ACIT, CIRCLE-1, WARANGAL vs. M/S. VIJAYA SREE CONSTRUCTIONS, WARANGAL

Brief facts of the case are that the assessee firm, engaged in the business of execution of civil contracts, filed its return of income for the A.Y 2007-08 on 31.10.2007 admitting total income of Rs.19,38,460. During the assessment proceedings u/s 143(3) of the Act, certain information was called for, which was furnished by the assessee. The AO observed that the assessee has debited a sum of Rs.1,41,44,610 and Rs.20,30,625 towards “Labour Charges Metal Labour Charges” and “Earth Work”

From the Profit & Loss A/c of the assessee, the AO also observed that the assessee has claimed an amount of Rs.12,48,000 as “Drivers & Cleaners Salaries”. On perusal of the details furnished by the assessee, it was observed by the AO that the total amount paid to the Drivers & Cleaners was only Rs.9,24,000 and therefore, the assessee was asked to explain the excess claim of Rs.3,24,000. The assessee’s Authorized Representative agreed to the disallowance and therefore, it was brought to tax.

Further, on examination of the books of account, the AO also observed that the assessee has made payments in cash exceeding Rs.20,000 to a single party on the same day. Since the Authorized Representative of the assessee agreed to the disallowance to be made, the AO made the disallowance of 20% of the total cash payments and brought it to tax.

The learned DR supported the order of the AO and submitted that the assessee’s representative had agreed for the disallowance to be made on account of excess claim of salaries to the Drivers & Cleaners and therefore, the CIT (A) ought not to have deleted the said disallowance.

The learned Counsel for the assessee submitted that the claim of Rs.12,48,000 towards the salaries of Drivers and cleaners included the wages paid by the assessee to the Temporary Drivers & Cleaners and therefore, the CIT (A), after appreciating the said fact, has deleted the disallowance.

The learned DR has not brought any evidence on record to disprove or rebut the findings of the CIT (A).

Therefore, accepting the contention of the assessee that the claim of salaries to the Drivers & Cleaners included the payments of wages to the Drivers & Cleaners who were engaged on temporary basis, we decline to interfere with the orders of the CIT (A). The Revenue’s ground of appeal No.2 is accordingly rejected.

As regards the third ground of appeal, the learned DR supported the order of the AO and submitted that the assessee has made payments to a single party for transportation of “BT Transport” and to two parties for “Metal Transport Charges”. Therefore, it is to be deemed that the assessee had an agreement with those parties for transportation of Metals and therefore, ought to have deducted the taxes at sources before making the payment.

The learned Counsel for the assessee submitted that there was no contract with the parties, but the assessee has only engaged their Lorries for transportation of the goods and therefore, there is no privity of contract between them. He also submitted that the AO has only deemed that there is a contract and such a presumption is not sustainable.

Having regard to the rival contentions and the material on record, we find that as rightly held by the CIT (A), there is no agreement between the assessee and the transporters but the assessee has only engaged their vehicles for transport of the goods. There cannot be any presumption about any contract. In the absence of any material to the contrary, we decline to interfere with the orders of the CIT (A) on this ground also. Thus, ground of appeal No.3 is rejected.

In the result, Revenue’s appeal is dismissed.