2024 (8) TMI 918 - AT - Income Tax

Disallowance u/s 40(a)(ia) for late filling of Form 15G 15H is justified - HELD THAT - It is a matter on record that Forms no.15G and 15H, were furnished by the assessee before the AO during the course of assessment proceedings. Under section 197A of the Act, there is no requirement of deducting tax at source once the declaration Form is furnished before the AO under sub section (2) of section 197A of the Act. It is the requirement of the assessee to deliver these forms before the Commissioner before the 7th day of the month next following the month in which the declaration furnished before the AO - We do not find any representation from the side of the assessee. However, we have gone through the records. DR submitted before us that the assessment order need not be disturbed, but he failed to point out any specific provisions under which the disallowance due to non deduction of tax can be justified once the declaration forms are submitted before the AO. Consequently, we are of the view that even if the assessee fails to furnish the declaration forms before the concerned authority, he cannot be penalised for non deduction of tax. Addition made u/s 40(a)(ia) cannot be made when there was no requirement of deducting tax at source. Department did not verify whether the payees have declared the interest in the return of income. The direction of the learned CIT(A) is superfluous and does not rest on valid legal foundation. Appeal filed by the assessee is allowed.

Summary

Issues:
Challenge to order dated 08/05/2019 by CIT(A) for AY 2009-10.
Disallowance under section 40(a)(ia) for late filing of Form 15G & 15H.
Verification of Form 15G and 15H filing before the Commissioner.
Addition to total income for interest paid on unsecured loans.
Validity of disallowance due to non-deduction of tax at source.

Analysis:
The appeal was filed challenging the order by CIT(A) for AY 2009-10. The assessee did not appear for the hearing, prompting the Bench to proceed with the case. The assessee raised grounds related to disallowance under section 40(a)(ia) for late filing of Form 15G & 15H. The assessee, a proprietor of a construction firm, filed the return of income for the year, declaring total income and agricultural income. The Assessing Officer noted interest payments on unsecured loans without tax deduction at source, leading to disallowance and addition to total income. The CIT(A) directed verification of Form 15G and 15H filing before granting relief, which the assessee appealed to the Tribunal.

During the hearing, the Departmental Representative supported the Assessing Officer's order. The Tribunal noted that Form 15G and 15H were furnished before the Assessing Officer, relieving the assessee from tax deduction at source. The requirement was to deliver these forms before the Commissioner timely. The Department failed to justify the disallowance under section 40(a)(ia) once the forms were submitted before the Assessing Officer. The Tribunal found the CIT(A)'s direction superfluous and lacking legal basis. Non-compliance by the assessee did not warrant additions to income. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the grounds of appeal raised by the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, emphasizing that the addition to total income for interest paid on unsecured loans without tax deduction at source was not justified when the required forms were submitted before the Assessing Officer. The Tribunal's decision was based on the legal provisions and lack of valid grounds for the disallowance.