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ITO Ward-2 (3) , Vijayawada Versus M/s. Best Feeds

2016 (3) TMI 721 - ITAT VISAKHAPATNAM

Tds u/s 194C - non deduction of tds on hamali charges paid to daily labourers employed by the assessee - assessee 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) - Held that:- On verification of the ledger accounts, it was noticed that the assessee has made the payments on weekly basis towards wages payment .....

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ments are made through the mestri, the A.O. was not correct in coming to the conclusion that there exist 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 consid .....

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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 .....

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-2-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri I. Sarish Kumar, DR For The Respondent : Shri C. Subrahmanyam, AR ORDER PER G. MANJUNATHA, Accountant Member: This appeal filed by the revenue, is directed against the order of CIT(A), Vijayawada dated 14.2.2013 and it pertains to the assessment year 2008-09. 2. The brief facts of the case, are that the assessee is a partnership firm which is engaged in the business of processing of ca .....

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oceedings, the A.O. noticed that the assessee has debited an amount of ₹ 16,86,052/- towards hamali charges. On perusal of the details filed by the assessee, it was noticed that the hamali charges were paid to daily labourers employed by the assessee. Therefore, the A.O. asked to produce the bills & vouchers and TDS particulars for the hamali charges claimed in the P&L account. In response to notice, the assessee stated that it has employed daily labourers for handling the material .....

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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., ho .....

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introduced capital of ₹ 77,04,274/-. When asked to produce the sources for the capital introduced, the assessee stated that there is a search & seizure operation u/s 132 of the Act, in the case of assessee and its group concerns and all the books of accounts and other details were seized by the department. However, the assessee has furnished the personal books of accounts of the partner of the firm Sri M. Surendra Nath and also explained the sources for the capital introduced. The asse .....

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barred it is not possible to call for the explanations regarding the cash inflow into the capital account and hence it was proposed to add back to difference between the opening and closing balance of the capital account as unexplained credits. 4. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee submitted that during the year the firm has paid a sum of ₹ 16,86,052/- towards hamali charges. The assessee further submitted .....

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lied the provisions of section 40(a)(ia) of the Act and disallowed the amount which is not correct. 5. Similarly, the assessee has paid production charges of ₹ 20,82,228/- towards labour working in the factory in the production process. The assessee further submitted that these 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 .....

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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 explained, the A.O. was .....

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y disallowed the amounts u/s 40(a)(ia) of the Act. Similarly, the CIT(A), deleted addition made towards capital account by holding that when the sources for the capital was explained and also from which concern money have flown into the individual hands were produced before the A.O., the A.O. could have discharged his onus in rejecting the same by bringing cogent materials on record, which was not done. In addition, as rightly contended by the A.R. if at all the sources in the individual hands o .....

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ht to have sustained the disallowance u/s 40(a)(ia) of the Act towards hamali charges of ₹ 16,86,052/- and production charges of ₹ 20,82,288/-, as the payments were made to a single person for supply of labour from time to time which is evident from the vouchers produced before the A.O. The Ld. D.R. further submitted that the CIT(A) was erred in deleting the addition by stating that there is no written contract between the mestri and the assessee, since there exist an oral contract b .....

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he 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 st .....

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bourers employed in the assessee s firm. Therefore, the A.O. was not correct in invoking the provisions of section 194C of the Act, thereby disallowing the amounts u/s 40(a)(ia) of the Act. The A.R. further submitted that as far as the production charge is concerned, this is also similar payment made to the daily labourers for working in the factory premises for handling the materials. These payments are made to the labourers through a mestri, in turn the mestri has paid the amount to the indivi .....

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the credits in capital account. The A.R. further submitted that the assessee has submitted ledger account copies from the books of both, the partner and the firm and also produced the personal books of the partners to confirm the source for credits in capital account. The A.O. without considering the material and explanations of the firm has made additions towards unexplained credits on the ground that the information is not available. The assessee further submitted that the partner is having s .....

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ot satisfied with the sources for credits in capital account, then, the additions can be made only in the hands of the partners, but not in the hands of the firm. Therefore, the order of CIT(A) should be upheld. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. disallowed hamali charges and production charges by invoking the provisions of section 40(a)(ia) of the Act. The A.O. was of the opinion that the a .....

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y/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 .....

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e, where there in unskilled work force. Just because the payments are made through the mestri, the A.O. was not correct in coming to the conclusion that there exist 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 provisi .....

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ed the additions by holding that the assessee has furnished details with regard to the sources for the credits in capital account, therefore, the A.O. was not correct in adding the credits in the hands of the partnership firm. The CIT(A) was of the opinion that if at all the sources for the credits was not proved by the partners, then the same can be added in the hands of the partners, but not in the hands of the firm. It was the contention of the A.O. that the assessee has not furnished details .....

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