2022 (12) TMI 1212 - AT - Income Tax

Addition made on account of payment of labour charges paid - AO found that the assessee inflated expenditure without obtaining bills - HELD THAT - Admittedly, the assessee is a Civil Contractor and undertaken contract work from PWD, Zila Parishad, Municipalities, MIDC and State transport during the year under consideration, it is not disputed by both the authorities below as it was stated before the CIT(A) as well as the AO. We note that both the authorities below disallowed the said amounts only on the ground that they disbelieved the contention of the assessee. Admittedly, all the details relating to the said payments pertaining to the assessee, Malati V. Deshpande and Sumati D. Patil were not furnished before the assessment proceedings as well as in the First Appellate proceedings, even actual performance of road construction work for Government Department. It is also not disputed that furnishing of PAN, copies of Income Tax Return of Malati V. Deshpande before the AO. Both the authorities below examined all the said details but however rejected the same for not having sufficient evidences. Admittedly, the Malati V. Deshpande did not appear before the AO and the AO held that she did not offer the labour payment receipt in her return of income. There was no evidence to show the same has been recognized in the account of Malati V. Deshpande brought on record by the assessee. No infirmity in the order of CIT(A) in confirming the additions made by the AO on account of labour charges paid to labour contractors - Thus, ground Nos. 2 and 3 raised by the assessee are dismissed. Disallowance on account of supervision charges - According to the AO that the assessee conveniently paid supervision charges to each person below Rs.20,000/- and the said payment made to various persons i.e. 36 persons - HELD THAT - We note that the assessee did not file any evidences rebutting the finding of AO and the CIT(A) before this Tribunal. The assessee filed written submissions before the CIT(A) inter alia stating that the receipts under the contract works is of Rs.9,00,00,000/- and supervision charges paid to 36 persons on different sites required to be allowed on the basis of above said work done involving Rs.9,00,00,000/-. AO and the CIT(A) was of the opinion that the assessee made these payments only to avoid TDS as well as rigors of the provisions u/s. 40A(3) of the Act and no evidences showing establishing the assessee paid such amount to 36 persons on different locations. Therefore, as discussed above, we find no evidences in respect of the contention raised by the assessee before the AO and the CIT(A) even before in support of grounds raised in Form No. 36. Therefore, we find no infirmity in the order of CIT(A) in confirming the addition made on account of supervision charges. Thus, ground No. 4 raised by the assessee fails and it is dismissed.

Summary

Issues:
1. Confirmation of addition made on account of payment of labour charges to two individuals.
2. Confirmation of disallowance of payment made on account of supervision charges.

Analysis:
1. The first issue pertains to the challenge raised by the assessee against the confirmation of additions made on account of payment of labour charges to two individuals, Malati V. Deshpande and Sumati D. Patil. The Assessing Officer (AO) found that the assessee inflated expenditure without obtaining bills and issued a summon to Malati V. Deshpande for verification of labour charges. However, Malati V. Deshpande did not attend due to health reasons, and the AO rejected the contention of the assessee regarding payment of labour charges. In the case of Sumati D. Patil, the AO raised objections regarding the lack of books, bills, and income tax return. Both authorities disallowed the amounts due to insufficient evidence, despite the payments being made through bank with TDS. The Tribunal upheld the decision, noting the absence of detailed evidence and the failure to establish the nature of work performed by the individuals. Therefore, the additions on account of labour charges were confirmed.

2. The second issue concerns the disallowance of supervision charges paid by the assessee. The AO questioned the details of these charges and noted payments made to 36 persons below Rs.20,000 each, without providing reasons for discontinuation or site details. The CIT(A) upheld the disallowance due to lack of evidence regarding the nature of work and regular employment. The Tribunal found that the assessee failed to rebut the findings of the AO and CIT(A) with supporting evidence. Despite the assessee's claim of payments being related to a substantial contract amount, no evidence was presented to substantiate the payments made to 36 supervisors at different locations. Consequently, the Tribunal affirmed the disallowance of supervision charges.

In conclusion, the Tribunal dismissed the appeal of the assessee, upholding the additions made on account of labour charges and the disallowance of supervision charges. The decision was pronounced on 17th November 2022.