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Facts
The assessee, Raj Kumar Paliya, filed an appeal against the order of the CIT(A) which confirmed the disallowance of depreciation and disallowance of hire charges under Section 40(a)(ia) for the Assessment Year 2009-10. The original assessment order was passed ex-parte, and subsequent proceedings involved remands from the ITAT.
Held
The ITAT dismissed the ground related to depreciation as not pressed. For the disallowance under Section 40(a)(ia), the Tribunal upheld the CIT(A)'s order which restricted the disallowance to 30% of Rs. 2,16,333/-, holding that the assessee could not provide sufficient evidence to challenge the order.
Key Issues
1. Whether the disallowance of depreciation is justified. 2. Whether the disallowance of hire charges under Section 40(a)(ia) for non-deduction of TDS is justified.
Sections Cited
143(3), 254, 139, 142(1), 148, 147, 40(a)(ia), 194, 194C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 31.03.2025 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-3, Mumbai [“CIT(A)”] which in turn arises out of assessment-order dated 11.12.2018 passed by learned DCIT/ACIT, Itarsi [“AO”] u/s 143(3) r.w.s. 254 of Income- tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2009-10, the assessee has filed this appeal on following effective grounds:
“1. That on the facts and in the circumstances of the case of the assessee, the learned CIT(A) was not justified in confirming the disallowance of depreciation made by the AO.
That on the facts and in the circumstances of the case of the assessee, the learned CIT(A) was not justified in confirming disallowance partly made by the AO towards non deduction of TDS.” 1st Round of proceeding:
2.1 The assessee-individual filed his return of AY 2009-10 u/s 139 declaring a total income of Rs. 23,84,840/-. The case was selected for scrutiny and the AO issued notices u/s 143(2)/142(1). Finally, the AO completed assessment vide order dated 16.12.2011 u/s 143(3) after making an addition of Rs. 2,00,000/- and assessing total income at Rs. 25,84,840/-.
Subsequently, the AO issued notice u/s 148 to assessee in order to re-open assessee’s case u/s 147 on two issues, viz. (i) the assessee purchased Tata Dumpers and Tata Trucks costing Rs. 1,14,78,184/- and claimed full depreciation @ 15% whereas those assets were put to use for less than 180 days during the year and hence entitled to half depreciation @ 7.50%; this way the assessee had claimed excess depreciation of Rs. 8,60,865/-, and (ii)
Form No. 3CD (audit report filed by assessee) revealed that there was a failure on the part of assessee to deduct tax at source (TDS) out of payment of hire charges of vehicles amounting to Rs. 9,47,558/- which attracted disallowance u/s 40(a)(ia) but the disallowance was not made. However, finding no response from assessee, the AO passed ex-parte order of re- assessment dated 30.10.2014 u/s 147 r.w.s. 144 wherein he made a disallowance of Rs. 8,60,865/- (+) Rs. 9,47,558/-, aggregating to Rs. 18,08,423/- and thereby re-assessed total income at Rs. 43,93,263/-.
Page 2 of 11 2.3 The assessee went in next appeal in to ITAT, Indore whereupon the ITAT, vide order dated 21.09.2016, remanded both issues to AO for de novo consideration after allowing opportunities of being heard to assessee. The 1st round ended here. We re-produce below the relevant paras of order of ITAT for an immediate reference:
Paras relevant to the issue of Depreciation:
“9. The Ld. Counsel of the assessee submitted as under:- “The new asset being trucks and dumpers falls under the category of ‘New Commercial vehicle’. The rates of depreciation is effective from assessment year 2006-07 and the year under consideration is assessment year 2009-10. The list of assets with the date of purchase is as per table below :-
Page 3 of 11 AY 2009-10 Thus, the net excess depreciation claimed is only Rs. 66,781.82 (5,20,542.92 less 4,53,761.10). The vehicles were purchased from 30.10.08 to 30.03.2009 along with the invoice, registration certificate etc. (P.B. 32 to 58). The total of these assets is 1,14,78,184/- as per the chart.”
The ld. Departmental Representative has relied on the orders of the lower authorities.
We have considered the facts and materials available on record. We find that the additional evidences filed by the assessee were sent to the AO by the ld. CIT(A). However, the AO without examining the facts of the case on merit and the additional evidences regarding claim of purchase of trucks and depreciation thereon simply forwarded his remand report that the additional evidences may not be admitted. This action of the AO is not justifiable and no one should be punished without affording due hearing. Moreover, the assessment order was also made u/s 144 of the Act. Further, it is evidence from the chart that the items stated at Serial Nos. 5, 6 & 7 of chart in para 9 above were acquired on 13.02.2009 and 30.03.2009. Therefore, the AO has to examine the same whether these dumpers and trucks were actually put to use during the financial year ending on 31st March, 2009. Further, the assessee’s claim that depreciation is allowable @ 50% on the dumpers purchased during 01.01.2009 to 01.10.2009 is also to be examined at the end of the A.O. Therefore, this is restored to the file of the AO to examine the claim of depreciation in accordance with law. The AO shall provide necessary opportunity to the assessee.” Paras relevant to the issue of Disallowance u/s 40(a)(ia):
“11. Ground no.3 relates to disallowances on the hire charges amounting to Rs. 9,47,558/- u/s 40(a)(ia) of the Income-tax Act, 1961.
The facts of the case are that the AO has disallowed the payment of hire charges as according to him, no TDS was made u/s 194 of the Act. However, the assessee has submitted that the payment made to each person for hiring charges does not exceed to Rs. 1,20,000/- in the financial year under consideration. Therefore, there was no liability to deduct the TDS. Ld. Counsel of the assessee also submitted that no amount was payable as on 31st March, 2009. Therefore, provisions of Section 40(a)(ia) are not applicable in the light of the decision in the case of Dy. CIT vs. Veera Associates, 55 taxmann.com 466 (Vizag).
We have heard both the sides and find from the details that the claim of the assessee that the payment does not exceed Rs. 1.20 lakhs during the financial year under consideration, was not before the AO. Further, the AO has not examined this aspect while submitting his comments in the remand report dated 08.03.2016. Therefore, this aspect needs to be examined by the AO and if it is found that the payments to individuals does not exceed Rs. 1.20 lakhs during the financial year, then he may consider the same in accordance with law. Accordingly, this issue is set-aside to the file of the AO
Page 4 of 11 3.1 Pursuant to ITAT’s order, the AO resumed proceedings of assessment and passed a fresh assessment-order dated 11.12.2018 u/s 143(3) r.w.s.
254 of the Act. In the order so passed, the AO has again made disallowance of Rs. 8,60,864/- on account of depreciation. Further, the AO reduced/ made disallowance u/s 40(a)(ia) to the tune of Rs. 2,16,333/-. The relevant paras of AO’s order are re-produced below for an immediate reference:
Paras relevant to the issue of Depreciation:
“As per the directions of Hon'ble ITAT, the issue of depreciation has been restored to the file of the AO to examine the claim of depreciation in accordance with the law. The reply of the AR has been considered. The AR is correct that as per law the depreciation allowable on assets purchased from 01.01.2009 to 31.03.2009 was available at the rate of 50%. However, the claim of depreciation is according to what has been claimed in the return of income. Since, the assessee has claimed depreciation under the head plant and machinery entitled for depreciation 15 percent, therefore, the assessee cannot be given benefit of claim of depreciation under the head plant and machinery @ 50 percent. As per the block entitled for depreciation 15%, since, the aforementioned assets were used for less than 180 days, depreciation @ 7.5% was only available. Therefore, as per the claim of the assessee in the return of income regarding block entitled for depreciation, excess depreciation claimed amounting to Rs. 8,60,864/- is disallowed.” Paras relevant to the issue of Disallowance u/s 40(a)(ia):
“The Hon'ble ITAT in its order has stated that if it is found that the payments to individuals does not exceed Rs 1.2 lakhs during the financial year, then he may consider the same in accordance with law. The AR has submitted list of payments made to various parties for vehicle hiring charges along with relevant copy of certified ledgers. The payments as Page 5 of 11
per the vouchers have been made for hiring of JCB machine on hourly basis or drill machine on meters basis. The AR has submitted bills amounting to Rs. 6,45,575/- which is in the nature of rent and the payments made are below Rs 1,20,000/-. Therefore, since, payments made to individual parties was below Rs 1,20,000/- during the year, hence, there was not requirement for deduction of TDS u/s 40(a)(ia) on payments made of Rs. 6,45,575/-and the claim of the assessee is allowed. The AR has also submitted details of payments made of Rs. 3,01,083/- to various parties, However, no supporting bills/vouchers were presented. The AR has submitted that these payments were for vehicle hiring charges. The AR has not clarified as to whether such charges for hiring vehicle on rent or for carriage of goods. Therefore, on such rent paid, TDS was deductible u/s 194C of the Act. During AY 2009-10, TDS was required to be deducted on payments made to contractor exceeding Rs. 20,000/-. From the list submitted by the AR, out of payments made amounting to Rs. 3,01,983/-, Rs. 2,16,333/- were made to persons to whom payment during the year exceeded Rs. 20,000/- and TDS was required to be deducted u/s 194C. Therefore, in view of the above discussion, expenses on hiring of vehicles amounting to Rs. 2,16,333/- are disallowed u/s 40(a)(ia) of the Act as TDS was required to be deducted u/s 194C but was not deducted.” [emphasis supplied] 3.2 Aggrieved, the assessee again carried matter in appeal to CIT(A)
whereupon the CIT(A) upheld the disallowance of depreciation but restricted disallowance u/s 40(a)(ia) to 30% of Rs. 2,16,333/- taking into account the subsequent clarificatory amendment made by Govt. in section 40(a)(ia). The relevant paras of CIT(A)’s order are re-produced below:
Paras relevant to the issue of Depreciation:
“5.1 Depreciation on truck: - 5.1.1 The timeline of the issue is as under: - a. The appellant in his Return of Income claimed 15% depreciation on truck under the head 'Plant & Machinery. The claim was accepted during scrutiny assessment u/s 143(3) of the I.T. Act 1961.
Page 6 of 11 AY 2009-10 b. Thereafter, the assessment was reopening the as the depreciation allowable was 50% of 15% as the truck were used for less than 180 days. c. During re-assessment proceedings, the appellant claimed that the depreciation allowable is 50% and he is entitled to 50% of 50% depreciation i.e. 25%. d. The Assessing Officer did not allow the claim. e. The ITAT set aside the matter to the file of the Assessing Officer to examine the e. claim as per law. f. The Assessing Officer passed the order u/s 143(3) r w s 254 of the I.T. Act 1961 wherein claim of depreciation on truck was allowed @ 7.5% and 25%. g. The present appeal is against this order of the Assessing Officer. 5.1.2 The Assessing Officer made the claim in re-assessment proceedings. It may be appreciated that re-assessment proceedings are for the enhancement of income if any and not for the claim which the appellant did not make in the Return of Income. The appellant cannot seek review of the concluded items. I rely on the decision in the case of Commissioner of Income-tax vs. Sun Engineering Works (P.) Ltd. [1992] 64 Taxman 442 (SC)/[1992] 198 ITR 297 (SC)/[1992] 107 CTR 209 (SC) [17-09-1992] which is as under: -
[1992] 64 Taxman 442 (SC)/[1992] 198 ITR 297 (SC)/[1992] 107... [1992] 64 Taxman 442 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax V. Sun Engineering Works (P.) Ltd.* YOGESHWAR DAYAL AND A.S. ANAND, JJ. CIVIL APPEAL NOS, 3251-52 OF 1979 SEPTEMBER 17, 1992 Section 147 of the Income-tax Act, 1961 Reassessment General Assessment years 1960-61 and 1961-62-Whether proceedings under section 147 are for benefit of revenue and not an assessee and are aimed at gathering 'escaped income' of an assessee, and same cannot be allowed to be converted as 'revisional' or 'review' proceedings - Held, yes - Whether claims which have been disallowed in original assessment proceeding can be permitted to be Page 7 of 11 AY 2009-10 reagitated on assessment being reopened for bringing to tax certain income which had escaped assessment Held, no Whether, a matter not agitated in concluded original assessment proceedings also cannot be permitted to be agitated in reassessment proceedings unless relatable to item sought to be taxed as 'escaped income' Held, yes Whether, therefore, in reassessment proceedings under section 147 assessee cannot seek a review of concluded item, unconnected with escapement of income for purpose of computation of escaped income Held, yes.
5.1.3 In view of the above, the action of the Assessing Officer not to review the issue which are already concluded in original assessment proceedings, is upheld. Therefore, the appellant's claim to allow depreciation on truck at 25% is rejected. 5.1.4 This ground of appeal is dismissed.” Paras relevant to the issue of Disallowance u/s 40(a)(ia):
“5.2 Disallowance u/s 40(a)(ia): - 5.2.1 Subsequent to the setting aside the issue by the ITAT, the Assessing Officer noticed that the appellant was required to deduct T.D.S. on payment of Rs. 2,16,333/- and therefore disallowed the same u/s 40(a)(ia) of the I.T. Act 1961. 5.2.2 The appellant in his submission did not provide the details which were furnished before the Assessing Officer and not considered by the Assessing Officer. Even in his submission, no party wise details, nature of work done, corresponding evidence were provided. Under the circumstances, the action of the Assessing Officer to disallow the same u/s 40(a)(ia) is confirmed. 5.2.3 The appellant also argued that 30% thereof should have been disallowed though the provision related to 30% disallowance came into effect from A.Y. 2015-16. The appellant relied upon the decision in the case of DCIT v L.T. Foods Ltd reported in (2020) 208 TTJ (Del) 137. 5.2.4 Respectfully following the decision in the case of DCIT v L.T. Foods Ltd reported in (2020) 208 TTJ (Del) 137, the disallowance is restricted to 30%. 5.2.5 In view of the above, this ground of appeal is partly allowed.” 3.3 Still aggrieved, the assessee has again come up before ITAT in present appeal. Accordingly, this is 2nd round before ITAT.
We have heard learned Representatives of both sides and carefully perused all orders narrated above and the facts of case in the light of provisions of law and judicial precedents cited before us. We present our adjudication in subsequent paras.
Ground No. 1:
This ground relates to the issue of depreciation. The issue was deliberated at length during hearing. There was a discussion on block system of assets for the purpose of depreciation, W.D.V., etc. under the scheme of Income-tax. Subsequent to closure of hearing, the Ld. AR for assessee has move following application for not pressing this ground:
In view of the Application filed by Ld. AR for not pressing this ground, the Ground No. 1 is dismissed as not-pressed.
Ground No. 2:
This ground relates to the issue of disallowance u/s 40(a)(ia) for non- deduction of tax at source. We find that the AO initially made a disallowance of Rs. 9,47,558/- in assessment-order u/s 147. Subsequently, pursuant to ITAT’s direction, the AO re-examined issue; granted opportunity to assessee to file details/documents and reduced the quantum of disallowance substantially. While carrying out this exercise, the AO considered the assessee’s submissions; filtered the payments exceeding Rs. 20,000/- from the details of payments submitted by assessee and retained a partial disallowance of Rs. 2,16,333/- u/s 194C observing that the assessee did not file supporting bills/vouchers and did not clarify as to whether such charges were paid for hiring vehicle on rent or for carriage of goods. Thereafter, in first-appeal, the CIT(A) observed in Para 5.2.2 of impugned order that the assessee did not file party-wise details, nature of work done and corresponding evidences. On that basis, the CIT(A) confirmed the action of AO in retaining the disallowance of Rs. 2,16,333/-. However, the CIT(A) accepted assessee’s alternative legal submission and restricted the quantum of disallowance to 30% in contrast to 100% made by AO taking into account the subsequent clarificatory amendment made by Govt. in section 40(a)(ia) as interpreted by ITAT, Delhi in DCIT Vs. L.T. Foods Ltd (2020) 208 TTJ (Del)
Thus, after CIT(A)’s order, the effective disallowance remains a meagre
Page 10 of 11 AY 2009-10 amount of Rs. 64,900/- (30% of Rs. 2,16,333/-) only as against the disallowance of Rs. 9,47,558/- initially made. Although the Ld. AR for assessee has pleaded the grievance of assessee to the best of his ability but was unable to advance any clinching evidence or acceptable reason to establish that the order passed by CIT(A) is bad. Accordingly, we do not have valid or strong reason to interfere with the impugned order passed by CIT(A) qua this issue. We, therefore, uphold the CIT(A)’s order and this Ground No. 2 is also dismissed.
Resultantly, this appeal is dismissed.
Order pronounced in open court on 03/02/2026