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Facts
The assessee claimed subcontract expenses, but the Assessing Officer (AO) noticed a difference between the claimed amount and the confirmation from one subcontractor. The AO also noted non-deduction of TDS on subcontract expenses. The CIT(A) upheld the AO's additions.
Held
The Tribunal held that regarding the non-deduction of TDS, the matter should be remanded to the AO for verification of Form 26A filed by the assessee. Regarding the difference in subcontract expenditure, the Tribunal found that the AO and CIT(A) erred by not considering the ledger account which showed no difference.
Key Issues
Disallowance of subcontract expenses under Section 69C and 40a(ia) for non-deduction of TDS.
Sections Cited
69C, 194C, 40a(ia)
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Income Tax Appellate Tribunal, Hyderabad “B” Bench, Hyderabad
करदाता का प्रतततितित्व/ : Shri A.V. Raghuram, Assessee Advocate, Represented by राजस्व का प्रतततितित्व/ : Dr. Sachin Kumar, Sr. A.R. Department Represented by सुिवाई समाप्त होिे की ततति/ : 26.03.2026 Date of Conclusion of Hearing घोर्णध की तधरीख/ : 27.03.2026 Date of Pronouncement O R D E R PER MANJUNATHA G., A.M : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [in short “NFAC”], Delhi, dated 01.09.2025, pertaining to the assessment year 2018-19. 2 AMRCL KCL (JV)
The brief facts of the case are that, the assessee AMRCL KCL (JV) filed its return of income for A.Y. 2018-19 on 22.10.2018 declaring total loss of Rs. 15,10,040/-. The case was selected for scrutiny and during the course of assessment proceedings, the A.O. noticed that the assessee has claimed major expenses on account of subcontract expenses of Rs. 10,91,01,703/-, whereas the assessee has filed confirmation from one subcontractor AMR India Limited for an amount of Rs. 10,40,24,688/-. Therefore, the difference of Rs. 50,77,015/- has been treated as unexplained expenditure under Section 69C of the Income Tax Act, 1961. The A.O. further noted that, the assessee has failed to deduct tax at source on subcontract expenditure of Rs. 10,40,24,688/- under Section 194C of the Act. Therefore, the A.O. disallowed 30% of subcontract expenditure and added back sum of Rs. 3,12,07,406/- under Section 40a(ia) of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee contended that the A.O. has erred in making addition of Rs. 50,77,015/- towards difference in subcontract expenditure, because the assessee had filed relevant ledger account and claimed that, 3 AMRCL KCL (JV) there is no difference in expenses claimed under the head subcontract expenditure. However, the A.O. misread the ledger account filed by the assessee and had considered only the payment made for the year. The assessee had also challenged the addition made by the A.O. towards disallowance under Section 40a(ia) of the Act, and claimed that the recipient has offered the income to tax and therefore, in view of second proviso to Section 40a(ia) of the Act, the same cannot be disallowed under Section 40a(ia) of the Act.
The Ld. CIT(A) after considering the relevant submissions of the assessee and also taking note of the reasons given by the A.O. rejected the explanation of the assessee and upheld the addition made by the A.O. towards difference in subcontract expenditure of Rs. 50,77,015/- under Section 69C of the Act, on the ground that the assessee could not reconcile the difference. The Ld. CIT(A) rejected the explanation of the assessee with regard to disallowance under Section 40a(ia) of the Act, for non-deduction of tax at source under Section 194C of the Act, on the ground that the assessee could not file relevant Form 26A from the accountant, certifying the payments considered by the recipient in the ITR filed for the relevant assessment year.
4 AMRCL KCL (JV)
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
The first issue that came up for our consideration from Ground Nos. 2 to 4 of assessee’s appeal is disallowance of subcontract expenditure under Section 40a(ia) of the Act, for non-deduction of tax at source under Section 194C of the Act.
The learned counsel for the assessee, Shri A.V. Raghuram, Advocate, referring to petition filed by the assessee under Rule 29 of Income Tax (Appellate Tribunal Rules), 1963 submitted that, the assessee has obtained relevant Form No. 26A in terms of Rule 31ACB of I.T. Rules, 1962 and as per the certificate issued by the accountant, the recipient, AMR India Limited has considered entire payment of subcontract amount of Rs. 10,91,01,703/- in the return of income filed for the assessment year 2018-19 and paid relevant taxes. Therefore, the matter may be remanded to the A.O. to verify the certificate and decide the issue as per law.
The learned Senior A.R. for the Revenue, Dr. Sachin Kumar, on the other hand, fairly agreed that since the assessee has filed the 5 AMRCL KCL (JV) relevant Form 26A, the matter may be remanded to the A.O. for verification.
We have heard both parties and considered the relevant additional evidence filed by the assessee, including Form No.26A by the accountant and we find that, the accountant has issued a certificate and stated that the payment made by the assessee to AMR India Ltd., of Rs. 10,91,01,703/- has been considered by the subcontractor in the return of income filed for A.Y. 2018-19 on 22.10.2018 and paid relevant taxes. Since the assessee has filed Form 26A for the first time and the A.O. does not have any opportunity to examine the same, in our considered view, the matter needs to be remanded to the file of the A.O. for verification. Thus, we set aside the order of the Ld. CIT(A) and restore the issue back to the file of the A.O., with a direction to verify the claim of the assessee in light of relevant Form No. 26A filed by the assessee and decide the issue in accordance with law.
The next issue that came up for our consideration from Ground No. 5 of assessee’s appeal is addition of Rs. 50,77,015/- under Section 69C of the Act, towards the difference in subcontract 6 AMRCL KCL (JV) expenditure debited to the profit and loss account and confirmation filed by the subcontractor. The A.O. made addition of Rs. 50,77,015/- on the ground that the assessee claimed subcontract expenditure of Rs. 10,91,01,703/- and as per the confirmation filed by the subcontractor, AMR India Limited, they have shown receipts of Rs. 10,40,24,688/-. The arguments of the assessee that the A.O. has wrongly considered only payment made during the year without considering the contract receipts booked by the subcontractor.
Having heard both sides and considering relevant records, we find that the assessee has claimed subcontract expenditure of Rs. 10,91,01,703/- and the subcontractor AMR India Limited has also booked total contract receipts of Rs. 10,91,01,703/- which is evident from the relevant ledger account filed by the assessee. However, the A.O. has considered only payment made during the year of Rs. 10,40,24,688/- without considering the opening balance and closing balance available in the name of the subcontractor, which is also evident from the relevant ledger account which is available at pages 11 and 12 of the paper book filed by the assessee. From the details filed by the assessee, it is very clear that, there is no difference in subcontract expenditure debited by the assessee in the books of 7 AMRCL KCL (JV) accounts when compared to the confirmation filed by the subcontractor. The A.O. without considering the relevant facts simply assumed that there is a difference of Rs. 50,77,015/-. The Ld. CIT(A) without considering the relevant facts simply upheld the additions made by the A.O. Thus, we set aside the order of the Ld. CIT(A) on this issue and restore the issue back to the file of the A.O. with a direction to verify the claim of the assessee in light of the relevant ledger account filed by the assessee and delete the addition made towards difference in subcontractor expenditure of Rs.50,77,015/- under Section 69C of the Income Tax Act, 1961.
In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 27th March, 2026. (मंजूनाथ जी) श्री विजय पाल राि (MANJUNATHA G.) (VIJAY PAL RAO) लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष /VICE PRESIDENT Hyderabad, dated 27.03.2026. TYNM/sps 8 AMRCL KCL (JV)