RACHNA JAIN,DELHI vs. ITO, WARD-38(4), NEW DELHI

The sole issue involved in both the appeals is that, Assessing Officer has erred in law and on facts by invoking the provisions of section 40(a)(ia) made on account of interest paid on unsecured loans raised from Bajaj Auto Finance Company. In the case of Rachna Jain, the amount of interest disallowed is Rs.1,21,516/-; and in the case of Shyam Sunder Jain, the amount disallowed is Rs.3,14,625/-.

The ld. Assessing Officer has made the disallowance on the ground that assessee has paid interest to NBFC, Bajaj Auto Finance Company, on which tax had not been deducted at source u/s 194A and thus, assessee have failed to comply with the provisions of Section 40(a)(ia).

Before the ld. CIT(A), the assessee had filed application for admission of additional evidence under Rule 46A, enclosing the certificate issued from Bajaj Finance Company wherein they have certified the receiving the interest and have included the said interest in their income and paid taxes in the impugned Assessment Year. The reason for submitting the additional evidence was that this document belongs to the third party and could not be procured within time. Ld. CIT (A) had incorporated the scanned copy of such interest certificate and copy of repayment schedule. The said additional evidence was sent to the Assessing Officer for remand report, however, the ld. Assessing Officer in his detailed report submitted that these additional evidences are afterthought and should not be accepted and Assessing Officer has given full opportunity to the assessee. In response to the said remand report, assessee filed a detailed rejoinder on 09.05.2017 which has been incorporated in the impugned order from pages 13 to 18. Though Ld. CIT (A) has admitted the additional evidences but has rejected the assessee’s contention on the ground that these interest certificates are not in ‘Form 26A’ and it does not state whether they have has furnished their return of income u/s.139 or not. After detail reasoning he has upheld the disallowance.

After hearing both the parties and on perusal of the relevant findings given in the impugned order, we find that ld. CIT (A) in his detailed order has not considered the entire issue in proper perspective but has mainly harped on the ground that out of 17 occasions before the Assessing Officer, assessee did not appear on various occasions; and secondly, certificates filed by the assessee are not in Form no.26A. The main issue involved here is, whether in view of 2nd proviso to Section 201(1) read with 1st proviso to Section 201(1) the conditions mentioned therein have been met or not. These conditions are as under: (i) The payee has furnished his return of income under section 139; (ii) The payee has taken into account such sum for computing income in such return of income; and (iii) The payee has paid the tax due on the income declared by him in such return of income, and (iv) The payee person furnishes a certificate to this effect from an accountant in such form as may be prescribed, {vide Notification No. 37/2012 [F.No. 142/18/2012-SO(TPL)j dated 12-9-2012, the CBDT has inserted Rule 31ACB and Form No. 26A to prescribe the format in which the CA’s certificate should be obtained by the payee.

In the result, both the appeals of the assessee are allowed. Order pronounced in the open Court on 4th October, 2018.