A.C.I.T Cir - 2,Hooghly, Hooghly V. Supreme Construction, Hooghly

ITA 1252/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4525 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 30-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 14-05-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL J
• Keywords: Business expenditure
• Section: 194C; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1252/KOL/2013 ASSESSMENT YEARS:2006-07 ACIT, CIRCLE-2, HOOGHLY, AAYAKAR BHAWAN, G.T. ROAD, CHINSURAH, DIST. HOOGHLY PIN 712 101 / V/S . SUPREME CONSTRUCTION, SUPER MARKET, STATION ROAD, P.O.CHINSURAH, DIST. HOOGHLY, PIN 712 102 [ PAN NO.AAXFS 5334 A ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI RAJAT KUMAR KUREEL, JCIT-DR /BY RESPONDENT SHRI SOMNATH GHOSH ADVOCATE /DATE OF HEARING 30-06-2016 /DATE OF PRONOUNCEMENT 07-09-2016 /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. ASSE SSMENT 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 ORD ER DATED 28.12.2011 FOR ASSESSMENT YEAR 2006-07. SHRI RAJAT KUMAR KUREEL, LD. DR REPRESENTED ON BEHA LF OF REVENUE AND SHRI SOMNATH GHOSH, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. ITA NO.1252/KOL/2013 A.Y. 2006-07 ACIT CIR-2 HGL. VS. SUPREME CONSTRUC TION PAGE 2 2. AT THE OUTSET, IT IS OBSERVED THAT THERE IS A DE LAY 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 S EEKING CONDONATION OF THE SAID DELAY AS MENTIONED IN THE APPLICATION. 3. LET US DEAL WITH THE LIMITED ISSUE PRIMARILY BEF ORE 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 A RE 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 SIT UATION WHILE DEALING WITH THE DELAY ON BEHALF OF THE GOVERNMENT AND OBS ERVED AS ENUMERATED BELOW: 'WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATI ONS ARE A PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE DE SERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGH T 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 BU T BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO.' CONSIDERING THE JUDGMENT (SUPRA) WE FEEL THAT IN LI TIGATIONS TO WHICH GOVERNMENT IS A PARTY THERE IS YET ANOTHER ASPECT WHICH, PERHAPS, C ANNOT 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 INTERES T. THE DECISIONS OF GOVERNMENT ARE COLLECTIVE AND INSTITUTIONAL DECISIONS AND DO NOT S HARE THE CHARACTERISTICS OF DECISIONS OF PRIVATE INDIVIDUALS. 4. IN THE INSTANT CASE AS THE GOVERNMENT IS APPELL ANT 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 AN ALYSIS 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 A PPEAL HENCE WE ARE INCLINED TO ITA NO.1252/KOL/2013 A.Y. 2006-07 ACIT CIR-2 HGL. VS. SUPREME CONSTRUC TION PAGE 3 CONDONE THE DELAY OF 162 DAYS IN PREFERRING THE INS TANT APPEAL. NOW LET US PROCEED WITH THE CASE ON MERITS. 5. THE SOLE GROUND OF APPEAL, RAISED BY THE REVENUE IS REPRODUCED AS UNDER:- (1) LD. CIT(A) HAS ERRED ON FACTS AND IN CIRCUMSTA NCES IN GIVING RELIEF OF RS.69,63,750/- ON ACCOUNT OF LABOUR CHARGES ADDED U/S. 40(A)(IA). 6. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT 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 PROFI T AND LOSS A/C. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, OBSERVED THAT LABOUR CHARGES WERE PAID TO THE NINE PERSONS WHO AR E ACTING AS LABOR SARDAR OF THE LABOURERS AND PAYMENT HAS BEEN MADE WITHOUT DEDUCTI NG TAX DEDUCTED AT SOURCE (TDS). AO ACCORDINGLY, ISSUED SUMMONS U/S. 131 OF T HE ACT TO ALL THE LABOUR-SARDAR AND RECORDED THEIR STATEMENTS U/S. 131 OF THE ACT W HO WERE KNOWN AS LABOUR-SARDAR. IT WAS SUBMITTED THAT THERE IS NO CONTRACT WITH THE AS SESSEE AND ALL THE LABOUR CHARGES ARE DIRECTLY PAID TO THE LABOURERS. THEIR ROLE WAS NOTH ING BUT TO ACT AS CONDUIT BETWEEN THE ASSESSEE AND THE LABOURERS TO SEE WHETHER EVERY PER SON WORKS UNDER ASSESSEE HAS GOT THE PAYMENT. IT WAS BECAUSE THERE WERE MANY LABOURE RS AND IT WAS DIFFICULT FOR ASSESSEE TO KEEP A VIGIL ON ALL THE LABOURERS. HOWE VER, AO DISREGARDED THE CLAIM OF ASSESSEE BY OBSERVING THAT FROM THE APPEARANCE, DRE SS, BEHAVIOR AND CONFIDENCE OF ALL THESE PERSONS ARE THE LABOUR-SARDAR AND NOW THEY AR E DENYING THE FACT. ACCORDINGLY, AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOM E OF ASSESSEE. 7. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. 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 DA TED 29.03.2012 BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 8. 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 ITA NO.1252/KOL/2013 A.Y. 2006-07 ACIT CIR-2 HGL. VS. SUPREME CONSTRUC TION 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 O F LABOUR CHARGES. HE PRAYED BEFORE THE BENCH TO CONFIRM THE ORDER OF AO. ON THE OTHER HAND, LD. AR BEFORE US SUBMITTED WRITT EN SUBMISSION AND FILED PAPER BOOK CONTAINING PAGES 1 TO 367 AND STATED THAT IN N ONE OF THE CASE, PAYMENT HAS BEEN MADE TO THE LABOUR CONTRACTORS. THE ROLE OF THE LA BOUR CONTRACTORS WAS USED WHILE MAKING PAYMENT FOR THE PURPOSE OF ADMINISTRATIVE CO NVEYANCE. LD. AR OF ASSESSEE IN SUPPORT OF ASSESSEES CLAIM HAS SUBMITTED THE MUSTE R ROLL OF THE WAGE PAID DURING THE RELEVANT YEAR WHICH ARE PLACED ON PAGES 36 TO 313 O F THE PAPER BOOK AND HE RELIED ON THE ORDER OF LD. CIT(A). 9. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES 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 STATE MENTS 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 LAB OUR SARDAR. THE AO HAS HELD THAT THE ASSESSEE HAS NOT COMPLIED THE PROVISION OF SEC. 194 C 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 AR GUMENTS PLACED BY LD. DR IN THIS CONNECTION. THE AO HAS GIVEN THE CLEAR FINDING IN H IS 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 AS SESSEE BECAUSE THE ASSESSEE COLLECTS OTHER LABOURERS THROUGH THEM, MAKE PAYMENT S TO THE OTHER LABOURERS IN THEIR PRESENCE, THOUGH THERE IS NO WRITTEN CONTRACT . IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, I CANT CALL THEM AS LABOUR S ARDARS BUT THEY ARE ENJOYING SOME SPECIAL STATUS BEFORE THE ASSESSEE. ALL THE P AYMENTS 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 CL AIMS THEM TO BE ITS LABOUR AND THESE PERSONS HAVE DEPOSED THAT THEY ARE THE LA BOURERS, YET, I AM NOT FULLY CONVINCED WITH THEIR PLEA THAT THESE PERSONS ARE SI MPLY LABOURERS AND NOTHING ITA NO.1252/KOL/2013 A.Y. 2006-07 ACIT CIR-2 HGL. VS. SUPREME CONSTRUC TION PAGE 5 MORE THAN THAT. FROM THEIR APPEARANCE, DRESS, BEHAV IOR 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 T HAT THESE PERSONS ENJOY SOME PRIVILEGED POSITIONS IN COMPARISON TO OTHER LABOUR ERS. FROM THE ABOVE IT IS AMPLY CLEAR THAT THE AO HIMSEL F IS NOT SURE AND FORMING THE OPINION ON HIS OWN SURMISE AND CONJECTURE. IN OUR C ONSIDERED VIEW THE LD. DR HAS NOT BROUGHT ANYTHING CONTRARY TO THE FINDINGS OF LD. CI T(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 SAM ANWAYA VS. ACIT 34 SOT 332 HAS HELD AS UNDER : BUSINESS EXPENDITUREDISALLOWANCE UNDER S. 40(A)(I A)NEED FOR TDS UNDER S. 194C RELATING TO PAYMENTS MADE FOR DISBURSEMENT OF LABOUR CHARGES TO LABOUR SARDARSASSESSEE HAD SPECIFICALLY STATED BEFORE THE LOWER AUTHORITIES THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARSREVENUE AUTHORITIES COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE IN THIS RESPECTEVEN BEFORE THE TRIBUNAL, THE DEPARTMENT COULD NOT BRING OUT AN Y EVIDENCE BY PRODUCING COGENT MATERIAL IN RESPECT OF ANY CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS TO CONTRADICT THE SUBMISSION OF THE ASSESSE E THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARA CONTRA CTOR OR A SUB-CONTRACTOR IS ENGAGED ON THE BASIS OF A CONTRACT WHICH IS THE MOS T IMPORTANT ESSENCE OF A CONTRACT JOB AND IS A PRIMARY REQUIREMENT FOR THE A PPLICATION OF S. 194CLABOUR 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 CHEESETHERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SAR DARS FOR SUPPLY OF LABOURERS AND WITHOUT WHICH THERE CANNOT BE ANY APPLICATION O F 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 THE RE IS NOTHING ON RECORD TO SUGGEST THAT THE PAYMENT TO LABOURERS WERE PAID TO THE CONT RACTORS. ON THE CONTRARY, ASSESSEE HAS MADE PAYMENT TO LABOURERS DIRECTLY AND IN SUPPO RT OF ITS CLAIM, LD. AR OF ASSESSEE HAS PRODUCED THE MUSTER ROLL. IN THIS REGARD, LD. D R FAILED TO BRING ANY DEFECT / INFORMATION FROM THE MUSTER ROLL WHICH SUGGESTED TH AT THE LABOUR CHARGES PAID BY ASSESSEE ARE SUBJECT TO TDS. SINCE NO COGENT MATERI AL HAS BEEN BROUGHT ON RECORD, IN OUR CONSIDERED OPINION, AO WAS NOT JUSTIFIED IN INV OKING THE PROVISION OF SEC. 194C R.W.S. 40(A)(IA) OF THE ACT. IN THE BACKGROUND OF T HE ABOVE DISCUSSIONS AND PRECEDENT ITA NO.1252/KOL/2013 A.Y. 2006-07 ACIT CIR-2 HGL. VS. SUPREME CONSTRUC TION PAGE 6 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CI T(A) AND ACCORDINGLY WE UPHOLD THE SAME. IN THE CIRCUMSTANCES, THIS ISSUE OF REVENUES APPEAL IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 07 /09/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP - 07 /09/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIRCLE-2, HOOOGHLY, AAYAKAR BHAWAN , G.T. ROAD, CHINSURAH , DIST. HOOGHLY, PIN 712 101 2. /RESPONDENT-SUPREME CONSTRUCTION, STATION ROAD, P.O .CHINSURAH, DIST. HOOGHLY , PIN. 712 102 3. ' % / CONCERNED CIT 4. % - / CIT (A) 5. & ))' , ' / DR, ITAT, KOLKATA 6. + / GUARD FILE. BY ORDER/ , / ',