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2018 (2) TMI 594

the amount has considered the same for computation its income offered to tax then no disallowance is called for u/s 40(a)(ia) of the Act. See CIT vs. Ansal Landmark Township Pvt. Ltd. (2015 (9) TMI 79 - DELHI HIGH COURT) - The assessee filed the additional evidence in support of its claim that the recipient have included this amount in the income offered to tax however, the CIT(A) declined to admit the additional evidence. We find that the additional evidence filed by the assessee can be verified by the AO from the record of the Department or otherwise. We admit the additional evidence and direct the AO to verify the additional evidence filed by the assessee and in case the AO is satisfied with the evidence filed by the assessee that the recipient of the amounts have considered the same while computing their income offered to tax then, in view of the second proviso to section 40(a)(ia) of the Act no disallowance can be made u/s 40(a)(ia). Appeal of the assessee is allowed for statistical purpose. - ITA No. 445/JP/2017 - Dated:- 5-2-2018 - Shri Vijay Pal Rao, JM And Shri Vikram Singh Yadav, AM Assessee by : Shri Rohan Sagani (C.A.) Revenue by : Shri Prithavi Raj Meena (JCIT) ORD .....

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Hon ble Supreme Court in case of CIT vs. NTPC 229 ITR 383 and submitted that when the assessee raised the additional ground which is purely legal in nature then, the assessee should not have been prevented from raising the said question as well the failing of the additional evidence to show that the recipient of the amount have already considered the same as part of their total income offered to tax. He has relied upon the decision of Hon ble Delhi High Court in case of CIT vs. Ansal Landmark township (P) Ltd (supra) as well as following decision of this Tribunal as under:- • Ved Prakash Samariya vs. ACIT in ITA No. 116/JP/2015 • M/s Morani Fourwheels Pvt. Ltd. vs. ACIT in ITA No. 175/JP/2016 • M/s G.B. Impex Vs. ITO in ITA No. 430/JP/2016 • Smt. Prem Lata Gupta vs. ACIT in ITA No. 56/JP2016 • Shri Rakesh Tak vs. ITO in ITA No. 888/JP2014 4. On the other hand, ld. DR has submitted that the ld. CIT(A) has relied upon the decision of Hon ble Kerala High Court in case of Thomas George Muthoot vs. CIT 63 Taxmann.com 99. He has also relied upon the decision of Punjab and Haryana High Court PMS Diesels vs. CIT 374 ITR 562. Thus, the ld. DR has submitted that when .....

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he account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident- (i) has furnished his return of income under section 139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income; And the person furnishes a certificate to this effect from an accountant in such form as may be prescribed." 11. The first proviso to Section 201(1) of the Act has been inserted to benefit the Assessee. It also states that where a person fails to deduct tax at source on the sum paid to a resident or on the sum credited to the account of a resident such person shall not be deemed to be an assessee in default in respect of such tax if such resident has furnished his return of income under Section 139 of the Act. No doubt, there is a mandatory requirement under Section 201 to deduct tax at source under certain contingencies, but the intention of the legislature is not to treat the Assessee as a person in default subject to the fulfilment of the conditions as stipulated in the first proviso to Section 201(1). The insertion of the second provis .....

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be an "intended consequence" to disallow the expenditure, due to non-deduction of tax at source, even in a situation in which corresponding income is brought to tax in the hands of the recipient. The scheme of 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 withholding lapse. The penalty for tax withholding lapse per se is separately 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 created undue hardships even in cases in which the assessee's tax withholding lapses did not result in any loss to the exchequer. Now that the legislature has been compassionate enough to cure these shortcomings of provision, an .....

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