2014 (6) TMI 532 - AT - Income Tax

Addition u/s 40(a)(ia) of the Act and section 37 of the Act Payment made to sub-contractors u/s 40(a)(ia) of the Act Failure to deduct TDS u/s 194C of the Act Bogus expenses - Held that - AO during the course of assessment made total disallowance u/s 40(a)(ia) of the Act but when the matter reached before CIT(A), CIT(A) out of the total disallowance made by AO, treated the expenses to be bogus and the action of AO was upheld with respect to balance disallowance u/s 40(a)(ia). Since the issue the year under consideration with respect to disallowance u/s. 40(a)(ia) is identical to earlier years, no addition is called for - With respect to the addition which has been held by the CIT(A) to be bogus, Assessee has placed copies of Form 15J, 15I copies of RC books and PAN cards of the truck owners the documents were not before CIT(A), in the interest of justice, the evidence submitted before us, being in the nature of additional evidence needs verification at the end of AO thus, the matter is remitted back to the AO for fresh adjudication Decided partly in favour of Assessee.

Summary

Issues:
1. Disallowance under Section 40(a)(ia) for A.Y. 2007-08.
2. Confirmation of addition of Rs. 60,87,393 as bogus expenditure.
3. Non-compliance with provisions of Section 194C and Form 15I/J.

Issue 1: Disallowance under Section 40(a)(ia) for A.Y. 2007-08:
The Assessee, engaged in transport contracting, contested the addition of Rs. 1,67,08,372 under Section 40(a)(ia) by the Assessing Officer (A.O.). The CIT(A) partially upheld the disallowance, designating Rs. 60,87,393 as bogus expenditure and the remaining Rs. 1,06,20,979 as disallowable under Section 40(a)(ia). The Assessee argued that the issue was previously decided in their favor by the Tribunal for A.Y. 06-07, and the High Court also ruled in their favor. The Tribunal referred to the High Court's decision, emphasizing that once the conditions of Section 194C(3) were met, the liability to deduct tax ceased, and failure to furnish details did not warrant disallowance under Section 40(a)(ia). Consequently, the Tribunal concluded that no addition was warranted for Rs. 1,06,20,979.

Issue 2: Confirmation of addition of Rs. 60,87,393 as bogus expenditure:
The CIT(A) deemed Rs. 60,87,393 as bogus expenditure due to incomplete addresses and suspicious details in Form 15 I submitted by the Assessee. The Assessee argued that the CIT(A) made the addition without proper inquiry, relying on presumptions. The Assessee presented Form 15J, sample RC books, and PAN cards to support their case, which were not previously before the lower authorities. The Tribunal directed the Assessing Officer to re-examine the evidence submitted by the Assessee and make a fresh decision after verifying the documents. The Tribunal stressed the need for the Assessing Officer to grant a fair hearing to the Assessee and consider all evidence before reaching a conclusion.

Issue 3: Non-compliance with provisions of Section 194C and Form 15I/J:
The A.O. disallowed the payments made by the Assessee to sub-contractors under Section 40(a)(ia) due to non-compliance with Section 194C and failure to submit Form 15 I/J on time. The Assessee's argument centered on fulfilling the requirements of Section 194C(3) and the subsequent High Court decision, which clarified the liability to deduct tax at source. The Tribunal reiterated that once the conditions of Section 194C(3) were met, the liability to deduct tax ceased, emphasizing the importance of timely submission of required forms. The Tribunal directed the Assessing Officer to re-evaluate the issue of disallowance under Section 40(a)(ia) in light of the evidence presented by the Assessee.

In conclusion, the Tribunal partially allowed the Assessee's appeal, directing a fresh assessment by the Assessing Officer regarding the disputed addition of Rs. 60,87,393 as bogus expenditure. The Tribunal emphasized the importance of proper verification of evidence and granting the Assessee a fair opportunity to present their case.