TMI Blog2017 (12) TMI 918X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee would not be treated as a person in default. Thus remit this issue to the file of the Assessing Officer for fresh consideration in the light of above judgment. The ground raised by the assessee u/s.40(a)(ia) of the Act is partly allowed for statistical purposes. - I.T.A. No. 2280/Mds. /2017 - - - Dated:- 7-12-2017 - Shri Chandra Poojari, Accountant Member Appellant by : Mr.Meenakshi Sundaram, ITP Respondent by : Mr.B.Sagadevan, JCIT, D.R ORDER Per Chandra Poojari, Accountant Member This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax(A)-13, Chennai dated 11.07.2017 pertaining to assessment year 2013-14. 2. The assessee has raised the following grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Assessing Officer. 6. The Learned Commissioner of Income tax (Appeals) ought to have appreciated the fact that the assessee had discharged his initial onus with respect to submission of form 15G in the manner under law and hence there was no obligation on the part of the assessee to deduct any tax under section 40(a)(ia). 7. The Learned commissioner of Income tax (Appeals) ought to have verified the records of the department with regard to submission of Form 15G and dismissal of appeal without making such verification is not in accordance with law. 8. The assessee under these circumstances submits that there is no violation u/s 40 (a) Ia and the addition of ₹ 3,60,009/-deserves to be deleted by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and hence there was no deduction of tax under section 194(A). All the recipients of interest are income tax assesses and they had admitted the interest in their individual income tax returns. Therefore, the assessee pleaded the Ld.CIT(A) that the addition of ₹ 3,60,009 under section 40(a)(ia) may be deleted. On appeal, the Ld.CIT(A) confirmed the addition made by the ld. Assessing Officer for the reason that the declaration given by the assessee in form 15G did not bear any serial number of the acknowledgement stamp of dated 10.04.2013. Against the order of Ld.CIT(A), now the assessee is in appeal before us. 4. I have heard both the parties and perused the material on record. The main contention of the ld.A.R is that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case is APIL) has filed its return of income disclosing the payment received by and in which the income earned by it is embedded and has also paid tax on such income, the assessee would not be treated as a person in default. As far as the present case is concerned, it is not disputed by the Revenue that the payee has filed returns and offered the sum received to tax. 13. Turning to the decision of the Agra Bench of the Income-tax Appellate Tribunal in Rajeev Kumar Agarwal v. Asst. CIT (supra ), the court finds that it has undertaken a thorough analysis of the second proviso to section 40(a)(ia) of the Act and also sought to explain the rationale behind its insertion. In particular, the court would like to refer to paragraph 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 40(a)(ia), as we see it, is aimed at ensuring that an expenditure should not be allowed as deduction in the hands of an assessee in a situation in which income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. It is not, in our considered view, a penalty for tax withholding lapse but it is a sort of compensatory deduction restriction for an income going untaxed due to tax with holding lapse. The penalty for tax withholding lapse per se is sepa rately provided for in section 271C, and, section 40(a)(ia) does not add to the same. The provisions of section 40(a)(ia), as they existed prior to insertion of second proviso thereto, went much beyond the obvious intentions of the lawmakers and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the second proviso to section 40(a)(ia) of the Act and its conclusion that the said proviso is declaratory and curative and has retrospective effect from April 1, 2005, merits acceptance. 5. In view of the above judgement, I am inclined to remit this issue to the file of the Assessing Officer for fresh consideration in the light of above judgment. The ground raised by the assessee u/s.40(a)(ia) of the Act is partly allowed for statistical purposes. At this stage, I refrain from going into other grounds of appeal raised by assessee as the applicability of Second Proviso to Section 40(a(ia) of the Act is not at all examined by ld. Assessing Officer. 6. In the result, the appeal of assessee is partly allowed for statistical purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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