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In a recent judgment, Rajasthan High Court Jaipur Bench has upheld the order of ITAT which held that auditors vague remarks cannot be construed as a conclusive statement. This is the job of assessing officer to peruse the facts, circumstances and material in entirety and not to resort to piece meal observations

Case Details:
Income Tax Appeal No.53/2015
Principal Commissioner of Income-tax (Appellant) vs Tulsi Ram Modi (Respondent)
Date of Order: 14-08-2015

Facts of the Case:
The assessee wa Proprietor of M/s. Riddhi Siddhi Industries and was engaged in sales of aluminum sections/ profiles/profiles, glass sheets, wooden/ gypsum boards etc. According to assessee installation of fitting of such material in customers premises was done by him employing casual labourers. During the course of assessment proceedings, the assessing officer held that the amounts paid by the assessee to the casual laborers were liable for TDS under section 194C(3) of the Income tax Act, 1961. According to AO holding that there was a relationship of contractor and sub-contractor between the assessee and the casual labours and the assessee was liable to deduct TDS as such, disallowed the payments under section 40(a)(ia).

The assessee contested the assessment and contended that the casual labours had been employed on daily wage basis as evident from the payment vouchers. None of the team labourer had raised any bill or submitted any measurement sheet or given details of work done by them. They were paid at flat rates on the basis of number of days and there was no oral contract with them. CIT(A) deleted the disallowance.

The Department contested the order of CIT(A) before ITAT. The department in support of the AO contended that assessee had not paid any PF/ESI etc to indicate that labourers were employed by him, all payments have been routed through senior labourer's accounts to show that it was a sub-contract and in the audit report of the assessee u/s 44AB the auditor has mentioned that no TDS was deducted for the payment made to labour charges.

ITAT after hearing and considering all the material rejected the contentions of the revenue and observed that,

“ no adverse inference can be derived from auditors remark as it is only statement of fact about wages and in any case auditors vague remarks cannot be construed as a conclusive statement. This is the job of assessing officer to peruse the facts, circumstances and material in entirety and not to resort to piece meal observations.”

Held by High Court:

“After hearing counsel for appellant & taking note of the material on record, we are of the view that as regards applicability of the provisions of TDS u/S 194C of the Act is concerned, that has been examined on factual matrix in detail& the view expressed by CIT Appeals on appreciation of facts came to be confirmed by the Tribunal on reappreciation of evidence & in our considered view there appears no substantial question of law emerges for our consideration in the instant appeal.

Consequently, the appeal fails and is hereby dismissed.”

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Download ITAT Judgment Click Here >>

Rajasthan HC upheld ITAT Order-Auditors’ Remark in Tax Audit Report was only Statement of Fact, Vague Remarks cannot be considered Conclusive Statement | 07-09-2015 |