TaxTMI 
TaxTMI 
2009 (12) TMI 685
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.... that the payments were made to sub-contractor is illegal, misconceived and liable to be deleted CIT v. United Rice Land Ltd. [2008] 217 CTR (Punj. & Har.) 332/[2008] 8 DTR (Punj. & Har.) 3051. 2. That the addition under the head "Unexplained investment" amounting to Rs. 1,77,853 is uncalled for, illegal, excessive and without any basis as the accounts are duly verified and certified by the auditor and audited under section 44AB of the Income-tax Act, 1961. The discrepancy as observed by the learned Assessing Officer is not correct." 2. At the time of hearing, the learned counsel for the assessee preferred not to press ground No. 2 and therefore, the same is rejected as not pressed. 3. So far as ground No. 1 is concerned, we have heard the parties. 4. The brief facts, as have been revealed from the records and are relevant for disposal of the issue involved in the sole surviving ground i.e., ground No. 1, relates to applicability of section 40(a)( ia) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), are that the assessee has been carrying on business of transport and return for the assessment year 2005-06 declaring an income of Rs. 11,79,990 was furnished on ....
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....27. B. Mohapatra 90,310 OR-09D-8233 28. B.N. Rajbhar (Bholanath Rajbhar) 2,80,869 OR-09D-6031 29. C. Barik 60,170 OR09C7084 30. C.C. Savolia 6,25,401 OR-09D-1937, OR-09D-7037, OR-04B-8737 31. CM. Munda 1,37,943 OR-09D-5285 32. Debasish Kar 6,92,789 OR-09A-8448, OR-04B-8448 33. Debendra Kumar 1,24,304 OR09E-0935 34. Dhaneswar Sahoo 1,26,812 OR-05R-8976 35. D.K. Srivastav 72,315 OR 09D-4722, OR-09D-4723 36. D. Mahanta 79,068 OR-09D-6157 37. D. Sahoo (Dhaneswar Sahoo) 1,44,206 OR-05R-8976 38. D. Sandil 1,09,732 OR-09D-7015 39. D. Singh 61,468 OR-04D-3693, OR-09A-2093 40. Ganesh Mahanta 53,015 OR-04C-0501 41. G. Mahakhud 1,13,764 OR-09E-5342 42. Goutam Palai 1,92,761 OR-09D3551 43. G. Patra (Gurucharan patra) 61,691 OR09C-8511 44. Gurucharan Patra 2,70,926 -do- 45. Hemanta Sahay 1,27,641 OR-09D-2897, OR 09D-3433, OR-09F-1073 46. Hira Lal Jaiswal 84,959 OR 14J-4683 47. Imran Mallik 1,54,891 OR-09D-7120, OR-09D-3995, OR-09C-9620, JH-05D-2335 OR-09E-4113 48. I. Singh 1,69,998 OR-04C-0102 49. Jogeswar Gope 50,391 OR-09D-0228 50. Jyoti Ranjan 1,26,876 OR-04D 4040, OR-09D-9264 51. Kashinath S....
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....7,371 OR-09D-5890 100. S.N. Jaiswal 1,65,929 OR-04B-9190, OR-09D-2190 101. S. Purohit 50,416 OR-09E-4532, OR-Q9E-4533 102. S.S. Ali 96,255 OR-09D-4844 103. S. Srivastav 58,981 OR-09C-4360, OR-09C-4361 104. S.S. Sahoo 52,915 OR-09D-5098 105. Sukh Lal Munda 61,940 OR-09C-6827 106. Surendra Singh 2,62,295 OR-09D-5406 Total 1,76,35,660 The Assessing Officer reproduced the above list at p. 2 of the assessment order but seems to have omitted to record the registration number of trucks/vehicles owned by each one of them. 4.1 After considering the aforesaid list, the Assessing Officer considered the payments to each one of them as payments to the transporters probably in view of the fact that the names of the truck/vehicle owners were listed in the column "name of the transporter" and therefore, came to the conclusion that these payments were to the transporters and as a result of contract/sub-contract. He, therefore, invoked the provisions of section 40(a)(ia ) of the Act, because the payments to each one of the persons listed in the list were more than Rs. 50,000 and the assessee has not deducted tax at source. This action of the Assessing....
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.... made to ITO, Keonjhar and he was requested to confirm the receipt of such declaration in Form Nos. 15-I and 15J from the assessee Sri Chandrakant Thacker. 4.2 In his letter No. ITO/KJR/2008-09/2003, dated 14th March, 2009 the ITO has categorically denied to have received any such declaration in From Nos. 15-I and 15J from the assessee Sri Chandrakant Thacker. As regards the receipt of filing of Form Nos. 15-I and 15J, submitted by the assessee before the learned CIT(A), the ITO has stated that signature/endorsement made therein is not related to officials working in the month of May, 2005 in the office of the ITO, Keonjhar Ward, Keonjhar. The ITO, Keonjhar has also filed the photocopy of attendance register for the month of May, 2005 as token of evidence. 5. The assessee Sri Chandrakant Thacker was also summoned under section 131 of the Income-tax Act 1961 and his statement was recorded wherein he was asked to explain the reason for not producing the copies of Form No. 15-I received from the sub-contractors during the course of assessment proceeding. He was also asked to explain the reason for not filing the Form Nos. 15-I and 15J before the CIT, Sambalpur. But he failed to offe....
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....a transporter executing various contracts by engaging its own vehicles and transporters' vehicles. The Assessing Officer disallowed the payments by observing that payments were made to the transporter as sub-contractor. There is nothing on record to suggest that any contract existed between the assessee and the alleged transporter as sub-contractor. There is neither written nor oral agreement in this regard. There is no dispute to the settled legal proposition that written agreement is not compulsory. Even oral agreement can be inferred in the facts and circumstances of the case. The Assessing Officer has not made out the case that on the basis of the contract of the business by the assessee there existed contractor and sub-contractor relationship between the assessee and the alleged sub-contractor. The Assessing Officer has not made out the case that the alleged sub-contractor has been engaged on some definite terms and conditions for executing the work of the assessee. Basically, the assessee has engaged different transporters for executing its different works. Even there is nothing on record to suggest that the assessee has assigned any particular portion of work to a particular....
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....n have drawn support from the decision of the Punjab and Haryana High Court in the case of CIT v. United Rice Land Ltd. [2008] 217 CTR (Punj. & Har.) 332/[2008] 8 DTR (Punj. & Har.) 305. A close reading of the judgment in the case of United Rice Land Ltd. ( supra) reveals that the decision has been rendered in the context of a different set of facts. Here the transporters were not transporting goods but merely arranging the trucks for the assessee for a consideration of Rs. 200 per truck. It will be relevant to reproduce the factual position as described in para 2 of the judgment : These trucks were provided by the transporters who were having links with the truck operators and their consideration for providing such services was about Rs. 200 per truck. This consideration was charged by the transporter from the truck owners/operators. The hire charges were paid by the assessee directly to the truck owners/drivers or through transporters.' (Emphasis, italicized in print, supplied) The above factual position is again repeated in para 4 of the order which has reproduced an extract from the order of the Tribunal as under : '... We have also carefully gone through the certificates fu....
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....he acts and conduct of the parties to the arrangement. The undisputable facts in this case are that the appellant had engaged several transporters to carry goods and payments amounting to Rs. 2,19,63,728 were made to them. These are comprehensive business transactions and will not take place on their own. Payments will not flow to the transporters automatically. There has to be discussion between the appellant and these transporters about the carriage of goods, the destination of trucks and the amount of transportation charges to be paid. There has to be a proposal in this regard from one of the parties and when accepted by the other party, it will give rise to an agreement. Even if, it is not reduced to writing, it remains a contract or an oral contract. Therefore, I reject the contention of the appellant that the provisions of section 194C will not be applicable in his case. The disallowance under section 40(a)(ia ) of the Income-tax Act 1961 as made by the Assessing Officer is upheld." 4.9 It was in view of the above facts and circumstances of the case that the assessee has come up in appeal before the Tribunal. 5. The learned Authorised Representative of the assessee disputed....
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.... allege that all the 106 truck owners were transporters and were working in the capacity of sub-contractor as a result of oral contract is of no use to the Revenue. He therefore, submitted that in the present case, carrying of goods by 106 truck owners being not in pursuance of a contract entered between the assessee and the truck owners, the assessee was not liable to deduct tax at source under section 194C of the Act and in support of the same, relied on the decision of Hon'ble Punjab and Haryana High Court in the case of United Rice Land Ltd. case (supra). 5.3 The learned Authorised Representative of the assessee further relied on the following decisions of the Tribunal, Cuttack Bench, wherein the Tribunal, on similar facts and circumstances of the case as that of the assessee, has after following the decision of Hon'ble Punjab and Haryana High Court in the case of United Rice Land Ltd. case (supra) held that the appellants were not liable to deduct tax under section 194C of the Act and therefore, payments made to truck owners are not hit by the provisions of section 40(a)(ia ) of the Act : (1)R.R. Caryying Corpn. v. Asstt. CIT [2009] 126 TTJ (Ctk.) 240 (2)Gurudev Singh case ....
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....5.7 Concluding his submissions, the learned Authorised Representative of the assessee submitted that since the facts and circumstances of the assessee's case are similar as to the facts and circumstances as were in the case before the Tribunal, Cuttack Bench as well as the case before the Hon'ble Punjab and Haryana High Court, the assessee's case is fully covered by these decisions and therefore, the appeal of the assessee is liable to be allowed. 6. The learned Departmental Representative, on the other hand, supported the order of the CIT(A) by referring to the provisions of section 194C(2) of the Act and the findings of the CIT(A). 7. We have considered the rival submissions, facts and circumstances of the case and various decisions relied upon by the parties as well as the provisions of section 194C and section 40(a)( ia) of the Act. After having analyzed the totality of the facts and circumstances of the case and law in this respect, we are of the opinion that liability for deduction of tax at source of a contractor arises if he has allowed any other person to carry on whole or in part of a contract work taken by the contractor for doing himself and has also fastened liabilit....
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....t any freight charges were paid to them in pursuance of a contract for a specific period, quantity or price-Tribunal too has clearly stated that nothing has been brought on record by the Assessing Officer to prove that there was written or oral agreement between the parties for carriage of goods-Therefore, assessee was not liable to deduct tax under section 194C from the payments made to the transporters. 7. As per provisions of section 194C of the Income-tax Act any person responsible for paying any sum to any resident for carrying out any work in pursuance of a contract shall at the time of credit of such sum or at the time of payment thereof in cash or by cheque deduct a tax thereon at a prescribed rate. However, no such deduction at source is required to be made if the sum paid or credited does not exceed Rs. 20,000. In the present case, the Assessing Officer had held the assessee liable for deduction of tax only on the assumption that assessee was having agreement with the parties through whom trucks were arranged for transportation of goods. However, the CIT(A) has recorded a finding of fact that there was neither any oral or written agreement between the assessee and transp....