1 ITA No. 2701-2702/Kol/2013 Joydeb Chandra, AY 2005-06 & 2006-07 IN INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [Before Shri N. V. Vasudevan, JM & Shri M. Balaganesh, AM] I.T.A Nos. 2701 & 2702/Kol/2013 Assessment Years: 2005-06 & 2006-07 Assistant Commissioner of Income-tax, Vs. Joydeb Chandra Circle-33, Kolkata. (PAN: ABZPC3187E) (Appellant) (Respondent) Date of hearing: 20.09.2016 Date of pronouncement: 14.10.2016 For Appellant: Shri Banibrata Dutta, Addl. CIT, Sr. DR For Respondent: Shri Soumitra Choudhury, Advocate ORDER Per Shri M. Balaganesh, AM: Both these appeals by revenue are arising out of separate orders of CIT(A)-XIX, Kolkata vide appeal Nos. 140 & 141/CIT(A)-XIX/Circle-33/Kol/12-13 both dated 25.09.2013. Assessments were framed by DCIT, Circle-33, Kolkata u/s. 143(3)/147 of Income tax Act, 1961 (hereinafter referred to as Act ) for AYs 2005-06 and 2006-07 vide his separate orders both dated 31.12.2010. Since issues are identical and facts are common and for sake of brevity, we dispose of both appeals by this consolidated order. 2. only issue to be decided in these appeals is as to whether ld CIT(A) is justified in deleting disallowance made u/s 40(a)(ia) of Act in facts and circumstances of case. facts of Asst Year 2005-06 are considered herein and decision rendered thereon would apply with equal force for Asst Year 2006-07 as facts are identical except with variance in figures. 3. brief facts of this issue is that assessee is individual contractor engaged in various contractual jobs with Government of West Bengal particularly with PHE Department running its business under name and style of Oriental Engineering Co. . assessee has been authorized as per contract with various department to maintain Pump Houses, Guarding, Supply of Oil and Fuel to run pumps and overall 2 ITA No. 2701-2702/Kol/2013 Joydeb Chandra, AY 2005-06 & 2006-07 maintenance and look after security aspects. ld AO observed that assessee had spent sum of Rs. 62,90,803/- on account of operation and maintenance charges in different pump houses maintained by PHE , Government of West Bengal, including labour charges at Ganga Sagar Mela. assessee also spent Rs. 4,63,297/- on account of site labour charges at their various sites. ld AO disallowed sum of Rs. 67,64,900/- u/s 40(a)(ia) of Act for payment of labour charges without deduction of tax at source. assessee submitted that payments to labourers are made as per Contract with various PHE department, Government of West Bengal wherein rate of payment per labour is also guided by terms and conditions of contract. assessee placed copies of contract with authorities. As per contract, wages per day fixed was Rs 65/- and hence there was no obligation to deduct tax at source in terms of section 194C of Act as admittedly it falls within Tax deduction limits prescribed in said section. ld CITA deleted addition by observing as under:- 6.5. Wages are liable for TDS u/s 192, but if wages are below basic exemption limit then there is no need to deduct tax on it. But if labourers are supplied by Labour Contractor, then TDS is liable to be made on bill of Labour Contractor if it exceeds Rs. 20,000/- and if it exceeds Rs. 50,000/- during whole year. AO could not find/allocate single case where payment exceeds Rs.50000/- to justify his addition or for that matter there was contract. It was found that expenses were incurred by appellant on account of hired labourers taken at different sites. These types of payments were made to daily hired labourers and hence do not fall within ambit of section 194C of Act. Hence, disallowance was arbitrary and is liable to be deleted. Last but not least while going through assessment order it is observed that AO passed non-speaking order for making disallowance u/s 40(a)(ia) and order is also silent on reason for impugned addition made. In view of this addition on this count amounting to Rs.67,64,900/- is deleted. 4. Aggrieved, revenue is in appeal before us on following grounds:- l. A.R. has admitted that there was violation of provisions u/s.194C himself as per Para(3) of order. 2. Similarly Para 4.1 and Para No. 4.2 of A.O.'s order in which it is very clear that assessee never produced bills, voucher before A.O. in any of expenses. 3. Even if we see 3 CD report, auditor himself given avoiding answer by saying "nil" there by it is clear that assessee never followed TDS provisions. 4. Report under 26AS has not submitted by assessee. 5. Ld. CIT(A) deleted additions by simply picking word "Cursory Glance" and deleted entire addition without appreciating facts. 6. Ld. CIT(A)'s observations is wrong and not according to facts because A.O. was 3 ITA No. 2701-2702/Kol/2013 Joydeb Chandra, AY 2005-06 & 2006-07 unable to verify entire books, bills and vouchers as per order sheet noting since assessee's A.R. not produced. Hence, it is factually wrong to "presume" that only cursory glance was made by A.O. 7. How come CIT had come to such conclusion without examined any facts is doubtful and based on assumption only addition was deleted. 5. ld DR argued that assessee is engaged in doing contract work with Government of West Bengal and had engaged several labourers for same and made payment of labour charges. He stated that assessee had not maintained proper wages register with proper deduction of PF and ESI thereon which was not done by assessee. Even books of accounts were not produced by assessee. Only list of labourers to whom payments were made were produced by assessee . In response to this, ld AR argued that without engaging these labourers, assessee could not have carried out Government contract. All wages paid is less than Rs 2000 per month and hence there is no obligation to deduct tax at source under section 194C of Act. Moreover, entire details regarding payment of labour charges were filed before lower authorities which are also enclosed in paper book filed before this tribunal. Accordingly, he prayed for non-interference in order of ld CITA. 6. We have heard rival submissions and perused materials available on record including paper book filed by assessee containing summary of paper book submitted to ld AO on 8.12.2010 (page 1 of PB) ; names and addresses of workers to whom wages were paid (pages 2 to 16 of PB) ; details of labour charges (pages 17 to 77 of PB) ; vouchers for payment of wages (pages 115 to 144 of PB) and reply to ld AO vide letter dated 10.11.2010 furnishing details of labour charges for Rs. 95,63,200/- (Pages 171 to 179 of PB) . Similar details were also filed by way of separate paper book for Asst Year 2006-07 comprising of pages 1 to 250 by ld AR. We find that entire details of labour charges were duly filed before ld AO. We find that these details were not properly appreciated by ld AO while making disallowance. Infact certain labourers had even confirmed before ld AO in response to notice u/s 133(6) of Act. All these labour payments were maximum to extent of Rs. 2,015/- per month. We hold that payments made thereon would definitely not fall within limits for tax deduction obligations prescribed u/s 194C of Act. We find lot of force in argument of ld AR that without incurrence of these labour charges, it would not be practically possible to 4 ITA No. 2701-2702/Kol/2013 Joydeb Chandra, AY 2005-06 & 2006-07 execute Government contracts by assessee. Hence in these facts and circumstances, we hold that there is no obligation to deduct tax at source in terms of section 194C of Act and therefore disallowance made u/s 40(a)(ia) of Act is not warranted. Accordingly, grounds raised by revenue are dismissed. 7. In result, both appeals of revenue are dismissed. Order pronounced in open court on 14.10.2016 Sd/- Sd/- (N.V. Vasudevan) (M. Balaganesh) Judicial Member Accountant Member Dated : 14th October, 2016 Jd.(Sr.P.S.) Copy of order forwarded to: 1. APPELLANT ACIT, Circle-33, Kolkata 2 Respondent Shri Joydeb Chandra, 7/1A, Abhoy Halder Lane, Kolkata- 700 012. 3. CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata /True Copy, By order, Asstt. Registrar. Assistant Commissioner of Income-tax, Circle-33, Kolkata v. Joydeb Chandra