2021 (7) TMI 1221 - AT - Income Tax

TDS u/s 194I - rent paid to five person - Addition u/s. 40(a)(ia) - HELD THAT - In so far as the payment to four persons is concerned, none of such persons received an amount exceeding ₹ 1,80,000/- in the financial year and therefore, under proviso to section 194-I, no deduction need be made. This is the reason why the ld. CIT(A) did not confirm such an addition and she confined her discussion to the addition of ₹ 3,36,000/-. Though it is implied from the order of the ld. CIT(A), now we expressly state that the addition made by the Assessing Officer in respect of payments made to four individuals is unsustainable and shall stand deleted. Amount paid to one Sh. Chandra Kant Adrekar - The record reveals that Form 26A dated 10.01.2017 was issued by the assessee and it was countersigned by the Chartered Accountant and inasmuch as it was not submitted to DCIT(Systems), the ld. CIT(A) held that there was no sufficient compliance with the Rules. Be that as it may, the leaned CIT(A) was not sure as to the fact whether the income of the payee was below the maximum amount not chargeable to tax. As submitted before the ld. CIT(A) that the assessee was required to file the details of expenses, on which TDS was deducted and the Assessing Officer did not seek any explanation for non-deduction of TDS in respect of this amount. According to the assessee before the ld. CIT(A), this prevented the assessee from producing Form 26A before the Assessing Officer. In these circumstances, when once form 26A was produced before the CIT(A), the fact of income of the payee below the maximum amount not chargeable to tax assumes importance, and in the absence of any finding on this aspect, the addition cannot be sustained. In the circumstances, we find it difficult to sustain the orders of the authorities below and accordingly allow the grounds of appeal. - Decided in favour of assessee.

Summary

Issues:
1. Addition u/s. 40(a)(ia) of the Income-tax Act
2. Compliance with Form 26A for TDS deduction
3. Non-service of notice to the assessee

Analysis:
1. Addition u/s. 40(a)(ia) of the Income-tax Act:
The appellant, a company engaged in verification services, challenged an addition of ?3,36,000 u/s. 40(a)(ia) for the assessment year 2012-13. The appellant contended that certain payments made to individuals were below the threshold for TDS deduction under section 194-I. The Tribunal found that payments to four individuals did not exceed ?1,80,000 individually, thus no deduction was required under the proviso to section 194-I. Consequently, the Tribunal deleted the addition of ?3,82,200 made by the Assessing Officer in respect of these payments.

2. Compliance with Form 26A for TDS deduction:
Another grievance of the appellant was regarding the addition of ?3,36,000 paid to an individual, where the Form 26A was not submitted to DCIT(Systems). The Tribunal noted that the appellant argued that the payee's income was below the taxable limit, and the Assessing Officer did not seek an explanation for non-deduction of TDS. The Tribunal found that the absence of a finding on the payee's income status made it difficult to sustain the addition. Therefore, the Tribunal allowed the appellant's appeal concerning this issue.

3. Non-service of notice to the assessee:
The Tribunal observed that despite a notice being sent to the address provided by the assessee, there was no representation from the assessee during the proceedings. The Tribunal emphasized that non-service of notice was due to the conduct of the assessee and proceeded to decide the appeal based on the available record. The Tribunal ultimately allowed the appeal of the assessee concerning the issues raised.

In conclusion, the Tribunal ruled in favor of the appellant, deleting the additions made under section 40(a)(ia) and finding insufficient compliance with Form 26A for TDS deduction. The Tribunal also addressed the non-service of notice issue, emphasizing the importance of proper communication between the parties involved in legal proceedings.