2014 (2) TMI 650 - AT - Income Tax

Tribunal remands tax assessment for fresh review, emphasizes detailed examination by Assessing Officer

The Tribunal set aside the Revenue authorities' orders and remanded the case to the Assessing Officer for a fresh assessment, allowing the assessee to ... Disallowances made u/s 37 and section 40A(3) and section 40(a)(ia) of the Act – Held that:- The CIT(A) considered the disallowance under S.37(1) as if it is a disallowance under S.40A(3) - Even though the assessee requested for giving an opportunity to submit the bills, the same was also not accepted - the vouchers pertaining to payment to Vaseem is for Roller Rent - the payment is for more than one year, and partly covers the previous year, the Assessing Officer seems to have not noticed this and disallowed the entire amount under S.40A(3) - the orders set aside and the matter remitted back to the AO for fresh adjudication after giving due opportunity to the assessee, to explain the nature of payments and why provisions of Rule 6DD apply to each of the cash payments – Decided in favour of Assessee. Issues:Assessee's appeal against disallowances made under S.37, S.40A(3), and S.40(a)(ia) of the Income-tax Act, 1961.Analysis:The assessee, a firm engaged in civil contracts, appealed against disallowances made by the Assessing Officer under various sections of the Income-tax Act. The disallowed amounts included expenses for cement, metal, labor charges, and vehicle charges. The Commissioner of Income-tax(Appeals) rejected most grounds raised by the assessee, except for the addition related to work-in-progress. The assessee then appealed to the Tribunal, arguing that the Assessing Officer did not consider valid justifications for the cash payments made. The Tribunal noted that the issue required re-examination by the Assessing Officer based on the submissions made by the assessee. The Tribunal highlighted specific aspects, such as payments to partners, labor charges, cement purchases, and tractor hire charges, which the assessee argued should not be disallowed under relevant clauses of Rule 6DD. The Tribunal emphasized the need for detailed examination by the Assessing Officer and directed a fresh assessment, allowing the assessee to provide necessary details for the disallowed amounts under S.37(1). The Tribunal set aside the orders of the Revenue authorities and remanded the matter to the Assessing Officer for further review, granting the assessee the opportunity to explain the nature of payments and the applicability of Rule 6DD to each cash payment.The Tribunal also highlighted discrepancies in the assessment order, such as the disallowance of an entire amount under S.40A(3) without considering that the payment covered more than one year and partly the previous year. The Tribunal emphasized the importance of assessing whether payments were made on a 'labour' account rather than a 'vehicle account' and the need for the Assessing Officer to examine these aspects thoroughly. The Tribunal concluded by allowing the assessee's appeal for statistical purposes and remanding the case back to the Assessing Officer for a fresh examination with proper opportunity given to the assessee to clarify the nature of payments and the application of Rule 6DD to each cash payment.