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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
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)’].
The Revenue is aggrieved by the action of the CIT(A) in
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.
The Revenue now has come in appeal contending that the
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.
We have heard the rival submissions. The Ld. Counsel for
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
The Ld. DR has fairly admitted that the issue is now squarely covered by the decision of the Hon'ble Delhi High Court (supra) and also with the decision of the Coordinate Bench of the Tribunal. She, however, e has submitted that the figures in the certificates do not match with the figures of the payments recorded by the AO that have been made by the assessee to the aforesaid parties. At this stage, the Ld. Counsel for the assessee has submitted that the issue be restored to the file of the Assessing officer. That the assessee will produce the required certificate before the Assessing officer and the assessing officer may grant the admissible relief as per the certificates. In view of this, the issue is restored to the file of the Assessing officer to examine as to whether the payees have taken into account the amount received from the assessee in their return of income and have paid the taxes thereupon. If the contention of the assessee is found correct on this issue, then no disallowance should be made on this issue. Order pronounced in the Open Court on 11.06.2018
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