M/s. Shah Construction, Satara V. Joint Commissioner of Income-tax,

ITA 766/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7715 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2018
• Assessment Year: 2011-2012
• Appeal Filed On: 20-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 766 /P U N/201 6 / ASSESSMENT YEAR : 20 11 - 12 M/S. SHAH CONSTRUCTION, PARAG, 286/2, BUDHWAR PETH, KARAD, DISTT. - SATARA PAN : AAFFS0461E ....... / APPELLANT / V/S. JT. COMMISSIONER OF INCOME TAX, SATARA RANGE, SATARA / RESPONDENT ASSESSEE BY : S HRI M.K. KULKARNI REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 2 6 - 04 - 201 8 / DATE OF PRONOUNCEMENT : 26 - 0 4 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMI SSIONER OF INCOME TAX (APPEALS) - 2, PUNE DATED 23 - 12 - 2015 FOR THE ASSESSMENT YEAR 20 11 - 12. 2 ITA NO . 766/PUN/2016, A.Y. 2011 - 12 2. SHRI M.K. KULKARNI APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED AT THE OUTSET THAT HE IS NOT PRESSING GROUND NOS. 1 AND 2 RAISED IN THE APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND IS ENGAGED IN CONSTRUCTION OF ROADS, BRIDGES, OFFICE BUILDINGS FOR GOVERNMENT AND SEMI - GOVERNMENT DEPARTMENTS. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER INTER ALIA DISALLOWED PAYMENT TO THE TUNE OF RS.8,87,875/ - MADE TO THE LABOURS WORKING AT VARIOUS SITES. THE AUTHORITIES BELOW HAVE FAILED TO TAKE INTO CO NSIDERATION THE FACT THAT ASSESSEE HAS MADE PAYMENTS TO THE LABOURERS WORKING AT REMOTE AREAS WITH NO BANKING FACILITIES AND EVEN IF THE AREAS HAVE BANKING FACILITIES THE LABOURERS ARE NOT PERMANENTLY RESIDING IN THOSE AREAS. THE LABOURERS WOULD BE WORKIN G ON THE SITE ONLY TILL THE TIME THE WORK IS IN PROGRESS. AFTER THE WORK IS COMPLETE ON THE SITE , THEY MOVE TO THE NEXT LOCATION. 3. ON THE OTHER HAND SHRI MUKESH JHA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCO ME TAX (APPEALS). THE LD. DR SUBMITTED THAT THE ASSESSEE HAS TRIED TO MAKE OUT A CASE BEFORE THE AUTHORITIES BELOW THAT THE CASH PAYMENTS MADE BY THE ASSESSEE TO THE LABOURERS FALL WITHIN EXCEPTIONS PROVIDED IN RULE 6DD(G) OR (J) OF THE INCOME TAX RULES. THE ASSESSEE HAS FAILED TO SHOW THAT THE CASH PAYMENTS MADE TO LABOURERS FALL IN ANY OF THE ABOVE EXCEPTIONS PROVIDED UNDER RULE 6DD. THE LD. DR ASSERTED THAT THE ASSESSEE HAS MADE PAYMENTS TO THE LABOURERS FOR WORKING AT MUNDHE, PHALTAN, KADEGAON AND DE EPNAGAR. ALL THESE PLACES HAVE A BANK BRANCH. THEREFORE, THE CASE OF THE ASSESSEE WOULD NOT FALL IN THE EXCEPTIONS PROVIDED UNDER RULE 6DD(G). THE LD. DR FURTHER POINTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO SHOW EITHER THAT THE PAYMENTS WERE MADE ON B ANK HOLIDAY. THEREFORE, THE CASE 3 ITA NO . 766/PUN/2016, A.Y. 2011 - 12 OF THE ASSESSEE WOULD ALSO NOT FALL WITHIN THE EXCEPTIONS PROVIDED UNDER RULE 6DD( J ). 4. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . THE LD. CO UNSEL FOR THE ASSESSEE HAS STATED AT THE BAR THAT HE IS NOT PRESSING GROUND NOS. 1 AND 2 RAISED IN THE APPEAL. ACCORDINGLY, THE SAME ARE DISMISSED AS NOT PRESSED. 5. IN GROUND NO. 3 OF THE APPEAL THE ASSESSEE HAS ASSAILED DISALLOWANCE OF RS.8,87,875/ - U/S. 40A(3) OF THE ACT. UNDISPUTEDLY, THE ASSESSEE HAS MADE CASH PAYMENTS TO THE LABOURERS. THE ASSESSEE BEFORE THE AUTHORITIES BELOW HAVE TRIED TO TAKE SHELTER OF EXCEPTIONS PROVIDE UNDER RULE 6DD (G) AND (J). WE OBSERVE THAT THE ASSESSING OFFICER HAD FOUND CASH PAYMENTS OF RS.10,26,569/ - IN EXCESS OF RS.20,000/ - . THE ASSESSING OFFICER AFTER GIVING THE BENEFIT OF RULE 6DD(J) MADE ADDITION OF RS.8,87,875/ - . THE ASSESSEE HAS FAILED TO SUBSTANTIATE THAT ANY PART OF THE ADDITION MADE IN RESPECT OF CASH PA YMENTS MADE TO THE LABOURERS WERE ON CLOSED BANK HOLIDAY. THEREFORE, THE EXCEPTION PROVIDE D IN S UB - R ULE ( J ) WOULD NOT FURTHER COME TO THE RESCUE OF ASSESSEE. 6. NOW, WE HAVE TO SEE WHETHER THE CASH PAYMENTS MADE BY ASSESSEE FALL WITHIN THE EXCEPTION PR OVIDED UNDER RULE 6DD(G). BEFORE PROCEEDING FURTHER IT WOULD BE RELEVANT TO REFER TO RULE 6DD(G). THE SAME IS REPRODUCED HERE - IN - BELOW : 6DD. NO DISALLOWANCE UNDER SUB - SECTION (3) OF SECTION 40A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB - SECTION (3A) OF SECTION 40A WHERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, 4 ITA NO . 766/PUN/2016, A.Y. 2011 - 12 EXCEEDS TWENTY THOUSAND RUPEES IN THE CASES AND CIRCUMSTANCES SPECIFIED HEREUNDER, NAMELY : - ( A ) . ( B ) . ( C ) . ( D ) . ( E ) . ( F ) . ( G ) WHERE THE PAYMENT IS MADE IN A VILLAGE OR TOWN, WHICH ON THE DATE OF SUCH PAYMENT IS NOT SERVED BY ANY BANK, TO ANY PERSON WHO ORDINARILY RESIDES, OR IS CARRYING ON ANY BUSINESS, PROFESSION OR VOCATION, IN ANY SUCH VILLAGE OR TOWN ; A BARE PERUSAL OF S UB - R ULE (G) SHOWS THAT TO FALL WIT HIN THE EXCEPTION FOLLOWING CONDITIONS SHOULD BE SATISFIED : I . PAYMENTS MADE IN VILLAGE OR TOWN . II . SUCH VILLAGE OR TOWN IS NOT SERVED BY ANY BANK . III . PAYMENT MADE TO PERSON WHO ORDINARILY RESIDES OR CARRIES ON HIS BUSINESS IN SUCH VILLAGE OR TOWN. ALL THESE CONDITIONS HAVE TO BE SATISFIED CONCURRENTLY. 7. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE IS A CIVIL CONTRACTOR AND IS ENGAGED IN CONSTRUCTION OF ROADS, BRIDGES, OFFICE BUILDINGS FOR GOVERNMENT AND SEMI - GOVERNMENT DEPARTMENTS. THE ASSE SSEE WORKS AT DIFFERENT SITES EVEN AT REMOTE PLACES. THE LABOURERS TO WHOM CASH PAYMENTS ARE MADE MOVE FROM ONE SITE TO ANOTHER AFTER COMPLETION OF THE WORK. THUS, NEITHER THE WORKERS/LABOURS HAVE PERMANENT PLACE OF STAY AT THE SITE NOR THE ASSESSEE HAS PERMANENT PLACE OF WORK AT ONE SITE. THUS, THE LABOURERS DO NOT ORDINARILY RESIDE AT A PLACE WHERE THE PURPORTED CASH PAYMENTS ARE MADE BY THE ASSESSEE. THE ASSESSEE MAY HAVE BANK ACCOUNT AT THE PLACE OF WORK BUT IT MAY NOT BE NECESSARY THAT ALL THE LABO URERS HAVE BANK ACCOUNTS EVEN IF THE PLACE IS SERVED BY BANK BRANCH, AS THEY ARE LIVING THE LIFE OF NOMADS. THE ASSESSING OFFICER HAS NOT RAISED ANY DOUBT OVER THE PAYMENTS MADE TO THE LABOUR ERS. THE PAYMENTS HAVE BEEN 5 ITA NO . 766/PUN/2016, A.Y. 2011 - 12 DISALLOWED AS THEY DO NOT FALL WITH IN THE EXCEPTIONS PROVIDED IN RULE 6DD. THE PAYMENTS IN CASH TO THE LABOURERS ARE MADE ON ACCOUNT OF TYPICAL NATURE OF WORK CARRIED OUT BY THE ASSESSEE AND ON ACCOUNT OF BUSINESS EXIGENCIES. THUS, WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND ALLO W GROUND NO. 3 OF THE APPEAL. RESULTANTLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE DISALLOWANCE OF RS.8,87,875/ - U/S. 40A(3) OF THE ACT IN THE PECULIAR FACTS OF THE CASE. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 26 TH DAY OF APRIL, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 26 TH APRIL, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 2, PUNE 4. THE PR. CIT - 3, PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE