2010 (12) TMI 631 - AT - Income Tax

Non Deduction of TDS - Disallowance u/s 40(a)(ia) - Rs.13,38,542/- disallowed by the AO by applying provision of section 40(a)(ia) read with section 194C - Excess deduction of TDS can not be compensated with non deduction of TDS - The assessee is directed to furnish the details of Rs.13,78,542/- to substantiate whether the TDS is required to be deducted or not, before the AO - Revenue s Appeal allowed by way of remand to AO.

Summary

Issues:
Deletion of disallowed amount under section 40(a)(ia) read with section 194C of the Income Tax Act.

Analysis:
1. Issue of Deletion of Disallowed Amount:
The Revenue appealed against the order of the C.I.T.(A)-XVI, Kolkata for the assessment year 2006-07, specifically concerning the deletion of Rs.13,38,542/- disallowed by the AO under section 40(a)(ia) read with section 194C of the Income Tax Act. The AO observed that the assessee, a job contractor, did not deduct TDS on job charges of Rs.13,78,542/-, leading to the disallowance. However, the Ld. CIT(A) disagreed, stating that the appellant had actually deducted and paid more tax than required under section 194C(2) of the Act. The Ld. CIT(A) directed the AO to delete the disallowance, emphasizing that no disallowance could be made under section 40(a)(ia) as the appellant had complied with the law by paying more tax. The Revenue contended that the Ld. CIT(A) erred in accepting the appellant's submissions without addressing the AO's findings. The Ld. Counsel for the Assessee argued that since the appellant had already recovered more tax than needed, the Ld. CIT(A)'s decision should stand. However, upon review, the ITAT found that the appellant had not recovered TDS on the balance amount of Rs.13,78,542/- and that the Ld. CIT(A) was unjustified in deleting the disallowance solely based on the excess TDS paid on a different amount. Therefore, the ITAT set aside the Ld. CIT(A)'s order and directed the AO to verify whether the balance job charges were subjected to TDS as required by law, instructing the assessee to provide necessary details for verification.

2. Conclusion:
The ITAT allowed the Revenue's appeal for statistical purposes, emphasizing the importance of ensuring compliance with TDS requirements under the Income Tax Act. The judgment highlighted the necessity for meticulous verification of TDS deductions and the significance of substantiating claims with relevant details to avoid disallowances under section 40(a)(ia). The decision underscored the need for both the assessee and the AO to adhere strictly to the provisions of the Act regarding TDS deductions, emphasizing the importance of accurate record-keeping and compliance to prevent unnecessary disputes and disallowances.