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2015 (5) TMI 640 - AT - Income TaxDisallowance u/s 40(a)(ia) r.w.s. 192C(2) - assessee had debited certain sub-contract payments to different parties and explanation of the assessee was that the payments were made to labourers, who were not possessing Permanent Account Number (PAN) and due to nonavailability of PAN, TDS could not be deducted - Held that - assessee had booked the expenses under various sub-heads of the job work carried on by it, but that itself does not establish the case of the Revenue that it is a case of sub-contractor. Merely, in order to better manage its affairs vis- -vis the different work orders received by it and such works being carried out at different places on account of different works, does not establish that the assessee had transferred any part of its responsibilities and obligations to the said persons. Merely because, the services of the labourers through Jamadar were utilized by the assessee does not establish that there was an understanding for transfer of responsibilities through the said persons to carry out any part of the job work, which was the sole responsibility of the assessee contractor. In the absence of the same, there was no sub-contract between the parties and hence, no requirement for deduction of tax at source where the assessee in order to execute its work orders had engaged the services of Labourers through Jamadar, the same cannot part take the nature of sub-contract in the absence of any obligation or responsibility being fastened upon the said Jamadar or Labourers. There is no merit in the orders of authorities below. Accordingly, we hold that the assessee is entitled to the claim of deduction of ₹ 1,03,72,141/-. In view of our holding that the understanding between the assessee was not sub-contract and there being no requirement of deduction of tax at source, the issue of applicability of section 40(a)(ia) of the Act becomes academic and the same is dismissed. - Decided in favour of assessee. Addition made being gross receipt - Non dis-closer of receipts - 26AS form e-TDS shows the receipt - Held that - find merit in the plea of the assessee that in order to execute any work contract, the assessee has to incur certain expenditure in order to earn the said remuneration. In respect of the said contract with M/s. Flagship Infrastructure Pvt. Ltd., the gross receipts for the year under consideration were ₹ 1,55,42,485/- and the entire receipts cannot be income of the assessee. We find no merit in the plea of the authorities below that the total expenditure has been booked by the assessee, in the absence of any details being brought on record to the effect. Accordingly, we are of the view that the expenditure relatable to such receipts is duly allowable in the hands of the assessee and the entire receipts cannot be brought to the tax in the hands of the assessee. In the entirety of the above facts and circumstances, we hold that estimation of income has to be made on account of such receipts by applying NP rate of 20% as against the plea of the assessee that NP rate of 10% be applied. The assessee failed to bring on record the complete evidence in this regard and accordingly, we are constrained to estimate the income in the hands of the assessee by applying NP rate of 20%. - Decided partly in favour of assessee. Interest under s. 234B - Held that - Tax at source had been deducted out of the receipts arising to the assessee for the year under consideration. However, the said tax at source was not sufficient to take care of tax liability of the assessee and the assessee deposited the balance tax due. Since there was default in the payment of advance tax, the assessee was held to be liable for charging of interest under section 234B of the Act. The Hon ble Supreme Court in CIT v. Anjum M.H. Ghaswala 2001 (10) TMI 4 - SUPREME Court has held the charging of interest under section 234B of the Act is consequential in nature and we find no merit in the plea of the assessee in this regard - Decided against assessee.
Issues Involved:
1. Disallowance under Section 40(a)(ia) read with Section 194C(2) of the Income Tax Act, 1961. 2. Addition of gross receipts under Section 69C of the Income Tax Act, 1961. 3. Charging of interest under Section 234B of the Income Tax Act, 1961. 4. Opportunity of hearing and limitation for filing the appeal. Detailed Analysis: 1. Disallowance under Section 40(a)(ia) read with Section 194C(2): The primary issue was whether the assessee was liable to deduct tax at source under Section 194C(2) from payments made to laborers through Jamadar. The assessee, engaged in civil construction, received work orders from Ashoka Buildcon Ltd. and made payments totaling Rs. 1,03,72,141 to laborers. The Assessing Officer disallowed this expenditure under Section 40(a)(ia) due to non-deduction of TDS. The CIT(A) upheld this disallowance, noting that the payments were made to sub-contractors, not directly to laborers, and the assessee failed to provide adequate evidence like wage registers or PF/ESIC deductions. However, the Tribunal found that the payments were made to laborers through Jamadar, who acted merely as intermediaries, and there was no sub-contract relationship. The Tribunal held that the assessee was solely responsible for the work and had not transferred any part of its responsibilities to the laborers or Jamadar, thus Section 194C(2) was not applicable. Consequently, the disallowance under Section 40(a)(ia) was deleted, allowing the assessee's claim of Rs. 1,03,72,141 as revenue expenditure. 2. Addition of Gross Receipts under Section 69C: The second issue involved the addition of Rs. 1,55,42,485 as unexplained expenditure under Section 69C. The assessee received this amount from Flagship Infrastructure Pvt. Ltd. but did not declare it in the original return, later filing a revised return including this income. The Assessing Officer added the entire amount as income, claiming all expenses had already been booked. The CIT(A) upheld this addition. The Tribunal, however, noted that the assessee had not claimed expenses related to this contract in the original Profit & Loss Account. It held that only the profit element from these receipts should be taxed. Given the lack of detailed evidence, the Tribunal estimated the net profit rate at 20%, partially allowing the assessee's appeal. 3. Charging of Interest under Section 234B: The assessee contended that interest under Section 234B should not be charged as all receipts were subject to TDS. The Tribunal found that while TDS was deducted, it was insufficient to cover the total tax liability, and the assessee failed to pay the balance advance tax. Consequently, the interest under Section 234B was upheld as consequential, dismissing the assessee's ground. 4. Opportunity of Hearing and Limitation for Filing the Appeal: The assessee argued that the appeal was filed within limitation as the CIT(A)'s order dated 30.01.2012 was served on 26.04.2013, and claimed a lack of proper hearing opportunity. The Tribunal did not specifically address this issue in the detailed analysis, focusing instead on the substantive grounds of appeal. Conclusion: The appeal was partly allowed. The Tribunal deleted the disallowance under Section 40(a)(ia) and partially allowed the addition under Section 69C by estimating the net profit rate, while upholding the charging of interest under Section 234B.
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