2022 (2) TMI 916 - AT - Income Tax

Tribunal sets aside Commissioner's order, directs fresh assessment of expenses under section 40(a)(ia)

M/s K. Dhanasekharan Versus Deputy Commissioner of Income Tax, Central Circle-3 (2) Chennai

M/s K. Dhanasekharan Versus Deputy Commissioner of Income Tax, Central Circle-3 (2) Chennai - TMI Issues:1. Validity of reassessment order passed u/s. 144 r.w.s. 147 of the Act.2. Disallowance of expenses u/s. 40(a)(ia) of the Act.Validity of Reassessment Order:The appeal challenged the order passed by the Commissioner of Income Tax (Appeals) for assessment year 2010-11. The appellant contended that the reassessment completed u/s. 144 read with section 147 of the Act was invalid and lacked proper justification. The appellant argued that jurisdiction under section 147 should not have been assumed after the search operation under section 132, and only assessment under section 153A should have been conducted. It was further contended that parallel assessment proceedings post-search were impermissible. The appellant asserted that the reassessment order was passed out of time, invalid, and unsustainable in law. However, the appellant did not press this legal ground during the hearing, leading to its dismissal by the Tribunal.Disallowance of Expenses u/s. 40(a)(ia) of the Act:The core issue revolved around the disallowance of expenses under section 40(a)(ia) for non-deduction of TDS. The appellant, a transport contractor, declared total income for the relevant assessment year and underwent assessment under section 143(3) initially. Subsequently, reassessment was conducted under section 144 r.w.s. 147, resulting in the disallowance of expenses amounting to Rs. 3,33,166 for non-deduction of TDS. The appellant contended that although TDS was not deducted, the payees had included the payments in their income tax returns and paid due taxes. The appellant sought to demonstrate compliance with the provisions of the Act, specifically referring to the second proviso to section 40(a)(ia) and the first proviso to section 201. Citing a precedent, the Tribunal directed the issue to be reconsidered by the Assessing Officer to verify the appellant's claims regarding the payees' tax compliance. The Tribunal emphasized the importance of providing the appellant with an opportunity to substantiate their assertions with requisite documentary evidence.In conclusion, the Tribunal allowed the appeal for statistical purposes, setting aside the order of the Commissioner of Income Tax (Appeals) and directing a fresh assessment of the disallowance of expenses under section 40(a)(ia) by the Assessing Officer. The legal grounds challenging the validity of the reassessment order were dismissed as not pressed by the appellant.