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TMI Blog2011 (7) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... llant. Jai Raj Kumar for the Respondent. 1. Out of this bunch of four appeals, three appeals are filed by the assessee for the assessment years 2005-06, 2006-07 2007-08 in connection with disallowance made by the A.O. u/s 40(a)(ia) of the Income tax Act, 1961 in these three years whereas remaining one appeal is filed by the revenue directed against the order of CIT(A) I, Surat dated 10.09.2009 for the assessment year 2005-06 in respect of deletion of penalty imposed by the A.O. of Rs.3,22,257/- u/s 271(1)(c) of the Act. All these appeals were heard together and are being disposed off by this common order for the sake of convenience. 2. First we take up three appeals filed by the assessee involving similar ground of appeal which are identical in all the three years in respect of disallowance made by A.O. u/s 40(a)(ia) of the Income tax Act, 1961. One more ground was raised by the assessee in assessment year 2005-06 in respect of validity of reassessment proceedings in that year being ground No.1 in that year but no argument was advanced by the Ld. A.R. in respect of this ground in that year and hence, this ground No.1 in assessment year 2005-06 is rejected as not pressed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,23,43,233 4,12,886 9,33,919 13.46,805 Less: TDS paid upto March 2005 U/S.194C {Excl. 201(1A)} 4,97,089 4,97,089 TDS paid upto 29.10.05, i.e. before filing return {Excl. 201(1A)} 8,49,715 8,49,716 Outstanding TDS liability as on 29.10.2005 NIL The assessee further submitted that as per the amended provisions of Section 40(a)(ia) the total TDS liability in respect of expenditure upto the month of February 2005 is Rs.4,12,886/- as against which the assessee company had paid total TDS of Rs.4,97,089/- upto 31.03.2005. The total liability in respect of expenditure incurred in the month of March 2005 is Rs.9,33,919/- out of which Rs.84,203/-is paid before 31.03.2005 and the balance Rs.8,46,716/- has been paid prior to 29.10.2005, i.e. upto the date of filing of return of income. In view of the above, the assessee stated that there was no late deposit of TDS and the provisions of Section 40(a)(ia) are not applicable. 2.2 The A.O. did not accept the above explanation... stated that in respect of amount of Rs.37,89.0637- there was TDS liability of Rs.4,12.S86/- which was deducted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above explanation. The TDS provisions are independent and if the assessee wants to claim the payment provisions of Section 40(a)(ia) would apply. He, therefore, made a disallowance under this Act." 5. In assessment year 2007-08, the A.O. made disallowance of Rs.18,87,229/- on the same basis and hence we are not reproducing the facts of this year which are admitted by both the sides to be identical. 6. Thereafter, the assessee carried the matter in appeal before Ld. CIT(A) in all the three years. In assessment year 2005-06, it was noted by the Ld. CIT(A) in para 2.3 of his order that the assessee has admitted that on a sub-contractors payment of Rs.37,89,063/-, TDS of Rs.40,845/- was deducted but was paid after the due date of filing of return of income i.e. 31.10.2005 and the assessee has failed to furnish any reason as to why after TDS has been deducted the same, has not been paid in time. On this basis, Ld. CIT(A) upheld the assessment order on this issue in assessment year 2005-06. 7. Similarly, in assessment year 2006-07, it is noted by the Ld. CIT(A) that out of TDS deducted by the assessee from the payment to sub-contractor of Rs.7295/- in relation to the amount of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears @ 1% which is applicable rate for payment to sub-contractors. But some of the payments of TDS were delayed and the disallowance was made by the A.O. in this respect only. One more query was raised by the bench as to whether amount disallowed in one year was allowed in the subsequent when payment of TDS was made by the assessee and in reply, it was submitted by the Ld. A.R. that the A.O. has allowed deduction in that subsequent year i.e. in the year of payment of TDS and hence, the deduction should be withdrawn in that year if it is held that deduction is allowable in the year in which expenses were incurred. 9. As against this, Ld. D.R. supported the orders of authorities below. 10. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that this is not the case of the assessee that no TDS is deductible by the assessee form the payments made by the assessee to the sub-contractors out of the payments received by it from the principal after deducting its own commission and other agreed deductions. The assessee has in fact deducted the TDS @ 1% from such payments made by the assessee to the subco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Government department and if the 2nd party leave or stopped the contract work or even if action is taken by the department, the 1st party i.e. the assessee will take charge to complete the contract work and 2nd party cannot create any hindrances. These clauses of agreement of the assessee company with the subcontractors show that even after sub-contracting the work, the prime responsibility is of the assessee and hence, the assessee is the owner of the entire income received against the contract work and it can claim deduction on account of payments made to sub-contractors but this is not acceptable that the assessee is earning only commission income and the same should be accepted as commission income only instead of gross income being assessed in the hands of the assessee after allowing deduction on account of payment to sub-contractor to the extent it is allowable as per law. Hence, we do not find any merit in these contentions of the assessee that since the payments made to sub-contractors has not been debited to the P L account of the assessee, Section 40(a)(ia) is not applicable with regard to such payments to sub-contractors although the assessee itself is deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al order which is a combined order for the assessment years 2001-02 to 2005-06. It is pointed out that in assessment year 2003-04also, similar addition was made by the A.O. of Rs.10 lacs for which also, a penalty was imposed by the A.O. of Rs.3,64,927/- which was deleted by the CIT(A) in that year. The appeal of the revenue against the order of CIT(A) in assessment year 2003-04 was also dismissed by the tribunal in I.T.A. No. 308/Ahd/2009 dated 12.02.2010 and he pointed out that para 62 and 63 of the tribunal order are relevant for this purpose. 14. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below and the tribunal order cited by the Ld. A.R. rendered in the assessee's own case. In assessment year 2003-04 and 2004-05 also, penalty was imposed by the A.O. in respect of the addition made by the A.O. on account of low G.P. In those two years also, penalty was deleted by Ld. CIT(A) and the appeals of the revenue in those two years were also dismissed by the tribunal. We are of the considered opinion that addition on account of low G.P. was made by the A.O. only on estimate basis and for such addition without ..... X X X X Extracts X X X X X X X X Extracts X X X X
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