SUBRAMANIAM ARUMUGAM BALASUBRAMANIAM CHATRAPATTI,VIRUDHUNAGAR vs. ITO, WARD-1,, VIRUDHUNAGAR

The order of the Ld. CIT (A) is erroneous and bad in law as the same is opposed to the facts of the case and provisions of law.

The Ld. CIT (A) erred in dismissing the appeal in violation of principles of natural justice without properly considering the submissions filed by the Appellant.

The AO erred in adding the disallowing Rs. 9, 89, 603/- u/s 40(a)(ia) of the Act and the Ld. CIT (A) erred in failing to delete the same.

The AO erred in adding the disallowing Rs. 20, 16, 538/- u/s 40(a)(ia) of the Act and the Ld. CIT (A) erred in failing to delete the same.

The Appellant having submitted Form 26A, the Ld. CIT (A) erred in treating the appellant as assesse in default and sustaining the disallowance.

Any other ground raised at the time of hearing.

The brief facts of the case are that the assessee filed its return of income at Rs. 4, 99,210/-. The case of the assessee was selected for scrutiny and the case was assessed at Rs. 35, 05,350/-. The assessee being aggrieved preferred an appeal before the Ld. Addl. /JCIT (A), who in turn confirmed the order of the AO and the appeal of the assessee was dismissed. The assessee being further aggrieved preferred the present appeal before us. We have gone through the order of the AO, the Ld. Addl. /JCIT (A) and submissions of the assessee along with arguments taken before us by the AR and the Ld. DR.

It is observed that during the year under consideration the assessee paid Rs. 9, 89,603/- as sales commission to various parties as per the details in the assessment order and Rs. 20, 16,538/- to Shri Harini Textiles and both the payments are liable for TDS u/s. 194H and194C respectively. But the assessee has not deducted any TDS on the above amounts, resultantly both the amounts were disallowed u/s. 40(a) (ia) of the Act. For better understanding of the matter we are reproducing herein below the relevant section pertaining to the matter i.e. section 201 of the Act as under: “Consequences of failure to deduct or pay. 201. [(1) Where any person, including the principal officer of a company,— (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax: [Provided 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 payee or on the sum credited to the account of a payee shall not be deemed to be an assessee in default in respect of such tax if such payee— (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:”

It is observed that the assessee furnished Form-26A of his vendor, i.e. M/s. Shri Harini Textiles (Rs. 20,16,538/- u/s. 194C of the Act) along with ITR, Computation of income sheet and financials before the Ld. Addl. /JCIT (A) and the same were not considered by the Ld. Addl. /JCIT (A). The copies of Form No.26A, ITR, and Computation of income sheet and Financials were submitted before us also. In the light of the provisions reproduced (supra) r.w. rule 31ACB of the Income Tax Rules, 1962, it is observed that the assessee rightly complied the requirement of proviso to section 201 of the Act. Hence, the payments made to M/s. Shri Harini Textiles amounting to Rs. 20, 16, 538/- cannot be disallowed on account of non- deduction of TDS and the same are allowable in terms of section 201 of the Act r.w. rule 31ACB of the Income Tax Rules, 1962.

The powers of the Ld. Addl. /JCIT (A) are coterminous with that of AO. What an AO can do, the Ld. Addl. /JCIT (A) can also do the same. As the documents mentioned above were not filed by the assessee before the AO but the same were duly filed before the Ld. Addl. /JCIT (A), at the max he can ask for a report from the AO or he may examine the same at his own. But the Ld. Addl. /JCIT (A), instead of Page 3 of 5 following the procedure ignored the same and not even allowed the legitimate expenses allowable to the assessee. Being final fact finding authority after verification of the documents mentioned above, we deem it fit to allow the expenses covered u/s. 194C of the Act amounting to Rs.20, 16, 538/-. In the result, ground no. 4 raised by the assessee is allowed.

As for as the amount of Rs. 9, 89, 603/- covered u/s. 194H of the Act is concerned, there is no submission / argument adduced by the assessee, hence the same is not discussed by us here and confirmed to be disallowed. In the result, ground no. 3 raised by the assessee is dismissed.

In the result, the appeal of the assessee is partly allowed with above directions.