Rabindra Chakraborty, Kolkata V. I. T.O. Wd-40(1), Kolkata, Kolkata

ITA 1612/KOL/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7649 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-09-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 14-09-2009
• Court: TRIBUNAL
• Department Lawyers: RANJIT KR SAHA
• Assessee Lawyers: S M SURANA
• Keywords: Business income; Depreciation; Wrong claim
• Section: 143(3); 142(1); 194C; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 1612/KOL/2009 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2006-07 RABINDRA CHAKRABORTY VS. INCOME-TAX OFFICER, WD- 40(1), KOLKATA (PAN: ACQPC 6499 M) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) & $ $ $ $ / I.T.A NO. 1706/KOL/2009 %& %& %& %& '( '( '( '(/ // / ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER, WD-40(1), KOLKATA VS. RABINDRA CHAKRABORTY (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING: 02.01.2012 DATE OF PRONOUNCEMENT: 06.01.2012 FOR THE ASSESSEE: SHRI S. M. SURANA FOR THE REVENUE: SHRI RANJIT KR. SAHA . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THESE CROSS APPEALS, BY ASSESSEE AND REVENUE, ARE A RISING OUT OF ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO 380/XII/40(1)/08-09 DATED 15.0 7.2009. ASSESSMENT WAS FRAMED BY ITO, WARD-40(1), KOLKATA U/S. 143(3)(II) OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE DATED 29.12. 2008. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS A GAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE TO THE TUNE OF RS.1008/- ON ACCOUNT OF DEPRECIATION ON TRUCK. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. FOR THAT AT THE TIME OF ASSESSMENT THE LD. ITO, WD-40(1), KOLKATA AS WELL AS THE CIT(A)-XII AT THE APPEAL STAGE ERRED IN LAW BY DISA LLOWING THE DEPRECIATION TO THE TUNE OF RS.1,008/- IN FULL ON TRUCK. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT HE HAS INSTRUCTIONS FROM ASSESSEE NOT TO CONTEST THIS GROUND OF APPEAL, HENCE HE WANT S TO WITHDRAW THIS GROUND. SINCE LD. DR HAS NOT OBJECTED, WE DISMISS THIS GROUND OF APPEAL AS W ITHDRAWN. 2 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 4. THE SECOND, THIRD AND FOURTH ISSUE OF ASSESSEES APPEAL ARE AGAINST THE ORDER OF CIT(A) DISALLOWING THE EXPENSES TO THE TUNE OF RS.10,000/- EACH ON ACCOUNT OF SALES PROMOTION, STAFF FOODING EXPENSES AND ADVERTISEMENT EXPENSES. FO R THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 2, 3 AND 4: 2. FOR THAT THE LD. CIT(A)-XII ERRED IN LAW WHILE DISALLOWING THE EXPENSES TO THE TUNE OF RS.10,000/- ON ACCOUNT OF SALES PROMOTION. 3. FOR THAT THE LD. CIT(A)-XII WRONGLY DISALLOWED T HE EXPENSES TO THE TUNE OF RS.10,000/- ON ACCOUNT OF STAFF FOODING EXPENSES. 4. FOR THAT THE ADVERTISEMENT EXPENSES TO THE TUN E OF RS.10,000/- WAS WRONGLY DISALLOWED BY THE LD. CIT(A)-XII. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF CASE. WE FIND THAT ASSESSING OFFICER DISALLOWED A SUM OF RS. 25,347/- AS CLAIM OF EXPENDITURE ON SALES PROMOTION WAS TREATED AS NOT FOR BUSINESS PURPOSE A ND ADDED THE SAME TO THE INCOME OF ASSESSEE. ASSESSING OFFICER ALSO DISALLOWED 20% OF FOODING EXPENSES AMOUNTING TO RS.22,251/- AS ASSESSEE PRODUCED ONE SAMPLE VOUCHER OF STAFF FOODING EXPENSES FOR ONE MONTH. THIS WAS A SELF MADE VOUCHER AND CLAIM OF ALL EXPEN SES ARE BY CASH AND BOGUS CLAIM OF EXPENSE CANNOT BE DENIED AND TO PREVENT LEAKAGE OF REVENUE AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE BY DISALLOWING A SUM OF RS.22,300/- AS THE CLAIM OF EXPENDITURE ON ACCOUNT OF ADVERTISEMENT EXPENSES WHICH IS BOGUS AND ADDED THE SAME TO THE INCOME OF ASSESSEE. IN APPEAL, CIT(A) RESTRICTED THE DISALLOWANCES TO RS.1 0,000/- INSTEAD OF RS.25,347/- ON ACCOUNT OF SALES PROMOTION EXPENSES, RS.10,000/- INSTEAD OF RS .22,251/- ON ACCOUNT OF STAFF FOODING EXPENSES AND RS.10,000/- INSTEAD OF RS.22,300/- ON ACCOUNT OF ADVERTISEMENT EXPENSES. 6. WE FIND THAT THE AO HAS NOT GIVEN ANY BASIS FOR MAKING DISALLOWANCE OF THESE EXPENSES AND EVEN CIT(A) HAS NOT GIVEN ANY BASIS FOR RESTRIC TING THE DISALLOWANCE AT 10,000/- IN EACH OF THE EXPENSES I.E. SALES PROMOTION, STAFF FOODING AN D ADVERTISEMENT. WE FIND THAT THE LOWER AUTHORITIES WITHOUT FINDING A FAULT MADE ADDITION A ND THESE BEING PETTY AMOUNT, WE ARE OF THE VIEW THAT WITHOUT ANY BASIS AND JUST ON ESTIMATES, THESE DISALLOWANCES CANNOT BE MADE. ACCORDINGLY, WE DELETE THE DISALLOWANCES AND THESE ISSUES OF ASSESSEES APPEAL ARE ALLOWED. 7. THE NEXT COMMON ISSUE IN BOTH APPEALS IS AS REGA RDS TO THE ADDITION OF TRANSPORT CHARGES OF RS.56,86,701/- ADDED BY AO BY BIFURCATING THESE AS BOGUS EXPENSES OF RS.11,37,340/- AND BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR FAILURE OF DEDUCTION OF TAX AT SOURCE U/S. 194C OF THE ACT ON SUB-CONTRACT PAYMENTS AMOUN TING TO RS.45,49,361/-. THE ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 5 AND 6: 5. FOR THAT THE LD. CIT(A-XII WRONGLY DISALLOWED T HE EXPENSES TO THE TUNE OF RS.5,68,670/- ON ACCOUNT OF TRANSPORTATION CHARGES . 3 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 6. FOR THAT LD. CIT(A)-XII HAS FAILED TO UNDERSTAND THE MEANING OF THE PROVISION OF SECTION 40(A)(IA) OF THE I. T. ACT, 1961 AND DISALL OWED RS.31,67,438/- FOR NON DEDUCTION OF TDS FROM THE PAYMENTS MADE TO THE VARIOUS TRUCK DRIVERS UNDER THE HEAD TRANSPORTATION EXPENSES. ACCORDING TO THE AGREEM ENT, WHICH HAS BEEN SUBMITTED AT THE TIME OF ASSESSMENT AS WELL AS AT THE TIME OF AP PEAL, BETWEEN THE PRINCIPAL CONTRACTOR I.E. HINDUSTAN PAPER CORPORATION LIMITED AND THE AS SESSEE, THE ASSESEE CANNOT ENGAGE ANY SUB-CONTRACTOR WITHOUT THE WRITTEN CONSENT OF T HE CORPORATION AUTHORITY. BUT THE LD. ASSESSING OFFICER AS WELL AS THE CIT(A)-XII DENIES TO ACCEPT THE ABOVE STATED CLUE OF THE AGREEMENT AND TAKEN THE TRUCK DRIVERS AS SUB-CONTRA CTORS. REVENUES RAISED FOLLOWING GROUND NOS.1 AND 2: 1) THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE UNDER THE HEAD TRANSPORT CHARGES TO 10% RESULTING IN DELETION OF ADDITION OF RS.5,68,670/- WITHOUT CONSIDERING THE F INDINGS OF THE A.O. 2. THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S. 40(A)(IA) TO RS.31,67,438/- R ESULTING IN DELETION OF ADDITION OF RS.13,81,923/- WITHOUT CONSIDERING THE FINDINGS OF THE A.O. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF CASE. THE BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JOB CONTRACT AND TRADING WITH HINDUSTAN PAPER CORPORATION LTD, ASSAM AND ALL RECE IPTS OF THE ASSESSEE ARE FROM THIS PARTY ONLY. THE ASSESSEE HAS INCURRED EXPENDITURE MOSTLY ON ACCOUNT OF PURCHASE OF BAMBOOS, LABOUR CHARGES PAYMENT AND TRANSPORT CHARGE PAYMENT. THE ASSESSEE FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR 2006-07 ON 22.08.2006 AND NOTICE U/S. 143(2) WAS ISSUED ON 25.06.2007 AND NOTICE U/S. 142(1) OF THE ACT WAS IS SUED ON 09.07.2008. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE IS AN INDIVIDUAL AND RECEIVED TRANSPORT CHARGES FROM HINDUSTAN PAPER COR PORATION LTD. AND MADE PAYMENT UNDER THIS HEAD AS SUB CONTRACT PAYMENTS. ACCORDING TO A SSESSING OFFICER, THE ASSESSEE HAS NOT DEDUCTED TDS U/S. 194C OF THE ACT ON THESE PAYMENTS I.E. TRANSPORT CHARGES BUT SINCE NO TDS WAS DEDUCTED, THE ASSESSING OFFICER MADE DISALLOWAN CE FOR NON-DEDUCTION OF TDS AT RS.45,49,361/-. THE ASSESSING OFFICER ALSO MADE A DISALLOWANCE AS THE EXPENDITURE IS NOT A GENUINE EXPENDITURE FOR THE REASON THAT THE VOUCHER S ARE SELF MADE VOUCHERS AND WITHOUT BEARING ANY DATES AND EVEN SIGNATURE WAS OF ITS PRO PRIETOR INSTEAD OF SIGNATURES OF STATION IN CHARGE. HENCE, DISALLOWED TO THE EXTENT OF RS.11,3 7,340/- I.E. 20% OF TOTAL EXPENDITURE AS BOGUS/EXCESS EXPENDITURE CLAIMED. AGGRIEVED, ASSES SEE PREFERRED APPEAL BEFORE CIT(A). CIT(A) RESTRICTED THE DISALLOWANCE ON ACCOUNT OF BO GUS EXPENDITURE AT 10% AT RS.5,68,670/- BY GIVING FOLLOWING FINDING IN PARA 8.1.3 OF HIS APPEL LATE ORDER: 8.1.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSION S OF THE LD. AR OF THE APPELLANT. THERE IS SOME FORCE IN THE ARGUMENTS. IT IS REPORTE D THAT A PORTION OF TRANSPORT CHARGES (RS.18,89,540/-) RELATED TO PURCHASE OF BAMBOOS. AS REGARDS PAYMENTS MADE IN CASH, THE ARGUMENTS PUTFORTH BY THE APPELLANT TO CERTAIN EXTE NT ARE REASONABLE. THE NATURE OF JOB IS SUCH THAT THERE IS BOUND TO BE CASH PAYMENTS IN RESPECT OF LABOUR/WORKERS OR SMALL TRUCK DRIVERS WHERE SMALL PAYMENTS WERE MADE. BUT A T THE SAME TIME, THE SAME 4 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 ARGUMENTS CANNOT GIVE A TOTAL IMMUNITY TO THE ENTIR E EXPENDITURE INCURRED IN CASH. THERE IS BOUND TO BE AN ELEMENT OF INFLATION IN THI S LINE OF ACTIVITY. THE A.O HAS POINTED OUT CERTAIN DEFICIENCIES. THOUGH THESE DEFICIENCIES ARE NOT CONCLUSIVE PROOF, BUT THE SAME INDICATES AN ELEMENT OF UNSUBSTANTIATED EXPENS ES. IN THESE CIRCUMSTANCES THE ONLY WAY TO ARRIVE AT THE INFLATION OF EXPENSES IS ONLY ON ESTIMATION BASIS SINCE NEITHER THE ASSESSEE NOR THE DEPARTMENT COULD IN A POSITION TO PROVE OR DISPROVE CONCLUSIVELY. HOWEVER, IN THE FACTS AND CIRCUMSTANCES OF THE CASE , I FEEL THAT THE DISALLOWANCE MADE BY THE A.O IS ON A HIGHER SIDE. IN MY OPINION A DIS ALLOWANCE @ 10% OF TOTAL TRANSPORT CHARGES WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY , I DIRECT THE A.O TO RESTRICT THE DISALLOWANCE AT 10% INSTEAD OF 20%. THE APPELLANT G ETS A RELIEF OF RS. 5,68,670/- ON THIS ISSUE. THE GROUND OF THE APPELLANT IS PARTLY ALLOWE D. THE CIT(A) ALSO RESTRICTED THE DISALLOWANCE U/S. 40 (A)(IA) OF THE ACT AT RS.31,67,480/- INSTEAD OF DISALLOWANCE MADE BY ASSESSING OFFICER AT RS.45, 49,361/- BY GIVING FOLLOWING FINDING IN PARA 8.2.3 (IV) OF HIS APPELLATE ORDER: IV. IN VIEW OF THE FACT DISCUSSED, I AM OF THE OPI NION THAT IN THE PRESENT CASE THE APPELLANT CONTRACTEE HAS SUB-CONTRACTED HIS CONTRAC T WORKS TO THE TRANSPORT PARTIES FOR CARRIAGE OF GOODS AND THUS THE APPELLANT WAS LIABLE TO DEDUCT TAX IN RESPECT OF PARTIES WHERE HE AGGREGATE PAYMENTS EXCEEDED MORE THAN RS. 50000/- IN THE FINANCIAL YEAR UNDER CONSIDERATION. THE A.O, HOWEVER, DISALLOWED R S. 45,49,361/- (RS. 56,80,701/- -- RS.11,37,340/-) U/S. 40(A)(IA) OF THE ACT. THIS IS NOT FACTUALLY CORRECT AS THIS INCLUDES PARTIES WHERE PAYMENTS LESS THAN RS. 20000/- WERE M ADE. THE APPELLANT HOWEVER SUBMITTED A LIST OF PARTIES IN WHOSE CASES THE AGGR EGATE OF PAYMENTS EXCEEDS RS.50000/- IN THE WHOLE YEAR. THE TOTAL OF SUCH LIST AMOUNTS T O RS.31,67,438/-. THEREFORE, I DIRECT THE A.O TO RESTRICT THE DISALLOWANCE U/S. 40(A)(IA) TO RS. 31,67.438/- INSTEAD OF RS.45,49,361/ -. THE APPELLANT GETS A RELIEF OF RS. 13,81,923/-ON THIS COUNT. THE GROUND OF E APPELLANT IS PARTLY ALLOWED. AGGRIEVED, BOTH REVENUE AND ASSESSEE CAME IN APPEAL BEFORE US. 9. WE FIND THAT WHETHER THE PAYMENT EXCEEDS RS.50,0 00/- OR ARE LESS, ADMITTED FACT THAT THE ASSESSEE IS AN INDIVIDUAL AND RECEIVED PAYMENT FROM A CONTRACTOR HINDUSTAN PAPER CORPORATION LTD., ASSAM. WE FIND THAT THIS ISSUE IS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE ACIT VS SMT. KEYA SETH IN ITA NO.842 & 843/K/2010 FOR ASSESSMENT YEAR S 2006-07 & 2007-08 VIDE ORDER DATED 11.03.2011, WHEREIN EXACTLY THE SAME ISSUE HAS BEEN DECIDED AS UNDER: 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. IT IS AN ADMITTED POSITION THAT THE ASSESSEE AN INDIVIDUA L CARRYING ON THE BUSINESS OF AYURVEDIC (COSMETIC DIVISION) AND THE CONSULTANCY ON BEAUTICI AN AND ALSO RELATED THERAPIES . AS CLAIMED BY THE ASSESSEE, WHETHER THE PROVISIONS OF SECTION 194 (1) AS EXISTED IN ASSESSMENT YEARS 2006-07 & 2007-08 WILL APPLY TO THE ASSESSEE OR NOT? ADMITTED LY, ASSESSEE HAS NOT DEDUCTED ANY TDS ON ADVERTISEMENT PAYMENT AND ACCORDING TO HER, PROVISI ONS OF SECTION 194C(1) AS EXISTED IN THE RELEVANT ASSESSMENT YEARS WILL NOT OBLITERATE ANY D UTY ON ASSESSEE TO DEDUCT TDS. NOW, WE HAVE TO EXAMINE THIS. THE RELEVANT PROVISIONS OF SECTION 194C(1) & (2) AS EXIST IN ASSESSMENT YEAR 2006-07 & 2007-08 READS AS UNDER :- (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A NY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE O F A CONTRACT BETWEEN THE CONTRACTOR AND-- 5 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 (A) THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT ; OR (B) ANY LOCAL AUTHORITY ; OR (C) ANY CORPORATION ESTABLISHED BY OR UNDER A CENTR AL, STATE OR PROVINCIAL ACT ; OR (D) ANY COMPANY, OR (E) ANY CO-OPERATIVE SOCIETY ; OR (F) ANY AUTHORITY, CONSTITUTED IN INDIA BY OR UNDER ANY LAW, ENGAGED EITHER FOR THE PURPOSE OF DEALING WITH AND SATISFYI NG THE NEED FOR HOUSING ACCOMMODATION OR FOR THE PURPOSE OF PLANNIN G, DEVELOPMENT OR IMPROVEMENT OF CITIES, TOWNS AND VILLAGES, OR FO R BOTH ; OR (G) ANY SOCIETY REGISTERED UNDER THE SOCIETIES REGI STRATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT AC T IN FORCE IN ANY PART OF INDIA ; OR (H) ANY TRUST ; OR (I) ANY UNIVERSITY ESTABLISHED OR INCORPORATED BY O R UNDER A CENTRAL, STATE OR PROVINCIAL ACT AND AN INSTITUTION DECLARED TO BE A UNIVERSITY UNDER SECTION 3 OF THE UNIVERSITY GRANTS COMMISSION ACT, 1956 (3 OF 1956), OR (J) ANY FIRM, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CH EQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO-- (I) ONE PER CENT. IN CASE OF ADVERTISING, (II) IN ANY OTHER CASE TWO PER CENT. OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN. (2) ANY PERSON (BEING A CONTRACTOR AND NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY) RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE SUB-CONTRACTOR) IN PURSUANCE OF A CONTRACT WITH THE SUB-CONTRACTOR FOR CARRYING OUT, OR FOR THE SUPPLY OF LABOUR FOR CARRYING OUT, THE WHOLE OR ANY PART OF THE WORK UNDERTAKEN BY THE CON TRACTOR OR FOR SUPPLYING WHETHER WHOLLY OR PARTLY ANY LABOUR WHICH THE CONTR ACTOR HAS UNDERTAKEN TO SUPPLY SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE SUB-CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISS UE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMO UNT EQUAL TO ONE PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN. XXXX XXXX XXXX 6. FROM THE ABOVE PROVISIONS OF SECTION 194C(1), IT IS CLEAR THAT THE PAYMENTS MADE BY INDIVIDUAL OR HINDU UNDIVIDED FAMILY DOES NOT COME WITHIN THE AMBIT OF TDS I.E. THE EXPENDITURE INCURRED FOR ADVERTISEMENT AS INDIVIDUAL AND HUF ARE SPECIFI CALLY EXCLUDED IN THE ABOVE PROVISIONS. THE PROVISION OF SUB-SECTION (2) APPLIES ONLY TO PAYMEN TS MADE TO SUB-CONTRACTORS AND NOT TO CONTRACTORS. ACCORDINGLY, ASSESSING OFFICER CAN NOT MADE DISALLOWANCE BY INVOKING PROVISIONS OF 6 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 SECTION 40A(IA), AS PRESENT ASSESSEE BEING AN INDIV IDUAL IS NOT LIABLE TO DEDUCT TAX IN VIEW OF PROVISIONS OF SECTION 194C(1) AS EXISTED IN THE REL EVANT ASSESSMENT YEARS. NO DOUBT, ASSESSEES TURNOVER EXCEEDS THE MONETARY LIMIT AS SPECIFIED UN DER CLAUSE (A) OR CLAUSE (B) OF SECTION 44AB AND THE ASSESSEES ACCOUNTS ARE SUBJECT TO AUDIT AN D THE ASSESSEE HAS AUDITED HER ACCOUNTS AND FILED TAX AUDIT REPORT ALONG WITH RETURN OF INCOME. WE FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE IN VIEW OF THE AMENDED PROVISIONS OF S ECTION 194C(1) BY THE FINANCE ACT, 2007 WITH EFFECT FROM 01.06.2007 WHEREIN IT IS PROPOSED TO A MEND SUB-SECTION (1) IN SECTION 194C SO AS TO INCLUDE PAYMENTS MADE BY ANY INDIVIDUAL OR HINDU UN DIVIDED FAMILY WHOSE TOTAL SALES / GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSIO N CARRIED ON BY HIM EXCEED MONETARY LIMIT SPECIFIED UNDER CLAUSE (A) OR CLAUSE (B) OR SECTION 44AB DURING THE FINANCIAL YEAR OR IMMEDIATELY PRECEDING FINANCIAL YEAR IN WHICH SUCH SUM IS CREDI TED OR PAID TO THE ACCOUNT OF THE CONTRACTOR. THIS AMENDMENT TAKES EFFECT FROM 1 ST DAY OF JUNE, 2007 AND IS APPLICABLE FOR AND FROM A SSESSMENT YEAR 2008-09. IN SECTION 194C(1) WITH EFFECT FROM 0 1.06.2007, BY THE FINANCE ACT, 2007, CLAUSE AS INSERTED, READS AS UNDER :- (K) ANY INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WH OSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PROFESSIO N CARRIED ON BY HIM EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE FINANC IAL YEAR IN WHICH SUCH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR, SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTH ER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO - (I) ONE PER CENT IN CASE OF ADVERTISING, (II) IN ANY OTHER CASE TWO PER CENT, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THERE IN : PROVIDED THAT NO INDIVIDUAL OR A HINDU UNDIVIDED FA MILY SHALL BE LIABLE TO DEDUCT INCOME-TAX ON THE SUM CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR WHERE SUCH SUM IS CREDITED OR PAID EXCLUSIVELY FOR PERSONAL PURPOSES OF SUCH INDIVIDUAL OR ANY MEMBER OF HINDU UNDIVIDED FAMILY. 7. WE FIND FROM THE ARGUMENTS OF LD.SR. DR THAT REV ENUE WANT TO INVOKE PROVISIONS OF SUB-SECTION (2) OF SECTION 194C FOR FURTHERANCE OF THIS CASE BU T WE ARE OF THE CONSIDERED VIEW THAT SECTION 194C(2) WILL APPLY TO THE PAYMENTS MADE TO SUB-CONT RACTORS BY THE CONTRACTOR AND NOT BY THE ASSESSEE. IN THE PRESENT CASE, IT IS AN ADMITTED PO SITION THAT THE ASSESSEE HAS MADE PAYMENTS ON ADVERTISEMENT TO THE CONTRACTORS AND NOT TO SUB-CON TRACTORS. FURTHER AS REFERRED BY LD. COUNSEL FOR THE ASSESSEE, THIS PROVISION WAS EXPLAINED BY C BDT CIRCULAR NO.3 OF 2008 DATED 12.03.2008 WHICH IS REPORTED IN (2008)299 ITR 8 (STATUTE) AND THE RELEVANT CIRCULAR AS REPORTED AT PAGE 71, READS AS UNDER :- 54. EXPANSION OF SCOPE OF THE PROVISIONS OF SECTIO N 194C. 54.1 THE EXISTING PROVISIONS OF SUB-SECTION (1) OF SECTION 194C PROVIDED FOR DEDUCTION OF INCOME-TAX AT SOURCE FROM ANY SUM CRED ITED OR PAID TO THE RESIDENT CONTRACTOR FOR CARRYING OUT ANY WORK (INCLUDING SUP PLY OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CO NTRACTOR AND THE GOVERNMENT, LOCAL AUTHORITIES, STATUTORY CORPORATIO NS, COMPANIES, CO-OPERATIVE SOCIETIES, STATUTORY AUTHORITIES ENGAGED IN PROVIDI NG HOUSING ACCOMMODATION, ETC., REGISTERED SOCIETIES, TRUSTS, UNIVERSITIES AN D FIRMS. THE RATE OF TDS IS 1% IN RESPECT OF ADVERTISING CONTRACTS AND 2% IN OTHER CA SES. 54.2 THE EXISTING PROVISIONS OF SUB-SECTION (1) OF SECTION 194C DID NOT PROVIDE FOR DEDUCTION OF TAX AT SOURCE ON PAYMENTS MADE BY AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY TO A CONTRACTOR. 54.3 CONSIDERING THE RISING NUMBER OF CONTRACTS BEI NG AWARDED BY INDIVIDUALS AND HUFS CARRYING ON BUSINESS OR PROFESSION AND THE INCREASING VOLUME OF SUCH 7 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 PAYMENTS TO CONTRACTORS, IT WAS FELT THAT THERE IS NEED TO REQUIRE SUCH PERSONS TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE BY THEM TO CONTRACTORS. 54.4 THERE WOULD BE GENUINE DIFFICULTIES IF INDIVID UALS OR HUFS WITH SMALL BUSINESS TURNOVERS OR GROSS RECEIPTS OF PROFESSION ARE REQUIRED TO DEDUCT TAX AT SOURCE. AN EXCEPTION IN SUCH CASES WOULD BE JUSTIFI ED. SIMILARLY THE CONTRACTS AWARDED BY AN INDIVIDUAL OR A MEMBER OF HUF OF HUF EXCLUSIVELY FOR PERSONAL PURPOSES MERIT EXCLUSION. 54.5 ACCORDINGLY, THE FINANCE ACT, 2007, HAS SUBSTI TUTED THE SAID SUB-SECTION (1) TO INCLUDE IN ITS AMBIT SUCH INDIVIDUAL OR A HI NDU UNDIVIDED WHOSE TOTAL SALES, GROSS RECEIPTS OR TURNOVER FROM THE BUSINESS OR PRO FESSION CARRIED ON EXCEED THE MONETARY LIMITS SPECIFIED UNDER CLAUSE (A) OR CLAUS E (B) OF SECTION 44AB DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING FINANCIAL YEAR IN WHICH SUM IS CREDITED OR PAID TO THE ACCOUNT OF THE CONTRACTOR. THIS AMEN DMENT SHALL NOT APPLY IN RESPECT OF PAYMENTS MADE TO A CONTRACTOR BY ANY IND IVIDUAL OR A MEMBER OF A HINDU UNDIVIDED FAMILY EXCLUSIVELY FOR THEIR PERSON AL PURPOSES. 54.6 APPLICABILITY - THIS AMENDMENT WILL TAKE EFFEC T FROM THE 1ST DAY OF JUNE, 2007. 8. IN VIEW OF THE ABOVE CLEAR PROVISIONS OF SECTION 194(1) AS EXISTING IN ASSESSMENT YEARS 2006-07 & 2007-08, I.E. RELEVANT ASSESSMENT YEARS IN THE PR ESENT APPEALS, IT IS CLEAR THAT THE ASSESSEE IS UNDER NO OBLIGATION TO DEDUCT TDS ON THE EXPENDITUR E OF ADVERTISEMENT, AS THE ASSESSEE BEING AN INDIVIDUAL, AND THE CLAIM OF THE ASSESSEE IS AS PER PROVISIONS OF LAW. ONCE THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS UNDER THE PROVISION OF SECTION 194C(1 ), THE PROVISIONS OF SECTION 40A(IA) FOR MAKING DISALLOWANCE OF EXPENDITURE FOR NON-DEDUCTION OF TD S WILL NOT APPLY. WE FURTHER FIND THAT, IT IS NOT THE CASE OF THE REVENUE THAT THE EXPENSES ARE BOGUS OR UNREASONABLE OR EXCESSIVE BUT THE DISALLOWANCE IS MADE MERELY FOR NON-DEDUCTION OF TD S. ACCORDINGLY, WE ARE OF THE CONSIDERED VIEW THAT CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE AN D WE CONFIRM THE SAME. 10. AS THE ISSUE RAISED BY THE ASSESSEE AND REVENUE IS EXACTLY ON SIMILAR FACTS IN THE PRESENT CASE, TAKING A CONSISTENT VIEW, WE ARE OF THE VIEW THAT THE AMENDED PROVISIONS OF SECTION 194C(1) OF THE ACT WILL NOT APPLY TO THE PRESENT AS SESSMENT YEAR ON THE ASSESSEE. ACCORDINGLY, THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED AND THAT OF THE REVENUE IS DISMISSED. 11. IN RESPECT TO THE ESTIMATION OF DISALLOWANCE AT 20% BY THE ASSESSING OFFICER AND RESTRICTION BY CIT(A) AT 10%, WE FIND THAT THE CIT( A) HAS TAKEN INTO CONSIDERATION THE FACT THAT THE PAYMENTS MADE IN CASH DUE TO NATURE OF JOB AND IN SUCH, THERE IS BOUND TO BE CASH PAYMENTS IN RESPECT OF LABOUR/WORKERS AND SMALL TRUCK DRIVER S WHERE SMALL PAYMENTS ARE MADE. THE CIT(A) ALSO NOTED THAT AT THE SAME TIME THE SAME AR GUMENT CANNOT GIVE TOTAL IMMUNITY TO THE ASSESSEE FOR ENTIRE EXPENDITURE INCURRED IN CASH AN D ACCORDING TO HIM THERE IS BOUND TO BE AN ELEMENT OF INFLATION IN THIS LINE OF ACTIVITY. HE ALSO NOTED THAT THE ASSESSING OFFICER HAS POINTED OUT CERTAIN DEFICIENCIES IN EVIDENCES OF THE ASSESS EE AND FURTHER NOTED THAT THOUGH THESE DEFICIENCIES ARE NOT CONCLUSIVE BUT SAME INDICATES ELEMENT OF UNSUBSTANTIATED EXPENSES. HENCE, HE RESTRICTED DISALLOWANCE OF BOGUS/EXCESS EXPENSES AT 10% INSTEAD OF 20%. WE FIND THAT NONE OF THE AUTHORITIES BELOW HAVE QUANTIFIED THE DISALL OWANCE EXACTLY ON THE BASIS OF THE DEFECTIVE VOUCHERS AND NO ENQUIRY WAS CARRIED OUT BY THE ASSE SSING OFFICER DESPITE THE FACT THAT COMPLETE 8 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 NAMES AND ADDRESSES OF THE LABOURERS AND SUPERVISOR S TO WHOM PAYMENTS WERE MADE IN CASH WAS AVAILABLE BEFORE THE ASSESSING OFFICER. EVEN NO W THE ASSESSEE HAS FILED COMPLETED DETAILS IN ASSESSEES PAPER BOOK AT PAGES 30 TO 61 WHERE CO MPLETE LIST OF LABOURERS AND SUPERVISORS IS GIVEN WITH ADDRESSES. WE FIND THAT WITHOUT ANY BAS IS DISALLOWANCE CANNOT BE MADE. THE AO WITHOUT CARRYING OUT ANY ENQUIRY HAS MADE DI SALLOWANCE PURELY ON SURMISE. IT IS NOT OPEN TO THE DEPARTMENT TO PRESCRIBE HOW THE ASSESSE E HAS TO SPEND OR INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR EXPENDITURE. IT IS N OT THE CASE OF THE REVENUE THAT THE EXPENSES ARE NOT GENUINE AND NOT RELATED TO BUSINESS. ONCE THIS IS THE CASE, THE ENTIRE EXPENDITURE SHOULD HAVE BEEN ALLOWED AND WE ORDER ACCORDINGLY. THIS I SSUE OF REVENUES APPEAL IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED. 12. THE NEXT ISSUE IN THESE CROSS APPEALS IS AS REG ARDS TO THE ORDER OF CIT(A) RESTRICTING THE DISALLOWANCE AT RS.7,10,969/- OUT OF THE TOTAL ADDI TION MADE BY ASSESSING OFFICER AT RS.28,43,879/- AS BOGUS CLAIM OF EXPENDITURE. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.3: THAT UNDER THE FACTS & CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE UNDER THE HEAD LABOUR CHARGES TO 5% RESULTING IN DELETION OF ADDITION OF RS.21,32,910/- WITHOUT CONSIDERING THE FINDINGS & M ATERIALS BROUGHT ON RECORD BY THE A.O. THE ASSESSEE HAS RAISED FOLLOWING GROUND NO. 7: 7. FOR THAT THE LD. CIT(A)-XII HAS DISALLOWED THE EXPENSES UNDER LABOUR CHARGES AMOUNTING TO RS.7,10,969/- WITHOUT ANY BASIS. 13. BRIEF FACTS ARE THAT THE ASSESSING OFFICER REQU IRED THE ASSESSEE TO EXPLAIN EXPENSES CLAIMED AT RS.1,65,71,738/-. THE ASSESSING OFFICER DISALLOWED 20% OF THE EXPENSES TO PREVENT LEAKAGE OF REVENUE AS THE ASSESSEE COULD NOT PRODUC E COMPLETE VOUCHERS AND EVEN THERE WAS NO SIGNATURE OF STATION IN CHARGE AND EVEN SOME OF THE VOUCHERS WERE UNDATED. IT WAS FOUND BY ASSESSING OFFICER THAT THESE VOUCHERS WERE SIGNED B Y ASSESSEE HIMSELF. EVEN STATION IN CHARGE REFUSED TO IDENTIFY ASSESSEE AND HIS BUSINESS. EVE N THERE WAS NO COMMUNICATION FROM SOME OF THE LABOURERS I.E. 21 IN NOS, WHERE NOTICES ISSUED WERE RETURNED BY DOPT WITH THE COMMENT NOT KNOWN. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO RESTRICTED THE DISALLOWANCE AT 5% BY GIVING FOLLOWING FINDING: AS SEEN FROM THE FACTS OF THE CASE, THE STATION-IN -CHARGES STATIONED AT DIFFERENT CENTERS ARE THE KEY FIGURES WHO SUPERVISE THE ACTIVITIES AT GROUND LEVEL. THEY ARE IN CHARGE OF MAINTAINING RECORDS AND MAKING PAYMENTS TO LABOURER S. THUS, THEY ARE THE PERSONS WHO CAN VOUCH FOR SUCH PAYMENTS. IN FACT THE SUNDRY CREDITORS RELATED TO LABOUR EXPENSES HAVE BEEN SHOWN ON THE NAME OF STATION-IN- CHARGES ONLY. HOWEVER IN THE VOUCHERS THE SIGNATURE OF THE STATION-IN-CHARGE IS NOT AVAILABLE. THIS DISCREPANCY DEFINITELY, CASTS DOUBT ON THE VERY NATURE OF PAYME NTS. IT IS A FACT THAT SIGNATURE OF THE RECIPIENTS ARE AVAILABLE. BUT THIS ALONE CANNOT BE A CONCLUSIVE PROOF TO ESTABLISH THE 9 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 GENUINENESS OF ALL SUCH PAYMENTS. AS THE LABOUR PAY MENTS ARE UNVERIFIABLE, THE COUNTER SIGNATURE BY THE STATION-IN-CHARGES IS VERY VITAL T O PROVE THE PAYMENTS. THE A.O ALSO NOTICED A DIFFERENCE IN OUTSTANDING SUNDRY CREDITOR S BALANCES FROM THE BREAK UP DETAILS FURNISHED BY THE ASSESSEE. AS REGARDS THE C ONTENTION THAT HPCL FIXED A RATE FOR THE WORK AND ENTIRE EXPENSES GOT REIMBURSED, THUS C ANNOT BE A YARDSTICK TO JUDGE THE IDENTITY OF LABOURERS AND GENUINENESS OF TRANSACTIO NS. HPCL CANNOT VOUCH FOR THESE FEATURES. AS REGARDS THE OTHER ARGUMENT THAT THE A. O HAS NOT GIVEN A CONTRARY FINDING ABOUT THE GENUINENESS OF SIGNATURES OF RECIPIENTS, THIS ISSUE DOES NOT ARISE AT ALL AS THE AO GAVE A CLEAR FINDING THAT THE VOUCHERS THEMSELVE S ARE UNVERIFIABLE. AS REGARDS FAVOURABLE TRADING PROFITS, THIS MAY BE TRUE, BUT T HE SAME CANNOT GIVE IMMUNITY TO THE ENTIRE EXPENDITURE BOOKED WHEN THE SAME STANDS UNVE RIFIABLE AND UNSUBSTANTIATED. AS REGARDS THE THEORY OF RES JUDICATA IT IS TO MENTION THAT THE A.O IN THE PRESENT YEAR UNDER CONSIDERATION MADE ENQUIRERS AND GAVE CLEAR FINDING S ABOUT UNVERIFIABLE NATURE OF THE LABOUR CHARGES. IT IS NEEDLESS TO SAY THAT EVERY AS SESSMENT YEAR IS AN INDEPENDENT YEAR OF ASSESSMENT AS THE FACTS OR THE FINDINGS DIFFER F ROM YEAR TO YEAR. AT THE SAME TIME THE ENTIRE LABOUR PAYMENT CANNOT BE DOUBTED AS THIS FOR M THE MAJOR PART OF THE BUSINESS ACTIVITY. HENCE A REASONABLE DISALLOWANCE BASED ON ESTIMATE METHOD IS ONLY THE METHOD TO ARRIVE AT REASONABLE DISALLOWANCE. HOWEVER IN TH E PRESENT CASE THE DISALLOWANCE MADE BY THE A.O AT 20% APPEARS TO BE ON A HIGHER SI DE. CONSIDERING THE TURNOVER AND TOTALITY OF CIRCUMSTANCES AND FACTS OF THE CASE, A DISALLOWANCE AT 5% APPEARS TO BE MORE REASONABLE. ACCORDINGLY, I DIRECT THE A.O TO R ESTRICT THE DISALLOWANCE TO 5% INSTEAD OF 2O% DISALLOWANCE. ACCORDINGLY, THE DISAL LOWANCE UPTO 5% OF RS.1,42,19.398/- AMOUNTING TO RS. 7,10.969/- IS SUS TAINED. THE APPELLANT GETS A RELIEF OF RS.21,32,910/- ON THIS GROUND. THE GROUND OF APPEA L IS PARTLY ALLOWED. 14. WE FIND THAT THE LOWER AUTHORITIES HAVE MADE DI SALLOWANCE OF 20% OF LABOUR EXPENSES JUST TO AVOID REVENUE LEAKAGE AS THE VOUCHERS ARE S IGNED BY THE OWNER AND NOT STATION IN CHARGE. IT IS ALSO A CHARGE BY REVENUE THAT THE LABOURERS A RE NOT AVAILABLE AT THE GIVEN ADDRESS AND VOUCHERS ARE SELF MADE VOUCHERS WITHOUT DATE (SOME) . FROM THE ABOVE FACTS, WE FIND THAT NONE OF THE AUTHORITIES BELOW HAVE QUANTIFIED THE DISALL OWANCE EXACTLY ON THE BASIS OF THE DEFECTIVE VOUCHERS AND NO ENQUIRY WAS CARRIED OUT BY THE ASSE SSING OFFICER DESPITE THE FACT THAT COMPLETE NAMES AND ADDRESSES OF THE LABOURERS AND SUPERVISOR S TO WHOM PAYMENTS WERE MADE IN CASH WAS AVAILABLE BEFORE THE ASSESSING OFFICER. EVEN NO W THE ASSESSEE HAS FILED COMPLETED DETAILS IN ASSESSEES PAPER BOOK AT PAGES 30 TO 61 WHERE CO MPLETE LIST OF LABOURERS AND SUPERVISORS IS GIVEN WITH ADDRESSES. WE FIND THAT WITHOUT ANY BAS IS DISALLOWANCE CANNOT BE MADE. THE AO WITHOUT CARRYING OUT ANY ENQUIRY HAS MADE DI SALLOWANCE PURELY ON SURMISE. IT IS NOT OPEN TO THE DEPARTMENT TO PRESCRIBE HOW THE ASSESSE E HAS TO SPEND OR INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR EXPENDITURE. IT IS N OT THE CASE OF THE REVENUE THAT THE EXPENSES ARE NOT GENUINE AND NOT RELATED TO BUSINESS. ONCE THIS IS THE CASE, THE ENTIRE EXPENDITURE SHOULD HAVE BEEN ALLOWED AND WE ORDER ACCORDINGLY. THIS I SSUE OF REVENUES APPEAL IS DISMISSED AND THAT OF ASSESSEE IS ALLOWED. 15. THE NEXT ISSUE IN THIS APPEAL OF THE ASSESSEE I S AS REGARDS TO THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF SUNDRY CREDITORS AT RS.23,52,340/-. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.8: 10 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 8. FOR THAT THE LD. ITO, WD-40(1)/KOLKATA AS WELL AS THE CIT(A)-XII WRONGLY DISALLOWED THE SUM OF RS.23,52,340/- UNDER THE HEAD SUNDRY CREDITORS WHICH IS ENTIRELY RELATED TO THE LABOUR CHARGES. 16. BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED LABOU R CHARGES AS PAYABLE TO THE EXTENT OF RS.23,52,340/- AS ON 31.03.2006 IN ITS BALANCE SHEE T. ASSESSING OFFICER REQUIRED ASSESSEE TO EXPLAIN SUNDRY CREDITORS/LABOUR CHARGES PAYABLE. T HE ASSESSEE EXPLAINED VIDE REPLY DATED 11.12.2008 AND PRODUCED BREAK UP OF SUNDRY CREDITOR S LIABILITY, STATION WISE AND EXPENDITURE HEAD WISE. IT WAS CLAIMED THAT THE OUTSTANDING AMO UNTS ARE DUE TO LABOUR CHARGES AND BUNDLING CHARGES, DEEDING CHARGES, PROCUREMENT CHARGES, CHIP PER HOUSE MAINTENANCE CHARGES ETC. THE ASSESSEE PRODUCED SELF MADE VOUCHERS CLAIMING THIS AS PROOF OF TRANSACTION WITH SUCH LABOURERS BUT THE ASSESSING OFFICER DISALLOWED THE ENTIRE LAB OUR PAYMENTS AMOUNTING TO RS.23,52,340/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIRMED THE DISALLOWANCE BY GIVING FOLLOWING FINDING IN PARA 9.2.2 OF HIS APPEL LATE ORDER AS UNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LD. AR OF THE APPELLANT. I HAVE ALSO EXAMINED THE FINDINGS BROUGHT ON RECORD BY THE A.O. THE MAJOR FINDING GIVEN IS THAT THE OUTSTANDING SUNDRY CREDITORS ARE SHOWN IN THE NAME OF STATION-IN-CHARGES WHO ARE THE EMPLOYEES OF THE APPELLANT. SECONDLY THE TWO STATIO N-IN-CHARGES REPLIED THAT THEY HAVE NOT INVOLVED WITH APPELLANTS BUSINESS AND HAVE NO IDEA ABOUT APPELLANTS BUSINESS ACTIVITIES. THE APPELLANT FAILED TO ESTABLISH IDENT ITY OF THE LABOURERS WHO FINALLY RECEIVED PAYMENTS THROUGH STATION-IN-CHARGE. THE GENUINENESS OF PAYMENTS VIS-A-VIS VOUCHERS HAS NOT BEEN ESTABLISHED BY THE APPELLANT. AS RIGHT LY OBSERVED, THE LABOURERS SHOWING THEM AS OUTSTANDING CREDITORS IS AN ODD FEATURE AND DEFINITELY CAST A DOUBT ON THE GENUINENESS OF SUCH CREDITORS. MOREOVER THE OUTSTAN DING SUNDRY CREDITORS FOR LABOURERS SHOWN ARE ABNORMALLY HIGH. A CLEAR BREAK UP OF SUND RY CREDITORS FOR LABOUR AND GOODS HAS NOT BEEN PRODUCED. THE DETAILS PRODUCED DO NOT GIVE AN IDEA ABOUT QUANTUM OF LABOUR PAYMENTS OUTSTANDING. THE LABOURERS BEING DA ILY WAGE EARNERS CANNOT WAIT SO LONG TO GET THEIR WAGES PAID. THOUGH THE AR HAS GIV EN A CHART SHOWING BREAK UP OF FIGURES SHOWING PAYMENTS MADE IN SUBSEQUENT YEAR, N O EVIDENCES PRODUCED TO THE EFFECT THAT PAYMENTS WERE INDEED MADE TO LABOURERS WHO WER E SHOWN AS OUTSTANDING. THE CONTENTION THAT WAGE REGISTERS ARE MAINTAINED WHICH ARE SUBJECTED TO VERIFICATION BY HPCL AND THAT ENTRIES IN THE BOOKS SHOWN IN THE AUD ITED BOOKS CONFIRM SUCH LIABILITY IS NOT TENABLE. AS LONG AS THE PAYMENTS TO OUTSTANDING LABOURERS REMAIN UNPROVED, THE ABOVE CONTENTIONS DO NOT MERIT CONSIDERATION. AS RE GARDS THE CONTENTION THAT IN THE EARLIER YEAR THE SAME HAD BEEN ACCEPTED IS AGAIN NO T ACCEPTABLE AS EACH YEAR IS INDEPENDENT UNIT OF ASSESSMENT. THE FINDINGS ARE D IFFERENT IN THIS YEAR UNDER APPEAL. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINIO N THAT THE APPELLANT FAILED TO ESTABLISH CONCLUSIVELY THE IDENTITY AND GENUINENESS OF OUTSTA NDING SUNDRY CREDITORS AND SUBSEQUENT PAYMENTS MADE TO SQUARE UP THESE CREDITO RS. HENCE, THE ADDITION MADE BY THE A.O ON THIS GROUND IS UPHELD, THE GROUND OF APP ELLANT IS REJECTED. 17. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF CASE. WE FIND THAT ASSESSEE EXPLAINED VIDE REPLY DATED 11 .12.2008 AND PRODUCED BREAK UP OF SUNDRY CREDITORS LIABILITY, STATION WISE AND EXPENDITURE HEAD WISE. IT WAS CLAIMED THAT THE OUTSTANDING AMOUNTS ARE DUE TO LABOUR CHARGES AND BUNDLING CHAR GES, DEEDING CHARGES, PROCUREMENT CHARGES, CHIPPER HOUSE MAINTENANCE CHARGES ETC. TH E ASSESSEE PRODUCED SELF MADE VOUCHERS CLAIMING THIS AS PROOF OF TRANSACTION WITH SUCH LAB OURERS BUT THE ASSESSING OFFICER DISALLOWED 11 ITA 1612/K/2009 & 1706/K/2009 RABINDRA CHAKRABORT Y, A.Y.2006-07 THE ENTIRE LABOUR PAYMENTS AMOUNTING TO RS.23,52,34 0/- AND CIT(A) CONFIRMED. WE FIND THAT THE TOTAL LABOUR CHARGES OUTSTANDING ARE ON ACCOUNT OF SUNDRY CREDITORS, WHICH REMAINS PAYABLE AS ON 31.03.2006 AND THESE ARE PARTICULARLY ON ACCO UNT OF PAYMENTS FOR THE MONTH OF FEBRUARY AND MARCH, 2006. SIMILAR LIABILITY FOR AY 2004-05 AND 2005-06 WAS ACCEPTED BY REVENUE WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT FOR THE REASON THAT THIS IS NORMAL PRACTICE IN THIS LINE OF BUSINESS THAT THIS TYPE OF PAYMENT REM AINS OUTSTANDING AS ON THE YEAR ENDING I.E. IN THE MONTH OF MARCH. NO DOUBT AFTER THREE FOUR YEAR S WHEN ASSESSMENT TOOK PLACE, THE LABOURERS, WHO CONSTITUTE THE MAIN SUNDRY CREDITORS AND THE AMOUNT IS TO BE PAID TO THEM IN THE MONTH OF APRIL ARE NOT IN THE DOMAIN OF ASSESSEE OR THEY ARE NOT WORKING UNDER HIM. IN VIEW OF THE ABOVE AND MORE SO WHEN REVENUE CONSISTENTLY ACC EPTING THIS PRACTICE, IN THIS YEAR, WITHOUT ANY BASIS THE DISALLOWANCE CANNOT BE MADE. WE DELET E THE DISALLOWANCE AND ORDER ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 18. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED AND THAT OF REVENUE IS DISMISSED. 19. ORDER PRONOUNCED IN OPEN COURT ON 06.01.2012 SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 6 TH JANUARY, 2012 /0 %12 3 JD.(SR.P.S.) . 4 ,5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SHRI RABINDRA CHAKRABORTY, 9/1D, NANDRA M SEN STREET, KOLKATA-700 005.. 2 ,-*+ / RESPONDENT, ITO, WARD-40(1), KOLKATA. 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, .%@/ BY ORDER, 2 /ASSTT. REGISTRAR .