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TMI Blog2019 (8) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... t tax u/s 194H is not applicable in this case. That being so, we decline to interfere in the order passed by CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. Addition on account of default in deducting TDS - the payment made through labour sardars, who is suppliers of labours and he himself is also a labourer - HELD THAT:- Respectfully following the judgment of the Co-ordinate Bench in the case of Kwality Construction [ 2016 (11) TMI 667 - ITAT KOLKATA] we are of the opinion that the CIT-A was justified in accepting the plea of assessee being the labour sardars are not suppliers of labours and as such he rightly deleted the impugned addition made u/s. 40(a)(ia). We uphold the impugned order of the CIT-A. Therefore, the grounds raised by the revenue are dismissed. Addition on account of capital introduction - unexplained Cash Credit u/s. 68 - HELD THAT:- We note that Assessee has introduced the following assets as capital contribution to the business firm such as, Building, Car , Computer Furniture , Security deposit etc., we adjudicate the asset-wise issue as follows: Building - The asssessee produced an exec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any infirmity in the order of ld. CIT(A), therefore, we uphold the same. Computer - We note that on examining the balance sheet and relevant evidences produced by the assessee, CIT (A) observed that the assessee has wrongly credited capital account instead of respective party account. Moreover, the Counsel of the assessee submitted a declaration from the creditors which clearly shows that the said amount is still outstanding. Therefore, the addition made by AO to the tune of ₹ 2,00,000/- has been deleted by ld. CIT(A). We do not find any infirmity in the order of CIT(A), therefore, we uphold the same. Furniture - Due to passing of wrong journal entries viz. instead of crediting the respective party ledgers, the assessee wrongly credited the Capital A/c. Moreover, the Counsel of the assessee submitted invoices in respect of the purchases. The assessee also admitted that since all the documents were under the custody of DGCEI, the same could not be submitted by the assessee earlier. Therefore, the addition made by AO to the tune of ₹ 9,73,000/- has been deleted by CIT(A). The assessee produced before the Bench, Bill for purchase of Furniture on credit basis - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rises out of assessment order passed by the Assessing Officer [ I.T.O., W-25(3), Kolkata ] under section 143(3) of the Income-Tax Act, 1961 (in short, the Act ) dated 29-01-2016. 2. Grounds of appeal raised by the revenue are as under:- 1. That on the facts and in the circumstances of the case, the Ld.CIT(A) erred in accepting the assessee's contention of Accounting Charges being in the nature of Salary merely on the basis of production of on appointment letter without taking cognizance of the fact that there is no evidence of acceptance by the incumbent and moreover, since the assessee had shown expenses towards 'Salary' and 'Accounting Charges' separately in in the audited Profit Loss A/c. proves that the plea of employeremployee relationship is only an afterthought on the port of the assessee to absolve himself from the provisions of Section 40(a (ia) of the Act. 2. That on the facts and in the circumstances of the case, the powers of the Id. CIT (A) are coterminus with those of the AO and once the AO. in his Remand Report pointed out that mere submission of evidence in support of payment of ₹ 80, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee admitted that no tax deduction was made. Hence, the entire amount of ₹ 37,146/- was disallowed and added back with the total income of the assessee in terms of violation of provision of section 40(a)(ia) of the I. T Act 1961. 5. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the impugned addition. Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us. 6. We have heard both the parties and perused the material available on record. We note that the payment made to Sachindra Kumar Jha under the head accounting charges falls u/s. 192 of the Act. There was a relationship between employer and employee between assessee and Sachindra Kumar Jha which attracts Section 192 of the Act. Hence, the provision of Sec 40(a)(ia) is not applicable in this case. Therefore, the addition made by the then AO was deleted by ld. CIT(A). On the other hand, Ld. DR for the Revenue submitted before us that the decision of Ld. CIT (A) is not accepted in this case because during the course of assessment proceedings the assessee failed to submit any suitable explanation as to why ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of ₹ 80,000/- was not in the nature of commission but it was made on account of petty works. The Ld.CIT(A) also stated that the said expenditure is an allowable expenditure as per provision of Section 37 of the I.T. Act. Therefore, the provisions to deduct tax u/s 194H is not applicable in this case. That being so, we decline to interfere in the order passed by Ld. CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. 11. Ground no. 3 relates to deletion of addition of ₹ 1,51,83,363/- made by AO on account of default in deducting TDS. 12. Brief facts qua the issue are that the assessee debited an expense under the head 'Direct Labour' of ₹ 1,59,23,102/- in the Profit and Loss account. On examination of the details as per annexure it was found by AO that a list of 75 names was provided by the assessee wherein the addresses of only 10 persons were mentioned to whom such labour payments amounting to ₹ 87,46,572/- had been made. Further, the assessee disclosed an amount of ₹ 44,27,640/- shown as payment to 'Others' but no details were filed. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuance of a contract between the contractor and a specified person shall, at the time of credit of such sum to the account of the contractor or at the time of payment thereof in cash or by issue of cheque of draft or any other mode, whichever is earlier Therefore, from the above observation it is crystal clear that TDS are required to be deducted while making payment in pursuance of execution of work. There is no need to make any written contract agreement. The execution of work can be done on the basis of the verbal contract also. But in this case the assessee failed to deduct tax while making payment to the labour sardar for execution of works. Considering the above, it is evident that it definitely attract under the purview of the TDS u/s 194C of the Act which the assessee failed to make in this case. Moreover, it is a statutory obligation of a person, to deduct tax at source u/s 194C of the I.T Act and deposit to the Central Govt. Account while making payment to the party. Therefore, the AO rightly pointed out the facts and addition was made as there was violation of provision of Sec 40(a)(ia) of the Act. On the other hand, Ld. Counsel fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Certain case decision in favour of assessee. 24. The matter is examined. In this case the alleged labour contractor is undoubtedly a labourer himself. He gets the same sum as any other labourer i.e. at ₹ 130/per day. The entire affair is managed through Trade Union. Further contract is executed by him and he has not subcontracted any part of work to execute the contract. The fact is that the so called 'labour sardars 'are not suppliers of labourers but facilitators for payment of wages. 25. Considering all aspects the case as discussed above, I hold that the payments to labour sardars are not the ones falling in ambit of section 194C. Accordingly I direct Assessing Officer to delete the addition of ₹ 1,26,52,944/. Ground 6 is accordingly allowed. 7. Before us the ld.DR fairly conceded and submits that it is a case where the Kolkata Tribunal passed various orders on this issue in favour of assessee, wherein the Tribunal held that the labour sardars/labour contractors neither beneficiaries nor the contractors/suppliers of labours. 8. Heard ld.DR and perused material a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194C and as such the invocation of provision of section 40(a)(ia) is outside the scope and ambit of such enactment. In view of the matter, we are of the considered opinion that section 194C(2) being not applicable in this case, the disallowance of ₹ 74,33,210/made by the Assessing Officer by invoking section 40(a)(ia) of the Income Tax Act, 1961 and sustained by the ld CIT(A) is hereby deleted. This ground of the assessee is allowed. 7.3. We also find that the decision of this tribunal in the case of ACIT vs Supreme Construction in ITA No. 1252/Kol/2013 dated 7.9.2016 had held as under: 9. We have heard rival contentions of both the parties and perused the materials available on record. At the outset, we find that AO has called the labour contractors by issuing summons u/s. 131 of the Act and their statements were duly recorded. The AO failed to bring anything on record that the labour charges were paid in pursuance of contract either in writing or the oral with the labour sardar. The AO has held that the assessee has not complied the provision of Sec. 194C r.w.s. ..... 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(ia) Need for TDS under s. 194C relating to payments made for disbursement of labour charges to labour SardarsAssessee had specifically stated before the lower authorities that there is no contract between the assessee and the labour SardarsRevenue authorities could not controvert the submission of the assessee in this respectEven before the Tribunal, the Department could not bring out any evidence by producing cogent material in respect of any contract between the assessee and the labour Sardars to contradict the submission of the assessee that there was no contract between the assessee and the labour SardarA contractor or a subcontractor is engaged on the basis of a contract which is the most important essence of a contract job and is a primary requirement for the application of s. 194C Labour Sardars in the present case has no locus standi as labour contractor as a labour Sardar and a labour contractor are as different as chalk and cheeseThere was no contract between the assessee and the labour Sardars for supply of labourers and without which there cannot be any application of s. 194C and as such the invocation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, the ld. CIT(A) deleted the impugned addition. Aggrieved the Revenue is in appeal before us. 21. We have heard both the parties and perused the material available on record. We note that Assessee has introduced the following assets as capital contribution to the business firm, details of which are given below:- Amount (1) Building 70,00,000 (2) Car 3,68,000 (3) Assessee wrongly entered car in book 16,31,986 (4) Computer 2,00,000 (5) Furniture 9,73,000 (6) Security deposit ( in order to obtain construction work 20,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he F.Y. 2012-13. However, the Counsel of the assessee admitted that due to an accounting error committed by the earlier accountant, the assessee has wrongly entered the car in the books of account. Wrong accounting treatment done by the assessee clearly shows that addition in capital is purely on account of an asset which was not owned by the assessee in F.Y. 2012-13. Hence, the AO.'s action to treat the same as unexplained cash credit is not valid and hence deleted by ld.CIT(A). Therefore, the addition made by AO to the tune of Rs.l6,31,986/- was rightly deleted by ld. CIT(A). We do not find any infirmity in the order of ld. CIT(A), therefore, we uphold the same. (4) Computer: We note that on examining the balance sheet and relevant evidences produced by the assessee, Ld. CIT (A) observed that the assessee has wrongly credited capital account instead of respective party account. Moreover, the Counsel of the assessee submitted a declaration from the creditors which clearly shows that the said amount is still outstanding. Therefore, the addition made by AO to the tune of ₹ 2,00,000/- has been deleted by ld. CIT(A). We do not find any infirmity in the order ..... 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