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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is against the order of Commissioner of Income Tax (Appeals)-XXXVI, Kolkata dated 25.09.2012. Assessment was framed by JCIT(OSD), Circle-2, Hooghly u/s 143(3)/263/254 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.12.2011 for assessment year 2006-07. Shri Rajat Kumar Kureel, Ld. DR represented on behalf of Revenue and Shri Somnath Ghosh, Ld. Advocate appeared on behalf of assessee.
ACIT Cir-2 Hgl. Vs. Supreme Construction Page 2 2. At the outset, it is observed that there is a delay of 162 days on the part of the Revenue in filing the appeal before this Tribunal. In this regard, application has been filed by the Revenue seeking condonation of the said delay as mentioned in the Application.
Let us deal with the limited issue primarily before going to the merits of that case as the contours of the area of discretion of the Courts in the matter of condonation of delays in filing appeals are set out in a number of Apex Court and specially in case titled as Collector Land Acquisition, ... vs....... Mst. Katiji & Ors (1987 AIR 1353, 1987 SCR (2) 387) analyzed the situation while dealing with the delay on behalf of the Government and observed as enumerated below: "When substantial justice and technical considerations are A pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non deliberate delay."
"It must be grasped that judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so."
Considering the judgment (Supra) we feel that in litigations to which Government is a party there is yet another aspect which, perhaps, cannot be ignored, if appeals brought by Government are lost for such defaults, no person is individually affected but what, in the ultimate analysis, suffers is public interest. The decisions of Government are collective and institutional decisions and do not share the characteristics of decisions of private individuals.
In the instant case as the Government is Appellant as submitted that before finalization of appeal, the case has to cross many channel and even there was non- communication qua filing of SLP in Supreme Court of India is related matter of ISG Traders Ltd. –vs.- CIT , Hence on the aforesaid analysis while following a justice-oriented approach from this perspective, we feel that there is sufficient cause for condoning the delay in the institution of the appeal hence we are inclined to ACIT Cir-2 Hgl. Vs. Supreme Construction Page 3 condone the delay of 162 days in preferring the instant Appeal. Now let us proceed with the case on merits.
The sole ground of appeal, raised by the Revenue is reproduced as under:- “(1) Ld. CIT(A) has erred on facts and in circumstances in giving relief of Rs.69,63,750/- on account of labour charges added u/s. 40(a)(ia).”
The facts in brief are that assessee in the present case is a partnership firm and engaged in the construction business. The assessee for the year under consideration has filed return of income declaring a profit of ₹30,08,100/- on 23.12.2008 and claimed a sum of ₹69,63,750/- as labour charges by debiting its profit and loss a/c. The Assessing Officer, during the course of assessment proceedings, observed that labour charges were paid to the nine persons who are acting as labor “sardar” of the labourers and payment has been made without deducting Tax Deducted at Source (TDS). AO accordingly, issued summons u/s. 131 of the Act to all the labour-Sardar and recorded their statements u/s. 131 of the Act who were known as labour-sardar. It was submitted that there is no contract with the assessee and all the labour charges are directly paid to the labourers. Their role was nothing but to act as conduit between the assessee and the labourers to see whether every person works under assessee has got the payment. It was because there were many labourers and it was difficult for assessee to keep a vigil on all the labourers. However, AO disregarded the claim of assessee by observing that from the appearance, dress, behavior and confidence of all these persons are the labour-sardar and now they are denying the fact. Accordingly, AO disallowed the same and added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A) who deleted the addition made by AO after reliance on the judgment of Special Bench in the case of Merilyn Shipping & transport in ITA 477/Viz/2008 dated 29.03.2012 Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us.
Before us Ld. DR submitted that the decision of M/s Marilyn shipping and Transport has been reversed by the Hon'ble Calcutta High Court in the case of ACIT Cir-2 Hgl. Vs. Supreme Construction Page 4 Crescent Exports. He stated that assessee has made the payment to the labour sardar in pursuance to contract which may be verbal / written contract. Therefore the assessee has defaulted by not deducting TDS on the payment of labour charges. He prayed before the Bench to confirm the order of AO.
On the other hand, Ld. AR before us submitted written submission and filed paper book containing pages 1 to 367 and stated that in none of the case, payment has been made to the labour contractors. The role of the labour contractors was used while making payment for the purpose of administrative conveyance. Ld. AR of assessee in support of assessee’s claim has submitted the muster roll of the wage paid during the relevant year which are placed on pages 36 to 313 of the paper book and he relied on the order of Ld. CIT(A).
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 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 ACIT Cir-2 Hgl. Vs. Supreme Construction Page 5 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. 194C relating 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 ACIT Cir-2 Hgl. Vs. Supreme Construction Page 6 we do not find any infirmity in the order of Ld. CIT(A) and accordingly we uphold the same. In the circumstances, this issue of Revenue’s appeal is dismissed.
In the result, the appeal of the revenue is dismissed. Order pronounced in open court on 07 /09/2016
Sd/- Sd/- (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp �दनांकः- 07 /09/2016 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-ACIT, Circle-2, Hoooghly, Aayakar Bhawan, G.T. Road, Chinsurah, Dist. Hooghly, Pin 712 101 2. ��यथ�/Respondent-Supreme Construction, Station Road, P.O.Chinsurah, Dist. Hooghly, Pin. 712 102 3. संबं"धत आयकर आयु%त / Concerned CIT 4. आयकर आयु%त- अपील / CIT (A) 5. &वभागीय �)त)न"ध, आयकर अपील�य अ"धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड+ फाइल / Guard file.