SITANGSHU DAS,SOUTH TWENTY FOUR PARGANAS vs. ITO, WARD - 26(1),, KOLKATA

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ITA 2656/KOL/2024Status: DisposedITAT Kolkata26 May 2025AY 2016-177 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, while considering the rival submissions and perusing the record, noted that the required vouchers/evidences were not before the Assessing Officer, leading to disallowances for non-deduction of TDS and non-production of bills. The assessee's representative argued that TDS was either not warranted or the payees had already included the income in their returns and paid taxes, and that supporting vouchers were available. In the interest of justice and to allow the assessee to substantiate claims with sufficient evidence, the Tribunal set aside the order of the Ld. CIT(A) and the Ld. AO. All issues were restored to the file of the Assessing Officer. The Assessing Officer was directed to consider the evidence filed by the assessee, including whether payees had paid taxes on the income and other evidence justifying the expenditure. A further opportunity of hearing was to be granted. If the assessee's explanation or evidence was not satisfactory, the additions and disallowances confirmed by the Ld. CIT(A) would stand. Ground No. 7, concerning the addition from other sources, was partly allowed for statistical purposes, as relief on a Rs. 2,00,000/- addition under Section 68 was granted by the Ld. CIT(A), leaving only Rs. 18,117/- unadjudicated. All other grounds of appeal were allowed for statistical purposes.

What were the facts?

The assessee, Sitangshu Das, proprietor of P.K. Consultancy, a manpower recruitment agent, filed an appeal against the order of the Ld. Addl/JCIT(A)-2, Mumbai, dated 29.10.2024. This order was passed under Section 250 of the Income Tax Act, 1961, against the assessment order under Section 143(3) dated 22.12.2018 for Assessment Year 2016-17. The assessee's original total income was Rs. 5,04,750, but the assessment was made at Rs. 19,96,724 after several disallowances. The Ld. CIT(A) partly allowed the appeal, confirming some disallowances, including those for non-deduction of TDS, low drawings, and 10% of expenses for non-production of bills. The appeal before the ITAT concerns multiple grounds of disallowance and additions made by the Assessing Officer and partly confirmed by the Ld. CIT(A).

What were the issues?

The Tribunal had to decide the following issues: 1. Whether the payment of wages amounting to Rs. 15,21,238/- to 57 workers, averaging Rs. 2,224/- per month per family head, was wrongly treated as contractor payment attracting TDS under Section 194C, leading to disallowance under Section 40(a)(ia) of the Act. 2. Whether consolidated payments for airfare, passport, visa, insurance, ship freight, and fooding to a travel agent, including reimbursements as a pure agent, were wrongly subjected to TDS provisions, making Section 40(a)(ia) applicable. 3. Whether courier expenses of Rs. 2,28,000/-, including foreign and domestic charges, incurred at an average of Rs. 19,000/- per month, attracted TDS provisions and disallowance under Section 40(a)(ia). 4. Whether commission paid to recruiting agents, Rs. 12,80,000/-, which included various expenses like travel, visa, and training, was wrongly subjected to TDS provisions, leading to disallowance under Section 40(a)(ia). 5. Whether the disallowance of drawings amounting to Rs. 1,05,580/-, based on average drawings of previous years, was arbitrary and without considering other family members' earnings. 6. Whether the disallowance of Rs. 1,42,974/- (10% of expenses) for non-production of supporting vouchers for various expenses like banquet rentals and meeting expenses was justified. 7. Whether an arbitrary income of Rs. 2,18,117/- was wrongly added to income from other sources without any reference in the assessment order. 8. Whether the imposition of penalty under Section 271(1)(c) on the ground of daily cash deposits into the bank from undisclosed sources was erroneous. Assessee's Contentions: - For issue 1: Labour charges were paid to workers on an average of Rs. 2,224/- per month per family head, not to contractors, and thus did not attract TDS under Section 194C. - For issue 2: Payments to the travel agent included reimbursements as a pure agent, so TDS under Section 40(a)(ia) was not applicable. - For issue 3: Courier expenses were below the threshold limit and did not attract TDS under Section 40(a)(ia). - For issue 4: Commission paid to recruiting agents included various expenses, and details were submitted, thus not attracting TDS under Section 40(a)(ia). - For issue 5: Drawings disallowance was imaginary and arbitrary, as other family members were earning. - For issue 6: Details of expenses were submitted, and the disallowance was unjust and arbitrary. - For issue 7: Income from other sources was arbitrarily added without adjudication by the Ld. CIT(A). - For issue 8: Penalty under Section 271(1)(c) was wrongly imposed. - The assessee also claimed that sufficient evidence existed for all claims and requested another opportunity to submit them. Revenue's Contentions: - The Ld. Sr. DR supported the orders of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194C,Section 194H,Section 250,Section 143(3),Section 68,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA

Before: SHRI SONJOY SARMA

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Ld. Addl/JCIT(A)-2, Mumbai [hereinafter referred to as “the Ld. Addl. /Joint CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2016-17 dated 29.10.2024, which has been passed against the assessment order u/s 143(3) of the Act, dated 22.12.2018. I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17

2.

The assessee is in appeal before the Bench raising the following

grounds of appeal:

“1) Payment_of Wages wrongly considered_as Contractor Payment _of Rs.15,21,238/- 30% taxed: That on the facts and in the circumstances of the case, the assessing officer/appellate authority went wrong in charging Section 40(a)(ia) of the Income Tax Act, 1961, where the Assessee paid the Labour Charges of Rs.15,21,238/- to 57 Nos of Workers throughout the whole year on an average of Rs.2,224/- per month which was given to the Labour Family Head [15 Nos. as per Assessment Order) not to be treated as Labour Contractor Payment and does not cover Under the provision 194C of the Income Tax Act, 1961, he is not liable to deduct TDS and the assessing officer/ appellate authority treating this amount as labour payments as per provision 194C, which is unjust and arbitrary.

2) Travelling & Recruitment: Rs.3,19,668/-/-@30% taxed: That on the facts and in the circumstances of the case, the assessing officer/appellate authority went wrong in charging Section 194C of the Income Tax Act, 1961, where the Assessee paid consolidated Air Fare, Passport Charges, Visa

Charges, Foreign Country Insurance Premium, Ship Freight, Ship Period Fooding and various other expenses etc. which was paid to the Travel Agent which includes Expenses Reimbursement as Pure Agent and thus the question of TDS Under Section 40(a)(ia) of the Income Tax Act, 1961 does not arise.

3) Courier Expenses of Rs.2,28,000/-/-@30% taxed: That on the facts and in the circumstances of the case, the assessing officer / appellate authority went wrong in charging Section 40(a)(ia) of the Income Tax Act, 1961, the Expenses incurred by the Assessee includes foreign courier and domestic

courier charges. Within the West Bengal the courier rate per letter was Rs.15/- and within the Country the rate was on and average of Rs.60/- per consignment. In case of Foreign Country, the rate was variable as per the Country concerned. The total Amount paid to M/S. Sunil Kumar Halder was shared by him among the Local Courier Firms, Country wide Courier Companies and International Courier Companies. On an average per month the expenses being Rs. 19,000/- much below the threshold limit and does not attract the question of TDS Under Section 40(a)(ia) of the Income Tax Act, 1961. 4) Commission Paid: Rs. 12,80,000/-/-@30% taxed

That on the facts and in the circumstances of the case, the assessing officer/ appellate authority went wrong in charging Section 40(a)(ia) of the Income Tax Act, 1961, where the Assessee paid the commission of Rs.

12,80,000/- to the Recruiting Agents which involves Travelling Expenses, Visa Charges, Immigration Charges, Training Charges, Language Learning

I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17 and other Reimbursement of Expenses required to appoint one illiterate person for different suitable posts in Foreign Hotels. All details and supporting were duly submitted at the time of Assessment and Appeal but not being considered and does not attract the question of TDS Under Section 40(a)(ia) of the Income Tax Act, 1961. 5) Drawings Disallowed:-of Rs. 1,05,580/- That on the facts and in the circumstances of the case, the assessing officer/appellate authority disallowed the drawings of Rs. 1,05,580/- (average drawings of AY: 2014-15 and 2015-16 being Rs. 1,50,000/- Less () Actual Drawings shown as Rs.44,150/-), without considering the fact that the other family members of the Proprietor was engaged in Regular Monthly Earning are thus the Addition of Rs. 1,05,580/- which imaginary, hypothetical and arbitrary. 6) Various Expenses without Supporting Vouchers :- Rs.14,29,742/- That on the facts and in the circumstances of the case, the assessing officer/appellate authority disallowed of Rs. 1,42,974/- which is 10% of expenses reported in Profit and Loss Account on the distance stretch of Imagination of the Non-Genuinity of the Actual Expenses incurred as Banquet & Venue Rentals, Meeting related general expenses/Guest amenities, Gift, Travelling Recruitment expense (Local Bus & train tickets), details of which were fully submitted at the time of Hearing which is unjust and arbitrary. 7) Arbitrary Income Added _in Computation Sheet_as Income_from other Source of Rs.2,18,117/-: No Such Income was Mentioned in the Assessment Order, but the Assessing Officer while Calculating Total Income Computation, Added Rs.2,18,117/- without any reference and Imaginary Income Tax has been charged on the said arbitrary Income should be deleted in full. 8) That on the facts and in the circumstances of the case, the assessing officer went wrong in imposing Penalty u/s.271(1)(c) of the Income Tax Act, 1961, on the ground that the daily cash deposited into Bank was from Undisclosed Source of Income. 9) That the appellant craves leave to file any additional ground or amend the ground already taken either before or at the time of hearing of the appeal.”

3.

Brief facts of the case are that the assessee is a proprietor of P.K.

Consultancy which is stated to be a “Man Power Recruitment Agent”. During the financial year relevant to the assessment year 2016-17, the assessee had shown income from business in the return of income

disclosing the total income at Rs.5,04,750/-. The return was selected

I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17 for complete scrutiny and the assessment was made at the total income at Rs.19,96,724/- after making several disallowances. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) and the Ld. JCIT(A) partly allowed the appeal. The additions made and disallowances under various heads of expenses were partly confirmed for the reason that no further details were filed by the assessee. The disallowances were on account of non-deduction of TDS for payment exceeding Rs.75,000/- paid to the labourers, travelling and recruitment expenses and out of all these expenses claimed, 30% of the claim was disallowed on account of non-deduction of tax at source and the disallowance was made u/s 40O(a)(ia) of the Act. Similarly, the disallowance out of courier expenses, addition on account of commission paid were also made. A sum of Rs. 20,632/- on account of commission income omitted to be included in the total income was also added. Further, addition on account of unexplained unsecured loans/advances etc. was also made. Penalty proceedings were also initiated.

4.

In the first appeal, the Ld. Addl./Joint CIT(A) confirmed the disallowance of the expenses for non-deduction of TDS from the payment made to labourers, addition on account of low drawings, disallowance of 10% of the expenses for non-production of bills and disallowance of 30% of commission expenses under section 40(a)(ia) for non-deduction of tax at source u/s. 194H of the Act and deleted the addition of Rs. 2,00,000/- made under section 68 of the Act and the appeal was partly allowed. Aggrieved with the order of the Ld. Addl./Joint CIT(A), the assessee has filed the appeal before the Tribunal.

I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17

5.

Rival submissions were heard and the record and the submissions

made have been examined.

6.

Before us, the Ld. AR requested that the assessee has sufficient evidences for the claim of payments which have been disallowed and confirmed by the Ld. Addl./Joint CIT(A) as either they do not attract the provisions of TDS u/s 194C/194H etc. or there was no liability for deduction of tax at source or disallowance of part of the expenses debited to the profit and loss account as required details are in the possession of the assessee and the same can be submitted if another opportunity is granted to the assessee. The Bench noted that since during the course of the appeal, proper submissions could not be made, another opportunity may be granted to the assessee to explain the claim of expenses made. It was further submitted that arbitrary income has been computed as income from other sources of Rs.2,18,117/- which has not been adjudicated upon by the Ld. Addl./Joint CIT(A) and the assessee has sufficient evidence to substantiate his claims. However it is noted that relief on account of addition of Rs. 2,00,000/- made u/s 68 has been allowed by the Ld. Addl./Joint CIT(A) and only a sum of Rs. 18,117/- added on account of interest has not been adjudicated

upon.

7.

In reply, Ld. Sr. DR supported the orders of the lower authorities.

8.

We have considered the rival submissions made and also perused the record. Admittedly, the required vouchers/evidences were not before the Assessing Officer, who has disallowed the expenses on account of non-deduction of TDS and non-production of bills/vouchers. The Ld. AR claimed that either the TDS was not warranted or the payee

had included the income in his return of income and had paid the taxes

I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17 on the same, hence there was no question of any disallowance to be made. It was also submitted that the assessee has supporting vouchers for the expenses claimed. Hence, in the interest of justice and as requested by Ld. AR that the assessee has sufficient evidence to substantiate the claims, the order of ld CIT(A), who has partly allowed the appeal, is hereby set aside along with the order of the Ld. AO and all the issues in this appeal are restored to the file of the Assessing Officer, who shall consider the evidences filed that either the payees had paid the taxes after including the same in their income and also other evidences to justify the expenditure claimed in the profit and loss account and after granting another opportunity of hearing to the assessee and after verification shall make the assessment. If the explanation of the assessee is not satisfactory or no evidence is filed, the addition as made and confirmed by the Ld. Addl./Joint CIT(A) shall stand confirmed. Hence, all the Grounds of appeal of the assessee are allowed for statistical purposes except Ground No. 7 which is partly

allowed for statistical purposes.

9.

In the result, the appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open Court on 26t May, 2025. [Sonjoy Sarma] [Rakesh Mishra] Judicial Member Accountant Member

Dated: 26.05.2025

Bidhan (P.S.)

Page |

I.T.A, No.: 2656/KOL/2024 Assessment Year: 2016-17 Copy of the order forwarded to:

1.

Sitangshu Das, Bishnupur, Vill - Gabberia, P.O. Dosotina, P.S. Bishnupur, South 24 Parganas, West Bengal, 743503. 2. ITO, Ward-26(1), Kolkata.

3.

Addl/JCIT(A)-2, Mumbai.

4.

5. 6. /

CIT-

. CIT(DR), Kolkata Benches, Kolkata. . Guard File.

/|

By order

Assistant Registrar ITAT, Kolkata Benches Kolkata

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