M/s. Gaonkar Mines,, Mangalore v. ACIT, Udupi

ITA 989/BANG/2008 | 2005-2006
Pronouncement Date: 22-01-2010 | Result: Allowed

Appeal Details

RSA Number 98921114 RSA 2008
Bench Bangalore
Appeal Number ITA 989/BANG/2008
Duration Of Justice 1 year(s) 6 month(s) 7 day(s)
Appellant M/s. Gaonkar Mines,, Mangalore
Respondent ACIT, Udupi
Appeal Type Income Tax Appeal
Pronouncement Date 22-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 22-01-2010
Date Of Final Hearing 30-12-2009
Next Hearing Date 30-12-2009
Assessment Year 2005-2006
Appeal Filed On 15-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO. 989/BANG/2008 ASSESSMENT YEAR : 2005-06 M/S. GAONKAR MINES C/O. CHANDRASHEKAR & CO CHARTERED ACCOUNTANTS NO.65 3 RD MAIN PRASHANTH NAGAR BANGALORE 560 079. : APPELLANT VS. THE ADDL. COMMISSIONER OF INCOME TAX UDUPI RANGE UDUPI. : RESPONDENT APPELLANT BY : SHRI SHIVA RAO RESPONDENT BY : SMT. PREETHI GARG O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE FIRM IS DIRECTED AGAINS T THE APPELLATE ORDER OF THE CIT(A) MANGALORE IN ITA NO: 11/UDP/CI T(A)/MNG/07-08 DATED: 12.5.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE FIRM (THE ASSESSEE IN SHORT) HAD ORIGINALLY RAISED FOUR GROUNDS OUT OF WHICH GROUND NOS: 1 AND 4 BEI NG GENERAL AND NO SPECIFIC ISSUES INVOLVED THEY WERE TREATED AS NON- CONSEQUENTIAL. IN THE ITA NO.989/BANG/09 PAGE 2 OF 7 REMAINING GROUNDS THE CRUX OF THE ASSESSEES GRIEV ANCE IS THAT THE AO HAD ERRED IN DISALLOWING THE EXPENDITURE OF RS.2.40 CRORES AS NO TDS WAS EFFECTED U/S 40(A)(IA) OF THE ACT WHICH HAS BEEN UP HELD BY THE LD.CIT(A). 2.1. DURING THE COURSE OF HEARING THE ASSESSEE VID E ITS APPLICATION DATED: 25.2.2009 HAD PRAYED FOR ADMISSION OF ADDITI ONAL GROUNDS. 2.2. AFTER DUE CONSIDERATION OF THE CONTENTIONS OF THE LD. AR WE ARE OF THE CONSIDERED VIEW THAT THERE WAS A FORCE IN THE A RGUMENT OF THE LD. A.R. IN THE INTEREST OF JUSTICE AND EQUITY THE ADDITION AL GROUNDS RAISED BY THE APPELLANT WERE ADMITTED FOR ADJUDICATION. 2.3. EVEN THOUGH THE ASSESSEE IN ITS ADDITIONAL GR OUNDS HAS RAISED TWELVE EXHAUSTIVE GROUNDS THE ESSENCE AND SUBSTANC E CONFINED TO THE CHARGING OF INTEREST U/S 234A 234B AND 234C OF THE ACT . 3. THE ASSESSEE FIRM WAS ENGAGED IN MINING OF SEASH ELLS. THE ASSESSEE HAD PAID WAGES OF RS.2.4 CRORES TO ITS CON TRACTORS WHICH WERE CLAIMED AS EXPENSES. DURING THE COURSE OF ASSESSME NT PROCEEDINGS IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD FAILED TO DEDUCT TDS ON THESE AMOUNTS AND THAT THESE WAGES WERE HIT BY THE PROVISIONS OF S.40(A) (IA) OF THE ACT. THE 3CD REPORT FURNISHED ALONG WI TH THE ROI IT WAS MENTIONED THAT THE ASSESSEE HAD DEDUCTED TAX AT SOU RCE ON THE WAGES PAID TO THE CONTRACTORS ONLY ON 7.1.2006 WHEREAS TH E DUE DATE FOR MAKING TDS PAYMENT WAS 31.3.2005. ITA NO.989/BANG/09 PAGE 3 OF 7 3.1. NOT SATISFIED WITH THE ASSESSEES EXPLANATION THE AO WENT AHEAD WITH A STAND THAT THE ASSESSEE HAD NOT MADE TDS ON THE WAGES PAID TO THE CONTRACTORS DURING THE PREVIOUS YEAR RELEVANT T O THE AY UNDER DISPUTE HE HAD DISALLOWED RS.2 40 09 915/- U/S 40(A)(IA) OF THE ACT. 4. AGGRIEVED THE ASSESSEE TOOK UP THE ISSUE WITH T HE CIT(A) FOR REDRESSAL. HOWEVER THERE WAS NO PERSONAL REPRESEN TATION ON THE PART OF THE ASSESSEE ON THE DATES OF HEARING. THE LD. CIT( A) HAD WHILE DECIDING THE ISSUE ON THE BASIS OF MATERIALS AVAILABLE ON RE CORD OBSERVED THUS 4. THE PROVISIONS OF SECTION 40(A)(IA) WHICH ARE A PPLICABLE FROM ASSESSMENT YEAR 2005-06 ARE VERY CLEAR AND IN CASE THE TDS IS NOT MADE ON PAYMENTS TO SUB-CONTRACTORS DURING THE RELE VANT PREVIOUS YEAR THE AMOUNT OF PAYMENT MADE TO SUB-CONTRACTORS WOULD BE DISALLOWED AND ADDED BACK IN THE TOTAL INCOME OF TH E ASSESSEE. THERE IS NO SCOPE FOR ANY RELIEF BASED ON THE REASO N GIVEN BY THE APPELLANT AS THERE IS NO DISCRETION GIVEN TO THE AS SESSING OFFICER REGARDING DISALLOWANCE OF ANY PAYMENT TO SUB-CONTRA CTORS MADE WITHOUT TDS. THEREFORE NO RELIEF CAN BE GIVEN TO THE APPELLANT BY WAY OF THIS APPEAL. 5. DISENCHANTED WITH THE FINDING OF THE LD.CIT(A) THE ASSESSEE HAS COME UP WITH THE PRESENT APPEAL. THE CONTENTIONS O F THE LD. A.R ARE SUMMARIZED AS UNDER: (I) THE ASSESSEE FIRM HAD DEDUCTED THE TAX AT SOURCE ON WAGES PAID TO THE CONTRACTORS ON 7.1.2006 WHEREAS THE DUE DATE FO R MAKING THE TDS PAYMENT WAS 31.3.2005; (II) THE NON-PAYMENT OF TDS WAS DUE TO LABOUR STRIKE AND PAUCITY OF FUNDS; (III) DURING THE ASSESSMENT YEAR UNDER DISPUTE THE PRODU CTION WAS TOTALLY STOPPED DUE TO LABOUR STRIKE. THE ASSESSEE WAS UNABLE TO MEET THE DAY-TO-DAY EXPENSES DUE TO SHORTAGE OF FUN DS; - THIS WAS THE REASON FOR THE DELAY IN PAYING THE TAX DEDUCTED FROM THE CONTRACTORS PAYMENTS AND THAT THE DELAY W AS BONA- FIDE AND BEYOND ITS CONTROL (IV) PLACED RELIANCE IN THE CASE OF JEHANGIR BIRI FACTOR Y (P) LTD. V. DCIT (2009) 28 (II) ITCL 114 KOL. C TRIB. AY 2005 -06 ITA NO.989/BANG/09 PAGE 4 OF 7 5.1. ON THE OTHER HAND THE LD. D.R. WAS EMPHATIC I N HER URGE THAT THE ASSESSEE HAD FAILED TO MAKE TDS ON THE WAGES PAID T O THE CONTRACTORS AND ALSO NOT PAID TO THE GOVERNMENT EXCHEQUER WITHIN TH E DUE DATE AND THUS THE AO WAS WITHIN HIS DOMAIN TO DISALLOW THE SAME U /S 40(A)(IA) OF THE ACT WHICH HAS BEEN JUDICIOUSLY UPHELD BY THE FIRST APPE LLATE AUTHORITY. IT WAS THEREFORE PLEADED THAT SINCE THE ASSESSEE HAD NO L OCUS STANDI TO AGITATE THE STAND OF THE AUTHORITIES BELOW BE SUSTAINED. T O DRIVE HOME HER POINT THE LD. D R HAD PLACED STRONG RELIANCE ON THE FOLLO WING RULINGS: (A) RUKESH KUMAR & CO. V. UNION OF INDIA (2009) 178 TA XMAN 481 (P & H); & (B) DEYS MEDICAL (U.P) (P) LTD. V. UNION OF INDIA & OR S. (2008) 216 CTR (ALL) 83 6. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS P ERUSED THE RELEVANT RECORDS AND ALSO THE CASE LAWS ON WHICH ST RONG RELIANCE WAS PLACED BY EITHER PARTY. 6.1. ON A PERUSAL OF THE IMPUGNED ORDER OF THE AO U NDER DISPUTE WE FIND THAT THE ASSESSEE FIRM HAD DEBITED TO ITS P & L ACC OUNT A SUM OF RS.3.04 CRORES UNDER THE HEAD DIRECT EXPENSES. ON VERIFI CATION THE AO FOUND THAT THE ASSESSEE FIRM HAD PAID WAGES TO THE TUNE OF RS. 2.40 CRORES TO ITS CONTRACTORS WHICH WAS CLAIMED BY THE ASSESSEE AS EX PENSES. HOWEVER THE ASSESSEE HAD FAILED TO DEDUCT TDS ON THESE AMOU NTS AND REMIT TO THE GOVERNMENT ACCOUNT. ACCORDINGLY THE AO WAS OF THE VIEW THAT THE WAGES PAID TO THE CONTRACTORS OF RS.2.40 CRORES WERE HIT BY THE PROVISIONS OF S.40(A)(IA) OF THE ACT. ON SCRUTINIZING THE 3CD RE PORT FURNISHED ALONG WITH THE ROI THE AO NOTICED THAT THE ASSESSEE FIRM HAD DEDUCTED TAX AT SOURCE ITA NO.989/BANG/09 PAGE 5 OF 7 ON THE WAGES PAID TO THE CONTRACTORS ONLY ON 7.1.2006 WHEREAS THE DUE DATE FOR CREDITING THE TDS AMOUNT TO THE GOVERNMENT EXCHEQUER WAS 31.3.2005. WHEN THIS FACT WAS BROUGHT TO THE NOTIC E OF THE ASSESSEE THE ASSESSEES MANAGING PARTNER CAME UP WITH A REPLY TH AT DURING THE AY 2005-06 OUR PRODUCTION WAS TOTALLY STOPPED DUE TO L ABOURS STRIKE. WE WERE UNABLE TO MEET OUR DAY-TO-DAY EXPENSES BECAUSE OF S HORTAGE OF FUNDS. THIS IS THE REASON WHY THERE WAS A DELAY IN PAYING THE T AX DEDUCTED FROM OUR CONTRACTORS PAYMENT AND ALSO REASON FOR DELAY WAS DUE TO BEYOND OUR CONTROL 6.2. THE MOOT QUESTION IS THAT ON THE ONE HAND THE ASSESSEE FIRM HAD DEBITED IN P& L ACCOUNT A SUM OF RS.3.04 CRORES AS DIRECT EXPENSES OUT OF WHICH A SUM OF RS.2.40 CRORES WAS PURPORTED TO HAV E BEEN PAID TO ITS CONTRACTORS AND ON THE OTHER HAND THE MANAGING PAR TNER CAME UP WITH A REPLY THAT THE PRODUCTION WAS TOTALLY STOPPED DUE T O LABOURERS STRIKE DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR U NDER DISPUTE. HOWEVER IN THE 3CD REPORT THE AUDITOR HAD MENTION ED THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE ON THE WAGES PAID TO THE CONTRACTORS ON 7.1.2006 . 6.3. ON ANALYZING THE ABOVE FACTS THE FOLLOWING FA CTS EMERGE: - (A) THE MANAGING PARTNER OF THE ASSESSEE FIRM HAD VOUCH ED THAT THE PRODUCTION WAS TOTALLY STOPPED DUE TO LABOURERS ST RIKE DURING THE ASSESSMENT YEAR UNDER DISPUTE; - IF SO HOW DID THE ASSESSEE FIRM CLAIM EXPENS ES TO THE TUNE OF RS.3.04 CRORES AND PURPORTED TO HAVE PAID THE WAGES OF RS.2.40 CRORES TO ITS CONTRACTORS WHEN THERE WAS TOTAL STOP PAGE OF PRODUCTION? ITA NO.989/BANG/09 PAGE 6 OF 7 (B) WHETHER THE ASSESSEE FIRM HAVE ENTERED INTO AN Y AGREEMENT WITH THE SO CALLED CONTRACTORS FOR EXECUTING THE JOB? (C) WAS THE PAYMENT MADE TO CONTRACTORS FOR SUPPLY OF LABOUR FOR CARRYING OUT WORK OR WAS IT A MERE CONSOLIDATED DIS BURSEMENT OF WAGES? (D) WAS THERE ANY ORAL OR WRITTEN AGREEMENT BETWEE N THE ASSESSEE AND THE PAYEE TO ESTABLISH THAT IT AMOUNTS TO CONTR ACT FOR SUPPLY OF LABOUR? (E) WHETHER THE TERMS AND CONDITIONS OF THE CONTRAC TUAL OBLIGATIONS ESTABLISHES THAT THERE WAS A RELATIONSHIP BETWEEN T HE ASSESSEE AND PAYEE IN THE NATURE OF LABOUR CONTRACT? (F) DOES THE PAYMENT MADE BY THE ASSESSEE LEADS TO MERE ROUTING OF CONSOLIDATED WAGES OR AMOUNTS TO CONTRACTUAL PAYMEN T FOR SUPPLY OF LABOUR. 6.4. THE ABOVE FACTS HAVE NOT BEEN LOOKED INTO EITH ER BY THE AO OR BY THE FIRST APPELLATE AUTHORITY. MOREOVER THE FIRST APPELLATE AUTHORITY HAD DECIDED THE ISSUE ON THE BASIS OF THE MATERIALS AVA ILABLE ON RECORD WITHOUT HEARING FROM THE ASSESSEE IN PERSON. THE PROVISION S OF SECTION 40(A)(IA) OF THE ACT ARE VERY HARSH. THEREFORE BEFORE RUSHING T O APPLY THE PROVISION OF THE ACT WHICH IS PENAL IN NATURE THE CONCERNED AUT HORITIES HAVE TO MINUTELY OBSERVE THE FACTS WHICH WE FIND TO BE ABSENT IN T HIS CASE. 6.5. IN OVER ALL CONSIDERATION OF THE ISSUE AS DISC USSED ABOVE AND ALSO IN THE INTEREST OF JUSTICE AND EQUITY WE ARE OF THE F IRM VIEW THAT THE ISSUE SHOULD GO BACK ON THE FILE OF THE LD.CIT (A) FOR FR ESH CONSIDERATION. WE ACCORDINGLY REMIT BACK THE ISSUE ON THE FILE OF THE LD.CIT (A) WITH A SPECIFIC DIRECTION TO LOOK INTO ALL ASPECTS AND TO TAKE APPR OPRIATE ACTION IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AFTER AF FORDING A REASONABLE ITA NO.989/BANG/09 PAGE 7 OF 7 OPPORTUNITY TO THE ASSESSEE FIRM OF BEING HEARD AND ALSO AFTER OBTAINING A REMAND REPORT FROM THE LD. AO. THE ASSESSEE FIRM THROUGH ITS LD. COUNSEL IS ADVISED TO FURNISH ALL RELEVANT PARTICULARS AT ITS POSSESSION TO THE CIT (A) WHICH WOULD FACILITATE HIM TO FINALIZE THE ISSUE EX PEDITIOUSLY. IT IS ORDERED ACCORDINGLY. 7. SINCE WE HAVE REMITTED THE CASE BACK TO THE FILE OF LD. CIT(A) FOR FRESH CONSIDERATION THE OTHER GRIEVANCE OF THE ASS ESSEE OF CHARGING OF INTEREST U/S 234A 234B AND 234C OF THE ACT HAS BEC OME OBSOLETE AND THUS IT HAS NOT BEEN ADDRESSED TO. 8. IN THE RESULT THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JANUARY 2010. SD/- SD/- (K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE DATED THE 22 ND JANUARY 2010. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. C IT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.