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Facts
The assessee's assessment under Section 143(3) resulted in an addition of Rs. 12,00,600/- for non-deduction of TDS on interest payments to various financers, disallowed under Section 40(a)(ia). The assessee's subsequent appeal to the Ld. CIT(A) was dismissed due to non-prosecution.
Held
The Tribunal condoned a delay in filing the appeal and noted the assessee's contention that financers, being regular assessees, might have included the interest income in their returns. Applying the 2nd proviso to Section 40(a)(ia), the Tribunal set aside the orders of both the AO and CIT(A), remanding the matter for a de novo assessment to allow the assessee to furnish necessary evidence.
Key Issues
Whether disallowance under Section 40(a)(ia) for non-deduction of TDS on interest payments is justified when the payees may have accounted for the income, and whether the CIT(A) correctly dismissed the initial appeal for non-prosecution.
Sections Cited
143(3), 143(2), 40(a)(ia), 133(6), 201
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI RAKESH MISHRA
Present for: Appellant by : None Respondent by : Shri Dheeraj, Sr. DR Date of Hearing : 03.12.2024 Date of Pronouncement : 03.01.2025 O R D E R
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”], dated 21.07.2023 which has been passed against the assessment order passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 27.12.2016.
Although the registry has not pointed out any delay in the filing of the appeal, however, it is observed from the acknowledgement report of e- filing of appeal before the Tribunal that the order of the Ld. CIT(A) dated 21.07.2023 was received on 21.07.2023, while the appeal has been filed on 10.01.2024. Thus, there is a delay in filing the appeal. Along with appeal memo, the assessee has also filed an application seeking Anup Nayak, AY: 2014-15 condonation of delay as the advocate Shri Soumitra Sengupta was ill and the less was severe, which required him to undergo extensive medical treatment and rest and consequently he was unable to attend to his professional duties during the period of his illness from 15.07.2023 to 08.01.2024 and the delay in filing the appeal has been requested to be condoned.
2.1 We have considered the application for condonation of delay and since there was sufficient cause for the delay, therefore, the delay is condoned and appeal is admitted for adjudication.
Brief facts of the case are that the assessee is an individual, and had filed his return of income on 29.03.2015 declaring total income of Rs. 17,31,750. Subsequently, the case was selected under manual scrutiny. A notice u/s 143(2) of the Act issued on 16.09.2015, which was duly served upon the assessee on 19.09.2015. During the year under consideration the appellant was engaged in contractual business. The Ld. AO examined the case and found that a sum of Rs. 12,00,600/- was paid by the appellant to the Financers. He was asked to produce the details of TDS made on account of interest paid to Financers, on Lease rent for Land & Dumper Hire Charge Paid. During the course of hearing, the Ld.AR of the assessee was asked to produce the details of purchase along with bills and vouchers & Transporting Charges paid. In this context, the Ld. AR appeared and filed the statement of transportation charges along with few self-made vouchers. Further, the ld. Counsel for the assessee was asked to produce the details of TDS made on account of interest paid to Financers, Lease rent for Land & Dumber Hire Charges paid. The reply was received from the appellant but the Ld. A.O. was not satisfied with the same. Hence, a sum of Rs. 12,00,600/- was added to his total income. Aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who vide order dated 21.07.2023 dismissed the appeal on account of non-prosecution of the appeal.
3. None appeared on behalf of the assessee and the appeal was heard with the assistance of the Ld. Sr. DR and the record and the submissions made have been examined.
In the appeal memo filed on Form No. 36, the assessee has filed combined grounds of appeal, and statement of facts, the gist of which is that no TDS was made on account of interest paid to M/s. L&T Finance Ltd., SREI Equipments Finance Ltd., ICICI Bank and Mahindra & Mahindra Financial Services Ltd., therefore, the interest paid was disallowed under section 40(a)(ia) of the Act. The assessee contends that during the course of assessment, the assessee stated that the interest paid by the appellant had been shown by the payees in their taxable income. As the payees stand on a higher status, therefore, the appellant asked the payees to confirm whether the amount of interest paid by the appellant was shown by the payees in their taxable income or not. As no response was received from the payees, the appellant requested the Ld. AO to issue notices under section 133(6) of the Act to the respective payees, but the Ld. AO added the above amount of interest payment along with the returned income of the assessee. The assessee, therefore, requested that it is a fit case for remand back to the Ld. AO by giving a specific instruction for examination of above interest payment by issue of notice to the respective payees.
We have gone through the records and the grounds of appeal and the facts of the case. The financers to whom the interest was paid by the assessee are apparently regular assessees and some of them are listed companies and, therefore, the possibility that the interest received from the assessee had been shown in their returns of income on which tax is been paid cannot be ruled out. The assessee failed to furnish any evidence Anup Nayak, AY: 2014-15 in support of the claim that the interest had been shown in their returns of income, the onus for which lay on the assessee. Even before the Ld. CIT(A), proper compliance could not be made. Therefore, in the interest of justice and fair play and since the assessee could not get the required evidence despite making efforts and as per the 2nd proviso of section 40(a)(ia), where an assessee fails to deduct the whole or any part of the tax 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 on the date of furnishing of return of income by the payees referred to in the said proviso. Since the matter needs verification and adequate opportunity to the assessee, therefore, the orders of the Ld. CIT(A) as well as of the Ld. AO are hereby set aside and the Ld. AO is directed to frame the assessment order de novo after the assessee furnishes necessary evidence for the relief claimed. The assessee shall not seek unnecessary adjournments and shall be at liberty to file all evidence before the Ld. AO.
In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the court on 3rd January, 2025.