2017 (5) TMI 1512 - AT - Income Tax

TDS u/s 194C - existence of a payer and payee - Held that - As gone through the relevant record and impugned order Section 194(c) presupposes existence of a payer and payee. We find that in the case of the assessee identity of payee was not established at all. When the contractors are not identifiable at all and also not identified by the Department even otherwise the question of TDS liability anyway does not arise. The AO has just passed the order on the basis on assumptions without disproving the facts reported by the assessee that no payment to the contractors was made. Therefore we do not find any infirmity or illegality in the order passed by the learned CIT(A). - Decided against revenue.

Summary

Issues:
Appeal against the order of Commissioner of Income Tax (Appeals) for Assessment Year 2012-13 regarding deletion of tax and interest under section 201(1) and 201(1)(a), respectively.

Analysis:
The Department filed an appeal against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2012-13. The Department contended that the CIT(A) erred in directing the deletion of tax under section 201(1) amounting to ?36,25,103 and interest under section 201(1)(a) of ?13,05,037. The Department argued that the CIT(A) should have considered the evidence obtained during the appellate proceedings. The case involved a survey under section 133A at the appellant's office premises, revealing non-deduction of tax at source on payments made to laborers. The Assessing Officer (AO) treated the appellant as in default for non-deduction of tax under section 194C, resulting in a total default of ?49,30,140. The appellant contended that the laborers were personally appointed, and there was no involvement of labor contractors. The CIT(A) allowed the appeal, stating that TDS liability cannot be imposed based on presumption and assumption, especially when the payee's identity was not established. The ITAT upheld the CIT(A)'s decision, emphasizing that the AO's order was based on assumptions without disproving the appellant's claim of not making payments to contractors. The appeal by the Department was dismissed, and the Crossobjection by the assessee was not pressed and also dismissed.