JASWANT RAI VERMA,CHANDIGARH vs. ACIT, CHANDIGARH

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the assessee against

the order dated 21.04.2016 of the Commissioner of Income Tax [hereinafter referred to as CIT(A)]-2, Chandigarh. The assessee has taken following grounds of appeal:

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Head Jamadars namely Nanhey Labour Jamedar, Sher Singh Labour Jamedar, Vijay Binder Labour Jamader & Jawant Sahu Labour Jamader.

ITA No.625/Chd/2016- Sh. Jaswanat Rai Verma, Chandigarh 3

of expenditure as provided under the proviso to section 40(a)((ia) of

the Act, there are separate penalty provisions for non-deduction of

TDS under section 201 of the Income Tax Act. However, the first

proviso to section 201 which has been inserted by Finance Act 2012

w.e.f. 1.7.2012 states that is if a person fails to deduct TDS on an

amount paid to a resident as per the provisions of the Income Tax

Act, he shall not be deemed to be assessee in default, if the payers

has furnished his return of income u/s 139 of the Act and has also

taken into account such sum so received for computing income in the

said return of income and has paid the tax due on the income

declared by him in the said return of income and the payee furnishes

a certificate to this effect from Accountant in such form as may be

prescribed. The Ld. counsel has further invited our attention to the

decision of this Tribunal in the case of M/s Kurukshetra Darpan (P)

Ltd, Kurukshetra Vs. Addl CIT in ITA No. 877/Chd.2008 vide order

dated 16.11.2015 wherein the Tribunal while relying upon the

decision of the Hon'ble Delhi High Court in the case of CIT Vs.

Ansal Landmark Township (P) Ltd in ITA No. 160 / 161 of 2015

order dated 26.8.2015 has held that the second proviso to section

40(a)(ia) of the Act is declaratory and curative in nature and should

be given retrospective effect form 1.4.2005 being the date from

which sub clause (ia) of section 40(a) of the Act was inserted by

Finance (No.2,) Act 2004.

covered by the decision of the Hon'ble Delhi High Court (supra) and

also with the decision of the Coordinate Bench of the Tribunal. She,

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however, has submitted that the assessee has not placed on file the

Certificate from the payee that he has taken into account the amount

received form the assessee while furnishing the return of income.

At this stage, the Ld. Counsel for the assessee has submitted

that the issue be restored to the file of the Assessing officer. That the

assessee will produce the required certificate before the Assessing

officer. In view of this, the issue is restored to the file of the

Assessing officer to examine as to whether the payee had taken into

account the amount received from the assessee in his return of

income and has paid the taxes thereupon. If the contention of the

assessee is found correct on this issue, then no disallowance should

be made on this issue.

Assessing officer under the provisions of section 40A(3) of the Act

for making the payments in cash of the amount more than the

prescribed limit (Rs. 20,000/- a day) and also on account of

disallowance u/s 40a(ia) for making payments to the contractors

without deducting TDS.

The Ld. Counsel, at the outset, has submitted that the assessee

did not make any payments to the contractors. That the assessee is a

government contractor engaged in construction of roads and bridges

for the government. That the payments were not made to any

contractor but to the daily wagers / labourers. That, as a matter of

convenience, the payments were used to be made to the ‘Head

Jamadars’ who further used to distribute the same to the individual

ITA No.625/Chd/2016- Sh. Jaswanat Rai Verma, Chandigarh 5

labourers. The Ld. Counsel in this respect has also relied upon the

wage sheets and muster rolls etc. He has further submitted that the

assessee has been doing the business in the area of Himachal Pradesh

and interiors of Himachal Pradesh and the payments to the poor

labourers were made in cash on daily basis.

above contention of the assessee. A perusal of the orders of the

lower authorities reveals that the lower authorities have assumed that

the payments made to the ‘head jamadars’ were in fact payments to

the contractors. Considering the nature and business of the assessee,

and in the absence of any evidence that such persons to whom

payments were made in fact were contractors, we are of the view that

no disallowance is called for on this issue also. In view of above

discussion, in our view, the provisions of section 40A(3) and 40a(ia)

of the Act are not attracted on the payments made by the assessee to

the labourers. Ground Nos. 2 to 4 are therefore, allowed.

adjudication.

In the result, the appeal of the assessee is treated as allowed

for statistical purposes.

Order pronounced in the Open Court

Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 17.04.2018 Rkk

ITA No.625/Chd/2016- Sh. Jaswanat Rai Verma, Chandigarh 6

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR