ITAT allows appeal for disallowed expenses under Income Tax Act, remands for further verification

The ITAT allowed the appeal of the assessee for statistical purposes in both issues related to disallowance of expenses under section 40(a)(ia) of the Income Tax Act. The ITAT set aside the issues to the assessing officer for further verification as the arguments presented were new and had not been raised before the Revenue Authorities. The assessing officer's additions were not upheld, and the matters were remanded for additional examination.

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Issues involved:
The judgment involves issues related to disallowance of expenses under section 40(a)(ia) of the Income Tax Act.

Issue 1: Disallowance of Rs.5.85 lakhs under section 40(a)(ia) of the Act:
The assessing officer observed that the assessee firm had paid interest to certain parties on which no tax was deducted at source under section 194A of the Act. The assessing officer made an addition of the said amount in the assessment order as the assessee did not file any response regarding non-deduction of tax. The CIT(A) upheld the disallowance stating that the appellant was required to deduct TDS out of interest payments to non-banking finance companies. The appellant's arguments were based on the partners of the firm taking loans in their personal names and introducing the same as capital in the firm, thus claiming no obligation to deduct tax at source. However, the ITAT found that the arguments presented before them were new and had not been raised before the Revenue Authorities. The ITAT set aside the issue to the assessing officer for further verification.

Issue 2: Disallowance of Rs.57,000 out of freight payment:
The assessing officer observed that the assessee had made truck freight payments on which no TDS was deducted. The CIT(A) upheld the disallowance. The appellant contended that the payee had reflected the freight income in the income tax return, thus arguing against being an assessee in default. The ITAT noted that this argument had not been examined by the Revenue Authorities earlier and set aside the issue to the assessing officer for verification of the payee's income disclosure.

Conclusion:
The ITAT allowed the appeal of the assessee for statistical purposes in both issues, setting them aside to the assessing officer for further examination.

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