A.C.I.T., Circle-31,Kolkata, Kolkata V. Kalpana Mukherjee, Kolkata

ITA 2693/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4270 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMS TAUHEED JCITSRDR
• Assessee Lawyers: ANIKESH BANERJEE
• Keywords: Principle of natural justice; Additional evidence
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI K.NARSIMHA CHARY, JUDICIAL MEMBER ITA NO.2693/KOL/2013 ASSESSMENT YEAR:2009-10 ACIT, CIRCLE-31, 4 TH FLOOR, 10B, MIDDLETON ROW, KOLKATA-13 / V/S . KALPANA MUKHERJEE, 95B, LENIN SARANI, KOLKATA-13 [ PAN NO.ADTPM 5412 E ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SMS TAUHEED, JCIT-SR-DR- /BY RESPONDENT SHRI ANIKESH BANERJEE, ADVOCATE /DATE OF HEARING 25-10-2016 /DATE OF PRONOUNCEMENT 09-11-2016 /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)-XIX, KOLKATA DATED 23.09.2013. ASSESS MENT WAS FRAMED BY ITO, TECH-11, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 23.11.2011 FOR ASSE SSMENT YEAR 2009-10. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A)-XIX, KOLKATA HAS ERRED IN FACT AND IN LAW AND FAILED TO PROVE THAT THE PAYMENT OF INTEREST OF RS.325448 WAS INCIDENTAL TO THE BUSINES S ACTIVITY OF THE ASSESSEE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-XIX, KOLKATA HAS ERRED IN FACT AND IN LAW IN ALLOWING TH E PAYMENT OF SUB-CONTRACT EXPENSES 6169180 WITHOUT EXAMINING THE WAGE REGISTE R AT THE TIME OF APPELLATE PROCEEDINGS AND ACCEPTED THE CLAIM OF THE ASSESSEE IN FULL. ITA NO.2693/KOL/2013 A.Y.2009 -10 ACIT CIR-31 KOL. VS. KALPANA MUKHERJ EE PAGE 2 SHRI SMS TAUHEED, LD. DEPARTMENTAL REPRESENTATIVE A PPEARED ON BEHALF OF REVENUE AND SHRI ANIKESH BANERJEE, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE. 2. FIRST ISSUE RAISED BY REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR 3,25,448/- ON ACCOUNT OF INTEREST ON THE MONEY ADVANCED FOR NON-BUSINESS. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE, AN INDIV IDUAL CARRIES ON BUSINESS AS OF ELECTRICAL WORKS CONTRACTOR IN NAME AND STYLE OF A.R. RURAL ELECTRICALS (ARRE FOR SHORT). THE ASSESSEE IS ALSO 1/3 RD SHAREHOLDER AND DIRECTOR OF M/S ARCON ELECTRICALS (P) LTD. (MAEPL FOR SHORT). THE BALANCE SHEET OF THE A SSESSEE WAS SHOWING THE ADVANCES FOR THE PURCHASE OF THE LAND FOR 57,22,800/- ON 31.03.2009 TO MAEPL WHICH WAS PURCHASED IN THE NAME OF MAEPL. AT THE SAME TIME TH E ASSESSEE WAS HAVING SECURED AND UNSECURED LOAN FOR ITS BUSINESS ON WHICH INTERE ST OF RS. 3,25,448/- WAS INCURRED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE DID NOT CHARGE ANY INTEREST FROM MAEPL ON THE ADVANCE GIVEN TO IT. ACCORDINGLY, THE AO OBS ERVED THAT INTEREST BEARING FUND OF ASSESSEE HAS BEEN DIVERTED FOR NON-BUSINESS ACTIVIT Y AND THAT TOO WITHOUT INTEREST. ACCORDINGLY, AO DISALLOWED INTEREST EXPENSE OF 3,25,448/- AS CLAIMED BY ASSESSEE IN HER PROFIT AND LOSS ACCOUNT AND ADDED TO THE TOT AL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT THERE WAS SUFFICIE NT OWN FUND AS ON 31.03.2009 AMOUNTING TO 1,64,85,047.55. THE MONEY WAS ADVANCED OUT OF OWN F UND. LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF ASSESSEE DELETE D THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 4.3 FROM THE ASSESSMENT ORDER IT APPEARS THAT THE A O NEVER CONFRONTED THE APPELLANT ON THE POINTS ON WHICH ADDITION WAS CONTE MPLATED. THE MAIN GRIEVANCE OF THE APPELLANT STEMS FROM THE FACT THAT THE AO NEVER GAVE ANY OPPORTUNITY TO HER FOR FILING THE DOCUMENTS NEEDED TO EXPLAIN HER CASE. TH E BASIC INGREDIENT OF NATURAL JUSTICE IS FOUND MISSING IN THE CASE. SINCE THE APPELLANT HAS COME UP WITH DOCUMENTS AND NEW SUBMISSIONS ALONG WITH REVISED GROUNDS OF A PPEAL IN SUPPORT OF HER STAND DURING THE APPELLATE PROCEEDING, THE CASE WAS REMAN DED BACK TO THE AO VIDE LETTER DATED 19.12.2012 TO SUBMIT A REPORT COVERING ALL TH E GROUNDS OF APPEAL. HOWEVER ONLY A SKELETAL REPORT WAS SENT BACK VIDE LETTER DATED 0 9.01.2013 COVERING ONE CLERICAL ITA NO.2693/KOL/2013 A.Y.2009 -10 ACIT CIR-31 KOL. VS. KALPANA MUKHERJ EE PAGE 3 MISTAKE RECTIFIED WHERE THE ADDITION OF 66,18,032/- TO BE READ AS 61,69,180/- AND THE ISSUE ON THE MATTER OF DISALLOWANCE MADE U/S. 4 0(A)(IA) IN WHICH THE CASE OF MERLYN SHIPPING & TRANSPORT, VISAKHAPATNAM VS. ADDL . CIT, R-1, VISAKHAPATNAM WAS REFERRED TO BY MY PREDECESSOR. IN THE REJOINDER TO THE REMAND REPORT OF THE AO, THE AR OF THE APPELLANT STATED - THAT THE AO ONLY SUPPLIED THE JUDGMENT OF THE HON'BLE ANDHRA PRADESH HIGH COURT RELATED TO MERILYN SHIPPING CASE . HE NEITHER COMMENTED NOR REJECTED THE APPLICATION. AS A RESULT THE ADDITIONAL EVIDENCES SEEM TO BE ACCEPTED. SINCE THE ISSUES HAVE NOT BEEN ADDRESSED BY THE AO HIMSELF IN FACILITATING THE DISPOSAL OF THE APPEAL, I HAVE NO OTHER OPTION BUT TO ADJUDICATE THE MATTER ON THE BASIS OF SUBMISSIONS AND DOCUMENTS FI LED BEFORE ME BY THE APPELLANT. 4.4 COMING TO THE MERITS OF THE CASE IN SO FAR AS T HIS GROUND IS CONCERNED, IT IS SEEN THAT THE ASSESSMENT HAS BEEN MADE WITHOUT CONFRONTI NG THE APPELLANT ON THE ISSUE WHEREAS THE AR OF THE APPELLANT HAS NOW GIVEN A PLA USIBLE EXPLANATION TO THE ISSUE AT HAND I.E. THE INTEREST PAYMENT OF 3,25,448/- DISALLOWED ON THE GROUND THAT IT WAS NOT INCIDENTAL TO THE APPELLANTS BUSINESS ACTIVITY. TH E AO HAS TO ESTABLISH THE NEXUS OF THE INTEREST PAYMENT AND THE AMOUNT DIVERTED FOR NO N BUSINESS PURPOSE FOR MAKING ANY DISALLOWANCE. SINCE THE APPELLANT HAS DISCHARGE D HER ONUS IN EXPLAINING HER CASE WHICH SHOULD HAVE BEEN DEALT WITH BY THE AO AT THE TIME OF ASSESSMENT PROCEEDING OR EVEN AT THE TIME OF REMAND REPORT PROCEEDING, THE A DDITION MADE ON THIS COUNT IS DELETED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 5. BEFORE US LD. DR RELIED ON THE ORDER OF AO AND P RAYED BEFORE THE BENCH TO CONFIRM THE SAME. ON THE OTHER HAND, LD. AR FILED P APER BOOK WHICH IS RUNNING PAGES FROM 1 TO 32 AND CASH FLOW STATEMENT WHICH IS TAGGE D WITH THE RECORD. IT WAS DEMONSTRATED THAT THE MONEY HAS BEEN ADVANCED OUT O F THE OWN FUND OF THE ASSESSEE. THE LD. AR RELIED ON THE ORDER OF LD. CIT(A). 6. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT THERE WAS SUFFICIENT FUND AVAILABLE WITH ASSESSEE AS PER ITS BALANCE SHE ET WHICH IS PLACED ON PAGE 20 OF THE PAPER BOOK. WE ALSO FIND THAT THE LOAN LIABILITIES SHOWN BY THE ASSESSEE ARE INCLUSIVE OF CAR LOAN ETC. WHICH IN OUR CONSIDERED VIEW CANNO T BE ADVANCED TO MAEPL BUT THE INTEREST ON SUCH LOAN HAS BEEN BOOKED IN THE BOOKS OF ACCOUNTS. THEREFORE THE AO SHOULD HAVE ALLOCATED THE INTEREST ON REASONABLE BA SIS BEFORE MAKING ANY DISALLOWANCE FOR THE DIVERSION OF THE FUNDS. WE ALSO FIND THAT T HE ORDER OF THE AO IS ALSO SILENT FOR THE AVAILABILITY OF THE OWN FUNDS OF THE ASSESSEE. BUT THE AO CHOSE TO MAKE THE DISALLOWANCE OF 100% OF THE INTEREST EXPENSES ON HI S OWN PRESUMPTIONS AND ITA NO.2693/KOL/2013 A.Y.2009 -10 ACIT CIR-31 KOL. VS. KALPANA MUKHERJ EE PAGE 4 CONJECTURES. LD. DR BEFORE US HAS NOT BROUGHT ANYTH ING CONTRARY TO THE FINDING OF LD. CIT(A). IN THE BACKGROUND OF THE ABOVE DISCUSSIONS AND PRECEDENT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A) AND ACCORDINGL Y WE UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. NEXT ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION OF 61,69,180/- ON ACCOUNT OF WAGE EXPENSES INCURRED B Y ASSESSEE. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE HAS INCURRED WAGE EXPENSE ON WHICH TDS HAS NOT BEEN DED UCTED. THEREFORE, THE WAGE OF 61,69,180/- WAS DISALLOWED AND ADDED TO THE TOTAL I NCOME OF ASSESSEE. 9. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHEREAS ASSESSEE SUBMITTED THE WAGES REGISTER AND STATED THAT ALL LA BOURERS ARE EMPLOYEES. IN NONE OF THE CASE THE PAYMENT IS EXCEEDING MORE THAN TAXABLE LIMIT AS SPECIFIED U/S 192 OF THE ACT. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS M ADE BY ASSESSEE DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5.2 ON EXAMINATION OF THE DETAILS FILED, IT IS OBS ERVED THAT THE ABOVE PAYMENTS RELATE TO THE DIRECT EXPENSES INCURRED IN RESPECT OF LABOU R PAYMENTS AND NOT INSTALLATION AND CONTRACT EXPENSES AS STATED BY THE AO. STATEMENT OF PAYMENTS TO LABOURERS SITE WISE AND MONTH-WISE FOR THE FINANCIAL YEAR UNDER CONSIDE RATION IS SUBMITTED FOR VERIFICATION. THE APPELLANT HAS VEHEMENTLY OBJECTED TO THE ADDITION OF 66,18,032/- MADE U/S. 40(A)(IA) AND FURTHER STATED THAT SHE HAS MAINTAINED WAGES REGISTER ALSO TO JUSTIFY HER STAND. THAT IN MAKING THE ASSESSMENT OR DER UNDER SECTION 143 THE ASSESSING OFFICER IS NOT ENTITLED TO MAKE A PURE GU ESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR ANY MATERIAL A T ALL. THERE MUST BE SOMETHING MORE THAN BARE SUSPICION TO SUPPORT THE ASSESSMENT UNDER SECTION 143(3) DHAKESWRI COTTON MILLS V. CIT [1954] 26 ITR 775 (SC) 5.3 WAGES ARE LIABLE FOR TDS U/S. 192, BUT IF THE W AGES ARE BELOW THE BASIC EXEMPTION LIMIT THEN THERE IS NO NEED TO DEDUCT TAX ON IT. BU T IF THE LABOURERS ARE SUPPLIED BY A LABOUR CONTRACTOR, THEN TDS IS LIABLE TO BE MADE ON THE BILL OF THE LABOUR CONTRACTOR IF IT EXCEEDS 20,000/- AND IF IT EXCEEDS 50,000/- DURING THE WHOLE YEAR. ASSESSING OFFICER COULD NOT FIND/ALLOCATE A SINGLE CASE WHERE PAYMENT EXCEEDS 50,000/- TO JUSTIFY HIS ADDITION. IT WAS FOUND THAT EXPENSED WERE INCURRED BY THE APPELLANT ON ACCOUNT OF HIRED LABOURERS TAKEN AT D IFFERENT SITES. THESE TYPES OF PAYMENTS WERE MADE TO DAILY HIRED LABOURERS AND HEN CE DOES NOT FALL WITHIN THE AMBIT OF SECTION 194C OF THE IT CT, 1961. HENCE, THE DISA LLOWANCE WAS ARBITRARY AND IS LIABLE TO BE DELETED. LAST BUT NOT THE LEAST WHILE GOING T HROUGH THE ASSESSMENT ORDER IT REVEALS IT REVEALS THAT THE AO HAS PASSED A NON SPE AKING ORDER FOR ADDITION MADE U/S. ITA NO.2693/KOL/2013 A.Y.2009 -10 ACIT CIR-31 KOL. VS. KALPANA MUKHERJ EE PAGE 5 40(A)(IA) AND ORDER WAS SILENT ABOUT THE REASON FOR THE ALLEGED ADDITION MADE. IN VIEW OF THIS ADDITION AMOUNTING TO 61,69,180/- IS DELETED . BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 10. BEFORE US LD. DR SUBMITTED THAT ASSESSEE IS ENG AGED IN ELECTRICAL CONTRACT WORKS IN DIFFERENT LOCATION. THEREFORE IT IS NOT PO SSIBLE FOR ASSESSEE TO ENGAGED LABOURERS ON EMPLOYMENT BASIS. THEREFORE, ASSESSEE MUST HAVE ENGAGED LABOURERS ON CONTRACTUAL BASIS. AT THE TIME OF ASSESSMENT PROCEE DINGS THE ASSESSEE DID NOT SUBMIT DOCUMENT AS DESIRED BY AO. HE RELIED ON THE ORDER O F AO. ON THE OTHER HAND, LD. AR OF THE ASSESSEE FILED WAGE REGISTER WHICH IS RUNNIN G PAGES 1 TO 151 AND SUBMITTED THAT ALL LABOURERS ARE EMPLOYED BY ASSESSEE AND NO CONTR ACTOR WAS INVOLVED FOR THE SUPPLY OF LABOURERS. LD. AR RELIED ON THE ORDER OF LD. CIT (A) AND PRAYED BEFORE THE BENCH TO CONFIRM THE SAME. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRESENT CASE IS THAT THE A O HAS TREATED THE PAYMENT OF WAGES TO THE LABOURERS AS SUBJECT TO THE PROVISIONS OF SE CTION 194C OF THE ACT. BUT THE ASSESSEE CLAIMS THAT THE LABOURERS ARE THE EMPLOYEE S OF IT AND THEREFORE THEY ARE GOVERNED BY THE PROVISIONS OF SECTION 192 OF THE AC T I.E. SALARY TO THE EMPLOYEES. ACCORDINGLY THE LD. CIT(A) HAS GIVEN THE RELIEF TO THE ASSESSEE FOR NOT DEDUCTING THE TDS ON THE PAYMENT OF WAGES TO THE LABOURERS UNDER SECTION 194C OF THE ACT. NOW THE ISSUE BEFORE US ARISES SO AS TO WHETHER THE LAB OURERS TO WHOM THE PAYMENTS ARE BEING MADE ARE THE EMPLOYEES OF THE ASSESSEE. WE FI ND THAT AS PER THE PROVISIONS OF SECTION 17(1) OF THE ACT SALARY INCLUDES WAGES AND THEREFORE CONCEPTUALLY THERE IS NO DIFFERENCE BETWEEN SALARY & WAGES. WAGES ARE TREATE D JUST LIKE SALARY AND ARE TAXABLE ON SAME BASIS. THE EMPLOYMENT RELATIONSHIP CAN BE C OMPLEX, WITH NO QUICK AND EASY FORMULAE TO USE WHICH WILL PROVIDE AN INSTANT SOLUT ION. THE GENERAL PRINCIPLES OF CONTRACT LAW GOVERN THE FORMATION OF THE CONTRACT O F EMPLOYMENT. A CONTRACT OF EMPLOYMENT IS A CONTRACT BY WHICH A PERSON, THE EMP LOYEE, UNDERTAKES FOR A LIMITED OR INDETERMINATE PERIOD OF TIME TO DO WORK FOR REMUNER ATION ACCORDING TO THE INSTRUCTIONS AND UNDER THE DIRECTION OR CONTROL OF ANOTHER PERSO N, I.E THE EMPLOYER. WITHIN THE FRAMEWORK OF A CONTRACT OF EMPLOYMENT, A PERSON CAR RIES OUT THE SERVICE OF WORK, RECEIVES REMUNERATION AND THE WORK IS CARRIED OUT A CCORDING TO THE DIRECTION AND ITA NO.2693/KOL/2013 A.Y.2009 -10 ACIT CIR-31 KOL. VS. KALPANA MUKHERJ EE PAGE 6 CONTROL OF THE EMPLOYER. THE TERMS OF THE CONTRACT MAY BE EITHER IN WRITING OR GIVEN ORALLY, BUT BOTH ARE EQUALLY BINDING AND ENFORCEABL E. WHEN A PERSON IS HIRED TO BE AN EMPLOYEE, THE PERSON ENTERS INTO A CONTRACT OF SERV ICE, WHICH IS AN EMPLOYER/EMPLOYEE RELATIONSHIP. ANOTHER TYPE OF CONTRACT BETWEEN TWO PARTIES IS THAT OF AN INDEPENDENT CONTRACTOR OR A CONTRACT FOR SERVICE. THIS TYPE OF CONTRACT MAY BE DEFINED AS A CONTRACT BY WHICH A PERSON, CONTRACTOR OR SERVICE PROVIDER M AKES A COMMITMENT TO ANOTHER PERSON, THE CLIENT, TO CARRY OUT MATERIAL OR INTELL ECTUAL WORK OR TO PROVIDE A SERVICE FOR A PRICE OR FEE. THE CHARACTERISTICS OF A CONTRACT F OR SERVICE ARE THAT THE CONTRACTOR IS FREE TO CHOOSE THE MEANS OF PERFORMING THE CONTRACT AND NO RELATIONSHIP OF SUBORDINATION EXISTS BETWEEN THE CONTRACTOR OR THE PROVIDER OF SERVICES AND THE CLIENT IN RESPECT OF SUCH PERFORMANCE. IN THE INSTANT CASE BEFORE US THE LD. DR HAS NOT BROUGHT ANYTHING CONTRARY TO THE FINDINGS OF LD. CI T(A). IN OUR CONSIDERED VIEW THE WAGES IN THE INSTANT CASE ARE COVERED UNDER SECTION 192 OF THE ACT. THEREFORE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE. IN T HE INSTANT CASE THE PAYMENT HAS BEEN MADE TO THE EMPLOYEES OF THE ASSESSEE. IN VIEW OF A BOVE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE REVENUE APPEAL IS DISMISSED. 12. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 09/11/2016 SD/- SD/- (K.NARSIMHA CHARY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ! - 09/11/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIRCLE-31, 10B, MIDDLETON ROW, 4 TH FL, KOL-71 2. /RESPONDENT-KALPANA MUKHERJEE, 95B, LENIN SARANI, K OLKATA-13 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORD ER/ , /TRUE COPY/ / '#,