Ariruz Zaman Kazi, Kolkata V. ITO, WD-49(2), KOLKATA, Kolkata

ITA 366/KOL/2015

• Counselvise Citation: 36623514 RSA 2015
• Duration Of Justice: 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TANUJ NIOGI
• Section: 194C

Judgement Text

I.T.A. NO. 366/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 366/KOL/ 2015 ASSESSMENT YEAR : 2010-2011 AMIRUZZAMAN KAZI,.................................. .........................APPELLANT NEW PANCHABATI COMPLEX, FLAT NO. 3D, 3 RD FLOOR, KAIKHALI GHOSH PARA, KOLKATA-700 052 [PAN : BBRPK 6559 D] -VS.- INCOME TAX OFFICER,................................ ............................RESPONDENT WARD-49(2), KOLKATA, MANICKTALA CIVIC CENTRE, UTTARAPAN COMPLEX, KOLKATA-700 054 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY, ADVOCATE , FOR THE ASSESSEE SHRI TANUJ NIOGI, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 18, 2015 DATE OF PRONOUNCING THE ORDER : NOVEMBER 27, 2015 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-15, KOLKATA DA TED 07.01.2015 FOR THE ASSESSMENT YEAR 2010-11 AND THE SOLITARY ISSUE RAISED THEREIN RELATES TO THE ADDITION OF RS.3,11,59,812/- MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF DIS ALLOWANCE OF LABOUR CHARGES UNDER SECTION 40(A)(IA) FOR THE FAILURE OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE PAYMENT THEREOF. I.T.A. NO. 366/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 2 OF 5 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LEATHER GOODS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY HIM ON 14 .10.2010 DECLARING TOTAL INCOME OF RS.4,34,519/-. IN THE PROFIT & LOSS ACCOUNT FILED ALONGWITH THE SAID RETURN, A SUM OF RS.3,26,95,812/- WAS DEBI TED BY THE ASSESSEE UNDER THE HEAD WAGES. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE CLAIM OF THE ASSESSEE FOR WAGES WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION, HE FOUND THAT THE EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD WAGES TO THE EXTENT OF RS .3,11,59,812/- WERE ACTUALLY INCURRED ON ACCOUNT OF FABRICATING CHARGES . HE ALSO FOUND THAT THE SAID CHARGES WERE PAID BY THE ASSESSEE TO THE O UTSIDE FABRICATORS AND, THEREFORE, HE WAS LIABLE TO DEDUCT TAX AT SOURCE FR OM THE SAID PAYMENTS UNDER SECTION 194C OF THE ACT. SINCE NO SUCH TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE FABRICATION CHARGES AMOUNTING TO RS.3,11 ,59,812/- SHOULD NOT BE DISALLOWED UNDER SECTION 40(A)(IA) OF THE ACT. I N REPLY, NO EXPLANATION WAS OFFERED BY THE ASSESSEE INSPITE OF SUFFICIENT O PPORTUNITY AFFORDED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER, THERE FORE, PROCEEDED TO MAKE A DISALLOWANCE ON ACCOUNT OF FABRICATING CHARGES UN DER SECTION 40(A)(IA) OF THE ACT. 3. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF FABRICATING CHARGES UNDER SECTION 40(A)(IA) WAS CHA LLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS) AND THE FOLLOWING SUBMISSIONS IN BRIEF WERE MADE ON BEHALF OF THE ASS ESSEE IN WRITING BEFORE THE LD. CIT(APPEALS) IN SUPPORT OF HIS CASE ON THE ISSUE:- (I)THE ADDITION OF RS.3,11,59,812/- TOWARDS PAYMEN T OF WAGES IS NOT TENABLE AS THE SAID PAYMENT WAS MADE TO DAILY - RATED/PIECE- RATED WORKER WITHOUT ANY CONTRACT EITHER ORAL OR WR ITTEN THROUGH LABOUR SARDER WHO IS ALSO A LABOURER. THE L ABOUR SARDAR DID THE IDENTIFICATION OF EACH LABOURER WHO WORKED WITH HIM FOR DISBURSEMENT OF PERIODICAL PAYMENTS. THE PAYMENT SH EET OR ACQUITTANCE ROLL WAS NOT ASKED FOR BY THE LD. A.O. AT THE TIME OF SCRUTINY. IN THIS REGARD THE ASSESSEE RELIED ON THE JUDGEMENT APART FROM THE CASE LAWS GIVEN EARLIER IN THE GROUN DS OF APPEAL I.T.A. NO. 366/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 3 OF 5 RATNAKAR SAWANT, DINESH N. SHAH & CO. V. ITO [2012] 22 TAXMANN. COM 218 (MUMBAI -TRIB.). II) THAT THE PROVISION OF SECTION 40A(IA) IS NOT AP PLICABLE TO THE EXPENDITURE THAT HAS ALREADY BEEN PAID DURING THE Y EAR BUT IS APPLICABLE ONLY FOR THE EXPENDITURE I. E. 'PAYABLE' AS ON 31S/ MARCH, AS PER VERDICT OF SPECIAL BENCH I) MERILYN S HIPPING AND TRANSPORT LTD. (136 ITD 23) (SB) (VIZ) II) VERDICT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING S ERVICES (P) LTD. 357 ITR 642. THE DEPARTMENT'S SLP TO THE SUPREME COURT IN THIS R EGARD HAS BEEN UNCONDITIONALLY DISMISSED IN LIMINE UPHOLDING THE VERDICT OF SPECIAL BENCH (VIZ.). III) THAT THE PROVISIONS OF SECTION 194C WILL NOT B E APPLICABLE TO THE TERM 'WORK' WHERE THE 'WORK' WILL NOT INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO T HE REQUIREMENT OR SPECIFICATION OF A CUSTOMER VIDE DEC ISION OF CIT- XVII, DELHI VS. SILVER OAK LABORATORIES P. LTD. JUN E 13, 2013 (SC). 4. THE LD. CIT(APPEALS) DID NOT FIND MERIT IN THE S UBMISSIONS MADE BY THE ASSESSEE AS PER CLAUSE (II) & (III) OF ITS LETT ER AND REJECTED THE SAME AFTER DISCUSSING THE RELEVANT CASE LAWS AND LEGAL P OSITION IN DETAIL IN HIS APPELLATE ORDER. AS REGARDS THE SUBMISSIONS MADE BY THE ASSESSEE AS PER CLAUSE (I) THAT THE AMOUNT IN QUESTION WAS PAID TOW ARDS WAGES AND THE SAID PAYMENTS HAVING BEEN MADE ON DAILY RATE BASIS OR PIECE RATE BASIS, THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE, LD. CIT(APPEALS) REQUIRED THE ASSESSEE TO ADDUCE EVIDENCE IN SUPPORT OF THE SAME. AS STATED BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDE R, THE ASSESSEE, HOWEVER, FAILED TO PRODUCE SUCH EVIDENCE AND KEEPIN G IN VIEW THE SAME, THE LD. CIT(APPEALS) REJECTED THE CONTENTION RAISED BY THE ASSESSEE AS PER CLAUSE (I) OF THE SUBMISSIONS FOR THE FOLLOWING REA SONS GIVEN IN HIS IMPUGNED ORDER:- IN LEATHER GARMENT WORK, THE LABOUR INPUT OF EACH ARTISAN IS CRUCIAL AND AN ERROR OF JUDGMENT IN ONE CASE RENDER S HIM INELIGIBLE TO RECEIVE WAGES FOR THE END PRODUCT AS IT WOULD THIS IS IN CONTRAST WITH A CONSTRUCTION CONTRACT WHERE H UNDREDS OF LABOUR PERFORM THE SAME TASK AND INDIVIDUAL INPUT C ANNOT BE VERIFIED. FURTHER IN THE CASE OF THE ASSESSEE MOST OF THE SUMS PAID TO THE CONTRACTOR FABRICATOR WERE PAID BY CHEQ UE AND NOT IN CASH. THIS IS SEEN FROM THE ANALYSIS OF THE ASSE SSEE'S BANK I.T.A. NO. 366/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 4 OF 5 ACCOUNT NO. 0084250313391 WITH UNITED BANK OF INDIA AND A/C. NO.05910200000624 WITH BANK OF BORODA. THE BANK STA TEMENT ARE AVAILABLE IN THE ASSESSMENT FOLDER. THIS IS NOT THE MODUS OPERANDI OF ANY HEAD LABOUR OR LABOUR SARDAR. THERE FORE, IT IS CLEAR THAT THE PAYMENTS WERE MADE ONLY TO CONTRACTO R FABRICATORS AND NOT TO A HEAD LABOURER OR SARDAR. T HE ASSESSEE HAS NOT BEEN ABLE TO EVEN PRIMA FACIE ESTABLISH THA T THE CONTRACTOR FABRICATORS WERE NOT RECEIVING THE SUMS IN THEIR OWN CAPACITY AS CLAIMED BY THE ASSESSEE. THE LD. CIT(APPEALS) THUS CONFIRMED THE DISALLOWANC E OF RS.3,11,59,812/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I A) ON ACCOUNT OF FABRICATING CHARGES. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIB UNAL. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION R AISED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US IS THAT THE ENTI RE DETAILS IN THE FORM OF PAYMENT SHEETS SHOWING PAYMENTS MADE TO LABOUR SARD ARS AND LABOURERS ON ACCOUNT OF FABRICATING CHARGES WERE FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND THESE DOCUMENTS FILED BY T HE ASSESSEE BEFORE THE LD. CIT(APPEALS) FOR THE FIRST TIME AS ADDITIONAL E VIDENCE, WERE NOT TAKEN INTO CONSIDERATION BY HIM WHILE DECIDING THE ISSUE RELATING TO THE DISALLOWANCE UNDER SECTION 40(A)(IA). THE LD. D.R., ON THE OTHER HAND, HAS POINTED OUT FROM THE IMPUGNED ORDER OF THE LD. CIT( APPEALS) THAT THERE IS NO MENTION OF SUCH DOCUMENTS FILED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AS PER THE OBSERVATIONS RECORDED S PECIFICALLY BY THE LD. CIT(APPEALS), THE ASSESSEE, IN FACT, FAILED TO PROD UCE ANY SUCH EVIDENCE DESPITE SUFFICIENT OPPORTUNITY GIVEN BY THE LD. CIT (APPEALS). THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, HAS FILED A PAPE R BOOK BEFORE US CONTAINING COPIES OF THESE DOCUMENTS WITH THE CERTI FICATE THAT THE SAME WERE FILED BEFORE THE LD. CIT(APPEALS). THERE IS TH US A CLEAR CONTRADICTION IN THE CLAIM MADE BY THE LD. COUNSEL FOR THE ASSESE SE IN THIS REGARD AND THE OBSERVATIONS RECORDED BY THE LD. CIT(APPEALS) I N HIS IMPUGNED ORDER . WE, THEREFORE, CONSIDER IT FAIR AND PROPER TO REMIT THE MATTER BACK TO THE LD. CIT(APPEALS) WITH A DIRECTION THAT IF THE ADDIT IONAL EVIDENCE IN THE I.T.A. NO. 366/KOL./2015 ASSESSMENT YEAR: 2010-2011 PAGE 5 OF 5 FORM OF PAYMENT-SHEETS RUNNING INTO MORE THAN 400 P AGES WAS ACTUALLY FILED BY THE ASSESSEE DURING THE COURSE OF APPELLAT E PROCEEDINGS BEFORE HIM, THE SAME MAY BE CONSIDERED AS PER RULE 46A OF THE INCOME TAX RULES, 1962 AND THE ISSUE MAY BE DECIDED AFRESH ON SUCH CONSIDERATION. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 27, 2015. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 27 TH DAY OF NOVEMBER, 2015 COPIES TO : (1) AMIRUZZAMAN KAZI, NEW PANCHABATI COMPLEX, FLAT NO. 3D, 3 RD FLOOR, KAIKHALI GHOSH PARA, KOLKATA-700 052 (2) INCOME TAX OFFICER, WARD-49(2), KOLKATA, MANICKTALA CIVIC CENTRE, UTTARAPAN COMPLEX, KOLKATA-700 054 (3) COMMISSIONER OF INCOME-TAX (APPEALS)- 15, KOL KATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.