Addition made on Lumpsum basis on account of payment of labour charges in cash

[Kishor Deshpande]

One of my client, a civil contractor, paying labour charges on cash basis ( payments do not violate the provision of Section 40A(3). But the assessing officer disallowed Rs. 4,50,000 out of labour charges on lumpsum basis and gave the reason in AO that due to payments made in cash I am disallowing the same. Is there any decision given by the Courts against such vies of AO ?

AI Summary

Contractor's Cash Payments Disallowed Despite Section 40A(3) Compliance; Must Prove Legitimacy with Detailed Evidence and Case Law Support. A civil contractor's payments for labor charges made in cash were disallowed by an assessing officer, who cited the cash payments as the reason for disallowance, despite compliance with Section 40A(3). The contractor sought legal precedents to challenge this decision. A respondent advised that the contractor must prove the legitimacy of the expenses with detailed evidence and consider the opportunity provided for justification. The outcome would depend on the specific facts and circumstances, and relevant case law could support the contractor's position.