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2014 (6) TMI 632 - AT - Income TaxDisallowance made u/s 40(a)(ia) of the Act Failure to furnish details of Lorry Hire Charges in prescribed format Held that - The assessee has collected Forms in 15I from truck owners at Rs. 18,48,00,229/- and the same were produced before the revenue authorities - filing of Form 15I or 15J belatedly cannot be a reason to deny the deduction claimed by the assessee - If the assessee filed these forms which are duly filled with the details such as full address, PAN, father s name and they are assessed to tax and the same should be considered as filing of these forms are only procedural in nature. Explanation III to section 194C being applicable to the assessment year under consideration as the Explanation would be applicable prospectively from 01/07/1995, on which date it was introduced - the assessee made specific plea before the revenue authorities that assessee has collected form 15I from the truck operators but he could not produce them before the AO, however, the same was produced before the CIT - once the assessee has obtained form No. 15I from the sub-contractors, he is not liable to deduct TDS on the payment made to sub-contractors and no disallowance can be made u/s 40(a)(ia), belated furnishing of Form No. 15-J to the CIT is an act of posterior in time to payments made to sub-contractors - this cannot be itself undone the eligibility for exemption created in second proviso to section 194C(3)(1) by virtue of submission of form 15I by subcontractors. The purpose of rule 46A is to place fetters on the rights of an appellant to produce additional evidence before the first appellate authority and not the rights of the first appellate authority to call for production of any fresh evidence or information - This aspect of the provisions of rule 46A is clear from the provisions of Sub-rule (4) of rule 46A itself that nothing contained in rule 46A shall affect the power of first appellate authority to direct the production of any document or examination of any witness to enable him to dispose of the appeal or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the assessing officer) - due credit be given to the claim of the assessee in terms of Form 15I and 15-J filed by the assessee thus, the order of the CIT(A) is upheld in deleting the disallowance made by the AO u/s 40(a)(ia) of the Act Decided against Revenue. Disallowance of 1/5th of various expenditure - Section 40A- Held that - Incurring of expenditure is not doubted by the revenue authorities - the assessee has not raised any objection before the AO, the addition made by the AO was confirmed by the CIT(A) - there is no doubt that incurring of any expenditure and also other conditions are not applicable to the facts of the case of the assessee - some expenditures like telephone expenses are paid by cheque - if the payments are made by cheque and supported by self-made vouchers, it cannot be said that the expenditure is excessive or unreasonable - the payments made by cheque cannot be disallowed - there is every chance of inflating the same and considering these inflating of expenditure by way of self-made vouchers, the disallowance of 10% of the cash payments made towards the expenditure is upheld Decided partly in favour of Assessee. Addition of unexplained cash credits Held that - The expenditure is not doubted and just because the expenditure was outstanding at the end of the year in the balance sheet, the addition was made u/s 68 of the IT Act - the claim of the assessee and in an arbitrary manner decided the issue without appreciating the facts on record - When they have not doubted the expenditure which debited to the P&L A/c, only the expenditure shown as outstanding in the balance sheet, cannot be doubted when there are valid confirmations letters issued by the concerned parties - there cannot be double addition as the AO made one addition in the form of section 68 and another in the form of section 40(a)(ia) of the Act - the addition made on this count is not warranted Decided in favour of Assessee.
Issues Involved:
1. Deletion of addition under Section 40(a)(ia) of the Income Tax Act. 2. Disallowance of various expenditures. 3. Addition on account of unexplained cash credits. 4. Applicability of Section 194C to hire charges paid to truck owners. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 40(a)(ia) of the Income Tax Act: The revenue challenged the CIT(A)'s decision to delete an addition of Rs. 18.48 crores made by the AO under Section 40(a)(ia) for non-deduction of TDS on lorry hire charges. The AO argued that the assessee failed to submit Form 15I and 15J within the stipulated time, thus invoking Section 40(a)(ia). The CIT(A) observed that the provisions of Section 194C(2) are not applicable to the payments made to individual truck owners as there was no contractual obligation between the assessee and the truck owners. The CIT(A) also noted that the assessee had collected Form 15I from the truck owners, which exempts the assessee from TDS obligations. The CIT(A) held that the non-submission of Form 15J is a procedural lapse and does not warrant disallowance under Section 40(a)(ia). The Tribunal upheld the CIT(A)'s decision, emphasizing that filing of Form 15I or 15J belatedly cannot be a reason to deny the deduction claimed by the assessee. 2. Disallowance of Various Expenditures: The assessee claimed various expenditures totaling Rs. 1,54,01,680/-. The AO made an ad-hoc disallowance of 25% (Rs. 30,80,336/-) due to the expenses being supported by self-made vouchers. The CIT(A) confirmed the addition, noting that the assessee did not object before the AO. The Tribunal, however, observed that incurring of expenditure is not doubted by the revenue authorities and that payments made by cheque and supported by self-made vouchers cannot be said to be excessive or unreasonable. The Tribunal allowed the deduction for expenditures paid by cheque and disallowed 10% of the cash payments made towards the expenditure. 3. Addition on Account of Unexplained Cash Credits: The AO treated an amount of Rs. 1,27,59,797/- as unexplained credits under Section 68, representing outstanding amounts against sundry creditors. The AO held that the assessee failed to furnish confirmations for these creditors. The CIT(A) noted that the assessee had offered to surrender the sundry credits during the assessment proceedings. The CIT(A) observed that the sundry creditors for goods supplied were supported by proper bills and payments made through banking channels, thus treating them as explained. However, the sundry creditors for hire charges, paid mostly in cash, were considered unexplained. The Tribunal found that the lower authorities did not verify the confirmation letters regarding the genuineness of the claim and that there cannot be double addition under Section 68 and Section 40(a)(ia). The Tribunal deleted the addition made on this account. 4. Applicability of Section 194C to Hire Charges Paid to Truck Owners: The assessee contended that the provisions of Section 194C are not applicable to the hire charges paid to truck owners as there was no contract between the assessee and the truck owners. The CIT(A) observed that the provisions of Section 194C(2) are not applicable to the payments made to individual truck owners. The Tribunal upheld the CIT(A)'s decision, noting that the hire charges paid to truck owners do not fall within the ambit of Section 194C as there was no contractual obligation between the assessee and the truck owners. Conclusion: The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, confirming the deletion of the addition under Section 40(a)(ia), allowing partial deduction of expenditures, and deleting the addition on account of unexplained cash credits. The Tribunal also upheld the CIT(A)'s decision that the provisions of Section 194C are not applicable to the hire charges paid to truck owners.
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