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TMI Blog2023 (5) TMI 1035X X X X Extracts X X X X X X X X Extracts X X X X ..... the recipients of contract payments have included the contract payment in their return of income and has paid the due tax. CIT(A) on such submission, obtained remand report from the AO. AO except sub-contractor No. 4,5 and 6, accepted that recipients of contract payments, have included the contract payment in their return of income. Thus, we affirm the order of ld CIT(A) to that extent. Sub-contractor No. 4 5 have not filed their return of income, so there is no occasion to include such contract receipt in their income. Before us, assessee made his alternative submissions that the disallowance on their payments may be restricted to 30% of sub contract payment in view of amendment to second Proviso to Section 40(a)(ia) by the Finance Act, 2014 which has been held as retrospective by various courts and Tribunal and relied upon the decision of Rajkot Tribunal in Punabhai G. Pardava [ 2022 (6) TMI 1338 - ITAT RAJKOT] On considering such plea of assessee, we direct AO to restrict the disallowance to the extent of 30% of payments made to sub-contractor No. 4 5, thereby, the order of ld CIT(A) is modified to that extent. Discrepancy in the computation of income of Mahendrabhai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout considering the fact that the assessee had not adhered to all the conditions of first proviso of Section 201 of the Income Tax Act,1961? 2. Whether, on facts and circumstances of the case and in law the Ld. CIT (A) was justified in deleting the addition in the case of Sub Contractor Shri Jyantkumar Hirani, on account of assessee's failure to deduct TDS on Labour Contract Expenses, by observing that the said person has not filed ROI because of below taxable income, without considering the fact that the assessee had not adhered to all the conditions of first proviso of Section 201 of the Income Tax Act,1961? 3. Whether, on facts and circumstances of the case and in law the Ld. CIT (A) was justified in deleting the addition in the case of Sub Contractor Shi Laljibhai Narola, on account of assessee's failure to deduct TDS on Labour Contract Expenses, by observing that the said person has expired, without considering the fact that the assessee had not adhered to all the conditions of first proviso of Section 201 of the Income Tax Act,1961? 4. Whether, on the facts and in law the Ld. CIT(A) was justified in restricting the disallowance to Rs. 1,56,193/- out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAN or PAN number of such contractors was furnish. The Assessing Officer issued final show cause notice as to why the contract receipts of Rs. 3.28 crores should not be disallowed. The Assessing Officer on perusal of audit report also noted that auditor has made remarks that the assessee has not deducted TDS on labour contract expenses. Thus, the Assessing Officer on the basis of report of auditor and in absence of complete details of contract payments, made disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 (in short, the Act) of Rs. 3,28,67,900/- while passing the assessment order on 28/03/2016. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed its detailed written submissions vide submission dated 08/09/2018. The submission of assessee are recorded in para 4 of order of ld. CIT(A). On the disallowance under Section 40(a)(ia) of the Act, the assessee submitted that the Assessing Officer disallowed the entire amount of Rs. 3.28 crores under Section 40(a)(ia) for non-deduction of tax at source. The assessee further submitted that they gave explanation and furnished compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 2,37,370/- instead of Rs. 29,17,300/- as claimed by assessee. 7. In response to remand report, the assessee filed its rejoinder. In the rejoinder, the assessee further reiterated that in case of Hindustan Coca Cola Beverages Private Limited Vs CIT (supra), it has been held that the liability to deduct the tax at source is a vicarious liability which means if the tax on which amount paid or payable not deducted by the assessee, but the recipient of such payment has declared such income and paid the tax thereon, there will be no loss to the revenue and therefore, the deductor will not be treated as the assessee in default. Further the assessee also relied upon the decision of Hon'ble Delhi High Court in CIT Vs Ansal Landmark Private Limited (2015) 279 CTR 384 and decision of Ahmedabad Tribunal in DCIT Vs Esaote India (NS) Ltd. 2018 (*) TMI 1183 ITAT, wherein it was held that if the recipient has included payment made by assessee in their receipt and paid tax thereon, the deductor is not liable and the amended provisions are retrospective effect. For two sub-contractors, who have not filed their return of income, the assessee explained that their income was less than the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DGIT(System) or the person authorised by DGIT(System) in accordance with the procedure and standard specified under sub-Rule (2). In this case it cannot be ascertained whether Form 26A as furnished by Accountant was submitted to the authorised person or not. No such evidence is submitted by assessee, therefore, the assessee is not eligible for benefit of Proviso 1 to Section 201 of the Act. The ld. CIT-DR for the revenue submits that there were clear discrepancies in the computation of income of Mahendrabhai Radadiya who has shown contract receipts from diamond labour. The other two sub-contractors namely Jayantkumar Hirani and Lalji Bhai Narola have not filed their return of income, therefore, the stand taken by assessee before the ld. CIT(A) has so many inconsistencies and the same is liable to be set aside and to restore the order of Assessing Officer. 11. With regard to ground No. 4 which relates to restricting the disallowance of various expenses to 10% instead of 20%, the ld. CIT-DR submits that the ld. CIT(A) has not given any reason as to why he has restricted 10% only. The ld. CIT-DR for revenue submits that no evidence to substantiated the expenses were filed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The Assessing Officer on the basis of adverse remark in audit report by the auditor that no TDS is made on such sub-contract payment, disallowed the entire expenses of Rs. 3.28 crores. The ld. CIT(A) granted relief to the assessee by taking a view that Assessing Officer in his remand report has accepted the fact about payments to 8 sub-contractors out of 11, who had included the contract receipt in their income and Certificate of Accountant alongwith Form-26A therefore, the addition to the extent of Rs. 2.34 crores were deleted. So far as dispute relating to remaining two namely Shri Jayantkumar Hirani and Lalji Bhai Narola, return was not filed because of income was below the taxable income and death of Lalji Bhai Narola. Therefore, the ld. CIT(A) directed to delete the addition in respect of those two sub-contractors. Regarding discrepancy in case of Mahendrabhai Radadiya, the ld. CIT(A) took his view that the payment was made through cheque and was debited in the account of recipient, therefore, there is no dispute about the payment and directed to delete the entire addition. 15. We find that neither the Assessing Officer narrated the name and details of sub-contract in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akhiya BYIPS4414H 29,24,400 7,72,626 3,28,67,900 16. As noted in earlier paragraphs that before the ld. CIT(A), the assessee contended that the recipients of contract payments have included the contract payment in their return of income and has paid the due tax. The ld. CIT(A) on such submission, obtained remand report from the Assessing Officer. The Assessing Officer except sub-contractor No. 4,5 and 6, accepted that recipients of contract payments, have included the contract payment in their return of income. Thus, we affirm the order of ld CIT(A) to that extent. 17. However, sub-contractor No. 4 5 have not filed their return of income, so there is no occasion to include such contract receipt in their income. Before us, the ld AR for the assessee made his alternative submissions that the disallowance on their payments may be restricted to 30% of sub contract payment in view of amendment to second Proviso to Section 40(a)(ia) by the Finance Act, 2014 which has been held as retrospective by various courts and Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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