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Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ Bench, Hyderabad
Before: Smt. P. Madhavi Devi & Shri S.Rifaur Rahman
Per Smt. P. Madhavi Devi, J.M.
This is Revenue’s appeal for the A.Y 2007-08 against the order of the CIT (A)-VI, Hyderabad, dated 31.03.2011.
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”
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respectively. The assessee was asked to produce the bills and vouchers and books of account in support of the claim. On verification of which the AO found that all the vouchers were self- made vouchers. It was explained by the assessee that most of the expenditure is incurred at work sites, and therefore, in this line of business, it is not possible to obtain proper vouchers for the expenditure incurred. The AO proposed to disallow 15% of the claim on the ground that the vouchers are self-made and the assessee agreed to the disallowance and accordingly the AO made the disallowance of Rs.24,26,285 and brought it to tax.
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.
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5 On examination of the books of account produced by the assessee during the course of the assessment proceedings, the AO found that the assessee has paid an amount of Rs.11,20,392 to Mr. Sheikh Hussein for ‘B.T. Transport’ and an amount of Rs.4,42,275 to Mr.Rami Reddy and Mr. Sanjeeva Reddy as “Metal Transport Charges”. Observing that the assessee had an agreement with a single party for transportation of goods, the AO deemed it that the assessee has an agreement of contract and therefore, it was required to deduct tax at source u/s 194C of the Act. Since the assessee has not made any TDS, the AO applied the provisions of section 40(a)(ia) of the Act and disallowed the sum of Rs.15,62,667 and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) who granted partial relief to the assessee. Against the relief denied to the assessee, the assessee preferred an appeal before us and against the relief granted by the CIT (A), the Revenue is in appeal before us. The assessee’s appeal was disposed of vide order dated 22.03.2017 and vide the common and consolidated order, the Revenue’s appeals was also dismissed on the ground of low tax effect. However, vide orders dated 22.11.2017 in Miscellaneous Application (M.A. No.39/Hyd/2017), the order of the Tribunal in Revenue’s appeal was recalled and the appeal was posted for hearing afresh and the grounds of appeal raised by the Revenue are as under:
“1. The CIT(A) has erred on both facts and law. 2. The learned CIT(A) erred in deleting disallowance made by the Assessing Officer of the expenditure claimed on account of drivers and cleaner salaries. The CIT(A) has failed to appreciate the fact that during the
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course of Asst. proceeding the AR has accepted that it is a mistake and has agreed for disallowance of the same. 3. The learned CIT(A) has erred in deleting the disallowance made by the Assessing Officer of the expenditure claimed on account of 'BT Transport' and 'Metal Transport charges', since the expenditure claimed by the assessee attracts the provisions of Sec.194C, and as no TDS has been made on the said payments, it is not allowable business expenditure u/s 40(a)(ia) of the Income tax Act, 1961”.
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
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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.
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In the result, Revenue’s appeal is dismissed.
Order pronounced in the Open Court on 25th April, 2018.
Sd/- Sd/- (S.Rifaur Rahman) (P. Madhavi Devi) Accountant Member Judicial Member
Hyderabad, dated 25th April 2018. Vinodan/sps
Copy to:
1 Asstt. CIT, Circle-1 Aayakar Bhavan, Station Road, Warangal 2 M/s. Vijaya Sree Constructions, H.No.5-9-118 Hanamkonda, Warangal 3 CIT (A)-VI Hyderabad 4 CIT – VI, Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File
By Order
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