I.T.O Wd - 1(1),Hgl, Hooghly V. M/s Blue Heaven Construction Co, Hooghly

ITA 1761/KOL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6520 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 05-06-2013
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA
• Keywords: Question of law
• Section: 143(3); 194C

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1761/KOL/2013 #$ %&/ ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WD-1(1), HOOGHLY. VS. M/S. BL UE HEAVEN CONSTRUCTION CO. PAN: AAFFB5595G) (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 05.05.2014 DATE OF PRONOUNCEMENT: 05.05.2014 FOR THE APPELLANT: SHRI D. J. MEHTA, JCIT, SR. DR FOR THE RESPONDENT: SHRI SOMNATH GHOSH, ADVOCATE / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-XXXVI, KOLKATA IN APPEAL NO. 758/CIT(A)-XXXVI/KOL/2009-10/SET ASIDE DATED 13 .02.2013. ASSESSMENT WAS FRAMED BY ITO, WARD-1(1), HOOGHLY U/S. 143(3) OF THE INCOME-T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2007-08 VIDE HIS ORD ER DATED 30.11.2009. 2. AT THE OUTSET, IT IS NOTICED THAT THIS APPEAL BY REVENUE IS TIME BARRED BY 47 DAYS AND REVENUE HAS FILED CONDONATION PETITION SUPPORTED BY AFFIDAVIT. AS THE REASONS STATED IN THE CONDONATION PETITION WAS CONFRONTED TO LD. COUNSEL FOR THE ASSESSEE AND IN VIEW OF THE SAME HE FAIRLY CONCEDED THAT THE DELAY CAN BE CONDONED, ACC ORDINGLY, WE CONDONE THE DELAY AND APPEAL IS ADMITTED FOR HEARING. 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY AO FOR NON-DEDUCTION OF TDS U/ S. 194C(1) OF THE ACT BY APPLYING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THI S, REVENUE HAS RAISED FOLLOWING TWO GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. CIT(A) WAS NOT JUSTIFIED IBN ALLOWING THE RELIEF OF RS.15,07,810/- BY NOT APPLYI NG SEC. 40(A)(IA) R/W SEC. 194C(1). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) OUGHT TO HAVE DISBELIEVED THE CONTENTION OF THE ASSESSEE THAT THERE WERE TWO COMPLETELY DIFFERENT SETS OF LABOUR FORCE IN THE TWO HALVES O THE F.Y. 2006-07. 2 ITA NOS. 1761/K/2013 M/S. BLUE HEAVEN CONSTRUCTION CO. AY 2007-08 4 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE FIRM CAR RIES ON THE BUSINESS OF CIVIL CONSTRUCTION. IN PURSUANCE OF ITS BUSINESS ASSESSE E FIRM PAID LABOUR CHARGES TO THE EXTENT OF RS.15,07,810/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS ASSESSEE FILED CASH BOOK, PARTY- WISE LEDGER AND BANK BOOK ALONG WITH OTHER DETAILS. FOR THIS, AO HAD RECORDED THE FOLLOWING FACTS: THE ASSESSEE MADE DUE COMPLIANCE TO THE AFORESAID NOTICES FROM TIME TO TIME AND HAD SUBMITTED THE BOOKS OF ACCOUNTS, MORE SPECIFICALLY CASH BOOK, PARTY WISE LEDGER AND BANK BOOK. IN COURSE OF PROCEEDINGS THE ASSESSEE ALSO F URNISHED THE DETAILS OF PURCHASE, STATEMENT OF LABOUR CHARGES PAID (PARTY WISE), STAT EMENT OF GROSS AMOUNT (NET RECEIPT) FROM FLAT OWNERS FOR MY SATISFACTION. THE ASSESSEE HAD ALSO PRODUCED VARIOUS OTHER DETAILS WHICH WERE EXAMINED IN RELATION TO BOOKS OF ACCOUNTS. THE AO ON PERUSAL OF DETAILS FILED BY ASSESSEE DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS I.E. PARTY WISE LEDGER AND PARTY WISE LABOUR CHARGES PAI D NOTED THAT THE ASSESSEE HAS NOT DEDUCTED TDS ON BEHALF OF LABOUR PAYMENTS UNDER THE PROVISIO NS OF SECTION 194C(1) OF THE ACT. ACCORDINGLY, HE DISALLOWED ENTIRE LABOUR CHARGES AT RS.15,07,810/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO AFTER NOTING THE FACT THAT THE ASSESSEE HAS MADE PAYMENT PER DAY I.E. AT EVERY INS TANCE BELOW RS.20,000/- TO EACH OF THE LABOURERS AND AGGREGATING IN A YEAR LESS THAN RS.50 ,000/- FOR EACH OF THE LABOURER. HE DELETED BY OBSERVING IN PARA 5 AS UNDER: 5. I HAVE HEARD THE A/R AND PERUSED THE ASSESSMENT ORDER AS WELL AS MATERALS ADDUCED ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE AO ON GOING THROUGH THE DETAILS OF PAYRNENT MADE TO THE LABOURERS ALLEGED T HAT THEY WERE MADE TO LABOUR CONTRACTORS WTHOUT DEDUCTING TAX AT SOURCE THEREFR OM IN VIOLATION OF PROVSIONS OF SEC. 194C(1) OF THE I.T. ACT, 1961 WHICH PROMPTED HIM TO INVOKE THE PROVISIONS OF SEC. 40(A)(IA) OF THE I.T. ACT, 1961 AND TO DISALLOW THE ENTIRE PAYMENT OF LABOUR CHARGES AND MAKE ADDITION THEREOF TO THE TOTAL INCOME OF THE AP PELLANT. BEFORE COMING TO THIS CONCLUSION THAT THE INDIVIDUAL LABOURERS WERE LABOU R CONTRACTORS, THE AO WAS UNABLE TO ADDUCE ANY MATERIAL ON RECORD IN SUPPORT OF HIS JUS TIFICATION THAT THERE WAS ACTUALLY ANY CONTRACTUAL OBLIGATION BEHIND PAYMENT OF LABOUR CHA RGES AND AS SUCH THERE WAS FAILURE ON THE PART OF THE APPELLANT TO COMPLY WITH THE REQ UIREMENTS OF SEC. 194C( 1) OF THE ACT, ALTHOUGH FULL DETAILS AS PER HIS SATISFACTION WERE MADE AVAILABLE TO HIM DURING THE COURSE OF ASSESSMENT PROCEEDINGS. BE THAT AS IT MAY , IT IS OBSERVED FROM THE MATERIALS ADDUCED ON RECORD THAT THE APPELLANT HAD MADE PAYME NT OF LESS THAN RS. 20,000/- AT EVERY INSTANCE AND AGGREGATNG TO LESS THAN RS. 50, 000/- TO EACH OF THESE PARTES THROUGHOUT THE YEAR. IT IS N THIS CONTEXT THAT THE PROVSONS OF SUB-SEC. 3(I) TO SEC. 194C OF THE I T. ACT, 1961 ALONG WITH THE FIRST PROVISO THEREOF ARE REPRODUCED HEREIN BELOW FOR REFERENCE: (3) NO DEDUCIION SHALL BE MADE UNDER SUBSECTION ( 1) OR SUB-SEETION (2) FROM - 3 ITA NOS. 1761/K/2013 M/S. BLUE HEAVEN CONSTRUCTION CO. AY 2007-08 (I) THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDIIED OR PAID TO THE ACCOUNT OF, OR TO, THE CONTRACTOR, IF S UCH SUM DOES NOT EXCEED TWENTY THOUSAND RUPEES: PROVDED THAT WHERE THE AGGREGATE OF THE AMOUNTS OF SUCH SUMS CREDITED OR PAID OR LKELY TO BE CREDITED OR PAID DURING THE FI NANCIAL YEAR EXCEEDS FIFTY THOUSAND RUPEES, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SUB-SECTION (1) OR, AS THE CASE MAY BE, SUB- SEC TION (2) SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION: IN OTHER WORDS, AS PER CLAUSE (I) OF SEC,. 194C(3) OF THE ACT, NO DEDUCTION SHALL BE MADE UNDER SUB-SECTIONS (1) OR (2) OF SEC. 194C FROM THE AMOUNT OF ANY SUM CREDITED OR PAID OR LIKELY TO BE CREDTED OR PAID TO THE ACCOUNT OF, OR TO, THE CONTRACTOR OR SUB-CONTRACTOR, IF SUCH SUM DOES NOT EXCEED RS.20,000/-; WHEREAS, A S PER THE FIRST PROVISO TO SEC.194C(3) OF THE ACT, WHERE THE AGGREGATE OF THE AMOUNTS OF S UCH SUMS CREDITED OR PAID OR CREDITED OR LIKELY TO BE CREDITED DURING THE RELEVANT PREVIO US YEAR EXCEEDS RS. 50,000/-, THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS REFERRED TO IN SEC. 194C(1) OR 194C(2) OF THE ACT SHALL BE LIABLE TO DEDUCT INCOME-TAX UNDER THIS SECTION. THE OBJECT OF THE PROVISO IS TO CARVE OUT FROM THE MAIN SECTION A CLASS OR CATEG ORY TO WHICH THE MAIN SECTION DOES NOT APPLY. ACCORDNGLY, IT IS CONSTRUED THAT PAYMEN T OVER AND ABOVE RS. 20,000/- IS ENOUGH TO TRIGGER THE PROVISIONS OF S. 194C OF THE I.T. ACT, 1961; HOWEVER, THE APPLICATION THEREOF WILL DEPEND ON THE AGGREGATE PA YMENTS, IF THE SAME IS ABOVE RS. 50,000/-. HOWEVER, ON PERUSAL OF THE SUMMARY OF LAB OUR CHARGES AND THE INDIVIDUAL STATEMENT OF LABOUR CHARGES, WHICH ARE NOT DISPUTED BY THE AO AND HAVE BEEN FOUND TO BE IN ORDER AS VERIFIED, IT IS FOUND THAT NOT A SN GLE PAYMENT TO THE SAID LABOURERS EXCEEDED THE SUM OF RS. 20,000/- AT ONE TIME OR RS. 50,000/- ANNUALLY. THEREORE, THE APPELLANT WAS NOT UNDER ANY LIABILITY IN LAW TO DED UCT ANY TAX UNDER SEC. 194C(1) OF THE ACT, AS CONCEIVED BY THE AO, FROM THE LABOUR CHARGE S NCURRED DURING THE ASSESSMENT YEAR UNDER APPEAL. IN VIEW OF SUCH CLEAR EXPOSITION IN LAW AND ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, IT IS OBSERVED THAT THE AO WAS WHOLLY IN ERROR IN NOT APPRECIATING THAT THE PROVISIONS OF S. 40(A)(IA) OF THE ACT ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE AS ON A CONJO INT READING OF S. 194C(1) ALONG WITH S. 194C(3) OF THE ACT, THE APPELLANT DID NOT HAVE L EGAL LIABILITY TO DEDUCT TAX AT SOURCE IN MAKJNG PAYMENTS OF LABOUR CHARGES AND AS CONSEQUENC E THEREOF, THE APPLICABILITY OF S. 40(A)(IA) OFTHE ACT BECOMES REDUNDANT AND AS SUCH T HE ENTIRE AMOUNT OF RS. 15,07,810/- IS THEREFORE DRECTED TO BE DELETED. APPELLANT GETS RELIEF OF RS.15,07,810/-. AGGRIEVED, REVENUE CAME IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SHRI SO MNATH GHOSH, ADVOCATE FILED A COPY OF JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. HATISH RAMANLAL PATEL (2013) 35 TAXMANN 16 (GUJ), WHEREIN IT IS HELD THAT WHERE NO INDIVIDUAL PAYMENT MADE TO ANY SUB- CONTRACTOR EXCEEDED RS.20,000 AT A TIME NOR TOTAL P AYMENTS TO AN INDIVIDUAL EXCEEDED RS.50,000 IN A YEAR, NO TDS LIABILITY WOULD ARISE U NDER SECTION 194C BEFORE US, LD. COUNSEL FOR THE ASSESSEE FILED COMPLETE PAPER BOOK WHEREIN THE COMPUTATION OF LABOUR CHARGES INDIVIDUALLY TO EACH LABOUR IS FILED WHICH CLEARLY DEMONSTRATES THAT NO INDIVIDUAL PAYMENT EXCEEDS RS.20,000/- ON EACH OCCASION OR INDIVIDUAL PAYMENT DOES NOT EXCEED RS.50,000/- IN A 4 ITA NOS. 1761/K/2013 M/S. BLUE HEAVEN CONSTRUCTION CO. AY 2007-08 YEAR TO EACH OF THE LABOURER. ONCE THIS IS THE POS ITION, WE FEEL THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE BY TH E DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF HATISH RAMANLAL PATEL (SUPRA), WHEREIN IT IS HELD AS UNDER: 10. FROM THE ABOVE, IT CAN BE SEEN THAT THE ASSESS EE HAD PRODUCED COPY OF THE ACCOUNTS OF CARTING PAID OF RS.1,09,68,236/- DURING THE YEAR UNDER CONSIDERATION. ON THE BASIS OF SUCH DOCUMENT, HE HAD FROM THE OUTSET CONTENDED WIT H THE ASSESSING OFFICER THAT NO INDIVIDUAL PAYMENT EXCEEDED RS.20,000/- AT A TIME N OR THE TOTAL TO AN INDIVIDUAL PAY EXCEEDED RS.50,000/- IN A YEAR. THE ASSESSING OFFI CER, WITHOUT DISCARDING SUCH STAND OF THE ASSESSEE, PROCEEDED TO MAKE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT ON THE PREMISE THAT TAX WAS NOT DEDUCTED AT SOURCE. CIT(A ) AND TRIBUNAL CAME TO THE CONCLUSION THAT SUCH DISALLOWANCE WAS MADE WITHOUT ASCERTAININ G THE LIABILITY OF DEDUCTING TAX AT SOURCE. NO QUESTION OF LAW THEREFORE ARISES. 7. AS THE ISSUE IS SQUARELY COVERED IN FAVOUR OF AS SESSEE AND ASSESSEE IS NOT LIABLE TO DEDUCT TDS U/S. 194C(1) OF THE ACT AND AS THE FACTS CLEARLY REVEALED SUCH A SITUATION, INVOCATION OF PROVISION OF SECTION 40(A)(IA) OF THE ACT IS AGAINST THE PROVISIONS OF LAW. WE CONFIRM THE ORDER OF CIT(A) IN DELETING THE ADDITIO N. APPEAL OF REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 9. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 5 TH MAY, 2014 -. #/0 1 JD.(SR.P.S.) 2 *3 4 3%5- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT ITO, WARD-1(1), HOOGHLY 2 *+() / RESPONDENT M/S. BLUE HEAVEN CONSTRUCTION CO., DA ZIARY COMPLEX, S. C. RAKSHIT ROAD, CHANDANNAGARE, HOOGHLY. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 3:; *# / DR, KOLKATA BENCHES, KOLKATA +3 */ TRUE COPY, #