ACIT, Circle - 1, Hooghly, Hooghly V. Pranab Kumar Neogi, Hooghly

ITA 612/KOL/2010

• Counselvise Citation: 61223514 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-03-2010
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA
• Assessee Lawyers: SOMNATH GHOSH
• Section: 194C

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B , KO LKATA [ , , , , , . .. . . .. . , , , , ! ] BEFORE SRI MAHAVIR SINGH, JUDICIAL MEMBER & SRI C.D. RAO, ACCOUNTANT MEMBER ' ' ' ' / ITA NO. 612 (KOL) OF 2010 #$ %& / ASSESSMENT YEAR 2006-07 ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE-1, HOOGHLY. PRANAB KUMAR NEOGI, HOOGHLY. (PAN-ABMPN7259D) ()* / APPELLANT ) - # - - VERSUS -. (-.)*/ RESPONDENT ) C.O. NO. 43 (KOL) OF 2010 [ ' / ITA NO. 612 (KOL) OF 2010 ] #$ %& / ASSESSMENT YEAR 2006-07 PRANAB KUMAR NEOGI, - # - ASSTT.COMMISSIONER OF INCOME-TAX HOOGHLY. (PAN-ABMPN7259D) - VERSUS - CIRCLE-1, HOOGHLY ( CROSS-OBJECTOR ) ( RESPONDENT ) )* / 0 / FOR THE APPELLANT: / SRI M. BHATTACHARYA -.)* / 0 / FOR THE RESPONDENT: / SRI SOMNATH GHOSH 1 / ORDER ( . .. . . .. . ), ! (C.D. RAO), ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE O RDER DATED 23.12.2009 OF LD. C.I.T.(A)-XXXVI, KOLKATA PERTAINING TO ASSESSMENT Y EAR 2006-07. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REVENUE READS AS UNDER :- 1. FOR THAT THE LD. CIT (APPEALS)-XXXVI, KOLKATA ERRED IN NOT TREATING THE LABOUR PAYMENT EXPENSES AS CONTRACT PAYMENT U/S. 194C O F THE I.T. ACT, 1961. THE ASSESSEE ALSO FILED THE CROSS-OBJECTION RAISING THE FOLLOWING GROUNDS :- 1. FOR THAT ON FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) XXXVI, KOLKATA ERRED IN NOT CO NSIDERING THAT THE ASSESSEE IS NOT REQUIRED TO DEDUCT TAX AT SOURCE ON PAYMENTS MADE ON ACCOUNT OF LABOUR CHARGES AS ALLEGED BY THE LD. DEPUTY COMMISSIONER O F INCOME TAX, CIRCLE 1, HOOGHLY. 2 2. FOR THAT THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) XXXVI, KOLKATA ACTED UNLAWFULLY IN MERELY ASSERTING THAT ORAL CONTRACT E XISTS IN THE FACTS OF THE CASE WITHOUT ESTABLISHING ON RECORD THE APPLICABILITY TH EREOF AND THE PURPORTED FINDING ON THAT BEHALF IS ABSOLUTELY ARBITRARY, UNREASONABL E, INFIRM AND PERVERSE. 3. FOR THAT THE LD. COMMISSIONER OF INCO ME TAX (APPEALS)XXXVI, KOLKATA GRAVELY ERRED IN NOT CONSIDERING THAT THE PURPORTS OF THE P ROVISION OF S. 194C OF THE INCOME TAX ACT, 1961 IS NOT APPLICABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE IMPUGNED FINDINGS IN THIS REGARD ARE WHOLLY ARBITRARY, UNSUSTAINABLE, BIASED, CAPRICIOUS, ERRONEOUS AND PERVERSE. 2. THE BRIEF FACTS OF THE CASE ARE THAT WHILE DOIN G THIS SCRUTINY ASSESSMENT, THE A.O. HAS DISALLOWED THE AMOUNT OF RS.28,87,690/- U/S. 40 (A)(IA) OF THE ACT BY OBSERVING AS UNDER :- IT HAS BEEN FOUND THAT PAYMENTS ON ACCOUNT OF LABOU R CHARGES WERE MADE WITHOUT DEDUCTING TAX AT SOURCE. ACCORDINGLY, A SUM OF RS. 28,87,690/- CLAIMED AS EXPENSES WITHOUT TDS IS DISALLOWED U/S. 40(A)(IA) AND ADDED BACK. 3. ON APPEAL, THE LD. C.I.T.(A) HAS ALLOWED THE AP PEAL OF THE ASSESSEE BY OBSERVING AS UNDER :- THE AUTHORIZED REPRESENTATIVE HAS RELIED ON THE DEC ISIONS OF THE HONBLE ITAT, A BENCH, KOLKATA IN THE CASE OF M/S. SAMANWAYA RE FERRED TO ABOVE. IN THE ABOVE REFERRED DECISION, THE HONBLE ITAT HAS HELD THAT T HERE EXISTED NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS WITHIN THE MEAN ING OF SECTION 194C(2) OF THE I.T. ACT READ WITH SECTION 40(A)(IA) OF THE I.T. AC T. THE RELEVANT PORTION OF THE ITAT ORDER DT. 23.04.2009 IS EXTRACTED BELOW: WE FIND THAT IN THIS PRESENT CASE, THE CONTROVERSY IS REGARDING TO PAYMENTS MADE FOR DISBURSEMENT OF LABOUR CHARGES TO LABOUR S ARDARS. WE FURTHER FIND THAT IN THE INSTANT CASE, THE ASSESSEE HAD SPECIFIC ALLY STATED BEFORE THE LD. LOWER AUTHORITIES THAT THERE IS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS. WE ALSO FIND THAT THE REVENUE AUTHORITIES COULD NOT CONTROVERT THE SUBMISSION OF THE ASSESSEE IN THIS RESPECT. AT THE TIME OF HEARING BEFORE US, THE LD. DR COULD NOT BRING OUT ANY EVIDENCE BY PRODUCIN G COGENT MATERIAL IN RESPECT OF ANY CONTRACT BETWEEN THE ASSESSEE AND TH E LABOUR SARDARS TO CONTRADICT THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDAR S. IT IS NOT IN DISPUTE THAT A CONTRACTOR OR A SUB-CONTRACTOR IS ENGAGED ON THE BA SIS OF A CONTRACT WHICH IS THE MOST IMPORTANT ESSENCE OF A CONTRACT JOB AND IS A PRIMARY REQUIREMENT FOR THE APPLICATION OF S. 194C OF THE ACT. WE, THEREFO RE, FIND FORCE IN THE ARGUMENT OF THE LD. COUNSEL OF THE ASSESSEE THAT THE LABOUR SARDARS IN THE INSTANT CASE CANNOT BE SAID TO BE LABOUR CONTRACTORS WITHIN THE MEANING OF THE PROVISIONS S. 194C(2). IN THE CIRCUMSTANCES, THERE IS NO REQUIREM ENT IN LAW TO DEDUCT TAX AT SOURCE BY THE ASSESSES UNDER THE PROVISIONS OF S. 1 94C(2). THIS VIEW OF OURS IS ALSO SUPPORTED BY THE DECISION OF THE PUNJAB & HAYA NA HIGH COURT IN CIT-VS- 3 ESSKAYCONSTRUCTION CO. SUPRA WHEREIN IT WAS HELD TH AT ONCE A FINDING HAS BEEN RECORDED THAT THERE WAS NO SUBCONTRACT OF WORK, THE RE COULD NOT BE ANY APPLICABILITY OF SECTION 194C(2) OF THE I.T. ACT, 1 961. THEREFORE THE RATIO LAID DOWN IN THE AFORESAID JUDGMENT IS SQUARELY APPLICAB LE TO THE FACTS OF THIS CASE. WE FURTHER FIND THAT THE ASSESSEE HAS MADE PAYMENTS TO INDIVIDUAL LABOURS, WHICH IS EVIDENT FROM THE MUSTER-ROLL ENCLOSED IN T HE PAPER BOOK PAGE 21. WE ALSO FIND FROM THE MUSTER-ROLL THAT THE PERSON SIGN ING AS LABOUR SARDAR IS ALSO INCLUDED IN THE SERIAL OF THE LABOURS. WE FIND THAT IN THIS CASE, ADMITTEDLY, THE LABOUR SARDARS IN THE PRESENT CASE HAS NO LOCUS STA NDI AS LABOUR CONTRACTOR AS A LABOUR SARDAR AND A LABOUR CONTRACTOR ARE AS D IFFERENT AS CHALK AND CHEESE. WE FIND THAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE LABOUR SARDARS FOR SUPPLY OF LABOURS AND WITHOUT WHICH THE RE CANNOT BE ANY APPLICATION OF S. 194C AND AS SUCH THE INVOCATION O F PROVISION OF S. 40(A)(IA) IS OUTSIDE THE SCOPE AND AMBIT OF THE SUCH ENACTMENT. IN VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT S. 194C(2) BEING NOT APPLICABLE IN THIS CASE, THE DISALLOWANCE OF RS.74,33,210/- MADE BY THE AO BY IN VOKING S. 40(A)(IA) OF THE I. T. ACT, 1961 AND SUSTAINED BY THE LD. CIT(A) IS HER EBY DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. THE FACTS OF THE INSTANT CASE ARE SIMILAR TO THOSE IN THE CASE DECIDED BY THE HONBLE ITAT, A BENCH, KOLKATA. LABOUR SARDARS ARE, IN MY VIEW, ARE NOT LABOUR CONTRACTORS. THEY ARE ALSO LABOURERS BUT ALSO ACT A S SUPERVISIONS. THEREFORE, IN MY VIEW, THEY CAN BE TAKEN AS SUB-CONTRACTORS FOR THE PURPOSE OF SECTION 194C OF THE ACT. RESPECTFULLY FOLLOWING THE DECISION OF THE IT AT, KOLKATA, I DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS. 28,87,690/-. 4. AGGRIEVED BY THIS ORDER OF LD. C.I.T.(A) DIRECT ING DELETION OF DISALLOWANCE OF RS.28,87,690/-, THE REVENUE IS IN APPEAL ON THE GRO UND REFERRED TO IN PARA-1 ABOVE AND THE ASSESSEE IS IN CROSS-OBJECTION BY RAISING THE G ROUNDS MENTIONED ABOVE IN PARA-1 OF THIS ORDER. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CARE FUL CONSIDERATION OF THE MATERIAL AVAILABLE ON RECORD, THE UNDISPUTED FACT IS THAT IN THIS CASE THE ASSESSEE IS AN INDIVIDUAL AND THIS TRIBUNAL HAS CONSISTENTLY TAKEN A VIEW THA T THE PROVISION OF SEC. 194C(1) IS APPLICABLE TO THE INDIVIDUAL ASSESSEE W.E.F. 01/06/ 2007. SINCE THE ASSESSMENT YEAR INVOLVED IN THIS APPEAL IS 2006-07, WE ARE OF THE V IEW THAT THE A.O. IS NOT JUSTIFIED IN DISALLOWING EXPENDITURE U/S. 40(A)(IA) OF THE ACT B Y STATING THAT THE ASSESSEE HAS NOT DEDUCTED TDS AS REQUIRED U/S. 194C OF THE ACT, AS T HE ACTION OF THE A.O. IS NOT SUSTAINABLE AS PER LAW. WE, THEREFORE, UPHOLD THE ORDER OF LD. C.I.T.(A) FOR THE REASONS MENTIONED HEREINABOVE IN DIRECTING DELETION OF DISA LLOWANCE OF RS.28,87,690/-, WHICH THE A.O. HAD MADE BY INVOKING PROVISION OF SEC. 40( A)(IA) OF THE ACT. KEEPING IN VIEW 4 ABOVE, WE DISMISS THE APPEAL OF THE REVENUE AND ALL OW THE CROSS-OBJECTION OF THE ASSESSEE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D AND THE CROSS-OBJECTION OF THE ASSESSEE IS ALLOWED. 1 !2 3 2# 4 5 THIS ORDER IS PRONOUNCED IN OPEN COURT SD/- SD/- , . .. . . .. . , , , , ! ! ! ! , ( MAHAVIR SINGH, JUDICIAL MEMBER) ( C.D.RAO, ACCOUNTANT MEMBER) ( (( (! ! ! !) )) ) DATE: 23-06-2011 1 / -6 7 6%8- COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT : A.C.I.T., CIRCLE-1, HOOGHLY 2 -.)* / THE RESPONDENT : PRANAB KUMAR NEOGI, GORBATI, D OLTALA, CHANDANNAGORE, HOOGHLY -712 102. 3. 1# () : THE CIT(A)-XXXVI, KOLKATA. 4. 1#/ THE CIT, KOL- 5 . <4 -# / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 . GUARD FILE . .6 -/ TRUE COPY, 1#2/ BY ORDER, (DKP) = > / DY/ASSTT. REGISTRAR .