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Mr. Sushil Govindrao Uttarwar Versus The Asst. Commissioner of Income Tax

Non-deduction of tax at source on sub-contract payments - applicability of proviso to section 40(a)(ia) - Held that:- The assessee has furnished on record the complete particulars in this regard which established the case of assessee. The return of income filed by Mr. Anil Patil relates to assessment year 2012-13 and in the totality of the above said facts and circumstances, where the amount of sub-contract payments made by the assessee though without tax deduction at source, has been included b .....

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m of assessee after verifying the claim of assessee that the payer has included the sub-contract payments as part of its receipts. The grounds of appeal raised by the assessee are thus, allowed as directed. - Decided in favour of assessee. - ITA No. 508/PN/2016, S.A. No. 34/PN/2016 - Dated:- 31-5-2016 - Ms. Sushma Chowla, JM And Shri Pradip Kumar Kedia, AM For the Appellant : Shri Vaibhav Rathi For the Respondent : Shri Dheeraj Kumar Jain ORDER Per Sushma Chowla, JM This appeal filed by the asse .....

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uling by confirming the addition of Piece Work Expense of ₹ 1,52,95,475/- u/s 40(a)(ia) in the year under appeal and allowed as deduction in subsequent year. While doing so the Honourable CIT-Appeal has ignored the fact that assessee is a small taxpayer. He is a civil contractor and 70% of the total contract was executed by way of sub-contract i.e. Piece Work. Thus, confirming such substantial amount in year under appeal and allowing in subsequent year will have adverse consequences and fi .....

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f Commissioner of Income Tax Vs. Naresh Kuma, Delhi High Court and CIT Vs. Talbros (P) Ltd. 4. Thus, by adding income of ₹ 1,52,95,475/- the total income sums up to ₹ 1,77,88,140/- which is 80% of turnover which is practically impossible in such business. Assessee s income has decreased in the subsequent years and deduction of ₹ 1,52,95,475/- will not be absorbed even in next 6-7 assessment year. Hence, claiming loss for another 6-7 A.Y. will cause undue hardship to the assesse .....

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al and hence, we proceed to decide the present appeal after hearing both the learned Authorized Representatives in this regard. 4. Briefly, in the facts of the present case, the assessee was an individual engaged in the business of Government contract. In addition, the assessee had declared income from house property and other sources. The Assessing Officer on verification of the Profit & Loss Account noted that the assessee had incurred expenditure under the head Piece Work amounting to  .....

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ovisions of section 40(a)(ia) of the Act were attracted. The assessee before the Assessing Officer admitted that no tax was deducted at source after payment made to Mr. Anil Patil, who was the subcontractor. Thereafter, the assessee pointed out that by the Finance Act, 2012, proviso has been inserted and where it had taken into account the said sum in computing his income and had paid taxes due thereon and had also furnished his return of income under section 139 of the Act, the assessee could n .....

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012, which clearly states that the said amendment would come into effect from first day of April, 2013. In view thereof, the Assessing Officer was of the view that the said amendment would come into effect from 01.04.2013 and for the year under consideration, the assessee was in default and hence, sum of ₹ 1,52,95,475/- was added to the income of the assessee. 5. The CIT(A) upheld the order of Assessing Officer by rejecting the plea of assessee with regard to the amount being paid during t .....

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In view thereof, the CIT(A) held that insertion of proviso to section 40(a)(ia) of the Act by the Finance Act, 2012 was applicable retrospectively. However, the addition of ₹ 1.52 crores was confirmed on account of disallowance of deduction under section 40(a)(ia) of the Act in the year under appeal and he further held that the same was to be allowed as deduction in the subsequent year. 6. The assessee is in appeal against the order of CIT(A). 7. We have heard the rival contentions and per .....

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d payments, then there is clear violation of provisions of section 40(a)(ia) of the Act. The CIT(A) held that proviso to section 40(a)(ia) of the Act was to be applied retrospectively but he disallowed the claim, since it is to be allowed in which payee had filed return of income. Consequently, the above said amount was disallowed in the hands of assessee. On the other hand, the plea of assessee was two-fold that, all the amounts which were due to the subcontractor, were paid to him, before the .....

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the sub-contractor, who in turn, had accepted the same as its receipts and had paid taxes thereon and also furnished return of income under section 139(1) of the Act, then the assessee was prevented from deducting the tax at source. We find that the Finance Act, 2012 has inserted a proviso to section 40(a)(ia) of the Act, which inter alia, provides that where the payment has been made to a resident and such resident has included the receipts as part of his income and paid taxes thereon and also .....

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ects that the said concern has shown sub-contract receipts to the extent of ₹ 3.66 crores, which as per the assessee includes the sub-contract payments made by it to the said concern at ₹ 1.52 crores. He has further filed the copy of computation of income for the year under consideration, wherein the income from business has been included in the hands of the said person and tax payable by the said person is adjusted against the tax deducted at source out of other payments received by .....

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d that the proviso to section 40(a)(ia) of the Act is to be applied retrospectively to all pending assessments. The relevant findings of the Tribunal are as under:- 10. Now, coming to the second aspect of the issue i.e. new legal plea raised by the assessee in view of second proviso to section 40(a)(ia) of the Act, which was inserted by the Finance Act, 2012. The Tribunal in ACIT Vs. Bhavook Chandraprakash Tripathi (supra) while adjudicating similar issue had observed as under:- 4. Following the .....

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assessee is that the said proviso should be understood as retrospective in nature as it has been introduced to eliminate unintended consequences which may cause undue hardships to the tax payers. It was pointed out that in similar circumstances, the Pune Bench of the Tribunal in the case of ITO vs. M/s Gaurimal Mahajan & Sons vide ITA No.185 2/PN/2012 dated 06.01.2014 following the decision of the Cochin Bench of the Tribunal in the case of Antony D. Mundackal vs. ACIT vide ITA No.38/Coch/2 .....

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of Antony D. Mundackal (supra) in a similar circum stance. The Ld. Representative submitted that the matter be restored back to the file of the Assessing Officer in the light of the order of the Tribunal dated 06,01.2014 (supra). The aforesaid plea of the respondent-assessee has not been seriously opposed by the Ld. Departmental Representative appearing for the Revenue. 5. Following the aforesaid precedent, we therefore deem it fit and proper to restore the matter back to the file of the Assess .....

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Tribunal (supra) and following the same parity of reasoning, we deem it fit to restore the matter back to the file of Assessing Officer, who shall consider the plea of the assessee based on the provisions of the Act inserted by the Finance Act, 2012 w.e.f. 01.04.2013 and in line with earlier order of the Tribunal dated 06.01.2014 (supra), the Assessing Officer is directed to adjudicate the issue in accordance with law after affording reasonable opportunity of hearing to the assessee. 10. Once th .....

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