2018 (9) TMI 2072 - AT - Income Tax

Addition u/s.40(a)(ia) for want of deduction of tax at source - failure to furnish Form 26A for the interest paid by it to M/s. Reliance Capital Ltd - HELD THAT - Assessee had addressed a letter to M/s. Reliance Capital Ltd for getting Form 26A but the said company had not responded. Where the payee had included the amounts received as a part of its income and filed return after paying the taxes assessee can always say that it cannot be deemed as one in default. By virtue of the judgment of Hon ble Delhi High Court in the case of Ansal Land Mark Township P. Ltd 2015 (9) TMI 79 - DELHI HIGH COURT first proviso to Section 201(1) as well as proviso to Section 40(a)(i) of the Act had to be construed retrospectively. Considering the facts and circumstances of the case we are of the opinion that issue requires a fresh look by the ld. Assessing Officer. Ld. Assessing Officer can use the powers vested on him for getting the required information from M/s. Reliance Capital Ltd so as to ascertain whether they had included the interest paid by the assessee as a part of their income and filed return after paying due taxes. Ld. Assessing Officer can also direct the M/s. Reliance Capital Ltd to issue the certificate mandated in Annexure A to form 26A if the said company fails to respond to assessee s request. Ld. Assessing Officer shall thereafter proceed in accordance with law. Appeal of the assessee is allowed for statistical purpose.

Summary

Issues: Disallowance under section 40(a)(ia) of the Income Tax Act, 1961 for non-deduction of tax at source. Delay in filing appeal.

Analysis:
1. Delay in filing appeal: The appellant filed an appeal with a delay of thirty-four days, accompanied by a condonation petition. The reasons provided for the delay were considered justified, and the Departmental Representative did not raise any serious objections. Consequently, the delay was condoned, and the appeal was admitted.

2. Disallowance under section 40(a)(ia) of the Income Tax Act: The disallowance of Rs. 9,20,853/- was challenged by the appellant, who was a wholesaler trader of gems & jewel. The disallowance was made by the Assessing Officer under section 40(a)(ia) for non-deduction of tax at source. The appellant had paid interest during the relevant year, including the disputed amount paid to M/s. Reliance Capital Ltd. The appellant's representative argued that despite efforts to obtain Form 26A from M/s. Reliance Capital Ltd, the Assessing Officer disallowed the amount. The representative contended that if given another opportunity, corroborative evidence could be presented to show that M/s. Reliance Capital Ltd included the interest in their income return. The representative relied on the first proviso to Section 201(1) and the proviso to Section 40(a)(i) of the Act, citing a judgment of the Hon'ble Delhi High Court in support of a retrospective construction of these provisions.

3. Judgment and Directions: The Tribunal considered both parties' arguments and the lower authorities' orders. It noted that the disallowance was based on the appellant's failure to furnish Form 26A for the interest paid to M/s. Reliance Capital Ltd. The Tribunal agreed with the appellant's representative that if the payee had included the received amounts in their income and filed returns after paying taxes, the appellant could not be deemed in default. Relying on the Delhi High Court judgment, the Tribunal directed the Assessing Officer to re-examine the issue. The Assessing Officer was instructed to obtain necessary information from M/s. Reliance Capital Ltd to verify if they included the interest in their income and filed returns after paying taxes. Additionally, the Assessing Officer could compel M/s. Reliance Capital Ltd to issue the required certificate if they did not respond to the appellant's request. The Tribunal allowed the appeal for statistical purposes, emphasizing the need for a fresh assessment by the Assessing Officer.

4. Conclusion: The Tribunal's decision highlighted the importance of verifying whether the payee had included the payment in their income and paid taxes, which could impact the appellant's liability. The case underscored the retrospective interpretation of relevant provisions and the Assessing Officer's role in obtaining necessary information for a fair assessment.