2023 (3) TMI 616 - AT - Income Tax

Addition u/s 40(a)(ia) - Non deduction of TDS on commission and professional fees - assessee claims exemption for non deduction of TDS under Form 26A r.w. Rule 31ACB - HELD THAT - Assessee has not filed Form 26A as per Rule 31ACB to prove that the payee has furnished its return of income u/s. 139 of the Act; and the payee has taken into account the amount paid by the assessee while computing the income in such return of income; and the payee paid the tax due on the income declared by it in such return of income. When the assessee files Form -26A before the authorities, it proves that assessee is not in default. Further, in the present case it is fact on record that assessee has not deducted TDS while making the payment to above said two parties. However, assessee has acquired the Form 26A. However, failed to submit the same before CPC as well as Ld.CIT(A). As per the submissions of the assessee due to system glitch it could no upload the same in time and it has submitted a copy of Form -26A before us in the form of Paper Book. Therefore, it clearly indicates that assessee has genuinely possesses the Form 26A at its disposal and as per the Rule 31ACB it has to be submitted to the DGIT(Systems). Since the case of the assessee is falling in the above category and there is no restriction that assessee has to file within such a period, that is, there is no bar on the assessee to file such form within such period. Therefore, the case seems to be genuine and assessee should be given one more opportunity for the sake of overall justice. Thus we remit this issue back to the file of Ld.CIT(A) and to consider the Form 26A, adjudicate the same after considering the above said Form 26A and as per law. Appeal filed by the assessee is allowed for statistical purpose.

Summary

Issues Involved:
The appeal against the order of the Learned Commissioner of Income Tax (Appeals) for the Assessment Year 2017-18 regarding disallowance of commission and professional fees under section 40(a)(ia) of the Income-tax Act, 1961.

Commission Disallowance Issue:
The assessee, a firm engaged in the business of Imitation Jewellery, filed its return showing total income. The Assessing Officer disallowed 30% of the commission and professional fees under section 40(a)(ia) for non-deduction of TDS. The Learned Commissioner of Income Tax (Appeals) sustained these additions, emphasizing the requirement to submit Form-26A to prove non-default status. The assessee contended that sufficient opportunity was not given to produce evidence and that the Form-26A was available but not submitted due to system glitch. The Appellate Tribunal observed that the assessee genuinely possessed Form-26A, which should have been submitted to the authorities. Considering the circumstances, the Tribunal remitted the issue back to the Ld.CIT(A) for further adjudication based on the Form-26A submitted by the assessee.

Professional Fees Disallowance Issue:
Similar to the commission disallowance, the professional fees disallowance under section 40(a)(ia) was upheld by the Ld.CIT(A) due to non-submission of Form-26A. The assessee argued that the addition should be set aside based on the Form-26A showing the payee's compliance with tax obligations. The Appellate Tribunal noted that the assessee possessed Form-26A but failed to submit it in time due to a system glitch. Acknowledging the genuineness of the case and the availability of Form-26A, the Tribunal directed the Ld.CIT(A) to reconsider the issue in light of the submitted Form-26A and applicable law. Consequently, the appeal by the assessee was allowed for statistical purposes.