MIRZA JAHED BAIG,,AURANGABAD vs. ASSISTANT COMMISSIONER OF INCOME-TAX,, AURANGABAD

This appeal by the assessee against the order dated 18-01-2017 passed by the Commissioner of Income Tax (Appeals)-2, Aurangabad [‘CIT(A)’] for assessment year 2009-10.

The ld. AR submits that the assessee is not interested to prosecute ground No. 2 and prayed to dismiss the same as not pressed. Accordingly, ground No. 2 is dismissed as not pressed.

Ground Nos. 1 and 3 are interlinked which can be discussed collectively. In ground No. 1, the assessee challenged the action of CIT(A) in confirming the addition made by invoking the provisions u/s. 40(a)(ia) of the Act. In ground No. 3, the assessee challenged the action of CIT(A) for not considering the second proviso to section 40(a)(ia) of the Act, which in our opinion is a legal ground concerning invocation of provisions u/s. 40(a)(ia) of the Act. In view of the same, we shall discuss the facts of the case concerning the invocation of section 40(a)(ia) of the Act.

Heard both the parties and perused the material available on record. We note that the assessee is an individual filed return of income declaring total income of Rs.33,65,370/- and agricultural income at Rs.78,620/-. The AO determined the same at Rs.5,09,44,738/- inter alia making disallowance for violation of section 194C of the Act to an extent of Rs.4,01,08,595/- and an amount of Rs.73,56,773/- for violation of section 194I of the Act by invoking provisions u/s. 40(a)(ia) of the Act vide its order u/s. 143(3) of the Act.

In First Appellate proceedings, the CIT(A) allowed relief to an extent of Rs.1,78,45,723/- u/s. 194C of the Act and Rs.63,43,270/- u/s. 194I of the Act.

Both, the assessee and Revenue filed appeals before the Tribunal. The Tribunal held the order of CIT(A) is not justified and considering the nature of business activity of the assessee and also furnishing of additional evidences remanded the matter to the file of AO on the issue of applicability of provisions u/s. 194C of the Act for fresh adjudication. Regarding the applicability of section 194I the Tribunal held the order of CIT(A) is not justified by reversing the same held the AO is correct in making addition of Rs.73,56,773/- u/s. 194I of the Act.

In giving effect to the order of Tribunal, the AO held there was no contractor-contractee relation and the provision of section 194C of the Act is not applicable. The AO computed the total income of the assessee at Para No. 8 in Page No. 3 of the assessment order dated 30-03-2016 passed u/s. 143(3) r.w.s. 254 of the Act which are as under : Assessed Income as per Order dtd. 5,09,44,738/- 01.12.2011 Less : Relief Granted by CIT(A) vide 2,43,02,993/- order dated 10.01.2013 Income as per order giving effect to the 2,66,41,745/- CIT(A)’s order dtd. 10.01.2013 Less : Relief Granted by ITAT by Net Relief out of 2,22,62,872/- restoring the issue of adjudicating addn. of afresh the addition of Rs.4,01,08,595/- Rs.4,01,08,595/- instead of amount of Rs.2,22,62,872/- that was confirmed by the CIT(A) Add : Addition confirmed by ITAT 63,43,270/- Assessed Income 1,07,22,143/- Rounded off to 1,07,22,100/- Agricultural Income 78,620/-

On perusal of the above, we note that the AO assessed the total income of the assessee at Rs.1,07,22,100/- by giving relief to an extent of Rs.2,43,02,993/- by the CIT(A) vide its order dated 10-01-2013. Further, allowed relief granted by the Tribunal to an extent of Rs.2,22,62,872/-. Therefore, the AO given effect to the orders of CIT(A) and Tribunal. The AO also added an amount of Rs.63,43,270/- u/s. 194I of the Act, thereby, determined the income of the assessee at Rs.1,07,22,100/-.

Before the CIT(A), the assessee challenged the action of AO in making addition u/s. 40(a)(ia) of the Act for violation of section 194C of the Act. The assessee also prayed applicability of second proviso inserted to provisions u/s. 40(A)(ia) of the Act contending the same should be interpreted and held to be applicable with retrospective effect from 01-04- 2005. The CIT(A) confirmed the order of AO.

Before us, as discussed above, the ld. AR contends that the effect of second proviso to section 40(a)(ia) of the Act that even if payer fails to deduct tax at source of any sum paid to the payee if the payee are admitted the income in the return filed and had paid tax thereon, then it is admitted that the payer has deducted and paid the tax on such sum on the date of furnishing the return by the resident payee. The ld. AR vehemently argued in such eventuality the provisions u/s. 40(a)(ia) of the Act would not be invoked in view of the amendment by way of insertion of second proviso to section 40(a)(ia) of the Act. He argued that the issue requires fresh adjudication in the light of the fact that the AO will have to carry necessary verification in order to find out whether the payee admitted the receipt from assessee as income in accounts or not and prayed to remand the matter to the file of AO for fresh adjudication.

We note that in the first round of litigation the Tribunal restored the order of AO in respect of addition made u/s. 40(a)(ia) of the Act for violation of section 194I of the Act. Admittedly, the assessee did not challenge the said addition before the higher forum. Before us, now, by way of legal ground, the ld. AR contends that the applicability of section proviso inserted to section 40(A)(ia) of the Act, in our opinion, when the said addition was confirmed by the ITAT, there is no scope again sending the issue to the file of AO will arise. The CIT(A) also discussed the same vide Para No. 7 of the impugned order and clearly held the said issue was not open to the AO for fresh adjudication in view of the issue attained finality by the order of ITAT. Therefore, we find no infirmity in the order of CIT(A) in this regard and the grounds raised by the assessee are dismissed.

In the result, the appeal of assessee is dismissed.