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Issues: (i) Whether the inordinate delay in filing the appeal against the revisionary order under section 263 of the Income-tax Act, 1961 could be condoned; (ii) Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was attracted on the sub-contract payment, and whether the matter required verification of TDS compliance.
Issue (i): Whether the inordinate delay in filing the appeal against the revisionary order under section 263 of the Income-tax Act, 1961 could be condoned.
Analysis: The delay was substantial and the explanation that the assessee bona fide pursued an alternate appellate remedy was found unsupported by material. The record did not establish any competent professional advice or other evidence showing a genuine basis for the claimed belief. Inordinate delay, unlike a short delay, required a cautious approach, and no sufficient cause was shown.
Conclusion: The delay was not condoned and the appeal against the revisionary order was dismissed.
Issue (ii): Whether disallowance under section 40(a)(ia) of the Income-tax Act, 1961 was attracted on the sub-contract payment, and whether the matter required verification of TDS compliance.
Analysis: The relaxation introduced in section 40(a)(ia) by the Finance Act, 2010 was treated as applicable to earlier years, but only where tax had in fact been deducted in accordance with Chapter XVII-B and paid to the Government by the due date under section 139(1). As the existing record did not clearly show whether the tax was deducted out of the actual payments made or credited, factual verification was necessary. The matter was therefore restored to the Assessing Officer to examine the books and TDS certificates and decide the disallowance accordingly.
Conclusion: The issue was remanded for verification, and the assessee obtained only a statistical allowance on this appeal.
Final Conclusion: The challenge to the revisionary order failed on limitation, while the substantive disallowance issue was sent back for factual verification of TDS compliance under section 40(a)(ia).
Ratio Decidendi: The amended relaxation in section 40(a)(ia) applies where tax has been duly deducted under Chapter XVII-B and deposited by the due date under section 139(1), but factual compliance must be established before disallowance can be deleted.
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