Income Tax Appellate Tribunal - Jodhpur
Shri Ragvendra Singh Ranawat, Udaipur vs Assessee on 13 May, 2014
[1]
IN THE INCOME TAX APPELLATE TRIBUNAL
JODHPUR BENCH, JODHPUR
BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER
AND SHRI N. K. SAINI, ACCOUNTANT MEMBER
I.T.A. No. 241/Jodh/2012
Assessment Year: 2008-09
Shri Ragvendra Singh Ranawat Vs. The Income Tax Officer
Prop. M.I. Minerals Ward 1(4),
3-Pipleswar Mahadeo Ki Gali 6, New Fatehpura,
Rao Ji Ka Hatta, Udaipur. Udaipur.
PAN: AFDPR 5504 G
(Appellant) (Respondent)
I.T.A. No. 252/Jodh/2012
Assessment Year: 2008-09
The Income Tax Officer, Vs. Shri Ragvendra Singh Ranawat
Ward 1(4), Prop. M.I. Minerals
6, New Fatehpura, 3-Pipleswar Mahadeo Ki Gali
Udaipur. Rao Ji Ka Hatta, Udaipur.
PAN: AFDPR 5504 G
(Appellant) (Respondent)
Assessee by : Shri Amit Kothari
Revenue by : Shri N.A. Joshi, D.R.
Date of hearing : 13/05/2014
Date of pronouncement : 19/05/2014
ORDER
PER N.K. SAINI, A.M.
These cross appeals by the assessee and the department are directed against the order dated 28/3/2012 of Ld. CIT(A), Udaipur. First we [2] will deal with the appeal of the assessee in I.T.A. No. 241/Jodh/2012, following grounds have been raised in this appeal.
"1. The Learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts and circumstances of the case in confirming the disallowance of hiring and transportation charges of Rs. 10,80,092/- made by the Assessing Officer under section 40(a)(ia) of the Act.
2. The Learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts and circumstances of the case in confirming the depreciation on excavators (L&T Machines I & II) running on hire at the rate of 15% per annum as allowed by the Assessing Officer whereas the same is allowable at the rate of 30% per annum as per the rates of depreciation prescribed under section 32 of the Act.
3. The Learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts and circumstances of the case in confirming the disallowance of depreciation on excavators (L&T Machines I&II) running on hire of Rs. 2,24,726/- made by the Assessing Officer under section 32 of the Act.
4. The appellant reserves the right to add to the above grounds of appeal and/or to amend, modify and to delete any of them on or before the hearing of appeal."
2. Vide ground No. 1, the grievance of the assessee relates to the confirmation of disallowance amounting to Rs. 10,80,092/- made by the Assessing Officer u/s 40(a)(ia) of the I.T. Act, 1961 (hereinafter referred as the Act).
[3]
3. The facts related to this issue in brief are that the Assessing Officer during the course of assessment proceedings, noticed that the assessee had made payment of Rs. 9,73,551/- as hire charges and Rs. 1,45,875/- as transportation charges. He enquired about deduction of TDS and details of expenses. It was submitted by the assessee that there was no written contract and the job was not in the nature of contract. It was further stated that the assessee obtained declaration in form No. 15I from the transporters for non deduction of TDS. The Assessing Officer, however, rejected the assessee's contention that payment was made as soon as work was over. He also pointed out that the part payment and advance payment had been made to M/s Kamal Earthmovers, M.I. Enterprises and M.I. earthmovers. The Assessing Officer observed that the assessee on the one hand, claimed that he was not covered under the provisions of TDS and on the other hand, he obtained form No. 15I from payees but no such form had been produced during the assessment proceedings. He, therefore, disallowed Rs. 9,34,217/- out of hire charges, similarly transportation charges of Rs. 1,45,875/- were disallowed on account of non deduction of TDS u/s 40 (a)(ia) of the Act. Accordingly, disallowance of Rs. 10,80,092/- was made.
4. Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and submitted that there was no oral or written agreement between the assessee and the owners of earthmovers and the transporters, therefore, provisions of Section 194C of the Act were not applicable. It was further [4] stated that the payment of transportation charges to each person was under the permissible limit prescribed u/s 194C of the Act, hence TDS was not applicable. Reliance was placed on the following case laws:
(i) CIT Vs. United Rice Land Ltd. (2008) 174 Taxman 286 (P&H)
(ii) Income Tax Officer (TDS) Vs. Nhoruka Roadlines Ltd. (2009) 117 ITD 311 (Mum).
5. The Ld. CIT(A) after considering the submissions of the assessee, observed that the contention of the assessee that there was no oral or written agreement of contract, was not acceptable as the assessee had a contract for carrying out the work, which had been executed by the owner of the machinery in the mines and the payment was specifically made for the earth moving activity and transportation to the owners of the machinery. The Ld. CIT(A) was of the view that the conduct of the assessee & the payee and the nature of work executed, made it clear that the transactions fell under the provisions of Section 194C of the Act. He also pointed out that the assessee himself had stated that form No. 15I were obtained from the payees, which supported the Assessing Officer's view that there was contract between the assessee and the payees. As regards to the submissions of the assessee that for transportation charges, truck number had been given and the payment was below the prescribed limit, the Ld. CIT(A), observed that the assessee claimed to have obtained form No. 15I but those were not produced before the Assessing Officer, which showed that these payments were liable for tax [5] deduction at source. The Ld. CIT(A) also observed that the decisions relied by the assessee were distinguishable on facts. Accordingly, the addition made by the Assessing Officer was upheld. Now the assessee is in appeal.
6. The learned counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the expenses incurred for each person were below Rs. 20,000/-, as such, those were outside the purview of the provisions of Section 194C of the Act but neither the Assessing Officer nor the Ld. CIT(A) appreciated this fact even when the details were furnished by the assessee.
7. In his rival submissions, the learned D.R. supported the orders of the authorities below.
8. We have considered the submissions of both the parties and perused the material available on the record. In the present case, the main contention of the learned counsel for the assessee was that the payments on account of transportation charges and job work for earth moving was not subject to deduction of TDS because the payments made to each person was below Rs. 20,000/- and the transactions did not fall under the provisions of Section 194C of the Act but this fact has neither been considered by the Assessing Officer nor by the ld. CIT(A). The said contention was not rebutted. We, therefore, set aside this issue and remand the same to the file of the Assessing Officer to be decided afresh [6] in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
9. The next issue vide ground Nos. 2 and 3 relates to the confirmation of disallowance of depreciation on excavators.
10. The facts related to this issue in brief are that the assessee claimed depreciation @ 30% on excavators (L&T machine). He was of the view that the assessee had claimed excess depreciation by Rs. 2,24,726/-. The same was added to the income of the assessee. The Ld. CIT(A) also, on appeal of the assessee, confirmed the action taken by the Assessing Officer. Now the assessee is in appeal.
11. The learned counsel for the assessee submitted that excavator (L&T machine) was running on hire, therefore, the depreciation was allowable @ 30%. Alternatively, it was stated that the matter may be sent back to the Assessing Officer to be decided in accordance with law. The learned D.R. did not object if the limited issue is sent back to the Assessing Officer for fresh adjudication.
12. We, therefore, by considering the submissions of both the parties and the material on record, deem it appropriate to send this issue back to the file of the Assessing Officer to be adjudicated after proper verification, in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
[7]
13. Now, we will deal with departmental appeal in I.T.A. No. 252/Jodh/2012. First issue in this appeal relates to deletion of disallowance of Rs. 44,78,809/- made by the Assessing Officer u/s 40A(3) of the Act.
14. Facts related to this issue in brief are that the assessee was hiring earthmovers and doing contract work. He purchased fuel from M/s R.K. Fuel, Umathi and M/s Tirupati Automobiles, Bhagwanda. The Assessing Officer noted that the assessee had made payment of more Rs. 20,000/- in cash totalling to Rs. 44,13,809/- to M/s R.K. Fuel and Rs. 65,000/- to M/s Tirupati Automobiles. He also observed that the assessee had shown the payment on piecemeal basis and claimed that each payment was less than Rs. 20,000/- while M/s R.K. Fuel had shown the whole consolidated payment at a time, in its books of account. The assessee explained that his site of work was in remote village where no banking facilities were available and M/s R.K. Fuel did not accept the outstation cheques, therefore, the assessee was bound to purchase the fuel in cash. It was also stated that only one petrol pump was located nearby the site of mining area, therefore, exemption under Rule 6DD(g) of the I.T. Rules, 1962 was available to the assessee. It was further stated that the distance of petrol pump and site of work was about 6 to 7 K.M., so the imprest system was followed and the various payments made by the vehicle drivers were adjusted at the end of the day by issuing one bill by the recipient. The Assessing Officer rejected the contention of the assessee by stating that the transaction was not covered under rule 6DD(g) of the I.T. Rules as M/s [8] R.K. Fuel had bank account in IDBI Rajasmand where the assessee had also the bank account, in which the same cheques had been paid by the assessee. So, it could not be said that there were no banking facilities. It was also pointed out that the assessee had not made the payment on the day when the diesel was purchased, it had been paid after some days and M/s R.K. Fuel had a bank account in IDBI Rajasmand where the assessee had also the bank account. The Assessing Officer accordingly, made the addition of Rs. 44,78,809/- by invoking the provisions of Section 40A(3) of the Act.
15. Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and submitted that no cash payment exceeding Rs. 20,000/- had been made by the assessee. It was further stated that the books of assessee had not been rejected but had been accepted by the Assessing Officer. It was further stated that until and unless the third parties were called by the Assessing Officer with their books, vouchers, acknowledgements of goods, challans and other documents in support of mode of payments and evidences of such payments, no reliance could be placed by the Assessing Officer merely on the statements collected from M/s R.K. Fuel and M/s Tirupati Automobiles. Reliance was placed on the following case laws:
(i) Prathana Construction (P) Ltd. Vs. DCIT-(2001) 70 TTJ 122 (Amhd-T)
(ii) Jaikishan Rs. Agarawal Vs. ACIT (2000) 66 TTJ 701 (Bang-T).[9]
(iii) Smt. Purnimal Beri Vs. DCIT (2003) 264 ITR 54 (Amritsar-T) TM.
It was contended that ceiling limit of Rs. 20,000/- would apply to each payment and not on aggregate payment as decided by the Hon'ble Orissa High Court in the case of CIT Vs. M/s Alloo Supply Co. (1980) 121 ITR 680 (Orissa). It was also stated that the case of the assessee was covered under Rule 6DD(g) as decided by the Hon'ble Madras High Court in the case of K.K.S.K. Leather Processors Pvt. Ltd. 292 ITR 669 (Mad).
16. The Ld. CIT(A) after considering the submissions of the assessee, observed that the books of account of the assessee revealed that each payment was below Rs. 20,000/- and such books had not been rejected. He further observed that the recipient had shown the cash payments in their books of account, exceeding Rs. 20,000/- in consolidated entry. However, it was explained that the payments were made by the assessee in piecemeal below Rs. 20,000/- each as noted on the reverse of the receipts. The Ld. CIT(A) pointed out that the proviso to Section 40A(3) of the Act carves out certain exemption and in certain prescribed circumstances having regard to the consideration of the business expediency and other relevant facts, cash payment could be made otherwise than account payee cheque. He further observed that the assessee's site of work was in a village, which was not served by any banking facility, therefore, the assessee's case was covered under Rule 6DD(g) of the I.T. Rules, which provides that payment made in village or [10] town, which on the date of such payment, was not served by any bank to any person, who ordinarily reside or was carrying his business in such village or town, the same was allowable. The Ld. CIT(A) observed that the diesel was required at early morning and late night hours and the cheques were not acceptable to the recipient, therefore, the assessee's case was covered under Rule 6DD(g) of the Rules. He also observed that the assessee had explained the reason of commercial expediency and necessity for making cash payments, which were relevant factors to be considered. The Ld. CIT(A) deleted the addition made by the Assessing Officer. Now the department is in appeal.
17. The learned D.R. supported the order of the Assessing Officer and further submitted that copies of accounts were received by the assessee from the third parties which clearly revealed that the payments were exceeding Rs. 20,000/-. Therefore, the Assessing Officer rightly disallowed u/s 40A(3) of the Act and made the addition.
18. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the Ld. CIT(A).
19. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, the contention of the assessee that banking facility was not available at assessee's site where the payments were made, had not been rebutted at any stage, therefore, the payments made in cash exceeding Rs. [11] 20,000/- if any was covered under Rule 6DD(g) of the I.T. Rules, 1962. In the present case, the main contention of the assessee was that each individual payment was below Rs. 20,000/-. The said contention was also not rebutted by bringing any cogent material on record. In our opinion, the view taken by the Ld. CIT(A) does not require any interference on our part. In that view of the matter, we do not see any merit in this ground of the departmental appeal.
20. The next issue vide ground No. 2 of the departmental appeal relates to deletion of lump sum disallowance of Rs. 3.00 lacs made by the Assessing Officer.
21. The facts related to this issue in brief are that the Assessing Officer required the assessee to produce details of expenses alongwith bills and vouchers. The Assessing Officer observed that the assessee did not produce the bills and vouchers in respect of expenses claimed under the head salary of drivers, helpers, machine operators etc.. The explanation of the assessee was that the nature and place of work was such that it was not possible to obtain such bills. The Assessing Officer did not find merit in the explanation of the assessee and made the disallowance of Rs. 3.00 lacs on lump sum basis.
22. Being aggrieved, the assessee carried the matter to the Ld. CIT(A) and submitted that he had maintained the complete records of payment of salary to drivers, machine operators and helpers as well as vouchers of transportation and other expenses. It was further submitted that the [12] payments were duly acknowledged by the recipient, who were most technically scaled in their job but were not fully literate except to sign the payments vouchers. Therefore, internal vouchers were prepared and the persons who received the payment had singed on the payment receipt. Therefore, genuineness of the payment could not be doubted. The assessee also submitted application under Rule 46A enclosing therewith salary payment sheets and transportation expenses vouchers for admission as additional evidence by claiming that the Assessing Officer had not specifically asked to produce such records.
23. The Ld. CIT(A) forwarded those details to the Assessing Officer for his remand report. In the said report, the Assessing Officer stated as under:-
"In this regard, it is submitted that vide order sheet entry dated 24/12/2010, I was specifically asked to produce bills/vouchers relating to drivers and helpers salary Rs. 9,04,000/-, operators salary Rs. 4,67,000/-, salary expenses Rs. 2,40,000/- and bills of transportation expenses Rs. 1,45,875. The assessee had not provided the same during the course of assessment proceedings.
Now also the assessee has produced transportation expenses bills for Rs. 21,957/- only instead of Rs. 1,23,918/-. Regarding drivers and helpers salary, operators salary, and salary expenses, the assessee has produced photo copy of salary- sheet only.
On perusal of salary sheets, it is noticed that some drivers are illiterate and put their thumb impression in the salary sheets. In the cases of where signatures shown in salary sheets also again hide by thumb impression in all cases of drivers and helpers."
Hence, in this regard, it is submitted that additional evidence produced by the assessee may be accepted, however, it is [13] requested that the issue of disallowance may kindly be decided on merits."
The assessee in his rejoinder to the remand report of the Assessing Officer stated that he had filed details on salary payment sheets, which were examined by the Assessing Officer and found to be genuine. It was further stated that certain copies of transportation expenses were filed and the Assessing Officer did not insist on producing all the evidences/vouchers for payment of transportation expenses during the assessment proceedings, the same were furnished before the Ld. CIT(A).
24. The Ld. CIT(A) after considering the submissions of the assessee and the remand report of the Assessing Officer, admitted the salary sheet as an evidence under Rule 46A by observing that the assessee could not submit those sheets as the Assessing Officer did not specifically asked to produce the same. The Ld. CIT(A) further observed that the salary payments sheets and vouchers for transport expenses furnished by the assessee revealed that the payments had been duly acknowledged either by signatures or by putting thumb impression and moreover, it could not be said that without incurring such expenses, work at mines could be executed by the assessee. He also pointed out that the Assessing Officer in the assessment order, accepted that the assessee had shown better net profit rate for the year under consideration in comparison to the earlier years. He, therefore, deleted the lump sum disallowance made by the Assessing Officer. Now the department is in appeal.
[14]
25. The learned D.R. supported the order of the Assessing Officer and reiterated the observations made in the assessment order dated 31/12/2010.
26. In his rival submissions, the learned counsel for the assessee reiterated the submissions made before the authorities below and strongly supported the impugned order passed by the Ld. CIT(A).
27. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the Assessing Officer made he disallowance out of the salary expenses for the reason that the assessee could not produce salary sheets. Later on, the assessee explained the reason for not producing the salary sheet before the Assessing Officer and furnished the same before the Ld. CIT(A) who admitted under Rule 46A of the I.T. Rules, 1962. Those salary payment sheets and vouchers for transport expenses revealed that the payments had been duly acknowledge by the recipient either by signature or by putting thumb impression. In the present case, the Assessing Officer did not bring any material on record to substantiate that the work was not executed by the assessee, even the Assessing Officer himself admitted that the assessee had shown net profit rate of 2.18% for the year under consideration in comparison to 1.32% in the earlier year. Therefore, net profit rate shown by the assessee was better in comparison to the preceding year and no specific defect was pointed out by the Assessing Officer in the books of account maintained by [15] the assessee in the regular course of business. Therefore, the impugned disallowance made by the Assessing Officer was rightly deleted by the Ld. CIT(A).
28. In the result, appeal of the assessee is allowed for statistical purposes while the appeal of the department is dismissed.
(Order pronounced in the open court on 19th May, 2014).
Sd/- sd/-
( HARI OM MARATHA ) ( N. K. SAINI )
Judicial Member Accountant Member
Dated: 19th May, 2014
*Ranjan
Copy forwarded to:
1. Appellant-
2. Respondent-
3. CIT(A)
4. CIT
5. D.R.
By Order
Assistant Registrar
Jodhpur