Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri J. Sudhakar Reddy & Shri S.S. Viswanethra Ravi
Shri S.S.Viswanethra Ravi, JM:
This appeal by Assessee is arising out of order dt. 24-12-2013 of CIT(A), Durgapur for the assessment year 2008-09.
In this appeal, the assessee has raised the following grounds of appeal:-
01) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions made by the Ld. Assessing Officer as undisclosed receipts of Rs.6,49,210/- received from Ion Exchange (India) Limited and Rs.9,554/- received from M/s Po i Technologies and Constructions (P) Ltd. is erroneous in law as well as on the facts of the case.
02) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions of Rs.35,24,438/- made u/s 68 of the Income Tax Act, 1961 by the Ld. Assessing Officer is erroneous in law as well as on the facts of the case.
03) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions of Rs.9,02,950/- made u/s 40(a)(ia) of the Income Tax Act, 1961 for non- deduction of TDS u/s 194C of the Income Tax Act, 1961 by the Ld. Assessing Officer is erroneous in law as well as on the facts of the case.
04) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions of Rs.10,55,878/- made by the Ld. Assessing Officer as is erroneous in law as well as on the facts of the case.
05) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions of Rs.7,72,957/- made u/s 40(a)(ia) of the Income Tax Act, 1961 for non- deduction of TDS u/s 194-I of the Income Tax Act, 1961 by the Ld. Assessing Officer is erroneous in law as well as on the facts of the case.
1 ITA No.277/Kol/2014 M/s. New Modern Construction
06) That the order of the Learned Commissioner of Income Tax (Appeals), confirming the additions of Rs. 4,36,693/- made u/s 40(a)(ia) of the Income Tax Act, 1961 for non- deduction of TDS u/s 194-I for Machinery Charges by the Ld. Assessing Officer is erroneous in law as well as on the facts of the case. 07) The appellant craves leave to add/or amend any ground(s) of this appeal. “ 3. The brief facts of the case are that the assessee is a firm and conducts its business under the name and style ‘New Modern Construction’ and filed its return of income showing a total income at Rs.75,735/- on 28-09-2008. Under scrutiny, the notices u/s. 143(2) and 142(1) of the Act were issued. In response to which the assessee appeared through his AR and filed relevant supporting documents. The AO determined the total income of the assessee at Rs.85,24,663/- vide his order dt: 29-12-2010 U/Sec. 143(3) of the Act.
Ground no.1 relates to addition made by the AO as undisclosed receipts of Rs.6,49,210/- and Rs.9,554/-.
During course of scrutiny proceedings the AO noticed that the assessee received contractual receipts of Rs.6,49,210/- from M/s. Ion Exchange(India) Limited and Rs.9,554/- from M/s. Pobi Technologies and Constructions Pvt. Ltd. and the assessee did not show the same in gross contractual receipts. In explanation, Shri Dulal Acharya, Partner filed a letter on 08-12-2010 along with an affidavit and admitted that the receipt of Rs.6,49,210/- has been shown in assessee firm’s account for A.Y 2008- 09 and also contended that the said amount was not received directly from M/s. Ion Exchange (India) Ltd but from M/s. Ion Exchange India.
To confirm and clarify the same, the AO issued notice u/s. 133(6) of the Act to M/s. Ion Exchange India Ltd. In response to which, the said company confirmed that the assessee raised bill for Rs.6,49,210/- and further stated that TDS certificate to this effect was also issued in favour of the assessee. The said company also furnished the copy of ledger account and copy of bill as raised by the assessee. In explanation, Shri Amit Baran Roy, another partner of the assessee stated that M/s. Ion Exchange, Delhi sent cheque on 06-04-2008 and the same has been 2 ITA No.277/Kol/2014 M/s. New Modern Construction
shown in the FY 2008-09 relevant to AY 2009-10. The said company did not issue TDS certificate and the assessee did not claim TDS for the A.Y 2009-10 relevant to FY 2008-09. The AO found contradictory statements from the said two partners of the assessee firm and as such the submissions made by the assessee were rejected. Accordingly, the amount of Rs.6,49,210/- was added to the total income of the assessee.
Regarding the amount of Rs.9,554/- which said to have been received by the assessee from M/s. Pobi Technologies & Constructions Pvt. Ltd according to AO Shri Dulal Acharya, Partner did not say anything. Shri Amit Baran Roy, another partner stated that the said amount was credited to assessee’s account regarding consumables/repairs and maintenance charges, which was mistakenly not shown in their books. Accordingly, the AO added the said amount to the total income of the assessee.
Before the CIT-A the assessee sought further opportunity. Considering the same the CIT-A sought remand report from AO. In the said remand report, the AO stated that the amount of Rs. 6,49,210/- received from Ion Exchange Limited was credited to account of assessee on 31-03-08 and other amount of Rs.9,554/- received from M/s. Pobi Technologies & Constructions P.Ltd was credited to assessee’s account on 31-07-07. The CIT-A considering the remand report of the AO confirmed the impugned additions by stating as under:-
4.4 I have gone through the findings of the A.O. in the assessment order and remand report, as the well as the submissions of the appellant. It will be seen and well appreciated that the AO. has given very crystal clear findings in the body of the assessment order as well as in the remand report. As per the statement 26AS of the Department it is seen that the payment of Pobi Technologies & Constructions Pvt. Ltd. amounting to Rs.9554/- is credited on 31.07.2007 and Rs.649210/-of Ion Exchange (India) Ltd. is credited on 31.03.2008. Since the appellant is following mercantile system of accounting consistently, as will seen from its Tax Audit report at column 11(a) for the AY. 2008-09 (as well as for A.Y. 2007-08 and A.Y. 2009-10), these amounts should have accounted for in the income for A.Y. 2008-09. The A.O. in his remand report has enclosed the letter of confirmation from these two parties, T.D.S Certificates, bill and Ledger account of the transactions with Ion Exchange (India) Ltd., Pobi Technologies & Constructions Pvt. Ltd. The partners of the appellant were initially hesitant to admit the fact of receipt of these amounts, as will be seen from their affidavit and letter dt.08.12.2010 before the AO during the assessment proceedings, but later on during the course of assessment proceedings have admitted of having received the same. The partner Amit Baran Roy has admitted that the payments from M/s. Pobi Technologies and Construction Pvt. Ltd was mistakenly left out to be 3 ITA No.277/Kol/2014 M/s. New Modern Construction
shown in the books of account. Hence in such a factual matrix of the case the submissions of the appellant during the appellate proceedings is found to be highly out of context, as the facts & evidences brought on record by the A.O have not been addressed at all and not been rebutted by the appellant. Regarding the receipt from Ion Exchange India Ltd the appellant has not mentioned a word in his written submission and regarding M/s. Pobi Technologies he has taken a contradictory stand than that of the partner Amit Baran Roy had taken during the course of the assessment proceedings. Such dubious stand taken by the appellant is purely to defraud the revenue, as it will be seen and appreciated that but for the clarity of the AO the amount of Rs.6,58,764/- would have escaped assessment. Hence the submissions of the appellant is hereby rejected as it does not contain any substance and accordingly the addition of Rs.6,58,764/- is hereby upheld. Accordingly, this ground of appeal is dismissed.
Before us the ld.AR of the assessee contends that the assessee has shown the amount received from M/s. Ion Exchange in F.Y 2008-09 relevant to A.Y 2009-10. He further contended that even if it is proved that the assessee did not show such amount in its account the entire amount cannot be added to the income of the assessee. On the other hand, the ld.DR has relied on the orders of the AO and CIT-A.
Heard rival submissions and perused the material available on record. We find that the discrepancies as found by the AO during scrutiny proceedings regarding one of the partners of the assessee explained that the assessee has received an amount of Rs.6,49,210/- and credited the same to assessee’s account. But, thereafter, in explanation to statement u/s. 133(6) of the Act another partner of the assessee submitted that the said company issued cheque on 6-4-08 and assessee shown the same as credit for the F.Y 2008-09 relevant to A.Y 2009-10. But, however, it is observed from the remand report as discussed by the CIT-A that amount of Rs.6,49,210/- was credited to assessee’s account on 31-03-08 and other amount of Rs.9,554/- came into account of the assessee on 31-03-08. The findings show that both the said amounts came into account of the assessee in the asstt. year under consideration. But, the AO found that the said amounts were not entered into books of the assessee. It appears that the submissions made by one of the partners, Mr. Amit Baran Roy the cheque was received by the assessee on 6-4-08 is incorrect. We find that the AO has rightly held that both the amounts were not entered in the books of account for the A.Y under consideration. The CIT-A confirmed the same, 4 ITA No.277/Kol/2014 M/s. New Modern Construction
which is justified. Accordingly, ground no. 1 raised by the assessee is dismissed.
Ground no. 2 relates to addition of Rs.35,24,438/-made u/s. 68 of the Act.
During the course of scrutiny proceedings the AO found that there was cash payments recorded in the books of account of the assessee. The AO found that cash amounts have been received from M/s. Indure Pvt. Ltd, New Delhi and M/s. Pobi Technologies & Constructions Pvt. Ltd. Under show cause, the assessee through a letter dt. 22-12-2010 stated that the said amounts were received in cash as advance from the said two parties and returned back the same to the said parties in the same year itself. The assessee also submitted that the same may be verified from the ledger accounts of the said two parties. According to AO, the said two parties furnished information that they did not make any cash payment to assessee. Therefore, the AO added the said amount of Rs.35,24,438/- u/s.68 of the Act to the total income of the assessee.
Aggrieved, the assessee challenged the same before the CIT-A and contended that the original books of account got corrupted on account of a technical snag in the computer and as such data representing the credit entries and corresponding debit entries got merged in the books of account. Before him the assessee also contended that the AO conducted assessment proceedings in a hasty manner and reasonable opportunity was not afforded to represent the case properly. The AO compelled the assessee to make available the books of account in a short time. As such, the assessee could not retrieve the data of account in a short time. The assessee also undertaken that all the lost data can be retrieved with the help of computer expert and reconstructed the books of account and the assessee is ready to produce the same for verification before the 5 ITA No.277/Kol/2014 M/s. New Modern Construction
authorities whenever it is required. Basing on the submissions of the assessee, the CIT-A sought for remand report, wherein the AO stated that M/s. Indure Pvt. Limited and M/s. Pobi Technologies & Construction Pvt. Limited did not make any cash payment to the assessee. The CIT-A considering the remand report confirmed the addition made by the AO by stating as under:-
“Hence in the light of the above clinching evidence brought on record during the assessment proceeding by the AO the remand report dt. 05.11.2013 by the present incumbent is highly wanting and deficient. The AO while preparing the remand report have put on blinkers and has not gone through the relevant portion of the findings of his predecessor in the assessment order dt. 29.12.2010. It will be seen from the body of the assessment order that there is no iota of discussion related to corruption of data of the books of account in the system of the assessee firm. The appellant has not made any such submission during the assessment proceedings. The assessee firm has rather admitted vide its letter dt. 22.2.2010 to the AO during the assessment proceeding, that it has received cash as advance from these parties and returned these amounts to these two parties during the year. This letter dt. 22.12.2010 is a clear admission of fact which cannot be washed off now under the garb of data corruption in the system.
Besides a cursory look at the tabular chart will clearly reveal that various amounts of cash have been received on various dates and from the Ledger account of these parties in the books of the assessee it will be seen that all these cash receipts are maintained in a chronological order. The most worth noticing factor is that all these amounts are in amounts below Rs.20,000/-. Since the assessee firm is running the business of subcontractor, all these individual receipts have been meticulously kept below Rs.20,000/- to bypass the rigours of the legal provisions u/s. 40A(3) and S-194C etc etc. of the Act. It is worth mentioning that the assessee is subcontractor to both these parties and to various other parties.
Besides even if for academic purpose it is accepted that the assessee firm has received advances from these two parties, then the advances will be received in one lump sum or in few tranches. Such advances will not be received in 58 tranches between 01.11.2007 to 30.01.2008 as is the case with The Indure Pvt. Ltd. Similarly these alleged advances have been received in 133 tranches between 01.07.2007 to 15.11.2007 in the case of Pobi Technology & Construction Pvt. Ltd. All these tranches consists of odd amounts and each transaction is below Rs.20,000/- and there is not a single transaction where the amounts is in round figure. The turnover of the assessee firm of this assessment year is Rs. 1,93,25,950/- and Rs.2,35,32,312/- in the assessment year 2009-10. With this kind of turnover, the business prudence of any assessee will not find it viable and practicable to accept such several cash advances in odd amounts, each being below Rs.20,000/-
Besides for this assessment year accounts have been audited and tax audit report has been prepared as per the certificate dt. 25.09.2008 by B.Bathwal & Associates CAs. The assessment proceedings are carried out during the year 2010. Hence if there is a glitch in the stem of the assessee the same should have detected during the audit or before the date of submission of letter dt. 22.12.20a0 by the assessee to the AO or up to the date of passing the assessment order dt. 29.12.2010. The assessee firm out of its own volition, on being requisitioned from the AO has produced the hard copies of the ledger of these two parties. I am sure the A/R as well as the partners of the assessee firm were not so gullible to have submitted such hard copies of ledgers of these two parties to the AO without verifying the contents therein.
Besides even it is admitted for argument’s sake that there was a data corruption in the system of the assessee, can the corrupted computer system suomoto generate such credulous and meticulous data for the appellant as has been reproduced in the tabular chart of this order? The appellant has not been able to explain as to' how and from where such credible "foreign data" got merged with its books of accounts, and thus miserably failed to bring out any evidence in support of its contentions raised in ground no. 2 of its grounds of appeal. Besides the appellant has also not explained as to how only selectively this portion of the data in the computer system got corrupted by
6 ITA No.277/Kol/2014 M/s. New Modern Construction
virus and other data in the system have remained unaffected and have remained intact. This mystry has not been resolved by the appellant during this appellate proceedings.
Hence in the light of the above findings I am of the firm belief and opinion that such theory of data corruption is definitely a well concocted after thought by the appellant. In the light of the plethora evidences brought on record, the theory of data corruption as advanced by the appellant now during the appellate proceedings, even cannot be palated with a bucket of salt. In the remand report the A.O. has got swayed away by this theory and accepted it without bothering to see the clinching evidences brought in the body of the assessment order. Besides t the appellant had admitted during the assessment proceedings that the cash transactions have been carried out with these two parties by the assessee, who is their subcontractor, yet these two parties have not shown these cash transactions in their replies to the A.O and only cheque amount are shown in their replies to the A.O.
It is seen from the assessment order that the appellant has carried out its business operation as a subcontractor to various parties including these two parties such as The Indure Pvt. Ltd. and Pobi Technologies & Construction Pvt. Ltd. Besides on the basis of the replies received by the A.O. from these two parties, it cannot be inferred as to whether there was any cash transaction with these two parties or not. The AO has given the appellant numerous opportunities to explain this discrepancy during the assessment proceeding and in the absence of any compliance from the assessee on this issue, the A.O. has to finalise the assessment proceeding on dt. 29.12.2010 i.e. the fag end of the time barring period. As has been mentioned in this case the tax audit report has been finalized on 25.09.2008. The assessment proceedings have been taken up during the year 2010, which is long after the tax audit report has been prepared in this case. During the assessment proceedings, the AO has called for the books of accounts of the appellant, which is routine matter in the scrutiny assessment proceedings. On examination of the books of accounts, the AO has detected serious discrepancies on. this issue as discussed above, for which the appellant has no explanation to offer. Hence in such a scenario, the contentions of the appellant in ground no.- 3 & 4 of the grounds of appeal, that the assessment proceeding was finalized by the A.O. in a "very hasty manner", are found to be only unsubstantiated and baseless allegations against the A.O.
Hence in such a situation when the appellant is not forthcoming and has not offered any explanation about these cash transactions and its nature and source, it is reasonable to conclude that the source of these cash credits in the books of the assessee has remained unexplained. Besides these replies from these two parties were there before the A.O. during the assessment proceedings. Hence to this extent the comments of the AO. in his remand report dt. 05.11.2013, on this issue is not accepted because of these discrepancies. Similarly the submissions made by the appellant is rejected as it is found to be a concocted story without any material base.
Thus in the light of the above discussion and in the facts and circumstances of the case, the AO is absolutely right in his finding that the amount of Rs.35,24,438/- is unexplained cash credits in the books of the assessee and the AO is in a very sound legal footing to invoke the provisions S-68 of the Act on this point. In the light of above, I find no infirmity in the findings of the AO in the assessment order and accordingly the addition of Rs.35,24,438/- by the A.O is hereby upheld. Accordingly this ground of appeal is dismissed. “
The ld.AR of the assessee submits that the addition was made for not providing any explanation. He further submits that the amounts in question received from the said two parties were returned back in the same year. He submits that the entire addition cannot be added to the total income of the assessee.
On the other hand, the ld.DR relied on the orders of the authorities below.
7 ITA No.277/Kol/2014 M/s. New Modern Construction
Heard rival submissions and perused the material available on record. It is observed that before the AO the assessee stated under show cause that it received cash payments from the said two parties and the same were returned back to them during the year itself. The assessee also contended that the fact of returning back the same to the said parties can be verified from their ledger accounts and whereas before the CIT-A the assessee took a stand that all the original books of account were corrupted due to technical snag in computer and the assessee lost all the data of credit and corresponding debit entries due to said technical reason. Considering the same the CIT-A sought the remand report from the AO and during such proceeding the AO got information from the said two parties stating that they did not pay any amount in cash to the assessee during the year under consideration. It is also noticed that when the remand report confronted to the assessee, the assessee admitted the said finding of the AO regarding that there was cash payments made by the said two parties. From the impugned order of the CIT-A, it is noticed that the assessee is a sub contractor to the said two parties and the transactions were carried out with these two parties. Before the CIT-A the assessee contended that the said two parties did not show cash payment transaction in their books and instead they shown cheque payments. The ld.AR of the assessee further contended that though it is a cash credit, the entire amount cannot be added as addition as the assessee conducted its business with the said two parties as sub contractor. He further submits that the assessee is a sub contractor with the said two parties and the two parties did not show cash payments in their ledger accounts, but, however, they shown the payments in cheque payments. We find that in support of the contentions, the ld.AR of the assessee did not file anything to suggest that the entire amount cannot be added. In the absence of any evidence to substantiate the claim/contention, we find no force in the arguments of the ld.AR. Therefore, the arguments advanced the by the ld.AR of the assessee are rejected. In view of above discussion, we 8 ITA No.277/Kol/2014 M/s. New Modern Construction
uphold the impugned order of the CIT-A. Accordingly, ground no. 3 of assessee is dismissed.
Ground nos. 3,4, 5 & 6 are relating to additions of Rs.9,02,950/-, Rs.10,55,878/-, Rs.7,72,957/- and Rs. 4,36,693/- made by invoking the provisions of section 40(a)(ia) of the Act for non deduction of TDS u/s. 194C and 194 I of the Act.
The AO found that the assessee has made the payments to certain labour suppliers and no TDS was deducted u/s. 194C of the Act. In explanation, the assessee stated that there was no contract with the labour suppliers and as such the assessee did not make any TDS on such payments. Being not satisfied with the submissions of the assessee the AO made the addition of Rs.9,02,950/- u/s. 40(a)(ia) of the Act for violation of section 194C of the Act.
The CIT-A sought remand report, wherein the AO found that the assessee has been maintaining separate ledger accounts for each and every labour suppliers and taking into consideration the same the CIT-A held that there is some kinds of contract with the labour suppliers confirmed the addition made by the AO.
Regarding the addition of Rs.10,55,878/-, the AO found that assessee claimed the expenses of Rs.10,55,878/- out of which Rs.7,24,720/- has been shown as Creditors in the balance sheet of the assessee as on 31-03-08. But non production of any evidence and for not furnishing the addresses of the labour suppliers, the AO disallowed the expenses of Rs.10,55,878/- and added the same to the total income of the assessee.
Before the CIT-A the assessee contended that the said amounts were paid to labour sardars. But, however, the accountant of the assessee wrongly booked the same under the head ‘labour charges
9 ITA No.277/Kol/2014 M/s. New Modern Construction
supplier A/c’. The CIT-A examined the profit and loss account and found that the assessee debited Rs.57,97,785/- on account of labour charges. Out of which Rs. 7,24,720/- was shown as under the head ‘labour charges ‘ in the balance sheet as on 31-03-08. The CIT-A found that the assessee did not produce any evidence reconciling the impugned amount with that of total charges debited in the profit & loss account neither before the AO nor before CIT-A in the appellate proceeding. Accordingly, the CIT-A upheld the disallowance made by the AO.
Before us the ld.AR submitted than an opportunity may be given for verification of the amounts paid to labour contractors involving an amount of Rs.9,02,950/- and Rs.10,55,878/-.
The ld.DR relied on the order of the AO.
Heard rival submissions and perused the material available on record. We find that the issues involving ground no’s. 3 & 4 (additions of Rs. 9,02,950/- and Rs.10,55,950/-) are covered by the order Coordinate Bench of Kolkata Tribunal in the case of M/s. Kwality Construction by an order dt:14.10.2016 in I.T.A No. 18/Kol/2014 Assessment Year: 2009- 10. Relevant portion of findings are reproduced herein below for better realization:-
7.1. We find that the ld CITA had deleted the disallowance on the ground that there is no contract entered into by the assessee and the labour sardars. We find that the impugned issue is covered by the decision of the Hon'ble Calcutta High Court in the case of CIT vs Stumm India in ITA No. 127 of 2009 dated 16.8.2010 , wherein it was held that :-
"The court: This appeal is sought to be preferred against the judgment and order of the Ld. Tribunal in relation to the assessment year 2005-06, dated October 24, 2008, being aggrieved by a portion of the same. It is urged before us that the learned Tribunal ought not to have accepted the judgment and order of the CIT (Appeal) who has quashed the disallowance of deduction of Rs.41,33,710/- and on account of tax deduction at source. The learned Tribunal has recorded the fact that the department has not been able to bring any material on record to show that the assessee has made the payment to the transporters in pursuance of contract for carriage of goods of the assessee and the question of deduction at source under section 194C does not and cannot arise. In the absence of evidence of payment made by the assessee to the transporters, the assessee cannot be saddled with the liability of deducting tax at source. Before us no other point has been urged not it is said that the aforesaid fact finding is truthful without any basis whatsoever."
7.2. We find that the decision of this tribunal in the case of Samanwaya vs ACIT reported in 34 SOT 332 in ITA No. 484 (Kol) of 2008 dated 23.4.2009 directly supports the case of the assessee wherein it was held that :- 10 ITA No.277/Kol/2014 M/s. New Modern Construction
"We find that in this case, admittedly, the labour sardars in the present case has no locus standi as labour contractor as a labour sardar and a labour contractor are as different as chalk and cheese. We find that there was no contract between the assessee and the labour sardars for supply of labourers and without which there cannot be any application of section 194C and as such the invocation of provision of section 40(a)(ia)is outside the scope and ambit of such enactment. In view of the matter, we are of the considered opinion that section 194C(2) being not applicable in this case, the disallowance of Rs. 74,33,210/- made by the Assessing Officer by invoking section 40(a)(ia) of the Income Tax Act, 1961 and sustained by the ld CIT(A) is hereby deleted. This ground of the assessee is allowed."
7.3. We also find that the decision of this tribunal in the case of ACIT vs Supreme Construction in ITA No. 1252/Kol/2013 dated 7.9.2016 had held as under:-
"9. We have heard rival contentions of both the parties and perused the materials available on record. At the outset, we find that AO has called the labour contractors by issuing summons u/s. 131 of the Act and their statements were duly recorded. The AO failed to bring anything on record that the labour charges were paid in pursuance of contract either in writing or the oral with the labour sardar. The AO has held that the assessee has not complied the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act on the presumption and surmise. There is no evidence that the payments have been made to the contractors. We do not find any merit in the arguments placed by Ld. DR in this connection. The AO has given the clear finding in his order which is as follows :
"In my opinion, all these labourers who are treated as Labour Sardars are enjoying some privileged position in the eyes of assessee because the assessee collects other ITA No. 18/Kol/2014 M/s. Kwality Construction, AY 2009-10 labourers through them, make payments to the other labourers in their presence, though there is no written contract. In the absence of any documentary evidence, I can't call them as Labour Sardars but they are enjoying some special status before the assessee. All the payments were made through them as per Books of Accounts whereas the assessee produced the Muster Roll establishing through it that payments were made to the other co-labourers in their presence for the sake of convenience and the amounts were debited in their names only because the assessee can not keep track of all the labourers without the help of these labourers. Though the assessee claims them to be it's labour and these persons have deposed that they are the labourers, yet, I am not fully convinced with their plea that these persons are simply labourers and nothing more than that. From their appearance, dress, behavior and confidence, I am confident that they are the labour sardars, though they are denying this fact. Whether you admit or not but it can not be denied that these persons enjoy some privileged positions in comparison to other labourers." From the above it is amply clear that the AO himself is not sure and forming the opinion on his own surmise and conjecture. In our considered view the ld. DR has not brought anything contrary to the findings of ld. CIT(A). In this connection we rely on the decision of ACIT vs. Kalindi Agro Biotech Ltd. (2012) 20 taxmann.com 339 where it was held that the provisions of Sec. 194C of the Act are applicable if the payment has been made to a contractor for the year exceeding Rs.20,000/-. Similarly the jurisdictional ITAT, Kolkata in the case of Samanwaya Vs. ACIT 34 SOT 332 has held as under :
"Business expenditure--Disallowance under s. 40(a)(ia)--Need for TDS under s. 194Crelating to payments made for disbursement of labour charges to labour Sardars--Assessee had specifically stated before the lower authorities that there is no contract between the assessee and the labour Sardars--Revenue authorities could not controvert the submission of the assessee in this respect--Even before the Tribunal, the Department could not bring out any evidence by producing cogent material in respect of any contract between the assessee and the labour Sardars to contradict the submission of the assessee that there was no contract between the assessee and the labour Sardar--A contractor or a sub-contractor is engaged on the basis of a contract which is the most important essence of a contract job and is a primary requirement for the application of s. 194C--Labour Sardars in the present case has no locus standi as labour contractor as a labour Sardar and a labour contractor are as different as chalk and cheese--There was no contract between the assessee and the labour Sardars for supply of labourers and without which there cannot be any application of s. 194C and as such the invocation of provision of s. 40(a)(ia) is outside the scope and ambit of such enactment" Relying in the aforesaid decisions we find that there is nothing on record to suggest that the payment to labourers were paid to the contractors. On the contrary, assessee has made payment to labourers directly and in support of its claim, Ld. AR of assessee has produced the muster roll. In this regard, Ld. DR failed to bring any defect / information from the muster roll which suggested that the labour charges paid by assessee are subject to TDS. Since no cogent material has been brought on record, in our considered opinion, AO was not justified in invoking the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act. In the background of the above discussions and precedent we do not find any infirmity in the order of Ld. 11 ITA No.277/Kol/2014 M/s. New Modern Construction
CIT(A) and accordingly we uphold the same. In the circumstances, this issue of Revenue's appeal is dismissed." ITA No. 18/Kol/2014 M/s. Kwality Construction, AY 2009-10 7.4. Respectfully following the judicial precedents relied upon hereinabove, we do not find any reason to interfere with the order of the ld CITA and accordingly dismiss the ground of the revenue.
Respectfully following the above, we are of the opinion that the labour sardars are not suppliers of labour and as such he rightly deleted the impugned addition made u/s. 40(a)(ia) of the Act. Therefore, we delete the addition made by the AO and confirmed by the CITA. Grounds no-3 and 4 raised by the assessee are allowed.
Regarding the amount of Rs.7,72,957/- in ground no.5, the AO found that M/s. Pobi Technologies & Constructions Pvt. Ltd supplied ‘Transit Mixture’ machine to the assessee. For which the said concern charged Rs.7,72,957/-.In explanation, the assessee submitted that the assessee was not aware of the provisions of section 194I of the Act. Such submission of the assessee was not acceptable to the AO and added the said amount of Rs.7,72,957/- to the total income of assessee for non deduction of TDS on such payment by invoking the provisions of section 40(a)(ia) of the Act for violation of section 194I of the Act.
Before the CIT-A the assessee contended that the said contract was awarded to M/s. Pobi Technologies & Constructions Pvt. Ltd. The said concern, M/s. Pobi Technologies & Constructions Pvt. Ltd deducted hire charges out of the bill raised by the said concern. Before him the assessee contended that it had no scope to affect the TDS. Basing on such submissions of assessee, the CIT-A sought for remand report from the AO. In the remand proceedings, the assessee produced ledger of M/s. Pobi Technologies & Constructions Pvt. Ltd in its books and found that the impugned amount of Rs.7,72, 957/- have been credited along with other receipts and payments made to assessee. Thereby the CIT-A confirmed the said addition.
12 ITA No.277/Kol/2014 M/s. New Modern Construction
Before us the ld.AR reiterated the submissions made before the CIT-A.
The ld.DR relied on the order of the AO.
Heard rival submissions and perused the material available on record. We find that the assessee is a sub-contractor to M/s. Pobi Technologies & Constructions Pvt. Ltd and executed the work awarded to said concern. It is also noticed that the assessee submitted before the CIT-A that the hire charges were deducted by the said concern and it has no scope to deduct the TDS from the bill raised. On examination of the ledger of the said concern by the AO in remand proceedings that AO found the impugned amount was credited to the assessee along with all other receipts. But, however, it is not clear from the record under which head the assessee received the impugned amount from the said concern whether it is received under the head ‘hire charges or transit mixture or something else to the assessee for executing the said contract work as a sub-contractor on behalf of said concern. The ld. AR did not produce anything to show that the said concern deducted the said hire charges and the said amounts credited to some other purpose. In view of the same, we deem it fit and proper to restore the issue to the file of AO for his fresh examination. Thus, ground no.5 on the addition of Rs.7,72, 957/- is allowed for statistical purpose.
Regarding the amount of Rs.23,06,898/- in ground no. 6, the AO found that the assessee debited an amount of Rs.23,06,898/- in the profit & loss account on account of ‘machinery hire charges’. In explanation, the assessee stated that an amount of Rs.7,72,957/- were already verified on account of disallowance under the head ‘transit mixture’ and remaining amount of Rs.15,33,941/- (Rs.23,06,898- Rs.7,72,957) were paid to large no. of suppliers from the cheque receipts which were received in the month of April, 2008. Being not
13 ITA No.277/Kol/2014 M/s. New Modern Construction
satisfied with the submissions of the assessee, the AO added the same to the total income of the assessee.
Before the CIT-A the assessee produced the details of payments on account of machinery hire charges along with copies of bill raised by various parties from whom the machineries were hired. The CIT-A examined and found that all the bills are computer generated. He also found that the said bills are containing no telephone nos. and has only signature of parties. The CIT-A also found no stamp and signature of dealing staff and details of payments made by the assessee to the parties on the said bills. The CIT-A in the interest of justice directed the AO to verify all the bills before giving effect to the impugned order of the CIT-A. The CIT-A out of the disallowance of Rs. 15,33,941/- made by the AO upheld the addition to an extent of Rs.4,36,693/- and deleted the addition of Rs.10,97,248/-.
The ld.AR submits that the issue may be restored to the AO for the verification.
The ld. DR relied on the order of AO.
Heard rival submissions and perused the material available on record. We find that the CIT-A confirmed the impugned addition to an extent of Rs.4,36,693/-. The CIT-A while examining the ledger accounts of various parties to whom the machine hire charges paid, found that no deduction made U/Sec. 194I of the Act. The Ld.AR did not bring on record to show that the TDS was deducted on the amounts paid to Shri Gautam and Suniti Soren, but, however, in the interest of justice, taking to consideration the submission of the ld.AR, we restore the issue on hand involving an amount of Rs.4,36, 693/- to the file of AO. Thus, ground no. 6 is allowed for statistical purpose.
14 ITA No.277/Kol/2014 M/s. New Modern Construction
In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open court on 24-05-2017.
Sd/- Sd/- J. Sudhakar Reddy S.S. Viswanethra Ravi Accountant Member Judicial Member
Dated : 24-05-2017 Order pronounced by
Sd/- Sd/- W.A SSVR AM JM PP(Sr.P.S.) Copy of the order forwarded to: 1. Appellant/Assessee – M/s. New Modern Construction, Suri, Sajano Pally, Birbhum-731 101. 2 Respondent/Department – Income Tax Officer, Ward 3, Suri, Birbhum-731101. 3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order
Sr. Private Secretary Head of Office ITAT Kolkata
15 ITA No.277/Kol/2014 M/s. New Modern Construction