2016 (4) TMI 751 - AT - Income Tax

TDS u/s 194H - non deduction of TDS on commissioner paid - Held that - The case of the assessee is squarely covered by the decision of Ansal Land Mark Township Pvt. Vs CIT 2015 (9) TMI 79 - DELHI HIGH COURT wherein it has been held that The second proviso to section 40(a)(ia) of the Act is declaratory and curative in nature and has retrospective effect from 1st April, 2005. Assessing Officer is directed to examine the claim of the assessee whether the said amount has been included as income of the payee. - Decided in favour of assessee for statistical purposes Additions on account of hawala purchases - Held that - The ld.AR produced before us the various records such as copies of stock register, copies of invoice and delivery challan, bank statement evidencing the payment, copy of ledger account, summary of LDO purchased and consumed during the year and comparative analysis for various year for consumption which shows that the materials was actually received. The AO added the same as bogus purchase without carrying any further verification especially when he accepted the submission of the assessee M/S Vinav Trading Co and rejecting the plea for the other without bringing on records any other independent evidence such as specific confirmation from M/S Mahalaxmi and cross examination by the assessee. In our opinion the assessee had explained the purchase made from Mahalaxmi Corporation with all the supporting records which proved that the assessee had received the materials as evidenced by the delivery challan and other records. In view of the above facts, the additions - Decided in favour of assessee

Summary

Issues:
1. Addition of commission under section 40(a)(ia)
2. Disallowance of purchases as bogus hawala transactions

Issue 1: Addition of commission under section 40(a)(ia):
The appellant challenged the addition of commission under section 40(a)(ia) for non-deduction of TDS. The AO added Rs. 9,08,111 for non-compliance with section 194H, which was confirmed by the CIT(A). The appellant argued that the disallowance was unnecessary as they provided proof of tax payment by the payees. The Tribunal noted that the appellant failed to deduct TDS but satisfied conditions under the first proviso to section 201(1) of the Act. The second proviso to section 40(a)(ia) is declaratory and curative, effective from April 1, 2005. Relying on precedents, the Tribunal remanded the issue to the AO for further examination, directing a reasonable opportunity for the appellant.

Issue 2: Disallowance of purchases as bogus hawala transactions:
The AO disallowed Rs. 4,23,875 for alleged hawala purchases from M/S Mahalaxmi Corporation based on information from the VAT department. The CIT(A) upheld the disallowance due to lack of proof of material supply. The appellant presented various records proving material receipt, including stock registers, invoices, bank statements, and delivery challans. The Tribunal found that the AO's addition was based on suspicion and conjecture, without further verification. The appellant adequately demonstrated material receipt from Mahalaxmi Corporation. Therefore, the Tribunal directed the AO to delete the addition. The appeal was allowed in favor of the appellant.

In conclusion, the ITAT Mumbai ruled in favor of the appellant on both issues, directing the AO to re-examine the matters based on the provided evidence.