RANJIT SINGH MANKOO,MUMBAI vs. I.TO. 23(1)(1), MUMBAI

The assessee is contesting addition of ` 35,90,438/- made by the Assessing Officer u/s. 40(a)(ia) of the Act for non deduction of tax at source on the above said amount.

Learned AR submitted that the Assessing Officer has considered the impugned payment as payment made towards labour charges and has taken the view that the assessee is liable to deduct tax at source u/s. 194C of the Act. Accordingly, the Assessing Officer has disallowed the above said amount u/s. 40(a)(ia) of the Act, as the assessee did not deduct tax at source. The contention of learned AR is that they are not labour charges, but they

On the contrary, learned Departmental Representative submitted that the disallowance was made, since the assessee has debited the impugned amount under the head “labour charges” and he did not deduct tax at source from the said payment.

Having heard the rival contentions, we are of the view that the assessee should be provided an opportunity to explain its case, since the very nature of payment is being disputed by the assessee. Even though the assessee has accounted the impugned payment as “labour charges”, yet, in our view, the entries made in the books of account are not determinative of nature of transactions. The assessee, in our view, could still show the true nature of transactions by producing necessary evidences. Accordingly, we set aside the order passed by learned CIT(A) on this issue and restore the same to the file of the Assessing Officer with the direction to examine the same afresh after affording adequate opportunity of being heard to the assessee.

In the result, appeal of the assessee is treated as allowed for statistical purposes.