Income Tax Appellate Tribunal - Hyderabad
Asst.Cit,Circle - 8(1),, Hyderabad vs Sri K.M. Vara Prasad,, Hyderabad on 27 June, 2018
THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "A", HYDERABAD
BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SHRI V. DURGA RAO, JUDICIAL MEMBER
ITA No.776/Hyd/2014
Assessment Year: 2009-10
Asst. CIT, vs. Shri K.M. Vara Prasad
Circle-8(1), Hyderabad.
Hyderabad.
PAN - AKOPK9052G
(Appellant) (Respondent)
Revenue by : Shri K.J. Rao
Assessee by : Shri A.V. Raghuram
Date of hearing : 12-06-2018
Date of pronouncement : 27-06-2018
ORDER
PER SHRI V. DURGA RAO, JM:
This appeal by the Revenue is directed against the order passed by the Ld. CIT(A), Vijayawada, dated 31.01.2014. The Revenue has raised the following grounds of appeal:
"1. The CIT(A)'s decision is erroneous both on f acts and in law.
2. The CIT(A)'s had erred in allowing the disallowance of sub-contract payments of Rs. 1,08,08,715/-.
3. The CIT(A)'s had erred in allowing the disallowance u/s 43B of Rs. 21,53,673/-
4. The CIT(A)'s had erred in allowing the disallowance of labour charges u/s 40A(3) of Rs. 38,55,820/-. 2 ITA No. 776/Hyd/2014
Shri K.M. Vara Prasad, Hyderabad.
5. Any other ground or grounds as may be urged at the time of hearing".
1.1 The ground of appeal Nos. 1 and 3 raised by the Revenue are general in nature, hence, no adjudication is required and therefore the same are dismissed.
2. Ground No. 2 raised by the Revenue is with regard to disallowance of sub-contract payments. The assessee is an individual engaged in the business of civil contracts. The assessee has filed the return of income for the A.Y 200-10 on 25.09.2009, declaring a total income of Rs. 3,93,92,068. The return filed by the assessee was processed u/s 141 of the IT Act. After due process, the assessment was completed u/s 143(3) of the IT Act and the A.O has disallowed an amount of R.s 1,08,08,715/-. In the assessment order the A.O has observed that as seen from the profit and loss account the claim of sub-contract expenses made during the year is of Rs. 42,54,11,214/-. However, as per the TDS certificates issued, the amount covered is only Rs. 41,46,02,499/-. The difference of Rs. 1,08,08,715/- is proposed to be disallowed. The A.O called the assessee to explain the reasons for above difference of amount. It was submitted by the assessee that the difference of the amount represent advances paid to the 3 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
sub-contracts in the F.Y 2007-08. The A.O after considering the explanation given by the assessee, observed that the assessee has failed to submit the extent of work given to sub-contracts and the bills raised on sub- contracts, the assessee has not filed agreement entered it with the sub-contractors. The A.O further called for details of the sub-contractors and on verification of the same, he found that some of the sub-contractors are only agriculturists and do not have any business income and not maintained any books of account and they have no experience in any contract work. In view of the observations, the A.O disallowed an amount of Rs. 1,08,08,715/-.
3. On appeal, the assessee has filed the sub-contract agreement entered by him before the CIT(A). The CIT(A) by considering the same, observed that the assessee has filed a copy of sub-contract agreement in support of his contentions, which were also filed before the A.O, which was mentioned at para 2.1 of the A.O's order. He accordingly, deleted the addition made by the AO.
4. Aggrieved by the order of CIT(A), the Revenue is in appeal before us.
4ITA No. 776/Hyd/2014
Shri K.M. Vara Prasad, Hyderabad.
5. Before us, the Ld. DR submitted that the assessee has not filed nay agreement entered by him with the sub- contracts before the A.O and details filed before the CIT(A) only. He, therefore, submitted that the order of the CIT(A) may be set aside and that of the order of AO may be restored.
6. On the other hand, the Ld. Counsel for the assessee supported the order passed by the CIT(A).
7. We heard both the parties, perused the record and gone through the orders passed by the authorities below. The only issue involved in this appeal is whether the assessee has made payments to sub-contractors to the extent of Rs. 1,08,08,715/- allowable or not. In the assessment order the A.O observed that the assessee has claimed sub-contractors payment of Rs. 42,54,11,214/-, as per the TDS certificate issued, the amount covered only Rs. 41,46,02,499/-, the A.O has called the assessee to explain the difference of amount of Rs. 1,08,08,715/- and also asked the assessee to file agreement entered by the assessee with sub-contractors. The assessee has not filed any agreement entered by him with sub-contractors before the A.O, however, these agreements were filed before the 5 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
CIT(A). The Ld. CIT(A) without calling the remand report has observed that these documents were filed before the A.O, which is contrary to the finding of the A.O. As per the assessment order, the assessee has not filed any agreement entered by him with sub-contractors and also work given to them and executed by them. Under these facts and circumstances of the case, we are of the opinion that the issue has to be adjudicated afresh and therefore the order of CIT(A) is set aside and remitted the file back to the A.O for examining the issue afresh and decide the same in accordance with law after affording reasonable opportunity of being heard to assessee. This ground of appeal raised by the Revenue is allowed for statistical purposes.
8. The second ground of appeal relates to disallowance u/s 43B of the IT Act. In the assessment order the A.O observed that as seen from the profit and loss account the assessee has claimed an amount of Rs. 97,92,737/- as work contract tax. However, the assessee disallowed only Rs. 33,25,078/- in the computation of the total income. During the course of scrutiny proceedings, the A.O requested the assessee to furnish the details of work contract tax, assessment orders and evidence including 6 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
actual payments. In response to the notices, the assessee has submitted two assessment orders, one from Govt. of Karnataka and the other from Govt. of Andhra Pradesh, which is reproduced hereunder:
TDS Authority TDS No. Date Amount
(Rs)
EE. KHSDRP Division, Gulburga 0251285 03.12.10 11,77,720
EE. KHSDRP Divisioin, Mysore 0366242 25.05.09 7,80,771
EE. KHSDRP Division, Bangalore 0680388 25.02.11 9,75,953
Total 29,34,444
9. The above Challan indicates that the payments as mentioned above subsequent to the date of filing of the return i.e 25.09.2009 and therefore applying the provision of Sec. 43B of the IT Act, the AO disallowed an amount of Rs. 21,53,673/- (11,77,720+9,75,953/-) and added back to the total income to the assessee.
10. On appeal before the Ld. CIT(A), the CIT(A) deleted the addition made by the A.O by observing that on a perusal of the certificate of tax deduction issued by the executive engineer, KHSDRP Division, Gulbarga and Bangalore, it is seen that the contractor remitted by way of book 7 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
adjustment on the same day, which is before the due date of the filing of the return i.e 25.09.2009.
11. Aggrieved, the revenue is in appeal before us.
12. The Ld. DR had supported that the payments are made subsequent to the filing of the returned income, and therefore the same cannot be allowed.
13. The Ld. AR, however, supported the order passed by the CIT(A).
14. We have considered the rival submissions and perused the material on record. We find that according to the A.O, the assessee has made the payments subsequent to the date of filing of the return i.e 25.09.2009, whereas, the CIT(A) without examining the same simply observed that the deductor remitted by way of book adjustment on the same day which is due date of filing. We are of the view that there is nothing on record and on what basis the above finding given by the CIT(A). Therefore, we are of the opinion that the issue has to be remitted back to the file of the A.O for afresh examination. In view of the above, we set aside the order passed by the CIT(A) and direct the 8 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
issue A.O to examine the issue in accordance with law after giving a fair opportunity of being heard to the assessee.
15. As regards ground of appeal No. 3, relates to disallowance of labour charges u/s 40A(3) of the IT Act, in the assessment order the A.O observed that as seen from the profit and loss account, the assessee has made a claim of Rs. 1,23,09,996/-, however, TDS was deducted only for an amount of Rs. 84,54,176/-. When the AO asked the assessee to explain, the assessee has submitted that the balance of amount of Rs. 38,55,820/- represents payment made as wages to the daily labourers and hence no TDS was deducted. The A.O after considering the explanation given by the assessee and examined the ledger extract filed by the assessee and observed that the assessee has paid an amount in the form of cash and also payments were made more than Rs. 20,000/-, therefore, it clearly falls under provisions of Sec. 40A(3) of the IT Act. The assessee has asked the reasons for the above amount. The assessee has submitted that the payments were made in turn was distributed to several persons and hence Sec. 40A(3) of the IT Act, has no application. The A.O after considering the explanation given by the assessee, observed that the 9 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
assessee paid an amount of Rs. 20,000/- and the assessee failed to produce the evidence that payments in turn were distributed to several daily wagers, accordingly, he has disallowed an amount of Rs. 38,55,820/- and the same was added back to the income of assessee.
16. On appeal, the Ld. CIT(A) deleted the addition made by the A.O by observing that on perusal of individual ledger account it was found that the assessee has not made payments in cash excess of Rs. 20,000 in a day. Aggrieved by the order of CIT(A) the Revenue is in appeal before us.
17. The Ld. DR submitted that the assessee has not filed individual ledger account copies before the A.O, but, only filed before the CIT(A) and submitted that the Ld. CIT(A) ought to have called for a remand report from the A.O and without calling for remand report simply deleted the addition and submitted the order of CIT(A) may be set aside.
18. The Ld. Counsel for the assessee strongly supported the Ld. CIT(A).
19. Having regard to the rival contentions and material on record, we find that the case of the A.O is that the assessee 10 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
has made payments to the extent of Rs. 38,55,820/- to various people which exceeds above Rs. 20,000/- and therefore the payments made by the assessee comes within the purview of the 40A(3) of the IT Act. The case of the assessee is that, he has made various payments to the several persons and distributed to various workers which is below Rs. 20,000/-, therefore Sec. 40A(3) has no application. Before the A.O, the assessee has simply submitted that the amounts paid to the individuals and, in turn, distributed to various workers, for which no details were filed before the AO. On appeal the CIT(A) by considering the individual ledger account copy deleted the addition made by A.O. This individual ledger account on which CIT(A) relied not filed before the A.O. In our opinion, the CIT(A) ought to have called for a remand report from the A.O before deciding the issue. Therefore, in our opinion, the order passed by the CIT(A) is not correct and accordingly, we set aside the order passed by the CIT(A) and remit the matter back to the file of the AO for fresh adjudication in accordance with law after providing reasonable opportunity of being heard to the 11 ITA No. 776/Hyd/2014 Shri K.M. Vara Prasad, Hyderabad.
assessee. Accordingly, the ground raised by the Revenue is allowed for statistical purposes
20. In the result the appeal by the Revenue is treated as allowed for statistical purposes.
Pronounced in the open court on 27th June, 2018.
Sd/- Sd/- (B. RAMAKOTAIAH) (V. DURGA RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER Hyderabad, Dated 27 th June, 2018. KRK
1) Sri K.M. Vara Prasad, 8-3-961/A, Beside SBI, Srinagar Colony, Hyderabad.
2) The ACI, Circle-8(1), Hyderabad.
3) CIT(A), Vijayawada.
4) The Addl. CIT, Range-8, Hyderabad.
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File