2020 (9) TMI 75 - HC - Income Tax

Addition u/s 40(a)(ia) - disallowance made towards transportation charges - Tribunal held that the assessee has produced the evidence in case of payment made to one T.Shivakumar and the matter was therefore, remitted for re-examination - HELD THAT - Admittedly, the assessee had produced a copy of the agreement entered between it and T.Shivakumar as well as affidavit of T.Shivakumar stating that he acted only as a commission agent. CIT (Appeals) refused to accept the evidence adduced by the assessee. Tribunal directed the remand of the matter to the CIT (Appeals). In view of submissions made and in the facts of the case, the remand of the case is imperative. Accordingly, it is directed that the assessee shall be at liberty to adduce the evidence with regard to the payments made to Abdul Rahim and Srinivas before the CIT (Appeals). The aforesaid evidence shall be considered by the CIT (Appeals) and in case, CIT (Appeals) deems it appropriate, he shall be at liberty to seek the remand report from the Assessing Officer and thereafter to decide the matter afresh in accordance with law. To the aforesaid extent, the order passed by the Tribunal is modified. No substantial questions of law

Issues:
1. Tribunal's decision to remand the matter for re-verification of documents related to handling charges payment.
2. Disallowance of payments made to individuals for wages and handling charges.
3. Interpretation of Section 40(a)(ia) of the Income Tax Act.
4. Application of the amendment to Section 40(a)(ia) by Finance Act 2012.

Analysis:
1. The appeal was filed under Section 260A of the Income Tax Act, 1961, regarding the Assessment year 2006-07. The Tribunal remanded the matter to the Commissioner of Income Tax (Appeals) for re-verification of documents related to the payment of handling charges to T.Shivakumar. The appellant argued that all necessary documents were already produced, and there was no need for remand. However, the High Court found it imperative to allow the appellant to adduce evidence regarding payments made to other individuals as well, directing the Commissioner of Income Tax (Appeals) to consider this evidence and decide the matter afresh if necessary.

2. The issue of disallowance of payments made to individuals for wages and handling charges was raised. The appellant contended that payments made were for legitimate purposes, such as disbursement of wages and reimbursement of handling charges. The High Court acknowledged the evidence produced by the appellant and directed the Commissioner of Income Tax (Appeals) to consider this evidence along with the remand report from the Assessing Officer to make a fresh decision on the matter.

3. The interpretation of Section 40(a)(ia) of the Income Tax Act was crucial in this case. The appellant argued that they should not be treated as an assessee in default under this section. The High Court noted the evidence provided by the appellant regarding the payments made and the nature of these payments. The Court directed the matter to be remanded for further examination to ensure a fair decision based on all relevant evidence.

4. The High Court also addressed the amendment to Section 40(a)(ia) by the Finance Act 2012, specifically the insertion of the second proviso. The appellant sought clarification on the retrospective application of this amendment to avoid disallowance of payments. The Court did not directly answer this question, as the remand for re-examination of evidence was deemed necessary to make a fair decision based on all facts presented.

In conclusion, the High Court modified the Tribunal's order, allowing the appellant to present additional evidence related to payments made to other individuals besides T.Shivakumar. The Commissioner of Income Tax (Appeals) was directed to consider this evidence and decide the matter afresh if required. The Court did not address the substantial questions of law framed, as the remand was deemed essential for a comprehensive decision.

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