POPATLAL KANTILAL JAIN,MUMBAI vs. ITO 17(3)(3), MUMBAI

At the outset, it was noted that the filing of the appeal was delayed by 35 days. The Ld. Representative for the assessee has referred to an affidavit averred by the appellant, which brings out the reasons for the delay and it was canvassed that the delay is on account

The first issue was with regard to a disallowance of Rs.4,55,602/- out of interest expenditure. The appellant is an individual engaged in the business of jewellery and the Assessing Officer noted that in relation to interest incurred of Rs.4,55,602/-, in relation to six parties, the requisite tax was not deducted at source and therefore, such amount was disallowed under section 40(a)(ia) of the Act. The CIT(Appeals) has also affirmed the stand of the Assessing Officer.

Before us, the Ld. Representative for the assessee pointed out that before the Assessing Officer as well as before the CIT(Appeals) the assessee had pleaded that no deduction of tax at source was required in the impugned six cases as the recipients had duly submitted Form No.15G requesting for non-deduction of tax at source. The claim of the assessee has been denied by the Assessing Officer on the ground that the requisite copies of Form No.15G were not furnished. It transpires from the order of the CIT(Appeals) that such copies were furnished as additional evidence in the appellate proceedings and the remand report was sought from the Assessing Officer. The Commissioner has observed that assessee was required to furnish such Forms to the (Assessment Year : 2009-10) concerned Commissioner of Income Tax in terms of section 197A of the Act and in the absence of such compliance, the disallowance of interest was justified.

Before us, the Ld. Representative for the assessee has relied upon the second proviso to section 40(a)(ia) which was inserted by the Finance Act, 2012 w.e.f. 01/04/2013. As per the said proviso, a legal fiction is introduced in a situation where an assessee fails to deduct tax in accordance with the provisions of Chapter XVIIB of the Act. It is prescribed that where such assessee is not deemed to be an assessee in default in terms of the first proviso to section 201(1) of the Act, then in such a situation, it shall be deemed that assessee has deducted and paid the tax on such sum on the date of furnishing the return of income by the recipient payee referred to in the said proviso. Ld. Representative for the assessee pointed out that such an amendment has been held to be declaratory and retrospective in operation as held by the Hon’ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd. vs. CIT, ITA 160/2015 dated 26/08/2015 and, therefore, it would apply to the instant assessment year also. Ld. Representative for the assessee considered that the said position was not canvassed before the lower authorities and being a point of law, the matter can be set-aside to the file of Assessing Officer for appropriate verification.

Ld. Departmental Representative for the Revenue has not disputed the factual matrix brought out by the Ld. Representative for the assessee.

The only other issue is with regard to disallowance of labour expenses of Rs.2,000/-, sundry expenses of Rs.2,500/- and motor car expenses & deprecation of Rs.14,000/-. It is seen from the order of authorities below that the aforesaid adhoc disallowances have been made on the ground that the expenditure is not fully verifiable as they are supported by self-made vouchers. The element of disallowance made out of the total expenses, in my view is fair and reasonable and no interference is called for. Thus, on this aspect assessee fails.

In the result, the appeal of the assessee is partly allowed as above.