The ITO, Trivandrum V. Sri.Shahul Hameed A, Trivandrum

ITA 307/COCH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7557 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 11-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2015
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Assessee Lawyers: IYPE MATHEW
• Keywords: Assessment record
• Section: 143(3); 142(1); 194C; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH C OCHIN BEFORE S/SHRI B.P. JAIN, AM AND GEORGE GEOR GE K., JM I.T.A. NO. 498/COCH/2015 ASSESSMENT YEAR : 2008-09 SHRI SHAHUL HAMEED, M/S. NATIONAL ELECTRICALS, EAST FORT, TRIVANDRUM. [PAN: ACJPA 6108L] VS. THE INCOME TAX OFFICER, WARD-1(3), TRIVANDRUM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDENT) I.T.A. NO. 307/COCH/2015 ASSESSMENT YEAR : 2008-09 THE INCOME TAX OFFICER, WARD-1(3), TRIVANDRUM. VS. SHRI SHAHUL HAMEED, M/S. NATIONAL ELECTRICALS, EAST FORT, TRIVANDRUM. [PAN: ACJPA 6108L] (REVENUE -APPELLANT) (ASSESSEE-RESPONDENT) ASSESSEE BY SHRI IYPE MATHEW, CA REVENUE BY SHRI SHANTAM BOSE, CIT(DR) DATE OF HEARING 11/01/2016 DATE OF PRONOUNCEMENT 13/01/2016 O R D E R PER B.P.JAIN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE IN I.T.A. NO. 498/ COCH/2015 ARISES FROM THE ORDER OF THE LD. CIT, TRIVANDRUM PASSED U/S. 263 OF THE INCOME TAX ACT DATED 19-03-2013. THE REVENUE HAS ALSO FILED AN AP PEAL IN I.T.A. NO. I.T.A. NOS.498 &307/COCH/2015 2 307/COCH/2015 ARISING FROM THE ORDER OF THE LD. CI T(A), TRIVANDRUM DATED 26/03/2015 EACH FOR THE ASSESSMENT YEAR 2008-09. 2. SINCE THE FACTS IN THE PRESENT CASE ARE IDENT ICAL, THEREFORE, BOTH THE APPEALS ARE BEING TAKEN UP BY THIS CONSOLIDATED ORD ER. 3. FIRST OF ALL, WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE IN I.T.A. NO. 498/COCH/2015 WHERE THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE REPRODUCED HEREINBELOW: 1) THE ORDER UNDER SECTION 263 PASSED BY THE CIT IS ILLEGAL, ARBITRARY, UNCOLD FOR, AND AGAINST THE FACTS ON RECORD. 2) THE CIT IS NOT JUSTIFIED IN LAW IN RESTORING THE ASSESSMENT ORDER TO THE AO FOR RE-EXAMINATION WHICH WAS ALREADY EXAMINED BY THE A.O. 3) THE CIT SHOULD HAVE NOTED THAT THE A.O. HAS PASS ED THE ASSESSMENT ORDER AFTER EXAMINING THE ACCOUNTS OF THE APPELLANT , BILLS, VOUCHERS, DETAILS OF ASSETS AND LIABILITIES AS ON 31.03.2008, DETAILS OF LABOUR CHARGES PAYABLE AFTER 15.03.2008 UPTO 31.03.2008, W HICH IS EVIDENT FROM NOTICES DTD 01/11/2010, 6/12/2010 AND PARA 2 O F THE ASSESSMENT ORDER DTD 23/12/2010. THE A.O. HAS TAKEN A POSSIBL E VIEW AFTER EXAMINING THESE STATEMENTS AND DETAILS AND THEREFOR E SHE WAS NOT BOUND TO EXPLAIN WHY SHE WAS SATISFIED WITH THE EXP LANATION OF THE ASSESSEE. REF CIT VS. J.L. MORRISON (INDIA) 270 CTR (CAL) 405. 4) THE REASONS ADDUCED BY THE CIT IN THE ORDER U/S. 263 WAS NOT ITSELF SUFFICIENT TO SUPPORT THE FINDING OF THE CIT THAT T HE ORDER U/S. 143(3) WAS REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF THE REVENUE. 5) THE CIT SHOULD NOT HAVE PASSED AN ORDER AGAINST THE APPELLANT AFTER EXAMINING THE DETAILS AND SUBMISSIONS SUBMITTED BEF ORE HIM AT THE TIME OF HEARING OF THE CASE. NONE OF THE DETAILS PRODUCE D OR NONE OF THE I.T.A. NOS.498 &307/COCH/2015 3 ASSESSMENT RECORDS WAS CONCLUSIVE PROOF FOR THE FIN DING BY THE CIT THAT TDS WAS DEDUCTIBLE FROM THE LABOUR CHARGES OF RS.80 ,89,565/- DEBITED TO THE PROFIT AND LOSS ACCOUNT AS LABOUR CHARGES IT SELF. 6) THE CIT HAD NO EVIDENCE AVAILABLE WITH HIM TO P ROVE THAT THE LABOUR CHARGES PAID WERE IN PURSUANCE OF A CONTRACT, EITHE R WRITTEN OR ORAL, TO HOLD THAT TDS WAS DEDUCTIBLE U/S. 194C FROM THE PAY MENT OF LABOUR CHARGES. SO THE ORDER U/S. 263 IS NOT SUSTAINABLE U NDER LAW. 7) WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE C OURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR W HERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UN LESS THE VIEW TAKEN BY THE ITO UNSUSTAINABLE IN LAW. REF MALABAR INDUSTRY CO. 243 ITR 83 (SC), CIT VS. MAX INDIA LTD. 295 ITR 282 (SC) AND UNIROYA L MARINE EXPORTS VS. DY. CIT I.T.A. NO. 118/COCH/2013 DATED 14/05/2015. 8) THE APPELLANT CRAVES LEAVE TO ADDUCE ADDL. GROUN DS AT THE TIME OF HEARING. 4. THE LD. CIT HAS PASSED THE ORDER U/S. 263 OF THE ACT DATED 19/03/2013 WHICH FOR THE SAKE OF CONVENIENCE IS REPRODUCED HER EINBELOW: THE ASSESSEE IS THE PROPRIETOR OF M/S. NATIONAL ELE CTRICALS, THAKARAPARAMBU ROAD, EAST FORT, TRIVANDRUM DOING CON TRACT WORKS. HE FILED A RETURN OF INCOME FOR THE ASST. YEAR 2008-09 DECLARING A TOTAL INCOME OF RS.3,17,220. ASSESSMENT U/S. 143(3) WAS C OMPLETED ON 23.12.2010 ON A TOTAL INCOME OF RS.6,07,220 AFTER D ISALLOWING CERTAIN EXPENDITURE ON ACCOUNT OF NON PRODUCTION OF VOUCHER S. 2. HOWEVER, THE FOLLOWING DISCREPANCIES WERE NOTIC ED FROM THE RECORDS. THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.80,89,565 IN THE PROFIT AND LOSS ACCOUNT BEING LABOUR CHARGES UNDER THE HEAD D IRECT EXPENSES AND SHOWN AN AMOUNT OF RS.30,26,315 BEING LABOUR CHARGE S PAYABLE AS LIABILITY IN THE BALANCE SHEET. THE LEDGER ACCOUNT FILED ALSO SHOWS THAT AN AMOUNT OF RS.30,26,315 BEING LABOR CHARGES PAYABLE FROM 11.3.2008 TO 31.3.2008. 3. THE ORDER U/S. 143(3) WAS THEREFORE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, A NO TICE FOR REVISION OF ASSESSMENT U/S. 263 DATED 14.2.2013 WAS SENT TO THE ASSESSEE. I.T.A. NOS.498 &307/COCH/2015 4 4. SHRI C.A. JAMES VARGHESE, FCA, APPEARED ON BEH ALF OF THE ASSESSEE. HE MADE A WRITTEN SUBMISSION DATED 19.3.2013 OFFERI NG EXPLANATION FOR THE DISCREPANCIES AS MENTIONED ABOVE. THE ASSESSEE CLAIMS THAT DURING THE FINANCIAL YEAR CITED ABOVE, I HAVE RECEIVED AN AMOUNT OF RS.1,31,89,428 AS CONTRACT RECEIPTS AND I HAVE PAID AN AMOUNT OF RS.80,89,568 AS LABOUR CHARGES. THIS WORK WAS UNDER TAKEN AND EXECUTED BY ME DIRECTLY AND HAVE ENGAGED LABOURS DIRECTLY BY ME. THESE LABOURS ARE MY REGULAR WORKERS ENGAGED BY ME FOR THE LAST S EVERAL YEARS. THE PAYMENTS ARE GIVEN DIRECTLY TO THEM AS AND WHEN THE CONTRACT PAYMENTS ARE RECEIVED BY ME. IN CERTAIN CASES, ONLY AFTER PR OPER INSPECTION BY THE PUBLIC WORKS DEPARTMENTS THE FULL PAYMENTS ARE SETT LED. I PAY THE WORKERS ON ACCOUNT AND THE PAYMENTS ARE SETTLED AS AND WHEN THE BILL IS PASSED BY THE PUBLIC WORKS DEPARTMENT. 5. HE ALSO RELIES ON THE DECISION OF THE ITAT, KOC HI IN THE CASE OF ALLEPPEY PARCEL SERVICE COMPANY (I.T.A. 325/COCH/20 10 DATED 20.7.2012). 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AND THE MATERIAL AVAILABLE ON RECORD. IT IS CLEAR FROM THE RECORD T HAT THE AO HAS NOT MADE NECESSARY ENQUIRIES IN THIS REGARD, AND AS SUCH THE CLAIM OF THE ASSESSEE NOW NEEDS TO BE VERIFIED. 7. . IN VIEW OF THE FOREGOING REASONS, I ORDER REV ISION OF ASSESSMENT U/S. 263 FOR VERIFICATION OF TDS DEDUCTIBILITY ON THE AF OREMENTIONED PAYMENT AS PER EVIDENCE, RECORD AND MATERIAL PRODUCED BY TH E ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE, SHRI IYPE M ATHEW INVITED OUR ATTENTION TO PARA 2 WHERE THE LD. CIT HAS POINTED O UT DISCREPANCIES AND THE DISCREPANCIES AS NOTED BY THE LD. CIT ARE AS UNDER: 1) THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 80,89 ,565/- IN THE PROFIT AND LOSS ACCOUNT BEING LABOUR CHARGES UNDE R THE HEAD DIRECT EXPENSES. 2) THE ASSESSEE HAS SHOWN LABOUR CHARGES PAYABLE A T RS.30,26.,315/- AS LIABILITY IN THE BALANCE SHEET FOR THE PERIOD 11.03.2008 TO 31.03.2008. I.T.A. NOS.498 &307/COCH/2015 5 6. THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO PARA 6 OF THE LD. CITS ORDER WHERE THE LD. CIT(A) GIVES HIS FIND ING THAT THE ASSESSING OFFICER HAS NOT MADE NECESSARY ENQUIRIES IN THIS RE GARD AND AS SUCH, THE CLAIM OF THE ASSESSEE NOW NEEDS TO BE VERIFIED AND DUE TO THE FOLLOWING REASONS AS SPECIFIED IN PARA 2 OF THE LD. CITS ORD ER, THE LD. CIT ORDERED REVISION U/S. 263 FOR VERIFICATION OF TDS DEDUCTIBI LITY ON THE AFORESAID PAYMENT AS PER EVIDENCE, RECORD AND MATERIAL PRODUC ED BY THE ASSESSEE. 7. THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT T HERE IS NO ERROR POINTED OUT IN THE ORDER OF THE ASSESSING OFFICER EXCEPT TH E VERIFICATION OF THE TDS DEDUCTIBILITY ON THE AFORESAID AMOUNT OF RS.80,89,5 68/- PAID AS LABOUR CHARGES. TO THIS, IT WAS SUBMITTED BEFORE THE LD. C IT THAT THE WORK WAS EXECUTED BY THE ASSESSEE DIRECTLY AND HE HAS ENGAGE D THE LABOURS DIRECTLY BY HIM. IT IS A FACT THAT THESE WORKERS ARE ENGAGED BY HIM REGULARLY FOR THE LAST SEVERAL YEARS AND THE PAYMENTS ARE GIVEN DIREC TLY AS AND WHEN PAYMENTS ARE RECEIVED FROM THE CONTRACTOR. DURING T HE IMPUGNED YEAR, THE ASSESSEE HAS RECEIVED RS.1,31,89,428/- AS CONTRACT RECEIPTS AND HAS PAID RS.80,89,568/- AS LABOUR CHARGES DIRECTLY TO THE LA BOURS FOR WHICH VOUCHERS HAVE BEEN PRODUCED. I.T.A. NOS.498 &307/COCH/2015 6 8. THE ASSESSING OFFICER HAD ASKED FOR COMPLETE BOOKS OF ACCOUNT WITH BILLS AND VOUCHERS WHICH WERE PRODUCED AND NO DEFEC T IN THE SAID VOUCHERS HAS BEEN POINTED OUT. THE SAID VOUCHERS INCLUDES TH E PAYMENTS MADE TO LABOURS INDIVIDUALLY 9. THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE NOTICE U/S. 142(1) AT PAGES 2 AND 3 OF THE PAPER BOOK WHER E THE DETAILS OF THE LABOUR CHARGES WERE SPECIFICALLY ASKED FOR BY THE I TO, WARD-1(3), TRIVANDRUM. AND THE ASSESSEE HAS SUBMITTED THE SAME AND NO DEFECT IN THE SAME HAS BEEN POINTED OUT. HE FURTHER INVITED OUR A TTENTION TO THE ORDER OF THE ITO, WARD-1(3), TRIVANDRUM WHERE AT PARA 2, THE ASSESSING OFFICER WRITES THAT BOOKS OF ACCOUNT AND OTHER DOCUMENTS CA LLED FOR WERE PRODUCED AND EXAMINED AND IN THE ABSENCE OF NOT PRODUCING CE RTAIN BILLS AND VOUCHERS FOR EXPENSES, A LUMPSUM ADDITION OF RS.2,9 0,000/- WAS MADE. THE LD. COUNSEL ARGUED THAT THE ASSESSING OFFICER H AS VERIFIED ALL THE PAYMENTS MADE TO THE LABOURS AND NO DEFECT IN THE S AME HAS BEEN POINTED OUT. THE ASSESSING OFFICER HAS EXAMINED ALL THE LA BOUR PAYMENTS MADE DIRECTLY TO THE LABOURS FOR WHICH THE LEDGER SHEET HAS BEEN PLACED ON RECORD WHICH CLEARLY SHOWS THAT EVEN THE MONTHLY PAYMENT D OES NOT EXCEED TO ANY OF THE LABOUR MORE THAN RS.13,583/- AND THE LABOURS HAVE EVEN BEEN PAID UPTO RS.5430 PER MONTH. NONE OF THE PAYMENTS EXCEED THE LIMIT AS LAID DOWN U/S. 194C OF THE ACT WHICH IS EVIDENT FROM THE VOUCHERS PRODUCED I.T.A. NOS.498 &307/COCH/2015 7 BEFORE THE ASSESSING OFFICER FOR WHICH ENQUIRIES AN D VERIFICATION HAVE BEEN MADE BY THE ASSESSING OFFICER AND ACCORDINGLY, IN T HE ASSESSING OFFICERS VIEW, NO DISCREPANCY HAS BEEN FOUND ON THE SAID PAY MENTS ESPECIALLY WHEN A SPECIFIC QUERY HAS BEEN RAISED U/S. 142(1) OF THE ACT AND THE SAME HAS BEEN MET BY THE ASSESSEE AND NO DEFECT HAS BEEN POI NTED OUT OF WHATSOEVER KIND. ONLY THE ADDITION OF RS.2,90,000/- IN THE ABSENCE OF VOUCHERS/BILLS ETC. HAS BEEN MADE AND THEREFORE, SU CH ORDER CANNOT BE CALLED A CRYPTIC ORDER. 10. THE LD. COUNSEL RELIED UPON THE DECISIONS OF THE VARIOUS COURTS OF LAW IN THIS REGARD. 11. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. AT THE OUTSET, THERE IS DELAY IN FILING THE APPEAL AND THE ASSESSEE HAS FILED THE CONDONATION PETITION AND WE FIND SUFFICIENT CA USE FOR THE DELAYED FILING OF THE APPEAL AND WE CONDONE THE SAME. 13. AS REGARDS THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS EARNED CONTRACT RECEIPTS OF RS.1,31,89,428/- DURING THE IM PUGNED YEAR AND HAS I.T.A. NOS.498 &307/COCH/2015 8 PAID RS.80,89,565/- AS LABOUR CHARGES, RS.30,26,315 /- BEING LABOUR CHARGES WHICH ARE PAYABLE BETWEEN 11.03.2008 AND 31.03.2008 . AS PER NOTICE U/S. 143(2) AND 142(1) WHICH ARE PART OF PB PGS. 1, 2 & 3, THE ASSESSING OFFICER HAS VERIFIED THE BOOKS OF ACCOUNT, BILLS AND VOUCHE RS WITH SPECIFIC REFERENCE TO THE LABOUR CHARGES. AS PER THE DETAILED LEDGER A CCOUNT AVAILABLE ON RECORD AT PB PGS. 5 AND 6, NO PAYMENT IS EXCEEDING RS.13,583/- PER MONTH PAID TO ANY OF THE LABOUR WHICH IS MUCH BELOW THE L IMIT AS PROVIDED U/S. 194C OF THE ACT WHERE TDS PROVISIONS ARE NOT APPLIC ABLE. AT THE OUTSET, THE PROVISIONS OF SECTION 194C CANNOT BE MADE APPLICABL E ON THE LABOUR PAYMENTS ESPECIALLY WHEN THE ASSESSEE HAS SUBMITTED THE EXPLANATION THAT THE ASSESSEE MAKES DIRECT PAYMENTS TO THE LABOURS A ND THIS PRACTICE IS BEING FOLLOWED FOR THE PAST SEVERAL YEARS AND NO DE FECT IN THE PAST HAS BEEN POINTED OUT. THE ASSESSING OFFICER HAS EXAMINED TH E BOOKS OF ACCOUNT AND ALL THE VOUCHERS/BILLS AND HAS CONDUCTED ADEQUATE E NQUIRIES AND ACCORDING TO HIM, NO TDS IS DEDUCTIBLE AND THEREFORE, IN OUR VIEW, THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER WHICH IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE. 14. WHEN THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER, EVEN IF IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, STIL L THE PROVISIONS OF SECTION 263 CANNOT BE MADE APPLICABLE FOR THE REASONS THAT THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, (I) THE ORDER O F THE ASSESSING OFFICER I.T.A. NOS.498 &307/COCH/2015 9 SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT, IF THE ORDER OF THE ITO IS ERRONEOUS BUT IT IS NOT PREJUDICIAL TO THE INTERESTS OF THE R EVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. IN VIEW OF TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 0083, THOUGH THERE COULD BE TWO VIEWS POSSIBLE AND IF THE ITO HAS TAKEN ONE VIEW WHICH THE COMMISSIONER DOES NOT AGRE E, IT CANNOT BE TREATED AS ERRONEOUS ORDER PREJUDICIAL TO THE INTER ESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IN THE PRESENT CASE, THE ASSESSING OFFICER HAVING CONDUCTED ADEQUATE ENQUIRI ES AND HAVING MADE VERIFICATION OF THE LABOUR CHARGES PAID, HAS NOT IN VOKED THE PROVISIONS OF SECTION 194C OF THE ACT. THE ASSESSING OFFICER HAS TAKEN ONE POSSIBLE VIEW SWHICH CANNOT BE SAID TO BE UNSUSTAINABLE IN LAW. 15. BEFORE THE LD. CIT COMES TO A CONCLUSION, TH ERE SHOULD BE SOME MATERIAL AVAILABLE FROM RECORD CALLED FOR BY THE LD . COMMISSIONER. IN THE PRESENT CASE, THE LD. CIT HAS NOT BROUGHT ON RECORD ANY MATERIAL TO POINT OUT THAT SOME SPECIFIC PAYMENT ON ACCOUNT OF LABOUR CHARGES HAS BEEN MADE ON WHICH TDS U/S. 194C HAS NOT BEEN DEDUCTED A T SOURCE AND THEREFORE, THE DECISION OF THE LD. CIT CANNOT BE BA SED ON THE WHIMS AND CAPRICE BEING A REVISIONARY AUTHORITY. SUCH VIEWS F IND SUPPORT FROM THE I.T.A. NOS.498 &307/COCH/2015 10 DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 0108 AND IN THE CASE OF C IT VS. HONDA SIEL POWER PRODUCTS LTD. (2010) 333 ITR 547 (DELHI). AS HELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (201) 332 ITR 0167, EVEN IF THERE WAS ANY ENQUIRY, EVEN INADEQUATE, THA T WOULD NOT BY ITSELF GIVE ANY OCCASION TO THE COMMISSIONER TO PASS ORDER S U/S. 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MA TTER. IT IS ONLY IN CASES OF LACK OF ENQUIRY THAT SUCH A COURSE OF ACTION WOU LD BE OPEN. IN THE PRESENT CASE, THERE IS NO LACK OF ENQUIRY ON THE PA RT OF THE ASSESSING OFFICER AND IN SUCH CIRCUMSTANCES AND FACTS OF THE CASE, THE ORDER OF THE LD. CIT IN REVISING THE ASSESSMENT U/S. 263 IS A BAD OR DER AND IS LIABLE TO BE QUASHED. IT IS ORDERED ACCORDINGLY. ACCORDINGLY, AL L THE GROUNDS OF THE ASSESSEE ARE ALLOWED. THUS THE APPEAL OF THE ASSESS EE IN I.T.A. NO.498/COCH/2015 IS ALLOWED. 16. WE SHALL TAKE UP THE REVENUES APPEAL IN 307 /COCH/2015 WHEREIN THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN TAKEN BY THE REVENUE: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, TRIVANDRUM IS SO FAR AS ON THE POINTS MENTIONED BELOW ARE CONCERN ED IS OPPOSED TO LAW ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OPINED THAT THE APPELLANT WAS NOT OBLIGATED TO DEDUCT TAX U/S. 194C OF THE INCOME TAX ACT AND THERE BY THE ASSESSING OFFICER HAS NOT JUST IFIED THE INVOCATION OF THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOM E TAX ACT. I.T.A. NOS.498 &307/COCH/2015 11 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) OUGHT TO HAVE NOTED THAT THE ASSESSEE HAS FAILED TO PRODUCE ANY D OCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM THAT THE ASSESSE E HAS MADE THE PAYMENTS DIRECTLY TO THE LABOURERS. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCE D AT THE TIME OF HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF A PPEALS, TRIVANDRUM ON THE ABOVE POINTS MAY BE SET ASIDE AND THAT OF TH E ASSESSING OFFICER RESTORED. 17. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED A SUM OF RS.80,89,568/- ON THE PRESUMPTION THAT THE ASSESSEE HAD PAID THE SAID AMOUNT TO THE SUB-CONTRACTORS FOR THE ELECTRICAL WO RK CARRIED OUT, AGAINST WHICH TAX WAS NOT DEDUCTED. ACCORDING TO THE ASSESS ING OFFICER, PAYMENT MADE TO THE SUB-CONTRACTORS WHO CARRIED OUT THE WOR K ASSIGNED BY THE ASSESSEE WOULD ATTRACT THE PROVISIONS OF SECTION 19 4C OF THE ACT AND THEREBY THE ASSESSEE HAD OBLIGATION TO DEDUCT TAX W HEN THE PAYMENT WAS MADE TO THEM. SINCE NO SUCH TAX WAS DEDUCTED, THE A SSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND DIS ALLOWED THE SAID AMOUNT. 18. THE ARGUMENTS OF THE ASSESSEE AND THE FINDINGS OF THE LD. CIT(A) ARE REPRODUCED HEREINBELOW: CONTRADICTING THE ASSESSING OFFICER, THE APPELLANT HAS ARGUED THAT SECTION 194C ATTRACTS ONLY TO A PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY CONTRACTOR FOR CARRYING OUT ANY WORK IN PURSUAN CE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON AND I N HIS CASE THERE IS I.T.A. NOS.498 &307/COCH/2015 12 NO SUCH CONTRACTOR OR SUBCONTRACTOR ARE INVOLVED AS THE PAYMENT WAS MADE ONLY TO LABOURS DIRECTLY WORKED UNDER HIM AND HENCE DEDUCTION OF INCOME TAX FROM THE PAYMENT OF LABOUR CHARGES DOES NOT ARISE. 3. IN RESPONSE TO HEARING NOTICE ISSUED, THE APPEL LANTS AUTHORIZED REPRESENTATIVE HAS APPEARED AND THROUGH HIM THE APP ELLANT HAS FILED A NOTE ON 23/02/2015 EXPLAINING THE CAPTIONED ISSUE A S UNDER: .THE LEARNED ASSESSING OFFICER ALLEGES THAT MY CO NTRACT WORK DONE DURING THE ASSESSMENT YEAR 2008-09 ATTRACTS SECTION 194C(2) OF THE INCOME TAX ACT. BUT, THE SECTION APPLIES ONLY TO TH E CONTRACTORS WHERE THEY PAY TO THE SUBCONTRACTOR THROUGH AN AGRE EMENT. HENCE IN MY CASE NO SUBCONTRACTOR IS INVOLVED AND NO AGRE EMENT IS MADE BETWEEN THE WORKERS AND ME. THE WAGES OF RS.80,89,5 68/- IS NOTHING BUT THE WAGES AND OVERTIME WAGES PAID TO MY 69 WORKERS WORKING UNDER ME, THE LIST OF WHICH IS ENCLOSED. TH E PAYMENT OF WAGES TO WORKERS CANNOT BE CONSIDERED AS PAYMENT MA DE TO ANY CONTRACTOR AND IT DOES NOT COME UNDER THE PURVIEW O F SECTION 194C(2) OF THE INCOME TAX ACT. THE DEDUCTION OF INC OME TAX FROM THE WAGES PAID TO MY WORKERS DOES NOT ARISE. KINDLY NOTE THAT THE AVERAGE INCOME PER WORKER IN A YEAR COMES TO ONLY R S.117240/- 4. I HAVE CAREFULLY EXAMINED THE FACTS OF THE C ASE, THE STAND TAKEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE GROUNDS OF APPEAL AND THE WRITTEN SUBMISSION FILED BY THE REPRESENTAT IVE DURING THE APPEAL PROCEEDINGS. 5.1 BY VIRTUE OF THE PROVISIONS OF SECTION 40(A)(I A), TAX IS TO BE DEDUCTED AT SOURCE IF AMOUNT IS PAYABLE IN PURSUANC E TO A CONTRACT TO A CONTRACTOR OR SUBCONTRACTOR. IF THE TAX WAS NOT DED UCTED THEN THE WHOLE OF THE AMOUNT SHALL BE DISALLOWED. THEREFORE IT IS OBLIGATORY ON THE PART OF AN ASSESSEE NOT ONLY UNDER THE ABOVE MENTIONED S ECTION BUT ALSO U/S. 194C TO DEDUCT TAX AND IF FOR ANY REASON SUCH TAX W AS NOT DEDUCTED THEN THE ASSESSEE WOULD FACE DISALLOWANCE U/S. 40(A )(IA). IN THE BACKGROUND OF FOREGOING, THE CRUX OF THE ISSUE TO B E DECIDED IS WHETHER THE APPELLANT IS OBLIGATED TO DEDUCT TAX OR NOT AND IN THE ABSENCE OF TAX NOT BEEN DEDUCTED WHETHER THE INVOCATION OF SECTION 40(A)(IA) HAS BEEN JUSTIFIED OR NOT. 5.2 THE APPELLANT IS ENGAGED IN THE BUSINESS OF EXECUTING ELECTRICAL WORK TO THE ELECTRICAL DIVISION OF PUBLIC WORKS DEPA RTMENT, GOVERNMENT OF KERALA AND DURING THE YEAR UNDER CONSIDERATION H E CLAIMED TO HAVE EARNED A SUM OF RS.1,31,89,428/- FOR THE ELECTRICAL WORK SUCH AS I.T.A. NOS.498 &307/COCH/2015 13 DIGGING, REMOVING, LAYING OF CABLES, ETC. CARRIED O UT TO THE SAID OFFICE. FURTHER, HE DEBITED IN THE PROFIT & LOSS ACCOUNT AN AMOUNT OF RS.80,89,568/- PAID TOWARDS LABOUR CHARGES AGAINST WHICH THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SEC. 40(A)(IA ) TREATING THE SAME AS PAID TO SUBCONTRACTORS WITHOUT DEDUCTING TAX AT SOU RCE. NOT AGREEING WITH THE ASSESSING OFFICER, THE APPELLANT DURING TH E COURSE OF HEARING BEFORE THE UNDERSIGNED HAS CONTENDED THAT THE WORK WAS UNDERTAKEN AND EXECUTED BY HIM DIRECTLY AND THEREFORE THE LABO UR CHARGES DEBITED IN THE PROFIT & LOSS ACCOUNT IS NOTHING BUT THE AMO UNT PAID BY HIM TO THE INDIVIDUAL WORKERS AND NOT TO ANYONE INCLUDING SUBCONTRACTORS AS ALLEGEDLY CLAIMED BY THE ASSESSING OFFICER. FURTHER , HE CONTENDED THAT HE IS NOT OBLIGATED TO DEDUCT TAX U/S. 194C AS THE PAYMENT WAS NOT MADE TO ANY CONTRACTOR OR SUBCONTRACTOR. IT EMERGE S FROM THE ABOVE, TO WHOM THE PAYMENT HAS ACTUALLY BEEN MADE, WHETHER TO SUBCONTRACTORS AS CLAIMED BY THE ASSESSING OFFICER OR TO THE INDIV IDUALS WHO WORKED DIRECTLY UNDER THE APPELLANT. 5.3 THE ASSESSING OFFICER HAS INVOKED THE PROVISIO NS OF SECTION 40(A)(IA) OF THE ACT ON THE CONCLUSION DRAWN THAT T HE PAYMENT WAS MADE TO THE SUBCONTRACTORS WITHOUT DEDUCTING THE TA X. THIS CONCLUSION THE ASSESSING OFFICER APPEARS TO HAVE DRAWN WITHOUT ESTABLISHING THE IDENTITY OF THE SUBCONTRACTORS, AMOUNT PAID TO THEM , NATURE OF WORK CARRIED OUT BY THEM ETC. IT HAS NOT BEEN PROVED BEY OND DOUBT THAT THE PAYMENT WAS ACTUALLY MADE TO CERTAIN SUBCONTRACTORS . IT HAS ALSO NOT BEEN ESTABLISHED THAT THE APPELLANT HAD WRITTEN AGR EEMENT AS ENVISAGED UNDER SECTION 194C OF THE ACT WITH THE SUBCONTRACTO RS TO WHOM THE PAYMENT WAS ALLEGEDLY MADE. WITHOUT ESTABLISHING TH E FACT THAT THE PAYMENT WAS ACTUALLY MADE TO CONTRACTORS OR SUBCONT RACTORS IN PURSUANCE OF A CONTRACT EITHER WRITTEN OR ORAL, TO MY UNDERSTANDING, THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED I N THE INSTANT CASE OF THE APPELLANT AS HE WAS NOT OBLIGATED TO DEDUCT TAX U/S. 194C. THIS APART, NOT MUCH HAS BEEN BROUGHT OUT IN THE ASSESSM ENT ORDER TO CLARIFY THESE IMPORTANT ASPECTS OF STATUTORY REQUIREMENTS A ND THE ASSESSMENT ORDER PASSED WITHOUT ANSWERING THESE IMPORTANT ASPE CTS WOULD NOT JUSTIFY INVOCATION OF THE PROVISIONS OF SECTION 40( A)(IA). ON THE OTHER HAND, THE VERY NATURE OF WORK CARRIED OUT BY THE AP PELLANT JUSTIFIES HIS ARGUMENT THAT THE PAYMENT WAS MADE TO 69 WORKERS WH O WORKED DIRECTLY UNDER HIM AND THE PAYMENT OF WAGES TO WORK ERS CANNOT BE CONSIDERED AS PAYMENT MADE TO ANY CONTRACTOR. IN TH E CIRCUMSTANCES NARRATED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT WAS NOT OBLIGATED TO DEDUCT TAX U/S. 194C OF THE ACT AN D THEREBY THE ASSESSING OFFICER HAS NOT JUSTIFIED THE INVOCATION OF THE PROVISIONS OF I.T.A. NOS.498 &307/COCH/2015 14 SECTION 40(A)(IA) OF THE ACT. THUS, THE DISALLOWANC E IS DELETED AND ACCORDINGLY THE APPEAL IS ALLOWED. 19. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED THE FACTS OF THE CASE. IN THE PRESENT CASE, AFTER PASSING THE ORDER U/S. 2 63 OF THE ACT, THE ASSESSING OFFICER HAS CONFIRMED THE ADDITION OF THE LABOUR CHARGES/WAGES PAID TO THE EXTENT OF RS.80,89,568/- WHICH HAS BEEN DELETED BY THE LD. CIT(A) BY GIVING THE FINDINGS WHICH HAVE BEEN REPRO DUCED HEREINABOVE. SINCE THE ASSESSEE HAS BEEN FOUND TO HAVE MADE THE PAYMENTS TO THE WORKERS AS LABOUR CHARGES/WAGES WHERE EACH OF THE P AYMENT IS LESS THAN RS.20,000/- CANNOT BE THE SUBJECT MATTER OF SECTION 194C OF THE ACT. THEREFORE, THE PROVISIONS OF SECTION 194C/40(A)(IA) CANNOT BE MADE APPLICABLE AND WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND SINCE WE HAVE DECIDED THE ISSUE U/S. 263 OF THE ACT IN FA VOUR OF THE ASSESSEE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING ANY AD DITION ON ACCOUNT OF LABOUR CHARGES/WAGES PAID OR IS NOT JUSTIFIED IN MA KING AN DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. ACCORDINGLY, ALL THE GROUNDS OF THE REVENUE ARE DISMISSED. THUS THE APPEAL OF THE REVENUE IN I.T.A . NO. 307/COCH/2015 IS DISMISSED. I.T.A. NOS.498 &307/COCH/2015 15 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I.T.A. 498/COCH/2015 IS ALLOWED AND THE APPEAL OF THE REVENUE IN I.T.A. NO. 307/COCH/2015 IS DISMISSED. PRONOUNCED IN THE OPEN C OURT ON 13-01-2016. SD/- SD/- (GEORGE GEORGE K.) (B.P. JAIN) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 13TH JANUARY, 2016 GJ COPY TO: 1. SHRI SHAHUL HAMEED, M/S. NATIONAL ELECTRICALS, EAS T FORT, TRIVANDRUM. 2. THE INCOME TAX OFFICER, WARD-1(3), TRIVANDRUM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS),TRIVANDR UM. 4. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM. 5. D.R., I.T.A.T.,COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN I.T.A. NOS.498 &307/COCH/2015 16