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TMI Blog2017 (4) TMI 778X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that it had come to his knowledge that the department itself and more particularly BRPD-II, Chungthang, had been deducting Income Tax under Section 194C i.e. @ 2% for consultancy works, similar to the work for which NIT No.01 had been issued and not under Section 194J @ 10%. This statement however is a bald, statement not buttressed by any document and is therefore, not acceptable before any Court of law. Thus, what transpires from the above is that the consultancy works were awarded to the Petitioner by the Respondents on the basis of the Certificate of M/s Vraj & Vaj Constructions. To gauge whether the Petitioner had indeed provided consultancy works in view of the letter of the ITO informing to the contrary, as no other documents were forthcoming from the Petitioner, the Respondent No.4 had to fall back on the income tax deducted at source. The correspondence discussed hereinabove clarifies that the TDS was for contract works and not for consultancy services. Apart from the Agreement documents between M/s Vraj and Vaj Constructions and the Certificate issued by the said Company, no other documents have been furnished to establish that the Petitioner offers consultancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner a registered Partnership Firm with its Office located at Ahmedabad, Gujarat is engaged in providing consultancy services in the field of Civil and Structural Engineering including Architectural design and specialty Engineering Services and has over the years provided such service to various clients, including the Central Public Works Department and other Governmental Organizations. The Petitioner being eligible, having executed four works of similar class during the required period, participated in the NIT 01 floated by the Respondent no. 4, for online percentage bids on two bid system, for the aforesaid work of Consultancy Services. The last time and date for submission of bid was 3.00 P.M on 21.06.2016. 3. After considering his bids, the Respondents found the Petitioner competent to execute the work and accordingly, issued letter dated 27.07.2016 informing the Petitioner of the acceptance of his bid and requested him to furnish Performance Security Guarantee, which was duly complied with on 04.08.2016. 4. In the meanwhile, the Petitioner received a letter from the Respondent No. 04 dated 01.08.2016 stating therein that the TDS certificate issued by M/s Vraj and Vaj co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .09.2016 to 27.09.2016 with regard to the work in question. 6. While awaiting the approval, the Petitioner was served with the impugned Show Cause dated 06.10.2016 by Respondent No. 4 to the effect that a communication was received from the office of the Income Tax officer, (ITO) Ahmedabad, Gujarat who had clarified that the Petitioner had shown Contract receipt under Section 194 C of the Act, of ₹ 97,98,383/- received from M/s Vraj and Vaj Constructions for A.Y. 2010-11. That the assessee had shown the nature of business code as 0505 Contractors (others) and not Consultant. Hence, the TDS made by the deductor was for Contract work. The Respondent No. 4 enquired of the Petitioner as to how shortfall of such tax over and above TDS is to be paid by the petitioner s firm if their business was of a Contractor as reported by the ITO. The Petitioner was directed to show cause within 10 days of the notice as to why action should not be initiated against him. As per the Petitioner, Copy of the Report of the I.T.O was allegedly deliberately withheld from him by the Respondent No. 4 preventing him from preparing an effective reply, consequently the petitioner vide, letter dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he last two years including a certificate issued by M/s Vraj and Vaj Constructions dated 25.01.2009 and 15.03.2010. After evaluating the bid documents the work was awarded to the Petitioner. That in the interim a complaint dated 30.07.2016 was received from one Ramesh Pandey RTI activist from Jaipur, interalia alleging that the Firm M/s Vraj and Vaj Constructions was a very small firm carrying out constructions as a contractor. The Respondent No. 4 issued a letter on 01.08.2016, to the Petitioner requesting him to submit proof of balance tax deposited to the Income Tax department along with reminder on 05.08.2016. In the meanwhile, the Respondents issued three letters to the Income Tax authorities at Ahmedabad, Gujarat, vide, letter dated 05.08.2016, 26.08.2016 and 02.09.2016 requesting information about the nature of business of the Petitioner for works amounting to ₹ 97,98,382/- for the year 2009-10, done for M/s Vraj and Vaj constructions and whether the Petitioner had submitted the balance tax under Section 194 J during the final settlement for the year 2009-10. A letter dated 12.08.2016 was issued to the Petitioner to commence the work it being of strategic importance an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner to file the response which would have been on 01.12.2016, but before the expiry of the said period, the Executive Engineer informed the Superintending Engineer vide letter dated 28.11.2016 of the approval of the competent authority to cancel the work awarded to the Petitioner, thereby willfully flouting the orders of this Court without assigning any reason for rejection of the petitioner s show cause. 13. I have heard the learned Counsel at length and carefully perused the pleadings and all appended documents. 14. What, therefore, arises for consideration of this Court is whether the Petitioner was offering consultancy services and, if so, was the Respondent No.4 justified in issuing the impugned show cause dated 06.10.2016 and impugned letter dated 08.12.2016, followed by a fresh NIT for the same works, on 19.12.2016. 15. The constant refrain of the Petitioner is that he had provided consultancy services to M/s Vraj Vaj Constructions and mere deduction of tax under Section 194C of the Income Tax Act, 1961, instead of Section 194J of the Income Tax Act, 1961 would not change the nature of the services provided from that of Consultancy to one of a Contractor, nor is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f A Y 2010-11, it is reveals that the scrutiny assessment has not been made in this year.. Further you have not provided complete details of work/contract agreement; hence, the nature of business is not verifiable. However, the TDS matter is dealt with the TDS section of Dept. and you may pursue for further details/inquiry. Questions answer (ii) The final tax payment settlement is depending on gross taxable income and the rate prevailing for the concerned A Ys and not on nature of works receipt. In this case, the assessee filed its return of income for A Y 2010-11 on 24.09.2010 showing taxable income of ₹ 99,210 and total tax paid ₹ 30,656/- and no other tax remain payable. .. In other words, the response of the I.T.O indicates that the TDS for the assessment year 2010-11 the assessee had shown the nature of business code 0505 Contractor [other] and not as Consultancy. 18. The argument on this aspect forwarded by the Petitioner was that the letter dated 29.09.2016 reveals that the Respondent No.4 had not provided the concerned officers with complete details of the work agreement. Be that as it may, pursuant to the above inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Court of law. 20. Thus, what transpires from the above is that the consultancy works were awarded to the Petitioner by the Respondents on the basis of the Certificate of M/s Vraj Vaj Constructions. To gauge whether the Petitioner had indeed provided consultancy works in view of the letter of the ITO informing to the contrary, as no other documents were forthcoming from the Petitioner, the Respondent No.4 had to fall back on the income tax deducted at source. The correspondence discussed hereinabove clarifies that the TDS was for contract works and not for consultancy services. 21. I also find that apart from the Agreement documents between M/s Vraj and Vaj Constructions and the Certificate issued by the said Company, no other documents have been furnished to establish that the Petitioner offers consultancy services. In such a situation, it has to be stated that obviously tax would be deducted on the basis of the Income and if the income of the Petitioner was only as a contractor then deductions so made would be for contract works and not for consultancy work. Added to this is the fact that although the Petitioner alleges that all balance tax was paid, the letter of the ..... 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