TaxTMI 
TaxTMI 
2011 (7) TMI 796
X X X X Extracts X X X X
X X X X Extracts X X X X
..... u/s 40(a)(ia) of the Income tax Act, 1961. One more ground was raised by the assessee in assessment year 2005-06 in respect of validity of reassessment proceedings in that year being ground No.1 in that year but no argument was advanced by the Ld. A.R. in respect of this ground in that year and hence, this ground No.1 in assessment year 2005-06 is rejected as not pressed. 3. The brief facts of the case regarding the issue relating to disallowance u/s 40(a)(ia) in assessment year 2005-06 are noted by the Ld. CIT(A) in para 2.1 to 2.3 of his order, which are reproduced below: "2.1 This is regarding disallowance of Rs.37,89,063/- u/s 40(a)(ia). In the assessment order, the A.O. has stated that summary of TDS amount pertaining to the amount paid to subcontractor are as under:- Description Amount in Rs. TDS amount Amount related to the same Amount to be disallowed Subcontract expenses: Amount of the disallowance as per the show cause 12,23,422 11,11,19,839 Less: TDS paid during the F.Y. 2004-2005 4,97,193 4,50,99,021 7,26,229 6,60,20,818 Less: Amount wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the above explanation... stated that in respect of amount of Rs.37,89.0637- there was TDS liability of Rs.4,12.S86/- which was deducted. The assessee should have paid this TDS by 31.03.2005 but it has been paid on 12.04.2005 and 30.06.2005 and, therefore, this amount needs to be disallowed u/s.40(a)(ia). 2.3 The assessee further submitted that with respect to the subcontract expenses the assessee's income is the commission income and hence no deduction U/S.194C is required. The A.O. did not accept the above explanation and stated that the assessee has on a large portion of this payment deducted TDS and paid on various dates. The TDS provisions are independent and if the assessee wants to claim the payment provisions of Section 40(a)(ia) would apply. He, therefore, made a disallowance under this Act." 4. Similarly, the facts for the assessment year 2006-07 are noted by the Ld. CIT(A) in para 2.1 of his order, which is also reproduced below: "2.1 This is regarding disallowance of Rs.6,63,177/- being the sum paid to the sub-contractors. The disallowance has been made u/s.40(a)(ia). In the assessment order, the A.O. has stated that summary of TDS amount-pertaining to the amount pai....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenses payable to the subcontractor of Rs.6,63,177/-, the assessee has made payment of part amount of TDS i.e. Rs.4047/- on 18.07.2006 whereas remaining amount of TDS of Rs.3248/- was not paid by the assessee till the date of the order of Ld. CIT(A) i.e. 16.11.2009. On this basis, he upheld the assessment order on this issue in assessment year 2006-07. On similar basis, Ld. CIT(A) has upheld the assessment order on this issue in assessment year 2007-08 also and the assessee is in further appeal before us for all these three years. 8. It is submitted by the Ld. A.R. before us that the assessee is following this system of accounting since very beginning that for the portion of contract not undertaken by the assessee itself but assigned to sub-contractor, the assessee is eligible only for an agreed amount of commission and accordingly, in the P & L account also, the assessee is deducting the value of that portion of the contract which is given away on sub-contract from the gross income on account of the contract work. In support of this contention, our attention was drawn to page 21 of the paper book containing P & L account for the year ended 31st March 2006. He again drawn our att....
X X X X Extracts X X X X
X X X X Extracts X X X X
....actors. The claim of the assessee is that since the amount of payment made to the sub-contractor has not been debited to the P & L account and only the commission income being 2% of the contracted value earned by the assessee on that portion of the contract, which was awarded to the subcontractor has been declared as income in the P & L account, no disallowance can be made u/s 40(a)(ia) of the Act in respect of the payment made to sub-contractor because the same has not been claimed by the assessee as deduction by way of debiting to the P & L account. With regard to this argument, we are of the considered opinion that this is by now a settled position of law that entry in the books of account of the assessee is not conclusive and merely because the assessee has claimed deduction of gross value of sub-contract from its gross income form contract and has shown commission income separately in the P & L account, this cannot be accepted that the assessee has not debited the amount of payments made to sub-contractor in its P & L account. The same fact can be accounted for in a different manner also. Instead of showing deduction of Rs.9,79,55,473/-from contract work income and declaration....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TDS @1% from those payments made to sub-contractors. We, therefore, decline to interfere in the order of Ld. CIT(A) in all the three years. 11. Now, we take up the remaining one appeal of the revenue for the assessment year 2005-06 in I.T.A. No. 3055/Ahd/2009. The grounds raised by the revenue are as under: "1. On the facts and circumstance of the case and in law, the Ld. CIT(A) has erred in deleting the penalty levied by the AO u/s. 271(1)(c) of the Act of Rs. 3,22,257 on account of furnishing of inaccurate particulars of inc respect of low disclosure of GP as compared to immediate earlier year. 2. On the facts and in the circumstances of the case, the learned CIT (A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent." 12. The brief facts of the case in this year for this issue are that in the course of assessment proceedings, the A.O. made addition of Rs.7,91,850/- on account of fall in gross profit. He has made addition of Rs.57,510/- on account of excess claim of depreciation. In addition to this, he made further add....