2022 (12) TMI 636 - AT - Income Tax

Disallowance u/s 40(a)(ia) for non-deduction of tax at source (TDS) - assessee in default - Assessee has paid interest u/s 201(1A) for non-deduction/short deduction of tax - HELD THAT - Assessee enclosed Form No. 26A namely Form for furnishing Accountant certificate under the First Proviso to sub- Section 1 of Section 201 of the Act, wherein it is certified that interest under Section 201(1a) of Rs. 4,030/- was paid by the assessee for non-deduction or short deduction of tax vide Bank Challan No. 83 dated 22.12.2018. Further as held by the Ld. CIT(A) there is no signature by Chartered Accountant, but Director of the assessee company has signed, but in Page No. 17 the assessee produced the Interest Challan payment of Rs. 4,030/- remitted into Central Bank of India more particularly under the caption Minor Head 200 TDS/TCS payable by taxpayer. Thus, the assessee having paid the interest of Rs. 4,030/- the assessee cannot be construed as an assessee in default. Therefore, the provision of Section 40(a)(ia) cannot be applied in assessee s case. Thus, the Ld. Assessing Officer and the CIT(A) has not considered the provision of Section 201(1) of the Act which is not justifiable in law. Therefore, the addition made under Section 40(a)(ia) by the Assessing Officer is hereby deleted. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Disallowance under Section 40(a)(ia) for non-deduction of tax at source.
2. Arm's Length price adjustment.
3. Penalty proceedings under sections 271(1)(C) and 271BA.

Analysis:
1. The appeal was against disallowance under Section 40(a)(ia) for non-deduction of tax at source. The assessee, a Private Ltd. Company, made interest payments without TDS to a Non-Banking Financial Institution. The CIT(A) disallowed the claim despite the assessee fulfilling conditions under Section 201(1A) not to be treated as an assessee in default. The CIT(A) held the claim invalid due to the absence of a Chartered Accountant's signature on Form No. 26A provided by the assessee. However, the ITAT found that the assessee paid the interest amount for non-deduction of tax, thus not defaulting. Citing the Agra ITAT case, the ITAT allowed the appeal, stating the disallowance was unjustifiable.

2. The second issue of Arm's Length price adjustment was not pressed during the hearing, indicating the assessee did not contest it. Hence, this issue was not further deliberated upon in the judgment.

3. The penalty proceedings under sections 271(1)(C) and 271BA were initiated by the ACIT. However, the AR did not press these grounds during the hearing. As a result, the judgment did not delve into these penalty proceedings, and they were not considered in the final decision.

In conclusion, the ITAT allowed the appeal against the disallowance under Section 40(a)(ia) as the assessee proved payment of interest for non-deduction of tax, thus not defaulting. The judgment did not address the Arm's Length price adjustment issue as it was not contested, and the penalty proceedings under sections 271(1)(C) and 271BA were not discussed as these grounds were not pressed during the hearing.