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2014 (4) TMI 433 - AT - Income TaxAddition u/s 68 of the Act - Unexplained cash credits Held that - If there is an entry in the accounts of the assessee, which shows the receipt of a sum the burden is on the assessee to explain the nature and source of such credit - the cash creditors shown in the name of Hira Bai Meghji Savla at Rs.2 lacs where no copy of return had been filed only copy of PAN card given to the AO - The source of income has not been explained - The full copy of bank account maintained with HDFC, Vapi has not been filed by the assessee - there were cash deposits also in bank account thus, there is no reason to interfere in the order of CIT(A) Decided against Assessee. Disallowance of labour expenses u/s 40(a)(ia) of the Act Held that - The assessee is in construction business - The expenses debited in the P&L account and had not been doubted by the A.O - In construction business, the labour is required and it is an unorganized sector and some persons are required to arrange the labour for construction work - The assessee paid this amount through mukadam - The mukadam has further distributed these payments in labourers - The mukadam had not given any margin money as profit on distribution of labour charges among labourers - When there is no profit element in payments, the TDS is not required to be deducted the decision in DCIT vs. Laxmi Protein Products (P.) Ltd. 2010 (2) TMI 989 - ITAT AHMEDABAD followed The individual payment is not exceeding the prescribed limit and once this is not the case, the assessee is not supposed to deduct tax under section 194C of the Act - The assessee is not required to deduct TDS u/s. 194C on labour payments made through the mukadam Decided in favour of Assessee. Restriction of addition u/s 68 of the Act Held that - The decision in BLESSING CONSTRUCTION Versus INCOME TAX OFFICER 2013 (10) TMI 154 - GUJARAT HIGH COURT followed - there is no creditworthiness of the cash creditor to give loan of Rs.1,30,000/- to the assessee - the assessee had not proved creditworthiness of the cash creditor as he had shown only income of Rs.99,260/- in the return - The bank account shows that cash has been deposited in the bank account of the cash creditor - the identity and the genuineness of the transaction had been proved by the assessee but cash creditor did not have creditworthiness to advance Rs.1,65,000/- to the assessee and also in bank account substantial cash has been deposited and thereafter loan was advanced by the cash creditor to the assessee - it is not the duty of the AO to prove that unaccounted income of the assessee routed through this cash creditor as held by various Courts - the creditworthiness has not been discharged by the assessee - Thus, the order of the CIT(A) is reversed Decided in favour of Revenue.
Issues Involved:
1. Addition of unexplained cash credits under Section 68 of the Income Tax Act. 2. Disallowance of labor expenses under Section 40(a)(ia) of the Income Tax Act. 3. Disallowance of various expenses (telephone, staff welfare, vehicle petrol, and repair expenses, and vehicle depreciation). Detailed Analysis: 1. Addition of Unexplained Cash Credits under Section 68 of the Income Tax Act: Assessee's Appeal (ITA No. 428/Ahd/2010): - The assessee contested the partial confirmation of the addition of Rs.10,15,000/- out of the total Rs.37,76,000/- made by the Assessing Officer (A.O.) as unexplained cash credits. - The A.O. had added Rs.37,76,000/- as unexplained cash credits due to insufficient evidence regarding the identity, creditworthiness, and genuineness of the loan creditors. - The CIT(A) partially allowed the appeal, reducing the addition to Rs.10,15,000/- for three parties: Fuzail Qureshi, Shabeena A. Qureshi, and Hira Bai Meghji Savla. - The Tribunal found that the amounts from Fuzail Qureshi and Shabeena A. Qureshi were originally received from the assessee and returned back, thus reversing the CIT(A)'s order for these two creditors. - However, for Hira Bai Meghji Savla, the Tribunal upheld the CIT(A)'s decision as the creditworthiness was not proven. Revenue's Appeal (ITA No. 429/Ahd/2010): - The Revenue appealed against the deletion of Rs.27,61,000/- by the CIT(A). - The Tribunal reviewed each cash creditor: - For Asif A. Saiyed, Imran Y. Saiyed, Majiya Qureshi, Ebrahim A, and Rashida E, the Tribunal found no creditworthiness and reversed the CIT(A)'s order. - For Asha Laxmichand Shah, the Tribunal upheld the CIT(A)'s order as the creditworthiness was proven. - For Rafique F. Qureshi, the Tribunal partially allowed the appeal, finding Rs.80,000/- explained and Rs.95,000/- unexplained. - For Sarifa Y. Sayyed, the Tribunal upheld the CIT(A)'s order as the loan was found explained. - For Raisa Rafique Qureshi, the Tribunal partially allowed the appeal, finding Rs.2,57,000/- explained and Rs.90,000/- unexplained. - For Yaqub M. Sayyed, the Tribunal reversed the CIT(A)'s order due to lack of creditworthiness. 2. Disallowance of Labor Expenses under Section 40(a)(ia) of the Income Tax Act: - The A.O. disallowed Rs.15,22,585/- for labor expenses due to non-deduction of TDS. - The CIT(A) confirmed this disallowance, stating that payments were made through mukadam (labor contractors), requiring TDS deduction. - The Tribunal reversed the CIT(A)'s order, citing that payments were made through mukadam without any profit margin, thus not attracting TDS under Section 194C, following the precedent set in DCIT vs. Laxmi Protein Products (P.) Ltd. 3. Disallowance of Various Expenses: - The A.O. disallowed 20% of telephone, staff welfare, vehicle petrol and repair expenses, and vehicle depreciation, totaling Rs.70,128/-. - The CIT(A) reduced the disallowance to 10%, totaling Rs.35,064/-. - The Tribunal upheld the CIT(A)'s decision, finding it reasonable. Conclusion: Both appeals by the assessee and the Revenue were partly allowed. The Tribunal provided a detailed examination of each cash creditor's creditworthiness, upheld the CIT(A)'s decision on various expenses, and reversed the disallowance of labor expenses under Section 40(a)(ia). The judgment emphasizes the necessity of proving the identity, genuineness, and creditworthiness of cash creditors to avoid additions under Section 68.
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