TaxTMI 
TaxTMI 
2024 (4) TMI 316
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....reference to the payment made to each individual worker and in holding that the group leader was the appellant's sub-contractor or that the individual workers worked not under the appellant but under such group leader and its purported findings in that behalf are arbitrary, unreasonable and perverse ?" Facts:- 3. Briefly stated facts of the present case are that the appellant/assessee is engaged in business of embroidery and stitching. The assessee paid a sum of Rs. 1,21,49,190/- for payment to labourers. According to the assessee, the aforesaid amount was paid to labours through supervisors who were employees of the assessee. The assessee used to draw a lump sum amount from bank by cheque through his employees i.e., supervisors for payment to be made to labours. The supervisors used to make payment to labours and give an account to the assessee in the form of a list containing payments made to each individual labour. In none of the cases, the payment so made by the supervisors to individual labour exceeded Rs. 20,000/-. The assessing officer, while passing the assessment order dated 31.12.2008 for the assessment year in question i.e., 2006-07, invoked Section 40A(3) of the I....
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....e High Courts held that the statutory limit u/s. 40A(3) applies to payment made to the party at a time and not to the aggregate of the payments made to a party. Considering the totality of the facts and circumstances and having regard to the case laws cited above, it is held that the disallowance u/s. 40A(3) made by the A.O. is not called for. Accordingly, the addition of Rs. 24,29,838/- is deleted." 5. Aggrieved with the order of the CIT(A), the revenue filed an appeal being ITA No. 1647/Kol/2010 (A.Y. 2006-07) which was allowed by the ITAT by the impugned order. On the aforesaid issue the ITAT has recorded the following finding to hold that the supervisors are nothing but subcontractors of the assessee. "We observe that assessee with each of above so-called supervisors ledger account has enclosed the copies of weekly work sheet showing the name of worker, inter alia, amount paid to each of them. However, on the top of the said work sheet, name of the said supervisor is stated. It is observed that assessee was making lumpsum payment on an adhoc basis for the purpose of further disbursement to workers and not as per the amount payable by them to individual workers. We a....
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....e Tax Rules, 1962 and Sections 182, 185, 186, 188 and 211 of the Indian Contract Act, as under :- Income Tax Act, 1961 40A. (3) Where the assessee incurs any expenditure in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [twenty thousand] rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, [twenty per cent of such expenditure shall not be allowed as a deduction]; Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding [twenty thousand] rupees otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, the allowance originally made shall be deemed to have been wrongly made and the [Assessing] Officer may recompute the total income of the assessee for the p....
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....iness of the same kind at the place where the agent conducts such business. When the agent acts otherwise, if any loss be sustained, he must make it good to his principal, and if any profit accrues, he must account for it." 10. On perusal of the assessment order, we find that the assessing officer has not disputed the specific case of the appellant/assessee that the supervisors are his employees. The specific stand of the appellant/assessee that the supervisors are his employees, was supported by books of account which were before the assessing officer. The assessing officer recorded the finding that since the provision of ESI, PF etc. were not followed by the assessee, therefore, the individual labours are not employees of the assessee. The assessing officer nowhere disputed the stand of the assessee supported by books of account that the supervisors are employees of the assessee. In paragraph 11 of the impugned order the ITAT recorded a finding based on surmise and presumption that the supervisors are nothing but subcontractors of the assessee. This finding is perverse inasmuch as firstly it is not supported by any evidence and secondly it is contrary to evidence on record in ....