NORTHERN CREDIT & COLLECTION BUSINESS P.LTD,NEW DELHI vs. DCIT, CIRCLE-18(2), NEW DELHI

Brief facts of the case are that the assessee is a company and engaged in the business of verification on behalf of Multi National Banks and other institutions. For the assessment year 2012-13, they have filed their return of income on 27.09.2012 declaring an income of Rs.78,13,250/-. Assessment u/s. 143(3) of the Income-tax Act (“the Act” for short) was, however, complete by making addition of Rs.3,22,890 u/s. 244A of the Act and Rs.7,18,200/- u/s. 40(a)(ia) of the Act. Learned CIT(A) partly allowed relief to the assessee and confirmed the addition of Rs.3,36,000/- u/s. 40(a)(ia) of the Act and deleted the rest of the additions.

Aggrieved by the order of ld. CIT(A) in sustaining the addition to the tune of Rs.3,36,000/- u/s. 40(a)(ia), assessee preferred this appeal stating that out of the total payment of Rs.7,18,200/- towards rent paid to five person, a sum of Rs.3,82,200/- was paid to four persons and payment to each of them is less than 1,80,000/- and therefore, under the provisions of section 194-I, no such deduction need be made where the aggregate of amount paid during the financial year does not exceed Rs.1,80,000/- individually. From the grounds of appeal, the grievance of the assessee could be deciphered that the ld. CIT(A) did not specifically delete this addition of Rs.3,82,200/- in her order.

4. Other grievance of the assessee is that in respect of Rs.3,36,000/- paid to one Sh. Chandra Kant Adrekar, the authorities failed to notice that Form 26A issued by the assessee and counter signed by the Chartered Accountant is in compliance with the Rules and Sh. Chandra Kant Adrekar was not obliged to file the return of income in as much as his income was below the maximum amount not chargeable to tax.

When the matter is called, there is no representation from the assessee. Notice was sent to the address given in form No. 36. If the assessee is available in such address, such notice should have been served on the assessee. If for any reason, the assessee is not available there, it is for the assessee to make arrangements for service of such notice by furnishing the address where the assessee would be available, or to deliver it to some authorised person, or by making request to the postal department to detain the mail till the assessee claims the same. Non-service of notice is solely attributable to the conduct of assessee. In these circumstances, we proceed to decide the appeal basing on the material available on record.

Learned DR relied on the orders of authorities below.

We have gone through the records in the light of submissions made by the ld. DR. In so far as the payment of Rs.3,82,200/- to four persons is concerned, none of such persons received an amount exceeding Rs.1,80,000/- in the financial year and therefore, under proviso to section 194-I, no deduction need be made. This is the reason why the ld. CIT(A) did not confirm such an addition and she confined her discussion to the addition of Rs.3,36,000/-. Though it is implied from the order of the ld. CIT(A), now we expressly state that the addition of Rs.3,82,200/- made by the Assessing Officer in respect of payments made to four individuals is unsustainable and shall stand deleted.

Now coming to the sustenance of addition to the tune of Rs.3,36,000/-, the record reveals that Form 26A dated 10.01.2017 was issued by the assessee and it was countersigned by the Chartered Accountant and inasmuch as it was not submitted to DCIT(Systems), the ld. CIT(A) held that there was no sufficient compliance with the Rules. Be that as it may, the leaned CIT(A) was not sure as to the fact whether the income of the payee was below the maximum amount not chargeable to tax.

It was submitted before the ld. CIT(A) that the assessee was required to file the details of expenses, on which TDS was deducted and the Assessing Officer did not seek any explanation for non-deduction of TDS in respect of this amount. According to the assessee before the ld. CIT(A), this prevented the assessee from producing Form 26A before the Assessing Officer. In these circumstances, when once form 26A was produced before the CIT(A), the fact of income of the payee below the maximum amount not chargeable to tax assumes importance, and in the absence of any finding on this aspect, the addition cannot be sustained. In the circumstances, we find it difficult to sustain the orders of the authorities below and accordingly allow the grounds of appeal