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2022 (2) TMI 336 - AT - Income TaxInterest levy u/s 201(1A) - suo-motto disallowances u/s. 40(a)(i)/(ia) - Whether obligation to deduct tax at source did not arise in respect of the provisions created in the books of accounts on 31 March 2012 (i.e., year-end provisions), as the receipt of such amounts by the parties was not established as on 31 March 2012? - HELD THAT:- Present assessee filed details of bifurcation of amount estimated in respect of each payee, the month in which the actual invoice was received and the TDS deducted coupled with details of it being deposited with the Government account. ITO(TDS) did not consider the same by observing that it is voluminous and impossible to be verified. On verification of the list of payees placed we note that assessee has deducted TDS between May 2012 to December 2012 (F.Y: 2012-13). Thus it is an admitted fact that TDS has been deducted at the time of making payment in respect of the provision made as on 31/03/2012 and the same has been deposited to the Government account. On identical facts and similar circumstances this Tribunal in case of IBM ltd [2015 (6) TMI 323 - ITAT BANGALORE] appreciated the arguments advanced by assessee therein to discharge assessee from the from being called as, 'assessee in default", under section 201(1) of the Act to the extent the TDS was effectuated. The present assessee cannot be treated to be an "assessee in default" to the extent TDS has been effectuated though in subsequent financial year. The provision of TDS provisions cannot applicable where there is no claim of expenditure made by the assessee. In the present facts assessee made suo motu disallowance of the entire provision under Section 40(a)(i)/(ia) of the Act. Once the amount is disallowed u/s. 40(a)(i)/(ia) for non-deduction of tax, it cannot be subject to TDS provisions again so as to make the assessee liable to interest u/s. 201(1A). The assessee(deductor) gets exonerated from the applicability of TDS provisions on disallowance of the expenditure in question under section 40(a)(i)/(ia) of the Act. This rational is based on the scheme of Section 40(i)/(ia), which is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee(deductor) in a situation in which income embedded in such expenditure remained untaxed due to tax withholding lapses by such assessee(deductor). In the amount on which TDS could not be effectuated due to non receipt of invoices, the Ld. AO will first have to ascertain if the payee has paid taxes on the income embedded therein. This is the pre condition for levying interest u/s. 201(1A) of the Act. Applicability of section 201(1A) needs verification of payment of tax by the recipient (payee) at the end of the Ld. AO since the Ld. AO failed to carry out necessary verification in respect of the payees, the details of which were provided by assessee. In the interest of justice, we direct the Ld. AO to verify the details filed by assessee in respect of the payee in accordance with the principles laid down by Hon'ble Supreme Court in case of Hindustan Coco Cola [2007 (8) TMI 12 - SUPREME COURT] and keeping in view the intention of the legislature envisaged under section 40(a)(i)/(ia) of the Act. Assessee is directed to file all the relevant details once again, details of TDS deducted and paid to the Government account on payment being made in the subsequent year on reversal of the provision. At this juncture we caution the Ld. AO provisions of section 201(1) cannot be invoked, in view of the fact that there is no loss to the revenue in the present facts of the case as observed by us in the preceding paras. In case the assessee has not added back the provision created towards the expenditure to the total income in the statement of income and took advantage of provision by reducing the income of assessee then assessee is liable for interest u/s. 201(1)&(1A) - Grounds raised by assessee in both the appeals stands allowed for statistical purposes
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