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Income Tax Appellate Tribunal, “D” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-9, Kolkata [in short the ld CIT(A)] in Appeal No.58/CIT(A)- 9/Cir-33/2014-15/Kol dated 07.01.2016 against the order passed by the ACIT, Circle- 33, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 11.03.2013 for the Assessment Year 2010-11.
2. The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in upholding the disallowances made u/s 40a(ia) of the Act in the sums of Rs. 9,75,970/- towards payments made to consultants and others and Rs. 10,04,895/- towards payments made to labourers, in the facts and circumstances of the case.
2 Tarun Chakraborty A.Yr.2010-11 3. The brief facts of this issue is that the assessee is an individual doing his business as a Government and Civil Electrical Contractor for several years. The return of income for the assessment year 2010-11 was filed by the assessee on 30.09.2010 disclosing total income of Rs. 23,80,363/-. The Ld. AO during the course of scrutiny proceedings observed that the assessee furnished the details and evidences that were called for and had also produced books of accounts partially and had also furnished the entire bank statements, which were examined and test checked by the Ld. AO. The Ld. AO observed from the profit and loss account that the assessee had made the following payments without deduction of tax at source. Name of Party Nature of Payment Section Amount 1.A.K. Sarangi Accounting Charge 194 J 35,000/- 2. Dev & Co. Audit Charge 194 J 50,000/- 3. A.K. Sarangi Consultancy Fees 194 J 1,00,000/- 4. Various parties Commission 194 H 5,10,000/- (paid each to above Rs. 2,500/-) 5. Hari Ram Transport 194 C 1,20,970/- Nishad/Pachanan Transport Total Amount 9,75,970/- For want of satisfactory explanation with documentary evidences the Ld. AO disallowed the sum of Rs. 9,75,970/- as above u/s 40a(ia) of the Act.
3.1. The Ld. AO observed from the profit and loss account that the assessee had made payment of labour charges to the following parties without deduction of tax at source.
3 Tarun Chakraborty A.Yr.2010-11 Name of Party Section Amount Remarks 1.Swarup Sinha 194C 64,520/- 2. Amal Electric 194C 64,520/- 3. Madan Barui 194C 78,450/- 4. A.R. Enterprise 194C 70,800/- 5. Ganesh Majee 194C 1,54,000/- 6. Sajay Singh 194C 74,311/- 7. Zakir Hossain 194C 69,000/- 8. Metro Electric & Engg. Work 194C 73,000/- 9. S.P. Enterprise 194C 95,000/- 10. Popular Enterprise 194C 1,08,163/- 11. Paul Electric 194C 1,53,131/- Total Amount 10,04,895/- For want of satisfactory explanation with documentary evidences the Ld. AO disallowed the sum of Rs. 10,04,895/- as above u/s 40a(ia) of the Act.
Before the Ld. CIT(A), the assessee gave detailed explanation with regard to each and every payment of labour charges for each party and also payment of consultancy and audit fees charges to each party. The Ld. CIT(A) did not appreciate the said explanation and upheld the disallowances made by the Ld. AO. Aggrieved, the assessee is in appeal before us on the following grounds: 1. The Ld. CIT(Appeals)-9, Kolkata Rs. 9,75,970/- on account of payments made to consultants auditors and also to some small parties who are not in the mother organization, the payments have been made for and on behalf of the sister organization also.
The Ld. CIT(Appeals)-9, Kolkata had added 10,04,895/- for non-deduction of TDS from the payment to labours. Since, a large number of workers are involved for the job, the payments are made individually to workers in small amounts but to reduce the accounting entries the payments are shown in the name of their 3
The appellant craves leave to alter, amend and/to modify the ground of appeal before or at the time of hearing and also to adduce such other or further evidences as the appellant may be advised at the time of hearing.
We have heard the rival submissions. We find that the disallowance of expenses has been made only on account of non-deduction of tax at source u/s 40a(ia) of the Act. During the course of hearing, both the parties agreed for remanding of this appeal to the file of the Ld. AO to decide the appeal in accordance with 2nd Proviso to Section 40a(ia) of the Act. We find that the 2nd Proviso to Section 40a(ia), though introduced w.e.f. 01.04.2012, has been held to be retrospective in operation by the decision of Hon’ble Calcutta High Court in the case of Pr. CIT vs. Tirupati Construction in GA No. 2146 of 2016 with ITAT No. 287 of 2016 dated 23.08.2016. We also find that the Hon’ble Delhi High Court in the case of CIT vs. Ansal Land Mark Township Pvt. Ltd. reported in 377 ITR 635 (Del) had held the same. In view of the 2nd proviso to Section 40a(ia) of the Act read with Section 201 of the Act, we deem it fit and appropriate to remand this appeal to the file of the Ld. AO with the following directions: (i) The assessee has to produce the evidences to the effect that the recipients of the payments made by the assessee had indeed declared subject mentioned payment in their respective returns of income. (ii) In case, if the assessee is not able to provide the same, the Ld. AO is directed to ascertain the said facts in the process known to law. (iii) In case, if the subject mentioned recipients are not liable for taxation, on satisfactory ascertainment of this fact, the Ld. AO is directed to decide the issue.
We further direct that if any or all of the aforesaid conditions were satisfied, then there could be no disallowance u/s 40a(ia) of the Act in the hands of the assessee. Accordingly, the grounds raised by the assessee are allowed for statistical purposes. 4
Order pronounced in the Court on 14.11.2017