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Income Tax Appellate Tribunal, BENCH “E”,MUMBAI
Before: SHRI B.R. BASKARAN & SHRI PAWAN SINGH
Revenue by Shri Goli Srinivas Rao : (CIT-DR) Assessee by : Dr. K. Shivram & Rahul Hakani (AR) Date of hearing : 17.01.2017 Date of Pronouncement : 17 .01.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JM: 1. This appeal by Revenue u/s 253 of the Income-tax Act (‘Act’) is directed against the order of Ld. Commissioner of Income-tax (Appeals) [for short ‘the CIT(A)] –24, Mumbai dated 20.06.2014 for Assessment Year (AY) 2008-09. The Revenue has raised only one grounds of appeal that: “The CIT(A) erred in deleting the addition of Rs. 91,90,424/- made under the provisions of Sec. 40(a)(ia) of the Act.”
2. Brief facts of the case are that the assessee filed return of income for relevant AY on 30.09.2008 declaring total income of 5,76,907/-. The assessment was completed u/s 143(3) of the Act on 31.03.2010 determining the total income of Rs. 5,76,907/-. Subsequently, an order u/s 263 of the Act was passed by ld. CIT on 23.01.2013 directing the Assessing Officer (AO) to examine whether there was any contract between the assessee and the ‘Mukadams’ or any contractual relation exist. Consequent upon the AO passed the order after giving the opportunity of hearing to the assessee. The AO passed the order on 28.02.2014 u/s 143(3) r.w.s. 263 and made a disallowance of Rs. 52,90,424/- u/s 40(a)(ia) of the Act. The AO made disallowance 2 M/s Shree Swami Samartha Agro Processors holding that labour charges payment of Rs. 52,90,424/- is liable for TDS u/s 194C. As the assessee failed to deduct the TDS on such labour payments hence the disallowance was made. On appeal before the ld. CIT(A), the entire disallowance was deleted holding that the labour representative (Mukadams) did not retain any amount received from assessee and the provision of section 194 are not attracted. Aggrieved by the order of ld. CIT(A), the Revenue has filed the present appeal before us.
We have heard the ld. Departmental Representative (DR) for the Revenue and the ld. Authorized Representative (AR) of the assessee and perused the material available on record. The ld. DR for the Revenue argued that the payments made to the so-called Mukadams were payment to contractors who were supplying the labour to the assessee. The ld. DR for the Revenue further argued that the AO made the disallowance as the same was the contractual payment. On the other hand the ld. AR of the assessee argued that the AO erred in appreciating the fact and made the addition without any substance. The addition was made on assumption and presumption and the same was not based on any positive and concrete evidence. The AO failed to appreciate the various facts and evidence available before him. It was further argued that the Mukadams were summoned u/s 131 during the assessment proceeding and they admit that they are Mukadams-cum-employee of the assessee and they have distributed the cash to the temporary workers/daily wagers under the supervision of assessee. All the Mukadams have filed their affidavit contending that they are employee of the assessee and they supervise the work of daily wagers/temporary workers.
We have considered the rival contentions of the parties and gone through the orders of authorities below. The AO made the addition that the labour charges were paid to the Mukadams/supervisor and not to the individual persons. Hence, the provision of section 194C was attracted. As the assessee failed to deduct the TDS on such labour charges of Rs. 51,90,440/- was disallowed. Before the ld. CIT(A) the assessee made the similar contention as pleaded before the AO was made. The ld. CIT(A) observed that the AO in obedience to the direction of ld. CIT(A) initiated the proceeding u/s 143(3) r.w.s. 263 of the Act and concluded that assessee’s account are subject to audit and Audit Report did not mention anything about the nature of payment. Assessee did not file the details of all Mukadams and payment made to them and thus, the assessee