M/S. ASHIM KUMAR CHATTERJEE,KOLKATA vs. DCIT, CIRCLE-22, KOLKATA, KOLKATA

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ITA 752/KOL/2017Status: DisposedITAT Kolkata13 July 2022AY 2012-133 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the issue to the Assessing Officer to verify if the payees had included the payments in their income and paid taxes. If confirmed, no disallowance would be made.

What were the facts?

The assessee appealed an ex parte order by the CIT(A) which disallowed payments made to counsel and advocates under Section 40(a)(ia) for non-deduction of TDS. The assessee argued that the payees had already accounted for these payments in their income tax returns and paid the due taxes.

What were the issues?

Whether disallowance under Section 40(a)(ia) is warranted when the payee has already accounted for the income and paid taxes, despite non-deduction of TDS by the assessee.

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 201

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B”

Before: Shri Sanjay Garg & Shri Girish Agrawal

order

: July 13, 2022 ORDER

Per Sanjay Garg, Judicial Member:

1.

The present appeal has been preferred by the assessee against the order dated 28.02.2017 of the Commissioner of Income Tax (Appeals)-6, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal:

“(1) For that the facts of the case under appeal was identical to the facts of the assessee's own appeal in the assessment year 2010-11 heard by Hon'ble ITAT ‘D’ Bench, Kolkata on 12th December, 2017 under Appeal No.1023/Kol/2016 and till 27th February, 2017 the order was not issued. For this reason a prayer for adjournment was made before Ld. CIT(A) in writing but Ld. CIT(A) refused to accept the application for adjournment and observed in the assessment order that nobody attended hearing on 27- 02-2017 and erred in passing the ex parte appellate order. (2) For that Ld. Assessing Officer as well as Ld. CIT (Appeals) both had erred in law and in facts in making addition of Rs.53,43,267/- as counsels payment and Rs.3,56,000/- as Advocates payments u/s.40(a)(ia) of the Income Tax Act, 1961, (in short 'Act') under the facts and circumstances of the case. (3) For that the payments made by The Appellant Assessee engaged in legal profession as solicitor and advocates were reimbursements by appellant assessee's clients and disallowance u/s.40(a)(ia) of the Act in respect of reimbursement expenses were devoid of any substantial basis. (4) For that the accounting entries made in the books of accounts are not decisive of nature of payment which is a settled principle of law and the same has been ignored by Ld. CIT (Appeals).

Assessment Year: 2012-13 M/s Ashim Kumar Chatterjee (5) For that the disallowances u/s.40(a)(ia) were deleted by Hon'ble ITAT Kolkata Bench in the case of Sharma Kajaria & Co. Vs. Deputy Commissioner of Income Tax, Circle - 54 - Kol. (2012) 50 SOT 282 (Kol.) and Ld. CIT (Appeals) had erred in not following the same although the said case was brought to his notice in appeal proceedings. (6) For that under similar fact Hon’ble ITAT Kolkata in the case of Appellate Assessee himself had allowed the assessee’s appeal in for assessment year 2010-11. (7) For that Ld. Assessing Officer as well as Ld. CIT(Appeals) both had erred in law and in fact by adding a sum of Rs.7,800/- on account of donation which is an allowable expenditure as per CBDT Circular No.200 and further addition of Rs.20,623/- on account of motor car expenditure under the facts and circumstances of the case. (8) For that your appellant assessee craves leave to add or alter and modify the grounds of appeal before or at the time of appeal hearing.”

2. Ground No.1 – No argument has been advanced by the ld. counsel in relation to Ground No.1 of the appeal. Ground No.1 is, therefore, dismissed as not pressed.

3.

Ground No.2 to 5 – The assessee through these grounds of appeal has agitated the disallowance made by the Assessing Officer u/s 40(a)(ia) of the Act of Rs.53,43,267/- for non-deduction of TDS as per the provisions of section 194J of the Act on the payment made for professional services. Though the assessee, inter alia, has pleaded through these grounds that it was mere reimbursement of expenses and no TDS was required to be deducted. However, during the course of argument, the ld. Counsel for the assessee did not press this argument. The only contention raised by the ld. Counsel for the assessee is that as per proviso to section 201, if any person fails to deduct tax at source in accordance with the provisions of Chapter XV of the Income Tax Act and but the concerned payee has furnished his income tax return and has taken into account such sum for computing his income in such return and has paid the due taxes thereupon, then the person who was supposed to deduct TDS will not be treated as assessee in default. The ld. Counsel has further submitted that as per the 2nd Proviso to section 40(a)(ia) if an assessee fails to deduct the TDs but because of the applicability of 1st Proviso to section 1 of section 201, the said assessee is not deemed to be assessee in default then 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 of the concerned payee. The ld. Counsel for the assessee has further submitted that in this case, the concerned payees i.e. the counsel/advocates to 2

Assessment Year: 2012-13 M/s Ashim Kumar Chatterjee whom the professional fees was paid have taken into account the aforesaid amount for the purpose of computation of income in their Income Tax Return and have paid the due taxes. The ld. Counsel has submitted that the matter may be restored to the file of the Assessing Officer for verification of the aforesaid fact.

4.

Considering the above submissions of the ld. Counsel for the assessee, the issue is restored to the file of the Assessing Officer with a direction that the Assessing Officer will verify whether the concerned payees have taken into account the aforesaid payments for the purpose of computation of income and have filed their Income Tax Return and paid the due taxes thereupon and if the said contention is found to be correct then no disallowance will be made by the Assessing Officer on this issue. Subject to the above observation, the appeal of the assessee is treated as allowed for statistical purposes.

5.

In the result, the appeal of the assessee is treated as allowed for statistical purposes.

Kolkata, the 13th July, 2022.

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