TaxTMI 
TaxTMI 
2020 (2) TMI 1041
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....t of furnishing inaccurate particulars of income by non deduction of TDS u/s.194C of the Act. (2) That the ld.CIT(A) has substantially erred by not considering the fact that the assessee has failed to deduct TDS u/s.194C of the Act attracting the violence of section 40(a)(ia) of the Act and furnished inaccurate particulars of income. (3) The appellant craves, to leave, to amend and/or to alter any ground or add a new ground which may be necessary. 3. Facts of the case are that return of income was filled by the assessee on 27/10/2005 declaring total income of Rs. 29,01,240/- The assessment was completed u/s. 143(3) of I.T. Act on 27/12/2007 determining total income at 2,51,85,660/-, The additions and disallowances of Rs. 2,22,84,420/- were made in the assessment, which included disallowance of Rs. 2,21,56,800/- out of freight expenses u/s 40(a)(ia) of the Act and Rs. 52,800/- out of interest expenses. The penalty proceedings u/s 271(l)(c) of the Act were initiated. A show cause notice was issued and served on the assessee. 3.1. The assessee had preferred an appeal against the assessment agitating the disallowance made u/s 40(a)(ia) of the Act. The Ld.CIT(A),....
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.... section 40(a)(ia) and the same has been accepted by the court and it is still pending. A copy of High Court order has already been served to your office by the court and it is part of the record. Since the matter is still sub judice the penalty proceeding initiated above are of Quasi judicial proceedings hence they should be kept at least in abeyance till the disposal of petition. In view of the above facts and circumstances since the matter on which the penalty proceeding are initiated is pending before the highest court of the state and the order of the Commissioner Appeals has been passed ex-party against which the assessee has preferred an appeal before the income tax tribunal and further there are no inaccurate particulars of income filed hence the penalty proceeding initiated may please be kept in abeyance till the order of the High Court on the constitutional validity of the section or may please be dropped. 5. That as regards the initiation of penalty proceedings for the unsecured loan u/s 68 is concerned, it is submitted that the learned commissioner of appeals without verifying the assessment records confirmed the deposits accepted by the asses....
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....,178/- and Rs. 35,250/- made in the assessment by the Assessing Officer. 3.4. Further, while deciding the appeal, the CIT(A), had noticed that out of the freight expenses debited of Rs. 6,93,67,089/- to P&L Account, the assessee was required to deduct TDS u/s 194C on Rs. 4,51,24,474/- and on balance freight amount of Rs. 2,42,42,615/-, provisions of section 194C were not applicable either on account of payments being below Rs. 50,000/- or on account of ownership of less than two vehicles by the payees. The CIT(A) had, therefore, given an opportunity of being heard to the assessee to furnish the evidences and explain the matter. The assessee, however, could not produce evidences and explanation before the CIT(A) in spite of several opportunities afforded by the CIT(A). The CIT(A), therefore, after recording elaborate findings on facts of the case in para No. 11 to 20 of her order, categorically held that the freight amount of Rs. 2,42,42,615/- remained unsubstantiated. The CIT(A), therefore, enhanced the disallowance of freight expenses by Rs. 2,42,42,615/-. Thus, the total disallowance u/s 40(a)(ia) of the Act worked out to Rs. 4,08,14,550/-. The assessee is, therefore, liable f....
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.... also observed by the CIT(A) that in respect of these 3 depositors, the assessee had not furnished information whatsoever to the Assessing Officer. The CIT(A) had, therefore, given an opportunity to assessee to inform about confirmation with respect to these unsecured loans. The assessee, however, could not produce satisfactory evidences and explanation before the CIT(A). The CIT(A), therefore, enhanced the addition by Rs. 13,25,000/- u/s 68 of the IT.Act, The assessee is, therefore, liable for penalty on the amount of Rs. 13,25,000/-, for which the assessee is deemed to have furnished inaccurate particulars of income. 3.8. Assessee's contention that it had filed the confirmations before the Assessing Officer and same were accepted is not found substantiated before the CIT(A). The issue regarding unsecured loans has not been adjudicated in favour of assessee by the CIT(A), but the CIT(A) after giving her findings on facts of the case has, made enhancement of Rs. 13,25,000/-. The income added in the assessment on account of unexplained cash credit is concealed income and the assessee is deemed to have concealed the particulars of income. 3.9. The assessee's request for....
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....were made : Sr. No. Particulars Amount in Rs. 1 Disallowance made by the ld. AO confirmed by the CIT(A) 1,65,64,178 2 Enhancement made by Your Honours in first round 2,42,15,122 Total 4,07,79,300 (b) The appellant submitted that: "So far as Sr. No. 1 i.e disallowance of Rs. 1,65,64,178/- u/s 40(a)(ia) is concerned, the Appellant submits that it is admitted facts that the Appellant has deducted tax at source, however, not deposited within the prescribed time limit but in any case has been duly deposited before the due date of filing return of income. Please refer para 3 of the assessment order wherein the details of tax deducted at source has been given. As a matter of facts, the tax has been deducted at source and has been paid before the due date of filing of return of income. Copy of the details of deduction of tax at source on amount of Rs. 1,65,64,178/-alongwith the bank statement showing clearance of amount of IDS is enclosed herewith marked as "Annexure - D". In this connection, The Appellant further submits that the provisions of S.40(a)(ia) has undergone a change by the Finance Act, 2010 whereby it has be....
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....count of, or to, the contractor or sub-contractor, if such sum does not exceed twenty thousand rupees: Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) or, as the case may be, sub-section (2) shall be liable to deduct income-tax under this section" Hence, from the above quoted provisions, it is very much clear that the Appellant was not required to deduct tax at source on an amount, upto 30/09/2004, if impugned amount does not exceed Rs. 20,000/- per contract. It is further submitted that from 01/10/2004, if the amount credited or paid to the contractor or sub-contractor does not exceed Rs. 20,000/- in single transaction and Rs. 50,000/- in aggregate, than the Appellant was not required to deduct tax at source. Therefore, the Appellant has bifurcated an amount of Rs. 1,08,22,029/- in to two periods viz. period from 01/04/2004 to 30/09/2004 and 01/10/2004 to 31/03/2005, which is Rs. 46,73,017/- and Rs. 61,49,012/-respectively. The Appellant further submits out of a....
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....not sustainable, because, Hon'ble Gujarat High Court in the case of CIT Vs. Sikhandharkhan N. Tanvar, 257 ITR 212 has overruled this decision. He pointed out that in the case of M/s.Kataria Movers, the ld.CIT(A) has observed that total disallowance of Rs. 6,53,59,734/- including enhancement made by the CIT(A) was to be done in this case. Out of this amount, a sum of Rs. 3,39,11,223/- is the amount on which TDS was deducted by the assessee, but was paid late i.e. before the due date of filing of the return. When the ld.CIT(A) has worked out the balance amount, then, this amount was not examined with the angle whether TDS was to be deducted by the assessee or not. The ld.CIT(A) has observed that only a sum of Rs. 3,07,35,157/- remained payable as on 31.3.2005. In a way, on the strength of order of the special Bench of the Tribunal in the case of Merilyn Shipping & Transports (supra) has construed that the amount which is not payable on 31.3.2005 allowability or disallowability on account of non-deduction of TDS ought not to be considered. Out of this total amount, the ld.CIT(A) has observed that a sum of Rs. 2,34,30,157/- representing the amount on which the assessee has already dedu....
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....e upon its earlier decision in the case of Gujarat Narmada Valley Fertilizers Co. Ltd., 361 ITR 192 (Guj) and in the case of CIT Vs.Omprakash R. Chaudhary has held that amendment in section 40(a)(ia) by Finance Act, 2010 has retrospective effect, meaning thereby, if the expenditure was incurred by the assessee in any month during the previous year and TDS was deducted, but such TDS was deposited after expiry of accounting year, but before due date of filing of the return, then disallowance under section 40(a)(ia) would not be made. The ld.DR was unable to controvert this contention of the ld.counsel for the assessee. 12. On due consideration of the facts and circumstances, we are of the view that as far as ground no.1 in all these three appeals are concerned, they are devoid of any merit, because, the assessee has deducted TDS on these amounts and TDS was deposited before the due date of filing of the return. The ld.AO has made disallowance on the ground that TDS was not deposited before the end of the accounting year i.e. before 31.3.2005. Therefore, ground no.1 in all three years is rejected. 13. With regard to ground no.2 in all three appeals, the ld.counsel fo....
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.... is assumed that section 194C is applicable upon the assessee and it was required to be deducted TDS, then, sub-clause (iii) of section 194C contemplates that upto 30.9.2004, if payment does not exceed Rs. 20,000/- per contract, then, the assessee was not required to deduct TDS. Similarly, after 1.10.2002 upto 31.3.2005, if the amount credited or paid to the contractor or sub-contractor does not exceed Rs. 20,000/- in a single transaction and Rs. 50,000/- in aggregate, then, the assessee was not required to deduct TDS. The assessee has given bifurcation of these amounts, which has duly been reproduced by the ld.CIT(A) on page no.15 of the impugned order. As per working reproduced by us in the foregoing paras, the assessee, in the case of Kataria Movers, required to deduct TDS at Rs. 1,60,09,690/-. Similarly, working submitted by the assessee in rest of two appeals which has also been reproduced on page nos.14 and 15 of the impugned orders (Rs. 36,71,905/- in the case of Kataria Transport Co., and Rs. 13,05,044/- in Kataria Logistic Services). It was demonstrated before us that if other explanation of the respondents, to support the order of CIT(A) is not being acc....
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....y person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and shall at the time of credit of such 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, deduct an amount equal to - (i) one per cent in case of advertising (ii) in any other case two per cent, of such sum as income-tax on income comprised there in. (2) Any person (being a contractor and not being an individual or a Hindu undivided family) responsible for paying any sum to any resident (hereafter in this section referred to as the sub-contractor) in pursuance of a contract with the sub-contractor for carrying out, or for the supply of labour for carrying out, the whole or any part of the work undertaken by the contractor or for supplying whether wholly or partly any labour which the contractor has undertaken to supply shall, at the time of credit of such sum to the account of the sub-contractor or at the time ....
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....see, 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 any part of the work undertaken by the assessee. x x x x x x x x x x x x 8.6 As per the provisions of section 194C(2), as explained in para 8.1 supra, the sub-contractor should carry out the whole or any part 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 signifies 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 carrying 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 undertaken by the assessee by spendi....
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....less there is a contrary decision at the end of Hon'ble jurisdictional High Court or at the end of the Hon'ble Supreme Court. In this decision, the Hon'ble High Court has held that section 40(a)(ia) is not applicable in the Asstt.Year 2005-06, therefore, no disallowance can be made. The discussion made by the Hon'ble Calcutta High Court read as under: "... Mr.Agarwal's criticism is not without force but he has not been able to point out as to how could the assessee have come to know that the omission to deduct tax from any payment made to a contractor shall become not deductible under section 40 before the Finance Act 2004 got presidential assent on 10th September, 2004. This question he has not answered because he has no answer to offer. Admittedly, the Finance Act, 2004 got presidential assent on 10th September, 2004. The assessee could not have foreseen prior to 10th September, 2004 that any amount paid to a contractor without deducting tax at source was likely to become not deductible under Section 40. It is difficult to assume that the legislature was not aware or did not foresee the aforesaid predicament. The legislature therefore provided that the ....
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....gainst the Government and in favor of the taxpayer. Gould v. Gould, 245 U.S. 151, 153.'' We are of the opinion that the learned Tribunal erred in applying provision of section 40(a)(ia) in disallowing payment of a sum of Rs. 4,30,386/- to a contractor without deducting TDS during the financial year 2004-05, corresponding to assessment year 2005-06. In that view of the matter, the question formulated is answered in the affirmative and in favour of the assessee." 22. In the absence of any contrary decision brought to our notice by the ld.DR, we are bound to follow, and therefore, the assessee cannot be held in default for nondeducting the TDS on the payments made to truck owners for hiring the trucks." 7. In parity with the aforesaid ITAT order and on the principle of consistency, we dismiss this ground of the revenue. 8. Now coming to ground relating to penalty on addition u/s.68 of the Act. 8.1. The ld.CIT(A) while passing order dated 21/06/2012 in quantum appeal in second round of litigation deleted the addition so made u/s.68 of the Act with the following observation: "7.3. In respect of ground related to enhancement of Rs. 13,50,000 b....