9911796707
TMI Blog2024 (1) TMI 1288X X X X Extracts X X X X X X X X Extracts X X X X ..... In our opinion, the assessee has spent an amount of Rs. 4,37,047/-, as we discussed in earlier para, this has been made by the assessee by the withdrawals made the total of Rs. 1,36,86,000/- from the assessee s bank account - Accordingly, this addition is also deleted. TDS u/s 194C - disallowance made u/s 40(a)(ia) - HELD THAT:- It is an admitted fact that payment was made to individual labourers and not to the labour contractors. These facts have not been disputed by the ld. AO. Now whether we could treat these labourers as employees of the assessee and the present assessee is an employer of those employees? The employer is a person who controls and directs a servant or worker under an express or implied contract of employment. The employer accordingly is under obligation to pay him the salary or wages in compensation. Accordingly, an individual who works part-time or full-time under a contract of employment whether oral or written expressed or implied and he is liable to perform the duties as assigned. That person is called as employee. In the instant case we find that the labourers are working under the direct supervision of the assessee. They have no other separate business org ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de. On appeal before NFAC, assessee has not produced any details explaining the source of such deposit. The same has been confirmed. Against this assessee is in appeal before us. 3. Before us, ld. A.R. submitted that the amount deposited to the assessee's bank account were out of withdrawals and partly out of business turnover of the assessee of the proprietary concern M/s. Bilwa Labs. According to him, earlier withdrawal was available to him to redeposit the same to the assessee's bank account and he also relied on the order of jurisdictional High Court in the case of S.R. Venkataratnam Vs. CIT (1981) 127 ITR 807 (Karn.) wherein held that ld. AO has not made any exercise to disbelieve the version of the assessee about redeposit of the amount out of earlier withdrawals and also the ld. AO is required to disprove that the amount withdrawn earlier was not the amount redeposited. According to him, ld. AO have not brought any evidence on record in support of the rejection of assessee's claim as to the earlier withdrawal and the same was recycled by way of cash deposit at a later date, therefore, it is submitted that the ld. AO was not justified to make addition of cash depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit to that extent of Rs. 18,96,800/- and to be given. 5.2.1 Further, assessee has submitted that assessee was regularly withdrawing the money from bank account and it is available to the assessee to deposit to bank account. As held by Hon'ble Karnataka High Court in the case of S.R. Venkataratnam Vs. CIT cited (supra), if assessee states that earlier withdrawal is available to the assessee to redeposit the same into bank account, the credit to that amount cannot be denied without bringing any material on record to suggest that, that earlier withdrawal has been spent by the assessee for some other purpose. Same view was taken by this Tribunal in the case of Sri Krishnamurthy Narayana Murthy Vs. ITO in ITA No. 2559/Bang/2019 dated 27.4.2020, wherein held as follows: 6. I have heard the rival submissions and perused the material on record. In this case, the Assessing Officer found that the assessee has deposited a sum of Rs. 1,06,19,947 in the saving bank account with ICICI Bank. The assessee was able to give explanation to the source of an amount of Rs. 86,27,558, however, the assessee has not led any evidence before the A.O. with regard to the balance amount of Rs. 19,92,38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also claimed to have agricultural income. It was the plea of the assessee that she has made withdrawals and redeposited the amount into bank account. The assessee filed day to day cash in hand position before me and submitted that earlier withdrawals were available with the assessee to deposit that amount and due credit to be given to such earlier withdrawals as available to deposit with bank account. The learned DR strongly opposed the argument of the AR and submitted that during the assessment year under consideration the assessee purchased immovable properties at No. 9, Laggere village, Peenya, Bangalore at a cost of Rs. 38,70,230 and the earlier withdrawals from the bank account might have been used to pay the onmoney for purchase of that property. Even otherwise, he submitted that the earlier withdrawals have been made to meet particular expenditure and not for redepositing with the bank account. The assessee s main plea is that the assessee had withdrawn huge amount from the said bank account on various dates and kept the said amount idle with the assessee and redeposited the same into the bank account. To this effect, the assessee has furnished the statement showing wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and financial matters and kept the cash withdrawn from Bank on 31/12/2013 for medical treatment and other expenses and deposited the amount in Bank only on 26/09/2014. In support of his claim, the assessee has produced discharge summary dated 06/11/2013 from Lourde Hospital, Ernakulam before AO. He has also produced CT Scan report dated 11/07/2013 which is not disputed by the lower authorities. The Assessing Officer has not accepted the contention of the assessee that he has kept the cash idly in his hands on the reason that he has not filed the wealth tax return showing the cash in hand. The Assessing Officer has not doubted the withdrawal of cash. However, the fact is that the assessee has withdrawn cash of Rs. 50 lakhs on 31/12/2013. There is no evidence brought on record to show that these withdrawals have been used by the assessee or deposited by the assessee in any other Bank. It cannot be said that these withdrawals made from the Bank account were used for household expenses or any other investment. In such circumstances, it cannot be disputed that the withdrawals have been used for redeposit into the Bank account of the assessee. In other words, the Assessing Officer has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission. I am of the view that the explanation offered by the Assessee with regard to the source of deposit of Rs. 15.00 lakhs in his bank account is satisfactory and therefore, no addition can be made on account of unexplained cash. As rightly contended by the ld.counsel for the Assessee, the withdrawal of cash from the bank account prior to deposit of cash is not disputed by the revenue. The fact that the Assessee did not explain the reasons for withdrawal of cash from his bank account cannot be the basis to hold that the source of deposit of cash was not explained by the Assessee. The legal position in this regard is that if the deposit of money in the bank account is preceded by withdrawal of money from the very same bank account, then the source of funds is prima facie demonstrated or explained by the Assessee. The Honourable Karnataka High Court in the case of S.R.Ventakaratnam Vs CIT, Karnataka-I Others 127 ITR 807 has held that once the Assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations as made above. 11. The appeal of the assessee is accordingly treated as allowed for statistical purposes. 12. In the result, appeal of the assessee is allowed for statistical purposes. 5.3.2 Considering the facts of the present case in the light of the above decisions cited Supra, we are of the opinion that the assessee has to get due credit towards opening cash balance of Rs. 18,96,800/- and cash withdrawal from the account of Rs. 89,42,200/-, which works out to Rs. 1,08,39,000/-, that is more than the amount deposited into bank account of Rs. 107,95,803/-, as such addition of Rs. 107,95,803/- cannot be sustained. Accordingly, we delete the addition made towards unexplained cash deposit made into assessee s bank account on various dates. This ground of the appeal of the assessee is allowed. 6. Next ground in this appeal is with regard to addition of Rs. 4,37,047/- towards unexplained credit card expenses. The ld. A.R. submitted that assessee has been making regular withdrawals from the bank account and the same has been used for payment of credit card expenses. 7. On the other hand, ld. D.R. submitted that the assessee has not produced relevant evidence in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO has held that the assessee was able to furnish only a list of names without PAN and address and also without details of proof of payment. The ld. A.R. submitted that the ld. AO was not justified to dis-allow the expenditure of Rs. 1,28,35,891/- u/s 194C of the Act which is not applicable since the labour charges paid to each individual labourer was not based on any contract. He submitted that the labour contract was taken in different places and the labourers were engaged from the place or nearby places on daily wage basis. The labourers were not having any PAN since the same was not obtained as the income earned by the labourers was below the taxable limit. Therefore, the AO was not justified to dis-allow the labour payment of Rs. 1,28,35,891/- merely on the ground of non-submission of PAN and address. The labour contract was undertaken in the previous year 31-03-2014 whereas the assessment was taken up for scrutiny in the year 2016 after lapse of more than two years eight months and therefore the labourers who were engaged for the execution of the work were not available and also it was not practicable for the assessee to contact the labourers who normally keep going from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the PAN numbers of the said labourers and it is not disputed that the payment was made to the labourers. Being so, it is an admitted fact that payment was made to individual labourers and not to the labour contractors. These facts have not been disputed by the ld. AO. Now whether we could treat these labourers as employees of the assessee and the present assessee is an employer of those employees? The employer is a person who controls and directs a servant or worker under an express or implied contract of employment. The employer accordingly is under obligation to pay him the salary or wages in compensation. Accordingly, an individual who works part-time or full-time under a contract of employment whether oral or written expressed or implied and he is liable to perform the duties as assigned. That person is called as employee. In the instant case we find that the labourers are working under the direct supervision of the assessee. They have no other separate business organization. They are representing the organization of the assessee. Thus, in our considered view there exists an employer and employee relationship between the assessee and labourers. The payment to the employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easoning, we hold that the assessee is not liable for TDS deduction under section 194C of the Act. The assessee gets the relief accordingly. 13.3 Further, same view was taken by coordinate bench of Kolkata in the case of Tapas Paul in ITA No. 237/Kol/2014 dated 3.5.2017. Even otherwise, if we consider payment as a payment to the sub-contractors who supply the labourers, this issue is covered against the department by the order of this Tribunal in the case of Ace Developers in ITA Nos.74 to 76/Bang/2022 dated 27.7.2023, wherein held as under: 5. We have heard the rival submissions and perused the materials available on record. In the present case, assessee is engaged in business of construction and sale of flats in agreement with the owner of the land. In the course of business of assessee, assessee made cash payment to sub-contractors in exceeds of Rs. 20,000/- otherwise by cash or demand draft or crossed cheque or through electronic mode through bank. The assessee s plea is that payment has been made to sub-contractors who in turn make payment to their labourers towards their wages/salary. The weekly payment has been made on the work acknowledged by the site engineer. The contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors made daily payments to workers on a daily or weekly basis through cash. On account of business exigency, the sub-contractors insisted upon cash payment and accordingly, the assessee paid through bearer cheques. Hence, business exigency of making cash payment on regular basis is also pleaded by the assessee in the instant case. To support this, assessee filed affidavits from Nagesh Poojary, S/o Mr. Gopal Kotian, Raghuveera, S/o Mr. Venkappa Salian, Manoj Kumar, S/o Mr. Mohan Gowda, which are kept on record in page Nos.63 to 68 of the assessee s paper book. In these affidavits, they have stated that they are sub-contractors of assessee firm and they insisted for cash payments to make payment to workers and confirmed the above payments. In such circumstances, it cannot be said that sub-contractors are not agents of the assessee for providing labours. Hence, on this count, the expenditure claimed on account of payment made to subcontractors cannot be considered u/s 40A(3) of the Act as held by Hon ble Karnataka High Court in the case of Balaji Engineering Construction Works cited (supra) as the Tribunal being subordinate to jurisdictional High Court what matters for the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re conspectus of case, we, do not find favour with the view taken by the lower tax authorities, consequently we vacate the ad-hoc disallowance in its entirety and thereby allow the ground number 2 of the appeal. In view of the above judicial decision, the adhoc disallowance made by the AO at the rate of 25% of the labour charges amounting to Rs. 48,32,852/- is not sustainable law and hence the same is liable to be deleted in its entirety in the interest of equity and justice. 15. The ld. D.R. relied on the order of lower authorities. 16. We have heard the rival submissions and perused the materials available on record. In this case, ld. AO has made disallowance at 25% of labour payment on adhoc basis on the reason that these payments were made by cash which is supported only by self-made vouchers and there is every chance of inflating this expenditure. In our opinion, while making such kind of adhoc disallowance, the ld. AO has to specify the vouchers, which are not properly verified for authenticating the payment. However, in the present case, the ld. AO has disallowed the same in a surmises and conjectures manner by not specifying the discrepancies found in the vouchers produced ..... 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