2013 (10) TMI 1222 - HC - Income Tax

Disallowance u/s 40(a)(ia) TDS deduction u/s 194C - payment to sub-contractors being transporters filing of Form No. 15J on the basis of Form I - Held that - The assessee was served with a show-cause notice as to why the amount paid to the sub-contractors on account transportation charges should not be disallowed. The assessee in reply never took the point that it did not or could not in law deduct the tax because Form No. 15-I had been submitted by the transporters. Therefore, the case that the assessee had submitted Form No. 15J on the basis of Form No. 15-I received from the transporters was inconsistent with the reply given to the show-cause notice by the assessee himself. In the absence of any satisfactory explanation as to why was this case not made out in reply to the show-cause notice, the contention that such Form 15J had been submitted on the basis of Form 15-I lost credibility. The Commissioner of Income-tax (Appeals) did not go into the relevant questions and straightaway proceeded to hold that Form No. 15-I were received by the appellant from the transporters and on the strength of those Forms he did not deduct the tax. This was not even the case of the assessee in reply to the show-cause notice. Under sub-rule 2, the Commissioner of Income-tax (Appeals) is required to record in writing the reasons for admission of the additional evidence. The Commissioner of Income-tax (Appeals) did not do so Decided in favor of Revenue.

Summary

Issues Involved:
1. Admission of additional evidence by the Commissioner of Income-tax (Appeals).
2. The validity of the finding that Forms Nos. 15-I and 15J were submitted.
3. The legality of the deletion of disallowance under section 194C read with section 40(a)(ia).

Issue-wise Detailed Analysis:

1. Admission of Additional Evidence by the Commissioner of Income-tax (Appeals):

The Commissioner of Income-tax (Appeals) allowed the assessee to introduce additional evidence on the grounds that the Assessing Officer did not provide sufficient opportunity to present this evidence during the assessment proceedings. This decision was challenged by the Revenue, which argued that the Assessing Officer had indeed provided adequate opportunities, and the assessee did not raise the issue of Forms Nos. 15-I and 15J during the initial proceedings. The High Court noted that under Rule 46A, the appellate authority must record reasons for admitting additional evidence, which the Commissioner failed to do. Consequently, the court found that the additional evidence was not legally admitted.

2. The Validity of the Finding that Forms Nos. 15-I and 15J were Submitted:

The Assessing Officer disallowed transportation payments exceeding Rs. 50,000 under section 40(a)(ia) of the Income-tax Act, 1961, because the assessee did not deduct tax on these payments. The assessee later claimed that Forms Nos. 15-I and 15J had been submitted, which exempted them from the requirement to deduct tax. The High Court found that this claim was inconsistent with the assessee's initial response to the show-cause notice, where they argued that individual payments did not exceed Rs. 50,000. Furthermore, the Assessing Officer's remand report indicated that the forms were not submitted as claimed. The court concluded that the finding that Forms Nos. 15-I and 15J were submitted was perverse and unsupported by evidence.

3. The Legality of the Deletion of Disallowance under Section 194C read with Section 40(a)(ia):

The deletion of the disallowance by the Commissioner of Income-tax (Appeals) and the Tribunal was based on the assumption that Forms Nos. 15-I and 15J had been duly submitted, which exempted the assessee from deducting tax. However, the High Court found that this assumption was incorrect, as the forms were not submitted as required. Consequently, the deletion of the disallowance was contrary to the provisions of section 194C read with section 40(a)(ia). The court ruled in favor of the Revenue, reinstating the disallowance made by the Assessing Officer.

Conclusion:

The High Court set aside the orders of the Commissioner of Income-tax (Appeals) and the Tribunal, ruling that the additional evidence was not legally admitted, the finding regarding the submission of Forms Nos. 15-I and 15J was perverse, and the deletion of disallowance was contrary to the law. The appeal by the Revenue succeeded, and the disallowance under section 40(a)(ia) was reinstated.