2012 (5) TMI 835 - AT - Income Tax

Summary

Issues involved: Appeal against CIT(A) order invoking provisions of u/s 40(a)(ia) for disallowance of TDS payment made before filing return and separate addition u/s 40(a)(ia) despite income estimation after rejecting books.

The Appellate Tribunal, ITAT Mumbai, heard an appeal against the CIT(A) order regarding the invocation of provisions of section 40(a)(ia) for disallowance of TDS payment made before filing the return and a separate addition under the same section despite income estimation after rejecting the books of accounts. The Authorized Representative (AR) rejected the books of accounts u/s 145(3) r.w.s. 144 of the Act and estimated the assessee's income at Rs. 3.98 Crores. The CIT(A) partly allowed the appeal but enhanced the income under the head "Enhancement of income (disallowance u/s. 40(a)(ia))" based on TDS discrepancies in sub-contract and transportation charges. The AR argued that TDS payment was made before filing the return and cited legal precedents to support the case. The Departmental Representative (DR) supported the CIT(A) order.

After considering the submissions, the Tribunal found that the CIT(A)'s enhancement was not in accordance with the law. The Tribunal emphasized that for invoking section 40(a)(ia), the dates of filing the return of income should be considered. Citing a Hyderabad case, the Tribunal highlighted that when income is estimated, there is no scope for further disallowances under section 40(a)(ia) or otherwise. Relying on legal precedents, the Tribunal allowed the appeal filed by the assessee, disagreeing with the CIT(A)'s action in invoking section 40(a)(ia) especially when income was estimated after rejecting the books of accounts.

In conclusion, the Appellate Tribunal, ITAT Mumbai, allowed the assessee's appeal, setting aside the CIT(A)'s decision to invoke the provisions of section 40(a)(ia) for disallowance of TDS payments made before filing the return and making a separate addition under the same section despite income estimation after rejecting the books of accounts.