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2016 (2) TMI 831 - ITAT MUMBAI

2016 (2) TMI 831 - ITAT MUMBAI - TMI - TDS u/s. 194C not paid - Addition u/s. 40(a)(ia) - payment of labour charges - non genuineness of the entire payment - Held that:- On perusal of the Ld. CIT(A)ís order, the remand report submitted by the AO, further enquiries conducted by the Ld. CIT(A), we do not find any infirmity in the order passed by the Ld. CIT(A) in deleting the disallowance made u/s. 40(a)(ia) of the Act as the payment made by the assessee to karigars is not contractual and therefor .....

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evant period and confirmed that they have received the payments from the assessee by way of either in cash or in cheque. The workers two of them filed copy of bank books in Development Credit Bank, Kurla and Bank of India. They have also confirmed that the lump sum amounts received from the assessee are distributed among other works as wages. Therefore it cannot be said that the assessee has not proved incurring of expenditure. Taking all these facts into consideration, we are of the view that t .....

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s appeals by the assessee and the Revenue against the very same order of the Ld. CIT(A)-30, Mumbai dated 04.12.2013 pertaining to assessment year 2006-07. Both these appeals are heard together and they are disposed of by this common order for the sake of convenience. ITA No. 948/M/2014 - Revenue s appeal 2. The only issue in Revenue s appeal is that the Ld. CIT(A) erred in deleting the addition of ₹ 81,88,864/- made u/s. 40(a)(ia) of the Act. 3. Brief facts are that the assessee is engaged .....

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f TDS made u/s. 194C of the Act on labour charges, the AO disallowed ₹ 81,88,864/- invoking the provisions of Sec. 40(a)(ia) of the Act for non deduction of TDS. In the alternative the AO held that since the assessee failed to submit the requisite details and supporting evidences and not discharged the onus cast upon him, the entire expenditures cannot be accepted and therefore he estimated the labour charges to be disallowed at ₹ 25,91,359/- being 20% of ₹ 1,29,56,796/-. Howev .....

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the nature of work carried out by the karigars through which the assessee is getting the work done is not contractual and therefore the provisions of Sec. 40(a)(ia) of the Act have no application. Thus, he deleted the addition u/s. 40(a)(ia) of the Act. However, he sustained the disallowance @ 20% of the entire labour charges stating that assessee has not been able to establish genuineness of the entire payment by taking note of the observations in the remand report given by the AO. 5. The Ld. C .....

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cence, Adhar Card and confirmation letters accepting the amounts received towards labour charges. 6. The Ld. Departmental Representative supports the orders of the AO. 7. Heard both sides, perused the orders of the lower authorities. The AO while completing the assessment noticed that assessee has not deducted TDS on labour charges and therefore by invoking provisions of Sec. 40(a)(ia) of the Act he disallowed labour charges to the extent of ₹ 81,88,864/-. In the alternative, the AO was of .....

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de to karigars who in turn distributed the amounts to workers as wages therefore the nature of work carried out by the karigars is not contractual. Therefore, he deleted the disallowance u/s. 40(a)(ia) of the Act observing as under: The sequence of events narrated above show that the appellant has been provided full and adequate opportunity to establish the basis of claim made in the return and compliance made to the provisions relating to TDS. In the said background of the matter, AO's repo .....

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at even though the payment has been made in lump sum to the main 'karigars', the same has been distributed to various workers as 'wages, and TDS is not applicable to wages. I, therefore, from the details furnished alongwith the remand report find that the appellant is carrying out embroidery and zari work through persons to whom he has made lump sum payment. It has not been disputed that payment has been made to 'karigars'. These payments are in lieu of services of 'karig .....

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RS.1 ,29,56,796/- debited under the , above head. In view of the same, I confirm the disallowance @ 20% of the above amount made by the AO. The addition of ₹ 25,91 ,359/- is, therefore, upheld 8. On perusal of the Ld. CIT(A) s order, the remand report submitted by the AO, further enquiries conducted by the Ld. CIT(A), we do not find any infirmity in the order passed by the Ld. CIT(A) in deleting the disallowance made u/s. 40(a)(ia) of the Act as the payment made by the assessee to karigars .....

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the assessee at the time of hearing submits that ground No. 1 of the grounds of appeal regarding sufficient opportunity is not pressed. Therefore the same is dismissed as not pressed. 10. In so far as the adhoc disallowance sustained by the Ld. CIT(A), the Ld. Counsel submits that the CIT(A) is not justified in confirming the disallowance without appreciating the fact that in the course of assessment proceedings, the assessee had produced the parties and they had submitted the PAN, bank account .....

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disallowances and additions made in the assessment order. On an earlier direction of the CIT(A) vide his letter dated 13.07.2009, this office vide letter-No.ITO-19(3)(2)/Remand Report/2010-11 dated 15.03.2011 has submitted a remand report. Copy of the same is enclosed for ready reference. The learned ClT (A) , vide his letter dated 16.12.2011, has again directed the AO to give another opportunity of being heard to the appellant and cause proper enquiries with regard to the genuineness of the la .....

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refore, adjourned to 19.06.2013. On the appointed day, Shri Vipul Shah alongwith the assesse Shri Syed Kamrul Islam attended. The following persons have also been produced before me on the said date. (1) Shri Shah Alam, S/o. Zuber Alam (2) Shri Shaikh Tohir AIi and (3)Shri Syted Nurul Islam The above three persons' names appear in the annexure submitted by the assessee to whom he has claimed to have paid labour charge/wages. They have produced their ID proof viz. PAN card, Driving Iicence an .....

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the period 1.1.2006 to 31.12. 2009 maintained with Development Credit Bank, Kurla and statement of account from 21.01.2005 to 02.06.2005 of Shri Shaikh Tohir AIi maintained with Bank of India have been furnished. (copy of these documents are enclosed for your kind perusal. No bank account was produced in the case of Syed Nurul Islam. The bank accounts produced were also partial. They have stated that the deposits reflected in the said accounts are the receipts from the assessee being labour char .....

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t file any return. They have further stated that the payment received from the assessee were distributed amongst the labourers who were temporarily appointed for doing the job (embroidery/jerry work). When asked about more details about these workers i.e. present whereabouts etc.: Shri Vipu Shah, AR of the assessee stated that these workers have come from other states in search of jobs is over and shift from there as per the job requirements. Hence, identity of these workers are not fully verifi .....

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and as such there is no contract agreement between the assessee and the karigars. Further, the assessee has stated that even though the payment is made in lump sum to the main karigars, the same is distributed to various workers as wages on which TDS is not applicable. At the time of assessment stage the assessee had stated that the workers are illiterate and if TDS is deducted from the wages, they will not do the assessee's job. Moreover, most of the workers are temporarily engaged for gett .....

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