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TMI Blog2015 (9) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... mon ground in these two appeals, challenging the orders of learned Commissioner of Income Tax (Appeals)-II, Hyderabad, confirming the penalty levied u/s 271C by the Addl. Commissioner of Income -tax, Range-15, Hyderabad. 3. The facts of the case, briefly are that the assessee Company is engaged in the business of civil contract works mostly executing Government projects. A survey operation u/s 133A of the I.T. Act, was conducted on 11-02-2004. During the course of survey it was noticed that the assessee did not deduct tax at source from the payments made to creditors for expenses, unpaid labour charges, job work charges, transport charges, labour charges and royalty payments made to Gayathri Constructions for both the assessment years, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf arranged the labourers and appoints one of them as maistry, a group leader, it gets the work done through them and payments were made through them. He further, submits that no labourer earns even Rs. 15,000/- during the year as canal works are purely seasonal and the work is executed for 5 to 6 months in a year. He further, argued that there was no written agreement between the assessee and the maistry and in the absence of written agreement the question of applicability of provisions of section 194C does not arise. The AR contended that both labourers and maistry are employed by the company and when both are employees of the company, the assessee is justified in not deducting the tax at source from payments made to the labour charges. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther argued that, the assessee put forth similar arguments before the ITAT, Hyderabad bench in quantum appeal and the ITAT did not accept the assessee contention, as such there is no reasonable cause exists for not deducting tax at source. To this effect, he has furnished copy of orders of ITAT in assessee own case. Therefore, he urged to confirm the order of CIT(A). 8. I have heard both the parties and perused material on record. The factual matrix of the case is that the assessee is a company engaged in the business of execution of works contract mostly on Government projects. A survey operation under section 133A of the I.T. Act was conducted on 11.02.2004. At the time of survey, the A.O. noticed that the assessee has defaulted in dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason for failure, was on account of reasonable cause. 10. In the instant case, the assessee makes out its case and contended that, it was on the bonafide belief that no TDS is applicable, when payments are made to labourers employed by it on its own without assigning any contract work to the labour contractors. Though, the assessee did not succeed in its arguments in the quantum appeal before the authorities, the reasonableness in its argument that it has make the payment through its own labourers without assigning any contract work to the labour contractor cannot be ruled out. The revenue has not brought out any material evidence to rule out the arguments put fourth by the assessee, other than placing reliance on the orders of the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state of circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered and only if it found to be frivolous, without substance or foundation, the prescribed consequences follow." 11. Now coming to the case on hand, I find that it is the contention of the assessee right from the beginning that the assessee had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pursue the matter and conceded the lapses, which is evident from the order of the Tribunal in quantum appeal. Therefore, there was lapse on the part of the assessee by short deducting tax at source from payments made to Job work charges and Transportation charges u/s 194A and 194C for the A.Y. 2003-04 and u/s 194C for the A.Y. 2004-05, which was accepted by the authorized representative before the Bench. 13. Therefore, considering the facts and circumstances of the case, I am of the considered view that the non-deduction of tax at source on labour charges u/s 194C for both the assessment years i.e. 2003-04 and 2004-05 cannot be said to be without a reasonable cause within the meaning of Section 273C. Therefore, the penalty levied u/s.271 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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