SK SAJJAD ALI,HOWRAH vs. ITO, WD-47(2), KOLKATA, KOLKATA

The sole issue as per revised ground of appeal of assessee is as under:

Brief facts of the case are that the AO noted that assessee was engaged as a contractor of “Jori Works” and has declared turnover of Rs. 2 cr. on which GP rate of 5.66% was shown by the assessee as his income. During scrutiny, the AO noted that the assessee had claimed and debited a sum of Rs.1,11,22,120/- under the head “Labour charges paid.”

We have heard rival submissions and gone through the facts and circumstances of the case. Our attention was drawn to page 6 of the impugned order of Ld. CIT(A) wherein the break-up of the amount in dispute is given which is as under:

In addition to this the following break-up was also brought to the notice of LdCIT(A):

According to Ld. AR, no TDS was deductible because the amount disbursed to nine labourers included cost of material, travel reimbursement and wages to individual labourers which cannot attract sec. 194C of the Act. The main grievance of the assessee is that no proper opportunity was given to the assessee to bring the aforesaid facts to the notice of AO. We note that the assessee had debited a sum of Rs.1,11,22,120/- under the head “Labour charges paid” and since the AO noted that against the aforesaid nine persons the payment made in the year exceeded Rs.50,000/- and because TDS was not deducted u/s. 194C of the Act, AO disallowed the entire expenditure made to these parties. Though the assessee pleaded before the Ld. CIT(A) and brought to his notice the break-up of the expenditure, the Ld. CIT(A) gave a deaf ear to the same. Before us it was pleaded by the assessee that if an opportunity is given to the assessee, he would be able to substantiate with the support of material the break-up given supra. We agree with the Ld. AR that wages given to labourers without contract will not attract sec. 194C of the Act and the money given for purchasing material, travel reimbursement also does not per se attract section 194C of the Act. However, it has to be kept in mind that the onus is on the assessee to discharge the facts which has been given in the break-up (supra) because these facts are exclusively in his knowledge and he is only privy to it and how the AO will be knowing these things and therefore the assessee has to bring material to substantiate what he claims. Moreover, it has to be kept in mind by the AO that merely because nomenclature of expense is given as ‘Labour Charges Paid’ does not conclusively determine the character and nature of the expense claimed. The AO has to decide the issue based on evidence/materials brought before him in accordance to law. So, with these observations, we are inclined to set aside the order of Ld. CIT(A) and remand this issue back to AO for de novo examination in the light of facts and law in accordance to law, after giving opportunity to assessee.

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