2023 (5) TMI 1035 - AT - Income Tax

Addition u/s. 40(a)(ia) - assessee's failure to deduct TDS on Labour Contract Expenses - assessee had not adhered to all the conditions of first proviso of Section 201 - CIT(A) granted relief to the assessee merely by accepting the submission of assessee that the recipient has included the income in their return of income and has shown in their taxable income - HELD THAT:- We find that neither the AO narrated the name and details of sub-contract in assessment order nor the CIT(A) recorded in his order bifurcation of impugned expenses paid to various sub-contractors. CIT(A) called the remand report from the Assessing Officer during the pendency of first appeal. AO again in his remand report has not specified the name and bifurcation of different payments made to such sub-contractors. Thus, after hearing the submissions of both the parties, we directed the assessee to furnish the list of such persons alongwith their PAN number, details of sub-contract payment and the return of income if any shown by such sub-contractor.

As noted before the CIT(A), the assessee contended that the recipients of contract payments have included the contract payment in their return of income and has paid the due tax. CIT(A) on such submission, obtained remand report from the AO. AO except sub-contractor No. 4,5 and 6, accepted that recipients of contract payments, have included the contract payment in their return of income. Thus, we affirm the order of ld CIT(A) to that extent.

Sub-contractor No. 4 & 5 have not filed their return of income, so there is no occasion to include such contract receipt in their income. Before us, assessee made his alternative submissions that the disallowance on their payments may be restricted to 30% of sub contract payment in view of amendment to second Proviso to Section 40(a)(ia) by the Finance Act, 2014 which has been held as retrospective by various courts and Tribunal and relied upon the decision of Rajkot Tribunal in Punabhai G. Pardava [2022 (6) TMI 1338 - ITAT RAJKOT] On considering such plea of assessee, we direct AO to restrict the disallowance to the extent of 30% of payments made to sub-contractor No. 4 & 5, thereby, the order of ld CIT(A) is modified to that extent.

Discrepancy in the computation of income of Mahendrabhai Radadiya, wherein he has shown gross receipt that too from Diamond labour income and not from the contract of construction, whereas the assessee have claimed to have paid it - Before us, assessee has filed copy of return of income of Mahendrabhai Radadiya for AY 2013-14, with computation of income wherein he has shown construction labour income of Rs. 29,17,000/-, which is contrary to the remand report of assessing officer dated 03.10.2018, therefore, this part of disallowance is restored back to the file of assessing officer to examine the fact, if the assessee has included construction contact receipt in his computation of income or the assessee has filed this false and fabricated evidence before Tribunal. If the assessee has included construction contract receipt in his computation of income, then disallowance be restricted to 30% of such receipt, if not included entire alleged contract payment be disallowed and action may be initiated against the assessee as per law. In the result, this part of issue is allowed for statistical purpose.

Disallowance of expenses as are not fully supported with bills and vouchers - CIT-A restricting the various expenses to 10% in place of 20% disallowed by AO - HELD THAT:- We find that the assessing officer made disallowance without specifying the specific defect. In our view the ld CIT(A) reasonable restricted the disallowance to the extent of 10%, which we affirm. In the result, this ground of appeal is dismissed.