ITAT allows appeal on tax disallowance but dismisses claim on material cost, stresses evidence importance.

The ITAT allowed the appeal on the disallowance under section 40(a)(ia) for non-deduction of tax at source, directing the appellant to provide required information within 90 days. However, the appeal was dismissed concerning the disallowance of the claimed cost of material as a business expense due to insufficient evidence provided by the appellant. The ITAT emphasized the necessity of furnishing detailed information to support expenditure claims, upholding the decision of the lower authorities in this regard.

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Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of tax at source.
2. Disallowance of cost of material claimed as business expense.

Issue 1 - Disallowance under section 40(a)(ia):
The appellant contested the disallowance of INR 200,505,600 under section 40(a)(ia) of the Income Tax Act for non-deduction of tax at source. The Assessing Officer (AO) rejected the appellant's claim based on the proviso inserted under Section 201(1) from July 2012, stating it was not applicable for the assessment year 2012-13. The CIT (A) also confirmed the disallowance, noting the appellant's failure to provide evidence that the payees included the sum in their income tax returns and paid due tax. However, the ITAT found that the proviso was retrospective as per the Delhi High Court and granted the appellant an opportunity to furnish the required information in the prescribed manner within 90 days. The ITAT directed the CIT (A) to re-examine the issue based on the provided information, allowing the appeal on this ground.

Issue 2 - Disallowance of cost of material claimed as business expense:
The appellant claimed a deduction for the cost of material amounting to INR 38,519,318, but failed to submit necessary information before the AO or the CIT (A). The lower authorities noted that the appellant did not provide sufficient details to support the claim, merely stating that the cost was 9% of the total revenue earned. The ITAT emphasized that the appellant must furnish requisite information to support any expenditure claim, rejecting the argument that a low percentage of expenditure relative to income negates the need for detailed submission. As the appellant did not provide substantial evidence beyond annual accounts, the ITAT upheld the disallowance of the cost of material claimed. Consequently, the appeal on this ground was dismissed.

In conclusion, the ITAT allowed the appeal on the first ground related to disallowance under section 40(a)(ia) while dismissing the appeal on the second ground regarding the disallowance of the cost of material claimed as a business expense. The ITAT provided specific directions for the appellant to comply with regarding the first ground, emphasizing the importance of furnishing necessary information to support expenditure claims in tax assessments.

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