Tribunal rules in favor of assessee on tax deduction claim, emphasizes compliance

The tribunal allowed the appeal of the assessee concerning the disallowance of a claim for purchases made from M/s. Manisha Industries due to non-deduction of tax at source. The tribunal directed the Assessing Officer to verify if M/s. Manisha Industries properly accounted for the amount and filed income tax returns. If verified, the addition under section 40(a)(ia) was to be deleted, and the assessee's income was to be accepted. The tribunal emphasized compliance with tax deduction provisions, ultimately ruling in favor of the assessee on 25th May 2018.

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Issues:
Disallowance of claim for purchases made from M/s. Manisha Industries due to non-deduction of tax at source under section 194C of the Act.

The judgment deals with an appeal filed by the assessee against the order of CIT (Appeals) for the assessment year 2012-13. The main issue was whether the Assessing Officer was correct in disallowing the claim of the assessee for purchases made from M/s. Manisha Industries amounting to &8377;6,65,731. The Assessing Officer disallowed the claim as the payment was for job work (powder coating) and not for purchases, and tax was not deducted at source under section 194C of the Act, invoking section 40(a)(ia) of the Act. The assessee did not appear before the Learned First Appellant Authority, who passed an ex-parte order.

During the appeal, the counsel for the assessee presented the return of income of M/s. Manisha Industries and a certificate confirming that the amount in question was properly accounted for in their books and reflected in their income tax return, with taxes paid. The counsel requested the application of the second proviso to section 40(a)(ia) of the Act and cited relevant case laws in support of the argument. Since this legal argument was not raised before the lower authorities, the appellate tribunal set aside the issue and directed the Assessing Officer to verify whether M/s. Manisha Industries had accounted for the amount of &8377;6,65,731 in its income and filed the return of income for the relevant assessment years. If verified, the Assessing Officer was instructed to delete the addition made under section 40(a)(ia) of the Act and accept the income returned by the assessee.

Ultimately, the appeal of the assessee was allowed by the tribunal, and the order was pronounced in the open court on 25th May 2018. The decision focused on the proper verification of whether the amount in question was duly accounted for by M/s. Manisha Industries, emphasizing compliance with tax deduction provisions under the Income Tax Act to determine the validity of the disallowance made by the Assessing Officer.

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