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TMI Blog2014 (3) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure in computing the total income of the appellant, in view of the provisions of Sec 40a(ia) of the Act. 2.1 The Learned CIT ought to have appreciated that the appellant is not deemed to be an assessee in default under the proviso to sub- section (1) of section 201 of the Act and consequently, the above sum paid by the appellant is not hit by the provisions of Sec 40a(ia) of the Act. 2.2 The Learned CIT ought to have appreciated that the amendments to Sec 40a(ia) and Sec 201(1) of the Act are applicable to all pending proceedings, since the same are procedural and beneficial in nature. 3. Without prejudice and in the alternative, the Learned CIT erred in not applying the principles that Sec 40a(ia) is applicable only in respect of TDS defaults, if amount is remaining payable as at 31st March of the relevant previous year as held by Hon‟ble I.T.A.T. 3.1 The Learned CIT ought to have appreciated that only a sum of Rs. 1,33,010 was outstanding as payable at the close of the relevant previous year and the balance amount of expenditure was actually paid during that year itself. 3.2 The Learned CIT ought to have appreciated that, at the highest, a sum of Rs,1,33, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the said party that they have not entered into any agreement or contract to the effect. The said documents are there on record of the Assessment Proceedings for AY 2 008-09. The AO accepted the contentions put forth and ignored the issue while concluding the assessment u/s 143(3). As such, it is also not true to state that the 'AO has failed to obtain the details and facts of the case to make necessary enquiries and verification with reference to facts and law'. I am enclosing herewith copies of the said two documents already filed before the AO. Hence the proceedings initiated, for the AO having not verified the fact, is liable to be dropped, as the same proceedings cannot be raised for the second time. Secondly, the TDS obligation u/s 194c, envisages that only when the payments are made 'in pursuance of a contract' between the two parties. As stated in the notice it is not acceptable that contract can be written or as well as oral‟. As the wordings of section 1 94C particularly states for the necessity of a contract and the payments to have been made only in pursuance of a contract, it is necessary that there should be a written contract, to make the obl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries (Private) Ltd, Bailhongal, the payments of Rs. 32,45,797/- are fully paid but balance of Rs,1,33,010/- remains as balance to be paid. Hence, the proposal to proceed with the applicability Of section 1 94C as well as 40(a) (ia), is liable to be dropped. Lastly but not the least, that Motibagh Industries (Private) Ltd, Bailhongal is an assessee under PAN:AAECMO241N and have filed the income tax return for AY 2008-09 for an income comprising of the said payment of Rs,32,45,797/-. So the taxes having been paid by the said party, there is no loss of income tax to the exchequer hence there is no loss of tax revenue. For which sake I do not happen to be a defaulter under section 194C. The relevant copies in its support are herewith enclosed. I also crave for your goodself‟s permission to submit any other contentions or objections in the course of time before conclusion of the proposition. In the light and support of the above mentioned grounds specifically, that the question of TDS was once already raised by the AO, and that there is no written contract for the payments made, and for the strict interpretation of section 40(a)(ia) as above mentioned, I humbly request your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made on facts and law the order of the Assessing Officer was erroneous as well as prejudicial to the interest of the revenue. Hence after considering all the aspects the assessment of the assessee is enhanced by Rs. 32,45,797/- by adding back the sum u/s 40(a)(ia). The Assessing Officer is directed to add back this sum to the total income of the assessee while giving effect to this order. Penalty proceedings u/s 271(1)(c) is also initiated for filing inaccurate particulars of income. 4. In view of the above, the order of the Assessing Officer is held to be erroneous as well as prejudicial to the interest of the revenue. The assessment order u/s 143(3) passed for the A.Y. 2008-09 on 29.11.2010 by the ITO, Ward 1(3), Bélgaum is enhanced u/s 263 of the I.T. Act, 1961 as discussed above with a direction to the Assessing Officer to recompute the total income and determine the tax and interest payable as per law and issue demand notice accordingly. 4. The learned AR submitted before us that the Commissioner of Income Tax has verified the vouchers and records of Expenditure on ginning & pressing charges for Rs. 32,45,797/- debited to profit and loss account of assessee for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2012 also states, "In order to rationalize the provisions of disallowance on account of non-deduction of tax from the payments made to a resident payee, it is proposed to amend section 40 40(a)(ia) to provide that where an assessee makes payment of the nature specified in the said section to a resident payee without deduction of tax and is not deemed to be an assessee in default under section 201(1) on account of payment of taxes by the payee, then, for the purpose of allowing deduction of such sum, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee." Then there will be no disallowance under section 40(a)(ia) of the Act. We find Section 201(1) which read as under: "Section 201(1) defines the term - 'assessee in default' as a person who is required to deduct tax but does not deduct tax or after deducting fails to pay the whole or any part of the tax, as required by or under the Act A proviso has now been inserted to this section to make exception to the above definition of 'assessee in default'. The Proviso provides that where any such default occurs and if payee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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