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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI V. DURGA RAO & SHRI G. MANJUNATHA
PER G. MANJUNATHA, AM: This appeal filed by the assessee is directed against order
passed by the learned Commissioner of Income Tax (Appeals)-
19, Chennai, dated 26.03.2019 and pertains to assessment
year 2010-11.
The assessee has raised following grounds of appeal:-
“1. The order of the Commissioner of Income Tax (Appeals) - 19, Chennai dated 24.03.2019 in I.T.A.No.13/16-17 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.
The CIT (Appeals) erred in confirming the validity of the re- assessment completed u/s 144 read with section 147 of the Act
ITA No. 1869/Chny/2019
in para 6.2 of the impugned order without assigning proper reasons and justification.
The CIT (Appeals) failed to appreciate that the assumption of jurisdiction u/s 147 of the Act for issuing reopening notice u/s 147 of the Act dated 30.03.2015 after the initiation of the search operation u/s 132 of the Act dated 6.3.2015 should be reckoned as bad in law and ought to have appreciated that after initiation of the search proceedings, the only course available for the Revenue to call back on completing the assessment only under section 153A of the Act in view of the overriding clause inbuilt therein.
The CIT (Appeals) failed to appreciate that there could not be parallel assessment proceedings including the initiation and completion of reassessment after search in view of the combined reading of the provisions governing search assessment and ought to have appreciated that the Assessing Officer was only empowered to assess or reassess the taxable total income pertaining to the assessment year under consideration only u/s 153A of the Act, thereby vitiating the decision rendered in para 6.6 of the impugned order.
The CIT (Appeals) failed to appreciate that in the light of the entire records available before him for completing the search assessment including the regular and search records, the presumption of lack of knowledge on the escaped income from the original assessment on the part of the Assessing Officer while negating the objection on completion of parallel assessment for the assessment year under consideration was wholly unjustified.
The CIT (Appeals) failed to appreciate that in any event the order of reassessment under consideration on various facts was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.
The CIT (Appeals) erred in sustaining the disallowance of Rs.3,33,166/- on the application of section 40 (a) (ia) of the Act for want of TDS in the computation of taxable total income without assigning proper reasons and justification.
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The CIT (Appeals) failed to appreciate that having not examined the components of the payments/interest to the account of M/s Sea Bird Transport including the applicability of TDS provisions in relation thereto, the disallowance made invoking section 40 (a) (ia) of the Act was wholly unjustified.
The CIT (Appeals) failed to appreciate that in any event having not examined the recipient assessment records in the context of the second proviso below section 40 (a) (ia) of the Act, the sustenance of disallowance mechanically in paras 6.3, 6.4 & 6.5 of the impugned order was wrong, erroneous, unjustified, incorrect and not sustainable in law.
The CIT (Appeals) failed to appreciate that there was no proper opportunity given before passing of the impugned order and any order passed in violation of the principles natural justice would be nullity in law.”
Brief facts of the case are that the assessee is engaged
in the business of transport contractor filed his return of income
for assessment year 2010-11 on 17.09.2010 declaring total
income of Rs. 17,34,810/-. The assessment has been
completed u/s.143(3) of the Income Tax Act, 1961, on
21.03.2013 and determined tax payable at Rs.62,270/-. The
case has been subsequently reopened u/s.148 of the Act and
assessment has been completed u/s.144 r.w.s. 147 of the
Income Tax Act, 1961, on 29.12.2016 and determined total
income at Rs.22,95,260/- by making additions towards
disallowance of certain expenses u/s.40(a)(ia) of the Act, for
4 ITA No. 1869/Chny/2019
non-deduction of TDS at Rs.3,33,166/-. The assessee carried
the matter in appeal before the learned CIT(A), but could not
succeed. The learned CIT(A), for reasons stated in his
appellate order, sustained additions made by the Assessing
Officer towards disallowance of business expenses
u/s.40(a)(ia) of the Act, and also rejected legal ground taken by
the assessee challenging validity of assessment order passed
u/s.144 r.w.s.147 of the Income Tax Act, 1961. Aggrieved by
the learned CIT(A) order, the assessee is in appeal before us.
The learned A.R for the assessee referring to grounds of
appeal filed by the assessee submitted that although the
assessee has taken legal ground challenging validity of
reassessment order passed u/s.144 r.w.s.147 of the Act, but
the issue involved on merits in appeal filed by the assessee is
disallowance of certain expenses u/s.40(a)(ia) of the Act, and
further, since the issue is covered by decision of the ITAT.,
Chennai, in the case of M/s.Mani Nagappa Motors Madurai
P.Ltd. Vs. ITO in ITA No.1612/Chny/2019 vide order dated 07.12.2021, he is willing to withdraw legal ground taken by the
assessee challenging validity of assessment order, if the issue
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involved on merits is set aside to the Assessing Officer to give
another opportunity to the assessee to demonstrate that payees
had duly offered payments in their income-tax returns and paid
due taxes thereon in terms of second proviso to section
40(a)(ia) and first proviso to sub-section (1) of Section 201 of
Income Tax Act, 1961.
The learned DR, on the other hand, fairly agreed that
there is no objection from the department, if the issue is set
aside to the file of the Assessing Officer for verification.
We have heard both the parties, perused material
available on record and gone through orders of the authorities
below. The only issue that needs to be resolved in the given
facts & circumstances of this case is disallowance of expenses
u/s.40(a)(ia) of the Act for non-deduction of TDS under
respective provisions of the Act. The assessee claims that
although it had not deducted TDS on those expenses which
have been disallowed by the Assessing Officer, but payees
have duly included sum paid by the assessee in return of
income filed by them for relevant assessment year and also
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paid due taxes thereon. Since, the assessee was not given
sufficient time to file necessary details, including income-tax
returns and certificate from payees to prove that payment
made by the assessee is part of their income tax returns, to
invoke second proviso to section 40(a)(ia) of the Act, the
issue may be set aside to the file of the Assessing Officer. We
find that an identical issue has been considered by the Tribunal
in the case of M/s.Mani Nagappa Motors Madurai P.Ltd. Vs.
ITO in ITA No.1612/Chny/2019 vide order dated 07.12.2021,
where under identical circumstances, the Tribunal set aside the
issue to file of the Assessing Officer for verification of claim of
the assessee that payees had duly offered payments in their
income tax returns and paid due taxes thereon. The relevant
findings of the Tribunal are as under:-
“4. We find that similar- issue has been dealt with by the Tribunal in the cited decision as under: -
We have considered the rival contentions and perused the orders of the authorities below. Disallowance u/s.40(a)(i) of the Act was fastened on the assessee for its failure to furnish Form 26A for the interest paid by it to M/s. Reliance Capital Ltd. As per the Id. Authorized Representative, assessee had addressed a letter, on 18.03.2016 to M/s. Reliance Capital Ltd for getting Form 26A, but the said company had not responded. Where the payee had included the amounts received as a part of its income and filed return after paying the taxes, assessee can always say that it cannot be deemed as one in default. By virtue of the
7 ITA No. 1869/Chny/2019
judgment of Hon‘ble Delhi High Court in the case of Ansal Land Mark Township P. Ltd (supra), first proviso to Section 201(1) as well as proviso to Section 4O(a)(ia) of the Act had to be icons trued retrospectively. Considering the facts and circumstances of the case, we are of the opinion that issue requires a fresh look by the Id. Assessing Officer. Ld. Assessing Officer can use the powers vested on him for getting the required information from M/s. Reliance Capital Ltd, so as to ascertain whether they had included the interest paid by the assessee, as a part of their income and filed return after paying due taxes. Ld. Assessing Officer can also direct the M/s. Reliance Capital Ltd to issue the certificate mandated in Annexure A to form 26A, if the said company falls to respond to assessee‘s request. Ld. Assessing Officer shall thereafter proceed in accordance with law.
We find that the assessee could escape the rigors of Sec.40(a)(ia) in terms of second proviso to Section 40(a)(ia) read with first proviso to sub-section (1) of Section 201 by demonstrating that the payee had duly offered the payment in their Income tax returns and paid due taxes thereon. In such a case, no disallowance u/s 40(a)(ia) is called for. As per the submissions of Ld. AR, the assessee could demonstrate the fulfillment of these conditions and is ready to file the requisite certificate I declaration from the payee. Therefore, we deem it fit to restore the matter back to the file of AO on similar lines as above to provide an opportunity to the assessee to demonstrate fulfillment of these conditions by adducing requisite documentary evidences. The Ld. AO is directed to consider the same and grant the benefit of proviso to the assessee, if otherwise available and found in order. The assessee, in turn, is directed to substantiate its claim in accordance with law. No other arguments have been urged before us.
The appeal stand allowed for statistical purposes.”
In this view of the matter and consistent with the view
taken by the co-ordinate Bench, we set aside order passed by
the learned CIT(A) and restore the issue to file of the Assessing
Officer and direct the Assessing Officer to reconsider the issue
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in light of claim of the assessee and also second proviso to
section 40(a)(ia) of the Act.
As regards legal grounds taken by the assessee
challenging validity of reassessment order passed u/s.144
r.w.s.147 of the Act, we find that the learned A.R has made a
statement at Bar that the assessee does not want to press the
legal ground and hence, those grounds taken by the assessee
challenging validity of assessment order passed u/s.144
r.w.s.147 of the Act has been dismissed as not pressed.
In the result, appeal filed by the assessee is treated as
allowed for statistical purposes. Order pronounced in the open court on 10th February, 2022
Sd/- Sd/- (वी. दुगा� राव) (जी. मंजुनाथ) (V. Durga Rao) (G. Manjunatha) #या�यक सद&य /Judicial Member लेखा सद&य / Accountant Member चे#नई/Chennai, )दनांक/Dated 10th February, 2022. DS आदेश क� ��त+ल,प अ-े,षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु.त (अपील)/CIT(A) 4. आयकर आयु.त/CIT 5. ,वभागीय ��त�न2ध/DR 6. गाड� फाईल/GF.