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02-01-2020, Debjyoti Dutta Section 40(a)(ia), 263, 40A(3), Tribunal Cuttack

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2 weeks 5 days ago #11910 by amit
Section - 40(a)(ia), 263, 40A(3), 68
Order Date - 02-01-2020
Favouring - Assessee Partly
Court - Tribunal Cuttack
Appellant - Debjyoti Dutta
Respondent - ITO
Justice - CHANDRA MOHAN GARG JM & LAXMI PRASAD SAHU AM
Citation - 120Taxpundit31
Appeal No. - ITA No.390/CTK/2014
Asstt. Year - 2008-09

Order

PER : C.M.Garg,JM

This is an appeal filed by the assessee against the order of the CIT(A), Cuttack dated 7.7.2014 for the assessment year 2008-2009.

2. The assessee has raised the following grounds of appeal:

“1. That, the learned CIT(A) has committed serious error in not quashing the assessment order passed u/s 143(3)/ 263 of the Income-tax Act, 1961 (Hereinafter referred as "the Act") in accordance with prayer of the appellant and for which said assessment order is liable to be quashed.

2. That, the learned CIT(A) has committed serious error in conforming an amount of Rs.2,00,000/- u/s 40(a)(ia) of the Act ignoring the submission and the provisions of the Act and for which same is liable to be deleted.

3. That, the learned CIT(A) has committed serious error in conforming the disallowances u/s 40A(3) of the Act of Rs.4,24,045/- which is liable to be deleted.

4. That, the learned CIT(A) has committed serious error in not deleting the addition made by the learned Assessing Officer of Rs.25,00,000/- which is contrary to the facts, law and for which the said addition is liable to be deleted.

5. That, the learned CIT(A) has committed serious error in not admitting the additional grounds of appeal No.1, 2 & 3 which are legal issues and for which same is liable to be decided in accordance with the law by the learned Hon'ble ITAT .

6. That, the learned CIT(A) has committed serious error in not quashing the assessment order passed by the learned Assessing Officer by issuing notice on extraneous reasons u/s 143(2) of the Act being illegal and hence the assessment order based on such illegal notice is liable to be quashed.

7. That, the learned CIT(A) has committed serious error in not quashing the assessment order on the basis of grounds of appeal submitted before him challenging the issuance of notice u/s 143(2) of the Act without processing the return u/s 143(1) of the Act.

8. That, the learned CIT(A) has committed serious error in not quashing the assessment order which has been passed in gross violation to the section 143(4) of the Act.”

3. At the outset, ld counsel for the assessee submitted that he does not press Ground No.1 and Ground Nos.5 to 9 of appeal. Hence, these grounds are dismissed as not pressed.

4. Apropos Ground Nos.2 to 4 of appeal, ld counsel for the assessee submitted that an amount of Rs.2 lakhs was paid to Shri K.C.Swain as machine hire charges for the assessment year 2007-08 and no tax has been deducted. Ld counsel further referred to the paper book from pages 72 to 107, containing cash book of the assessee for the period 1.4.2007 to 31.3.2008, and submitted that from the above, it is clearly discernible that payments to Shri K.C.Swain has been made in small amounts which are less than Rs.20,000/- in a day. Therefore, the provisions of section 40(a)(ia) of the Act cannot be applied. Ld counsel submitted that these payments are machine hire charges, which were not made in a single day and, therefore, provisions of section 40(a)(ia) are also not applicable.

5. Replying to above, ld DR submitted that prior to 1.10.2009, the assessee has made payment of Rs.2 lakhs in a year to Shri K.C.Swain, which is exceeding Rs.50,000/- and, therefore, TDS provision has to be applied.

6. Ld counsel, in the rejoinder, submitted that the payment has been made to Shri K.C.Swain as machine hire charges without any contract and K.C.Swain was neither a contractor nor sub-contractor, therefore, provisions does not apply.

7. On careful consideration of the rival submissions, we are of the considered view that ld D.R. could not controvert the situation that payment to Shri K.C.Swain has been made in a small amount which is less than Rs.20,000/- in a day and there is no contract or sub-contract between the assessee and Shri K.C.Swain. It is also not in dispute that the amount has been paid by the assessee as per the requirement of use of machine hire charges. The AO has not examined and verified the contention and explanation of the assessee, thus, the same is restored to the file of the AO for re-adjudication. Consequently, Ground No.2 of the assessee is allowed for statistical purposes.

8. Apropos Ground No.3 of appeal, ld counsel for the assessee, in the original assessment order, no disallowance u/s.40A(3) of the Act was made and this disallowance has been made in the subsequent assessment year in pursuance to order under section 263 of the Act. Ld counsel submitted that no payment has been made exceeding Rs.20,000/- in contravention of section 40A(3) of the Act and the assessee has submitted certificate establishing this fact before the lower authorities, which has been ignored by them without any reason. Ld counsel submitted that the amount of Rs. 4,24,045/- was paid to different persons for certain purchases and expenses under compelling circumstances to the sub-contractors, who does not have bank account and for getting the work with them, the assessee has made cash payment. Therefore, ld counsel for the assessee submitted that some payment has been made to the truck owners, who denied to have accepted cheque or draft by stating that they are required to purchase fuel in cash and to the labourers during odd hours because it is difficult to withdraw the amount from bank during that odd hours. Therefore, this kind of payment made under compelling circumstances may kindly be allowed.

9. Replying to above, ld D.R. strongly supported the action of the Assessing Officer and submitted that any payment in contravention of section 40A(3) has to be disallowed.

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