2016 (1) TMI 567 - AT - Income Tax

Partial appeal success in Income Tax Act reassessment. Section 40(a)(ia) clarified. Admissibility of additional evidence emphasized.

The Tribunal partly allowed the appeal, directing the Assessing Officer to reassess the disallowance under section 40(a)(ia) of the Income Tax Act. The ... TDS u/s 194C - Disallowance u/s 40(a)(ia) - non deduction of tds on payment to sub-contractors as the amount of payment exceeded ₹ 20,000/- on each - whether the provision of section 40(a)(ia) is attracted only in respect of payments which is actually payable as at the end of the year and not which is paid during the year? - CIT(A) rejected additional evidence presented - Held that:- As for assessee argument that the liability u/s.40(a)(ia) is restricted to the amount outstanding at the end of the year is concerned, the Pune Benches of the Tribunal in the case of Vinay Ashwinikumar Joneja Vs. ITO [2013 (11) TMI 1243 - ITAT PUNE ] following the decision of Hon’ble Calcutta High Court and Hon’ble Gujarat High Court are consistently taking the view that provisions of section 40(a)(ia) are attracted to the whole amount incurred as expenditure during the year on which no tax has been deducted. The same is not restricted to only the amount payable at the end of the year. Therefore, the first limb of the argument by the Ld. Counsel for the assessee is rejected. So far as the second limb of the argument of the Ld. Counsel for the assessee that the sub contractors have furnished Form 15G and therefore there is no liability to deduct tax is concerned, we find the Ld.CIT(A) did not accept the additional evidences filed before him on the ground that assessee had not explained the reasons for non furnishing of the same before the AO. CIT(A) should not have rejected the additional evidences filed before him. Under these circumstances, we restore this issue to the file of the AO with a direction to examine the 15G forms submitted by the concerned sub-contractors and decide the issue as per fact and law after giving due opportunity of being heard to the assessee So far as the observation of Ld.CIT(A) that the assessee is not entitled to prefer an appeal before him since the assessee has admitted before the AO for such addition u/s.40(a)(ia) is concerned, we find the Hon’ble Bombay High Court in the case of Nirmala L. Mehta (2004 (4) TMI 43 - BOMBAY High Court) following the decision of the Hon’ble Supreme Court in the case of The Amalgamated Coalfield Ltd. Vs. The Janapada Sabha, Chhindwara [1962 (9) TMI 60 - SUPREME COURT OF INDIA ] has held that acquiescence to an illegal tax for a long time is not a ground for denying the party the relief that he is entitled to. Thus we restore this issue to the file of the AO with a direction to decide the issue afresh in the light of the 15G forms submitted by the sub-contractors to whom the assessee has made payments exceeding ₹ 20,000/- without deduction of tax. The AO shall decide the issue afresh - Decided partly in favour of assessee for statistical purposes. Issues Involved:1. Disallowance under section 40(a)(ia) of the Income Tax Act.2. Applicability of section 40(a)(ia) to amounts payable at the end of the year.3. Admission of additional evidence under Rule 46A.4. Estoppel against the statute.Issue-wise Detailed Analysis:1. Disallowance under section 40(a)(ia) of the Income Tax Act:The assessee, engaged in civil construction, did not deduct tax on sub-contract charges amounting to Rs. 43,76,025/-. The Assessing Officer (AO) disallowed this amount under section 40(a)(ia) of the Income Tax Act, as the assessee admitted to non-deduction of tax. The CIT(A) upheld the AO's decision, rejecting the assessee's argument that the provision applies only to amounts payable at the end of the year.2. Applicability of section 40(a)(ia) to amounts payable at the end of the year:The assessee argued that section 40(a)(ia) should apply only to amounts outstanding at the end of the year, which was Rs. 12,65,081/-. The CIT(A) rejected this, citing decisions from the Calcutta and Gujarat High Courts, which held that section 40(a)(ia) applies to the entire expenditure incurred during the year, not just the outstanding amounts. The Tribunal concurred, following consistent views of the Pune Bench and other High Courts.3. Admission of additional evidence under Rule 46A:The assessee submitted that sub-contractors had furnished Form 15G, which exempts them from tax deduction. However, these forms were not presented to the AO, and the CIT(A) refused to admit them as additional evidence, stating the assessee did not explain why they were not submitted earlier. The Tribunal referenced the Bombay High Court's ruling in Smt. Prabhavati S. Shah, which allows the CIT(A) to admit additional evidence if justified. The Tribunal restored the issue to the AO to examine the 15G forms and decide accordingly.4. Estoppel against the statute:The CIT(A) noted that the assessee had agreed to the addition before the AO and thus should not appeal. The Tribunal, citing the Bombay High Court's decision in Nirmala L. Mehta, held that there is no estoppel against the statute. The Constitution of India mandates that no tax shall be levied or collected except by authority of law, and acquiescence cannot deny a party relief from an illegal tax. The Tribunal directed the AO to re-examine the issue in light of the 15G forms.Conclusion:The Tribunal partly allowed the appeal for statistical purposes, directing the AO to reassess the issue considering the 15G forms submitted by the sub-contractors. The AO must decide the matter afresh, ensuring compliance with the law and providing the assessee an opportunity to be heard. The Tribunal emphasized that the provisions of section 40(a)(ia) apply to the entire expenditure, not just the amounts payable at the end of the year, and that additional evidence should be admitted if justified.