2018 (5) TMI 1959 - AT - Income Tax

T DS u/s 194C - Addition u/s 40(a)(ia) - assessee submitted a copy of the return of income of M/s. Manisha Industries and a certificate that the amount in question was accounted for both in their books and was reflected in the return of income and taxes were paid on this receipt from the assessee - HELD THAT - Set aside this issue to the file of the A.O. with the direction to verify whether M/s. Manisha Industries has accounted for this amount in its income and filed its return of income for the assessment years 2012-13. If it has done so, the Assessing Officer is directed to delete the addition made u/s 40(a)(ia) of the Act and accept the income returned by the assessee. Appeal of the assessee is allowed.

Summary

Issues:
Disallowance of claim for purchases made from M/s. Manisha Industries due to non-deduction of tax at source under section 194C of the Act.

The judgment deals with an appeal filed by the assessee against the order of CIT (Appeals) for the assessment year 2012-13. The main issue was whether the Assessing Officer was correct in disallowing the claim of the assessee for purchases made from M/s. Manisha Industries amounting to &8377;6,65,731. The Assessing Officer disallowed the claim as the payment was for job work (powder coating) and not for purchases, and tax was not deducted at source under section 194C of the Act, invoking section 40(a)(ia) of the Act. The assessee did not appear before the Learned First Appellant Authority, who passed an ex-parte order.

During the appeal, the counsel for the assessee presented the return of income of M/s. Manisha Industries and a certificate confirming that the amount in question was properly accounted for in their books and reflected in their income tax return, with taxes paid. The counsel requested the application of the second proviso to section 40(a)(ia) of the Act and cited relevant case laws in support of the argument. Since this legal argument was not raised before the lower authorities, the appellate tribunal set aside the issue and directed the Assessing Officer to verify whether M/s. Manisha Industries had accounted for the amount of &8377;6,65,731 in its income and filed the return of income for the relevant assessment years. If verified, the Assessing Officer was instructed to delete the addition made under section 40(a)(ia) of the Act and accept the income returned by the assessee.

Ultimately, the appeal of the assessee was allowed by the tribunal, and the order was pronounced in the open court on 25th May 2018. The decision focused on the proper verification of whether the amount in question was duly accounted for by M/s. Manisha Industries, emphasizing compliance with tax deduction provisions under the Income Tax Act to determine the validity of the disallowance made by the Assessing Officer.