2013 (4) TMI 344 - AT - Income Tax

Disallowance made u/s 40(a)(ia) - assessee had deducted TDS but the tax deduction is not in accordance with the rate as has been prescribed u/s 194C, 194H and 194J of the IT Act - CIT(A) deleted the disallowance - Held that - As decided in CIT vs M/s. S.K.Tekriwal 2012 (12) TMI 873 - CALCUTTA HIGH COURT Section 40(a)(ia) refers only to the duty to deduct tax and pay to government account there is nothing in the said section to treat the assessee as defaulter where there is a shortfall in deduction. And if there is any shortfall due to any difference of opinion the assessee can be declared to be an assessee in default u/s. 201 but no disallowance u/s 40(a)(ia) is allowed - confirm the action of the CIT(A) so far as it relates to the short deduction by deleting the disallowance made by the AO u/s 40(a)(ia) - in favour of assessee. Balance amount of Rs.5,071,483/- - contention of the assessee that it had deducted the tax in course of various provisions but payment of the tax so deducted was made before filing of the due date of the return u/s 139(1) - Held that - Once the issue is decided in Virgin Creations case 2011 (11) TMI 348 - CALCUTTA HIGH COURT that the amendment made in the provisions of section 40(a)(ia) by the Finance Act 2010 as curative and remedial and TDS paid before filing of the return u/s 139(1) the deduction in respect of the amount on which the TDS is shown is allowed. As in the present case since the DR vehemently contended that the AO has not verified the date of payment of the TDS by the assessee the order of the CIT(A)so far it relates to Rs.5,071,483/- is set aside & restore the matter to the file of AO for the purpose verification whether the assessee has deposited the TDS before the due date of filing of the return u/s 139(1) of the IT Act - in favour of revenue for statistical purposes.

Summary

Issues:
1. Late filing of appeal by Revenue against CIT(A) order.
2. Disallowance made u/s 40(a)(ia) of the IT Act.
3. Verification of TDS deduction and payment timelines.

Analysis:
1. The Revenue filed an appeal against the CIT(A) order, which was late by 4 days. The Revenue provided valid reasons for the delay, which were accepted by the tribunal, and the appeal was admitted.

2. The disallowance u/s 40(a)(ia) of the IT Act was contested by the assessee. The disallowance consisted of two types of defaults: short deduction and non-deduction of TDS. The tribunal noted that the provisions of section 40(a)(ia) require deduction and payment of tax to the government account. The tribunal relied on the decision of the Calcutta High Court, which clarified that a shortfall in deduction does not automatically make the assessee a defaulter. The tribunal confirmed the deletion of disallowance for short deduction amounting to Rs. 45,530,517.

3. Regarding the balance amount of Rs. 5,071,483, the assessee contended that TDS was deducted and paid before the due date of filing the return u/s 139(1) of the IT Act. The tribunal referred to the decision of the Calcutta High Court, which recognized the amendments in section 40(a)(ia) by the Finance Act, 2010, as curative and remedial. The tribunal directed the AO to verify if the TDS was deposited before the due date of filing the return. If verified, the disallowance of Rs. 5,071,483 was to be deleted; otherwise, the AO was instructed to make additions accordingly.

4. The tribunal emphasized that the decisions of the Mumbai and Ahmedabad Benches, along with the Calcutta High Court, supported the retrospective application of the amended provisions of section 40(a)(ia). The tribunal concluded by partially allowing the Revenue's appeal for statistical purposes, based on the above analysis and directions provided for verification by the AO.