Well Knit Industries, Coimbatore V. ACIT, Tiruppur

ITA 608/CHNY/2014

• Counselvise Citation: 60821714 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2014
• Court: TRIBUNAL
• Department Lawyers: M RA V SREEKANTHJCIT
• Assessee Lawyers: BALAJI VENKATASUBRAMANIANC A
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.608 /MDS./2014 ( ! '! / ASSESSMENT YEAR :2009-10) M/S.WELL KNIT INDUSTRIES , 61,15,VELAMPALAYAM ROAD, ANUPPARPALAYAM POST, COIMBATORE 641 652. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX,CIRCLE I, TIRUPUR. PAN AAAFW 2875 K ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR.BALAJI VENKATASUBRAMANIAN,C.A '(#$ % & / RESPONDENT BY : M.RA.V.SREEKANTH,JCIT, D.R ) * % +, / DATE OF HEARING : 11.05.2015 -' % +, /DATE OF PRONOUNCEMENT : 03.07.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-II, COIMB ATORE DATED ITA NO.608 /MDS/2014 2 24.12.2013 IN ITA NO.272/11-12 PASSED UNDER SEC.14 3(3) READ WITH SECTION SEC. 250 OF THE ACT.. 2. THE ASSESSEE HAS RAISED SEVEN ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE L D. CIT(A) HAD ERRED IN NOT ACCEPTING THE PLEA OF THE ASSESSEE THAT THE WAGES PAID THROUGH SUPERVISORS/CONTRACTORS ARE ACTUALLY DISTRIBUTION O F WAGES TO INDIVIDUAL WORKERS, WHICH IS VERY MUCH LESS THAN RS.20,000/- A ND THEREFORE, THESE TRANSACTIONS WILL FALL OUTSIDE THE AMBIT OF S ECTION-40A(3) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A FIRM, ENGAGED IN THE BUSINESS OF MANUFACTURING & EXPORT O F HOSIERY GARMENTS, FILED ITS RETURN OF INCOME ON 26.09.2009 ADMITTING ITS INCOME AS ` 73,66,990/-. THE RETURN WAS TAKEN UP FOR SCRUTINY U NDER CASS AND ASSESSMENT WAS MADE U/S.143(3) OF THE ACT ON 17.10.2011. 3.1. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS VIOLATING THE P ROVISIONS OF ITA NO.608 /MDS/2014 3 SECTION 40A(3) OF THE ACT FOR ` 17,01,940/- ( ` 3,61,993 AS AGREED BY THE ASSESSEE + ` 13,39,947 NOT AGREED BY THE ASSESSEE ). 3.2. BEFORE THE LD. CIT (A), THE ASSESSEE HAD MADE THE FOLLOWING SUBMISSIONS:- 1. IT IS THE GENERAL INDUSTRIAL PRACTICE IN TIRUPU R TO GIVE THE RESPONSIBILITY TO MOBILIZE THE LABOUR TO A SUPERVISOR TO COMPLETE THE JOB AND THE SUPERVISOR WILL MOBILIZE THE LABOUR AND GET THE WORK DONE. TH E COMPANY WILL PAY THE WAGES TO THOSE CASUAL LABOURS THROUGH THOSE SUPERVI SORS/CONTRACTORS THEN AND THERE DISTRIBUTED TO THE INDIVIDUAL WORKERS. I T CAN BE SEEN THAT THE TOTAL PAYMENT AND WAGES ARE EQUAL AND NO PAYMENT IN EXCES S HAS BEEN MADE. 2. ACCOUNTING IS DONE IN THE NAME OF THE SUPERVISO R FOR THE CONTROL PURPOSES AND TO FIX RESPONSIBILITY IN THE CASE OF Q UALITY ISSUES. PAYMENT TO INDIVIDUAL LABOUR IS ALWAYS LESS THAN RS.20,000/-. 3. THE COMPANY IS PAYING ESI AND PF FOR THOSE CASU AL LABORERS, WHICH EVIDENCES THAT THE CONTRACTOR/SUPERVISOR IS ACTING ONLY AS AN AGENT OF THE COMPANY IN DISTRIBUTION OF WAGES. THE WEEKLY WAGES FILE RELATING TO THOSE SUPERVISORS/CONTRACTORS IS MAINTAINED AND THE SAME CAN BE VERIFIED. 4. SINCE THE PAYMENT MADE TO THE INDIVIDUAL LABOUR IS LESS THAN RS.20,000/- THESE TRANSACTIONS ARE NOT COVERED U/S. 40A(3). ITA NO.608 /MDS/2014 4 3.3. ON EXAMINING THE ISSUE, THE LD. CIT (A) CONFI RMED THE ADDITION IN THE HANDS OF THE ASSESSEE BY OBSERVING AS UNDER: - ON SCRUTINY OF CASH BOOK THE ASSESSING OFFICER DISA LLOWED A SUM OF RS.13,39,947/- BEING CASH PAYMENTS ABOVE RS.20,000/ -. THE ASSESSEES CLAIM THAT THESE WERE WAGES DISTRIBUTED THROUGH VAR IOUS SUPERVISORS AND THE WAGES IN THE CASE OF EACH WORKER WILL BE LESS T HAN RS.20,000/-. THIS CLAIM OF THE ASSESSEE IS NOT PROVED WITH ANY EVIDEN CE. IF FOR ARGUMENT SAKE WE ACCEPT THE PLEA OF THE ASSESSEE THAT THESE PAYMENTS ARE MADE TO SUPERVISORS IT WILL NOT ABSOLVE HIM FROM BEING HIT BY THE PROVISIONS OF SECTION 40A(3). NOTHING WOULD HAVE PREVENTED THE AS SESSEE FROM ISSUING CHEQUES TO THE SUPERVISORS WHO IN TURN COULD HAVE D ISTRIBUTED THE SMALL AMOUNTS TO THE WORKERS IF ANY. THEREFORE, IF THE AR GUMENT OF THE ASSESSEE WERE TO BE ACCEPTED THEN THE DEPARTMENT WILL NOT BE ABLE TO PREVENT THE SIPHONING OF THE FUNDS FROM THE COMPANY IN THE NAME OF VARIOUS SUPERVISORS BY CASH TRANSACTIONS. THEREFORE, THE AD DITION U/S.40A(3) OF RS.13,39,947/- IS CONFIRMED IN THE HANDS OF THE ASS ESSEE. 4. BEFORE US, THE LD. A.R. REITERATING THE SUBMISS IONS MADE BEFORE THE LD. CIT (A) AND FURTHER POINTED OUT RULE-6DD(K) WHEREIN IT WAS PROVIDED THAT WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR G OODS OR SERVICES ITA NO.608 /MDS/2014 5 ON BEHALF OF SUCH PERSON NO DISALLOWANCE U/S.40A(3) SHALL BE MADE. LD. D.R ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE AND ALSO RELIED UPON THE DECISION OF THE HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ACIT VS. S HREE SHANMUGHAR GUNNY STORES REPORTED IN [1984] 18 TAXMAN 127 (MAD. ). 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE CASE CITED BY TH E REVENUE HEREIN ABOVE IS NOT APPLICABLE TO THE CASE OF THE ASSESSEE BECAUSE THE ISSUE INVOLVED IN THAT CASE WAS WITH RESPECT TO PAY MENTS EXCEEDING THE PRESCRIBED LIMIT TOWARDS CERTAIN BILLS, BUT IN THE CASE OF THE ASSESSEE THE ISSUE IS WITH RESPECT TO PAYMENT OF WA GES THROUGH ITS SUPERVISORS/CONTRACTORS. ON THIS ISSUE, THE DECISI ON OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. VIJAY KUMAR RAMESHCHAND & CO. REPORTED IN [2007] 108 ITD 626(PU NE) IS SQUARELY APPLICABLE WHEREIN A DISTINCTION IS DRAWN FOR PAYMENT OF WAGES THROUGH THE EMPLOYEES OF THE ASSESSEE AND AGE NTS OF THE ASSESSEE. THIS ASPECT HAS NOT BEEN LOOKED INTO BY T HE LD. ASSESSING OFFICER OR THE LD. CIT (A) WHILE PASSING THEIR RESP ECTIVE ORDERS. HENCE ITA NO.608 /MDS/2014 6 THE MATTER IS REMITTED BACK TO THE FILE OF THE LD. ASSESSING OFFICER TO EXAMINE THE FACTS OF THE CASE AND PASS APPROPRIATE ORDER IN ACCORDANCE WITH THE DECISION OF THE PUNE BENCH OF T HE TRIBUNAL CITED SUPRA AND RULE 6DD(K) POINTED OUT BY THE LD. A.R. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON 3 RD JULY, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 3 RD JULY, 2015. K S SUNDARAM. % '+./ 0 /'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 1+ () /CIT(A) 4. ) 1+ /CIT 5. /4 '+5 /DR 6. 6! 7* /GF