Income Tax Appellate Tribunal - Kolkata
Tarun Kumar Mondal (Indv.), Asansol vs Department Of Income Tax
आयकर अपीलीय अधीकरण, Ûयायपीठ - "सी ", कोलकाता
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH : KOLKATA
(सम¢) ौी बी. आर. िमƣल ्, Ûयायीक सदःय, एवं ौी बी. के. हालदार लेखा सदःय,,)
[Before Hon'ble Sri B.R.Mittal, JM & Hon'ble Sri B. K. Haldar, AM]
आयकर अपील संÉया / I.T.A No. 1657/Kol/2009
िनधॉरण वषॅ/Assessment Year : 2005-06
Asstt.Commissioner of Income-tax -Vs- Tarun Kumar Mondal
Cir.3, Asansol. PAN:AENPM8465L
(अपीलाथȸ /Appellant) (ू×यथȸ/Respondent)
अपीलाथȸ/ For the Appellant : ौी़/ Shri P.K. Mishra, ld.DR
ू×यथȸ/ For the Respondent : ौी़/ Shri B.B.Payra, ld.AR
आदे श/ORDER
ौी बी.
बी.के.हालदार, हालदार, लेखा सदःय, Shri B.K.Haldar, Accountant Member.:
This is an appeal filed by the revenue against the order of the learned Commissioner of Income-tax (Appeals), Asansol dated 09.07.2009 for the assessment year 2005-06.
2. The revenue has taken following grounds of appeal:-
1. Whether Ld. CIT(A).was justified in deleting the additions of Ra.3,74,785/- en account of wages and salary expenses made by the assessing officer on the basis of facts and circumstances of the case and materials available on record.
2. Whether Ld. CIT(A). was justified in deleting the addition of made by the Assessing Officer U/s. 40(a) (ia) on the basis of facts and circumstances of the case and materials available on record
3. Whether Ld.CIT(A) was justified in deleting the addition of Rs.66,153/- on account of undisclosed Bank a/c deposit made by the Assessing Officer on the basis of facts and circumstances of the case and materials available on record.
3. The assessee being individual is a labour contractor of Food Corporation of India(FCI) and S.E Railway(SER). During the assessment proceedings the AO noted that following expenditure were debited to the P & L account on account of salary and wages :-
ITA No.1657/Kol/09 1 Contractee Particulars Amount (Rs.)
F.C.I Contract A/c Handling Labour Charges 11,39,200
Casual labour a/c 24,48,700
Labour without P.F a/c 74,85,941
Incentive to Labour 4,15,200
SER Contract A/c Labour charges 20,26,038
Incentive to Labour 1,17,217
1,36,32,296/-
3.1 With reference to F.C.I contract work the assessee only produced the copy of wage
sheets of handling labour charges.
3.2 With reference to other expenses no wage sheets were furnished or produced before
the AO. No corroborative evidence for payments were also submitted. The AO, therefore, concluded that the expenditure debited under the head 'casual labour', 'labour without PF' and 'incentive to labour' were unverifiable.
3.3 With reference to contract work with SER, the AO noted that the wages register submitted was new and there was no soiling. He, therefore, concluded that the entries made therein could not be relied upon. This view of the AO was intimated to the ld.AR for the assessee vide order sheet entry dated 29/11/07.
3.4 The AO in the facts narrated above concluded that it was not possible to verify the expenditure incurred by the assessee on a/c of followings:-
Head of A/c Amount Amount disallowed 3%
FCI Casual Labour 24,48,470 73454
Labour without P.F 74,85,941 224578
Incentive to Labour 4,15,200 12456
SER Labour charges 20,26,038 60781
Incentive to Labour 1,17,217 3516
TOTAL 3,74,785
3.5 He, therefore, disallowed 3% of the above expenditure being Rs.3,74,785/-.
3.6 The AO also noted that the assessee had engaged the following persons as sub-
contractor and paid hire charges of labour and transportation to them as under:-
ITA No.1657/Kol/09 2 Name Amount Paid
Mr. Partha Mondal 64,000
Ms. Shanti Mondal 381145
Mr. Rashid Ansari 56310
Mr. Nuruddin Ansari 60000
1137455
3.7 The assessee did not deduct TDS from the above parties. The assessee vide note-sheet entry dated 29-11-07 admitted that no TDS was deducted out of the said payment. The AO, therefore, disallowed an amount of Rs.11,37,455/- as per provision of section 40(a)(ia) of the I.T.Act'61.
3.8 The AO found that the assessee had maintained saving bank account bearing no.01150066071 with SBI, Adra Branch. The assessee did not disclose this bank account in his balance sheet. The ld.AR for the assessee was asked to explain the same. As the ld.AR for the assessee failed to rebut the same with satisfactory explanation, the AO treated the amount of Rs.4,11,721/- as undisclosed income of the assessee u/s.69 of the Act
4. Aggrieved the assessee filed appeal before the ld.CIT(A).
5. Before the ld.CIT(A) with reference to disallowance of Rs.3,74,785/-, the assessee's submissions were as under:-
"1) Disallowance under the head Payment made to casual labour:
A) The Assessee has produced the documents / registers etc pertaining to the payments made under the heads -- F.C.I., Handling Charges and Casual Labour A/c. These two heads of payments are subject to E.P.F.
-- deduction & contribution and no particular deficiency or discrepancy under this head has been detected as such the disallowance made under this head is wholly unjustified. The Assessee produced Wages Payment Register for (1) Handling Labour & (2) Casual Labour duly certified by the Inspector of Food .Corporation-of-india-during-
.the-course of-hearing. The Xerox copy of the same are lying with the Assessing Officer who accepted the payments made on account of handling charges wholly, but disallowed Rs. 73,454/- i:e. 3% of the payment made on Account of wages paid to casual labour without any cogent reason.
This may please be deleted.
B) Disallowance under the head Labour without P.F.:
The Labour without P.F. a/c -- in case of F.C.I -- are the labour charges paid for engaging labour for urgent and immediate requirement through different Agency I Group Leader / Sardar / Mates ITA No.1657/Kol/09 3 convened from outside but locally -- the names and addresses of those persons were submitted before the Ld. Assessing Officer. During the course of Scrutiny for the Assessment Year 2004-2005, the matter was verified by the Inspector of Income Tax, Purulia. The report submitted by the Inspector affirms the requirement of such payments as necessary and incidental to the business but the labours could not produce any documentary evidence in respect of the amount received by them. The Persons whose names and addresses were given by the Assessee have accepted and acknowledged the payment made through them by the Assessee for his urgent and immediate requirement of labours. The Ld. Assessing Officer could have verified but has been reluctant in doing so and made the disallowance of Rs.2,24,578/-.
C) Disallowance under the head incentive to Labour:
The Incentive to labour -- paid under this head is compulsion as because the Wagons / Racks of the Railway loaded with Food Grains are to be unloaded within the time or else, the Assessee shall have to suffer heavy damage / damages, wharfage and other charges and pay for, there also remains further threat / risk of pilferage, wastage and theft. This payment is made through the mates and sardars in the form of amenities to the casual labours whb does not enjoy the benefit of P.F. Their payments are made on self made vouchers and recorded accordingly in the Books.
2) Disallowance of Expenditure (S.E. Rly):
A) Head -- Labour Charges:
The Ld. Assessing Officer has disallowed Rs. 60,781/- under the head, however during the course of hearing the Assessee produced the Labour Payment Register kept and maintained neatly, instead of appreciating the same the Ld. Assessing Officer not only made the impugned disallowances but also treated it with uncalled for remark as it appears to be new without any soiling and only upon the surmises without examining the contents thereof disallowed the amount of Rs.60,781/-. It is pertinent to note that the Ld. Assessing Officer has again disallowed Rs.2,31,145/- on Account of Labour Charges (S.E.R.) paid through Shanti Mondal under the Head 'B' Additions made for amount paid without T.D.S. u/s l94C and has not disputed genuineness of the payments made.
B) Head -- Incentive to Labour:
expenditure is required to be incurred by the Assessee. The labours are required to jobs at distant places where amenities of life -- such as food, refreshment, drinking, water, medical treatment etc are scarce. To ITA No.1657/Kol/09 4 induce the labours to perform the jobs stretched at distant points, the Assessee has to arrange for all these amenities apart from and in addition to the cash payment of wages for which self made vouchers are kept and accordingly recorded in the books and for providing stimulus some times -- lungi, ganji, sharee and umbrellas other items are also required to be given to such labours so that they may be available at call."
5.1 The ld.CIT(A) deleted the addition by holding as under:-
6(i) 3% disallowances in respect of payment related to SER contracts viz. Labour Charges and Incentives to labours Rs. 20,26,038/- and Rs. 1,17,217/- respectively From the above referred discussion, it is clear that the A. 0. has made the addition without bringing on record any concrete material. The only reason given by him in respect of the disallowance out of the work related to SER contracts was that the various registers submitted before him appears to be new without any soiling. In this regard. the, Appellant inter alia appears to be correct that the assessee produced the labour payment register kept and maintained neatly and that instead of appreciating the same, Ld. A. 0. not only made the impugned disallowance, but also treated it with uncalled for remarks as "it appeared to be new without any soiling"; that the A.0. again disallowed Rs. 2,31,145/- on account of labour charges (SER) paid through Shanti Mondal under the head 'B' u/s. 40(a)(ia) r.w.s. I 94C and not disputed the genuineness of the payments made. In this regard, I would like to further add that the A.O. was not an expert to opine that whether the register was new and if he had some doubt he should had sent those registers for verification to forensic laboratory or any appropriate authority in the matter which he failed. Hence A.O.'s such comments are not acceptable. However, such a remark without certainty or authenticity '- by any competent authority is unsustainable in the eyes of law.
Hence the A.O. was not justified at all in making the 3% disallowance out of the above referred expenditure. I could not understand with the remarks of the A.O. in Assessment Order as to how the Appellant is responsible and why should he be penalized by wa of disallowance if as per A.O. it was not possible for the A.O to verify each and every labourer and staffs and therefore the expenditure remained doubtful.
In my considered opinion for such reason no Appellant can be penalized and no disallowance was warranted.ITA No.1657/Kol/09 5
Likewise, the A/R appears to be reasonable in his contention that the incentives were required to pay to Labourers to obtain the desired result within the time allowed and to avoid penalty and other actions and the following submission of the Appellant dt.l1.05.2009 also appears to be reasonable.
"This expenditure is required to be incurred by the Assessee. The labours are required to perform the jobs at distant places where amenities of life- such as food, refreshment, drinking, water, medical treatment etc. are scarce. To induce the labours to perform the jobs stretched at distant points, the Assessee has to arrange for all these amenities apart from and in addition to the cash payment of wages for which self made vouchers are kept and accordingly recorded in books and for providing stimulus some tomes-lungi, ganji, sharee and umbrellas other items are also required to be given to such labours so that they may be available at call."
These types of incentives in the form of lungi, ganji, saree, umbrella etc. is commonly paid by this line of businessman so that the labourers may be available at call. Moreover, the A.O. failed to pin point any defects, discrepancy or bogus or non-genuineness in those expenditures.
From the above referred discussion, it is clear that the A.O. has made the additions on presumptions, surmises, conjectures and without any basis. Moreover, the books of accounts were also audited, hence the A. 0. could not had made any addition without pin pointing any defects/discrepancy, and bogusness or non-genuine expenditure etc. in the books of accounts which he failed. Therefore he was not justified in making the addition.
3(v) 3% Disallowance related to F.C.L contracts payments viz, casual labour Rs. 24,48,470/; Labour without P.F. Rs. 74,85,491/- & Incentives to labourers Rs. 4,15,2001- The payments in respect of handling charges and casual labour payments related to FCI are subject to EPF deduction and contribution and hence there is no possibility of any hanky panky in the expenditure. Moreso, when all the expenditures found duly certified by the Inspector of F.C.l. in this regard. No particular defects, discrepancy, bogusness or non-genuineness or any abnormalit under any head has been detected by A.O. in the audited books, the registers and the vouchers Hence in these circumstances, I am agreeable to AIR that the disallowance made under this head wa wholly unjustified. The Appellant has also produced all the registers and debit vouchers as proof o payments etc. before me which are very bulky. The copies of some of the registers and debit note have been kept on record in my file.
ITA No.1657/Kol/09 6The Appellant has also produced the original registers before me for my verification. The original registers were also claimed to had produced before the A. 0. and the copies thereof were also claimed to had given to him by the Appellant.
On test check basis I have verified the original registers produced by the Appellant but no discrepancy, defects, non- genuineness or bogusness or abnormality whatsoever kind is apparent from the registers.
Likewise, the A/R appears to be correct that the incentives were required to pay to labourers to obtain the desired result within the time allowed and to avoid penalty and other actions and the following submission dt.1 1.05.2009 appears to be reasonable.
"The Incentive to labour -- paid under this head is compulsion as because the Wagons I Racks of the Railway loaded with Food Grains are to be unloaded within the time or else, the Assessee shall have to suffer heavy damage/damages, wharfage and other charges and pay for, there also remains further threat/risk of pilferage, wastage and theft. This payment is made through the mates and sardars in the form of amenities to the casual labours who does not enjoy the benefit of P.F. Their payments are made on self made vouchers and recorded accordingly in the Books."
These types of incentives are generally being paid in this line of business in the form of amenities to the casual labours who do not enjoy the benefit of P.F. The expenditure are also for the purposes of the business because the same had been paid by the Appellant to prevent his business from heavy damages, wharfage and other charges, further threat/risk of pilferage, wastage and theft. These types of expenditures are generally being paid through self made vouchers and found duly recorded in his books which were also test checked by me.
Moreover, the A.O. failed to pin point any defects, discrepancy or bogusness or non-genuineness or any abnormality in those expenditures.
I am also agreeable to both the submissions made by the Appellant before me and reproduced by me in my earlier paras and 1 am inclined to accept the submission of the Appellant. Since the A.O. has failed to pin point any defects discrepancy, bogus, non-genuinè,or any abnormality in the registers, debit vouchers etc. in my ITA No.1657/Kol/09 7 considered view, no disallowance was called for in the facts and circumstances of the case, moreso when the A.O. failed to establish that the expenditures were not for the purposes of business, not incidental to business, not during the course business and not for the business exigency. Hence the A. 0. was not incurred justified in making the addition. This ground of appeal is therefore allowed."
5.2 With reference to disallowance of Rs.11,37,455/- u/s.40(a)(ia) it was submitted before the ld.CIT(A) that no payment amounting to Rs.6,40,000/- was made to Sri Patho Mondal. Only an amount of Rs.1.50 lakh was paid to Sri Patho Mondal on a/c of truck hire charges. He was entitled to receive the hire charges of the truck as and when the same was let out to the assessee. Therefore, he cannot be treated as the sub-contractor of the assessee. 5.3 With reference to payment of Rs.3,81,145/- made to Mrs. Shanti Mondal, it was contended by the assessee before the ld.CIT(A) that she was paid truck hire charges on different dates amounting to Rs.1.50 lakh and labour charges of Rs.2,32,145/- on various dates. Mrs. Shanti Mondal was owner of only one truck, which was hired by the assessee as and when the same was required. It was, therefore, contended by the assessee that she cannot be considered as a sub contractor on a/c of hiring out of truck to the assessee.
5.4 With reference to labour charges payment made to her, it was contended that she was engaged to arrange for the payment of labour charges on behalf of the assessee. Thus, she cannot be considered as a sub contractor on this account also.
5.5 With reference to payment made to Mr. Rashid Ansari amounting to Rs.56,310/- and Mr.Nuruddin Ansari amounting to Rs.60,000/-, it was submitted that these parties arranged goods vehicle locally and supplied the same to the assessee. These parties were only inter-mediates. An elaborate submission was made by the assessee before the ld.CIT(A) emphasizing the ITA No.1657/Kol/09 8 fact there was no contract between the assessee and the parties concern. It was contended that they cannot be held as sub contractors. Therefore, it was contended that the impugned amount did not fall within the mischief of section 40(a)(ia) of the IT Act.
6. The ld.CIT(A) after considering the facts and circumstances of the case noted that the tax auditors in para 27 of Form No.3CD of the audit report has clearly mentioned that no TDS was deducted from payments made to four parties on a/c of truck hire charges and labour charges. He also accepted the contention of the assessee, after going through various documents, that only an amount of Rs.1.50 lakh was paid to Mr. Partha Mondal on a/c of truck hire charges and not an amount of Rs.6.40 lakh as mentioned by the AO. The ld.CIT(A), therefore, deleted the disallowance of Rs.6.40 lakh made by the AO.
6.1 With reference to payments made to other parties the ld.CIT(A) relied on CBDT's circular, where it was stated that even oral contract will be considered as contract. He held that the surrounding circumstances of these cases would show that they were either some kind of written or oral contract between the appellant and the four parties. He, therefore, upheld the addition of Rs.6,47,455/- on a/c of section 40(a)(ia) of the Act. 6.2 With reference to addition of Rs.4,11,721/- on a/c of peak credit in saving bank account no.01150066071 with SBI, it was submitted by the assessee before the ld.CIT(A) that the peak credit included an amount of Rs.4 lakh being cash drawn by the assessee from his proprietorship concern, M/s Mondal Constructions and deposited in the said saving bank account. Subsequently, this amount has been returned back to the M/s. Mondal Construction. The impugned saving bank account was not disclosed in the balance sheet of proprietorship concern, M/s. Mondal Constructions, but in the personal statement of the proprietor filed with the return of income.
ITA No.1657/Kol/09 96.3 The ld.CIT(A) found that the said account was disclosed and filed in the personal balance sheet of the proprietor along with return of income. He also held that the AO has failed to verif y and establish that the peak credit amount mentioned in the bank account was unexplained. He, therefore, deleted the impugned amount.
7. Aggrieved the revenue has filed appeal before the Tribunal.
8. Before us the ld.DR relied on the order of the AO in support of ground nos.1 to 3 taken by the revenue. With reference to ground no.1 it was submitted by him that the AO has clearly mentioned that the details were not furnished before him. However, the ld.CIT(A) has held that such documents were produced before the AO. Thus, it was contended by him that the ld.CIT(A) was not justified in deleting the entire addition.
9. The ld.AR for the assessee, on the other hand, relied on the order of the ld.CIT(A).
10. With reference to ground no.3 it was submitted by him that the relevant bank account was disclosed as per copy of personal balance sheet, which is available at page 72 of the APB.
11. We have heard the parties and perused the record. We find that details with reference to following expenses were not furnished before the AO and the same are not available in the paper book filed by the assessee, which consists of 78 pages:-
a. FCI- i) Casual Labour Rs.24,48,470/-
b. ii)Labour without PF Rs.74,85,941/-
c. iii)Incentive to Labour Rs. 4,15,200/-
TOTAL Rs.1,03,49,611
11.1 Thus, there is no evidence on record that details relating to the above were available. The AO has disallowed very fair amount of 3% of the total expenditure in absence of proper details. We are of the considered opinion that 3% of the above amount are required to be sustained.
ITA No.1657/Kol/09 1012. As regards the disallowance made on account of SER contract, we are in agreement with the findings of the ld.CIT(A) and uphold the same. Thus, ground no.1 taken by the revenue is partly allowed to the extent mentioned above.
13. With reference to ground no.2 the ld.CIT(A) has only deleted the addition of Rs.6,40,000/- made by the AO u/s.40(a)(ia) on a/c of alleged payment made to Sh.Partho Mondal. He, however, has sustained an addition of Rs.1.50 lakh on a/c of section 40(a)(ia) of the Act being the truck hire charges paid to the above party. He also upheld the other additions made on this account by the AO.
14. The ld.AR for the assessee has stated that the assessee has not filed any appeal on such sustaining of addition by the ld.CIT(A).
15. The ld.DR has also not brought on record any evidence to rebut the factual finding of the ld.CIT(A) for deleting the addition of Rs.6.40 lakh. We, therefore, do not find any reason to interfere with the finding of the ld.CIT(A) on this issue. Thus, we reject ground no.2 taken by the revenue.
16. With reference to ground no.3 i.e addition of Rs.4,11,721/- made u/s.69 of the Act, we find that copy of the said bank account is available in APB pages 75-79. Though the assessee has claimed that the major deposits in the said bank account came out of M/s. Mondal Constructions, the proprietorship concern of the assessee, there is no evidence on record to support the above submission of the assessee. It is noticed that the said account was opened only on 5-8-04. There were cash deposits of Rs.8 lakh on various dates during the relevant previous year. The assessee has not filed any evidence in the shape of cash book of proprietorship concern showing that the impugned amount came out of assessee's proprietorship concern, M/s. Mondal Constructions and the amounts were also returned back to the said concern subsequently. As such in the balance sheet of the proprietorship concern as on 31-3-05, which is available at APB page 55, there is only drawing of Rs.60,000/- by the ITA No.1657/Kol/09 11 assessee from his proprietorship concern. There is no details of any other withdrawals and repayment made to the proprietorship concern by the individual. It is noted by us that the assessee has not given details of explanation filed by him before the AO with reference to his query on this account. In the above circumstances, we are constrained to hold that the ld.CIT(A) was not justified in deleting the impugned addition. We, therefore, reverse the order of the ld.CIT(A) on this account and restore that of the AO. This ground of revenue is allowed.
17. In the result, the appeal of the revenue is partly allowed.
यह आदे श खुले Ûयायालय मɅ सुनाया गया है तारȣख 13-12-10 Order pronounced in the open court on 13-12-10.
Sd/- Sd/-
[बी. आर. िमƣल ्, Ûयायीक सदःय ] [बी. के. हालदार, लेखा सदःय]
(B.R.Mittal ) (B. K. Haldar)
Judicial Member Accountant Member
(तारȣख) Dated :13-12-10
*PP वǐरƵ िनǔज सिचव /Sr.P.S.
आदे श कȧ ूितिलǒप अमेǒषतः- Copy of the order forwarded to:
1. अपीलाथȸ /Appellant- Asstt Commissioner of Income-tax ,Cir-3, Parmar Building, 54 G.T Road(West), Asansol-713304.
2 ू×यथȸ/ Respondent : Shri Tarun Kumar Mondal Panchudanga,P.O Adra, Purulia
3. आयकर किमशनर/The CIT,
4. आयकर किमशनर (अपील)/The CIT(A), Kolkata.
5. वभािगय ूितनीधी / DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, उप पंजीकार/Deputy Registrar.ITA No.1657/Kol/09 12 ITA No.1657/Kol/09 13