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Income Tax Appellate Tribunal, ‘B(SMC
Before: SHRI MANJUNATHA. G, HON’BLE
आदेश /O R D E R
This appeal filed by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 14.02.2023 and pertains to assessment year 2017-18.
At the outset, we find that there is delay of 51 days in filing of appeal, for which a petition for condonation of delay along with affidavit explaining reasons for delay has been filed. The ld. Counsel for the assessee submits that, the delay in
:-2-: ITA. No:711/Chny/2023 filing of appeal is neither intentional nor to derive any undue benefit but beyond control of the assessee due to ill-health of the assessee’s counsel. Therefore, in the interest of justice, delay may be condoned.
The ld. DR, on the other hand fairly agreed that the delay in filing may be condoned.
Having heard both the sides and from reasons given by the appellant for delay in filing of appeal, we find that the reasons given by the assessee comes under reasonable cause as provided under the Act for condonation of delay and thus, the delay in filing of appeal is condoned and appeal filed by the assessee is admitted for hearing.
The assessee has raised the following grounds of appeal: “1. The Petitioner is an Assessee /Appellant, being a partnership firm in the Name and style of M/s. ldumban Knitters, is an MSME, manufacturer, exporter and Traders of Garments of all kinds, having place of working at S.F.NO. 440,443, SBI Colony, Gandhi Nagar Post, Tirupur - 641603, assessed to Income Tax on the file of the Honorable Assistant Commissioner, Income Tax Department, Circle 1,Tirupur, in PAN No.AAAFl7635P. 2. Whereas, the Ld. NFAC, Assessing Authority, have passed an erroneous assessment order u/s 14 7 / 144 of Income Tax Act, 1961 on 03/09/2021 vide DIN NO: ITBA/AST/S/147/2021-
:-3-: ITA. No:711/Chny/2023 22/1035283255(1), making addition of Rs.7,95,000/-, being 30% of Rs.26,50,000/-, paid to Mr.U.S.Dinesh, one of the employee of the appellant I assessee herein, for not complying with the TDS provisions u/s 194J, which have already been subjected to taxation, with relevance to provisions of section 40/40A, for not having complied with the TDS provisions u/s 192, which amounts to Double Taxation. Consequently the Honorable NFAC Assessing Authority, have also determined the taxable income as Rs.23,06,350/-, as against the original assessed amount of Rs.15, 11,350/- and arrived at aggregate income tax liability of Rs.8,91,677/- and determined fresh demand of Rs.3,78,280/after adjusting an amount of Rs. 5, 13,397/- already paid by the assessee / appellant herein, and as per the original intimation u/s 143 (1), which is bad in law and Initiated Penalty Proceedings by invoking the provisions of section 270 A(1) r.w.s 270A(9)(a) of the Act, 3. Aggrieved by the erroneous assessment by The Honorable NFAC Assessing Authority, the assessee / appellant herein, filed Appeal in Form No.35, before the Honorable Commissioner of Income Tax (Appeals) on 30/09/2021, vide Acknowledgement no.614015300300921, against the erroneous assessment order dated 03/09/2021, vide DIN NO: ITBA/AST/S/147/2021- 22/1035283255(1 ). 4. Thereafter, the NFAC ,Honorable Commissioner of Income Tax Appeals, have passed an erroneous order, on 14/02/2023, vide DIN & Order No. ITBA/NFAC/S/250/2022- 23/1049736957(1), dismissing the Appeal by confirming the addition of Rs.7,95,000/- being 30% of Rs.26,50,000/- paid to Mr.U.S.Dinesh, as was concluded by the Ld. NFAC, Assessing Authority 5. Whereas, the assessee I appellant herein, have totally disallowed , Rs.83,60,283/-, u/s 40/40a, which include Rs.69,09,872 /- , paid as salary and remuneration expenses u/s 40(a)(ia), which in turn include the disputed subject of this Appeal, Rs.26,50,000/-, paid to one of their employee Mr.U.S.Dinesh, for not having complied with the provisions of TDS u/s 192 to 194J, and accordingly 30% of the said total disallowed payment of Rs.83,60,283/-, being Rs.25,08,085/- added to the income, which include Rs.7,95,000/- being 30% of Rs.26,50,000/-, paid to Mr.U.S.Dinesh, who was the General Manager of the firm, for not having complied with the TDS
:-4-: ITA. No:711/Chny/2023 provisions of Section 192, as per the provisions of section 40 (a)(ia). 6. Whereas, the Ld. Assessing Authority, have once again added Rs.7,95,000/, being 30% of Rs.26,50,000/-, paid to Mr.U.S.Dinesh, without deduction of TDS, as per the provisions of Section 194 J, stating the same as payment to Mr.U.S.Dinesh, for the services rendered by him which amounts to duplication of addition and taxing twice on one transaction, and hence illegal and not sustainable in law. Therefore, the appellant / assessee herein, humbly pray before the Hon'ble Members of ITAT, to allow this Appeal in full on merits and pass necessary orders, by setting aside the Dismissal Orders given by the Hon'ble, NFAC, CIT- Appeals, and Order the Ld. Assessing Authority to delete the duplication of the addition amount of Rs 7,95,000/-, being 30% of Rs 26,50,000/- and place suitable orders for refunding the amount of Rs. 4,08,536/- already collected by the respectable assessing authority BY WAY OF ADJUSTMENT from the refund U/S 220(2) vide the Intimation u/s 143(1) dated 24.05.2022 vide Ref no:- CPC/2122/A5/240835350, u/s 245, pertaining to assessment year 2021-22 along with applicable interest there on u/s 244A, and render justice.”
The brief facts of the case are that, the assessee is a firm and running textile business under the name and style M/s. Idumban Knitters. The assessee filed its return of income for the assessment year 2017-18 on 10.01.2018 and declared total income of Rs. 15,11,350/-. The case has been subsequently reopened u/s. 147 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the reasons recorded, as per which income chargeable to tax has been escaped assessment on account of failure to disallow expenditure
:-5-: ITA. No:711/Chny/2023 incurred and debited to profit and loss account without deduction of tax at source u/s. 194J of the Act and accordingly, notice u/s. 148 of the Act dated 21.11.2019 was issued and served on the assessee. In response to notice u/s. 148 of the Act, the assessee filed its return of income on 14.12.2019. The case was selected for scrutiny and notice u/s. 143(2) of the Act dated 29.09.2020 was served on the assessee. There was no compliance from the assessee and accordingly, show cause notice was issued proposing to make additions of Rs. 7,95,500/- being 30% of payment made to U.S. Dinesh to the tune of Rs. 26,50,000/- u/s. 40(a)(ia) of the Act, for failure to deduct TDS u/s. 194J of the Act. In response, the assessee submitted that, although no TDS has been deducted on payment made to U.S. Dinesh, but it has suomoto disallowed 30% of expenses and added to statement of total income. The AO did not accept explanation of the assessee and according to the AO, there is a difference between amount paid to U.S. Dinesh and expenses without deduction of TDS as quantified by the auditor in the tax audit report. Therefore, rejected arguments of the assessee and disallowed a sum of Rs. 7,95,500/- being 30% of Rs.
:-6-: ITA. No:711/Chny/2023 26,50,000/- paid to U.S. Dinesh without TDS for failure to deduct tax u/s. 194J of the Act.
The assessee carried the matter in appeal before the first appellate authority, but could not succeed. The ld. CIT(A), for the reasons stated in their appellate order rejected arguments of the assessee and sustained additions made by the AO towards disallowance of expenses for not deducting TDS u/s. 194J of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
The ld. Counsel for the assessee, submitted that the ld. CIT(A) erred in not appreciating the fact that the assessee has already disallowed amount paid to U.S. Dinesh sum of Rs. 26,50,000/- without TDS in the statement of total income as per the quantification of tax audit report. He further submitted that the assessee has disallowed a sum of Rs. 83,60,283/- for non-deduction of TDS and same sum was included in salary account. The ld. CIT(A), observed that amount paid to U.S. Dinesh is not salary, but professional charges and the same has not been disallowed by the assessee without appreciating the fact that amount paid to U.S. Dinesh is included in salary
:-7-: ITA. No:711/Chny/2023 account and assessee has already disallowed the same and added to total income.
The ld. DR, on the other hand supporting the order of the AO and CIT(A) submitted that, what was paid by the assessee is a professional charges on which TDS ought to have been deducted u/s. 194J of the Act. It is an admitted fact that the assessee has not deducted TDS and also not made disallowance of expenditure. Although, the assessee claims that said sum was included in salary account, but the CIT(A) has examined facts and given findings that amount paid to U.S. Dinesh is not included in salary account and thus, the AO has rightly disallowed 30% of expenditure for non-deduction of TDS. Therefore, the additions made by the AO should be upheld.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. There is no dispute with regard to the fact that the assessee has paid a sum of Rs. 26,50,000/- to U.S. Dinesh without deduction of tax at source u/s. 194J of the Act. It was the claim of the assessee before the AO that sum paid to U.S.
:-8-: ITA. No:711/Chny/2023 Dinesh is included in salary account and further the assessee itself has disallowed 30% of said expenditure and added back to total income in the statement of total income. We find that the assessee has filed a statement on total income along with return of income filed for assessment year 2017-18. In the Schedule-4 of computation, the assessee has made various disallowance of expenses u/s 40(a)(ia) of the Act, for non- deduction of TDS, which includes a sum of Rs. 83,60,283/-. The assessee claimed that sum of Rs. 26,50,000/- paid to U.S. Dinesh is included in salary account and the same has been already disallowed by the assessee. Facts are not clear. If the claim of the assessee is correct, then there cannot be any disallowance u/s. 40(a)(ia) of the Act, for very same amount on the basis of different interpretation that said sum is nothing but professional charges and the assessee ought to have deducted TDS u/s. 194J of the Act. In our considered view, whether payment made by the assessee is liable for TDS u/s. 192 or 194J of the Act, but disallowance contemplated u/s. 40(a)(ia) of the Act is only 30% of expenses debited to profit and loss account without deduction of tax at source. Since, the assessee claims to have already disallowed 30% of sum paid to U.S. Dinesh, once again making additions towards 30%
:-9-: ITA. No:711/Chny/2023 of said expenditure under different head of expenditure is incorrect. Therefore, we are of the considered view that the facts needs to be verified by the Assessing Officer and thus, we set aside the order passed by the ld. CIT(A) and restore the issue back to the file of the AO and direct the AO to re- examine the claim of the assessee and decide the issue in accordance with law.
In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the court on 11th August, 2023 at Chennai. Sd/- (मंजुनाथ. जी) (MANJUNATHA. G) लेखासद�य/Accountant Member चे�ई/Chennai, �दनांक/Dated, the 11th August, 2023 JPV आदेश की �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3.आयकर आयु�/CIT 4.. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF
:-10-: ITA. No:711/Chny/2023