ITO, Jaipur V. SHRI TULSI RAM MODI, Jaipur

ITA 960/JPR/2011

• Counselvise Citation: 96023114 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 194C

Judgement Text

ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 960/JP/2011 ASSESSMENT YEARS : 2008-09 PAN : ACKPM 7029 D THE ITO VS. SHRI TULSI RAM MODI WARD- 6 (2) E-297, LAL KOTHI YOJNA JAIPUR TONK ROAD, JAIPUR (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RAJESH OJHA ASSESSEE BY : SHRI PRAVEEN SARASWAT DATE OF HEARING: 10-09-2014 DATE OF PRONOUNCEMENT: 31-10-2014 ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)- II JAIPUR DATED 02-08-2011 FOR THE ASSE SSMENT YEAR 2008-09 WHEREIN THE REVENUE HAS RAISED FOLLOWING GROUND S:- (I) HOLDING THAT THERE WAS NO ALLEGED ORAL CONTRA CT BETWEEN THE ASSESSEE AND THESE PERSONS WHEREAS CON DUCT OF THE PARTIES AND CONTINUITY OF THE TRANSACTIONS C LEARLY PROVE THAT THERE EXISTED A ORAL CONTRACT BETWEEN TH E ASSESSEE AND THESE SPECIALIZED WORKERS TO WHOM SPEC IFIC TASKS WERE ASSIGNED TO DO A SPECIALIZED PARTICULAR TYPE OF WORK. (II) HOLDING THAT PROVISIONS LAID DOWN U/S 40(A)(IA ) OF IT ACT ARE APPLICABLE ONLY FOR THE AMOUNT WHICH REM AINS ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 2 PAYABLE AT THE END OF THE PERIOD AND IT IS NOT APPL ICABLE TO THE AMOUNT ACTUALLY PAID DURING THE YEAR WHEREAS AS PER INTENTION AND SPIRIT OF THE LEGISLATURE, THE DISALL OWANCE HAS TO BE MADE WHERE TDS WAS NOT MADE AS PRESCRIBED . (III) DELETING THE ADDITION MADE BY THE AO BY CONSIDERING THE PAYMENT TO THESE PERSONS WERE LESS THAN RS. 20,000/- ON EACH OCCASION WHEREAS AGGREGATE PAYMENT MADE TO THE SUB-CONTRACTORS AT THE YEAR END WAS EXCEEDING RS. 50,000/-. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PROP. OF M/S. RIDDHI SIDDHI INDUSTRIES AND HE IS ENGAGED IN SALES OF ALU MINUM SECTIONS/ PROFILES/ PROFILES, GLASS SHEETS, WOODEN/ GYPSUM BOARDS ETC. ACCORDING TO ASSESSEE INSTALLATION OF FITTING OF SUCH MATERIAL IN CUSTOME RS PREMISES IS DONE BY EMPLOYING THE CASUAL LABORERS BY THE ASSESSEE. DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO WAS OF THE VIEW THAT THE AMOUNTS PAID BY THE ASSESSEE TO THE CASUAL LABORERS WERE LIABLE FOR TDS U/S 194C(3). ACCORDING TO AO ASSESSEE BECAME THE CONTRACTOR AND THE CASUAL WORKERS BECAME THE SUB-CONTRACTOR AND ON PAYMENT TO SUCH SU B-CONTRACTORS ASSESSEE OUGHT TO HAVE DEDUCTED TDS @ 1%. DUE TO NON-DEDUCT ION AND PAYMENT OF SUCH TDS, THE AMOUNTS PAID BY THE ASSESSEE IN THIS BEHALF WERE DISALLOWED U/S 40(A)(IA) OF THE ACT. 2.2 BEFORE THE LD. CIT(A) IN FIRST APPEAL, THE ASSE SSEE MADE THE FOLLOWING SUBMISSIONS:- ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 3 (A) THE ASSESSEE HAD BEEN AWARDED WORK ORDERS FRO M HIS CLIENTS AND IT WAS STIPULATED THAT THE ASSESSEE COULD NOT FURTHER SUB-CONTRACT THE WORK. THE WORK ORDER FROM M/S. NEXT RETAIL INDIA LTD. WHICH CONTRIBUTED NEARLY 70% OF T OTAL TURNOVER OF ASSESSEE , HAD LAID WON THAT THE WORK WAS TO BE COMPLETED WITHIN 25 DAYS FROM THE DATE OF RECEIPT OF THAT WOR K ORDER BY THE APPELLANT. FURTHER, THE WORK WAS TO BE COMPLETE D BY THE APPELLANT HIMSELF ONLY AND IN NO CASE THE SAME COUL D BE SUB- CONTRACTED TO ANY AGENCY/ CONTRACTOR/SUB-CONTRACTOR . IT WAS CATEGORICALLY MENTIONED THAT IF IT WAS NOTICED THAT THE WORK HAD BEEN FURTHER SUB-CONTRACTED, THE ASSIGNED WORK WOUL D BE IMMEDIATELY SUSPENDED AND 25% DEDUCTION WOULD BE MA DE FROM THE FINAL BILLED AMOUNT. (B) THE AO HAD EXAMINED ALL THE PAYMENT VOUCHERS FOR DISBURSEMENT OF WAGES. THE SKILLED WORKER/ TEAM LEADER, IN WHOSE NAME, THE LEDGER ACCOUNT HAD BEEN OPENED, HAD ALSO SIGNED VOUCHED AND RECEIVED THE WAGES ON DAILY BASI S ALONWITH THE OTHER LABOURERS. THE WORKERS HAD CONFIRMED THEI R ENGAGEMENT WITH THE APPELLANT ON DAILY WAGES BASIS BY FILING CONFIRMATION LETTERS. THE WAGES ARE CALCULATED ON THE BASIS OF NUMBER O F DAYS MULTIPLIED BY DAILY WAGE RATE OF 100/- , RS. 1 25/-, RS. 150/- AND RS. 200/- ETC. AS EVIDENT FROM THE PAYMEN T VOUCHERS. NONE OF THE TEAM LEADER/SKILLED WORKER HAD RAISED A NY BILL OR SUBMITTED ANY MEASUREMENT SHEET OR GIVEN DETAILS OF WORK DONE BY HIM. THEY WERE PAID AT FLAT RATES ON THE BASIS O F NUMBER OF DAYS. IT CONCLUSIVELY ESTABLISHED THAT THERE EXISTE D NOT EVEN AN ORAL CONTRACT BETWEEN THE ASSESSEE AND TEAM LEADERS / SKILLED WORKERS AS ALLEGED BY THE AO. (D) THE LEDGER ACCOUNTS OF TEAM LEADERS/ SKILLED WORKERS WERE OPENED FOR CONVENIENCE AS IT SAVED THE ASSESSEE FROM THE HASSLE OF OPENING OF HUNDRED OF ACCOUNT OF INDIVIDUAL LABOURERS. THE MAIN CONTENTION OF THE APPELLANT IS THAT THOUGH THE PAYMENTS WERE MADE TO THE SPECIFIED PERSONS TER MED AS TEAM LEADER OR SKILLED WORKERS, BUT THE ABOVE MENTI ONED PAYMENTS WERE ON ACCOUNT OF A GROUP OF PERSONS WOR KING ALONGWITH THESE TEAM LEADERS/ SKILLED WORKERS. ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 4 (E) THE ALLEGATION OF THE AO THAT VOUCHERS PRODUCED BY THE ASSESSEE WERE IN THE NATURE OF AN AFTERTHOUG HT ONLY, WAS TOTALLY PREPOSTEROUS. THE AUDITORS HAD MENTIONED IN NEXT AUDIT REPORT (PARA 9(B)) WHILE REPORTING THE LIST OF BOOK S OF ACCOUNTS EXAMINED BY THEM THAT THE VOUCHERS WERE BEING MAINT AINED MANUALLY. THE AUDITORS HAD ALSO VERIFIED THESE VOUC HERS IN THE COURSE OF TAX AUDIT AS CONFIRMED IN THEIR LETTER DA TED 08-01-2011 WHEREIN IT WAS STATED THAT IN THE COURSE OF AUDIT O F PAYMENT VOUCHERS BY THEM, IT WAS NOTICED THAT THE ASSESSEE HAD MADE PAYMENT OF LABOUR CHARGES TO DIFFERENT LABOURERS ENGAGED ON DAILY BASIS. THE APPELLANT COULD NOT HAVE FABRICATE D THESE VOUCHERS SUBSEQUENT TO TAX AUDIT AND THAT TOO DURIN G ASSESSMENT PROCEEDINGS WHEN THESE VOUCHERS HAD BEEN SPECIFICAL LY EXAMINED BY THEM. (F) THE AO HAS ALLEGED THAT THERE EXISTED EMPLOYER- EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND LABO URERS, THERE WOULD HAVE BEEN PF / ESI REGISTRATION. HOWEVER, THE CONSTRUCTION WORKERS WORKING AT A CONSTRUCTION SITE ARE NOT COVERED UNDER ESI ACT, 1948. IT IS APPLICABLE TO WO RKERS WORKING WITHIN A FACTORY AND THAT TOO IS LIMITED FO R A PERIOD DURING WHICH THEY ARE WORKING WITHIN A FACTORY. NO NE OF THE STATE GOVERNMENTS HAVE EXTENDED THE SCHEME TO CONST RUCTION WORKERS SINCE THEY ARE MOSTLY MIGRATORY. 2.3 TO SUPPORT HIS CONTENTIONS, ASSESSEE RELIED ON FOLLOWING CASE LAWS. (1) CIT VS. MRINALINI BIRI MFGG.CO. LTD. (105 CTR 3 27) (KOL.) (2) SAMANWAYA VS. ACIT, 34 SOT 332 (KOL.) (3) CIT VS. BHAGWATI STEELS, 326 ITR 108 (P&H) (4) CIT VS. UNITED RICE LAND LTD. 322 ITR 594 (RAJ.) (5) DCIT VS. LAXMI PROTEIN PRODUCTS (P) LTD. 3 ITR (TRIBUNAL) 768 AHD.) (6) JAIPUR VIDYUT VITRAN NIGAM LTD. VS. DCIT 123 TTJ 88 8 (ITAT , JAIPUR ) (7) CIT VS. MOTHER INDIA REFRIGERATOR INDUSTRIES (P) LT D. , 155 ITR 71 (SC) ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 5 2.4 LD. CIT(A) VIDE DETAILED ORDER, DELETED THE ADD ITION BY HOLDING :- (I) THAT THE PROVISIONS OF SECTION 194C AND SECTION 40(A)(IA) OF THE ACT WERE NOT APPLICABLE. (II) BESIDES THE SECTION 40(A)(IA) OF THE ACT WAS APPLICABLE TO THE AMOUNT OUTSTANDING AT THE END OF THE YEAR IN VI EW OF THE ITAT SPECIAL BENCH DECISION IN THE CASE MERILYN SH IPPING & TRANSPORTS VS. ACIT, (2012) 20 TAXMAN 474 VISAKHA PATNAM BENCH) AND ITAT JAIPUR BENCH DECISION IN THE CASE O F JAIPUR VIDYUT VITRAN NIGAM LTD. VS. DCIT , 123 TTJ 888. 2.5 AGGRIEVED, THE REVENUE IS BEFORE US. 2.6 THE LD. DR CONTENDS THAT RELIANCE PLACED BY THE LD. CIT(A) ON THE CASES OF MERILYN SHIPPING (SB) AND JAIPUR VIDYUT VI TRAN NIGAM LTD. VS. DCIT (SUPRA) IS NO MORE VALID INASMUCH AS THE SPECI AL BENCH DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT (SUP RA) HAS BEEN REVERSED BY THE HON'BLE CALCUTTA HIGH COURT. ON MERITS IT I S CONTENDED THAT ASSESSEE EXPLAINED ONLY TO THE EFFECT THAT THE CASUAL WORKER S WERE NOT THE SUB- CONTRACTORS AND WORKING ON THE BASIS OF ORAL CONTRA CTS FOR WAGES. THE NON- MAINTENANCE OF PF / ESI RECORD BY THE ASSESSEE ALSO INDICATES THAT THEY WERE NOT EMPLOYEES AND WERE SUB-CONTRACTORS. LOOKING AT THE SPECIFIC TASKS EXECUTED BY THEM I.E. WOODEN WORK, INSTALLATION OF PROFILE GLASS SHEETS, PANELS ETC; THEY CANNOT BE HELD AS CASUAL LABORERS, THEREFORE, THERE IS NO MERIT IN THE LD. CIT(A)S FINDINGS IN THIS BEHALF. ASESSE E HAS NOT MAINTAINED EVEN ANY WAGES ACCOUNT AND IMPUGNED PAYMENTS HAVE BEEN R OUTED THROUGH SENIOR ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 6 LABOURERS ACCOUNTS WHICH ALSO INDICATES THAT THERE WAS ANOTHER AGENCY INVOLVED IN EXECUTION OF WORK AND DISBURSEMENT OF P AYMENTS. ALL THESE FACTS, CLEARLY INDICATE THAT THE ALLEGED CASUAL LAB ORERS WERE ACTUALLY SUBCONTRACTORS WERE INVOLVED IN THE EXECUTION OF TH E WORK AND PAYMENTS MADE TO THEM WERE LIABLE FOR TDS U/S 194C. THE EXPL ANATION GIVEN BY THE ASSESSEE HAS BEEN RIGHTLY HELD BY AO TO BE AN AFTER THOUGHT TO COVER UP THE DEFAULT. THE CONTRACTS WORKS WERE CONTINUOUS IN NAT URE AND EVEN AN ORAL CONTRACT IS COVERED U/S 194C OF THE ACT. IN THE AUD IT REPORT SUBMITTED U/S 44AB OF THE ACT IN COLUMN NO. 27(A) OF FORM 3CD, T HE ASSESSEE'S CHARTERED ACCOUNTANT HAS MADE A MENTION THAT NO TDS IS DEDUCT ED AND PAID DURING THE YEAR FOR THE PAYMENT MADE TO LABOUR CHARGES. IF THE PAYMENT FOR CASUAL WORKERS WERE MADE THEN THE ASSESSEE'S OWN C.A, WOUL D HAVE NOT GIVEN THIS REMARKS. THE ORDER OF THE AO IS RELIED ON. 2.7 THE LD. COUNSEL FOR THE ASSESSE IN REPLY CONTEN DS THAT:- (I) THOUGH THE SB JUDGMENT IN THE CASE OF MERILYN SHIPPING CO HAS BEEN REVERSED BY HONBLE CALCUTTA HIGH COURT, HOWEVER THE SUBSEQUENT AMENDMENT BROUGHT IN SEC 40 A (IA) IS PR OSPECTIVE IN NATURE. THUS IN THE RELEVANT PERIOD THE MERILYN SHI PPING JUDGMENT IS APPLICABLE. (II) AS PROVIDED BY THE CONTRACT WITH M/S NEXT RET AIL INDIA ASSESSE WAS EXPRESSLY DEBARRED FROM EMPLOYING ANY S UB CONTRACTOR. THUS THE POSSIBILITY OF EMPLOYING A SUB CONTRACTOR IS RULED OUT AT THRESHOLD ITSELF. ASSESSEE CANNOT BE ASSUMED TO HAV E WORKED IN A MANNER TO JEOPARDIZE HIS MAIN SOURCE OF INCOME I.E. CONTRACT WITH THE PRINCIPAL. ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 7 (III) ASSESSEE EXPLAINED BEFORE AO THAT ASSESSE HAD TO INSTALL SUCH GLASS PANELS ON ORDERS RECEIVED FROM CUSTOMERS SCATTERED OVER VARIOUS PLACES. HIS OWN SUPERVISING OWN TEAM WOULD HIRE CASUAL LABOURERS TO COMPLETE THE WORK BY ORAL CONTRACT FOR JOB TO JOB. THIS MAKES IT VERY CLEAR THAT THEY WERE NOT SUBCONTRACTO RS OF ANY TYPEAND WORK ON HIRE AND FIRE BASIS. THE PAYMENTS OF WAGES WERE MADE TO THEM THROUGH ONE OF THEIR SELECTED SENIOR WORKMAN I N ORDER TO AVOID THE WORKLOAD OF PAYING AND ACCOUNTING FOR EACH LABO URER. THIS FACT IS CLEAR FROM THE PAYMENT PATTERN WHICH IS IN MULTIPLE OF DAYS AT THE RATE OF RS. 100/- TO 125/- PER DAY. THIS HAS NOT BEEN DI SPUTED. (IV) AUDITED RECORD DOESNT HAVE MENTIONED OF PAYME NT ON THE BASIS OF SQUARE FOOT/METER BASIS. (V) IT HAS NOT BEEN CONTROVERTED THAT PF AND ESI I S PAYABLE TO WORKERS OF A FACTORY AND NOT THE CASUAL LABOURERS, THEREFORE, THE ADVERSE INFERENCE DRAWN BY AO IN THIS BEHALF IS MIS PLACED. (VI) THERE IS NO CONTINUITY OF WORK QUA THE EACH CO NTRACT, IN AS MUCH AS WITH COMPLETION OF ANY ORDER ASSESSES OB LIGATION CAME TO END WITH FINISHING OF ONE INSTALLATION. THUS THE AS SUMPTION OF CONTINUING CONTRACT BETWEEN THE ASSESSE AND LABOURE RS OF THAT SITE IS MISPLACED. FOR NEW SITE FRESH TERMS WILL BE SET DEP ENDING ON THE NATURE, SIZE, DISTANCE AND INTRICACIES OF WORK. (VII) THERE IS NO OBSERVATION BY AUDITORS THAT THER E WAS ANY SUB CONTRACT WHICH ATTRACTED LIABILITY TO PAY TDS O N SUCH WAGES. THEY HAVE ONLY MENTIONED THAT THERE IS NO TDS PAYMENT ON WAGES. A SIMPLE STATEMENT OF HARMLESS FACT CANNOT BE ASSUMED BY THE AO AS CONCLUSION OF LIABILITY FOR TDS. 2.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE FACTS MENTIONED ABOVE IT CLEARLY EMERGES THAT BY MAIN CONTRACT WITH PRINCIPAL NEXT RETAIL INDIA A SSESSE WAS BARRED BY HIRING ANY SUBCONTRACTOR. WE ARE UNABLE TO SUBSCRIB E TO THE AOS VIEW THAT AS THE LABOURERS WERE ORALLY EMPLOYED OR THE SALARIES WERE DISBURSED THROUGH SENIOR WORKMAN CONSTITUTE ADVERSE FACTS TO LEAD TO A CONCLUSION THAT ASSESSE HIRED SUBCONTRACTORS TO COMPLETE THE WORK. SIMILAR LY NO ADVERSE INFERENCE ITA NO. 960//JP/2011 ITO VS. SHRI TULSI RAM MODI 8 CAN BE DERIVED FROM AUDITORS REMARK AS IT IS ONLY S TATEMENT OF FACT ABOUT WAGES AND IN ANY CASE AUDITORS VAGUE REMARKS CANNOT BE CONSTRUED AS A CONCLUSIVE STATEMENT. THIS IS THE JOB OF AO TO PERU SE THE FACTS, CIRCUMSTANCES AND MATERIAL IN ENTIRETY AND NOT TO R ESORT TO PIECE MEAL OBSERVATIONS. IN VIEW OF THE ABOVE, WE FIND NO INF IRMITY IN THE ORDER OF CIT(A) HOLDING THAT ASSESSE WAS NOT LIABLE TO DEDUC T TDS U/S 194 C, HIS ORDER ON MERITS IS UPHELD. SINCE WE HOLD THAT THERE IS NO LIABILITY U/S 194C THERE IS NO VIOLATION OF SEC. 40 A (IA), THERE IS N O NEED TO ADJUDICATE ABOUT THE MERYLIN SHIPPING ISSUE. 3.0 IN THE RESULT REVENUE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31-10 -2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 31 ST OCT, 2014 *MISHRA COPY FORWARDED TO:- 1. THE ITO, WARD- 6(2), JAIPUR 2. SHRI TULSI RAM MODI, JAIPUR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 960/JP/2011) AR ITAT, JAIPUR