SANJAY KUMAR AGRAWAL,ROURKELA vs. ITO,WARD-2, ROURKELA

आयकर अपीऱीय अधिकरण, “एस.एम.सी”, न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, CUTTACK श्री चन्द्र मोहन गगग, न्द्याययक सदस्य के समऺ । BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आयकर अऩीऱ सं./ITA Nos.15&16/CTK/2020 (नििाारण वषा / Assessment Years :2012-2013 & 2013-2014) Sanjay Kumar Agarwal, Vs. ITO, Ward-2, Rourkela Purohit Market Complex, Kachery Road, Rourkela-769012 स्थायी ऱेखा सं./ जीआइआर सं./ PAN/GIR No. : ABEPA 7073 N (अऩीऱाथी /Appellant) (प्रत्यथी / Respondent) .. यनधागररती की ओर से /Assessee by : Shri Shri B.Panda, Sr. Advocate. with Shri B.R.Panda, Advocate. राजस्व की ओर से /Revenue by : Shri Ashim Ku. Chakraborty, DR सुनवाई की तारीख / Date of Hearing : 24/06/2020 घोषणा की तारीख/Date of Pronouncement 24/06/2020 आदेश / O R D E R These two appeals have been filed by the assessee against the order of Commissioner of Income Tax (Appeals), Sambalpur, dated 30.08.2019 & 18.10.2019 for the Assessment Years 2012-2013 & 2013- 2014. 2. As per the office note, both the appeals of the assessee are barred by 70 days. In this regard ld. AR has filed an affidavit stating the reasons for condonation of delay, to which ld. DR did not object. I have gone through the affidavit of the assessee and found that there is sufficient reason stated by the assessee for delay in filing the present appeals. Accordingly, I condone the delay and both appeals of the assessee are heard finally.

2 ITA Nos.15&16/CTK/2020 3. In both the appeals, the assessee has raised sole common ground with regard to confirming the addition made by the AO u/s.40(a)(ia) of the Act. 4. Brief facts of the case are that the assessee is an individual and derives income from trading in Iron and steel in the name & style of M/s Sri Shyam Steels. He filed return of income electronically on 05.07.2013 declaring total income at Rs.5,08,290/-, which was processed u/s.143(1) of the Act and selected for scrutiny assessment through CASS. Thereafter the AO issued statutory notices to the assessee and the assessee appeared before the AO from time to time. During the course of assessment proceedings, the AO found that the assessee has claimed and debited an amount of expenditure of Rs.2,76,000/- under the head ‘Crane Expenses’. Further on perusal of the details of the ledger account, the AO found that during the year the assessee has paid the crane charges of Rs.2,76,000/- to one Saurav Mittal. Accordingly, the AO asked the assessee to furnish the TDS details of the party and the assessee replied that no TDS has been made. Therefore, the AO stated that the assessee has violated the provisions of the Income Tax Act, 1961 in not deducting the tax at source and disallowed the expenditure amounting to Rs.2,76,000/- claimed under the head ‘Crane Expenses’ u/s.40(a)(ia) of the Act for the Assessment Year 2012-2013. Similarly, the AO disallowed Rs.3,30,000/- u/s.40(a)(ia) of the Act claimed by the assessee under the same head for Assessment Year 2013-2014.

3 ITA Nos.15&16/CTK/2020 5. Being aggrieved, the assessee preferred appeals before the CIT(A), wherein the CIT(A) held that the assessee could not submit a certificate from chartered accountant before prescribed authority and, accordingly, the CIT(A) dismissed both the appeals of the assessee. 6. Further aggrieved by the order of CIT(A), the assessee is in appeals before the Tribunal for both the assessment years under consideration. 7. Ld.AR submitted that ld. CIT(A) has confirmed the addition made by the AO without considering the certificate of Chartered Accountant in form No.26A. Ld. AR produced the copy of certificate duly certified by the Chartered Accountant in the prescribed form along with other details, which are placed on record. Therefore, provisions of Section 40(a)(ia) of the Act do not apply. It was further the contention of ld. AR that the default in non-furnishing of declaration/forms to the Commissioner as prescribed may result in invoking penalty for which separate provisions/procedure was prescribed under the Act. On submission of certificate in the form No.26A, there is no liability on the part of the assessee to deduct tax. Once there is no liability to deduct tax, the provisions of section 40(a)(ia) of the Act cannot be invoked and no such default occurred in this case as such provisions of section 40(a)(ia) of the Act are not applicable to the facts of the case. 8. On the other hand, ld. DR relied on the order of lower authorities and submitted that the assessee has not filed the form before the prescribed authority as per Rules 31ACB of the Income Tax Rules, 1962.

4 ITA Nos.15&16/CTK/2020 Therefore, the assessee is not eligible for the above benefit. Hence, the lower authorities are justified. The ld. DR also submitted that even if it is accepted the certificate issued by the Chartered Accountant, then the assessee may be held liable to pay interest u/s.201(1A) of the Act. 9. After hearing both the sides and perusing the material available on record and the orders of lower authorities, It is noticed that the assessee has incurred expenditure without deducting TDS under the head ‘Crane Expenses’ for both the assessment years under consideration. It is observed form the assessment order that the assessee has paid crane charges to one Saurav Mittal, without deducting tax at source and nor the assessee submitted the Form 26A to the prescribed authority as per rules. The coordinate bench of the Tribunal in case of Jai Mata Di Vs. ITO, ITA No.508/CTK/2017, order dated 23.04.2018, has decided the similar issue in favour of the assessee which reads as under :- “7. We have heard the rival submissions, perused the orders of lower authorities and materials available on record. We find that the Mumbai Bench Á' of the Tribunal in the case of Karwat Steel Traders vs ITO, 145 ITD 370 (Mum) has held as under: "The amount cannot be allowed as deduction only in the event when tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid. In this case, the assessee was to deduct tax under provisions of section 194A. Section 194A is further qualified by the provisions of section 197A( 1 A) wherein if a person furnishes a declaration in writing in prescribed Form and verified in the prescribed manner to the effect that tax on his estimated total income is to be included in computing his total income will be nil there is no need to deduct tax. The assessee has received such forms as prescribed from those persons to whom interest was paid/being paid and, accordingly, no deduction of tax was to be made in such cases. The default for non-furnishing of the declarations to the Commissioner as prescribed may result in invoking penalty as per provisions under section 272 A(2)(i), for which separate provision/procedure was prescribed under the Act. However,

5 ITA Nos.15&16/CTK/2020 once Form 15G/Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax. Once there is no liability to deduct tax, it cannot be considered that tax is deductible at source under Chapter XVII-B as prescribed under section 40 (a)(ia). The provisions of section 40(a)(ia) can only be invoked in a case where tax is deductible at source and such tax has not been deducted or after deduction has not been paid. No such default occurred in this case. Accordingly, the provisions of section 40(a)(ia) are not applicable to the facts of the case. Both the Assessing Officer and Commissioner (Appeals) erred in considering that non- filing of form 15H invites disallowance under section 40(a)(ia). Suffice to say that on the facts of the case, there is no need to deduct tax at source and thus, there is no default committed by the assessee. Accordingly, disallowance under section 40(a)(ia) does not arise. Non-filing or delayed filing of such forms cannot result in disallowance under section 40(a)(ia). The grounds raised by assessee are allowed. Assessing Officer is directed to modify the order accordingly" In the instant case, we find that it is not in dispute that the assessee filed Form 26A together with income tax return of the recipients of the amount before the CIT(A). The only ground for rejecting the explanation of the assessee was that the said Form was not filed with Director General of Income Tax (Systems) or his authorised persons. Hence, in our considered view, for non-filing of the said Form before the Director General of Income Tax (Systems), the assessee can be visited with penalty as provided under the income Tax Act but no disallowance of the expenditure can be made u/s.40(a)(ia) of the Act in view of the above quoted decision of the Tribunal in the case of Karwat Steel Traders (supra). Hence, we set aside the order of the CIT(A) and delete the addition of Rs.2,24,662/- and Rs.11,24,266/- made by the Assessing Officer.” 10. I, respectfully following the above decision of the coordinate bench of the Tribunal, direct the AO to delete the addition made u/s.40(a)(ia) of the Act for both the years under consideration. However, I found substance in the arguments advanced by the ld. DR regarding interest payable by the assessee u/s.201(1A) of the Act. Accordingly, the assessee could not be escaped from the payment of interest as per section 201(1A) of the Act for delayed payment of tax which was required to be made within the stipulated time. Hence, the assessee is directed to

6 ITA Nos.15&16/CTK/2020 pay interest as per Section 201(1A) of the Act on the amounts made to Saurav Mittal of Rs.2,76,000/- for A.Y.2012-2013 and Rs.3,30,000/- for A.Y.2013-2014, respectively on account of crane charges. 11. In the result, both appeals of the assessee are allowed partly. Order pronounced in the open court on 24/06/2020. Sd/- (CHANDRA MOHAN GARG) न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनांक Dated 24/06/2020 प्र.कु.मम/PKM, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीऱाथी / The Appellant- . 1. Sanjay Kumar Agarwal, Purohit Market Complex, Kachery Road, Rourkela-769012 2. प्रत्यथी / The Respondent- ITO, Ward-2, Rourkela 3. आयकर आयुक्त(अऩीऱ) / The CIT(A), 4. आयकर आयुक्त / CIT ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 5. गार्ग पाईऱ / Guard file. 6. सत्यावऩत प्रयत //True Copy// आदेशािुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack