SEED INNOVATIONS PRIVATE LIMITED,HYDERABAD vs. INCOME TAX OFFICER, WARD-3(1), HYDERABAD

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ITA 742/HYD/2019Status: DisposedITAT Hyderabad29 October 2021AY 2014-154 pages
AI SummaryRemanded

What did the Tribunal hold?

The ITAT held that if the payees have offered the receipts in their income tax returns, the provisions of Section 40(a)(ia) may not be applicable. The issue was remitted back to the AO for verification of documentary evidence from the assessee.

What were the facts?

The assessee made contract payments, interest, commission, rent, and consultancy fees, and though TDS was deducted, it was not remitted to the government. The AO disallowed these expenses under Section 40(a)(ia), which was confirmed by the CIT(A).

What were the issues?

Whether disallowance under Section 40(a)(ia) is applicable when the payees have already offered the receipts in their income tax returns. The AO's grievance was the lack of substantiation by the assessee.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”: HYDERABAD

Before: SHRI SATBEER SINGH GODARA & SHRI LAXMI PRASAD SAHU

For Appellant: Shri P. Murali Mohan Rao
For Respondent: Shri Rohit Mujumdar
Hearing: 25/10/2021Pronounced: 29/10/2021

Assessment Year: 2014-15 Seed Innovations Pvt. Ltd., Vs. Income-tax Officer, Hyderabad. Ward – 3(1), Hyderabad. PAN – AAICS0120J (Appellant) (Respondent) Assessee by: Shri P. Murali Mohan Rao Revenue by: Shri Rohit Mujumdar Date of hearing: 25/10/2021 Date of pronouncement: 29/10/2021 O R D E R PER L.P. SAHU, A.M.: This appeal filed by the Assessee is directed against CIT(A) - 9, Hyderabad’s order dated 07/03/2019 for AY 2014-15 involving proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short “the Act.

2.

In this appeal, the assessee has raised 10 grounds of appeal, the sum and substance of which is against the action of the CIT(A) in confirming the addition of Rs. 70,49,405/- made by the AO u/s 40(a)(ia) of the Act.

:- 2 -: Seed Innovations Pvt. Ltd., Hyd.

3.

Briefly, the facts of the case are that the assessee engaged in the business of research, development, processing and marketing of hybrid seeds had filed its return of income for the AY 2014-15 on 30/11/2014 admitting total income of Rs. 1,58,818/-. Subsequently, the case was selected for scrutiny under CASS to verify the large increase in sundry creditors against reduction in business income as compared to preceding year and mismatch of amount paid to related persons u/s 40A(2)(B) reported in audit report and ITR. Accordingly, statutory notices were issued to the assessee, against which the AR of the assessee furnished the information called for.

3.1 On verification of the information submitted by the assessee, the AO noticed that the assessee had made payments to the extent of Rs. 70,49,905/- towards contract payments, interest payments, commission payments, rent payments and consultancy fee. The AO noted that the assessee had made TDS on the above payments but had not credited to the central govt. account and the above facts were even reported in the audit report. Since the assessee failed to remit the TDS to the Central Govt. Account in violation of provision, the claim of the expenditure of Rs. 70,49,905/- was disallowed u/s 40(a)(ia) by the AO.

:- 3 -: Seed Innovations Pvt. Ltd., Hyd.

4.

When, the assessee preferred an appeal before the CIT(A), the CIT(A) confirmed the addition made by the AO.

5.

Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT.

6.

We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. The only issue to be adjudicated in this appeal is disallowance u/s 40(a)(ia) of the Act. The contention of the assessee is that the payees had already offered the receipts of Rs. 70,49,405/- in their respective returns of income and, therefore, the provisions of section 40(a)(ia) of the Act are not applicable to be invoked in the hands of the assessee. Whereas, the revenue authorities grievance is that the assessee failed to substantiate its claim by way of documentary evidence that the payees have filed their returns of income or not and offered the receipts in their returns of income. In view of the above observations, we remit the issue back to the file of AO with a direction to decide the appeal based on the documentary evidence that will be furnished by the AO before him, in accordance with law and on merits after providing reasonable opportunity of being heard to the assessee in the matter. The assessee is directed to furnish the proof that the payees have offered the receipts in their returns of income. The interest u/s 201(1A), if applicable,

:- 4 -: Seed Innovations Pvt. Ltd., Hyd. shall also be calculated. Accordingly, the grounds raised by the assessee are treated as allowed for statistical purposes.

7. In the result, appeal of the assessee is allowed for statistical purposes in above terms. Pronounced in the open court on 29th October, 2021.

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