2022 (6) TMI 145 - AT - Income Tax

Addition u/s 40(a)(ia) - assessee had violated provision u/s 201 of the Act by not deducting of TDS from the parties - HELD THAT - The said amount paid to the parties was duly declared in the return of the contractees. The certificates produced before learned CIT(A). But the Learned Authority did not consider the said documents and passed the Order Accordingly. In Case of, ACIT-III, Kanpur v. Raja Chkravarty 2015 (8) TMI 753 - ITAT LUCKNOW observed that no disallowance under section 40(a)(ia) can be made if it is established that deductee has paid tax on amount received. In this stage we are unable to verify the sanctity of the documents. Hence, the matter is setting aside to the Ld. CIT(A) for de-novo adjudication by considering the evidences of assessee. Further, the assessee should get the reasonable opportunity for representing its case. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues: Violation of TDS provisions under section 201 of the Income Tax Act, disallowance of expenses under section 40(a)(ia) of the Act, non-consideration of certificates by CIT(A), applicability of second proviso to section 40(a)(ia), necessity of TDS deduction, verification of documents, de-novo adjudication by CIT(A.

In this case, the assessee appealed against the order of the Commissioner of Income Tax (Appeal)-2, Ludhiana, regarding the disallowance of expenses amounting to Rs. 618,630/- and Rs. 1,08,650/- paid to two parties without deducting TDS under section 40(a)(ia) of the Income Tax Act, 1961 for the assessment year 2012-13. The assessee contended that the payees had paid tax on the amounts received, supported by certificates from the contractors. However, the CIT(A) upheld the disallowance as the necessary certificates were not produced at the time of appeal. The Tribunal noted the violation of TDS provisions and the need for deduction under section 201 of the Act. Citing a relevant case law, the Tribunal emphasized that no disallowance can be made if it is established that the deductee has paid tax on the received amount. Due to the inability to verify the documents at that stage, the matter was remanded to the CIT(A) for de-novo adjudication, allowing the assessee a fair opportunity to present its case. The appeal was allowed for statistical purposes, emphasizing the importance of considering all relevant evidence in such matters.

This judgment highlights the significance of complying with TDS provisions, the requirement to deduct TDS under the Income Tax Act, and the importance of providing necessary documentation to support claims of tax payment by the deductees. It underscores the need for thorough consideration of all evidence by the appellate authorities and the opportunity for the assessee to present its case effectively. The decision also showcases the judicial approach of ensuring fair adjudication by remanding the matter for reevaluation based on the available evidence.