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TMI Blog2016 (3) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... - As during the course of assessment proceedings proper information and evidences were not supplied before the Assessing Officer for examining the applicability of provisions of section 194C of the Act on the labour contract charges of ₹ 17,79,855/- as to whether the complete amount of ₹ 17,79,855/- is liable for tax deduction at source u/s 194C of the Act or there was any bifurcation of the amount on which there was no liability for TDS u/s 194C of the Act or TDS of 1 % or 2% was applicable and also to the issue about the value of goods separately shown in the bills shown under the head labour contract charges. We are, therefore, of the view that this needs to be set aside to the file of ld. Assessing Officer before whom assessee will provide complete details with bifurcation of labour contract charges of ₹ 17,79,855/- and also classify the respective heads i.e. TDS not required to be deducted/ TDS to be deducted @ 1%/TDS deducted @ 2%/value of goods sold wrongly mentioned under the head labour contract charges.- Decided in favour of revenue for statistical purposes. - ITA No. 470/Ahd/2011 - - - Dated:- 15-3-2016 - Shri Kul Bharat, JM And Shri Manish Bora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal on the basis of submissions made by ld. DR and going through the material available on record. 4. First we take up ground no.1 which relates to deletion of addition of ₹ 62,62,863/- made on account of cessation of liability u/s 41(1) of the Act. During the course of assessment proceedings ld. Assessing Officer observed that in case of 31 sundry creditors amount was due to be paid since last three years and more and the only reason given by the assessee during the assessment proceedings for non-payment of such sundry creditors was due to the dispute with supplier on account of quality of goods supplied by them. The ld. Assessing Officer was not convinced with the reply of assessee because in the normal course of business supplier cannot wait so long for receiving money for sales made by him and as the assessee has claimed the amount of purchases made from such sundry creditors in previous years and nothing has been paid in last three years and also in lieu of the fact that assessee agreed for the proposed addition for the unpaid creditor for ₹ 62,62,863/- vide note sheet dated 22.12.2009 as a result of which ld. Assessing Officer went ahead to make the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditors as provided under section 133 of the I. T. Act, 1961. But due to last week of month for completion of assessment, the Id. A.O. had made the addition without considering the concerned fact. So in this regard, if you think it fit and wish to consider the additional evidences, we are ready to provide the confirmation in respect of remaining amount of creditors which were outstanding and payable by assessee on 31- 03-2007. As the confirmation in respect of the remaining creditors had been obtained, and as the liability of the same were genuine, we would like to request you to allow the same. 3.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. The addition was made by the A. O. simply on the ground that the liability continues to be outstanding for more than three years. The provisions of Sec. 41(1) come into play when the assessee obtains in cash or in kind any amount out of the expenditure allowed earlier. Alternatively the assessee must have obtained benefit by way of remission or cessation of trading liability. The third scenario in the provisions can be invoked is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Also the assessee vide note sheet dated 22.12.2009 agreed for the proposed addition. Accordingly an addition of ₹ 62,62,863/- is made to the total income of the assessee. Penal proceedings under section 271(l)(c) of the Income tax Act are being initiated separately for furnishing inaccurate particulars of income. 8. From the above para we understand that assessee has agreed to the proposed addition to be made because assessee was unable to provide the requisite information in order to prove the genuineness of the sundry creditors. Assessee has mentioned before the lower authorities that some of the confirmations were received by the assessee and some of the parties have not replied to the letters of assessee, but in our view such reply creates serious doubt that how can a person, who supplies goods to the assessee and is reluctant to take his money back towards goods supplied and even then not replying to the letters of assessee. As regards the contention of assessee before the Assessing Officer that the liability has not been written off in the books of account, we find that Hon. Supreme Court in the case of Sutles Cotton Mills 116 ITR 1 has upheld that the passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt during the year without deducting tax u/s 194C of the Act and in reply to the same vide letter dated 18.12.2009 assessee submitted as under :- You have requested to furnish explanation regarding labor claimed during the year. We have accepted order for supply of special seized stamping. We were not fully equipped to manufacture special sized stamping during the year under consideration as well as manufacturing thereof was not economically viable as it is going to disturb our normal ' business and hence the manufacturing of the same was entrusted to different private parties. This fact was explained vide our earlier submission. Parties to whom work was entrusted have raised bills on us for labor work done by them, the work and payment for labor is not contractual payment but it is labor purchase. These facts will be evident from the verification of statement of accounts of all parties filed herewith for your consideration. Since this not contractual payment but it is payment for labor purchase and hence no deduction of tax is required to be made at source. However, ld. Assessing Officer was not convinced with the reply of assessee as he could not put forth any evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 17,79,855/- as to whether the complete amount of ₹ 17,79,855/- is liable for tax deduction at source u/s 194C of the Act or there was any bifurcation of the amount on which there was no liability for TDS u/s 194C of the Act or TDS of 1 % or 2% was applicable and also to the issue about the value of goods separately shown in the bills shown under the head labour contract charges. 15. We are, therefore, of the view that this needs to be set aside to the file of ld. Assessing Officer before whom assessee will provide complete details with bifurcation of labour contract charges of ₹ 17,79,855/- and also classify the respective heads i.e. TDS not required to be deducted/ TDS to be deducted @ 1%/TDS deducted @ 2%/value of goods sold wrongly mentioned under the head labour contract charges. Ld. Assessing Officer has to ensure that the proper opportunity of being heard is given to the assessee and to furnish requisite details and accordingly decide as to whether the provisions of section 40(a)(ia) of the Act are applicable on the assessee and if so then the disallowance of the same can be made and that too if assessee is unable to prove that deductee has truly disclo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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