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Facts
The assessee, a joint venture, faced a disallowance of Rs. 10.62 crores under Section 40(a)(ia) for not deducting TDS on a sub-contract payment to a JV partner. During the first appeal, the assessee sought to admit additional evidence (Form 26AS) to prove the payee had already paid the tax, but the CIT(A) rejected this request.
Held
The Tribunal held that the CIT(A) was incorrect in rejecting the additional evidence on hyper-technical grounds, emphasizing that procedural technicalities should not hinder substantive justice. The matter was remanded to the CIT(A) with directions to admit the additional evidence (Form 26AS) and re-adjudicate the issue afresh after providing a reasonable hearing opportunity to both parties.
Key Issues
Whether the CIT(A) was justified in rejecting the assessee's additional evidence (Form 26AS) under Rule 46A of the Income-tax Rules, 1962, to substantiate tax payment by the payee for a Section 40(a)(ia) disallowance.
Sections Cited
40(a)(ia), 143(3), Rule 46A, 142(1), 271(1)(c)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against order dated 05.01.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2014-15, raising following grounds:
Ground No. 1:
On the facts and circumstances of the case and in law, Ld. CIT(A) On the facts and circumstances of the case and in law, Ld. CIT(A) On the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming order passed by Ld. AO which is against erred in confirming order passed by Ld. AO which is against erred in confirming order passed by Ld. AO which is against 'Principle of Natural Justice'. Natural Justice'. Ground No. 2: Ground No. 2: On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO which has resulted in erred in upholding the decision of Ld. AO which has resulted in erred in upholding the decision of Ld. AO which has resulted in disallowance of construction expenses paid of Rs. 10,62,34,619 disallowance of construction expenses paid of Rs. 10,62,34,619 disallowance of construction expenses paid of Rs. 10,62,34,619 made u/s 40(a) (ia) of the Act made u/s 40(a) (ia) of the Act and added back in the total income of and added back in the total income of the appellant. The appellant prays that such disallowance of such the appellant. The appellant prays that such disallowance of such the appellant. The appellant prays that such disallowance of such expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may expenditure of Rs. 10,62,34,619 made u/s 40(a)(ia) of the Act may kindly be deleted as no such expenditure is disallowable as per the kindly be deleted as no such expenditure is disallowable as per the kindly be deleted as no such expenditure is disallowable as per the provisions of the provisions of the Income Tax Act ('1961'). Ground No. 3: Ground No. 3: On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the decision of Ld. AO wherein it has made erred in upholding the decision of Ld. AO wherein it has made erred in upholding the decision of Ld. AO wherein it has made disallowance of Rs. 10,62,34,619 and added back to the income of disallowance of Rs. 10,62,34,619 and added back to the income of disallowance of Rs. 10,62,34,619 and added back to the income of the Act only on the ba the Act only on the basis of nonfulfillment of procedural sis of nonfulfillment of procedural requirement ignoring ignoring the the submission submission made made by by M/s M/s Unity Unity Infraprojects Limited regarding inclusion of contract charges in the Infraprojects Limited regarding inclusion of contract charges in the Infraprojects Limited regarding inclusion of contract charges in the total income and payment of tax due on total income. total income and payment of tax due on total income. Ground No. 4: Ground No. 4: On the facts and circumstances On the facts and circumstances of the case and in law, Ld. CIT (A) of the case and in law, Ld. CIT (A) erred in upholding the business income determined erroneously by erred in upholding the business income determined erroneously by erred in upholding the business income determined erroneously by Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while Ld. AO in its assessment order, amounting to Rs. 1,04,06,646 while the actual business income as per ITR filed of A.Y. 2014 the actual business income as per ITR filed of A.Y. 2014 the actual business income as per ITR filed of A.Y. 2014-15 amounts to Rs. 32,58,079 on to Rs. 32,58,079 only. The appellant prays that this arithmetical error ly. The appellant prays that this arithmetical error may kindly be rectified. may kindly be rectified. Ground No. 5: Ground No. 5: On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) On the facts and circumstances of the case and in law, Ld. CIT (A) erred in upholding the income from other sources determined erred in upholding the income from other sources determined erred in upholding the income from other sources determined erroneously by Ld. AO in its assessme erroneously by Ld. AO in its assessment order, amounting to Rs. nt order, amounting to Rs. 6,01,718 while the actual income from other sources as per ITR filed 6,01,718 while the actual income from other sources as per ITR filed 6,01,718 while the actual income from other sources as per ITR filed of A.Y. 2014- -15 amounts to Rs. 4,15,048 only. The appellant prays 15 amounts to Rs. 4,15,048 only. The appellant prays that this arithmetical error may kindly be rectified. that this arithmetical error may kindly be rectified. Ground No. 6: Ground No. 6:
On the facts and circumsta On the facts and circumstances of the case and in law, Ld. CIT(A) nces of the case and in law, Ld. CIT(A) erred in confirming the demand erroneously raised by the Ld. AO erred in confirming the demand erroneously raised by the Ld. AO erred in confirming the demand erroneously raised by the Ld. AO without perusing the facts and submission made by the appellant without perusing the facts and submission made by the appellant without perusing the facts and submission made by the appellant during the course of first appellate proceedings. The appellant prays during the course of first appellate proceedings. The appellant prays during the course of first appellate proceedings. The appellant prays that such erroneou that such erroneous demand raised may kindly be altered or deleted s demand raised may kindly be altered or deleted as per the factual evidence of the case. as per the factual evidence of the case. Ground No. 7: Ground No. 7: On the facts and circumstances of the case and in law, Ld. CIT(A) On the facts and circumstances of the case and in law, Ld. CIT(A) On the facts and circumstances of the case and in law, Ld. CIT(A) erred in upholding the decision of Ld. AO which has made erred in upholding the decision of Ld. AO which has made erred in upholding the decision of Ld. AO which has made disallowance of expenditure w disallowance of expenditure without appreciating the facts of the ithout appreciating the facts of the case. Ground No. 8: Ground No. 8: In consequence of the above ground, Ld. CIT(A) erred in upholding the In consequence of the above ground, Ld. CIT(A) erred in upholding the In consequence of the above ground, Ld. CIT(A) erred in upholding the action of Ld. AO which is initiating penalty proceedings u/s action of Ld. AO which is initiating penalty proceedings u/s action of Ld. AO which is initiating penalty proceedings u/s 271(1)(c) of the the Act.
Briefly stated, the facts of the present Briefly stated, the facts of the present case are that the case are that the assessee is a joint venture entity formed between M/s Unity Infra assessee is a joint venture entity formed between M/s Unity Infra assessee is a joint venture entity formed between M/s Unity Infra Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant Project Ltd. and M/s SMC Infrastructure Ltd. During the relevant assessment year, the assessee was engaged in the business of assessment year, the assessee was engaged in the business of assessment year, the assessee was engaged in the business of executing civil contracts. The assessee filed executing civil contracts. The assessee filed its return of income its return of income declaring declaring declaring a a a total total total income income income of of of Rs. Rs. Rs. 36,73,130/ 36,73,130/-, 36,73,130/ which was subsequently selected for scrutiny assessment. Statutory notices subsequently selected for scrutiny assessment. Statutory notices subsequently selected for scrutiny assessment. Statutory notices were duly issued and complied with. During the course of scrutiny were duly issued and complied with. During the course of scrutiny were duly issued and complied with. During the course of scrutiny proceedings, the Assessing Officer noted that the assessee had proceedings, the Assessing Officer noted that the proceedings, the Assessing Officer noted that the awarded a sub-contract amounting to Rs. 10,62,34,619/ contract amounting to Rs. 10,62,34,619/- to one of contract amounting to Rs. 10,62,34,619/ its joint venture partners, M/s Unity Infra Project Ltd. However, no its joint venture partners, M/s Unity Infra Project Ltd. However, no its joint venture partners, M/s Unity Infra Project Ltd. However, no tax was deducted at source on the said sub tax was deducted at source on the said sub-contract payment. contract payment. Consequently, the Assessing Officer invoked the provisions of Consequently, the Assessing Officer invoked the Consequently, the Assessing Officer invoked the section 40(a)(ia) of the Act section 40(a)(ia) of the Act , disallowing the said amount of Rs. , disallowing the said amount of Rs. 10.62 crores and completed the assessment under section 143(3) of 10.62 crores and completed the assessment under section 143(3) of 10.62 crores and completed the assessment under section 143(3) of the Act vide order dated 30.11.2016. the Act vide order dated 30.11.2016.
2.1 Aggrieved by the said disallowance, the assessee preferred an Aggrieved by the said disallowance, the assessee preferred an Aggrieved by the said disallowance, the assessee preferred an appeal before the Ld. CIT(A) Ld. CIT(A). In the course of appellate proceedings, . In the course of appellate proceedings, the assessee filed an application under Rule 46A of the Income-tax the assessee filed an application under Rule 46A of the Income the assessee filed an application under Rule 46A of the Income Rules, 1962 (hereinafter referred to as ‘the Rules’), seeking Rules, 1962 (hereinafter referred to as ‘the Rules’), see Rules, 1962 (hereinafter referred to as ‘the Rules’), see admission of additional evidence to substantiate that the payee, admission of additional evidence to substantiate that the payee, admission of additional evidence to substantiate that the payee, M/s Unity Infra Project Ltd., had already discharged its tax liability M/s Unity Infra Project Ltd., had already discharged its tax liability M/s Unity Infra Project Ltd., had already discharged its tax liability on the said sub-contract amount. In support of this claim, the contract amount. In support of this claim, the contract amount. In support of this claim, the assessee furnished a certificate in Form No. 26AS, as prescribed assessee furnished a certificate in Form No. 26AS, a assessee furnished a certificate in Form No. 26AS, a under the proviso to section 40(a)(ia) of the Act, and requested its under the proviso to section 40(a)(ia) of the Act, and requested its under the proviso to section 40(a)(ia) of the Act, and requested its admission as additional evidence. The assessee further explained admission as additional evidence. The assessee further explained admission as additional evidence. The assessee further explained the reasons for its inability to furnish the said evidence before the the reasons for its inability to furnish the said evidence before the the reasons for its inability to furnish the said evidence before the Assessing Officer during the assessment Assessing Officer during the assessment proceedings. The learned proceedings. The learned CIT(A), upon receipt of the additional evidence, called for objections CIT(A), upon receipt of the additional evidence, called for objections CIT(A), upon receipt of the additional evidence, called for objections from the Assessing Officer. The Assessing Officer, in the remand from the Assessing Officer. The Assessing Officer, in the remand from the Assessing Officer. The Assessing Officer, in the remand report, objected to the admission of the said additional evidence. report, objected to the admission of the said additional evidence. report, objected to the admission of the said additional evidence. After considering the objec After considering the objections raised, the learned CIT(A) declined tions raised, the learned CIT(A) declined to admit the additional evidence, relying upon the judgment of the to admit the additional evidence, relying upon the judgment of the to admit the additional evidence, relying upon the judgment of the Hon’ble Delhi High Court in Hon’ble Delhi High Court in CIT v. Manish Build Well (P.) Ltd. CIT v. Manish Build Well (P.) Ltd. [2011] 204 Taxman 106 (Delhi), among other judicial precedents cited in 204 Taxman 106 (Delhi), among other judicial precedents cited in 204 Taxman 106 (Delhi), among other judicial precedents cited in the impugned order.
2.2 Thus, the present appeal raises the crucial issue of whether the 2.2 Thus, the present appeal raises the crucial issue of whether the 2.2 Thus, the present appeal raises the crucial issue of whether the learned CIT(A) was justified in rejecting the additional evidence filed learned CIT(A) was justified in rejecting the additional evidence filed learned CIT(A) was justified in rejecting the additional evidence filed by the assessee under Rule 46A of the Rules and whether the by the assessee under Rule 46A of the Rules and whether the by the assessee under Rule 46A of the Rules and whether the disallowance under section 40(a)(ia) of the Act disallowance under section 40(a)(ia) of the Act was warranted in the was warranted in the facts and circumstances of the case. facts and circumstances of the case.
Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 35 comprising the copy of the Form No. 26AS containing pages 1 to 35 comprising the copy of the Form No. 26AS containing pages 1 to 35 comprising the copy of the Form No. 26AS issued by the Chartered Accountant. issued by the Chartered Accountant.
We have heard rival submissions of the parties and perused rival submissions of the parties and perused the relevant materials on record the relevant materials on record. The limited question in the matter . The limited question in the matter is eligibility of additional evidence for admission in terms of Rule is eligibility of additional evidence for admission in terms of Rule is eligibility of additional evidence for admission in terms of Rule 46A of the Rules. The Ld. CIT(A) has declined to admit the 46A of the Rules. The Ld. CIT(A) has declined 46A of the Rules. The Ld. CIT(A) has declined additional evidence observing as under: evidence observing as under:
“8.3 During the course of appellate proceedings, I have carefully 8.3 During the course of appellate proceedings, I have carefully 8.3 During the course of appellate proceedings, I have carefully considered the assessment order, submissions of the appellant, considered the assessment order, submissions of the appellant, considered the assessment order, submissions of the appellant, Remand report, Rejoinder to remand report submitted by the Remand report, Rejoinder to remand report submitted by the Remand report, Rejoinder to remand report submitted by the appellant and the grounds of appeal. Th appellant and the grounds of appeal. The reply submitted by the e reply submitted by the appellant with regard to additional evidence is not tenable since, the appellant with regard to additional evidence is not tenable since, the appellant with regard to additional evidence is not tenable since, the AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails AO issued notice u/s 142(1) on 17.10.2016 and subsequent mails sent on 01.11.2016 & 12.11.2016 required to explain as to why the sent on 01.11.2016 & 12.11.2016 required to explain as to why the sent on 01.11.2016 & 12.11.2016 required to explain as to why the said sub-contract charges of Rs contract charges of Rs. 10.62 crores should not be . 10.62 crores should not be disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on disallowed u/s 40(a)(ia) of the Act. The order passed u/s 143(3) on 30.11.2016 by which AO has given ample of time i.e. 43 days (from 30.11.2016 by which AO has given ample of time i.e. 43 days (from 30.11.2016 by which AO has given ample of time i.e. 43 days (from 18.10.2016 to 29.11.2016) which is more than sufficient time to 18.10.2016 to 29.11.2016) which is more than sufficient time to 18.10.2016 to 29.11.2016) which is more than sufficient time to submit required details. The submit required details. The reason given by appellant that the reason given by appellant that the Chartered Accountant had to examine several documents, books of Chartered Accountant had to examine several documents, books of Chartered Accountant had to examine several documents, books of accounts, records etc of the party in order to satisfy himself about the accounts, records etc of the party in order to satisfy himself about the accounts, records etc of the party in order to satisfy himself about the matter and only then he could issue Form 26A is not sufficient cause matter and only then he could issue Form 26A is not sufficient cause matter and only then he could issue Form 26A is not sufficient cause to admit additi to admit additional evidence as the same is not tenable. In my view onal evidence as the same is not tenable. In my view that does not constitute sufficient cause as required under Rule 46A that does not constitute sufficient cause as required under Rule 46A that does not constitute sufficient cause as required under Rule 46A of the Income Tax Rules, 1962. In my opinion, there is no case for the of the Income Tax Rules, 1962. In my opinion, there is no case for the of the Income Tax Rules, 1962. In my opinion, there is no case for the appellant to state that the appellant was prevented by sufficie appellant to state that the appellant was prevented by sufficie appellant to state that the appellant was prevented by sufficient cause from producing the said evidence during assessment cause from producing the said evidence during assessment cause from producing the said evidence during assessment proceedings. The assessee was given many opportunities which are proceedings. The assessee was given many opportunities which are proceedings. The assessee was given many opportunities which are documented in the assessment order and are also verifiable documented in the assessment order and are also verifiable documented in the assessment order and are also verifiable from the record. record.”
4.1 Having carefully examined the matter, we find that Having carefully examined the matter, we find that Having carefully examined the matter, we find that the learned CIT(A) declined to admit the additional evidence on the ground that CIT(A) declined to admit the additional evidence on the ground that CIT(A) declined to admit the additional evidence on the ground that a period of 43 days was sufficient for the assessee to procure and a period of 43 days was sufficient for the assessee to procure and a period of 43 days was sufficient for the assessee to procure and submit the requisite certificate from the Chartered Accountant. submit the requisite certificate from the Chartered Accountant. submit the requisite certificate from the Chartered Accountant. However, in our considered view, the require However, in our considered view, the requirement of obtaining such ment of obtaining such a certificate is contingent upon the facts and circumstances of each a certificate is contingent upon the facts and circumstances of each a certificate is contingent upon the facts and circumstances of each case, and no rigid or inflexible timeframe can be universally case, and no rigid or inflexible timeframe can be universally case, and no rigid or inflexible timeframe can be universally prescribed. The possibility that the assessee may have required prescribed. The possibility that the assessee may have required prescribed. The possibility that the assessee may have required additional time to secure the necessar additional time to secure the necessary certification cannot be y certification cannot be disregarded. The assessee has placed on record a copy of Form No. The assessee has placed on record a copy of Form No. The assessee has placed on record a copy of Form No. 26A, which is available at pages 2 to 5 of the Paper Book. The said 26A, which is available at pages 2 to 5 of the Paper Book. The said 26A, which is available at pages 2 to 5 of the Paper Book. The said certificate, issued by a duly qualified Chartered Accountant, certificate, issued by a duly qualified Chartered Accountant, certificate, issued by a duly qualified Chartered Accountant, unequivocally supports the content unequivocally supports the contention that the assessee has ion that the assessee has satisfied all conditions prescribed under the proviso to section satisfied all conditions prescribed under the proviso to section satisfied all conditions prescribed under the proviso to section 40(a)(ia) of the Act. It is a well 40(a)(ia) of the Act. It is a well-settled principle that procedural settled principle that procedural technicalities should not be allowed to defeat the cause of technicalities should not be allowed to defeat the cause of technicalities should not be allowed to defeat the cause of substantive justice. In the present substantive justice. In the present case, the denial of admission of case, the denial of admission of such evidence merely on a hyper such evidence merely on a hyper-technical ground would result in technical ground would result in grave prejudice to the assessee and frustrate the very purpose of grave prejudice to the assessee and frustrate the very purpose of grave prejudice to the assessee and frustrate the very purpose of the statutory provision. the statutory provision. In light of the foregoing discussion and in In light of the foregoing discussion and in the interest of substan the interest of substantial justice, we deem it appropriate to set tial justice, we deem it appropriate to set aside the impugned order of the learned CIT(A) and remand the aside the impugned order of the learned CIT(A) and remand the aside the impugned order of the learned CIT(A) and remand the matter back to him for reconsideration. The learned CIT(A) is matter back to him for reconsideration. The learned CIT(A) is matter back to him for reconsideration. The learned CIT(A) is directed to admit the additional evidence and adjudicate the issue directed to admit the additional evidence and adjudicate the issue directed to admit the additional evidence and adjudicate the issue afresh, strictly in accordance with law, after affording a reasonable ccordance with law, after affording a reasonable ccordance with law, after affording a reasonable opportunity of hearing to both the Assessing Officer and the opportunity of hearing to both the Assessing Officer and the opportunity of hearing to both the Assessing Officer and the assessee. We order accordingly. We order accordingly. The grounds of appeal of the The grounds of appeal of the assessee are accordingly allowed for statistical purposes. assessee are accordingly allowed for statistical purposes. assessee are accordingly allowed for statistical purposes.
In the result, the app In the result, the appeal of the assessee is allowed for eal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on nounced in the open Court on 21/02/2025. /02/2025.