TMI Blog2016 (3) TMI 721X X X X Extracts X X X X X X X X Extracts X X X X ..... xist written or oral contract for supply of labour which attracts the provisions of section 194C of the Act. There is no contract between the mestri and the assessee, as such these payments are not covered under the provisions of section 194C of the Act, therefore the A.O. was not correct in disallowing the amounts by invoking the provisions of section 40(a)(ia) of the Act. The CIT(A) after considering the relevant details and submissions of the assessee deleted the additions made by the A.O. We do not find any error or infirmity in the order passed by the CIT(A). Hence, we inclined to upheld the order passed by the CIT(A) and direct the A.O. to delete the additions. - Decided in favour of assessee Addition made towards credits in capital account - CIT(A) deleted the addition - Held that:- On perusal of the ledger account copies, we find that most of the transactions were done in cash. Though assessee claimed to have furnished the relevant details before the A.O. with regard to the sources for the credits in capital account, the A.O. could not had an occasion to verify the same, because the books of assessee were not available at the time of assessment. It is an admitted fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges through a person called mestri. However, no payments to any individual labourers exceed ₹ 20,000/- in each case and aggregate of such payments also does not exceed ₹ 50,000/-. Similarly, the A.O. noticed that the assessee has claimed production charges amounting to ₹ 20,82,288/-. When asked to produce the bills vouchers and TDS particulars for the same, the assessee has submitted that it has employed daily labourers for working in the factory premises and paid the wages on weekly/fortnightly basis. The assessee further submitted that it has not deducted TDS, because there is no written contract entered into between any individual and the payment is made to individual labouers, therefore, no disallowance can be made by invoking the provisions of 40(a)(ia) of the Act. The A.O., however, after considering the explanations furnished by the assessee, disallowed the amounts u/s 40(a)(ia) of the Act and added back to the income of the assessee. While doing so, the A.O. held that the assessee has failed to deduct TDS on such payments u/s 194C of the Act, therefore, disallowance u/s 40(a)(ia) of the Act is applicable for failure to deduct TDS. 3. Similarly, during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se labourers were engaged in the factory premises to assist the production process and wages was paid on weekly/fortnightly basis. As per the custom, the payments were made to mestri, in turn the mestri has distributed the payment to the workers on weekly basis. The assessee further submitted that it is not a contract of work or contact for supply of labour, but only a payment of labour charges for daily workers. Therefore, the provisions of section 40(a)(ia) of the Act cannot be invoked. 6. The assessee further submitted that as far as the addition towards credits in capital account is concerned, the assessee has furnished all the details before the A.O. with regard to the source for the capital introduced. The A.O. without verifying the details furnished by the assessee, completed the assessment just because the assessment is time barred. The assessee further submitted that the sources for the capital introduced was explained by furnishing ledger account copies of the partner and also explained the sources for the capital by stating that the amount was drawn from various firms, wherein the partner was either proprietor or partner. When the source for the capital account was ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and his order should be upheld. Similarly, as regards the additions towards capital is concerned, the Ld. D.R. submitted that the assessee has failed to furnish sources for the cash credits in capital account therefore, the A.O. has rightly made the additions. The Ld. D.R. further submitted that the CIT(A) erred in holding that the A.O. should have discharged his onus in rejecting the same by bringing cogent material on record which was not done as the assessee did not discharged initial burden cast upon it. Therefore, the additions made by the A.O. should be upheld. 9. On the other hand, the Ld. A.R. of the assessee strongly supported the order of the CIT(A). The A.R. further submitted that the assessee has incurred hamali charges towards labour payment to daily labourers employed in the factory for handling the material. The payments as per customs were made to mestri on behalf of labourers, in turn the mestri has distributed the payment to the individual labourers. The A.R. further submitted that it is not a contract for work or contract for supply of labourers, but it is only a payment of wages to daily labourers employed in the assessee s firm. Therefore, the A.O. was not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. was of the opinion that the assessee has made the payment to the mestri for supply of labourers, therefore, it attracts the provisions of section 194C of the Act, therefore, disallowed the amount u/s 40(a)(ia) of the Act. It was the contention of the assessee that the amounts paid towards hamali charges and production charges are not covered u/s 194C of the Act. The assessee further submitted that these payments were made to daily workers employed in the factory for handling the materials and the payments were made on weekly/fortnightly basis. The payments were made through the mestri for the sake of convenience. Therefore, it cannot be construed as work contract to invoke the provisions of section 194C of the Act. We find force in the arguments of the assessee for the reason that the assessee has furnished ledger account copies of hamali charges and production charges along with name and address of the persons to whom the payments were made. On verification of the ledger accounts, it was noticed that the assessee has made the payments on weekly basis towards wages payments to the daily workers employed in the factory. The assessee made the payments through the mestri, just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred. 13. We have gone through the assessment order, submissions of the assessee and order of the CIT(A). The assessee has filed paper book, which contains the ledger account copies of capital account of M. Surendra Nath and also ledger account copies of M. Surendra Nath in the books of the assessee firm. On perusal of the ledger account copies, we find that most of the transactions were done in cash. Though assessee claimed to have furnished the relevant details before the A.O. with regard to the sources for the credits in capital account, the A.O. could not had an occasion to verify the same, because the books of assessee were not available at the time of assessment. It is an admitted fact that the books of assessee were not before the A.O. to verify the sources of the credits in capital account. Unless, the A.O. satisfied himself about the source with reference to assessee books of account, he cannot came to a conclusion that the sources for the credits were satisfactorily explained. Therefore, we are of the opinion that to meet the ends of justice, we deem it proper to remit the issue back to the file of the A.O. and direct the A.O. to verify the details filed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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