2011 (11) TMI 839 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 40(a)(ia) for non-deduction and late deposit of TDS.
2. Ad-hoc disallowance of 5% out of labour expenses.

Summary:

1. Disallowance u/s 40(a)(ia) for Non-Deduction and Late Deposit of TDS:
The assessee, a civil contractor, faced disallowances of Rs. 15,39,867 and Rs. 12,18,061 u/s 40(a)(ia) for non-compliance with TDS provisions. The AO observed that TDS was either not deducted or deposited late. The CIT(A) upheld these disallowances, noting that TDS for Rs. 15,39,867 was deducted but deposited late, and for Rs. 12,18,061, no TDS was deducted on transport charges. The Tribunal referred to the Jurisdictional High Court's decision in CIT vs. J.K. Construction Co., which clarified that TDS deducted by 31st March and deposited before the return filing due date fulfills legal requirements. Consequently, the Tribunal restored the matter to the AO to verify the dates of TDS deduction and deposit, directing relief as per law.

2. Ad-hoc Disallowance of 5% Out of Labour Expenses:
The AO made an ad-hoc disallowance of Rs. 3,30,304 (5% of Rs. 66,06,095) from labour expenses due to unverifiable cash payments. The CIT(A) partially upheld this, noting that the vouchers were self-prepared and lacked names and addresses of recipients. The Tribunal affirmed this decision, as the assessee failed to provide cogent evidence to rebut the factual findings.

Conclusion:
The appeal was partly allowed for statistical purposes, with the issue of TDS disallowance remanded to the AO for verification, while the ad-hoc disallowance of labour expenses was upheld.