TMI Blog2011 (12) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the AO has not brought on record that the assessee has obtained any benefit with respect to such trading liability and therefore, such remission or cessation of the liability by the AO cannot be subject matter u/s. 41(1) of the Act, though the Ld. Counsel for the assessee had argued that the payments have been made to most of the creditors in the following years - Decided in favor of the assessee. Regarding disallowance u/s. 40(a)(ia) - The facts make it abundantly clear that the assessee ought to have deducted tax and deposited the same within the prescribed time limit - The arguments made by the Ld. Counsel for the assessee appears to be convincing in view of the amendment made in the Income Tax Act w.e.f. 1-10-2004 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e u/s. 40(a)(ia) was warranted to the extent payments did not exceed Rs.20,000/-. The Ld. CIT (A) ought to have appreciated that no TDS u/s. 194C(3) was required to be made up to 30-9-2004, unless the payment exceeded Rs.20,000/- and accordingly no disallowance was warranted in respect of Rs.12,84,546/-. 3.2. The Ld. CIT (A) has failed to appreciate that in respect of the payments aggregating to Rs.34,30,969/-, the provisions of Sec. 40(a) were not attracted. 3.3. Without prejudice to the above, the Ld. CIT (A) ought to have allowed the payments aggregating Rs.12,84,546/- in respect of which no TDS was required to be made u/s. 194C(3). 4.1. The Ld. CIT (A) has erred in confirming the addition of Rs.1,31,313/- u/s. 41(1) on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 only list of creditors more than 3 years old was furnished which is as below:- Name of party 31-3-2002 31 -3-2003 31-3-2004 31-3-2005 Kalidas Patel 83290 51000 51000 36000 M.L.Shrimali 39413 22859 22859 22859 Nilesh Soni 56613 44111 44111 44111 Swarangig Jassal 28343 28343 28343 28343 The Authorized Representative was again asked to establish that the creditors were genuine, and that liability actually existed on 31-3-05, particularly as in the scrutiny proceedings for A.Y. 2003-04 also similar addition was made on an agreed basis against which assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee." 6. The Ld. CIT (A) confirmed the action of the AO. 7. We have heard the rival contentions and perused the facts of the case. It was argued by the Ld. Counsel for the assessee that most of the payments have since been made to the creditors and all the creditors are old creditors and no benefits in respect of such creditor has been obtained by the assessee during the year. 8. The Ld. DR appearing on behalf of the Revenue relied upon the decision of both the authorities below. 9. There is no dispute to the fact that all the creditors are old creditors. Before the provisions of section 41(1) are brought into play to tax the income of the assessee, the onus lies on the revenue to prove that the assessee has obtained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in either deduction of tax or in depositing the tax deducted will attract the provisions of section 40a (ia) which reads as below:- "Notwithstanding anything to the contrary in section 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession"- (a) in the case of any assessee (ia) any interest commission or brokerage, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 194C(3)(i) and 40a(ia). The facts make it abundantly clear that the assessee ought to have deducted tax and deposited the same within the prescribed time limit. The language of section 40a (ia) is such that I the event of any default, the expense on which TDS has not been made, or after deduction has not been deposited in time shall not be allowed to be deducted while computing the business income of the assessee. Hence from the facts as stated above, the section is mandatory in nature. I am therefore satisfied that section 40a (ia) is applicable in respect of payments made after 1-10-04 without TDS. I therefore disallow Rs.40,13,901/- u/s. 40a (ia) of the Act. Penalty proceedings u/s. 271(1)(c) of the I.T. Act are initiated for concealme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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