2014 (8) TMI 1250 - AT - Income Tax

Addition u/s 40A(3) - assessee has made cash payments over and above Rs. 20,000/- towards purchases - HELD THAT - Before us, referring to copy of return and 44AB report counsel submits that return along with audit report was furnished and details regarding cash purchases were furnished before the AO. On hearing both the parties, we are of the considered view that this issue has to be re-examined afresh in detail with reference to the findings given by the AO and also submissions of the assessee's counsel and also with reference to evidences produced before us. In the circumstances, we remit this issue to the file of the AO, who shall examine the issue afresh in accordance with law, after providing adequate opportunity to the assessee. Disallowance u/s 40(a)(ia) - non-deduction of tax at source by the assessee in respect of transport charges - CIT following the decision of Merilyn Shipping and Transport 2012 (3) TMI 402 - ITAT VISAKHAPATNAM held that since the payments were not outstanding and they were all paid before the end of accounting year, no disallowance u/s 40(a)(ia) - HELD THAT -We are of the view that this matter should be examined by the AO in the light of the latest decisions of various High Courts on this issue. Thus, we remit this issue also back to the file of the AO to decide it afresh in the light of the latest decisions of various High Courts, after providing adequate opportunity to the assessee. Appeal of the Revenue is allowed for statistical purposes.

Summary

Issues:
1. Disallowance under section 40A(3) of the Act
2. Disallowance under section 40(a)(ia) of the Act

Issue 1: Disallowance under section 40A(3) of the Act
The appeal by the Revenue challenges the deletion of an addition made under section 40A(3) of the Act by the Commissioner of Income Tax (Appeals). The Revenue contended that the assessee, engaged in export of readymade garments, had made cash payments exceeding Rs. 20,000 towards purchases, leading to a disallowance of Rs. 1,65,44,149 under section 40A(3). The Departmental Representative argued that the Assessing Officer's disallowance was based on the lack of evidence for cash payments below Rs. 20,000 and absence of an audit report under section 44AB. The Commissioner of Income Tax (Appeals) deleted the disallowance, prompting the Revenue's appeal. The Tribunal held that the issue required a fresh examination by the Assessing Officer, remitting the matter for detailed review with reference to all submissions and evidence provided.

Issue 2: Disallowance under section 40(a)(ia) of the Act
The second issue involved the deletion of a disallowance made under section 40(a)(ia) of the Act concerning non-deduction of tax at source by the assessee in respect of transport charges. The Assessing Officer disallowed Rs. 88,696 for transport charges due to non-deduction of TDS. The Commissioner of Income Tax (Appeals) relied on a Tribunal decision and held that no disallowance was warranted since the payments were not outstanding and were made before the end of the accounting year. The Tribunal, after hearing both parties, decided to remit this issue back to the Assessing Officer for a fresh decision in light of the latest decisions of various High Courts, providing the assessee with an adequate opportunity.

In conclusion, the appeal of the Revenue was allowed for statistical purposes, and the Tribunal ordered a re-examination of both issues by the Assessing Officer in accordance with the law and recent judicial decisions.