Ito v. Chhotubhai Ramubhai Patel

Shailendra Kumar Yadav, J.M.:— This is an appeal filed by the Revenue against the order of CIT(A) dated 21.9.2011 on the following grounds:—

1. On the facts and in the circumstances of the case and in law, the CIT(A)-IV, Surat has erred in deleting an addition of Rs. 1,79,05,259/- made by the Assessing Officer as per the provisions of section 40(a)(ia) of the Income-tax Act.

2. On the facts and in the circumstances of the case and in law, the CIT(A)-IV, Surat has erred in holding that “the liability to deduct tax ceases on receipt of form No. 151 from the sub contractors” is not correct as and when the assessee has failed to file the Form No. 15J before the prescribed authority and within the prescribed time limit.

3. On the facts and in the circumstances of the case and in law, the CIT(A)-IV, Surat has erred in admitting the additional evidences as per the provisions of Rule 46A of the Income-tax Rule.

4. On the facts and in the circumstances of the case and in law, the CIT(A)-IV, Surat has erred in deleting an addition made by the Assessing Officer on account of difference in amount of income, without verification of the contention of the assessee that the excess TDS is pertains to the income of earlier years.

5. On the facts and in the circumstances of the case and in law, the CIT(A)-IV, Surat ought to have upheld the order of the Assessing Officer.

6. It is therefore, prayed that the order of the CIT(A) —IV, Surat may be set aside and that of the Assessing Officer restored.

2. The only issue before us with regard to deletion of addition of Rs. 1,79,05,259/- made under section 40(a)(ia) r.w.s. section 194C. The assessee has filed his return of income for AY 2007-08 declaring total income at Rs. 475,921/- on 22.10.2007. The return of income was duly processed u/s. 143(1) of the Act. The case was selected for scrutiny, accordingly, notice u/s. 143(2) of the Income-tax Act was issued on 22.09.2008. During the course of assessment proceedings the Assessing Officer had observed that the assessee had claimed hire expenses of Rs. 1,79,05,259/- but no deduction of tax at source was made as required u/s. 194C. In response to the show cause notice it was submitted on behalf of the assessee that no deduction had been made as declarations had been received from sub-contractor in form No. 15I. It was submitted that form No. 15J for non-deduction of TDS had been filed on 6.5.2008. The similar set of form No. 15J was also submitted on 30.11.2009 i.e. after 2 ½ years. The date of issue of show cause was only an afterthought to cover up for lapse of non-deduction at source. He held that the assessee was liable to deduct tax at source and since no deduction had been made or deposited within the prescribed time in the government account, the payment of Rs. 1,79,05,259/- was hit by Section 40(a)(ia). Therefore, he held that the hire charges claimed were inadmissible.

3. The matter was carried in appeal before the first appellate authority. The CIT(A) considering the submissions made on behalf of the assessee granted relief to the assessee. Same has been opposed by the Revenue before us. It is pleaded by the Revenue that CIT(A) has erred in deleting the disallowance of Rs. 1,79,05,259/-. So the order of CIT(A) be set aside and that of the Assessing Officer be restored. On the other hand, the ld. AR supported the order of CIT(A).

4. After going through the material on record, we find that provisions of section 40(a)(ia) come into play if the relevant TDS provisions in this case section 194C has been violated. The assessee is a contractor and as per section the assessee was required to deduct tax at source from sub-contractors unless the sub-contractor falls within any of the exceptions provided in the Act. As per the assessee he had received declaration in form No. 15I from the sub-contractors due to which it had not deducted tax at source. Undisputedly form No. 15J was filed late-once on 6.5.2008 and again on 30.11.2009. The Assessing Officer considered only form No. 15J which was filed on 30.11.2009 and since the date of filing was after issue of show cause notice, in this case it was held that this was an afterthought. The Assessing Officer ignored the claim of the assessee both before him and the ITO TDS that form No. 15J had been filed on 6.5.2008 also. In appeal, it was found by CIT(A) that the first date of filing form No. 15J was before the date of issue of show cause notice. Hence the theory of afterthought was not entertained by the CIT(A). He observed that the assessee was not liable for deduction of tax at source and in violation of provisions of section 194C. There is no condition prescribed in the Act or otherwise that filing of form No. 15J is a pre-condition for non-deduction of tax at source. The liability to deduct tax ceases on receipt of form No. 15I from the sub-contractor. Therefore, the assessee cannot be held to be in violation of provisions of section 194C in case of delay in filing of form No. 15J and therefore the provisions of section 40(a)(ia) was not attracted in this case. This view is fortified by the decision in the case of Vipin P. Mehta v. ITO in ITA No. 3317/Mum/2010 and by the decision of Ahmedabad Tribunal ‘Á’ Bench in the case of Valibhai Khanbhai Mankad ITA NO. 2228/Ahd/2009 dated 29.4.2011. There is no infirmity in this finding of CIT(A). The same is upheld.

5. In the result, the appeal filed by the Revenue is dismissed.