2021 (8) TMI 844 - AT - Income Tax

Addition u/s 40(a)(ia) - claim the benefit of the second proviso to Section 201 (1) - HELD THAT - We find that proviso inserted u/s 201 (1) by the finance act 2012 with effect from 1 July 2012 has been held to be retrospective in operation by honourable Delhi High Court in on Ansal landmark township private limited 2015 (9) TMI 79 - DELHI HIGH COURT as it is curative in nature. However to get the benefit of the above proviso certain particulars are required to be furnished before the AO in a particular manner. Though assessee has furnished certain information before AO however they were not in the prescribed format and not accompanied with the certificate of the accountant showing that income has been included by payees in return of income. So it was rejected. Learned AO further held that there was no claim made by the assessee by filing revised return and therefore in view of the decision of the honourable Supreme Court it cannot be entertained. We find that as the honourable Delhi High Court has held that the above proviso inserted u/s 201 (1) is retrospective in nature the assessee must be granted the benefit of the above proviso provided the assessee furnish the requisite information before the assessing officer in the prescribed manner. The information submitted by the assessee before the assessing officer, is not in the manner in which it is required. Before ld CIT A also assessee did not file this information. Therefore, in interest of justice, there is no harm if assessee gets one more opportunity in time bound manner to furnish this information. Regarding not making claim by filing revised return, fetters laid down by the honourable Supreme Court in the decision of the Goetz 2006 (3) TMI 75 - SUPREME COURT do not apply to the first appellate authority. therefore, the claim of the assessee should have been entertained by the ld CIT (A). Disallowing the cost of material - whether the same was incurred wholly and exclusively for the purpose of the business. - HELD THAT - We find that if assessee would like to claim any expenditure as a deduction, it is the duty of the assessee to furnish the requisite information in a reasonable manner. Assessee cannot plead that as percentage of expenditure compared to income is very low, therefore, there is no need of submission of any details. We do not appreciate such an argument, it tantamount to bypass the authority and responsibility of ld AO to compute the correct income of assessee. Further, it can also not be said that if there is a revenue there has to be certain expenditure, which should necessarily be allowed without verification. In this case, assessee has not submitted any details except the annual accounts. Therefore, we do not find any infirmity in the orders of the lower authorities in confirming the above disallowance.

Summary

Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of tax at source.
2. Disallowance of cost of material claimed as business expense.

Issue 1 - Disallowance under section 40(a)(ia):
The appellant contested the disallowance of INR 200,505,600 under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source. The Assessing Officer (AO) rejected the appellant's claim based on the proviso inserted under Section 201(1) from July 2012, stating it was not applicable for the assessment year 2012-13. The CIT (A) also confirmed the disallowance, noting the appellant's failure to provide evidence that the payees included the sum in their income tax returns and paid due tax. However, the ITAT found that the proviso was retrospective as per the Delhi High Court and granted the appellant an opportunity to furnish the required information in the prescribed manner within 90 days. The ITAT directed the CIT (A) to re-examine the issue based on the provided information, allowing the appeal on this ground.

Issue 2 - Disallowance of cost of material claimed as business expense:
The appellant claimed a deduction for the cost of material amounting to INR 38,519,318, but failed to submit necessary information before the AO or the CIT (A). The lower authorities noted that the appellant did not provide sufficient details to support the claim, merely stating that the cost was 9% of the total revenue earned. The ITAT emphasized that the appellant must furnish requisite information to support any expenditure claim, rejecting the argument that a low percentage of expenditure relative to income negates the need for detailed submission. As the appellant did not provide substantial evidence beyond annual accounts, the ITAT upheld the disallowance of the cost of material claimed. Consequently, the appeal on this ground was dismissed.

In conclusion, the ITAT allowed the appeal on the first ground related to disallowance under section 40(a)(ia) while dismissing the appeal on the second ground regarding the disallowance of the cost of material claimed as a business expense. The ITAT provided specific directions for the appellant to comply with regarding the first ground, emphasizing the importance of furnishing necessary information to support expenditure claims in tax assessments.