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TMI Blog2012 (8) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... e supplied. Such reasons read as under :- "1. In this case, the return of income was filed on 28.10.2005 by assessee for A.Y. 2005-06 showing total income at Rs. 7,83,400/-. The assessment u/s.143(3) completed on 21.12.2007, determining total income at Rs. 38,59,387/-. 2. The assessee engaged in cutting and polishing of diamonds. In this case, the assessee had claimed labour charges payment of Rs. 3,07,59,872/- to labour contractors. But the assessee had not deducted TDS @ 2.091% on the total payment of Rs. 3,07,59,872/- u/s.194C of the Act. 3. In view of the above, I have reasons to believe that the assessee became defaulter, and the entire amount of labour charges payment of Rs. 3,07,59,872/- made by him to Labour contractors shall not be deducted in computing the income chargeable under the head "profit and gains of Business or profession" as per Section 40(a)(ia) of the I.T. Act and is taxable as the income of the Assessee for A.Y. 2005-06. Thus there is escapement of income, which is required to be taxed by re-opening the Assessment U/s.147 of the I.T. Act. Thus it is a fit case for issuing notice U/s.148 of the I.T. Act." 2.3 From the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year. Admittedly in the original assessment framed by the Assessing Officer, the question of deduction of tax at source was not examined. Notice for reopening is thus validly issued. The proceedings must be allowed to be completed. 6. Having thus heard learned counsel for the parties, we find that undisputedly the notice for reopening has been issued within four years from the end of relevant assessment year. Equally undisputedly in the original assessment, the Assessing Officer had not examined the question of petitioner's liability of deduction of tax at source under Section 194C of the Act. The question however, is whether the petitioner had any such legal responsibility to do so. This question we are inclined to consider from the limited point of view of examining whether the Assessing Officer could be stated to have reason to believe that income chargeable to tax has escaped assessment. We are conscious that at this stage we are not required to go into the sufficiency of such reasons. Nevertheless, the existence of such reasons can always be looked into by the Court while examining the challenge of the assessee to notice for reopening of assessment previously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section (2) of Section 194C is at issue in the present case. 9. Relevant portion of Section 194C as stood at the relevant time reads as under :- (1) Any person responsible for paying any sum to any resident (hereafter in this section referred to as the contractor) for carrying out any work (including supply of labour for carrying out any work) in pursuance of a contract between the contractor and -- (a) the Central Government or any State Government; or (b) any local authority; or (c) any corporation established by or under a Central, State or Provincial Act; or (d) any company; or (e) any co-operative society (f) any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both; or (g) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India; or (h) any trust; or (i) any University established or incorporated by or under a Central, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. Explanation III. - For the purposes of this section, the expression "work" shall also include-- (a) advertising; (b) broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) carriage of goods and passengers by any mode of transport other than by railways; (d) catering." 10. It does not appear to be debatable that the case of the petitioner does not fall in sub-section (1) of Section 194C. Sub-section (1) of Section 194C would cover the cases of payments made by any person to a contractor pursuant to a contract between the contractor and authorities specified in clauses (a) to (j). 11. If at all, the case of the petitioner needs to be examined in terms of sub-section (2) of Section 194C of the Act. Main body of sub-section (2) provides that any person being a contractor and not being an individual or Hindu undivided family responsible for paying any sum to any resident in pursuance of a contract with the sub-contractor in case of specified contract, shall have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s situation. The assessee as an individual or HUF may be required to make the payments to a sub-contractor on the first date of the financial year or at any rate in the early part of the financial year. At that stage, the assessee would obviously not be in position to foresee whether total sales, gross receipts or turnover would exceed statutory limits and his accounts would be therefore required to be audited under Section 44AB of the Act. In such a situation, the assessee could not be expected to deduct tax at source. If out of abundant caution, he did deduct the tax at that stage, the recipient of the payment would legitimately object to any such deduction. Moreover, eventually during the financial year under consideration, if the assessee's total sales, gross receipts or turnover did not exceed statutory limits, the entire exercise of deduction of tax at source would be unauthorized. On the other hand, if the assessee did not deduct the tax and by the year end, found that his total sale, gross receipts or turnover had exceed the limit, he would be liable to be declared a defaulter with grave consequences of such payments though actually made, being discarded for deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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