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2021 (7) TMI 1071 - AT - Income TaxProceedings u/s 201(1) - not deducting TDS on the year-end provision - Addition u/s 40(a)(ia) - assessee in default for non-deduction of tax at source - assessee contended that these were end provisions that were reserved in subsequent financial year and based on invoices raised by the vendors were accounted in the books of account after deducting TDS - HELD THAT - The provision created at the end of the accounting year has not been credited to the relevant parties to whom the payments has to be made for the reason that it was unquantifiable. Further, assessee has suo moto disallowed the said sum under section 40(a)(ia) for non-deduction of TDS. See BIOCON BIOPHARMACEUTICALS PRIVATE LTD 2015 (3) TMI 684 - ITAT BANGALORE Therefore there is a sufficient and reasonable cause for not deducting TDS on the year-end provision. Assessee consistently follows this kind of accounting system for year-end provisions which is subsequently reversed in the subsequent year in the month of April, as and when the bills are received, and the payment is made to the payee by deducting TDS. Further, admittedly, assessee has paid interest under section 201(1A) which further demonstrates there was no malafide intention.
Issues involved:
1. Non-deduction of tax at source on year-end provisions. 2. Disallowance under section 40(a)(ia) of the Act. 3. Levy of interest under section 201(1A) of the Act. 4. Appeal against the order passed by the Ld.AO. Issue 1: Non-deduction of tax at source on year-end provisions: The assessee, a private limited company, created year-end provisions for expenses without deducting tax at source. The Ld.ACIT initiated proceedings under section 201(1) of the Act, treating the assessee as an "assessee in default" for non-deduction of TDS. The assessee contended that the provisions were based on fair estimates and not credited to any party's account due to payment amounts being undetermined. The Ld.AO levied interest under section 201(1A) for the delay in TDS remittance. The Ld.CIT(A) considered the company's actions, including disallowance under section 40(a)(ia), subsequent TDS deduction, and interest payment, finding no malafide intent and reasonable cause for non-deduction of tax. Issue 2: Disallowance under section 40(a)(ia) of the Act: The assessee voluntarily disallowed a sum under section 40(a)(ia) due to non-deduction of TDS on year-end provisions. The Ld.CIT(A) noted the consistent approach of the assessee in disallowing such amounts and considered judicial precedents. The Ld.CIT(A) found that the disallowance, subsequent TDS deduction, and interest payment demonstrated the absence of malafide intent, leading to the dismissal of the penalty under Section 271C. Issue 3: Levy of interest under section 201(1A) of the Act: The Ld.AO levied interest under section 201(1A) for the delay in TDS remittance by the assessee. However, the Ld.CIT(A) considered the company's actions, including subsequent TDS deduction and interest payment, as evidence of no malafide intent and reasonable cause for non-deduction of tax, leading to the dismissal of the penalty under Section 271C. Issue 4: Appeal against the order passed by the Ld.AO: The assessee appealed against the order passed by the Ld.AO, contending that the year-end provisions were based on fair estimates and consistent with accounting practices. The Ld.CIT(A) considered the company's disallowance under section 40(a)(ia), subsequent TDS deduction, and interest payment, finding no malafide intent and reasonable cause for non-deduction of tax. The appeal filed by the assessee was dismissed, upholding the decision of the Ld.CIT(A). In conclusion, the judgment by the Appellate Tribunal ITAT Bangalore addressed the issues of non-deduction of tax at source on year-end provisions, disallowance under section 40(a)(ia) of the Act, levy of interest under section 201(1A) of the Act, and the appeal against the order passed by the Ld.AO. The decision emphasized the company's actions, including disallowance, subsequent TDS deduction, and interest payment, as evidence of no malafide intent and reasonable cause for non-deduction of tax, leading to the dismissal of the penalty under Section 271C.
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