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Income Tax Appellate Tribunal, ‘SMC’ ‘D’ BENCH, CHENNAI
Before: Shri A. Mohan Alankamony
आदेश / O R D E R
This appeal by the assessee is directed against the order passed by the Ld. Commissioner of Income Tax (Appeals), Tiruchirapalli, dated 28.07.2011 in for the assessment year 2006-07 passed u/s.250(6) r.w.s.143(3) & 147 of the Act.
The assessee has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in confirming the disallowance made by the Ld.AO to the extent of Rs.3,06,678/- U/s.40(a)(ia) of the Act.
The brief facts of the case are that the assessee is a firm engaged in the business as dealer of Minidoor Van, filed its return of income for the assessment year 2006-07 on 10.10.2006 admitting total income of Rs.1,58,240/-. Subsequently the case was selected for scrutiny and finally order was passed U/s.143(3) r.w.s.147 of the Act on 24.12.2008, wherein the Ld.AO disallowed Rs.3,71,148/- U/s.40(a)(ia) of the Act, stating that no tax has been deducted at source U/s.194(A) of the Act. On appeal, the Ld.CIT(A) partly confirmed the order of the Ld.AO by deleting the amount Rs.64,470/- out of the aggregate disallowance. Thereby the Ld.CIT(A) sustained the addition of Rs.3,06,678/- invoking Section 40(a)(ia) of the Act.
At the outset, the Ld.AR submitted that the recipients of the amount paid by the assessee had duly declared the amount in their respective return of income and paid tax. He therefore pleaded that the matter may be remitted back to the file of Ld.AO, so that the assessee may be in a position to comply with Section 201 and the recently amended provisions of Section 40(a)(ia) of the Act, which states as follows:-
3 “Proviso to Section 40(a)(ia :-) Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B 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 resident payee referred to in the said proviso”
Section 201 : (1) Where any person, including the principal officer of a company,- a) who is required to deduct any sum in accordance with the provisions of this Act ; or b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax :
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” (Rule 31 ACB and Form No.26A)
The Ld.DR strongly objected to the submission of the Ld.AR and pleaded to sustain the order of the Ld.CIT(A).
I have heard the rival submissions and carefully perused the material available on record. It is worthwhile to mention that the Tribunal on several occasions has held that the recently amended proviso to Section 40(a)(ia) of the Act is a beneficial provision which brings down the rigger of Section 40(a)(ia) of the Act and therefore it should be given effect retrospectively.
Further if the taxes are duly paid by the recipients, the Revenue is at no loss and there is no scope for revenue leakage to the Department. In this situation, I’m of the considered view that the assessee should be provided with an opportunity to establish his claim and compliance in accordance with the recently amended proviso of Section 40(a)(ia) of the Act. Therefore, I hereby remit the matter back to the file of the Ld.AO, thereby providing an opportunity to the assessee to comply with the relevant provisions of the Act. I also direct the Ld.AO to grant relief to the assessee if it establishes that the recipients of the payments made by the assessee have declared the same in their 5 respective return of income and paid tax duly, and on submission of the requisite certificate issued by the qualified Chartered Accountant as per the provisions of the Act.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on the 10th July, 2017 at Chennai.