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Income Tax Appellate Tribunal, KOLKATA BENCH, “SMC” AT KOLKATA
Before: Shri A. T. Varkey, JM]
This is an appeal preferred by the Assessee against the order of the CIT(A)-17 Kolkata dated 31.03.2016 for assessment year 2005-06. The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs. 3,73,289/-.
The brief fact is that the assessee is an individual was carrying on contractual works for Tirupati Jute Industries Ltd. During assessment proceedings, the AO noted that the assessee had received a sum of Rs 4,01,308/- from M/s. Tirupati Jute Industries Ltd. as payment for execution of contract and that tax has been deducted from this income by M/s. Tirupati Jute Industries Ltd. However, according to the AO in the computation sheet, the assessee has shown only Rs. 28,019/- as income from branding job work and when confronted with this factual mismatch, the assessee filed revised return of income reflecting that out of Rs. 4,01,308/- received from M/s. Tirupati Jute Industries Ltd., a sum of Rs. 3,73,289/- was paid to Shri Ganesh Chandra Bhattacharya and net income was shown in his P&L Account. Taking this fact into consideration, the AO issued summons to Shri Ganesh Chandra Bhattacharya at the address given by the assessee which was returned userved. Since the assessee could not produce Shri Ganesh Chandra Bhattacharya before the AO and the AR of the assessee stated that payment were made by cash through M/s. Tirupati Jute
Devki Nandan Bhojak AY- 2005-06 Industries Ltd. to the said person, the AO concluded that the purported payment claimed to have been made to Shri Ganesh Chandra Bhattacharya is bogus and therefore, he added the amount of Rs. 3,73,289/- as the income of the assessee. Aggrieved he preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same but on a different reasons that since no TDS has not been deducted by assessee on the payment given to Shri Ganesh Chandra Bhattacharya for the branding of jute bags, the payment in any cases need to be disallowed u/s 40(a)(ia) of the Act. Aggrieved the assessee is before us.
We have heard both the parties and perused the record. We note that the assessee is an individual who carried out contractual work of branding of jute bags for M/s. Tirupati Jute Industries Ltd. The assessee in order to carry out the said work has out sourced it to Shri Ganesh Chandra Bhattacharya who was actually executing the work for lesser amount. Accordingly the assessee has instructed M/s. Tirupati Jute Industries Ltd. that payment on behalf of the assessee may be paid directly to Shri Ganesh Chandra Bhattacharya vide letter dated 26.03.2004 and as per the instruction of the assessee, M/s. Tirupati Jute Industries Ltd. has made payment directly to Shri Ganesh Chandra Bhattacharya which fact has been confirmed by M/s. Tirupati Jute Industries Ltd. and the assessee drew out attention to both the letters to corroborate the aforesaid facts. The learned AR to buttress his argument that the payments were made by M/s. Tirupati Jute Industries Ltd. drew our attention to the ledger of M/s. Tirupati Jute Industries Ltd. in respect of payments details of Shri Ganesh Chandra Bhattacharya wherein we note that from 5th April, 2004 to 31st March, 2005, an amount of Rs. 3,73,916/- has been paid by cheques to Shri Ganesh Chandra Bhattacharya except cash of Rs. 1,325/- on 29.07.2004. We note that Form No. 16A was filed by the director of M/s. Tirupati Jute Industries Ltd. wherein it is noted that an amount of Rs. 4,01,308/- has been disbursed to assessee and amount of Rs. 8,188/- has been deducted as TDS on the said payment. Thus we note that as per the internal arrangement between the assessee and M/s. Tirupati Jute Industries Ltd. out of the total payment out of Rs. 4,01,308/- to assessee, Rs. 3,73,916/- has been paid directly by M/s. Tirupati Jute Industries Ltd. to Shri Ganesh Chandra Bhattacharya by cheque and this total amount of Rs. 4,01,308/- due to assessee for execution of contract work has already suffered TDS. So,
Devki Nandan Bhojak AY- 2005-06 therefore, the total amount disbursed by M/s. Tirupati Jute Industries Ltd. to assessee to the tune of Rs.4,01,308/- has already suffered TDS of Rs.8,188/- and so we note that the assessee has reconciled the mismatch and so the AO erred in making the addition as bogus.
Coming to the action of the Ld. CIT(A) to confirm the action of A.O by holding the amount of Rs. 3,73,916/- which has been paid to Shri Ganesh Chandra Bhattacharya is also erroneous. According to him, without tax being deducted at source, so he disallowed the same under 40(a)(ia) of the Act. First of all, the assessee has not given the money to Shri Ganesh Chandra Bhattacharya. Secondly the money has been paid by M/s. Tirupati Jute Industries Ltd. directly to Shri Ganesh Chandra Bhattacharya after deduction of tax as noted supra. Thirdly, the assessee an individual does not fall u/s 194C of the Act since he is exempted from the specified person as per section 194C of the Act. Since he being an individual and does not fall in the description of “specified person” given in Explanation below (a) to (k) of section 194C of the Act and since the assessee, an individual is not liable to audit of accounts under Clause (a) or Clause (b) in section 44AB during the financial year immediately preceding the financial year in which such sum is credited or paid to the account of the contractor (which includes sub-contract). Therefore, we find force in the submission of the learned AR that for this reason also AO as well as Ld. CIT(A) erred in making the addition of Rs. 3,73,916/-. Therefore, we delete the addition.
In the result, appeal of assessee is allowed.