CARGO CONSTRUCTION COMPANY PRIVATE LIMITED,NEW DELHI vs. DCIT CIRCLE 4(2), NEW DELHI, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SH. SUDHIR KUMAR, JUDICIAL MEMBER AND SH. NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 1335/Del/2026 (Assessment Year : 2023-24) Cargo Construction Vs. DCIT Company Pvt. Ltd. Circle – 4(2) 1/9-B, Jindal House, New Delhi Asaf Ali Road, New Delhi-02 PAN No. AAACC 5291 J (APPELLANT) (RESPONDENT) Assessee by Shri Akhok Khandelwal, C.A. Revenue by Shri Sangeet Bansal, Sr. D.R. Date of hearing: 02.06.2026 Date of Pronouncement: 12.06.2026

ORDER PER NAVEEN CHANDRA, ACCOUNTANT MEMBER : This captioned appeal has been filed by the learned Commissioner of Income Tax (Appeals)/NFAC, Delhi (hereinafter referred as ‘CIT(A)’) order dated 19.01.2026 arising from the assessment order dated 21.03.2025 under section 143(3) read with sections 143(3A) & 143(3B) of the Income-tax Act, 1961 (hereinafter referred as ‘the Act’) for the Assessment Year 2023-24.

ITA No. 1335/DEL/2026 [A.Y 2023-24] Cargo Construction Company Pvt. Ltd. vs. DCIT 2. Grounds of appeal filed by the assessee are as under : 1. Action of the CIT (A) in confirming the action of A. O. in making a disallowance of Rs. 45,18,282/- u/s 40(a)(ia) of I. T. Act 1961 for non-deduction of tax at source being 30% of the purchases made is unjust, illegal, arbitrary and against the facts and circumstances of the case as the necessary compliance by filing the required certificate from CA in annexure to Form 26A from the vendors were duly placed on record. 2. That the learned Commissioner of Income-tax (Appeals) erred in law and on facts in sustaining the disallowance under section 40(a)(ia) of the Income-tax Act, 1961, without appreciating that the appellant had subsequently deducted and deposited the tax at source on the impugned purchases, duly revised the TDS returns for Assessment Year 2023-24, and furnished the corresponding TDS certificates before the Assessing Officer, thereby regularizing the alleged default and complying with the provisions of Chapter XVII-B of the Act, albeit belatedly. The impugned disallowance is therefore unsustainable and liable to be deleted.

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ITA No. 1335/DEL/2026 [A.Y 2023-24] Cargo Construction Company Pvt. Ltd. vs. DCIT of I. T. Act 1961 was not deducted during the year under consideration. 4. Aggrieved, assessee was in appeal before the CIT(A) who upheld the disallowance but allowed the deduction in the assessment year relevant to the previous year in which the payees filed their returns of income or the tax was deducted and paid, i.e A.Y. 2025-26. 5. The sole and substantive ground is with regard to the disallowance of Rs.45,18,282/- u/s 40(a)(ia) of the Act for non- deduction of tax at source being 30% of the purchases made. The ld AR submitted that during the year the assessee had made purchases exceeding Rs.50,00,000/- from four parties, namely BJS Genuine Spares, Guru Nanak Enterprises, Hind Automobiles and Matta Paint House. The taxable value of such purchases liable for deduction of tax at source under section 194Q aggregated to Rs.1,50,60,939/-. As the assessee had failed to deduct tax at source on the said amount during the relevant previous year, the Assessing Officer disallowed 30% of the taxable purchase value amounting to Rs.45,18,282/- under section 40(a)(ia) of the Act and added the same to the income of the assessee under the head “Income from Business”. The ld AR submitted that it could not be treated as an assessee-in default under section 201(1) since the payees had taken the corresponding income into account and

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ITA No. 1335/DEL/2026 [A.Y 2023-24] Cargo Construction Company Pvt. Ltd. vs. DCIT paid due taxes, and Form 26A had been obtained. The assessee further submitted that tax of Rs.15,130/- under section 194Q had been deposited subsequently. 6. Per contra, learned DR relied on the decision of the AO and CIT(A). 7. We have heard the rival submissions and perused the material available on record. We find that the mandate of law under the second proviso of Section 40(a)(ia) is that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum. In other words, as long as the assessee cannot be treated as an assessee in default, the disallowance under section 40(a)(ia) cannot come into play. To appreciate the effect of this proviso, it is necessary to refer to the first proviso to section 201(1), which provides that "any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a

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ITA No. 1335/DEL/2026 [A.Y 2023-24] Cargo Construction Company Pvt. Ltd. vs. DCIT resident shall not be deemed to be an assessee in default in respect of such tax if such resident – (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed.” 8. In the instant case though the assessee has not deducted the TDS as required, we find that it is an unrebutted fact that the assessee has furnished the copies of CA Certificate that the persons from whose payment the assessee had to deduct TDS, had filed their Return of income on due date and offered the sales made to the assessee for taxation. In such facts and circumstances, there is no occasion to treat the assessee as ‘assessee in default’ u/s 201(1). Once the assessee is not held in default under section 201(1) of the Act, the assessee cannot be fastened with the liability of disallowance under the provisions of Section 40(a)(ia) r.w. first proviso to subsection (1) of section 201 of I. T. Act 1961. Accordingly, following the decision of the hon’ble Supreme Court in the case of PCIT V Shivaai Industries P Ltd

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ITA No. 1335/DEL/2026 [A.Y 2023-24] Cargo Construction Company Pvt. Ltd. vs. DCIT (2024) 159 taxmann.com 388(SC), the disallowance is deleted. The ground of appeal is allowed. 9. In the result, appeal filed by the assessee in ITA No.1335/Del/2026 is allowed Order pronounced in the open court on 12.06.2026

Sd/- Sd/- (SUDHIR KUMAR) (NAVEEN CHANDRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 12.06.2026 Priti Yadav, Sr. Ps* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI

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