TMI Blog2017 (3) TMI 96X X X X Extracts X X X X X X X X Extracts X X X X ..... d accept assessees’ arguments challenging correctness of CIT’s orders under challenge in these two cases thereby restoring the abovestated regular assessments in their respective cases. - Decided in favour of assessee - ITA No. 243/Rjt/2014, ITA No. 4/Rjt/2015 - - - Dated:- 27-2-2017 - SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. For The Assessee : Shri D. M. Rindani, A.R. For The Revenue : Shri Arvind N. Sontakke, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER These two different assessees have filed their instant appeals against the CIT-I, Rajkot s separate orders dated 19.03.2014 (in both cases), directing the Assessing Officer to frame the regular assessments in their respective cases afresh after re-assessing allowability of deduction of labour expenses u/s.40(a)(ia) or unexplained labour expenses u/s.69C, in proceedings u/s.263 of the Income Tax Act, 1961; in short the Act . We heard these cases together stated to be involving identical set of facts as well as the relevant issues involved. We thus propose to decide both these appeals by way of a common order. 2. These two assessees are labour contractors. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in point 4 of notes to accounts in schedule-7 of the tax audit report, it is mentioned in respect of the creditors that the names appearing against amount outstanding were those of labour suppliers, who have supplied labour, it is further , mentioned that relevant payments were made directly to the labour not through or to the labour suppliers and therefore you did not deduct tax at source as the individual payment was below the limit prescribed. 5. In the income tax Act, 1961, it is provided in Sec. 194C that any person responsible for paying any sum to a sub-contractor including a labour supplier shall make TDS at prescribed sale at the time of credit of such sum to the subcontractor. On going through the prepara, it is observed that you have engaged labour through labour suppliers and the sum shown outstanding on account o/f labour expense payable was pertaining to such sub-contractors. Therefore it is apparent that you were responsible to make TDS amount of the sum at the time making credit in the accounts of such per sons, which you failed to do so. 6. As per Sec. 40(a)(ia) of the Act, no deduction shall allowed for any amount payable to sub-contractor, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vant entries in the order sheet show that Assessing Officer issued a questionnaire on 07-01-2011 u/s 142(1), asking assessee to submit Copy of tax audit report , Copy of P L a/c and B/S , Annual Report, Notes of accounts , Computation of income . The assessee submitted part details on 14-09-2011, and remaining details on 10-10-2011. The books of accounts were also produced before the Assessing Officer on 12-11-2011. However except for agreeing for an estimated disallowance of 15% of misc. expenses, site expenses and .water expenses, there is not a whisper on labour expenses during the entire assessment proceeding as apparent from order sheet entries, details called for u/s 142(1) notice, and the assessment order. 4.2 The contention, that the appellant has directly made payment to the labourers and not through Mukadam and that the labour payment does not exceed ₹ 20,000/- in each case, is not supported by relevant evidences available in records. At the time of present revisionary proceedings, assessee did not produce the evidence of identity of labourers to prove the above contention. The identity is normally proved by name and address of a person with relevant proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque from the main contractor. This issue is also required to be examined. 4.3 Assessing Officer has allowed the claim of deduction of labour expense without examining the fact regarding the actual recipient of labour charges. The investigation would require examination of Mukadams as well as the identity and examination of labourers to establish the fact whether the payment of labour charges was made to the Mukadams or directly to the labourers. The investigation would also require examination of these persons to establish whether payments to labourers was made earlier than what is shown in books of account through unaccounted money. In case the payment is made to the Mukadams, the provisions of sec, 40(a)(ia) of the Act would apply for disallowance of labour expenses for making such payment without making TDS. In case the payment was made through unaccounted money to the labourers at an earlier date, the same would constitute unexplained expenditure u/s 69C of the I.T.Act. In view of the above discussed facts, it is clear that the assessment order passed u/s. 143(3) on 14-11-2011 for Assessment Year 2009-10 is erroneous and prejudicial to the interest of Revenue. By the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the contract account, where total receipts of Rs, 4,76,14,0517/- have been shown. During the relevant period, you have also claimed deduction for labour charges of Rs, 3,89,14,880/- 3. Perusal of your balance sheet as on 31-03-2009 shows that there were a liability of ₹ 5,57,67,111/- for sundry creditors. The detail of sundry creditors shows that sundry creditors of Rs, 5,53,60,045/- were pertaining to labour expense payable, however, no details of the persons have been given in the balance sheet, to whom you were liable to make payment on account of labour charges. On analysis of the labour expense claimed in contract account and labour expense payable as shown in the balance sheet, it is found that labour expense payable as on 31st March was more than the entire sum of labour expense claimed during the relevant period. 4 . 5 . 6 .. 7.The assessing officer has not verified the genuineness of labour charges paid to individual labour by examining such labourers. This examination was necessary on account of the claim of the assessee that the labourers were unpaid creditors for a long period, becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ete postal address and PAN of the sundry creditor were enclosed and for Q9. Copy of TDS returns and Sales tax returns filed for the year were enclosed. 8. After considering the detailed reply along with documentary evidences, the A.O in his assessment order observes as under:- 2. Subsequently, a notice u/s. 142 (1) along with questioner letter was issued on 05-08-2011 and served, requesting to submit details produce books of accounts on 17-08-2011. In response to notices issued u/s. 143(2) and 142(1) of the Act, Shri Dhiren H. Lotia, Advocate and Authorized Representative of the assessee has attended the case from time to time and submitted the details as called for and produced books of accounts. The details submitted were placed on record and books of accounts were test checked. The case was discussed with him. 9. A perusal of the aforementioned factual matrix shows that the A.O has thoroughly examined the contentious issues raised by the ld. Commissioner. The Hon ble Bombay High Court in the case of Gabrial India Ltd. 203 ITR 108 has held that the decision of the Income Tax Officer could not be held to be erroneous simply because in his order, he did n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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