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Income Tax Appellate Tribunal, BANGALORE BENCH ‘B’ SMC
Before: SHRI SUNIL KUMAR YADAV
PER SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER :
This appeal is preferred by the assessee against the order of the Commissioner of Income-tax (Appeals) inter alia on the following grounds:-
1. The order of the Ld. Commissioner of Income Tax (Appeals)("CIT(A)") is opposed to law, facts and circumstances of the case.
The order is passed in haste, without providing sufficient and reasonable opportunity of being heard.
2 3. The order is passed against the principle of natural justice and thus liable to be quashed.
On the facts and circumstances of the case and in law, Ld. CT(A) erred in confirming the addition made by the Learned Assessing Officer ["Ld. AO"]of Rs.7,36,685/- u/s 40(a)(ia).
The Ld. CIT(A) and Ld. AO has failed to construed the second proviso to Section 40(a)(ia) of the Income Tax Act, 1961.
6. The Ld. CIT(A) has failed to lay emphasis on Form 26A received from all the payees to whom interest was payable by the Appellant, which was produced by the Appellant at the time of hearing.
The Appellant relied on the provision laid under Section 201(1) of the Act which clearly states as follows: "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 resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (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."
3 8. The Ld. CIT(A) has failed to appreciate the fact that the Appellant has already demonstrated the above three conditions to the Ld. Authorities satisfaction. As long as the Appellant cannot be treated as an assessee in default, the disallowance under section 40(a)(ia) cannot be attracted.
The Ld. CIT(A) and Ld. AO have grossly erred in confronting the evidences produced by the Appellant both at the time of appellant proceedings and at the time of assessment.”
2. During the course of hearing the ld counsel for the assessee has contended that the AO has made disallowance on interest payment having invoked the provision of sec.40(a)(ia) of the Act on account of non deduction of TDS. The assessee preferred an appeal before the CIT(A) with the submission that all the payees are not assessed to tax. He however filed Form No.26A with respect to all the payees before the CIT(A) for verification. The CIT(A) did not admit the same and made disallowance on account of interest on late payment and penalty matter was restored to AO for verification. The ld counsel for the assessee further contended that since the assessee has filed Form 26A for all the payees in the form of additional evidence, it should have been admitted by the CIT(A) after making necessary verification and the issue of disallowance u/s 40a(ia) should have been examined but he did not do the same.
The ld DR placed reliance upon the order of the CIT(A).
4. Having carefully examined the orders of lower authorities in the light of rival submissions, I find that the AO has not afforded an opportunity of being heard to the assesee to produce Form 26A with respect to the payees to whom the interest was paid and made disallowance u/s 40a(ia) of the Act. Before the CIT(A), the assessee had filed Form 26A but the same was not considered by the CIT(A) and he confirmed the disallowance. Since the assessee has filed certificate in Form No.26A with regard to all the payees, the CIT(A) ought to have examined the same while adjudicating the issue of disallowance u/s 40(a)(ia)
4 of the Act. I, therefore, set aside the order of the CIT(A) and restore the matter to his file with a direction to re-adjudicate the issue of disallowance in the light of certificate in Form No.26A field before the CIT(A) with regard to all the payees.
5. With respect to other disallowances of Rs.18,636/- towards interest on delayed payment and Rs.17,569 of penalty paid, the issues are restored to AO for verification. Therefore, I find no infirmity in the order of the CIT(A) in this regard. Accordingly, the appeal of the assessee stands allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 10th OCT, 2018.