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Income Tax Appellate Tribunal, KOLKATA BENCH ‘A’, KOLKATA
Before: Shri J. Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM
Per S.S. Viswanethra Ravi, JM The aforesaid appeal and cross-objection by the revenue and assessee respectively against the common order dated 31.03.2016 passed by the CIT(A) – 7, Kolkata for A.Y. 2012-13.
First we shall take up appeal of revenue in ITA 1253/Kol/2017.
2 I.T.A. No. 1253/Kol/2016 & C.O. No. 47/Kol/2016 Assessment Year: 2012-13 Shri Sujoy Krishna Jana 3. Ground No. 1 and 2 is relating to deletion of disallowance made u/s 40(a)(ia) of the Act in the facts and circumstances of the case.
The brief facts of the case are that the assessee is an individual and is a civil contractor. During the course of scrutiny proceedings, the AO found in the balance sheet as on 31.03.2012, the assessee has shown TDS of Rs. 98,643/- is payable on account of labour charges and for not depositing the same into government account, the AO disallowed entire expenditure on account of labour charges of Rs. 98,64,300/- by invoking section 40(a)(ia) of the Act and added to the total income of the assessee.
Before the CIT(A), it was contended no sub-contractors were existing in the business of the assessee and the payments paid to labourers in cash by employees of assessee that is Mr. Ashok Prasad and Mr. Asim Samanta were the staff of the assessee and the labour payments were made through them by withdrawing cash. The CIT(A) found satisfied by examining the salary payment vouchers and held in the absence of any contract deleted the addition made by the AO by placing reliance on the order of Tribunal. Before us, the learned AR supported the order of CIT(A) and referred to salary payment vouchers at page 10 to 21 of the Paper Book and affidavit of driver at page no 22. It is settled principle when there is no contract the deduction u/s 195C does not arise. In view of the same, we find no infirmity in the order of CIT(A). For better understanding, the relevant portion of CIT(A) is reproduced herein below: “4.1. During the appeal the A/R of the appellant submitted written submission as under:
3 I.T.A. No. 1253/Kol/2016 & C.O. No. 47/Kol/2016 Assessment Year: 2012-13 Shri Sujoy Krishna Jana This ground of appeal is against the addition of Rs. 98,64,300/- made u/s 40a(ia) of the Act, 1961. The contention of the AO is that payments are made to sub-contractors for supply of labour and as such TDS should have been deducted from such payments u/s 194C of the Act, 1961. Actually, the fact is that there are no sub contractors existing at all in this business. Payments to labourers are all made directly to the wage earners by the appellant at periodical intervals at various sites in cash. Two of the trusted employees of the appellant are entrusted to withdraw money from the banks in their names and made payment of labourers at site directly on behalf of the appellant. The two employees of the appellant was (1) Ashok Prasad the driver of the appellant, and (2) Mr. Asim Samanta ( is the site supervisor) of the appellant. These two persons withdrew money from bank accounts through bearer cheques at various intervals, as per requirements, and carried cash to various sites of work for making payments of wages to labourers in cash itself. Since, these two persons placed cash/cheques before the bank counters, for withdrawing of money from banks in cash, the names of Mr. Ashok Prasad and Mr. Asim Samanta appear repeatedly in the bank statements. During the course of assessment proceedings, the said fact was made clear to the A.O. vide the last explanation filed in the month of March 2012, but the A.O. refused to give any cognizance to the same. But the pertinent point t9 be noted is that these two persons through whom payments are made to the labourers are not sub-contractor by any stretch of imagination. One is the driver and the other is the site- supervisor of the appellant. The assessee was not legally aware of the provisions of TDS prevailing in Income tax Act'61, so he was under misconception that TDS will have to be deducted from labour payments (whenever routed through his employees ), so on the advice of his tax consultant, he made a provision of TDS, which is appearing in the liability side of his balance sheet as at 31/03/2012. They are getting paid by the appellant, for their service rendered as employees ( and not as sub contractor). The very definition of work u/s 194C of the Act'61, is not fulfilled in this case , because the two employees , are not carrying out any work on contract and no responsibility of completion of work or liability of carrying on the contract, are vested on them, at any stage. They do not share any responsibility of work as per section 194C of the Act'61.
4 I.T.A. No. 1253/Kol/2016 & C.O. No. 47/Kol/2016 Assessment Year: 2012-13 Shri Sujoy Krishna Jana There is no existing contract either written or oral in between the appellant and these two persons, and, if required the two persons are still available and are ready to depose on merits. As such the additions of Rs. 98,64,300/-, made on this count u/s 40(a)(ia) of the Act '61, for non deduction of TDS may please be deleted. 4.2 Before me during the appeal the appellant stated that there was no sub- -contractor engaged by the appellant for executing-any labour contract. Initially the TDS was deducted for Rs.98,643/- from the payments made to his own employees i.e. Ashok Prasad and Ashim Samanta who have withdrawn the cash and disbursed labourers by direct payment. However, at the time of assessment by mistake the appellant stated that the TDS was deducted but not remitted and the sub- contractors were assessed to tax. The appellant submitted before me that there was no labour contract to deduct the TDS. I have verified the assessment records and noticed that Sri Ashok Prasad and Sri Ashim Samanta were the staff of the appellant and the labour payments were made through the above staff members by withdrawing the cash. In support of the contention that Shri Ashim Samanta and Shri Ashok Prasad were the staff members of the appellant, the A/R produced the copies of salary payment vouchers. The AO verified the books of accounts and did not specify the names and the amounts paid to the sub- contractors which attracts the TDS. The cash payment were made to labourers through Sri Ashim Samanta and Sri Ashok Prasad and there was no evidence to show that the appellant had entered into any contract for supply of labour. In the case of ACIT Circle-2, Burdwan vs. Shiva Constructrion, Burdwan (dated 26.10.2010) Hon'ble ITAT held that in the absence of any contract between the appellant and the labour supply contractors there cannot be any application of section 194C and invocation of provision u/s 40(a)(ia) is outside the scope and ambit of such enactment. In this case there is no evidence to show that there was a contract for supply of labourers or any contract payments which attract the TDS. Therefore, the addition made by the AO amounting to Rs.98,64,300/- is deleted and this ground of appeal is allowed.” 6. In view of the above, the order of CIT(A) does not require any inference from us, therefore, Ground Nos. 1 and 2 raised by the revenue are dismissed.
Ground No. 3 is general in nature requires no adjudication, hence it is dismissed.
5 I.T.A. No. 1253/Kol/2016 & C.O. No. 47/Kol/2016 Assessment Year: 2012-13 Shri Sujoy Krishna Jana 8. Now, we shall take up C.O. 47/Kol/2016 filed by the assessee.
It is contended by the learned AR that the CIT(A) confirmed the addition made by the AO u/s 40A(3) of the Act for non-submission of explanation and prayed to remand the matter to file of the AO for his consideration.
Heard both the parties and perused the material available on record. It is noted from the impugned order that the CIT(A) confirmed the addition involving the cash purchases. The DR did not controvert the same. Taking into consideration, the submission of learned AR and facts and circumstances of the case and in the interest of justice, we deem it proper to remand the matter to the file of the AO for his fresh consideration. The assessee is liberty to file his evidences, if any, to support of his claim. Therefore, ground no. 1 raised by the assessee of cross-objection is allowed for statistical purposes. Ground No. 2 is general in nature requires no adjudication, hence it is dismissed.
In the result, the appeal of the revenue is dismissed and cross-objection of the assessee is partly allowed statistical purposes. Order Pronounced in the Open Court on 31 October, 2018. Sd/- Sd/- (J. Sudhakar Reddy) (S.S. Viswanethra Ravi) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 31/10/2018 Biswajit, Sr. PS
6 I.T.A. No. 1253/Kol/2016 & C.O. No. 47/Kol/2016 Assessment Year: 2012-13 Shri Sujoy Krishna Jana Copy of order forwarded to: 1. Shri Sujoy Krishna Jana, Jasora, Panskura, Purba Medinipur – 721 636. 2. ACIT, CIRCLE 27, Haldia, Dubey House, Basudevpur, Khanjanchak, Haldia, Puraba Medinipur – 721 602. 3. The CIT(A) 4. The CIT 5. DR True Copy, By order, Sr. P.S. / H.O.O. ITAT, Kolkata