×Latest Case Laws on Income Tax by various High Courts of India
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03-09-2019, Akrati Promoters, Section 260A, 40A(2)(a), HIGH COURT OF ALLAHABAD
1. These two appeals of the assessee filed under Section 260 A of the Income Tax Act, 1961 challenges the order of Income Tax Appellate Tribunal, Agra Bench, Agra (hereinafter called as Tribunal’) dated 28.2.2013 passed in Income Tax Appeal No.129/Agr/2012 for assessment year 2008-09 and order dated 21.4.2016 passed in ITA No.152/Agr/2014 for assessment year 2009-2010.
2. The Appeal No.89 of 2013 was admitted on 20.9.2013 on the following substantial question of law:-
“i. Whether, in view of the fact that the case of the revenue is confined under Section 40A(2)(a) and not section 37 of the Act, the finding of the Tribunal that the appellant did not get sub-contracts executed through Sri Sanjay Agarwal, Sri Subodh Agarwal and Sri R.R. Agarwal is impermissible and suffers from self contradiction?
ii. Whether, expenditure incurred by the appellant in execution of work through sub-contractors could have been disallowed, to any extent, under Section 40A(2)(a) in absence of any finding as to the expenditure being excessive or unreasonable having regard to the statutory factors enumerated therein?
iv. Whether, even otherwise, the finding of the Tribunal that the appellant did not get the work executed through the sub-contractors Sri Sanjay Agarwal, Sri Subodh Agarwal and Sri R.R. Agarwal is wholly perverse and against the entire weight of evidence and against the business practice as consistently accepted by the revenue authorities in the earlier assessment years?
v. Whether, any part of the expenditure incurred by the appellant in the earlier years and it, corresponding liability carried in the appellants books of account in the present year could be disallowed under Section 40A(2)(a)?
3. Appeal No.222 of 2016 was admitted on the same question for the assessment year 2009-10 on 20.12.2016.
4. As both the appeals arise out of same question of law, as such they are being heard and decided together by a common order.
5. Assessee/appellant during the assessment year in question was a partnership firm, but w.e.f. 28.8.2012 was taken over with all its assets and liabilities by a company known as Akrati Technimont Ltd.
6. Facts of Appeal No.89 of 2013, which is in respect of assessment year 2008-09, assessee/appellant filed its return of income disclosing income of Rs.30,06,670/-. The assessee firm was engaged in business of civil work contracts. Case of the assessee was selected for scrutiny, and notices under Section 143(2) and 142(1) of the Act were issued. Representative of the assessee firm appeared and produced the books of account before the assessing authority. During course of assessment proceedings, to verify the genuineness of payments claimed to have been made to sub-contractors, summons under Section 131 of the Act were issued. In response to the said, Sanjay Agarwal, Subodh Agarwal and R.R. Agarwal appeared and the statement on oath were recorded. During the assessment year in question, assessee had disclosed expenditure of Rs.2,55,49,027.78/- to 21 different sub-contractors towards execution of workcontract. Out of the said amount, assessee incurred expenditure of Rs.61,76,126/- on 3 sub-contractors namely Sanjay Agarwal (Rs.21,57,500/-), Subodh Agarwal (Rs.26,09,254/-) and R.R. Agarwal (Rs.14,09,372/-) Assessing Authority vide order dated 10.4.2011 disbelieved and disallowed the entire expenditure of Rs 61,76,126/- being payment made to the said 3 sub-contractors and work executed by them. An appeal was filed challeng ng assessment order before the Commissioner of Income Tax (Appeals), who on 31.1.2012 partly allowed the same, however, as regard the ground raised against disallowance of expenditure under Section 40A(2)(a) of the Act was rejected.
7. The assessee as well as the Revenue filed cross appeals before the Tribunal. On 28.2.2013, the Tribunal partly allowed the appeal of the assessee, out of total expenditure of Rs.61,76,126/- disallowed by the assessing authority under Section 40A(2)(a), Tribunal upheld the disallowance of Rs.12,35,225/- and allowed remaining 80% expenditure of Rs.49,40,900/- while the appeal of the department was dismissed.
8. Sri Rakesh Ranjan Agarwal, learned Senior Counsel assisted by Sri Suyash Agarwal, learned Counsel for the assessee submitted that the Tribunal had wrongly disallowed 20% of the amount while deleting the addition of Rs.49,40,901/- made by the assessing authority. He submitted that the Tribunal while recording the finding had held that the assessee has carried out contract work, may be not from the three sub-contractors named above but by other parties, thus the case of the assessee did not fall under Section 40A(2)(a) of the Act and case of the assessee fell under Section 37 of the Act, and the Tribunal should have granted entire relief to the assessee once it arrived at the finding that the subcontract was not carried out by the three contractors named above and it confirmed the finding of the assessing authority as well as the first appellate authority.
9. Sri Manu Ghildyal, learned Counsel appearing for the department submitted that the three sub-contractors named above, namely Sanjay Agarwal, Subodh Agarwal and R.R. Agarwal are the sons and relatives of the partners of the firm and are persons covered under Section 40A(2)(b) of the Act. He further invited the attention of the Court to the findings recorded by the assessing authority, wherein these three subcontractors were examined by the A.O. and the affidavit filed by them was considered.