M/s. Shreeji Construction Co., RAJKOT-GUJARAT V. The Income Tax Officer, TDS-2, RAJKOT-GUJARAT

CO 63/RJT/2015

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3003 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 09-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 133A; 194C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA VK;DJ VIHYH; VF/KDJ.K] JKTDKSV U;K;IHB] JKTDKSVA IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] LOZJH LOZJH LOZJH LOZJH EGKOHJ IZLKN] U;KF;D LNL; EGKOHJ IZLKN] U;KF;D LNL; EGKOHJ IZLKN] U;KF;D LNL; EGKOHJ IZLKN] U;KF;D LNL; ,OA ,OA ,OA ,OA VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG] YS[KK LNL; DS LE{KA ] YS[KK LNL; DS LE{KA ] YS[KK LNL; DS LE{KA ] YS[KK LNL; DS LE{KA (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ) ./ I.T.A. NO. 421/RJT/2015 & CO NO.63/RJT/2015(IN I.T.A. NO.421/RJT/2015) ( / ASSESSMENT YEAR :2012-13) INCOME TAX OFFICER, TDS-2, ROOM NO.503, 5 TH FLOOR, AAYAKAR BHAVAN, RACE COURSE RING ROAD., RAJKOT-360 001 / VS. M/S. SHREEJI CONSTRUCTION CO. F-22, NEPTUNE TOWER, KALAWAD ROAD., RAJKOT. ./ ./ PAN/GIR NO. : AAHFS 3595 H ( / APPELLANT ) .. ( / RESPONDENT ) & CROSS OBJECTOR ASSESSEE BY : SHRI A.N. SONTAKKE, SR. D.R. REVEUNE BY : SHRI KALPESH PAREKH, A.R. / DATE OF HEARING 02/05/2017 !' / DATE OF PRONOUNCEMENT 16/05/2017 #$ / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE DEPARTMENT AND THE CROSS- OBJECTION THEREOF FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-I, RAJKOT, DATED 30/06/2015 FOR THE ASSESSMENT YEAR (AY) 2012-13. ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 2 - 2. DEPARTMENT HAS BEEN TAKEN FOLLOWING GROUNDS OF A PPEALS: I. THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS O N FACTS OF THE CASE IN DIRECTING TO DELETE THE TAX U/S.201(1) OF R S.36,25,103/- AND INTEREST U/S. 201(1)(A) WORK OUT OF RS.13,05,03 7/-. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) OUGHT TO HAVE DECIDED THE ISSUE UNDER REFERE NCE, IN THE LIGHT OF EVIDENCE OBTAINED BY HIM DURING THE APPELL ATE PROCEEDINGS AFTER FOLLOWING THE DUE PROCEDURE OF LA W. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE APPELLANT IS ENGAGED IN THE BUSINESS OF CONSTRU CTION OF ROADS AND BRIDGES ON CONTRACT BASIS AND MAINLY DOING THE GOVE RNMENT CONTRACTS. IN THIS CASE A SURVEY U/S.133A WAS CARRIED OUT AT THE OFFICE PREMISES OF APPELLANT FOR VERIFICATION OF TDS COMPLIANCE BY THE APPELLANT COMPANY. DURING THE COURSE OF SURVEY IT CAME TO KNOW THAT TH E APPELLANT HAS MADE PAYMENTS OF LABOUR CHARGES, WITHOUT DEDUCTION OF TA X AT SOURCE. THEREFORE THE APPELLANT WAS ISSUED A NOTICE TO SHOW CAUSE AS TO WHY IT SHOULD NOT BE TREATED AS AN ASSESSEE IN DEFAULT IN RESPECT OF THE ABOVE PAYMENTS MADE WITHOUT DEDUCTION OF TAX AT SOURCE. A O HELD THAT THE APPELLANT FAILED TO DEDUCT TAX FROM LABOUR CHARGES PAYMENT MADE TO UNKNOWN LABOUR CONTRACTORS, WHOSE DETAILS HAVE NOT BEEN BROUGHT ON RECORD IN ITS BOOKS OR IN RESPONSE TO THE LETTER IS SUED BY THE AO. IN VIEW OF THIS THE AO TREATED THE APPELLANT DEEMED TO BE I N DEFAULT FOR NON- DEDUCTION OF TAX U/S.194C IN RESPECT OF PAYMENT OF LABOUR CHARGES OF ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 3 - RS.1,81,25,514/-. AS THE APPELLANT HAS NOT MADE AVA ILABLE THE PAN OF THE LABOUR CONTRACTORS, THE RATE OF TDS WAS ADOPTED AT 20% AND THE TOTAL DEFAULT WAS WORKED OUT AT RS.36,25,103/-. FURTHER, INTEREST PAYABLE @ 1% OF THE ABOVE DEFAULTS, FOR 36 MONTHS WAS WORKED OUT AT RS.13,05,037/-. THUS THE TOTAL TDS DEFAULT WAS COMPUTED AT RS.49,30 ,140/-. 4. APPELLANT CONTENTION WAS THAT IN CASE OF THE APP ELLANT, THE SURVEY U/S. 133A CARRIED OUT ON 18/02/2014 AT THE BUSINESS PREMISES OF THE ASSESSEE AN SHOW CAUSE NOTICE ISSUED U/S. 201(1)/(I A). AFTER CONSIDERING REPLY OF THE APPELLANT AND WITH A SINGLE HEARING OF JUST 20 MINUTES, THE LEARNED AO DECIDED MATTER AND MADE HUGE ADDITION OF RS.1,81,25,214/- ON ACCOUNT OF NON DEDUCTION OF TDS ON LABOUR CHARGE S PAID IN CASH TO THE INDIVIDUAL LABORERS. 5. DURING THE HEARING, FOLLOWING POINTS WERE HIGHLI GHTED BY THE ASSESSEE. TO EXPLAIN THE CORRECT NATURE OF BUSINESS OF APPELL ANT: APPELLANT STATED THAT HE IS ENGAGED IN BUSINESS OF CONSTRUCTION OF ROAD SINCE MORE THAN 30 YEARS WITH MORE THAN 7 PART NERS ALL THE TIME AND HENCE IT HAS VIDE EXPERIENCE OF BUSINESS. IN SUCH BUSINESS IT IS INEVITABLE TO MAKE CASH PAYMENTS TO LABORERS. ALL THE LABORERS WERE PERSONALLY APPOINTED BY THE PARTN ERS AND EMPLOYEES OF THE FIRM AND CASH PAYMENT WERE MADE TO ALL OF THE PERSONALLY BY THE PARTNERS ON 10 TO 15 DAYS INTERVA L. HENCE, THERE IS A PRE DEFINED AND WELL ESTABLISHED SYSTEM OF MANAGING LABORERS AND THEIR PAYMENTS. ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 4 - THERE ARISES NO QUESTION OF APPOINTING ANY LABOUR C ONTRACTOR. THE PROCUREMENT OF REQUIRED NUMBER OF LABOURERS BECOMES POSSIBLE BECAUSE OF FOLLOWING REASONS. GENERALLY, THERE ARE SOME PRE INDENTIFIED VILLAGES (EG. SHAMLAJI) WHERE MAJORITY OF POPULATION IS ENGAGED IN SUCH LAB OUR WORK. THERE REMAINS CONSIDERABLE TIME GAP BETWEEN ALLOTME NT OF A WORK BY GOVERNMENT, RECEIPT OF WORK ORDER AND BEGIN NING OF FIELD WORK. THIS ENABLES THE TEAM TO APPROACH AND G ET LABOURERS. GENERALLY, ONE PERSON IS APPOINTED AS SUPERVISOR AN D FEW ARE APPOINTED AS DRIVERS OF THE HEAVY VEHICLES FROM NEA RBY AREA WHERE THE SITE IS RUNNING. THIS HELPS IN REACHING T O MORE LABOURERS DUE TO THEIR KNOWLEDGE OF THAT PARTICULAR LY LOCALITY. THE FIRM IS ALSO ALLOTTING SOME WORKS TO SUB CONTRA CTORS (ON PAYMENT TO WHOM TDS IS DULY DEDUCTED AND PAID). THE LABOURERS MASS MAY ALSO BE FETCHED FROM THAT SOURCE AFTER COM PLETION OF THEIR WORK. DUE TO HIGH SOCIAL AND BUSINESS INVOLVEMENTS OF THE PARTNERS, THEY REMAINS CONTINUOUSLV IN TOUCH WITH THE OTHER C ONTRACTORS WHO CAN BE A HELPING HAND TO REACH TO THE LABOURERS . MANY OF THE OLD LABOURERS APPROACH THE FIRMS SUPERV ISORS FOR WORK. LABOURERS INTERNALLY PASS ON THE INFORMATION ABOUT AVAILABILITY OF WORK IN THEIR FAMILY AND GROUPS. TDS LIABILITY DOES NOT ATTACH ITSELF TO EVERY PAYME NT. ONLY THOSE PAYMENTS WHICH ARE SPECIFICALLY COVERED BY THE ACT ARE LIABLE FOR TAX DEDUCTION AT SOURCE. ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 5 - THE PAYMENT MADE TO CASUAL LABOUR AT SITE IS NOWHER E COVERED FOR THE TDS PURPOSE. HENCE, NO TDS IS DEDUCTIBLE ON THE LABOUR CHARGES P AID BY US AS THE AMOUNT IS PAID TO INDIVIDUAL LABOURERS HIRED BY US AT VARIOUS SITES. SECTION 194C CLEARLY PROVIDES THAT THERE MUST BE A CONTRACT BETWEEN TWO PARTIES TO ATTRACT TDS. THERE IS NO ORA L OR WRITTEN CONTRACT IN THIS CASE AS THE AMOUNT IS PAID TO LABO URERS WHO ARE ILLITERATE. BY NO MEANS CAN PAYMENT OF SUCH CHARGES BE BROUGHT UNDER THE PURVIEW OF SECTION 194C. THE LABOUR CHARGES ARE PAI D TO INDIVIDUAL LABOURER INDEPENDENTLY AND THE APPELLANT HAS NEVER APPOINTED ANY LABOUR CONTRACTOR. FURTHER, WHEN THE TDS IS NOT APPLICABLE, THE QUESTI ON OF MAINTAINING PAN OF THE PERSON TO WHOM THE PAYMENT H AS BEEN MADE DOES NOT ARISE. THERE IS NO DOUBT THAT WORK CARRIED OUT BY THE ASSE ESSEE IS BASICALLY LABOUR INTENSIVE IN NATURE BUT AT THE SAM E TIME, THERE REMAINS NO SCOPE OF WONDER ABOUT NON INVOLVEMENT OF ANY CONTRACTOR FOR SUCH WORK AFTER CONSIDERING THE PECU LIAR FACTS OF CONTRACT WORK BUSINESS AND THE SYSTEM FOLLOWED BY T HE APPELLANT. 6. LEARNED AO WAS NOT CONVINCED WITH THE SUBMISSION OF LABOURERS AND HE MADE AN ADDITION, WHICH IS MENTIONED IN THE GROUNDS OF APPEAL. 7. AGAINST THE SAID ORDER LEARNED CIT(A) ALLOWED TH E APPEAL BY HOLDING THAT HE IS INCLINED TO AGREE WITH THE APPEL LANTS CONTENTION THAT THE QUESTION OF DEDUCTION OF TDS DOES NOT ARISE. TH E AO HAS RAISED TDS LIABILITY ON THE PRESUMPTION THAT THE APPELLANT MU ST HAVE MADE PAYMENT ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 6 - TO THE LABOURERS THROUGH LABOUR CONTRACTOR. THERE IS GIST OF ALL OF THE PRESUMPTION MADE BY THE AO IN PARA 5.1 OF THE ORDER ALTHOUGH THE AO HAS NOT PROVIDED ANY NAME OF LABOUR CONTRACTOR. EVE N NOTHING ADVERSE IN THIS REGARD WAS FOUND DURING SURVEY. THE LAW DOES N OT PERMIT TO INVOKE PROVISIONS OF LAW SIMPLY ON PRESUMPTION AND ASSUMPT ION. THEREFORE, THE TDS LIABILITY WAS CANCELLED BY THE LEARNED CIT(A). 8. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER, SECTION 194(C) PRESUPPOSES EXISTENCE OF A PAYER AND PAYEE. WE FIND THAT IN THE CASE OF THE ASSESSEE IDENTITY OF PAYEE WAS N OT ESTABLISHED AT ALL. WHEN THE CONTRACTORS ARE NOT IDENTIFIABLE AT ALL AN D ALSO NOT IDENTIFIED BY THE DEPARTMENT EVEN OTHERWISE THE QUESTION OF TDS L IABILITY ANYWAY DOES NOT ARISE. THE AO HAS JUST PASSED THE ORDER ON THE BASIS ON ASSUMPTIONS WITHOUT DISPROVING THE FACTS REPORTED B Y THE ASSESSEE THAT NO PAYMENT TO THE CONTRACTORS WAS MADE. THEREFORE, WE DO NOT FIND ANY INFIRMITY OR ILLEGALITY IN THE ORDER PASSED BY THE LEARNED CIT(A). 9. IN THE RESULT, APPEAL FILED BY THE DEPARTMENT IS DISMISSED. 10. SO FAR AS CO IS CONCERNED, LD. A.R. DOES NOT WI SH TO PRESS CO. IN THE RESULT, CO IS ALSO DISMISSED AS NOT PRESSED. ITA NO. 421/RJT/2015 & CO 63/RJT/2015( IN ITA NO.421/RJT/2015) M/S. SHREEJI CONSTRUCTION CO. VS. ITO ASST.YEAR 2012-13 - 7 - 11. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED AND CO FILED BY THE ASSESSEE IS ALSO DISMISSED AS NOT PRESSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 16/05/2017 SD/- SD/- VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG VEJTHR FLAG %& # ( # ) (() # ) ( AMARJIT SINGH ) ( MAHAVIR PR ASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 16/05/2017 PRITI YADAV, SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. + ,- . / CONCERNED CIT 4. . () / THE CIT(A)-I, RAJKOT. 5. /01 )),- , ,-' , &%#+# / DR, ITAT, AHMEDABAD 6. 134 5 / GUARD FILE. / BY ORDER, / ) //TRUE COPY// / !'# ( DY./ASSTT.REGISTRAR) #$ %, / ITAT, AHMEDABAD TRUE COPY