ACIT, PATIALA vs. M/S SUKHMANI MEGA STRUCTURES PVT. LTD., PATIALA

Per Sanjay Garg, Judicial Member:

The present appeal has been preferred by the Revenue against

the order dated 17.02.2017 of the Commissioner of Income

Tax(Appeals), Patiala [hereinafter referred to as ‘CIT(A)’].

deleting the addition of Rs. 42,61,498/-made by the Assessing officer

on account of disallowance u/s 40(a)(ia) of the Income-tax Act, 1961

(in short 'the Act') for non-deduction of tax a source. The Ld.

CIT(A) deleted the addition made by the Assessing officer for non-

deduction of tax u/s 40(a)(ia) of the Act observing that the income of

the assessee in this case had been assessed on estimation basis after

rejection of books of account. He, therefore, held that since the

ITA No.720/Chd/2017- Sukhmani Mega Structures Pvt Ltd., Patiala 2

income was assessed on estimation basis @ 10% of gross receipts,

no separate / further disallowance was attracted.

provisions of section 40(a)(ia) of the Act are independent provisions

which have no connection with the assessment of income either on

estimation after rejection of books of account or otherwise by

accepting the results of books of account. That these provisions are

penal in nature and are attracted because of the failure of the

assessee to deduct tax at source on the payments made by the

assessee in accordance with the provisions of Chapter XVII-B of

the Act.

the assessee, at the outset, has submitted that though the assessee had

not deducted the TDS on the interest payments made to SREI

Equipment Finance Ltd. of Rs. 3627036/- and to Magma Fin Corpo.

Ltd of Rs. 634462/-, however, the payee has taken into account the

payment received from the assessee while returning the income for

assessment year under consideration. The Ld. counsel has further

invited our attention to the second proviso to section 40(a)(ia) of the

Act, which has been inserted by the Finance Act, 2012 w.e.f.

1.4.2013 providing that where an assessee fails to deduct the tax in

accordance with the provisions of Chapter XVII-B, but is not deemed

to be assessee in default, under the first proviso to sub section (1) to

section 201, then, for the purpose of this sub-clause, it shall be

deemed that the assessee has deduced and paid the tax on such sum

ITA No.720/Chd/2017- Sukhmani Mega Structures Pvt Ltd., Patiala 3

on the date of furnishing of return of income by such payee. He has

further pointed out that apart from disallowance of expenditure as

provided under the proviso to section 40(a)((ia) of the Act, there are

separate penalty provisions for non-deduction of TDS under section

201 of the Income Tax Act. However, the first proviso to section 201

which has been inserted by Finance Act 2012 w.e.f. 1.7.2012 states

that if a person fails to deduct TDS on an amount paid to a resident

as per the provisions of the Income Tax Act, he shall not be deemed

to be assessee in default, if the payee has furnished his return of

income u/s 139 of the Act and has also taken into account such sum

so received for computing income in the said return of income and

has paid the tax due on the income declared by him in the said

return of income and the payee furnishes a certificate to this effect

from Accountant in such form as may be prescribed. The Ld. counsel

has further invited our attention to the decision of this Tribunal in

the case of M/s Kurukshetra Darpan (P) Ltd, Kurukshetra Vs. Addl

CIT in ITA No. 877/Chd.2008 vide order dated 16.11.2015 wherein

the Tribunal while relying upon the decision of the Hon'ble Delhi

High Court in the case of CIT Vs. Ansal Landmark Township (P) Ltd

in ITA No. 160 / 161 of 2015 order dated 26.8.2015 has held that the

second proviso to section 40(a)(ia) of the Act is declaratory and

curative in nature and should be given retrospective effect form

1.4.2005 being the date from which sub clause (ia) of section 40(a)

of the Act was inserted by Finance (No.2,) Act 2004.

ITA No.720/Chd/2017- Sukhmani Mega Structures Pvt Ltd., Patiala 4

Sd/- Sd/-

(B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated :11.06.2018 Rkk

Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR