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2016 (4) TMI 416 - ITAT COCHIN

2016 (4) TMI 416 - ITAT COCHIN - TMI - Revision u/s 263 - non invoking the provisions of section 194C - Held that:- In the present case, the ld. CIT has not brought on record any material to point out that some specific payment on account of labour charges has been made on which TDS u/s. 194C has not been deducted at source and therefore, the decision of the ld. CIT cannot be based on the whims and caprice being a revisionary authority.

As held by the Hon'ble Delhi High Court in the .....

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rder of the Ld. CIT in revising the assessment u/s. 263 is a bad order and is liable to be quashed. - Decided in favour of assessee - ITA No. 498/Coch/2015, ITA No. 307/Coch/2015 - Dated:- 13-1-2016 - B P Jain, AM And George George K, JM For the Appellant : Shri Iype Mathew, CA For the Respondent : Shri Shantam Bose, CIT(DR) ORDER Per B. P. Jain, Accountant Member This appeal of the assessee in I.T.A. No. 498/Coch/2015 arises from the order of the Ld. CIT, Trivandrum passed u/s. 263 of the Incom .....

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The Order Under Section 263 passed by the CIT is illegal, arbitrary, uncold for, and against the facts on record. 2) The CIT is not justified in law in restoring the assessment order to the AO for re-examination which was already examined by the A.O. 3) The CIT should have noted that the A.O. has passed the assessment order after examining the accounts of the Appellant, bills, vouchers, details of Assets and Liabilities as on 31.03.2008, details of labour charges payable after 15.03.2008 upto 3 .....

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regarded as erroneous and prejudicial to the interest of the revenue. 5) The CIT should not have passed an order against the Appellant after examining the details and submissions submitted before him at the time of hearing of the case. None of the details produced or none of the assessment records was conclusive proof for the finding by the CIT that TDS was deductible from the labour charges of ₹ 80,89,565/- debited to the profit and loss account as labour charges itself. 6) The CIT had n .....

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ot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the ITO unsustainable in law. Ref Malabar Industry Co. 243 ITR 83 (SC) , CIT vs. Max India Ltd. 295 ITR 282 (SC) and Uniroyal Marine Exports vs. Dy. CIT I.T.A. No. 118/Coch/2013 dated 14/05/2015. 8) The appellant craves leave to adduce Addl. Grounds at the time of hearing. 4. The Ld. CIT has passed the order u/s. 263 of the Act dated 19/03/2013 which for the sake of convenience is reproduced h .....

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d debited an amount of ₹ 80,89,565 in the Profit and Loss account being labour charges under the head 'Direct Expenses' and shown an amount of ₹ 30,26,315 being labour charges payable as liability in the Balance Sheet. The ledger account filed also shows that an amount of ₹ 30,26,315 being labor charges payable from 11.3.2008 to 31.3.2008. 3. The order u/s. 143(3) was therefore regarded as erroneous and prejudicial to the interest of revenue. Hence, a notice for revisio .....

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tly and have engaged labours directly by me. These labours are my regular workers engaged by me for the last several years. The payments are given directly to them as and when the contract payments are received by me. In certain cases, only after proper inspection by the Public Works Departments the full payments are settled. I pay the workers on account and the payments are settled as and when the bill is passed by the Public Works Department. 5. He also relies on the decision of the ITAT, Koch .....

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d and material produced by the assessee." 5. The Ld. Counsel for the assessee, Shri Iype Mathew invited our attention to para 2 where the Ld. CIT has pointed out discrepancies and the discrepancies as noted by the Ld. CIT are as under: 1) The assessee has debited an amount of ₹ 80,89,565/- in the profit 'and loss account being labour charges under the head 'Direct Expenses'. 2) The assessee has shown labour charges payable at ₹ 30,26.,315/- as liability in the balanc .....

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ayment as per evidence, record and material produced by the assessee. 7. The Ld. Counsel for the assessee argued that there is no error pointed out in the order of the Assessing officer except the verification of the TDS deductibility on the aforesaid amount of ₹ 80,89,568/- paid as labour charges. To this, it was submitted before the Ld. CIT that the work was executed by the assessee directly and he has engaged the labours directly by him. It is a fact that these workers are engaged by hi .....

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out. The said vouchers includes the payments made to labours individually 9. The Ld. Counsel for the assessee invited our attention to the notice u/s. 142(1) at pages 2 and 3 of the Paper Book where the details of the labour charges were specifically asked for by the ITO, Ward-1(3), Trivandrum. and the assessee has submitted the same and no defect in the same has been pointed out. He further invited our attention to the order of the ITO, Ward-1(3), Trivandrum where at para 2, the Assessing offic .....

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record which clearly shows that even the monthly payment does not exceed to any of the labour more than ₹ 13,583/- and the labours have even been paid upto ₹ 5430 per month. None of the payments exceed the limit as laid down u/s. 194C of the Act which is evident from the vouchers produced before the Assessing officer for which enquiries and verification have been made by the Assessing officer and accordingly, in the Assessing officer's view, no discrepancy has been found on the s .....

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ties below. 12. We have heard the rival contentions and perused the facts of the case. At the outset, there is delay in filing the appeal and the assessee has filed the condonation petition and we find sufficient cause for the delayed filing of the appeal and we condone the same. 13. As regards the facts of the present case, the assessee has earned contract receipts of ₹ 1,31,89,428/- during the impugned year and has paid ₹ 80,89,565/- as labour charges, ₹ 30,26,315/- being lab .....

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are not applicable. At the outset, the provisions of section 194C cannot be made applicable on the labour payments especially when the assessee has submitted the explanation that the assessee makes direct payments to the labours and this practice is being followed for the past several years and no defect in the past has been pointed out. The Assessing officer has examined the books of account and all the vouchers/bills and has conducted adequate enquiries and according to him, no TDS is deducti .....

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icial to the interests of the Revenue. If one of them is absent, if the order of the ITO is erroneous but it is not prejudicial to the interests of the Revenue or if it is not erroneous but is prejudicial to the interests of the Revenue, recourse cannot be had to section 263(1) of the Act. In view of the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 0083, though there could be two views possible and if the ITO has taken one view which .....

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to a conclusion, there should be some material available from record called for by the ld. Commissioner. In the present case, the ld. CIT has not brought on record any material to point out that some specific payment on account of labour charges has been made on which TDS u/s. 194C has not been deducted at source and therefore, the decision of the ld. CIT cannot be based on the whims and caprice being a revisionary authority. Such views find support from the decisions of the Hon'ble Bombay H .....

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quiry that such a course of action would be open. In the present case, there is no lack of enquiry on the part of the Assessing officer and in such circumstances and facts of the case, the order of the Ld. CIT in revising the assessment u/s. 263 is a bad order and is liable to be quashed. It is ordered accordingly. Accordingly, all the grounds of the assessee are allowed. Thus the appeal of the assessee in I.T.A. No.498/Coch/2015 is allowed. 16. We shall take up the Revenue's appeal in 307/C .....

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tion 40(a)(ia) of the Income tax Act. 3. The learned Commissioner of Income tax (Appeals) ought to have noted that the assessee has failed to produce any documentary evidence to substantiate his claim that the assessee has made the payments directly to the labourers. 4. For these and other grounds that may be advanced at the time of hearing, the order of the learned Commissioner of appeals, Trivandrum on the above points may be set aside and that of the Assessing Officer restored. 17. The brief .....

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the assessee had obligation to deduct tax when the payment was made to them. Since no such tax was deducted, the Assessing Officer has invoked the provisions of section 40(a)(ia) and disallowed the said amount. 18. The arguments of the assessee and the findings of the Ld. CIT(A) are reproduced hereinbelow: "Contradicting the Assessing Officer, the appellant has argued that section 194C attracts only to a person responsible for paying any sum to any contractor for carrying out any work in pu .....

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;….The learned Assessing Officer alleges that my contract work done during the Assessment Year 2008-09 attracts section 194C(2) of the Income Tax Act. But, the section applies only to the contractors where they pay to the subcontractor through an agreement. Hence in my case no subcontractor is involved and no agreement is made between the workers and me. The wages of ₹ 80,89,568/- is nothing but the wages and overtime wages paid to my 69 workers working under me, the list of which i .....

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written submission filed by the representative during the appeal proceedings. 5.1 By virtue of the provisions of section 40(a)(ia), tax is to be deducted at source if amount is payable in pursuance to a contract to a contractor or subcontractor. If the tax was not deducted then the whole of the amount shall be disallowed. Therefore it is obligatory on the part of an assessee not only under the above mentioned section but also u/s. 194C to deduct tax and if for any reason such tax was not deducte .....

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ed to have earned a sum of ₹ 1,31,89,428/- for the electrical work such as digging, removing, laying of cables, etc. carried out to the said office. Further, he debited in the Profit & Loss account an amount of ₹ 80,89,568/- paid towards labour charges against which the Assessing Officer has invoked the provisions of Sec. 40(a)(ia) treating the same as paid to subcontractors without deducting tax at source. Not agreeing with the Assessing Officer, the appellant during the course .....

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hom the payment has actually been made, whether to subcontractors as claimed by the Assessing Officer or to the individuals who worked directly under the appellant. 5.3 The Assessing Officer has invoked the provisions of section 40(a)(ia) of the Act on the conclusion drawn that the payment was made to the subcontractors without deducting the tax. This conclusion the Assessing Officer appears to have drawn without establishing the identity of the subcontractors, amount paid to them, nature of wor .....

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n 40(a)(ia) cannot be invoked in the instant case of the appellant as he was not obligated to deduct tax u/s. 194C. This apart, not much has been brought out in the assessment order to clarify these important aspects of statutory requirements and the assessment order passed without answering these important aspects would not justify invocation of the provisions of section 40(a)(ia). On the other hand, the very nature of work carried out by the appellant justifies his argument that the payment wa .....

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