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2016 (6) TMI 38 - AT - Income TaxRevision u/s 263 - non deduction of tds on payment to contractor for supply of labour and transportation - Held that - There is no error in the order of the AO causing prejudice to the Revenue. The assessee had duly demonstrated before the Ld. CIT, that it was not required to deduct TDS on the impugned payments. The assessee has stated before the Ld. CIT that no payment was made for supply of labour & transportation, in pursuance to any contract for the supply of the same. In fact, the assessee had explained, that the so called contractors used to only facilitate payments to various temporary unskilled labour employed by the assessee. The modus operandi was explained as being that entire payment relating to a group of labourers being made to one so-called contractor, who in turn distributed it to the individual labourers. The assessee had demonstrated the same through monthly wage sheets of various labours. The assessee had also stated that it had not paid any commission to these so-called contractors. Further the assessee demonstrated before the Ld. CIT that no payment to a single labour exceeded ₹ 20,000/- i.e., the prescribed limit for deducting tax at source. The Ld. CIT we find has not controverted all these facts. In fact the entire case of the Ld. CIT rests on the submission of the assessee in which he has termed these persons as Contractor This alone cannot lead to the conclusion that the payments were made to contractor, without controverting the evidences produced by the assessee in support of its contention. In view of the same, we hold that the impugned payments are not liable to be tds deduction. - Decided in favour of assessee Claim of 100% depreciation on temporary structures of office - CIT held that the assessee had claimed double deduction since no bills and vouchers in support of this expenditure had been furnished by the assessee on this aspect - Held that - We find that this issue had been investigated during assessment proceedings and the AO after considering the assessee reply, had taken a plausible view and allowed the assessee 100% depreciation on the temporary structure. Moreover the case of the Ld. CIT we find is that in the absence of bills and vouchers pertaining to the impugned expenses, the assessee has claimed double deduction. We fail to understand how the assessee has claimed double deduction when the fact is that the impugned amount was debited to capital account and 100% depreciation claimed thereon.- Decided in favour of assessee Bogus purchases - Held that - We find that during assessment proceedings, the issue of purchases was considered by the AO and a lump sum addition of ₹ 12 lacs on account of unverified purchases was made. Having done so, we find that the Ld. CIT intends to revisit this very issue in the current proceedings and that too for verifying the genuineness of the impugned purchases. Meaning thereby that there is no categorical finding of any error in the order of the AO. In our considered opinion, revisionary powers under section 263 cannot be exercised in such circumstances. Moreover, the fact that two supplies are presumably defaulters being not registered under the relevant law, does not lead to any adverse inference being drawn against the assessee, more particularly when no defect has been found in the bills and vouchers produced by the assessee. Further we find that in the assessment order passed in consequence to the order passed under section 263, no addition on this issue has been made - Decided in favour of assessee Purchase made on 31/03/2008 but not shown as work in progress - Held that - We find that no addition on this account has been made in the assessment order passed in consequence to the order passed under section 263. Any adjudication on this issue is of no consequence and it remains only academic in nature.- Decided in favour of assessee Interest not found to have been included in the income of the assessee - Held that - We uphold the order of the Ld. CIT, since clearly there was an error in the order of the AO, having not examined the issue of taxability of interest, which resulted in an amount of ₹ 36,287/- escaping assessment thus causing prejudice to the Revenue. The assesssee we find has given no plausible explanation for not disclosing the impugned amount in its Profit & Loss account.- Decided against assessee Disallowance of rent paid for equipment and legal expenses - non deduction of tds - Held that - Undeniably the issue of tax deduction at source on legal expenses & Rent was not examined during assessment proceedings. Even before the Ld. CIT the assessee though furnished an explanation for not deducting tax at source but failed to substantiate the same with copies of ledger accounts , bills and voucher. In view of the same we hold that the assessee has not been able to establish categorically before the Ld. CIT that it was not required to deduct tax at source in the payments of rent and legal expenses and the same having not been examined during assessment proceedings also, the Ld. CIT had rightly held the order of the AO to be erroneous so as to cause prejudice to the Revenue.- Decided against assessee
Issues Involved:
1. Treatment of payments to amani labour as payments to contractors under Section 40a(ia). 2. Disallowance of claim for write-off of temporary structures. 3. Genuineness of purchases due to typographical error in dates. 4. Genuineness of purchases from parties not registered with Trade Tax Department. 5. Addition of purchases not reflected in closing stock or work in progress. 6. Disallowance under Section 40a(ia) for rent of equipment and legal expenses due to non-deduction of TDS. 7. Validity of notice under Section 263. 8. Arbitrariness and presumptions in the CIT's order under Section 263. 9. Doctrine of finality and insupportability of CIT's order under Section 263. Detailed Analysis: 1. Treatment of Payments to Amani Labour as Payments to Contractors under Section 40a(ia): The CIT treated payments made to amani labour as payments to contractors, requiring TDS deduction under Section 40a(ia). The assessee argued that these payments were made directly to temporary labourers and transporters, not to contractors, and no single payment exceeded ?20,000. The Tribunal found no error in the AO's order, as the payments were not made to contractors, and thus, the provision of Section 194C was not violated. The revisionary proceedings on this issue were set aside. 2. Disallowance of Claim for Write-off of Temporary Structures: The CIT disallowed the claim of ?13,82,300 for write-off of temporary structures, alleging double deduction. The assessee demonstrated that this amount was spent on constructing temporary structures and claimed as 100% depreciation. The Tribunal found that this issue was examined during the assessment proceedings, and the AO had taken a plausible view. The CIT's invocation of revisionary powers under Section 263 on this issue was set aside. 3. Genuineness of Purchases Due to Typographical Error in Dates: The CIT questioned the genuineness of purchases amounting to ?15,95,001 due to a typographical error in the date (31.02.2008). The assessee explained that the bill was a compilation of purchases made on various dates. The Tribunal noted that the AO had considered this issue during the assessment proceedings and made a lump sum addition of ?12 lakhs for unverifiable purchases. The Tribunal found no categorical error in the AO's order and set aside the CIT's order on this issue. 4. Genuineness of Purchases from Parties Not Registered with Trade Tax Department: The CIT doubted the genuineness of purchases from Bajrang Int Udyog (?47,31,100) and Rahimuddin & Sons (?53,60,594) as they were not registered with the Trade Tax Department. The assessee provided complete bills and vouchers for these purchases. The Tribunal held that the AO had considered this issue during the assessment proceedings, and the CIT's order was set aside. 5. Addition of Purchases Not Reflected in Closing Stock or Work in Progress: The CIT added ?10,09,208 for purchases made on 31.03.2008, not reflected in closing stock or work in progress. The assessee explained that the raw materials were consumed on the same day and never kept in stock. The Tribunal found no addition made in the assessment order passed in consequence to the order under Section 263, making this issue academic. The CIT's order on this issue was set aside. 6. Disallowance under Section 40a(ia) for Rent of Equipment and Legal Expenses Due to Non-deduction of TDS: The CIT disallowed ?4,92,250 for rent of equipment and ?34,150 for legal expenses due to non-deduction of TDS. The assessee argued that the payments did not exceed the specified limits for TDS deduction. The Tribunal found that the issue was not examined during assessment proceedings, and the assessee failed to substantiate its claim before the CIT. The CIT's order on this issue was upheld. 7. Validity of Notice under Section 263: The assessee challenged the validity of the notice under Section 263. The Tribunal did not find merit in this ground, as the CIT had valid reasons for initiating revisionary proceedings. 8. Arbitrariness and Presumptions in the CIT's Order under Section 263: The assessee argued that the CIT's order was arbitrary and based on presumptions. The Tribunal found that the CIT's order was partly justified but set aside the CIT's order on certain issues where no error was found in the AO's order. 9. Doctrine of Finality and Insupportability of CIT's Order under Section 263: The assessee contended that the CIT's order was contrary to the doctrine of finality. The Tribunal upheld the CIT's order on issues where errors were found in the AO's order but set aside the order on issues where no errors were identified. Conclusion: The Tribunal upheld the CIT's order on the issues of interest of ?36,287 not reflected in the income and disallowance of legal and rent expenses under Section 40(a)(ia) amounting to ?34,150 and ?4,92,250, respectively. The Tribunal set aside the CIT's order on the remaining issues. The appeal of the assessee was partly allowed.
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