2018 (8) TMI 1754 - AT - Income Tax

Addition u/s 40(a)(ia) - non-deduction of TDS - deduction restricted to 30% of the addition - scope of amendment provisions - Held that - As decided in case of Smt. Kanta Yadav vs. ITO 2017 (5) TMI 1565 - ITAT NEW DELHI As per the amended provisions of section 40(a)(ia) and in view of the order in case of SHRI RAJENDRA YADAV VERSUS THE INCOME TAX OFFICER, WARD 1 (3) , AJMER 2016 (3) TMI 358 - ITAT JAIPUR AND Smt. Sonu Khandelwal vs. ITO 2016 (5) TMI 1369 we set aside and modify the orders of the authorities below and direct the Assessing Officer to restrict the addition to 30% of the total addition made on account of deduction of TDS u/s 40(a)(ia) - Appeal of assessee is partly allowed.

Summary

Issues:
1. Disallowance under section 40(a)(ia) for non-deduction of TDS.
2. Jurisdiction of CIT(A) to enhance income.
3. Restriction of disallowance to 30% of the total addition.

Analysis:
1. The appeal was against the CIT(A)'s order enhancing the income of the assessee by &8377; 1,35,00,000 due to non-deduction of TDS under section 40(a)(ia). The Assessing Officer disallowed &8377; 16,450 and &8377; 1,36,77,355 as expenses related to unpaid TDS and sundry creditors. The CIT(A) upheld the disallowance but provided some relief. The assessee contended that the CIT(A) exceeded jurisdiction, made incorrect disallowances, and violated principles of natural justice. The assessee argued that only 30% of the amount should be disallowed based on retrospective amendment to section 40(a)(ia) and cited relevant case laws.

2. The Tribunal considered the issue of disallowance under section 40(a)(ia) and referred to a previous decision where it was held that the disallowance should be restricted to 30% of the total addition. The Tribunal followed this precedent and directed the Assessing Officer to limit the disallowance accordingly. The Tribunal also allowed the assessee to request similar treatment in subsequent years and held that the Assessing Officer should decide such requests based on facts and law. The appeal was partly allowed based on this decision.

3. The Tribunal's decision to restrict the disallowance to 30% of the total addition on account of non-deduction of TDS was in line with previous rulings and provided relief to the assessee. The Tribunal emphasized the importance of following legal principles and directed the Assessing Officer to consider similar requests in the future. Overall, the appeal was partly allowed, and the judgment was pronounced on August 1, 2018.