TaxTMI 
TaxTMI 
2015 (7) TMI 1404
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....gregate of Rs. 35,30,828/-, u/s. 40(a)(ia) in-as-much as the same is liable to TDS @ 1%, and which has admittedly not been deducted or deposited to the credit of the Central Government; and c) non-consideration for assessment as income u/s. 68 of cash credits by way of unsecured loans from two parties, for a total of Rs. 25,35,500/-." The ld. CIT held the assessee to have violated the provisions of section 194C or, as the case may be, section 194I, so that the disallowance u/s. 40(a)(ia) was exigible, while no enquiry was made by the Assessing Officer (A.O.) in respect of the compliance of the TDS provision/s and in respect of the two cash credits. 3. Before us, the assessee's argument was two-fold, one, legal, and the other factual. On facts, it was stated that the payment for hire charges stands made to twenty parties and, similarly, for labour charges to 100 contractors (and not 10, as shown, which is thus wrongly so) and, therefore, the tax deduction provision shall not apply. On the legal aspect, the assessee, relying on CIT v. Banwari Lal Bansidhar 229 ITR 229 (All), submitted that the assessee's income for the year being [1998] assessed invoking sectio....
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....sdiction in-as-much as the very basis for the invocation of section 263 in the present case is the absence of proper enquiry and due application of mind by the A.O., making his order legally infirm, so that the matter shall normally require being considered by him, allowing proper opportunity for stating its case to the assessee. We shall be equally at fault, if we were to discuss the merits of the case. 4.2 This leaves us with the aspect of whether there has indeed been, i.e., on facts, lack of proper enquiry or due of application of mind by the A.O. while framing the assessment, for his order to be considered as being per se erroneous in-so-far as it is prejudicial to the interest of the Revenue, i.e., on that count alone. There is nothing on record to suggest that the issue of deduction or, as the case may be, non-deduction of tax at source and, thus, of disallowance u/s. 40(a)(ia), if any, was considered or examined by the A.O. while framing the assessment. In fact, even the assessee does not so contend, with there not being even any enquiry in the matter. Its objection on facts, i.e., of the payment for the JCB machines as being to 20 payees, or that qua labour charges to 1....
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....lders (India) (P.) Ltd. v. ITO (in ITA Nos. 155 & 163/Pat/2012 dated 06.05.2015). There being nothing on record to suggest of it being separately considered or taken into account while estimating the income, the same cannot be presumed to have been allowed and, thus, would require being allowed separately. The decision in the case of Shri Ram Jhanwar Lal v. ITO [2010] 321 ITR 400 (Raj) is also on the same lines; the Hon'ble Court in fact also holding for the allowance of interest and remuneration to partners separately, i.e., after the estimation of the income of an assessee firm, even as both the deductions fall u/ss. 30 to 38, of course r/w s. 40(b). Continuing further, the disallowance u/s. 40(a)(ia), a non obstante provision, is a statutory disallowance. The same is not an absolute disallowance, and has nothing to do with admissibility of the deduction per se, i.e., as being not for business purposes, or on any other ground. The disallowance is attracted for want of deduction of tax at source to the account of the payee, so that it is, in that sense, a technical or artificial disallowance, statutorily provided. The allowance is deferred to the year of deduction and depos....
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.... assessed is the business profit, underlining its fallacy. Why, a similar ratio of 'income' could arise even under the condition of a normative assessment. Further, reliance is also placed on the decisions by the apex court in CIT v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC) and CIT v. Manick Sons [1969] 74 ITR 1 (SC), to rebut the proposition that when books of account are rejected, the same cannot be again relied upon for the purpose of making any other addition/disallowance, also discussed by the tribunal in Muni Rai (supra). 4.4 There is, however, a caveat to what stands stated by us. The estimation of income having been made at a income higher than that disclosed by the assessee's accounts, the assessee can validly state of having not been allowed a particular expenditure in full, i.e., to the extent of the difference. This aspect of the matter stands also discussed by the tribunal in Muni Rai v. ACIT (in ITA Nos. 29 & 30/Pat/2012 dated 28/5/2015). Where so claimed, the A.O. shall consider the assessee's argument on merits. It may well be that he has while estimating the income made no disallowance of the relevant expenditure, i.e., qua which disallowanc....
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....nds not only to matters which the A.O. has done, but also to what he ought to have, though has failed or omitted to. The disallowance u/s. 40(a)(ia) is not occasioned by the fact of it being not admissible per se, but for having not deducted tax at source on the impugned sum, forming part of the payee's-to whom it is allowed, income, i.e., toward his tax. Not therefore adjusting the assessee's income for the same would translate into a double whammy for the assessee in-as-much as - the presumption in law being of all allowances and disallowances having been effected, the same could in law validly be claimed and allowed on payment of tax at source in a subsequent year and, correspondingly, as also afore-stated, a double jeopardy for the Revenue. The said decision, laying the correct principles, though found distinguishable on facts, would thus be of not much assistance to the assessee. The legal proposition that no addition/disallowance could be made relying on the book which stand rejected, which found favour with and forms the basis of the said decision, stands already clarified as not valid, with reference to the decisions by the apex court in Devi Prasad Vishwanath Prasa....
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....e credit of the payee, in the year in which it stands complied with, introducing thus a timing effect. Not so considering; rather, leads to an anomalous, unacceptable situation. Our reasons in support of our decision stand listed in the foregoing paragraphs of this order. Our decision, based on first legal principles, is supported by the decisions in the case of Shyam Bihari (supra) by the hon'ble jurisdiction high court and Shri Ram Jhanwar Lal (supra). In both these decisions, the hon'ble high courts have held in favour of deduction of statutory allowances even where the income is estimated on global basis, which has been understood by the tribunal to imply that in-as-much as the said allowances have not been considered or factored into by the A.O. in arriving at his estimation, the same being otherwise deductible, with his purview being to assess the total (assessable) income under the Act, would have to be given effect to. True, there is reference to the Circular by the Board, of which support is drawn by the hon'ble courts. However, the said Circular does not and cannot override the law, nor is the same binding on appellate authorities. The premise, or the underlyi....