2015 (5) TMI 39 - AT - Income Tax

Prior period items - Disallowance of salary expenses for earlier years - TDS on salary was depoited during the current year - assessee failed to furnish a copy of challan of payment of tax deducted at source - Held that - The case of the assessee is that the TDS challan was lost because of change in accountants. However, the assessee obtained confirmation from OLTAS, a copy of which is placed on page 12 of the paper book, which transpires that tax at source to the tune of ₹ 18,50,514/- was received on 15.06.2006. Page No.17 of the paper book is a copy of the assessee s bank account which also evidences a payment of ₹ 18,50,514/- on 13th June, 2006. This confirmation also divulges the nature of payment as Pay of employees other than Govt. employees . In the absence of the availability of challan, one thing is clear that the assessee did deposit tax amounting to ₹ 18,50,514/- on 15.06.2006 and the nature of payment given by OLTAS is undoubtedly Salaries . These facts make it abundantly clear that the assessee did deposit tax at source amounting to ₹ 18,50,514/- after making deduction from salaries. However, the only shortcoming is about the establishment of nexus of this amount of tax with the salary of ₹ 55,47,237/- for which deduction has been claimed during the year - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of salary expenses claimed as deduction due to lack of evidence of tax deducted at source.

Analysis:
The appeal was filed against the CIT(A)'s order concerning the assessment year 2007-08, focusing on the disallowance of salary expenses amounting to &8377; 55,47,237/- due to the absence of proof of tax deducted at source. The Tribunal directed the AO to verify the TDS challan to allow the deduction. The assessee failed to produce evidence of TDS payments related to the earlier year, leading to the disallowance. The assessee claimed the tax payment was made but the challan was misplaced due to a change in accountants. The assessee obtained confirmation from OLTAS regarding the tax payment of &8377; 18,50,514/- and submitted it to the CIT(A). Despite this, the disallowance was upheld by the CIT(A) based on the remand report of the AO.

Upon review, the Tribunal noted that the assessee had indeed deposited tax amounting to &8377; 18,50,514/- on 15.06.2006, as evidenced by OLTAS confirmation and bank account records. The nature of payment was specified as salaries. Although the TDS amount was established, the nexus with the claimed salary deduction of &8377; 55,47,237/- was not proven. Consequently, the Tribunal set aside the order and directed the AO to verify the connection between the TDS amount and the claimed salary to allow the deduction if proven.

In conclusion, the appeal was allowed for statistical purposes, emphasizing the need for establishing a clear link between TDS payments and claimed deductions to validate the allowance.

The judgment highlights the importance of substantiating deductions with concrete evidence, especially concerning tax-related matters. The Tribunal's decision underscores the significance of establishing a direct correlation between claimed expenses and corresponding payments to ensure the legitimacy of deductions in tax assessments.