2014 (6) TMI 532 - AT - Income Tax

Tribunal directs reassessment on disputed expenditure, stresses evidence verification & fair opportunity

Valibhai Khanbhai Mankad Prop. A bad Roadways Versus The ACIT (OSD), Circle-9, Ahmedabad.

Valibhai Khanbhai Mankad Prop. A bad Roadways Versus The ACIT (OSD), Circle-9, Ahmedabad. - TMI Issues:1. Disallowance under Section 40(a)(ia) for A.Y. 2007-08.2. Confirmation of addition of Rs. 60,87,393 as bogus expenditure.3. Non-compliance with provisions of Section 194C and Form 15I/J.Issue 1: Disallowance under Section 40(a)(ia) for A.Y. 2007-08:The Assessee, engaged in transport contracting, contested the addition of Rs. 1,67,08,372 under Section 40(a)(ia) by the Assessing Officer (A.O.). The CIT(A) partially upheld the disallowance, designating Rs. 60,87,393 as bogus expenditure and the remaining Rs. 1,06,20,979 as disallowable under Section 40(a)(ia). The Assessee argued that the issue was previously decided in their favor by the Tribunal for A.Y. 06-07, and the High Court also ruled in their favor. The Tribunal referred to the High Court's decision, emphasizing that once the conditions of Section 194C(3) were met, the liability to deduct tax ceased, and failure to furnish details did not warrant disallowance under Section 40(a)(ia). Consequently, the Tribunal concluded that no addition was warranted for Rs. 1,06,20,979.Issue 2: Confirmation of addition of Rs. 60,87,393 as bogus expenditure:The CIT(A) deemed Rs. 60,87,393 as bogus expenditure due to incomplete addresses and suspicious details in Form 15 I submitted by the Assessee. The Assessee argued that the CIT(A) made the addition without proper inquiry, relying on presumptions. The Assessee presented Form 15J, sample RC books, and PAN cards to support their case, which were not previously before the lower authorities. The Tribunal directed the Assessing Officer to re-examine the evidence submitted by the Assessee and make a fresh decision after verifying the documents. The Tribunal stressed the need for the Assessing Officer to grant a fair hearing to the Assessee and consider all evidence before reaching a conclusion.Issue 3: Non-compliance with provisions of Section 194C and Form 15I/J:The A.O. disallowed the payments made by the Assessee to sub-contractors under Section 40(a)(ia) due to non-compliance with Section 194C and failure to submit Form 15 I/J on time. The Assessee's argument centered on fulfilling the requirements of Section 194C(3) and the subsequent High Court decision, which clarified the liability to deduct tax at source. The Tribunal reiterated that once the conditions of Section 194C(3) were met, the liability to deduct tax ceased, emphasizing the importance of timely submission of required forms. The Tribunal directed the Assessing Officer to re-evaluate the issue of disallowance under Section 40(a)(ia) in light of the evidence presented by the Assessee.In conclusion, the Tribunal partially allowed the Assessee's appeal, directing a fresh assessment by the Assessing Officer regarding the disputed addition of Rs. 60,87,393 as bogus expenditure. The Tribunal emphasized the importance of proper verification of evidence and granting the Assessee a fair opportunity to present their case.