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2022 (7) TMI 531 - AT - Income TaxDisallowance u/s 40(a)(ia) - TDS u/s 194C AND 194I - AR contended that the effect of second proviso to section 40(a)(ia) that even if payer fails to deduct tax at source of any sum paid to the payee if the payee are admitted the income in the return filed and had paid tax thereon, then it is admitted that the payer has deducted and paid the tax on such sum on the date of furnishing the return by the resident payee - AR vehemently argued in such eventuality the provisions u/s 40(a)(ia) would not be invoked in view of the amendment by way of insertion of second proviso to section 40(a) - HELD THAT - We note that in the first round of litigation the Tribunal restored the order of AO in respect of addition made u/s. 40(a)(ia) for violation of section 194I of the Act. Admittedly, the assessee did not challenge the said addition before the higher forum. Before us, now, by way of legal ground, the ld. AR contends that the applicability of section proviso inserted to section 40(A)(ia) of the Act, in our opinion, when the said addition was confirmed by the ITAT, there is no scope again sending the issue to the file of AO will arise. The CIT(A) also discussed the same and clearly held the said issue was not open to the AO for fresh adjudication in view of the issue attained finality by the order of ITAT. Therefore, we find no infirmity in the order of CIT(A) in this regard and the grounds raised by the assessee are dismissed.
Issues:
1. Challenge to addition under section 40(a)(ia) of the Act. 2. Applicability of second proviso to section 40(a)(ia) of the Act. 3. Fresh adjudication of the issue concerning section 40(a)(ia) of the Act. 4. Finality of the issue decided by ITAT. Issue 1: Challenge to addition under section 40(a)(ia) of the Act: The appeal involved the challenge by the assessee against the order passed by the Commissioner of Income Tax (Appeals) confirming the addition made under section 40(a)(ia) of the Act. The Assessing Officer (AO) had disallowed amounts under sections 194C and 194I of the Act, leading to a total income determination. The CIT(A) partially allowed relief in the first appellate proceedings, which was further contested by both the assessee and the Revenue before the Tribunal. Issue 2: Applicability of second proviso to section 40(a)(ia) of the Act: The assessee contended before the Tribunal the applicability of the second proviso to section 40(a)(ia) of the Act, arguing that if the payee admitted the income and paid tax, the provisions of section 40(a)(ia) should not be invoked. The argument was based on the retrospective effect of the proviso from 01-04-2005. The Tribunal considered this argument for fresh adjudication by the AO, emphasizing the need for verification regarding the payee's admission of income. Issue 3: Fresh adjudication of the issue concerning section 40(a)(ia) of the Act: The Tribunal remanded the matter to the AO for fresh adjudication on the applicability of provisions under section 194C of the Act, considering the nature of the business activity and additional evidence furnished. Regarding section 194I, the Tribunal reversed the CIT(A)'s order and upheld the addition made by the AO. The AO, in giving effect to the Tribunal's order, determined the total income, considering relief granted by the CIT(A) and the Tribunal, along with the addition under section 194I. Issue 4: Finality of the issue decided by ITAT: The Tribunal, having confirmed the addition under section 40(a)(ia) of the Act for violation of section 194I, found no scope for further adjudication as the assessee did not challenge this addition before a higher forum. The CIT(A) also concluded that the issue had attained finality with the ITAT's order, precluding fresh adjudication by the AO. Consequently, the Tribunal dismissed the grounds raised by the assessee, upholding the CIT(A)'s decision. In conclusion, the Tribunal dismissed the appeal of the assessee, emphasizing the finality of certain issues decided by the ITAT and the applicability of provisions under section 40(a)(ia) of the Act. The judgment provided detailed analysis and clarification on the challenges raised by the assessee, ensuring a comprehensive review of the legal aspects involved in the case.
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