2015 (7) TMI 536 - HC - Income Tax

Enhancement of tax liability - payments made to sub-contractors through cheque a sum of ₹ 2,70,70,745/- - ITAT allowed the appeal of the assessee in part - Held that - The Appellate Tribunal while deciding the appeal, has casually proceeded to sustain the order passed by the Assessing Officer. None of the major points decided by the Appellate Commissioner are answered by the Tribunal while setting aside the order passed by the Appellate Commissioner. Though the order passed by the Tribunal runs to number of pages, the crux of the matter is not adverted to by the Tribunal while arriving at the conclusion. On careful perusal of the order passed by the Tribunal, we are of the opinion that the order of the Tribunal cannot be sustained inasmuch as the Tribunal has not applied its mind judiciously to the facts and circumstances of the case. In view of the same, interest of justice requires that the matter has to be re-dealt by the Income Tax Appellate Tribunal, Bangalore. By the said process, no prejudice would be caused to either of the parties.

Summary

Issues:
Challenge to order by Revenue, Payment to labor force, Disallowance of cash payment to gang leaders, Appeal before Appellate Commissioner, Enhancement of tax liability, Appeal before Income Tax Appellate Tribunal, Discrepancies in payments made to sub-contractors, Allegations of suspicious vouchers, Lack of records by sub-contractors, Discrepancies in statements of sub-contractors, Disallowance of payment to sub-contractors, Mechanization of cargo handling process, Tribunal's decision, Setting aside of Tribunal's order, Remand to Income Tax Appellate Tribunal.

Analysis:

The appeal before the Karnataka High Court involved the Revenue challenging the order passed by the Income Tax Appellate Tribunal regarding the assessment year 2004-05. The case revolved around the assessee's involvement in stevedoring operations and the payment made to labor force engaged from New Mangalore Port Trust (NMPT) and private workers. The Assessing Officer allowed payments made through cheques to NMPT Union and sub-contractors but disallowed 20% of cash payment to gang leaders. The Appellate Commissioner enhanced the tax liability by setting aside the payment made to sub-contractors but affirmed the cash payment to gang leaders. The Income Tax Appellate Tribunal partially allowed the appeal, restricting the addition to a certain amount.

The Appellate Commissioner found discrepancies in the payments made to sub-contractors, noting suspicious vouchers and lack of records by the sub-contractors. The Commissioner observed that the labor contractors had not maintained proper accounts or evidence of payments made to laborers. The Tribunal, however, did not address the major points raised by the Commissioner, leading to the High Court setting aside the Tribunal's order and remanding the matter for fresh disposal.

The High Court highlighted the doubts regarding the actual payments made to sub-contractors and the lack of engagement of a large labor force as claimed by the assessee. The mechanization of cargo handling processes at NMPT port raised questions about the necessity of a significant labor force. The Court emphasized the need for the Tribunal to judiciously reconsider the case to ensure justice for both parties. Consequently, the Tribunal's order was set aside, and the matter was remanded for fresh disposal in accordance with the law, keeping the substantial questions of law raised in the appeal open for further consideration.