2021 (1) TMI 279 - AT - Income Tax

TDS u/s 194C - Contractual receipts of goods under section 194 C by treating them as regular sale by suppliers - Revenue challenging the deletion stating that there is error in the finding of the Ld. CIT(A) inasmuch as it treated the payments not as contractual payments but as consideration for purchase of food and also in not sustaining the unverifiable miscellaneous expenses - HELD THAT - CIT(A) found that a similar question had arisen in the case of the assessee in the previous assessment years and after examining the contract with the Dewa enterprises, the bills issue and the VAT returns of the assessee and a seller of the goods in the light of the amended section of 194C of the Act, his predecessor reached a conclusion that the transaction between the assessee and the supplier was that of sale and purchase and the same does not fall within the ambit of section 194C of the Act. Ld. CIT(A), therefore, observed that since there is no change in the facts and circumstances of the case nor has the learned Assessing Officer brought anything on record to prove that the agreement fell within the expanded scope of work contract envisaged under section 194C of the Act, explanation (iv) thereto with effect from 1/10/2009, there is no scope to deviate from the view taken by his predecessors for the assessment years 2006-07 to 2012-13. It is not the case of the Revenue that any change occurred either in the facts or in law subsequent to the Ld. CIT(A), taking the consistent view for the assessment years 2006-07 to 2001-13. In the absence of any such change, Ld. CIT(A) is justified in finding it difficult to take a different view from the consistent one taken for the earlier assessment years. We do not find any illegality or irregularity in such course adopted by the Ld. CIT(A). We accordingly decline to interfere with the same and dismiss this ground of appeal. Addition towards and had disallowance of 10% of the miscellaneous expenses - On a consideration of the contentions raised before us, we of the considered opinion that there is no perversity in the finding of the Ld. CIT(A) and he is right in observing that without pointing out any defect in the books of accounts of the assessee and without giving an opportunity to the assessee to explain their stand on this issue, the ad hoc disallowance cannot be sustained. Findings of the Ld. CIT(A) do not warrant any interference and have to be confirmed.

Summary

Issues:
1. Treatment of contractual receipts of goods under section 194C.
2. Deletion of unverifiable miscellaneous expenses.

Analysis:

Issue 1: Treatment of contractual receipts of goods under section 194C
The case involved a dispute regarding the treatment of contractual receipts of goods under section 194C of the Income Tax Act, 1961. The Revenue challenged the order of the Commissioner of Income Tax (Appeals) which treated the payments as regular sale by suppliers instead of contractual payments. The Revenue contended that the expenses were liable to be disallowed under section 40(a)(ia) of the Act due to non-deduction of Tax at Source. However, the assessee argued that the transaction was a purchase and sale agreement, not a labor work contract as per section 194C. The Commissioner (Appeals) considered the contract, bills, and VAT returns, concluding that the transaction was a sale and purchase, not falling under section 194C. The Tribunal upheld the Commissioner's findings based on consistency in previous assessments and lack of evidence to prove otherwise.

Issue 2: Deletion of unverifiable miscellaneous expenses
The second issue revolved around the deletion of unverifiable miscellaneous expenses by the Commissioner (Appeals). The Assessing Officer disallowed 10% of the expenses due to lack of proper vouchers for verification. The assessee argued that the disallowance was baseless and lacked proper reasoning or opportunity for explanation. The Commissioner (Appeals) found the disallowance arbitrary, as the Assessing Officer did not provide specific reasons or call for corresponding bills to verify the expenses. The Commissioner relied on precedents to emphasize that disallowance without pinpointing defects or providing an opportunity for explanation cannot be sustained. The Tribunal upheld the Commissioner's decision, stating that the ad hoc disallowance was unjustified without concrete evidence or opportunity for clarification.

In conclusion, the Tribunal allowed the appeal of the assessee, confirming the decisions of the Commissioner (Appeals) on both issues. The judgment highlighted the importance of providing proper reasoning and opportunities for explanation in tax assessments to ensure fairness and compliance with the law.