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2016 (9) TMI 1245 - AT - Income TaxTDS u/s 194C - Non deduction of TDS on labour charges - addition u/s. 40(a)(ia) - Held that - AO has called the labour contractors by issuing summons u/s. 131 of the Act and their statements were duly recorded. The AO failed to bring anything on record that the labour charges were paid in pursuance of contract either in writing or the oral with the labour sardar. The AO has held that the assessee has not complied the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act on the presumption and surmise. There is no evidence that the payments have been made to the contractors. We do not find any merit in the arguments placed by Ld. DR in this connection. AO himself is not sure and forming the opinion on his own surmise and conjecture. Assessee has produced the muster roll. In this regard, Ld. DR failed to bring any defect / information from the muster roll which suggested that the labour charges paid by assessee are subject to TDS. Since no cogent material has been brought on record, in our considered opinion, AO was not justified in invoking the provision of Sec. 194C r.w.s. 40(a)(ia) of the Act. - Decided in favour of assessee
Issues: Delay in filing appeal, Condonation of delay, Disallowance of labor charges
Delay in filing appeal: The Revenue appealed against the order of Commissioner of Income Tax (Appeals)-XXXVI, Kolkata, dated 25.09.2012, with a delay of 162 days. The Revenue sought condonation of the delay, citing the need for substantial justice over technical considerations. Referring to the Collector Land Acquisition case, the Tribunal emphasized the importance of preferring substantial justice over technicalities, especially in cases involving the Government as a party. The Tribunal acknowledged the public interest at stake when decisions of the Government are challenged due to procedural delays. Consequently, the Tribunal, following a justice-oriented approach, condoned the delay in filing the appeal. Condonation of delay: The Tribunal analyzed the situation in light of various Apex Court judgments and the specific case of Collector Land Acquisition. Emphasizing the need for substantial justice, the Tribunal highlighted the public interest aspect when the Government is a party to litigations. The Tribunal concluded that in cases where appeals by the Government are at risk due to procedural delays, condonation of such delays is crucial to uphold public interest and ensure justice. Disallowance of labor charges: The core issue revolved around the disallowance of labor charges amounting to ?69,63,750 under section 40(a)(ia) of the Income Tax Act, 1961. The assessee, a partnership firm engaged in construction business, claimed the labor charges without deducting Tax Deducted at Source (TDS). The Assessing Officer (AO) disallowed the claim, alleging that the payments to labor-sardars were made without TDS deduction. The AO's decision was based on the appearance and behavior of the labor-sardars, despite the absence of concrete evidence of a contractual relationship. However, the Commissioner of Income Tax (Appeals) reversed the AO's decision, relying on precedents and the absence of contractual evidence between the assessee and labor-sardars. The Tribunal examined the facts, noting that the AO failed to establish any contractual relationship between the assessee and the labor-sardars. The AO's decision was primarily based on presumption and surmise, lacking concrete evidence of a contractual obligation. Relying on precedents and the absence of proof of a contract, the Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal. The Tribunal emphasized the importance of concrete evidence in establishing contractual relationships for tax implications and disallowances under relevant provisions of the Income Tax Act. In conclusion, the Tribunal addressed the delay in filing the appeal, emphasizing the need for substantial justice and public interest considerations. The Tribunal also delved into the disallowance of labor charges, highlighting the significance of concrete evidence in establishing contractual relationships for tax implications. The decision upheld the Commissioner of Income Tax (Appeals)'s ruling, dismissing the Revenue's appeal on the grounds of lack of evidence supporting the disallowance of labor charges.
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