trichy

ITA 663/CHNY/2010 | 2006-2007
Pronouncement Date: 12-07-2011 | Result: Dismissed

Appeal Details

RSA Number 66321714 RSA 2010
Assessee PAN AEDPD8288A
Bench Chennai
Appeal Number ITA 663/CHNY/2010
Duration Of Justice 1 year(s) 2 month(s) 2 day(s)
Appellant ITO, Trichy
Respondent Shri R.Dhakshinamoorthy,, Trichy
Appeal Type Income Tax Appeal
Pronouncement Date 12-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 12-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2006-2007
Appeal Filed On 10-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH B : CHENNAI [BEFORE SHRI HARI OM MARATHA JUDICIAL MEMBER AND SHRI N.S. SAINI ACCOUNTANT MEMBER] I.T.A.NO.663/MDS/2010 ASSESSMENT YEAR : 2006-07 THE INCOME-TAX OFFICER WARD IV(1) TRICHY VS SHRI R.DAKSHINAMOORTHY CIVIL CONTRACTOR NO.3 MIDDLE STREET MELAKALKANDARKOTTAI TRICHY 620 011 [PAN - AEDPD8288A ] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R. CLEMENT RAMESH KUMAR RESPONDENT BY : SHRI R. VISWANATHAN O R D E R PER HARI OM MARATHA JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR ASSES SMENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) TIRUC HIRAPPALLI DATED 19.3.2010. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A CIVIL CONTRACTOR. HE HAD EXECUTED CIVIL WORKS FOR TRICHY MUNICIPAL CORPORATION AND PUBLIC WORKS DEPARTMENT OF GOVERNME NT OF TAMIL NADU DURING THE PERIOD PERTAINING TO ASSESSMENT YEA R 2006-07. THE ITA 663/10 :- 2 -: GROSS CONTRACT RECEIPTS FOR THE ASSESSMENT YEAR 200 6-07 CAME TO ` 50 87 031/-. THE ASSESSEE ADMITTED TOTAL INCOME OF ` 3 34 210/- GIVING NET PROFIT RATE OF 6%. IN THIS BUSINESS THE ASSESSEE HAD HIRED LORRIES BELONGING TO FIVE PERSONS AND PAID HIRING C HARGES OF ` 6 14 250/- WHICH WAS DISALLOWED U/S 40A(IA) OF THE ACT. THE ASSESSING OFFICER HAS ALSO DISALLOWED 5% OUT OF THE FOLLOWIN G EXPENSES FOR DEFECTIVE VOUCHING: I) BLUE METAL RRALAI ` 6 04 700 II)SAND AND GRAVEL ` 1 29 765 III) WAGES ` 16 78 881 TOTAL ` 24 13 346 3. THE ASSESSEE HAD CLAIMED AN AMOUNT OF ` 4 LAKHS HAVING BEEN RECEIVED FROM HIS WIFE U/S 68 OF THE ACT. AGGRIEVE D THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO HAS DEL ETED THE ENTIRE ADDITION. NOW THE REVENUE IS AGGRIEVED AND HAS RAI SED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IS CONTRARY TO LAW FACTS AND CIRCUMSTANCES OF THE CA SE. 2. THE LEARNED CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 3. THE CIT (APPEALS) HAS ERRED IN NOT LOOKING INTO THE FACT THAT THE AO HAD MADE DISALLOWANCE OF EXPENDITURE BY WAY OF ESTIMATION TOWARDS DEFECTIVE VOUCHERS AND NON- MAINTENANCE OF PROPER VOUCHERS WHICH MEANS THE VOUCHERS ARE NOT GENUINE THE CLAIMS MADE BY THE ITA 663/10 :- 3 -: ASSESSEE AND FAILED TO LOOK INTO THE FACT AGREED TO THE ESTIMATION AT THE TIME OF ASSESSMENT . 4. THE CIT(APPEALS) HAS FAILED TO APPRECIATE THE F ACT THAT THE ASSESSEE HAS OBTAINED LOAN FROM HIS WIFE WHICH HAS BEEN CLEARLY INDICATED IN THE ACCOUNTS WHICH IS DULY REF LECTED BY THE AUDIT REPORT U/S 44 AB A STATUTORY REPORT. THE CIT (APPEALS) HAS NOT LOOKED INTO THE FACT THAT THE ASS ESSEE WAS UNABLE TO SUBSTANTIATE THE CLAIM OF THE SUM OF ` 4 LAKHS STATED TO BE RECEIVED FROM MRS. RAJESWARI AS GIFT BY ANY MATERIAL EVIDENCE BUT WITH ONLY A CONFIRMATION LETTER OF MRS. RAJESWARI. HENCE THE A.O'S CONCLUSION THAT I T IS UNEXPLAINED CREDIT U/S 68 IS JUSTIFIED. 5. THE CIT(APPEALS) HAS ERRED IN NOT APPRECIATING T HE FACT THAT THE ASSESSEE FAILED TO ESTABLISH THE FACT THA T FORM 15- I WERE RECEIVED OR COLLECTED AT THE RELEVANT POINT OF TIME AND FORWARDED TO THE APPROPRIATE AUTHORITY WITHIN T HE STIPULATED PERIOD OF TIME THEN ONLY THE BENEFIT OF NON- DEDUCTION OF TAX AT SOURCE CAN BE ALLOWED AS STIPUL ATED UNDER SECTION 194C(3)(1). FOR THESE REASONS AND SUCH OTHERS THAT MAY BE ADDUC ED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE CANCELL ED AND THAT OF THE ASSESSING OFFICER RESTORED. 4. GROUND NOS.1 & 2 ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 5. GROUND NO.3 RELATES TO ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE ON ESTIMATE BASIS. THE ASSESSEE HAD CLAIMED TOTAL EXPENSES OF ` 24 13 346/- THE BREAK UP OF WHICH IS GIVEN AT PAGE 2. THE ASSESSING OFFICER HAS DISALLOWED 5% OF THE TOTAL ITA 663/10 :- 4 -: EXPENSES ON ACCOUNT OF DEFECTIVE VOUCHERS. THE CAS E OF THE ASSESSEE IS THAT THE ENTIRE EXPENSES ARE SUPPORTED BY VOUCHE RS. WHAT IS THE DEFECT IN THE VOUCHER IS NOT CONVEYED TO THE ASSESS EE. THE ASSESSEE HAS DECLARED NET PROFIT RATE OF 6% WHICH HAS BEEN A CCEPTED WITHOUT ANY ADVERSE OBSERVATION BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO NOT GIVEN A FINDING THAT THESE EX PENSES ARE IN ANY WAY UNREASONABLE OR EXCESSIVE AND WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS. THE REVENUES CASE IS THAT SOME OF THE VOUCHERS WERE FOUND TO BE DEFECTIVE BUT NO SPECIFIC INSTANCE(S) HAS BEEN GIVEN IN THIS REGARD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACC OUNT AND HAS ACCEPTED IN TOTO THE RECEIPTS AS WELL AS THE NET PR OFIT RATE DECLARED BY THE ASSESSEE. THE DISALLOWANCE OUT OF TOTAL EXPENS ES @ 5% SEEMS TO BE SIMPLICITOR ADHOC AND NOTIONAL WHICH CANNOT BE SUSTAINED IN THE EYES OF THE LAW. AFTER ACCEPTING THE NET PROFIT DE CLARED THE EXPENSES CANNOT BE SO DISALLOWED ON PERCENTAGE BASIS. ANY E XPENSE WHICH IS SPECIFICALLY FOUND TO BE NOT INCURRED CAN BE DISALL OWED. THIS IS NOT THE CASE THEREFORE IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY DELETED ITA 663/10 :- 5 -: THE IMPUGNED ADDITION. THUS GROUND NO.3 OF THIS A PPEAL CANNOT BE ALLOWED. 7. THE SECOND ISSUE RAISED VIDE GROUND NO.4 RELATES TO ADDITION OF ` 4 LAKHS ADDED U/S 68 OF THE ACT AS UNEXPLAINED CRE DIT. THE FACTS APROPOS THIS ISSUE ARE THAT THE ASSESSING OFFICER D ISBELIEVED THE RECEIPT OF GIFT OF ` 4 LAKHS FROM ASSESSEES WIFE. THE CASE OF THE ASS ESSEE IS THAT THIS GIFT WAS GIVEN OUT OF CASH RECEIVED ON TH E DISSOLUTION OF THE FIRM IN WHICH SHE WAS A PARTNER. THE ASSESSEE HAD FILED A CONFIRMATORY LETTER IN PROOF OF THE GENUINENESS OF THIS GIFT OF ` 4 LAKHS VIDE LETTER DATED 15.12.2008. THEREAFTER THE ASSE SSING OFFICER DID NOT REQUIRE THE ASSESSEE FOR ANY FURTHER PROOF IN THIS REGARD. ON THIS REASONING THE LD. CIT(A) HAS ACCEPTED THIS GIFT TO BE GENUINE BY HOLDING THAT THE SOURCE OF THE SOURCE CANNOT BE ASK ED FROM THE ASSESSEE AND IN THIS CASE THE SOURCE OF GIFT STAN DS PROVED AND THE DONOR IS IDENTIFIABLE WHO HAS ALSO CONFIRMED THE SA ME. 8. AFTER HEARING THE RIVAL CONTENTIONS WE FIND THAT T HIS ADDITION HAS BEEN MADE U/S 68 OF THE ACT WHEREUNDER THE IDENTITY OF THE CREDITOR(DONOR) THE GENUINENESS OF THE TRANSACTION AND THE CREDITWORTHINESS OF THE CREDITOR ARE REQUIRED TO BE ESTABLISHED BY THE ASSESSEE. IN THIS CASE THESE THREE INGREDIENTS ST AND PROVED HENCE ITA 663/10 :- 6 -: EVEN BY TREATING THIS ADDITION AS A CREDIT U/S 68 NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE. THE WIFE OF THE ASSESSEE HAS FILED CONFIRMATORY LETTER ALONGIWTH A COPY OF ACCOUNTS TO SHOW THAT SHE HAD RECEIVED MONEY FROM THE DISSOLVED FIRM IN WHICH SHE WAS A PARTNER. THE DECISIONS ON WHICH THE ASSESSEES REPRESENTATIV E HAS RELIED BEFORE THE LD. CIT(A) ARE RELEVANT IN THIS REGARD. THE AM OUNT OF PROOF REQUIRED EITHER FOR A GIFT OR CREDIT ARE BY AND LAR GE IDENTICAL. THEREFORE THIS GROUND ALSO CANNOT BE ALLOWED AND S TANDS DISMISSED. 9. THE LAST ISSUE RAISED VIDE GROUND NO.5 IS IN RELAT ION TO DELETION OF ADDITION MADE ON ACCOUNT OF NON-DEDUCTION OF TDS . THE ASSESSEE PAID HIRING CHARGES OF ` 6 14 250/- BUT DID NOT DEDUCT TAX AT SOURCE THEREFORE THE ENTIRE AMOUNT WAS ADDED U/S 40A(IA) OF THE ACT. THE DEFENCE OF THE ASSESSEE IS THAT AS PER THE PROVISIO NS OF SECTION 194C IN CASE THE ASSESSEE HAS GOT FORM 15-I FROM THE VEH ICLE OWNERS THEN NO TDS IS REQUIRED TO BE DEDUCTED. IT IS STATED TH AT FIVE PERSONS TO WHOM HIRE CHARGES TOTALING TO ` 6 14 250/- WAS PAID HAVE FILED FORM 15-I ON TIME. THE SECOND PROVISO TO SECTION 194C(3 )(I) PROTECTS A ASSESSEE FOR NON-DEDUCTION OF TAX AT SOURCE. THE CASE OF THE REVENUE IS THAT THE BONAFIDE OF FORM 15-I CANNOT BE ACCEPT ED. TO WHICH IT WAS REPLIED THAT THE NON-DEDUCTION AFTER RECEIPT OF FORM 15-I WAS DUE ITA 663/10 :- 7 -: TO ADVICE GIVEN BY A CHARTERED ACCOUNTANT. WHEN TH IS FACT WAS NOTICED THE ASSESSEE CHANGED HIS C.A. SUBSEQUENTL Y. 10. BEFORE US SIMILAR STAND WAS TAKEN BY BOTH THE PARTIES AS WAS TAKEN BEFORE THE LD. CIT(A). IT WAS FOUND FOR A FA CT THAT THE PHYSICAL OWNERS OF VEHICLES HAD FILED CONFIRMATORY LETTERS C ONFIRMING THAT THEY HAD SUBMITTED FORM 15-I ON TIME. IN OUR OPINION T HIS IS ENOUGH COMPLIANCE TO PROVE THE BONAFIDES OF THE ASSESSEE. THE OBSERVATION OF THE ASSESSING OFFICER THAT FORM 15-I WERE NOT RECEI VED BY THE ASSESSEE ON TIME IS SIMPLY IMAGINARY AND IS BASED ON HIS OWN CONJECTURES AND SURMISES. WE FIND MERIT IN ASSESSEES THIS CONTENT ION. IN OUR OPINION THE LD. CIT(A) HAS DONE JUSTICE. WE ARE OF THE VI EW THAT FOR MAKING PAYMENT TO HIRE VEHICLES WHO ADMITTEDLY DID NOT EX ECUTE ANY WORK FOR THE ASSESSEE PROVISIONS OF SECTION 194C ARE NOT AT TRACTED AT ALL. THE CONDITIONS LAID DOWN IN SECTION 194C ARE NOT SATISF IED IN THIS CASE. PAYMENT OF HIRE CHARGES ARE OUTSIDE THE PURVIEW OF SECTION 194C AND THUS NON-DEDUCTION OF TAX WOULD NOT ATTRACT THE PR OVISIONS OF SECTION 40(A)(IA). THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS POOMPUHAR SHIPPING CORPORATION LTD (282 ITR 3) HAS HELD THAT PAYMENT FOR HIRING OF SHIPS BY THE ASSESSEE AND USI NG THEM IN ITS BUSINESS IS NOT A CONTRACT AND SUCH HIRE CHARGES DO NOT ATTRACT SECTION ITA 663/10 :- 8 -: 194C. IF THIS ANALOGY IS APPLIED IN THIS CASE WHER E THE ASSESSEE HAS HIRED VEHICLES OF FIVE PERSONS TO CARRY OUT ITS BUS INESS THIS DECISION SQUARELY APPLIES. CONSEQUENTLY BY FOLLOWING HON'B LE JURISDICTIONAL HIGH COURTS DECISION AND IN VIEW OF OTHER OBSERVAT IONS WE DISMISS GROUND NO.5 OF REVENUES APPEAL. ACCORDINGLY WE D ISMISS THE APPEAL OF THE REVENUE. 11. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.7.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 12 TH JULY 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR