TaxTMI 
TaxTMI 
2010 (12) TMI 791
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....sum of Rs.4,37,84,725/- towards labour payments to the profit and loss account. On verification, it was noticed by the A.O. that various labour payments exceeding Rs.50,000/- were made to many persons contrary to the stipulations made in section 194C of the Act without deducting tax at source while making such payments. When confronted, the assessee submitted that the labour payments were not under contractual payments as the assessee engaged the required labour directly and for the purpose of payment assessee selected a senior knowledgeable worker to whom payments were released for the entire group of the labours. The said selected labour used to disburse the labour payments to the respective labours after obtaining their signature on the wage register. Therefore, the provisions contained in section 194C is not applicable. The A.O. did not accept the contention of the assessees as the assessee could not produce the wage register to prove that payments were made directly to the labours. 3. The assessee preferred an appeal before the CIT(A) with the submission that the assessee executes civil work at different work sites i.e. Visakhapatnam, Srikakulam, Ongole and Hyderabad....
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....rs and the labourer having received the payment, have signed the wage registers. In course of the remand proceedings, the assessing officer examined under oath five such workers through whom labour payments were released to the different workers. In their sworn statements, these workers confirmed the fact that they received the lumpsum payments on behalf of a group of workers which in turn they distributed to them based on the number of days worked by each of them. They also confirmed the fact that the workers signed in the wage register acknowledging the receipt of the labour payments. In this context, it is noted that the wage register maintained by the appellant is also a part of the books of accounts maintained by the appellant and entries in the said wage register constitute primary evidence. The entries in the said wage registers confirm the fact that wages were paid to the workers on daily wages basis. It is further noted that the assessing officer did not ever doubt the genuineness of the expenditure incurred by the appellant. It was only for want of proper evidence, the assessing officer did not accept originally the contention of the appellant that the wages were paid on ....
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....orted the order of the CIT(A). 6. We have carefully examined the order of the CIT(A) and we find that during the appellate proceedings before the CIT(A), the assessee has placed all relevant evidence in support of his claim that the payments were made directly to the labours and for convenience it was made to their group leaders for its disbursement amongst the labours and at the time of disbursement to labours proper receipt was also obtained. The assessee has placed the relevant evidence before the CIT(A) who has examined it minutely before accepting the claim of the assessee. Therefore, we find no infirmity in his order and we confirm the same. 7. The next issue involved in these appeals is with regard to the disallowance of Rs.1,50,25,500/- made by the A.O. having invoked the provisions of section 40A(3) of the Act. 8. During the course of assessment proceedings, the A.O. noticed that the assessee has issued 38 cheques from the Union Bank of India. On the basis of certain deficiencies noted in the said cheques, the A.O. was of the view that the assessee has violated the provisions of section 40A(3) in respect of entire labour charges of Rs.4,37,84,....
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....ed that with regard to the amounts paid by cross cheques, the assessee obtained certificates from the banks in respect of some payments to substantiate its contentions and they were produced in the appeal proceedings. With regard to the cash payments made on holidays like Sunday, it was contended that they fall within the exception provided in rule 6DD(J). With regard to the payments made to the cottage industries, it was contended that these payments were made to purchase the products from the cottage industries, as such, it would not fall within the purview of section 40A(3) of the Act. With regard to the payments made through agents, it was contended that it also falls within the exception provided in rule 6DD(K) of the I.T. rules. With regard to the cash below Rs.20,000/-, it was further contended that since each of the bill amount is less than stipulated limit of Rs.20,000/-, no disallowance u/s 40A(3) is called for. 14. Since additional evidence were furnished before the CIT(A) along with fresh arguments, the CIT(A) called a remand report from the assessing officer on the additional evidence and new argument raised before him. 15. In remand proceedings, th....
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.... "In so far as payments for purchases are concerned, the appellant claimed that an amount of Rs.2,13,98,101/- was paid through crossed cheques which are not covered by the provisions contained in sec.40A(3) of the Act. The assessing officer after verifying the bank certificates furnished by the appellant in support of the said contention, in course of the remand proceedings, accepted that as per evidences filed by the appellant, an amount of Rs.1,07,45,157/- could be considered as payments made through crossed cheques. Subsequently, the appellant furnished another certificate from the Indian Bank, Ongole who certified that an amount of Rs.76,40,910/- was paid through crossed cheques. Thus, the total amount which was paid through crossed cheques as per the evidences furnished by the appellant works out to (1,07,45,157 + 76,40,910) Rs.1,83,86,067/- as against the claim of the appellant of Rs.2,13,98,101/-. Thus, for the balance amount (2,13,98,101-1,83,86,067) Rs.30,12,034/-, the appellant has not been able to furnish evidence supporting that they were indeed paid through crossed cheques. Needless to mention the onus is on the appellant to establish a fact with supporting evidence.....
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....,49,128/. However, on verification of the same in course of the remand proceedings, the assessing officer was of the view that the total payments which were less than Rs.20,000/- in each cash was Rs.23,75,583/- only as payments to the extent of Rs.7,73,545/- was either not recorded in the cash book or the same was in excess of Rs.20,000/- in each case. From the details furnished by the assessing officer, in the remand report, it is noted that in so far as the payments in excess of Rs.20,000/- was concerned, the same was Rs.2,67,600/- and the balance amount of Rs.5,05,945/- represented payments not recorded in the cash book. However, in the counter submission to the remand report by the appellant, it was submitted that the amount of Rs.5,05,945/- was paid by bearer cheques and hence recorded in the bank book and not in the cash book. On verification of the bank book, it is noted that such payments are recorded in the bank book and none of these payments exceed Rs.20,000/- in each case. With respect to the amounts in excess of Rs.20,000/-, i.e., in total Rs.2,67,600/-, it was submitted that such payments were made at Ongole site and as such, they have been routed through the said acc....