2011 (11) TMI 510 - AT - Income Tax

Non-deduction of TDS on payment of interest - Dis-allowance u/s 40(a)(ia) - non-deposit of From No.15G collected from payee in the Department - Held that - Failure on the part of the assessee, who is the payer of the interest, to file the declarations given to him by the payees of the interest, within the time limit specified in sub-section (2) to section 197A is distinct and separate and merely because there is a failure on the part of the assessee to submit the declarations to the income-tax department within the time limit, it cannot be said that the assessee did not have declarations with him at the time when he paid the interest to the payees. That would be a separate matter and separate proof and evidence is required to show that even when the assessee paid the interest, he did not have the declarations from the payees with him and therefore he ought to have deducted the tax from the payment. No such evidence or proof has been brought by the department - Decided in favor of assessee. Unexplained direct expenses - assessee failed to furnish details of expenses executed for work - Held that AO has not found any abnormality in assessment of AY 2007-08, and the expenses are exactly similar and the nature of business and competitiveness of business, where direct expenses were incurred for earning professional income to the P & L Account, are found reasonable and fair. CIT(A) justified in deleting addition - Decided in favor of the assessee.

Summary

Issues:
1. Disallowance of interest payment due to non-deduction of TDS under section 40(a)(ia) of the Income Tax Act, 1961.
2. Deletion of unexplained direct expenses in the Profit and Loss Account.

Analysis:

Issue 1: Disallowance of Interest Payment:
The appeal by revenue concerns the deletion of disallowance made by the Assessing Officer on account of payment of interest without TDS deduction under section 40(a)(ia) of the Income Tax Act, 1961. The CIT(A) deleted the disallowance, citing the submission of Form 15G with CIT-1 as compliance. The ITAT, Kolkata examined the case, noting the submission of Form 15G and the absence of any evidence disproving the claim that declarations were filed by the payees. Referring to decisions by ITAT Mumbai and Ahmedabad, the ITAT upheld the CIT(A)'s decision, confirming that the issue was covered in favor of the assessee. Therefore, the ITAT dismissed this issue of the revenue's appeal.

Issue 2: Deletion of Unexplained Direct Expenses:
The second issue involves the deletion of unexplained direct expenses debited in the Profit and Loss Account. The Assessing Officer disallowed these expenses due to the lack of details provided by the assessee regarding the expenses executed for work. The CIT(A) reviewed the case and found that the appellant had produced evidence of expenses incurred for two offices, which were not disputed. The CIT(A) considered the nature of the business, the competitiveness involved, and the similarity in expenses with the previous year's assessment. Noting that the Assessing Officer did not make any disallowance in the previous year, the CIT(A) concluded that the expenses were explained and incurred for earning professional income. The ITAT, Kolkata upheld the CIT(A)'s decision, emphasizing the consistency in expenses, the nature of business, and the lack of abnormality found by the Assessing Officer in the previous year. Consequently, the ITAT dismissed this issue of the revenue's appeal.

In conclusion, the ITAT, Kolkata dismissed the revenue's appeal, confirming the decisions of the CIT(A) regarding the disallowance of interest payment and deletion of unexplained direct expenses. The judgment was pronounced on 29.11.2011 by the ITAT, Kolkata.