M/s. Nafe Singh & Co., Rohtak V. ITO, Sonepat

ITA 5113/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7097 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 31-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 12-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL SENIOR
• Assessee Lawyers: NAVEEN GUPTA
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.5113/DEL./2015 (ASSESSMENT YEAR : 2010-11) M/S. NAFE SINGH & COMPANY, VS. ITO, WARD 4, C/O SHRI NAVIN GUPTA, ADVOCATE SONIPAT (HARYANA) . HOUSE NO.60, GREEN ROAD, OPP. MALABAR GUEST HOUSE, ROHTAK 124 001 (HARYANA). (PAN : AAGFN5916L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAVEEN GUPTA, ADVOCATE REVENUE BY : SMT. ANIMA BARNWAL, SENIOR DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS FI LED AGAINST THE ORDER OF CIT (APPEALS), ROHTAK DATED 26.06.2015 FOR THE ASSE SSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE READ AS UNDER :- 1. THAT THE ORDER OF THE LD. CIT (APPEALS) IS AGAI NST LAW AND FACTS. 2. THAT THE LD. CIT (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.5,53,981/- U/S 40(A)(IA) OF THE I T ACT ON ACCOUNT OF VARIOUS EXPENSES I.E. RS.2,62,485/- OUT OF PATHAI EXPENSES, RS.1,10,867/- OUT OF BHARAI EXPENSES, RS. 1,04,629/- OUT OF NIKASI EXPENSES AND RS.76,000/- OUT OF JALAI EXPENSES. ITA NO.5113/DEL./2015 2 3. THAT THE LD. CIT (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.5,53,981/- U/S 40(A)(IA) OF THE I T ACT, ALTHOUGH ALL THE PAYMENTS ARE ALREADY PAID AND PROV ISIONS OF SEC. 40(A)(IA) ARE APPLICABLE ON PAYABLE EXPENSES O NLY. 4. THAT THE LD. CIT (APPEALS) ERRED IN CONFIRMING T HE DISALLOWANCE OF RS.6,000/- U/S 40(B) OF THE ACT ON ACCOUNT OF SALARY PAID TO PARTNER SH. JITENDER SINGH. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. GROUNDS NO.1 & 5 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION. GROUND NO.4 IS NOT PRESSED. 4. GROUND NOS.2 & 3 ARE AGAINST CONFIRMING THE FOLL OWING DISALLOWANCES ON VARIOUS EXPENSES U/S 40(A)(IA) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER THE ACT) :- (I) PATHAI EXPENSES : RS.2,62,485/- (II) BHARAI EXPENSES : RS.1,10,867/- (III) NIKASI EXPENSES : RS.1,04,629/- (IV) JALAI EXPENSES : RS. 76,000/- RS.5,53,981/- 5. THE ASSESSEE IS RUNNING BRICK KLIN AT VILLAGE LA DRAWAN, TEHSIL BAHADURGARH, JHAJJAR. THE RETURN OF INCOME WAS FIL ED ON 16.09.2010 AT RS.17,850/-. THE CASE WAS SELECTED FOR SCRUTINY AN D STATUTORY NOTICE U/S 143(2) WAS ISSUED ON 27.09.2011. THE AO OBSERVED T HAT THE ABOVE EXPENSES WERE PAID TO THE EMPLOYEES THROUGH THE INCHARGE OF VARIOUS TYPES OF WORKS ITA NO.5113/DEL./2015 3 LIKE, JALAI, BHARAI, NIKASI, AND PATHAI ETC. SINCE, THE PERSONS INCHARGE, WHO WERE ALSO EMPLOYEES OF THE ASSESSEE, WERE CALLED AS THEKEDAR, THE AO TOOK THEM AS CONTRACTOR AND MADE THE AFORESAID DISALLOWA NCES U/S 40A(IA) OF THE ACT. HOWEVER, THE ASSESSEE ARGUED THAT THIS WAS NO T A PAYMENT MADE TO A LABOUR CONTRACTOR; HENCE, NO TDS WAS MADE. THE ASS ESSEE PRODUCED THE COMPLETE BOOKS OF ACCOUNTS MAINTAINED BY IT. THE A O OBSERVED THAT THE ASSESSEE HAD OPENED SEPARATE ACCOUNTS FOR ALL THESE HEADS AND ALL EXPENSES RELATED TO THAT HEAD WERE DEBITED TO THAT ACCOUNT I .E. UNDER THE HEAD PATHAI WERE RS. 5,30,450/- AND OUT OF THAT A SUM OF RS.2,6 2,485/- WERE PAID TO LABOURERS FOR THE PERIOD JANUARY TO MARCH, 2010. TH E AO ACCEPTED THE AMOUNT PAID FOR THE PERIOD FROM APRIL TO DECEMBER B UT DISALLOWED THE AMOUNT OF RS.2,62,485/- PAID FROM JANUARY TO MARCH, 2010. SIMILARLY EXPENSES UNDER THE HEAD BHARAI, NIKASI AND JALAI EX PENSES WERE RS.2,12,802, RS.2,04,630/- AND RS.1,48,000/- RESPECTIVELY AND OU T OF THAT A SUM OF RS.1,10,867/-, 1,04,629/- AND 76,000/- WERE PAID TO DIFFERENT LABOURERS FOR THE PERIOD JANUARY TO MARCH, 2010. THE AO ACCEPTED THE AMOUNT PAID FOR THE PERIOD FROM APRIL TO DECEMBER BUT DISALLOWED THE AM OUNTS PAID FROM JANUARY TO MARCH, 2010. ACCORDINGLY, THE AO MADE A DISALLO WANCE OF RS.5,53,981/- (RS.2,62,485/- + RS.1,10,867/- + RS.1,04,629/- + R S.76,000/-) PAID TO CONTRACTORS. THE LD. CIT (A) UPHELD THE DISALLOWA NCE. ITA NO.5113/DEL./2015 4 6. LD. AR FOR THE ASSESSEE SUBMITTED THAT THE WAGES PAID UNDER EACH HEAD WAS DEBITED TO RESPECTIVE HEADS AND THE ASSESSEE HA D FILED DETAILS OF THE SAME BEFORE THE AO AND ALSO BEFORE THE LD. CIT (A). HE SUBMITTED THAT THE DETAILS CLEARLY SHOW THAT THERE WAS NO VIOLATION OF SECTION 40(A)(IA) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE IS FROM RURAL BACKGROUND AND DID NOT KNOW MUCH ABOUT IMPLICATION OF EACH WORD; AND T HE ACCOUNTS WERE ALSO WRITTEN BY A PART TIMER WHO WAS ALSO NOT A QUALIFIE D ACCOUNTANT. HE SUBMITTED THAT THE PAYMENTS WERE MADE TO THE EMPLOYEES OF THE ASSESSEE AND NOT TO ANY CONTRACTOR AND AS SUCH PROVISION OF SECTION 40A(IA) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THE CASE. LD. AR FURTHER SUBMITTED THAT THE ASSESSEES CASE IS COVERED BY A CASE ON SIMILAR FACTS BY THE TRIBUNAL OF A CO-ORDINATE BENCH SMC-2, NEW DELHI IN RANDHIR SINGH & SONS IN ITA N O.4156/DEL/2015 FOR AY 2010-11 DATED 09.11.2015. ACCORDINGLY, HE PLEAD ED THAT THE ORDERS OF THE AUTHORITIES BELOW BE SET ASIDE AND THE ASSESSEES A PPEAL BE ALLOWED. 7. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND WANTS US NOT TO INTERFERE WITH THE ORDERS OF TH E AUTHORITIES BELOW. 8. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND PE RUSED THE MATERIAL ON RECORD. AFTER GOING THROUGH THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE PAYMENTS IN QUESTION, I.E. WAGES, HAVE BEEN DIRECTL Y PAID TO THE WORKERS AND THE SAME WAS PAID UNDER THE SUPERVISION OF THE INCH ARGE CALLED THEKEDAR. WE FURTHER FIND THAT THIS IS NOT A CASE WHERE THE THEK EDAR CAN BE CONSIDERED AS A ITA NO.5113/DEL./2015 5 LABOUR CONTRACTOR. THE REVENUE HAS ALSO NOT BROUGH T OUT ANY EVIDENCE IN SUPPORT OF THEIR FINDING THAT THE THEKEDAR IS IN FA CT A LABOUR CONTRACTOR WHEREAS THE ASSESSEE HAS PRODUCED AMPLE EVIDENCE IN SUPPORT OF THE CLAIM THAT THE WAGES ARE PAID DIRECTLY TO THE LABOURERS. HENCE, T HE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE TO THE FACTS OF THIS CASE A ND CONSEQUENTLY, THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT . FURTHER, WE ALSO FIND SUPPORT FROM THE ORDER OF THE TRIBUNAL IN RANDHIR S INGH & SONS (SUPRA), RELIED UPON BY THE LD. AR, WHEREIN THE FACTS ARE SI MILAR TO THE PRESENT CASE. THEREFORE, WE DELETE THE ADDITIONS AND ALLOW THE GR OUNDS NO.2 & 3 OF THE ASSESSEES APPEAL. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 RD DAY OF FEBRUARY, 2016. SD/- SD/- (N.K. SAINI) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 3 RD DAY OF FEBRUARY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), ROHTAK. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.