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Income Tax Appellate Tribunal, RANCHI ‘E-COURT’AT KOLKATA
Before: Shri J. Sudhakar Reddy, AM & Shri S.S. Godara, JM
आदेश /O R D E R Per S. S. Godara: These Revenue’s two appeals for assessment years 2016-17 & 2017-18 arise against the Commissioner of Income-tax (Appeals), Ranchi’s separate orders; both dated 16.09.2019, passed in case No.CIT(A),Ranchi/10240&10263 of 2018-19, respectively involving proceedings u/s 201(1) r.w.s 201(1A) of the Income Tax Act, 1961; (in short ‘the Act’). Heard both the parties. Case files persued. 2. The Revenue’s identical sole substantive grievance raised in these two appeals pleads that the CIT(A) has erred in law and on facts in reversing Assessing Officer’s findings treating the assessee to be an assessee in default for not having deducted TDS
M/s Awadesh Singh Construction Pvt. Ltd. Assessment Years:2016-17 & 2017-18 Page 2 on alleged sub-contractors’ payments leading to the demands in issue of Rs.1,11,59,920/- and Rs.72,65,670/-; assessment year wise, respectively. We therefore treat the Revenue’s former appeal CIT(A)’s detailed discussion deleting the impugned demand reads as under:
“4.3 Appellate finding and decision: I have carefully considered the findings of the Ld.AO in the assessment order and the written submission of the appellant with documentary evidences. The undisputed fact is that the appellant is a civil contractor and engaged in the business of construction. The appellant is mainly dealing with government civil contracts in the state of Jharkhand which were allotted through e-tendering process. The place of actual work is carried in urban as well as remote hilly and forest areas. The AO on field enquiry noted that though the appellant is getting its work done through sub-contractors, however, their names and payments were not recorded in the books of account in order to avoid compliance to the provisions of Sec. 194C of the Act. Accordingly, the Assessing Officer carried out a survey u/s. 133A on 03.10.2018 at the office premises situated at B/1052, Sec-2, Dhurwa, Ranchi to make spot verification of compliance to various TDS provisions under the Act. During the survey, the AO also recorded the statement of the Managing Director Shri Awadesh Singh. The major findings of the AO during the survey was that the survey team did not find any books of accounts at the registered office including Cash Book, Purchase Register, Labour Register, Employee's Muster Roll including other registers which the appellant is required to maintain under labour welfare laws. Accordingly, the AO during the course of assessment proceeding show-caused the appellant to produce labour register including the compliance made under ESIC/PF Acts etc. and further show-caused as to why the payments made to labourers should not be held as made through sub-contractor and the provisions of sec. 194C should not be invoked. In compliance, the appellant by submitting labour register stated that the labour register is maintained at respective places of work and the payments were directly made to the labourers and further submitted that it is not required to comply with the labour welfare Acts, as the construction industry is an unorganized labour industry. The appellant in its reply also reiterated that it has not made any payments to any labour contractors. However, the AO disbelieved the genuineness of the documents produced and held that the appellant made payments to labourers through sub-contractors without deducting the tax at source as per sec. 194C. As the appellant failed to deduct tax on a total payment of Rs.2,13,03,657/- treated the appellant as assessee in default and imposed a tax liability under TDS of Rs.66,89,350/-. 4.3.2 On the other hand the appellant submitted that it is engaged in the business of civil construction contract. The construction site is generally situated in remote rural areas and some sites are also situated in urban areas. It procures material and labour directly from the open market and uses them for execution of the job. It hired labours on daily basis and paid them weekly after verifying their attendance and this is the general practice in this line of business. The appellant also submitted that EPF is not applicable for casual labours and as per circular of ESIC, the construction workers were not covered under the scheme. The appellant further submitted that during the course of survey all the regular books of accounts were made available to the survey team and the details of labour register were produced during the course of post survey proceedings after collecting the same from site offices. The appellant submitted that it never made any labour payments through any sub-contractor M/s Awadesh Singh Construction Pvt. Ltd. Assessment Years:2016-17 & 2017-18 Page 3 which fact also flows from the statement recorded u/s. 133A of the Act. In spite of submitting all the necessary documents / details the assessing officer without verifying any of the details submitted, treated attendance records as fake, fabricated and unreliable. The appellant further emphasized that the learned assessing officer has not bought any iota of evidence to justify that the appellant has engaged labours through labour contractor. No any single payment was pointed out by the learned assessing officer, which could lead to the conclusion that the payment has been made to the labour contractor. Accordingly, the appellant submitted that the AO is not justified in treating the appellant as assessee in default under TDS provisions. 4.3.3 On a careful consideration of rival submission, I find considerable force and substance in the argument of the appellant. The undisputed fact is that the appellant is a civil contractor and engaged in the business of construction and is mainly dealing with government civil contracts in the state of Jharkhand which were allotted through e-tendering process. The place of actual work was done in urban as well as remote hilly and forest areas. The A.O on field enquiry had a suspicion that though the appellant is getting its work done through sub- contractors, however, their names and payments were not recorded in the books of account in order to avoid compliance to the provisions of Sec.194C of the Act. Accordingly, to dispel the suspicion the AO carried out a survey u/s. 133A on 03.10.2018 at the office premises situated at B/1052, Sec-2, Dhurwa, Ranchi. However during the survey, the survey team could not lay their hand which could even remotely suggest that the appellant is making labour payments through a Contractor or sub-contractor. From the inception of survey to till the passing of order u/s.201 the appellant all along held on to its position that It hired labours on daily basis and paid them weekly after verifying their attendance and in support of the same not only produced the labour attendance register before the AO but also during the appellate proceeding. Further, the AO during the entire scrutiny proceeding, could not gather an iota of evidence which could strengthen his suspicion. The very fact that no evidence of payment made to contractors found during the survey by itself dispels the suspicion of the AO. Had the appellant made payments to any contractor at any point of time, there could have been some chances of recovering the same in the survey proceeding. In spite of the same the AO held his suspicion to core of his heart and rejected all direct evidences submitted before him and tried to fasten the imaginary liability of TDS default on the appellant. In my view, wherever, the assessee is complying with the provisions of the Act, the AQ should be gracious enough to appreciate such assessees and accept their claim by keeping aside his ego. In view of the above discussion the TDS liability imposed of Rs.66,89,350/- is hereby deleted. Accordingly, these grounds are allowed.”
Learned CIT-DR vehemently contended during the course of hearing that the Assessing Officer had rightly gone by the assessee’s survey statement on 03.10.2018; as taken note in the assessment order in issue wherein he had admitted not to have maintained the corresponding details of the salary/wages payments, sufficiently indicating the same to have been made through sub-contractor(s). And also that the necessary inference that flows from such an arrangement is that of engagement of a sub-contractor only. He invited our attention to assessment findings in pages 2
M/s Awadesh Singh Construction Pvt. Ltd. Assessment Years:2016-17 & 2017-18 Page 4 onwards to this effect as well. Learned authorized representative, on the other hand, highlighted the alleged fact that the CIT(A) had granted identical relief to the assessee in assessment years 2014-15 to 2017-18 whereas the Revenue has filed the instant twin appeals for the latter two assessment years only. Mr. Rastogi’s further case is that the assessee had nowhere engaged any sub-contractor(s) in his civil construction business which could invite section 194C TDS deduction. He also took us to the assessee’s survey statement making it clear in the penultimate paragraph that he had never made the payments to labour contractors and sub-contractors; as the case may be.
We have given our thoughtful consideration to the foregoing rival pleadings. There is hardly any dispute between the parties is that the Assessing Officer had treated the assessee to be an assessee in default for not having deducted TDS on alleged labour payments made through the alleged sub-contractor(s). We do not see even a single evidence in the case file which could suggest that the assessee had ever engaged such labour sub-contractor(s). This is despite the fact that the departmental authorities had carried out a survey in his premises alleging violation of TDS deduction only. It further emerges that the department had also not recorded any statement of the alleged recipients of the salary/wages as to whether they had been employed at various construction sites through the alleged sub-contractor(s) or not. It is therefore an instance where the assessee has paid the salary/wages to the workforce in office and on construction sites without any agent for rendering service either a contractor or a sub-contractor. We therefore see no merit in the Revenue’s instant sole grievance.
Coupled with this, there is no rebuttal to the assessee’s clinching plea that the corresponding CIT(A)’s orders deleting the very nature of demand in assessment years 2014-15 and 2015-16 in identical circumstances have been accepted as correct. Be that as it may, we conclude that since the department has nowhere pinpointed any of the alleged sub-contractor in the salary/wages payments in issue, the Assessing Officer
M/s Awadesh Singh Construction Pvt. Ltd. Assessment Years:2016-17 & 2017-18 Page 5 committed an error in treating this taxpayer to be an assessee in default whilst initiating the impugned proceedings. We thus affirm the CIT(A)’s above extracted findings. The Revenue’s former appeal fails. 6. Same order to follow in Revenue’s latter appeal in ITA No.281/Ran/2019. 7. These two Revenue’s appeals are dismissed. Order pronounced in open court on 30/09/2020.