2014 (9) TMI 121 - AT - Income Tax

Addition u/s 40(a)(ia) - Non deduction of TDS u/s.194C - Payments made to labour contractors for casual labor through single voucher - Held that - The CIT(A) was rightly of the view that the labourers employed by the appellant come from remote areas who normally do have bank accounts - under such circumstances, payments have to be made in cash assessee on being asked has submitted some affidavits specifying that payments have been received by those persons on behalf of and for their family members or relatives or acquaintances who have together worked at various sites of the appellant on a daily wage basis - a site record was maintained by the site supervisor and payments were largely made to the head of the family or a gangman who received money on behalf of several persons known to them being their family members or friends or relatives - It would have been impractical for the assessee to prepare individual vouchers for several labourers - only one voucher was prepared, the payment appeared to have exceed ₹ 50,000/- for every person but on an individual basis, the same would not exceed ₹ 50,000/- per person - the payments were made to casual labourers who were working for the appellant on daily wages - They were not regular employees of the assessee but worked under a direct supervision and control of the assessee - the CIT(A) was justified in holding that the provisions of section 40(a)(ia) will not be applicable in this case also - It is purely incidental that both Shri Nalawade and the assessee were road contractors - there was no justification for invoking the provisions of section 40(a)(ia) - order of CIT(A) needs no interference who has allowed the appeals of assessee by reasoned order Decided against Revenue. Excessive labour charges added Held that - The assessee did not file an appeal against the decision of the CIT(A) for A.Y. 2002-03 - following the order of the CIT(A) delivered in the earlier assessment year, the claim of the assessee is restricted to 0.8% of the total expenses, which worked out to ₹ 2,12,045 - the assessee s counsel argued that the CIT(A) was not justified in confirming the adhoc disallowance of labour payment at ₹ 2,12,045/- @ 0.8% - The disallowance is on purely adhoc basis and without challenging a genuineness of expenditure and it cannot be sustained - the assessee has not chosen to file an appeal to the higher forum on the similar issue for AY 2003-03, it is inferred that the assessee in principle accepted the addition at the rate of 0.8 % - There are no changes in facts for this year under consideration - the order of the CIT(A) is rightly upheld in restricting the disallowance of labour payment @ 0.8% which works out to ₹ 2,12,045/- for this year Decided against Revenue. Undervaluation of immovable property Held that - CIT(A) rightly observed that there appears to be a discrepancy in the statement made in the assessment order and in appellate proceedings and in the narration in the computation of income against the amount of ₹ 5,83,000 - It is not clear from the computation of income whether this pertains to an income on account of under valuation declared under section 132(4) or it pertains to some other income - The AO is directed to verify the head under which this income was offered for taxation in the AY 2007-08 - If he finds that it pertains to the agreed addition of ₹ 5,83,000/- which has been held to be taxable in assessment year 2006-07 then, he shall delete the addition in assessment year 2007-08 - same income cannot be taxed twice in different AYs - an income has to be taxed in the year in which it accrued and arises and not otherwise Decided against Revenue.

Summary

Issues Involved:
1. Deletion of addition under Section 40(a)(ia) for non-deduction of TDS under Section 194C.
2. Jurisdiction and scope of assessment under Section 153A.
3. Disallowance of excessive labor charges.
4. Understatement of value of immovable property.

Detailed Analysis:

1. Deletion of Addition under Section 40(a)(ia):
The primary issue was whether the CIT(A) was justified in deleting the addition of Rs. 50,39,900/- under Section 40(a)(ia) for non-deduction of TDS under Section 194C for A.Y. 2004-05. The CIT(A) found that the provisions of Section 40(a)(ia) as substituted by the Finance (No.2) Act 2004 were not applicable for the relevant previous year, thus disallowance for A.Y. 2004-05 was not justified. The Tribunal upheld this finding, noting that the provisions became applicable only from A.Y. 2005-06 onwards.

2. Jurisdiction and Scope of Assessment under Section 153A:
The assessee argued that additions could only be made based on incriminating material found during the search. The CIT(A) summarized that in cases where assessments were completed under Section 143(3) or processed under Section 143(1), the finality of such assessments could not be disturbed unless incriminating material was found. The Tribunal upheld the CIT(A)'s view, emphasizing that Section 153A does not contemplate a de novo assessment and additions should be based on undisclosed income found during the search.

3. Disallowance of Excessive Labor Charges:
For A.Ys. 2007-08 and 2008-09, the Assessing Officer made additions of Rs. 11,25,000/- and Rs. 13,49,98,000/- respectively, citing inflated labor expenses. The CIT(A) found that the Assessing Officer's approach was based on incorrect assumptions and partial quotations from the assessee's letter. The CIT(A) reduced the disallowance to 0.8% of the total labor charges, following the precedent set in earlier years. The Tribunal upheld this decision, noting that the Assessing Officer had not provided sufficient evidence to justify the higher disallowance.

4. Understatement of Value of Immovable Property:
The issue of understated property value of Rs. 5,83,000/- for A.Y. 2007-08 was raised as an additional ground. The CIT(A) directed the Assessing Officer to verify whether this amount pertained to an income declared under Section 132(4) or some other income. The Tribunal upheld the CIT(A)'s direction, emphasizing that the same income could not be taxed twice in different assessment years.

Conclusion:
The Tribunal dismissed all appeals filed by the Revenue, upholding the CIT(A)'s decisions on all contested issues. The judgments emphasized the importance of adhering to statutory provisions and the need for concrete evidence to support any additions made during assessments.