2016 (12) TMI 1190 - AT - Income Tax

Disallowance of expenditure u/s. 40(a)(ia) - Held that - We dismiss the plea of the assessee that provisions of section 40(a)(ia) of the Act cannot be made applicable in respect of amounts paid before the end of the previous year. However, the assessee had submitted the information before the CIT-A that the payees have duly reflected this subject mentioned receipts in their returns of income and paid taxes thereon. We find that the amendment in section 40(a)(ia) of the Act has been held to be retrospective in operation in the light of the decision in the case of CIT Vs. Ansal Land Mark Township (P) Ltd (2015 (9) TMI 79 - DELHI HIGH COURT ). Respectfully following the said decision, we deem it fit and proper and in the interest of justice and fair play set aside this issue to the file of the AO for examination of subject mentioned receipts in the hands of the respective payees based on details provided to that effect by the assessee. Once, if it is proved to be correct then no disallowance u/s. 40(a)(ia) of the Act would be operative in the hands of the assessee. - Decided in favour of assessee for statistical purposes Income from undisclosed source u/s. 69A - Held that - We find that the AO added the impugned addition for not disclosing the same in the balance sheet and by observing the same was settled through cheque on 14- 04-2010. Admittedly, the submission as made by the assessee before the CITA that assessee has taken into consideration the gross bill, which was disclosed and offered for taxation, wherein the said impugned amount is part and parcel of said gross bill. The CIT-A found the same as independent and doubted the same is taxed or not. In view of such observations and taking into considerations the submission as advanced by the ld.AR of the assessee, we are of the view that the issue requires fresh examination in terms of the contention of the assessee the gross bill amount have been disclosed and offered the tax or not. Hence, AO is directed to decide this issue afresh in accordance with law, uninfluenced by earlier decision and decision of CIT-A in this regard. - Decided in favour of assessee for statistical purposes

Issues Involved:

1. Sustaining the addition of ?23,72,327/- under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Sustaining the addition of ?2,05,102/- under Section 69A of the Income Tax Act, 1961.
3. Assessment order barred by limitation.

Issue-wise Detailed Analysis:

1. Sustaining the addition of ?23,72,327/- under Section 40(a)(ia) of the Income Tax Act, 1961:

The primary issue is the disallowance of ?23,72,327/- under Section 40(a)(ia) for non-deduction of tax at source on machine hire charges. The assessee argued that the entire expenditure had already been paid and should not be disallowed. The assessee relied on the decision of the ITAT Vishakhapatnam Bench in the case of M/s Marilyn Shipping & Transporters, which stated that disallowance should only apply to amounts payable at the end of the year.

However, the AO rejected this contention, citing an interim order by the Hon'ble High Court of Andhra Pradesh, and disallowed the payment under Section 40(a)(ia). The CIT-A confirmed the addition, referencing multiple High Court decisions that did not accept the Merilyn Shipping & Transporters' view. The CIT-A emphasized that the jurisdictional High Court's decision in CIT Vs. Crescent Export Syndicate, which stated that Section 40(a)(ia) applies to amounts payable at any time during the year, is binding.

The Tribunal upheld the CIT-A's view, stating that the term "payable" includes amounts paid during the year. However, it acknowledged the assessee's submission that the payees had declared these payments in their income returns. The Tribunal directed the AO to verify this claim and, if found correct, to not disallow the expenditure under Section 40(a)(ia). Thus, the ground was allowed for statistical purposes.

2. Sustaining the addition of ?2,05,102/- under Section 69A of the Income Tax Act, 1961:

The second issue pertains to the addition of ?2,05,102/- as income from undisclosed sources under Section 69A. The AO found this amount in the books of M/s. S.K Enterprises, which was not reflected in the assessee's balance sheet. The assessee claimed that all payments were received during the year and nothing was outstanding. The CIT-A confirmed the addition, doubting whether this amount was included in the profit and loss account.

The Tribunal noted that the assessee had claimed the entire gross bill amount, which included the disputed sum, was disclosed and offered for taxation. The CIT-A's doubt about this inclusion led to the confirmation of the addition. The Tribunal remanded the issue back to the AO for fresh examination to verify if the gross bill amount was indeed disclosed and taxed. Thus, this ground was also allowed for statistical purposes.

3. Assessment order barred by limitation:

The third ground, concerning the assessment order being barred by limitation, was dismissed as not pressed by the assessee.

Conclusion:

The appeal was disposed of with directions for fresh examination of the issues related to the additions under Sections 40(a)(ia) and 69A, allowing both grounds for statistical purposes. The ground regarding the assessment order being barred by limitation was dismissed.

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