SANTOSH KUMAR BHOGI,VISAKHAPATNAM vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3(1), VISAKHAPATNAM

ITA 253/VIZ/2026Status: DisposedITAT Nagpur01 October 2026AY 2023-2412 pages
AI SummaryRemanded

What were the facts?

The assessee, Santosh Kumar Bhogi, filed an appeal against the order of the CIT(A) for Assessment Year 2023-24. The dispute concerns a disallowance of Rs. 30.33 crores made by the Assessing Officer (AO) under Section 40(a)(ia) of the Income Tax Act, 1961. This disallowance arose from the assessee's failure to deduct Tax Deducted at Source (TDS) under Section 194Q on purchases of Rs. 101.61 crore from M/s Blue Star Trading Co. during FY 2022-23. The AO noted that the seller did not appear to have collected Tax Collected at Source (TCS) under Section 206C(1H), as it was not reflected in the assessee's Form 26AS. The assessee later deposited the TDS along with interest after receiving a show-cause notice. The AO disallowed the expenditure, holding that subsequent payment did not cure the default. The CIT(A) upheld this disallowance.

What did the Tribunal hold?

The Tribunal decided to remit the matter back to the Assessing Officer (AO) for passing an appropriate order. The Tribunal noted that the AO made the addition under Section 40(a)(ia) because the seller failed to comply with a notice, and the AO presumed the seller did not collect TCS. The assessee deposited the TDS after receiving a show-cause notice. The AO held that this subsequent deposit did not nullify the disallowance. However, a subsequent order dated 25.06.2025 by the ITO(TDS) stated that the assessee was not deemed an assessee in default as the payee had filed their return and accounted for the income, and the assessee deductor had paid interest. This information was not available to the AO when passing the assessment order on 26.03.2025, nor was it considered by the CIT(A). The Tribunal found that these subsequent developments, including the TDS officer's order and the payment of interest, should be taken into account. Therefore, the matter was remitted to the jurisdictional AO to pass an appropriate order on whether the disallowance under Section 40(a)(ia) is to be made, after affording a reasonable opportunity to the appellant. The appeal was allowed for statistical purposes.

What were the issues?

1. Whether the disallowance of expenditure under Section 40(a)(ia) of the Income Tax Act, 1961, is justified when the assessee has subsequently deducted and paid the TDS along with interest, as per Section 194Q of the Act? Assessee's contentions: - The assessee argued that the TDS was not deducted in FY 2022-23 due to a bonafide mistake and was paid in FY 2024-25. They relied on the order passed by the TDS Officer under Section 201/201(1A) on 25.06.2025, which stated that the assessee was not deemed an assessee in default as the TDS was paid with interest, and requested deletion of the addition under Section 40(a)(ia). - The assessee also relied on the decision in CIT Vs. Ansal Land Mark Township (P) Ltd., 377 ITR 635, regarding the benefit of the second proviso to Section 40(a)(ia). Revenue's contentions: - The Revenue argued that the assessee must prove all conditions of the proviso to Section 40(a)(ia), including Form 26A and payment of tax by the seller, which were not verified by the AO during assessment. - The subsequent order of the TDS Officer did not automatically nullify the disallowance, as the assessment was completed before this order. - The subsequent deposit of TDS was an admission of liability but did not cure the original failure for the purpose of allowance in the year under appeal. - The Revenue contended that the assessee failed to provide contemporaneous evidence of TCS collection and remittance by the seller.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 194Q,Section 206C(1H),Section 201,Section 201(1A),Section 139(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Pronounced: 01.10.2026

PER SHRI OMKARESHWAR CHIDARA, ACCOUNTANT MEMBER :

This appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals) [“Ld.CIT(A)”], National Faceless

1 Santosh Kumar Bhogi

Appeal Centre, Delhi vide DIN: ITBA/NFAC/S/250/2025- 26/1084815811(1) dated 15.01.2026 for the Assessment Year 2023-

24.2.

In the above cited appeal, the appellant has challenged the addition m

The order continues below.

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