ITAT restored matter on additions on cessation of liability and labour charge

1. The assessee individual was in the business of manufacturing of electric motor stamping and he filed his return of income declaring total income at Rs.14,33,570/-. The case was selected for scrutiny assessment and notice u/s 143(2) (of Income Tax Act, 1961) was issued and served upon the assessee. Assessment was completed by assessing the income at Rs.94,76,288/- after making additions on account of cessation of liability u/s 41(1) (of Income Tax Act, 1961), and labour charges u/s 40(a)(ia) (of Income Tax Act, 1961).

2. CIT(A) deleted the addition for cessation of liability u/s 41(1) (of Income Tax Act, 1961) of Rs.62,62,863/- and partly deleted the disallowance u/s 40(a)(ia) (of Income Tax Act, 1961) by sustaining it to Rs.5,33,965.

3. On appeal, the ITAT held as under:

"4. We further observe that assessee has himself agreed for the addition vide note sheet dated 22.12.2009 in the file of ld. Assessing Officer but the same has not been given any cognizance by the ld. Asst. Year 2007-08 CIT(A) in his appellate order. When the assessee himself is agreeing to the addition in the given circumstances, when the sundry creditors of Rs.62,62,863/- were outstanding for some three years or more then this aspect should have been examined in depth by the ld. CIT(A) by way of passing a speaking order on this ground. We, therefore, are of the view that in the facts and circumstances of the case including the acceptance of assessee for agreeing to the proposed addition, matter needs to be relooked by the ld. CIT(A) by way of passing a speaking order in light of our findings and we accordingly set aside the issue to the file of ld. CIT(A). Accordingly, this ground of Revenue is allowed for statistical purposes.

5. We are, therefore, of the view that this needs to be set aside to the file of ld. Assessing Officer before whom assessee will provide complete details with bifurcation of labour contract charges of Rs.17,79,855/- and also classify the respective heads i.e. TDS not required to be deducted/ TDS to be deducted @ 1%/TDS deducted @ 2%/value of goods sold wrongly mentioned under the head labour contract charges. Ld. Assessing Officer has to ensure that the proper opportunity of being heard is given to the assessee and to furnish requisite details and accordingly decide as to whether the provisions Asst. Year 2007-08 of section 40(a)(ia) (of Income Tax Act, 1961) are applicable on the assessee and if so then the disallowance of the same can be made and that too if assessee is unable to prove that deductee has truly disclosed the impugned amount in its income-tax return duly supported by a certificate of Chartered Accountant to this effect. This ground of revenue is allowed for statistical purposes.”

Case Reference- ACIT, Circle-6, Vs. Shri Popatlal Joitaram Patel

IN THE INCOME TAX APPELLATE TRIBUNAL "D" BENCH, AHMEDABAD BEFORE SHRI Kul Bharat, JM & SHRI MANISH BORAD, AM

ITA No.470/Ahd/2011

Asstt. Year: 2007-08