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

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.

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.

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.

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.

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 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.

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 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