Income Tax Appellate Tribunal - Rajkot
The Ito, Tds-2,, Rajkot-Gujarat vs M/S Shreeji Construction Co.,, ... on 16 May, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
[Conducted through E-Court at Ahmedabad]
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(BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
&
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER)
आयकर अपील सं./I.T.A. No. 421/Rjt/2015
&
CO No.63/Rjt/2015(in I.T.A. No.421/Rjt/2015)
( नधा रण वष / Assessment Year :2012-13)
Income Tax Officer, TDS-2, बनाम/ M/s. Shreeji
th
Room No.503, 5 Floor, Vs. Construction Co.
"Aayakar Bhavan", Race F-22, Neptune Tower,
Course Ring Road., Kalawad Road.,
Rajkot-360 001 Rajkot.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAHFS 3595 H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
& Cross Objector
Assessee by : Shri A.N. Sontakke, Sr. D.R.
Reveune by : Shri Kalpesh Parekh, A.R.
ु वाई क तार ख /
सन Date of Hearing 02/05/2017
घोषणा क तार ख /Date of Pronounce ment 16/05/2017
आदे श / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER :
This appeal has been filed by the Department and the Cross- objection thereof filed by the assessee are directed against the order of the Commissioner of Income Tax(Appeals)-I, Rajkot, dated 30/06/2015 for the Assessment Year (AY) 2012-13.
ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015)M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -2-
2. Department has been taken following Grounds of appeals:
i. The learned CIT(A) has erred in law as well as on facts of the case in directing to delete the tax u/s.201(1) of Rs.36,25,103/- and interest u/s. 201(1)(a) work out of Rs.13,05,037/-.
ii. On the facts and in the circumstances of the case, the learned CIT(A) ought to have decided the issue under reference, in the light of evidence obtained by him during the appellate proceedings after following the due procedure of law.
3. The relevant facts as culled out from the materials on record are as under:-
The appellant is engaged in the business of construction of roads and bridges on contract basis and mainly doing the government contracts. In this case a survey u/s.133A was carried out at the office premises of appellant for verification of TDS compliance by the appellant company. During the course of survey it came to know that the appellant has made payments of labour charges, without deduction of tax at source. Therefore the appellant was issued a notice to show cause as to why it should not be treated as an assessee in default in respect of the above payments made without deduction of tax at source. AO held that the appellant failed to deduct tax from labour charges payment made to unknown labour contractors, whose details have not been brought on record in its books or in response to the letter issued by the AO. In view of this the AO treated the appellant deemed to be in default for non- deduction of tax u/s.194C in respect of payment of labour charges of ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015) M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -3- Rs.1,81,25,514/-. As the appellant has not made available the PAN of the labour contractors, the rate of TDS was adopted at 20% and the total default was worked out at Rs.36,25,103/-. Further, interest payable @ 1% of the above defaults, for 36 months was worked out at Rs.13,05,037/-. Thus the total TDS default was computed at Rs.49,30,140/-.
4. Appellant contention was that in case of the appellant, the survey u/s. 133A carried out on 18/02/2014 at the business premises of the assessee an show cause notice issued u/s. 201(1)/(IA). After considering reply of the appellant and with a single hearing of just 20 minutes, the learned AO decided matter and made huge addition of Rs.1,81,25,214/- on account of non deduction of TDS on labour charges paid in cash to the individual laborers.
5. During the hearing, following points were highlighted by the assessee.
To explain the correct nature of business of appellant:
• Appellant stated that he is engaged in business of construction of Road since more than 30 years with more than 7 partners all the time and hence it has vide experience of business. In such business it is inevitable to make cash payments to laborers. All the laborers were personally appointed by the partners and employees of the firm and cash payment were made to all of the personally by the partners on 10 to 15 days interval.
• Hence, there is a pre defined and well established system of managing laborers and their payments.ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015)
M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -4- • There arises no question of appointing any labour contractor. The procurement of required number of labourers becomes possible because of following reasons.
• Generally, there are some pre indentified villages (Eg. Shamlaji) where majority of population is engaged in such labour work.
• There remains considerable time gap between allotment of a work by government, receipt of work order and beginning of field work. This enables the team to approach and get labourers.
• Generally, one person is appointed as supervisor and few are appointed as drivers of the heavy vehicles from nearby area where the site is running. This helps in reaching to more labourers due to their knowledge of that particularly locality.
• The firm is also allotting some works to sub contractors (on payment to whom TDS is duly deducted and paid). The labourers mass may also be fetched from that source after completion of their work.
• Due to high social and business involvements of the partners, they remains continuouslv in touch with the other contractors who can be a helping hand to reach to the labourers.
• Many of the old labourers approach the firms supervisors for work.
• Labourers internally pass on the information about availability of work in their family and groups.
• TDS liability does not attach itself to every payment. Only those payments which are specifically covered by the ACT are liable for tax deduction at source.ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015)
M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -5- • The payment made to casual labour at site is nowhere covered for the TDS purpose.
• Hence, no TDS is deductible on the labour charges paid by us as the amount is paid to individual labourers hired by us at various sites.
• Section 194C clearly provides that there must be a contract between two parties to attract TDS. There is no oral or written contract in this case as the amount is paid to labourers who are illiterate.
• By no means can payment of such charges be brought under the purview of Section 194C. The labour charges are paid to individual labourer independently and the appellant has never appointed any labour contractor.
• Further, when the TDS is not applicable, the question of maintaining PAN of the person to whom the payment has been made does not arise.
• There is no doubt that work carried out by the asseessee is basically labour intensive in nature but at the same time, there remains no scope of wonder about non involvement of any contractor for such work after considering the peculiar facts of contract work business and the system followed by the appellant.
6. Learned AO was not convinced with the submission of labourers and he made an addition, which is mentioned in the Grounds of appeal.
7. Against the said order learned CIT(A) allowed the appeal by holding that he is inclined to agree with the appellant's contention that the question of deduction of TDS does not arise. The AO has raised TDS liability on the presumption that "the appellant must have made payment ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015) M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -6- to the labourers through labour contractor". There is gist of all of the presumption made by the AO in Para 5.1 of the order although the AO has not provided any name of labour contractor. Even nothing adverse in this regard was found during survey. The law does not permit to invoke provisions of law simply on presumption and assumption. Therefore, the TDS liability was cancelled by the learned CIT(A).
8. We have gone through the relevant record and impugned order, Section 194(c) presupposes existence of a payer and payee. We find that in the case of the assessee identity of payee was not established at all. When the contractors are not identifiable at all and also not identified by the Department even otherwise the question of TDS liability anyway does not arise. The AO has just passed the order on the basis on assumptions without disproving the facts reported by the assessee that no payment to the contractors was made. Therefore, we do not find any infirmity or illegality in the order passed by the learned CIT(A).
9. In the result, appeal filed by the Department is dismissed.
10. So far as CO is concerned, Ld. A.R. does not wish to press CO. In the result, CO is also dismissed as not pressed.
ITA No. 421/Rjt/2015 & CO 63/Rjt/2015(in ITA No.421/Rjt/2015)M/s. Shreeji Construction Co. vs. ITO Asst.Year -2012-13 -7-
11. In the result, appeal of the Department is dismissed and CO filed by the assessee is also dismissed as not pressed.
This Order pronounced in Open Court on 16/05/2017
Sd/- Sd/-
vejthr flag महावीर साद
(लेखा सद य) ((या)यक सद य)
( AMARJIT SINGH ) ( MAHAVIR PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 16/05/2017
Priti Yadav, Sr.PS
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं,धत आयकर आयु.त / Concerned CIT
4. आयकर आयु.त(अपील) / The CIT(A)-I, Rajkot.
5. /वभागीय )त)न,ध, आयकर अपील य अ,धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड4 फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या/पत )त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy