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TMI Blog2017 (12) TMI 1532X X X X Extracts X X X X X X X X Extracts X X X X ..... to be the substantial questions of law: "(A) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that direct labour charges are not covered by the provisions of section 40(a)(ia) of the Income Tax Act, 1961 despite the fact that there is no employer-employee relation between the labourers and the assessee? (B) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal is justified in holding that the addition made u/s 68 of the Income Tax Act, 1961 cannot be held bogus despite of the fact that identity of M/s Himali Enterprise, in whose name the bills were raised, was not proved and who is a non-filer of Income Tax Return since 2002?" 2. The assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the assessee had failed to deduct tax at source on the payment of labour charges to the alleged headman/ contractors of labour supplier. 6. During the year, the assessee had sub-contracted two of the work contracts awarded to it by the Canal Division of the Roads & Buildings Department to one M/s Hemani Enterprises. The sub-contract for the entire work was to be completed in its entirety as per the terms of the tender and the assessee firm was to retain 1.75% of the billed amount under the tender as its profit. M/s Hemani Enterprises had billed for Rs. 2,17,02,016/- and the total payment of Rs. 1,44,13,137/- (including TDS made to it) and balance amount of Rs. 72,88,879/- was shown payable to it by the assessee in its accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble practically to preserve all the cards for lack of storage facility. It was further stated that though vouchers were self-made, the same were bearing the signature of the persons to whom payment was made along with the details of work site and the work done by the group. It was contended that the vouchers are always self-made as one cannot expect a labourer to provide a bill for the same. 9. The Commissioner (Appeals) observed that in connection with the submissions advanced by the assessee, remand report was called for from the Assessing Officer, who, however, stated that he requires more time to make a detailed investigation. The Commissioner (Appeals), however, took note of the fact that the assessee had produced two persons before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e head labourer. In the absence of any contract to carry out any work with a specified person, the provisions of section 194C of the Act would not be attracted and hence there would be no liability to deduct tax at source so as to attract the provisions section 40(a)(ia) of the Act. The Tribunal, therefore, did not commit any error in confirming the order passed by the Commissioner (Appeals). No question of law can be said to arise in relation to this ground of appeal. 12. Insofar as proposed question (B) is concerned, the Commissioner (Appeals) had noted the submissions advanced by the assessee and had observed that the assessee was a Government contractor and hence the receipt was not doubtful. The assessee had sub-contracted major part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract through M/s Hemani Enterprises. If the course of action adopted by the Assessing Officer was to be upheld, then the profit in the contract would be very abnormal because if for a contract valued at Rs. 2,17,02,016/- a sum of Rs. 72.88,879/- was to be treated as profit, then the ratio of profit would be too high for a civil work. 14. In the opinion of this court, the course of action adopted by the Assessing Officer defies logic. If the Assessing Officer had disbelieved that M/s Hemani Enterprises had executed the contract as a sub-contractor, he, at best, could have disbelieved the payment made to it and held that it was the assessee, who had executed the contract and worked out the profit accordingly. But when the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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