Tapas Paul, North 24 Parganas V. A.C.I.T., Circle-51, Kolkata, Kolkata

ITA 237/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1822 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 10-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S ALONG YADEN
• Assessee Lawyers: A K TIBREWAL
• Keywords: Non-deduction of tax
• Section: 194C; 148

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.237/KOL/2014 ASSESSMENT YEAR:2008-09 TAPAS PAUL 21, KUMARPARA ROAD, BHATPARA BARRACKPORE, 24- PARGANAS (N) 743 123 [ PAN NO.AJIPP 3882 G ] / V/S . ACIT, CIRCLE-51, ROOM NO. 13, 2 ND FLOOR, BLOCK-II, UTTARAPAN BUILDING, MANIKATALA CIVIC CENTRE, KOLKATA- 700 054 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI A.K. TIBREWAL, FCA /BY RESPONDENT SHRI SALONG YADEN, ADDL. CIT-DR /DATE OF HEARING 28-03-2017 /DATE OF PRONOUNCEMENT 03-05-2017 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA DATED 16.12.201 3. ASSESSMENT WAS FRAMED BY JCIT, CIRCLE-51,KOLKATA U/S 147/144 OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 30.1 2.2011 FOR ASSESSMENT YEAR 2008-09. SHRI A.K. TIBRAWAL, LD. AUTHORIZED REPRESENTATIVE A PPEARED ON BEHALF OF ASSESSEE AND SHRI SALLONG YADEN, LD. DEPARTMENTAL REPRESENTA TIVE REPRESENTED ON BEHALF OF REVENUE. 2. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEA L ARE AS UNDER:- 1) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.80,19,210 MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 IN RESPECT OF WAGES PAID BY TH E APPELLANT TO ITS WORKERS ON THE ALLEGED GROUND THAT THERE WERE SHORTCOMINGS AND DEF AULTS IN PAYMENT OF WAGES OR OTHERWISE. ITA NO.237/KOL/2014 A.Y. 2008-09 TAPAS PAUL VS. ACIT CIR-51, KOL. PAGE 2 2) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WHILE CONFIRMING THE AFORESAID DISALLOWANCE U/S. 40(A)(IA) OF THE ACT ER RED IN NOT ACCEPTING THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER IN RESPON SE TO DIRECTIONS ISSUED BY HIM, ON MERE SUSPICION AND ARBITRARY ALLEGATIONS MADE AGAIN ST THE APPELLANT AND THE ASSESSING OFFICER. 3) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ), HAVING ACCEPTED THAT THE SUM OF RS.80,19,210 REPRESENTING DAILY WAGS PAID TO LAB OUR CANNOT BE EQUATED TO PAYMENTS MADE TO CONTRACTORS, ERRED IN CONFIRMING T HE DISALLOWANCE OF THE SAME MADE BY ASSESSING OFFICER U/S. 40(A)(IA) OF THE ACT . 4) THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF WAGES OF RS.80,19,210 PAID TO D AILY WORKERS EMPLOYED BY THE APPELLANT, RELYING ON THE PROVISIONS OF SEC. 40(A)( IA) OF THE ACT ON THE GROUND OF ALLEGED SHORTCOMINGS IN MAINTENANCE OF WAGE REGISTE R ALTHOUGH THE PROVISIONS OF SEC. 40(A)(IA) ARE APPLICABLE FOR FAILURE TO DEDUCT TAX AND/OR PAYMENT OF THE TAX DEDUCTED AT SOURCE IN ACCORDANCE WITH THE PROVISIONS OF CHAP TER XVII B OF THE ACT. 5) THAT THE LD. COMMISSIONER OF INCOME TAX ERRED IN DISMISSING THE APPELLANTS GROUND OF APPEAL RELATING TO VALIDITY OF THE IMPUGN ED RE-ASSESSMENT PROCEEDINGS INITIATED IN PURSUANCE TO THE NOTICE ISSUE BY THE A SSESSING OFFICER UNDER SECTION 148 OF THE INCOME TAX ACT, 1961. 3. EFFECTIVE INTER-CONNECTED ISSUE RAISED BY ASSESS EE IN GROUND NO. 1 TO 4 OF THIS APPEAL IS THAT LD. CIT(A) ERRED IN CONFIRMING THE O RDER OF ASSESSING OFFICER BY SUSTAINING THE DISALLOWANCE OF 80,19,210/- ON ACCOUNT OF NON-DEDUCTION OF TAX DEDUCTED AT SOURCE (TDS) U/S. 194C OF THE ACT. 4. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS CLAIMED LABOUR CHARGES AMOUNTING TO 80,19,210/- WITHOUT DEDUCTING THE TDS U/S. 194C OF THE ACT. THE AO CALL ED UPON THE ASSESSEE TO EXPLAIN THE REASONS FOR NON-DEDUCTION OF TDS AND ALSO DIREC TED TO FURNISH THE LABOUR REGISTER, NAME AND ADDRESS OF THE LABOUR, MODE OF PAYMENT, BA NK STATEMENT AND DETAILS OF PF/ESI. HOWEVER, ASSESSEE FAILED TO FURNISH THE SAM E. THEREFORE, AO DISALLOWED THE LABOUR CHARGES FOR NON-DEDUCTION OF TDS AND ADDED T O THE TOTAL INCOME OF ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THE PAYMENTS WERE MADE TO INDIVIDUAL LABOUR AND NONE OF THE CASE, IT WAS EXCEEDING MORE THAN THE PR ESCRIBED LIMIT U/S. 194C OF THE ACT. THE ASSESSEE IN SUPPORT OF HIS CLAIM ALSO FILED A M ONTHLY LIST OF PAYMENTS MADE TO THE LABOUR AND ALSO PRODUCED THE LABOUR REGISTER. A REM AND REPORT WAS CALLED FOR FROM THE AO WHEREIN IT WAS SUBMITTED THAT THE WAGE REGISTER HAS BEEN PREPARED AFTER-THOUGHT AND IT DID NOT CONTAIN THE ADDRESS OF THE LABOURERS AND DETAILS OF WORK LOCATION. ITA NO.237/KOL/2014 A.Y. 2008-09 TAPAS PAUL VS. ACIT CIR-51, KOL. PAGE 3 HOWEVER, LD. CIT(A) OBSERVED CERTAIN DEFECTS IN THE LABOUR REGISTER PRODUCED BY ASSESSEE AND ACCORDINGLY HE REJECTED THE CONTENTION OF ASSESSEE BY OBSERVING AS UNDER:- THE CLAIM OF THE ASSESSEE IS NOT CONVINCING. THE A SSESSEE ADMITS THE APPARENT FLAW BUT CLAIMS THAT IT WAS BY INADVERTENCE. THE ASSESSE E HAS NOT EXPLAINED AS TO HOW A SINGLE SERIALLY NUMBERED LIST OF LABOUR IS ENUMERAT ED IN THE COMPUTERIZED REGISTER OF WAGES WHEN THE ASSESSEE WAS WORKING AT DIFFERENT SI TES AND WHEN THE ASSESSEE HAS NO ASSETS IN THE NAME OF OFFICE MACHINES OR EVEN A COM PUTER. THE ASSESSEE HAS NOT OFFERED TO PRODUCE THE PERSON(S) WHO HAVE PUT THEIR THUMB IMPRESSIONS AGAINST MULTIPLE NAMES. THE ASSESSEE HAS NOT OFFERED TO HAV E THE REGISTER FORENSICALLY EXAMINED. THE ENTIRE REGISTER CONTAINS NO DATE OF P AYMENT TO LABOUR AND THERE IS NO DATE OF RECEIPT OF THE PAYMENT BY ANY SO CALLED SIG NATORY. THEREFORE, IT IS HELD THAT THE REGISTER OF WAGES, ON WHICH THE ASSESSEE HAS PLACED HIS ENTIRE RELIANCE, CANNOT BE TAKEN AS PROOF THAT THE ASSESSEE HAD NOT HIRED LABO UR UNDER A CONTRACT OR SUB- CONTRACT. THUS THE APPLICABILITY OR NON APPLICABILI TY OF SECTION 40(A)(IA) OF THE ACT CANNOT BE TESTED AS THE PAYMENTS ARE IN CASH. HOWEV ER IT IS QUITE POSSIBLE THAT ALL THE LABOUR MAY NOT HAVE BEEN ENGAGED THROUGH A CONTRACT OR OR SUB-CONTRACTOR BUT THE AS HAS NOT PRODUCED ANY PF/ESI REGISTERS AND PROOF OF PAYMENT OF SUMS UNDER THE EPF & MP ACT OR THE ESI ACT TO SUBSTANTIATE THAT ALL TH E LABOUR WERE HIS OWN. THE ASSESSEE HAS ALSO NOT COMPLIED WITH THE STATE GOVER NMENTS BUILDING AND OTHER CONSTRUCTION WORKERS (REGULATION OF EMPLOYMENT AND CONDITIONS OF SERVICE) ACT, 1996 AND HAS NOT ADDUCED EVIDENCE THAT HE HAS GOT H IS BUSINESS AND HIS LABOUR REGISTERED UNDER THE STATE ACT. THE REGISTER OF WAG ES SO PRODUCED HAS NOT BEEN CERTIFIED TO HAVE BEEN INSPECTED BY THE LABOUR DEPA RTMENT AS PER LAW. IN VIEW OF THE ABOVE SHORTCOMINGS AND DEFAULTS IT I S HELD THAT IN PRINCIPLE THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT SEC TION 40(A)(IA) OF THE ACT WAS APPLICABLE TO THE ASSESSEE IN RESPECT OF THE LABOUR PAYMENTS AND THE REVISED GROUND NO.1 IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. 6. LD. AR FOR THE ASSESSEE BEFORE US FILED PAPER BO OK WHICH IS RUNNING PAGES FROM 1 TO 91 AND SUBMITTED THAT ALL THE LABOURERS ARE EM PLOYEE OF ASSESSEE AND IN NONE OF THE CASE PAYMENT IS EXCEEDING THE LIMIT TO ATTRACT THE PROVISION OF TDS. LD AR DREW OUR ATTENTION ON THE LABOUR REGISTER WHICH IS PLACE D ON PAGES 27 TO 91 OF THE PAPER BOOK. ON THE OTHER HAND, LD. DR HEAVILY RELIED ON THE ORD ER OF AUTHORITIES BELOW. 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT AO HAS DISALLOWED THE PAYMENT MADE BY ASSESSEE TO THE LABOURERS ON TH E GROUND THAT TDS WAS NOT DEDUCTED U/S. 194C OF THE ACT WHICH WAS SUBSEQUENTL Y CONFIRMED BY THE LD. CIT(A). ITA NO.237/KOL/2014 A.Y. 2008-09 TAPAS PAUL VS. ACIT CIR-51, KOL. PAGE 4 NOW THE ISSUE BEFORE US ARISES SO AS TO WHETHER THE LABOURERS ARE THE EMPLOYEES OF ASSESSEE OR THEY ARE WORKING IN CONTRACTUAL CAPACIT Y ATTRACTING THE PROVISIONS OF TDS. FROM THE LABORERS REGISTER PLACED ON PAGES 27 TO 91 OF THE PAPER BOOK, WE FIND THAT THE PAYMENT WAS MADE TO INDIVIDUAL LABOURERS AND NOT TO THE LABOUR CONTRACTOR. THEREFORE THE INDIVIDUAL LABOURERS CAN BE TREATED AS EMPLOYEE OF THE ASSESSEE. THE EMPLOYER IS A PERSON WHO CONTROLS AND DIRECTS A SERVANT OR WORKER UNDER AN EXPRESS OR IMPLIED CONTRACT OF EMPLOYMENT. THE EMPL OYER ACCORDINGLY IS UNDER OBLIGATION TO PAY HIM THE SALARY OR WAGES IN COMPEN SATION. ACCORDINGLY, AN INDIVIDUAL WHO WORKS PART-TIME OR FULL-TIME UNDER A CONTRACT O F EMPLOYMENT WHETHER ORAL OR WRITTEN EXPRESSED OR IMPLIED AND HE IS LIABLE TO PE RFORM THE DUTIES AS ASSIGNED. THAT PERSON IS CALLED AS EMPLOYEE. IN THE INSTANT CASE WE FIND THAT THE LABOURERS ARE WORKING UNDER THE DIRECT SUPERVISION OF THE ASSESSEE. THEY HAVE NO OTHER SEPARATE BUSINE SS ORGANIZATION. THEY ARE REPRESENTING THE ORGANIZATION OF THE ASSESSEE. THUS IN OUR CONSIDERED VIEW THERE EXISTS AN EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE A SSESSEE AND LABOURERS. THE PAYMENT TO THE EMPLOYEES CAN BE IN THE FORM OF FIXE D SALARY PLUS INCENTIVE COMMISSION AS MUTUALLY AGREED. SIMILARLY THE PAYMENT OF PF AND ESI BY THE EMPLOYER CANNOT BE THE BASIS OF DECIDING WHETHER THERE EXIST EMPLOYER AND EMPLOYEE RELATIONS HIP. FOR THE APPLICABILITY OF PF AND ESI THERE ARE CERTAIN CONDITIONS ATTACHED TO AN ORGANIZATION. THE CHARACTER OF THE RELATIONSHIP OF THE EMPLOYER AND EMPLOYEE CANNOT BE CHANGED ON THE BASIS WHETHER AN ORGANIZATION IS REGISTERED UNDER PF AND ESI. IN THIS CONNECTION WE ALSO RELY IN THE ORDER OF HON BLE TRIBUNAL OF DELHI IN THE CASE OF ST. STEPHENS HOSPITAL VS. DCIT REPORTED IN 6 SOT 60 WHEREIN IT WAS HELD AS UNDER : A CAREFUL PERUSAL OF THE SAID APPOINTMENT LETTERS S HOWED THAT OUT OF THE 18 CONSULTANT DOCTORS IN QUESTION, 11 DOCTORS WERE BEI NG PAID A FIXED MONTHLY AMOUNT BY THE ASSESSEE, WHEREAS THE REMAINING 7 DOCTORS WERE BEING PAID SOME FIXED SHARE OF FEES RECEIVED FROM PRIVATE PATIENTS TREATED BY THEM IN ADDITION TO THE FIXED MONTHLY PAYMENT. BARRING THAT ASPECT, THERE WAS NO MATERIAL DIFFERENCE IN THE TERMS AND CONDITIONS OF THEIR APPOINTMENT. [PARA 11] KEEPING IN VIEW THE POSITION ARISING FROM THE TERMS OF APPOINTMENT OF CONSULTANT DOCTORS AS WELL AS THE SERVICE RULES GOVERNING THE EMPLOYEES OF THE ASSESSEES HOSPITAL, IT COULD REASONABLY BE CONCLUDED THAT ALL THE CONSULTANT DOCTORS WERE EMPLOYEES OF THE ASSESSEE, AND THAT EVEN IF THERE W AS A DISTINCTION BETWEEN THE TERMS OF EMPLOYMENT OF THE PERMANENT EMPLOYEES AND THOSE OF CONSULTANT DOCTORS, THE FACT ITA NO.237/KOL/2014 A.Y. 2008-09 TAPAS PAUL VS. ACIT CIR-51, KOL. PAGE 5 WAS THAT THEY WERE THE EMPLOYEES OF THE ASSESSEE FA LLING IN THE CATEGORY OF FIXED PERIOD/CONTRACT EMPLOYEE AND/OR PART-TIME EMPLOYEE. IT, THEREFORE, FOLLOWED THAT THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTAN T DOCTORS WAS PURELY THAT OF EMPLOYER AND EMPLOYEE AND REMUNERATION PAID TO THEM IN TERMS OF THE SAID RELATIONSHIP WAS SALARY WHICH ATTRACTED THE PROVISI ONS OF SECTION 192. [PARA 14] THE TREATMENT GIVEN BY THE ASSESSEE AS WELL AS THE CONSULTANT DOCTORS TO THE REMUNERATION PAID IN THEIR RESPECTIVE BOOKS OF ACCO UNT WAS NOT CONCLUSIVE TO DECIDE THE NATURE OF THE SAID REMUNERATION WHICH HAD TO BE ASCERTAINED ON THE BASIS OF RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTAN T DOCTORS. [PARA 16] THERE WAS AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONSULTANT DOCTORS AND, CONSEQUENTLY, REMUNERATION PAID TO THEM WAS CHARGEABLE TO TAX UNDER THE HEAD SALARIES. THE SAID PAYMENTS, T HUS, WERE SUBJECT TO DEDUCTION OF TAX AS PER PROVISIONS OF SECTION 192 AND NOT AS PER PROVISIONS OF SECTION 194J. THUS, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN TREATI NG THE ASSESSEE AS IN DEFAULT FOR SHORT DEDUCTION OF TAX AT SOURCE FROM THE PAYMENTS MADE T O THE CONSULTANT DOCTORS. [PARA 17] THE ASSESSEES APPEAL WAS, ACCORDINGLY, DISMISSED. IN THE LIGHT OF ABOVE REASONING, WE HOLD THAT THE A SSESSEE IS NOT LIABLE FOR TDS DEDUCTION UNDER SECTION 194C OF THE ACT. THE ASSESS EE GETS THE RELIEF ACCORDINGLY. HENCE, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. AS WE HAVE ADJUDICATED THE ISSUE IN FAVOUR OF ASSESSEE ON MERIT, WE ARE NOT INCLINED TO ADJUDICATE THE TECHNICAL ISSUE RAISED BY THE ASSESSEE. HENCE, THE GROUND NO.5 OF THE ASSE SSEE IS DISMISSED AS INFRUCTUOUS. 8. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2017 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 03/05/2017 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-TAPAS PAUL, 21, KUMARPARA ROAD, BHATPARA BARRACKPORE 24-PARGANA S (N)-743123 2. /RESPONDENT-ACIT, CIRCLE-51, ROOM NO.13, 2 ND FLOOR, BLOCK-II, UTTARAPAN BUILD ING, MANIKTALA CIVIC CENTRE, KOLKATA-54 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,