2013 (1) TMI 810 - AT - Income Tax

Appeal dismissal due to delay, but allowed for compliance verification under Section 40(a)(ia)

The appeal against the Commissioner of Income-tax's order under Section 263 was dismissed due to a significant delay of 485 days. However, the appeal ... order u/s.263 - Applicability of section 40 (a)(ia) - Deduction of TDS - As per assessee TDS was required to be deducted and deposited into Govt. A/c. by 31.03.2006 - Deposit in Govt. A/c. was made much later i.e. on 05-10-2006 instead on before 31.03.2006 - As per Ao it is not clear that whether such tax was deducted at source out of the amounts paid/credited by the assessee - Hence Ao disallowed the same - this issue is restored to AO - Reasonable opportunity of hearing shall be given by the AO to the assessee - Matter remanded back Held that:- Appeal filed by the assessee is barred by limitation - assessee has applied for condonation of delay - The period of delay is nominal of 09 days - In case of Vedabai alias Vaijayanatabai Baburao Patil v. Shantaram Baburao Patil [[2002] 253 ITR 798 / 122] - it has been held that pragmatic approach should be adopted while exercising discretion in condoning delay but a distinction must be made between a case where the delay is inordinate and a case where the delay is of a few days - thus the delay is condoned - decided in favor of assessee Issues Involved1. Validity of the notice issued under Section 263 of the Income-tax Act.2. Legality of the disallowance under Section 40(a)(ia) of the Income-tax Act.3. Condonation of delay in filing the appeal.4. Validity of the appeal filed before the CIT(A) against the order under Section 143(3) read with Section 263.Detailed Analysis1. Validity of the Notice Issued Under Section 263 of the Income-tax ActThe Commissioner of Income-tax (CIT) exercised powers under Section 263 to revise the assessment order passed by the Assessing Officer (AO) under Section 143(3). The CIT found that the AO had not examined the applicability of Section 40(a)(ia) concerning payments made to M/s. Rajdhani Construction and M/s. Parth Construction without deduction of tax at source. Consequently, the CIT set aside the original assessment order and directed the AO to disallow the sub-contract payments to M/s. Rajdhani Construction and verify the payments to M/s. Parth Construction with respect to their deposit in the Government account.2. Legality of the Disallowance Under Section 40(a)(ia) of the Income-tax ActThe AO, following the CIT's directions, disallowed a sum of Rs. 70,47,160/- under Section 40(a)(ia) because the tax deducted at source (TDS) was deposited into the Government account after the due date. The CIT(A) upheld this disallowance, noting that the CIT's directions under Section 263 were clear and binding. The Tribunal, however, observed that the provisions of Section 40(a)(ia) were relaxed by the Finance Act, 2010, allowing TDS to be deposited by the due date of filing the return under Section 139(1). The Tribunal referred to the judgment in CIT v. Virgin Creations, which held that this relaxation applies retrospectively. The Tribunal directed the AO to verify whether the TDS was deducted and deposited in accordance with Chapter XVII-B and Section 139(1). If so, no disallowance under Section 40(a)(ia) would be warranted.3. Condonation of Delay in Filing the AppealThe assessee's appeal against the CIT's order under Section 263 was delayed by 485 days. The Tribunal noted that the delay was substantial and not supported by any material evidence of a bona-fide belief that the appeal should first be filed before the CIT(A). Consequently, the Tribunal dismissed the appeal due to the inordinate delay.4. Validity of the Appeal Filed Before the CIT(A) Against the Order Under Section 143(3) Read with Section 263The CIT(A) dismissed the appeal against the AO's order under Section 143(3) read with Section 263, stating that the appeal was invalid as it challenged the CIT's directions, which were not appealable before the CIT(A). The Tribunal condoned a nominal delay of 9 days in filing this appeal and admitted it. The Tribunal then directed the AO to verify the compliance with TDS provisions and the due date for deposit before making any disallowance under Section 40(a)(ia).ConclusionThe appeal against the CIT's order under Section 263 was dismissed due to an inordinate delay of 485 days. However, the appeal against the AO's order under Section 143(3) read with Section 263 was allowed for statistical purposes, with directions to the AO to verify the TDS compliance and deposit dates before making any disallowance under Section 40(a)(ia).