TMI Blog2012 (5) TMI 507X X X X Extracts X X X X X X X X Extracts X X X X ..... illegal stock - survey - assessee contended that additions are based upon surmises and assumptions without placing any corroborating material and observations purely on the basis of third party reports the findings which were also stayed by the higher authorities - Held that:- Following the Tribunal order in the case of M/s JP Stone Crushers (P) Ltd. v. DCIT based upon identical facts, issues involved on these points in this appeal are restored back to the file of the Assessing Officer for fresh adjudication after taking into account the final outcome of survey. Dis-allowance u/s 40(a)(ia) - non-deduction of tax at source - Revenue contending hiring of machine and equipments as transportation contract - AY 2005-06 - Held that:- From the facts of the case it is established that agreement was for lease of dumpers/JCB only and there was no agreement for executing any work or contract and hence cannot be classified as works contract or a service contract. See DCIT v. Satish Aggarwal & Co [2008 (11) TMI 322 (Tri)] - Decided in favor of assessee. Deduction u/s 80IB - dis-allowance on ground that it was not claimed in the original return of income - Held that:- If an assessee unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by recording incorrect facts and observations purely on the basis of third party reports, the findings of which were also stayed by the higher authorities who also regularized the same on 28.3.2008 considering the same has having mined from the pit and collecting the royalty accordingly. The said income has been brought to accounts in the financial year 2007-08 resulting in double taxation of the same income once in assessment year 2005-06 and second in assessment year 2008-09. 3. That having regard to the facts and circumstances of the case, the Ld CIT(A) II, Dehradun has further erred in law and on facts in confirming the action of the Assessing Officer in disallowing a sum of Rs. 62 lakhs as having covered under the provisions of section 40a(ia) in complete disregard to the departmental circulars and the terms of the agreement on record failing to appreciate that the TDS provisions for hiring of machine and equipments were introduced by the IT Amendment Act, 2006 and the same could not have been made applicable retrospectively from assessment year 2005-06. 4. The Ld CIT(A) has also erred in law and on the facts of the case in not giving benefit of provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in respect of hiring of machines and equipments on the ground that TDS was not deducted. We will first take up the appeal filed by the Department. 5. Ground No.1 relates to addition of Rs. 16,33,645/- on account of disallowance u/s 40A(2)(b) of the Act. During the assessment year, the assessee has purchased finished goods weighing 326729 qtls from its sister concern @ Rs. 18.50 per qtl. The Assessing Officer observed that the cost of manufactured goods came to Rs. 11.87 per qtl. And in view of difference between the cost of manufactured goods and cost of purchase from sister concern covered u/s 40A(2)(b) of the Act, the Assessing Officer made addition of Rs. 16,33,645/- @ Rs. 5/- per qtl. on total purchases of 326729 qtl. The contention of the assessee that the purchases were made on FOR basis and the purchases were made at prevalent market price during the month of March did not find favour with the assessee. The assessee during pleadings before Ld CIT(A) submitted the following arguments in support of its defence that payments against purchases made from sister concern were not excessive. 1. That the appellant company has made the above purchases to tied over the crisis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that during business exigencies the assessee could have to purchase at a litter higher price. Therefore, he argued that the orders of Ld CIT(A) be reversed and the order of Assessing Officer be restored. 9. The Ld AR argued that purchases were compulsory as its p[rice varies from time to time. The moment supply decreased the price tend to increase. He further argued that past average cannot be taken for determining the present market price. The Assessing Officer had taken the average of past price and had compared it with the purchase price paid by the assessee whereas it should have been compared with the present market price which was Rs. 20/- per qtl. He further argued that since the stock was lying as on 31st March, and was valued as its purchase price, there is no impact on profit/loss of the year. 10. We have heard the rival submissions of both the parties and have gone through the material available on record. We have observed that Ld CIT(A) had rightly deleted the addition by comparing the purchase p[rice paid by the assessee with the market price prevalent at the time of purchase i.e. in the month of March. Moreover CIT(A) has rightly observed that goods were pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and therefore it is a revenue expenditure to be allowed against the profits of the company. 16. We have heard the rival submissions of both the parties and have gone through the material available on record. We are of the considered opinion that the expenditure incurred for increase in the share capital of the company after commencement of business is not a capital expenditure but a regular business expenditure of revenue nature. Therefore, we do not see any reason to interfere in the order of Ld CIT(A). Hence, the second ground raised by the revenue in this appeal is dismissed. Assessee's appeal: 17. The first second ground in the assessee's appeal relates to disallowance of addition of Rs. 49,00,462/0 on account of illegal transportation + Rs. 4589133/- on account of illegal stock. During the year under consideration, a survey was conducted at the premises of the appellant by the Forest Department of Uttrakhand. On the basis of material found during the course of survey, the DM Nainital passed order on 19.3.2005 holding that during the year under consideration, the appellant has done illegal transportation of 6551029 cubic meters of stone grits. It was held b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial by him from his own site by depositing the royalty and compounding fees and later on cancelled his own order arbitrarily without assigning any reason. 20. The Ld CIT(A) after going through the submissions filed by Ld AR did not accept the contentions made by Ld AR and confirmed both the additions. The operative part of the Ld CIT(A)'s order is reproduced below:- "Since the Mining Officer and the Joint enquiry Committee consisting of officials of Forest Department, PWD and revenue Department were the experts who has determined the quantum of illegal mining and illegal transportation and illegal possession of stock, the report of such authorities cannot be brushed aside. Further, DM, Nainital being competent authority to evaluate such reports, I have no other fresh materials to differ from the findings of such authorities and accordingly the addition made by the Assessing Officer towards the undisclosed sales to the tune of Rs. 49,00,462/- is hereby upheld. Similarly, the Assessing Officer has made an addition of Rs. 45,89,133/- on account of undisclosed investment towards the payments of labour and transportation charges outside the books of accounts which is also found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has excess tock or not at the end of the accounting year. This information received from the state Government would be the information, which comes out after the determination of issue in pursuance of the order of Divisional Commissioner, Nainital. Needless to say that observation made by us will not impair or injure the case of the A.O. or would cause any prejudice to the defense/ explanation of the assessee in the fresh proceedings. The A.O. shall afford due opportunity of hearing to the assessee." 25. Respectfully following the Hon'ble Tribunal order in the cases based upon identical facts, we are incline to restore the issues involved on these points in this appeal back to the file of the Assessing Officer for fresh adjudication after taking into account the final outcome of survey and after providing reasonable opportunity of being heard to the assessee. Needless to say that observations made by us will not impair or injur the case of the Assessing Officer as would not cause any prejudice to the defence explanation of the assessee in the fresh proceedings. 26. The third ground of appeal is regarding disallowance u/s 40a(ia) of the Act for non deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w:- "I am not agreeable to such contention used by the counsel of the appellant because the transaction of taking dumpers/JCB loaders at a fixed price per month as per contract entered into by the appellant with the lessor constitutes a works contract and therefore the provision of section 194C are clearly applicable." 29. Aggrieved the assessee filed appeal before the Tribunal. 30. We have heard the rival parties and have gone through the material placed on record. Before us the Ld AR argued that the said agreement for supply of dumper was not a works contract and it was only for supply for dumpers which is nothing but equipments. Reliance was placed on the following judgments:- 1. Mithari Transport Corporation v. ACIT Viashakapatnam Bench reported in 124 IITD 40. 2. DCIT v. Satish Aggarwal Co. (Asr Bench) 124 TTJ 542. 3. Datta Digamber Sahkari Sansthan v. ACIT ITAT Pune Bench 83 ITD 148. 31. The Ld AR brought before our notice that all these cases were cases decided by different Benches of the Tribunal. It was held in all cases that where the vehicles are simply placed at the disposal of the assessee without involving themselves carrying ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the assessee without involving themselves in carrying out any part of the work undertaken by the assessee. It was held that payments to lorry owners cannot be categorized as payments towards sub contracts and therefore assessee was not liable to deduct tax at source as per the provisions of section 194C and consequently the provisions of section 40(a)(i) were not applicable such payments. DCIT v. Satish Aggarwal Co. 124 TTJ 542 (Amritsar): The assessee hired trucks for a fixed period on payment of hire charges. There was no agreement for carrying out any work or to transport any goods as or passengers from one place to another. It was held that hiring of trucks for the purpose of using them in assessee's business did not amount to contract for carrying out any work as contemplated in section 194C. For carrying out any work manpower is the sine qua non. Mere providing of the trucks without any manpower can not be termed as carrying out any work by the truck owners. Once the contract was not for carrying out any work, the provisions of section 194C were not attracted. Datta Digamber Sahakari Kamgar Sansthan Ltd. v. ACIT 83 ITD 148 (Pune). Assessee a Cooperativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee before Assessing Officer. The Ld CIT(A) was correct in dismissing this ground of appeal. 39. We have heard the rival parties and has gone through the material placed on record. We have also gone through the judgment of Hon'ble Tribunal in all cases relied upon by the Ld AR and has found the facts of the present case are similar only in the case in I.T.A. No.350/Del/.2009 wherein the Hon'ble Delhi Bench 'D' has dealt with the similar issue which was at ground No.3 of the appeal. The Tribunal has held in favour of the assessee and had remitted back file to the office of Assessing Officer for consideration of claim of assessee u/s 80IB. While deciding the matter, the Hon'ble Tribunal had considered various judicial pronouncements in which it was held that the authorities under the Act are under an obligation to act in accordance with law. If an assessee under a mistake, misconception or not being properly instructed is over-assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes are collected. 40. Respectfully following the various judicial pronouncements, we are of the considered opinion that this issue al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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