2019 (12) TMI 1236 - AT - Income Tax

Disallowance u/s 40(a)(ia) - non-deduction of TDS - HELD THAT - CIT(A) in view of the above binding precedent ought to have deleted the addition but he misdirected himself. When the issue has been decided by the higher forum after considering the law and issue in question, he is under statutory obligation to follow it. Any deviation there from would tantamount the contempt of lawful authority and against the judicial discipline. Therefore, respectfully following the judgement of the Hon'ble apex court rendered in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT ( 2007 (8) TMI 12 - SUPREME COURT ) and the decision of coordinate bench in the case of Rajiv Kumar Agrawal Vs. Addl. CIT 2014 (6) TMI 79 - ITAT AGRA direct the A.O. to delete this addition Addition in lumpsum on the ground that some of the vouchers were not produced - A.O. has not stated as to what were the vouchers, which were not produced - HELD THAT - As perused the materials available on record and gone through the orders of the authorities below. The assessee claimed certain expenditure, which was required to be substantiated by supporting evidences. Non-furnishing of such evidences would certainly result into disallowance of the expenditure. Ld. A.R. could not point out that what were the evidences placed before the assessing authority, which was sufficient to infer that the expenditure is duly supported by the evidences. Moreover, Ld. CIT(A) has further reduced the disallowance by taking a reasonable view. This ground of the assessee s appeal is dismissed. Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Disallowance under Section 40(a)(ia) for non-deduction of TDS amounting to ?10,12,921.
2. Adhoc disallowances amounting to ?1,27,905 out of ?2,25,811 for conveyance, printing, stationery, and office expenses.

Detailed Analysis:

1. Disallowance under Section 40(a)(ia) for Non-Deduction of TDS:
The primary issue pertains to the disallowance of ?10,12,921 under Section 40(a)(ia) of the Income Tax Act, 1961, due to non-deduction of TDS. The assessee argued that the deductee had disclosed the amount in their return of income, and hence, no disallowance should be made. The assessee cited the case of Rajiv Kumar Agrawal Vs. Addl. Commissioner of Income Tax (2014) and the judgment of the Hon'ble Delhi High Court in CIT Vs. Rajinder Kumar (362 ITR 241) to support their contention. The Tribunal noted that the objective of Section 40(a)(ia) is to ensure TDS compliance to prevent revenue loss. However, it should be interpreted in a "fair, just and equitable manner." The Tribunal emphasized that if the income embedded in the payments has been taxed, the disallowance should not be punitive but compensatory. The Tribunal also cited the Supreme Court's decision in Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT (293 ITR 226), which supports the view that no demand should be enforced if the deductee has paid the due taxes. Therefore, the Tribunal directed the A.O. to delete the addition, following the principle that the second proviso to Section 40(a)(ia) is curative and retrospective.

2. Adhoc Disallowances for Conveyance, Printing, Stationery, and Office Expenses:
The second issue involves adhoc disallowances amounting to ?1,27,905 out of ?2,25,811 for various office expenses. The assessee contended that the A.O. made a lumpsum addition without specifying which vouchers were not produced. The A.O. did not point out any specific defects in the vouchers. The Tribunal noted that the assessee was required to substantiate the claimed expenses with supporting evidence. The Ld. CIT(A) had already reduced the disallowance, taking a reasonable view. The Tribunal found no merit in the assessee's contention and upheld the disallowance, stating that non-furnishing of evidence would result in the disallowance of the expenditure. Consequently, this ground of the assessee’s appeal was dismissed.

Conclusion:
The appeal was partly allowed. The Tribunal directed the deletion of the addition under Section 40(a)(ia) for non-deduction of TDS, following the judgments of higher courts and the curative nature of the second proviso to Section 40(a)(ia). However, the adhoc disallowances for office expenses were upheld due to the lack of substantiating evidence. The order was pronounced in the open court on 26.12.2019.