Ita/361/2010 Of The Deputy Commissioner Of Income Tax v. Shri A Balarama Reddy

IN THE HIGH COURT OF KARNATAKA AT BENGALURU| ON THE 14 DAY OF NOVEMBER, 2018 BEFORE THE HON’BLE MR. JUSTICE RAVI MALIMATH| AND| THE HON’BLE MR. JUSTICE K.NATARAJAN INCOME TAX APPEAL No.361 OF 2010 BEI|WEEN 1THE DEPUTY COMMISSIONER INCOME TAX, CIRCLE - 1 DAVANAGERE | 2.|THE INCOME —- TAX OFFICER WARD - 1, CHITRADURGA ... APPELLANTS (BY SRI: K.V.ARAVIND, ADVOCATE) AND SRI.A. BALARAMA REDDY CLASS I CONTRACTOR| SRUJANA NILAYA, S.R.LAYOUT| CHI TRADURGA .. RESPONDENT (BY SRIYUTHS A SHANKAR AND M.LAVA, ADVOCATES) THIS ITA IS FILED UNDER SECTION 260-A OFINCOME TAX APPEAL ACT, 1961 ARISING OUT OF ORDER|DATED 20.05.2010 PASSED IN INCOME TAX APPEAL|NO.745/Bang/2009, FOR THE ASSESSMENT YEAR 2005-2006, PRAYING TO I)FORMULATE THE SUBSTANTIAL|QUESTIONS OF LAW STATED THEREIN, II)ALLOW THE! APPEAL AND SET ASIDE THE ORDER PASSED BY THE)INCOME TAX APPELLATE TRIBUNAL, BENGALURU IN|INCOME|TAX.APPEALNO.745/Bang/2009DATED.20.05.20L0 CONFIRMING THE ORDER OF THE APPELLATE|COMMISSIONER AND CONFIRM THE ORDER PASSED BYTHE INCOME TAX OFFICER, WARD —- 1, CHITRADURGA, INTHE INTEREST OF JUSTICE AND EQUITY. | THIS INCOME TJTAXK APPEAL COMING ON FHEARING THIS DAY, RAVI MALIMATH. J., DELIVERED THE.FOLLOWING: JUDGMENT The assessee is carrying on the business’ ofconstruction. With respect to the assessment year 2005-|06, he filed a return of income. He claimed a sum Of|Rs.2,04,35,25/7/- as trade creditors. On verification, theAssessing Officer found that the confirmation letters were|faise and did not nave credit worthiness. Therefore, this|amount came to pe added back as the Income of tne|assessee. Aggrieved by the same, an appeal was filed|before the Commissioner of Income-Tax (Appeals), Hubli.The appeal was allowed. Tne exemption claimed by the|assessee was allowed. Aggrieved by the same, the|Revenue preferred an appeal. Tne same was rejected. —Hence, the present appeal by the Revenue. ~ 2. By the order dated 1.6.2011 the appeal wasadmitted to consider the following substantial question of|law [-| Whetner the finding of the AppellateAuthorities that a sum of Rs.2,04,35,25/7/-shown as trade creditors should be accepted as|the same had peen reflected in the accountsand the name, address and_ confirmatoryletters were proaquced witnout examining tnecreait wortniness is perverse, arbitrary andbaseless and therefore unsustainable? 3. The learned counsel for the appellants submitsthat based on the facts and circumstances involved, two|other questions of law, as follows, would arise for|consideration in this appeal. qT.Whether the Appellate Authorities|were correct in holding that a sum_ ofRs.70,/76,/7/4/WaSpayments|madetolabourers as wages and therefore the same|was not payment to sub-contractor/contractorU/S.194COf|the|Actandconsequently provisions of section 40(a)(ia) of the Act was|not applicable? 2.|Whnetner tne Appellate Autnoritieswere correct in granting relief to the assesseeby recording different reasons whicn were not|supported by any material and _ thereforrecorded|dPervVversfindingwitnoutappreciating that even wages paid will be liableto tax at source? 4. On hearing the learned counsels, we are of the)view that the aforementioned two substantial questions of law also arise for consideration in this appeal. Hence, wehave considered the appeal so far as all the threesubstantial questions of law are concerned. 5. With regard to the first substantial question of)law, the Tribunal was of the view that the assessee hasdiscnarged tne primary onus of proving the genuineness of tne sunary creditors since he has filed confirmation letters|along with the names and addresses of the respective.trade creditors. He nas also furnished the ledger account|copies of the creditors duly certified by the creditors. 4. On hearing the learned counsels, we are of the)view that the aforementioned two substantial questions of law also arise for consideration in this appeal. Hence, wehave considered the appeal so far as all the threesubstantial questions of law are concerned. 5. With regard to the first substantial question of)law, the Tribunal was of the view that the assessee hasdiscnarged tne primary onus of proving the genuineness of tne sunary creditors since he has filed confirmation letters|along with the names and addresses of the respective.trade creditors. He nas also furnished the ledger account|copies of the creditors duly certified by the creditors. Therefore, the Commissioner of Income Tax (Appeals) nasrigntly neld that the assessee Nas discharged the primary|onus of proving the genuineness of the trade creditors. It)was also noticed by the Tribunal that credits are supportedby the corresponding entries relating to supply of goods|and availing of services; that the ledger account copies|were also certified by the creditors which were produced|before the Assessing Authority, their names address etc.|were all furnished; that those accounts are regularly|running in tne books of accounts of the assessee.,Therefore, the Tribunal declined to interfere. 6. On consideration of the order passed by theTribunal, we are of the view tnat the reasons assigned arejust and proper. It cannot be said that all the amounts|involved are cash _ credits. Tney are supported pycorresponding entries relating to supply of goods and/availing of services. In the circumstances, we are of the|view that the appellate authorities were justified in coming|to the conclusion that a sum of Rs.2,04,35,257/- snould De| accepted. Hence, tne first substantial question of law is |held in favour of the Assessee and against the Revenue.|So far as the second and third substantial questions of law|are concerned, the same are covered by the order of this|Court dated 25.05.2011 passed in Income Tax Appeal|No.363 of ZO1O. 7. In view of the same, the second and thirdsubstantial questions of law are answered against the|Revenue and in favour of the assessee by following the)order of this Court in Income Tax Appeal No.363 of 2010| disposed off on 25.05.2011. Accordingly, the appeal is disposed off. SD/- SD/-| JUDGE JUDGE.