KAMAL KANTI PATTANAYAK,PURBA MEDINIPUR vs. ACIT, CIRCLE-HALDIA, PURBA MEDINIPUR

The first issue raised in Ground No. 1 relates to the disallowance of Rs.10,67,800/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 40(a)(ia) of the Income Tax Act, 1961.

The assessee in the present case is an individual, who is engaged in the business of labour contractor and sub-contractor in the name of his proprietary concern M/s. Kiran Construction. He also carries on the business of running of a Petrol Pump in the name of his other proprietary concern M/s. Shivam Filling Station. The return of income for the year ./2014 Assessment year: 2009-2010 Page 2 of 5 under consideration was filed by the assessee on 05.10.2009 declaring total income of Rs.13,43,140/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee has paid labour charges totalling to Rs.10,67,800/- to seven parties that exceeded Rs.50,000/-. According to the Assessing Officer, the assessee was liable to deduct tax at source from the said payments under section 194C of the Act and since there was failure on the part of the assessee to do so, he disallowed the labour charges of Rs.10,67,800/- under section 40(a)(ia).

The disallowance made by the Assessing Officer under section 40(a)(ia) was disputed by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), it was submitted by the assessee that the relevant payments on account of labour charges had not been made by him to any contractor but the same were made to the workers, who had chosen representatives amongst them for the purpose of receiving and disbursing their wages. In this regard, opportunity was given by the ld. CIT(Appeals) to the assessee to produce the wage register or wage-sheets to establish his case that the payments had been made to the representatives of the labours and not to the contractors. The assessee, however, failed to comply with this requirement of the ld. CIT(Appeals) and keeping in view the same, the ld. CIT(Appeals) proceeded to confirm the disallowance made by the Assessing Officer under section 40(a)(ia).

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. The ld. counsel for the assessee has furnished before me the details of labour charges paid at page no. 5 of the paper book along with the corresponding wage register to show that the amounts in question paid by the assessee on account of labour charges were actually meant for the workers, which was paid to their group leaders and not to any independent contractor. He submitted that this evidence was produced by the assessee before the ld. ./2014 Assessment year: 2009-2010 Page 3 of 5 CIT(Appeals) during the course of appellate proceedings on 14.02.2014, but the same has not been considered by the ld. CIT(Appeals). Keeping in view this submissions made by the ld. counsel for the assessee, I consider it fair and proper and in the interest of justice to set aside the impugned order of the ld. CIT(Appeals) on this issue and remit the matter back to him for deciding the same afresh in the light of this evidence, which, according to the assessee, is already available on record before him. Ground No. 1 is accordingly treated as allowed for statistical purposes.

The issue raised in Ground No. 2 relates to the disallowance of Rs.78,031/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee’s claim for deduction under section 24(b) of the Act.

During the year under consideration, the assessee had received rent of Rs.2,60,046/- for the land given on lease to Essar Oil Limited. Against the said income, deduction under section 24(b) was claimed by the assessee amounting to Rs.78,031/-. According to the Assessing Officer, the lease rent of land received by the assessee was chargeable to tax under the head “income from other sources” and not under the head “income from house property” and, therefore, the assessee was not entitled for deduction under section 24(b) of the Act. Accordingly, the claim of the assessee for deduction under section 24(b) was disallowed by him.

The disallowance made by the Assessing Officer on account of his claim for deduction under section 24(b) was disputed by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings, a copy of Franchise Agreement entered into between M/s. Essar Oil Limited and his proprietary concern M/s. Shivam Filling Station was produced by the assessee in support of his claim that what was given by him to M/s. Essar Oil Limited was not just the land but even the other facilities including the building constructed on the land as ./2014 Assessment year: 2009-2010 Page 4 of 5

I have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As submitted by the assessee, the Franchise Agreement entered into with M/s. Essar Oil Limited was inadvertently filed by him before the ld. CIT(Appeals) instead of the lease agreement. He has filed a copy of the lease agreement dated 05.01.2006 entered into between him and M/s. Essar Oil Limited at page nos. 77 to 93 of his paper book as additional evidence and has also filed an application seeking admission of the said additional evidence. Keeping in view the reasons given by the assessee in the said application and having regard to the relevance of the lease deed filed by the assesese as the additional evidence, I admit the same and remit this matter to the file of the ld. CIT(Appeals) for deciding the same afresh in the light of the said additional evidence. Ground No. 2 is accordingly treated as allowed for statistical purposes.