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TMI Blog2019 (12) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of hearing. 2. The facts giving rise to the present appeal are that the assessee filed her return of income on 1.10.2013 declaring total income of Rs. 12,17,810/-. Thereafter, the case was selected through CASS for detailed scrutiny. Accordingly, the A.O. issued a notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter called as 'the Act'). A notice u/s 142(1) of the Act was issued on 6.7.2015. The A.O. proceeded to make assessment, thereby he disallowed the claim of commission of Rs. 10,12,921/- and made addition of Rs. 21,66,518/- on account of non-deduction of tax. Further, the A.O. made addition of Rs. 14,957/- in respect of undisclosed amount of TDS. Further, the A.O. made a lumpsum addition of Rs. 2,25,811/- in respect of adhoc disallowances related to conveyance, printing, stationery and office expenses. Aggrieved against this, the assessee preferred an appeal before Ld. CIT(A), who after considering the submissions, partly allowed the appeal, thereby the Ld. CIT(A) confirmed the addition of Rs. 10,12,921/- for non-deduction of tax at source and sustained disallowance of Rs. 1,28,905/- out of total disallowance made on account of adhoc disallowances of expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d be interpreted in a fair, just and equitable manner". Their Lordships thus recognized the bigger picture of realization of legitimate tax dues, as object of Section 40(a)(ia), and the need of its fair, just and equitable interpretation. This approach is qualitatively different from perceiving the object of Section 40(a)(ia) as awarding of costs on the "assessees who fail to comply with the relevant provisions by considering overall objective of boosting TDS compliance". Not only the conclusions arrived at by the special bench were disapproved but the very fundamental assumption underlying its approach, i.e. on the issue of the object of Section 40(a)(ia), was rejected too. In any event, even going by Bharti Shipyard decision (supra), what we have to really examine is whether 2012 amendment, inserting second proviso to Section 40(a)(ia), deals with an "intended consequence" or with an "unintended consequence". 7. When we look at the overall scheme of the section as it exists now and the bigger picture as it emerges after insertion of second proviso to section 40(a)(ia), it is beyond doubt that the underlying objective of section 40(a)(ia) was to disallow deduction in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fact that the amendment has been given effect prospectively". Revenue, thus, does not derive any advantage from special bench decision in the case Bharti Shipyard (supra). 9. On a conceptual note, primary justification for such a disallowance is that such a denial of deduction is to compensate for the loss of revenue by corresponding income not being taken into account in computation of taxable income in the hands of the recipients of the payments. Such a policy motivated deduction restrictions should, therefore, not come into play when an assessee is able to establish that there is no actual loss of revenue. This disallowance does deincentivize not deducting tax at source, when such tax deductions are due, but, so far as the legal framework is concerned, this provision is not for the purpose of penalizing for the tax deduction at source lapses. There are separate penal provisions to that effect. Deincentivizing a lapse and punishing a lapse are two different things and have distinctly different, and sometimes mutually exclusive, connotations. When we appreciate the object of scheme of section 40(a)(ia), as on the statute, and to examine whether or not, on a "fair, just an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 40(a) was inserted by the Finance (No. 2) Act, 2004. 7. Further, the Hon'ble apex court in the case of Hindustan Coca Cola Beverages Pvt. Ltd. Vs. CIT 293 ITR 226 has held as under: "10. Be that as it may, Circular No.275/201/95-IT(B) dated January, 29, 1997 issued by the Central Board Of Direct Taxes, in our considered opinion, should put an end to the controversy. The circular declares "no demand visualised u/s 201(1) of the Income Tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS, that taxes due have been paid by the deductee-assessee. However, this will not alter the liability to charge interest u/s 201(1A) of the Act till the date of payment of taxes by the deductee-assessee or the liability for penalty u/s 271C of the Income-tax Act". 11. In the instant case, the appellant had paid interest u/s 201(1A) of the Act and there is no dispute that the tax due had been paid by the deductee-assessee (M/s.Pradeep Oil Corporation). It is not before us that circular is applicable to the fact situation on hand". 8. The Ld. CIT(A) in view of the above binding precedent ought to have deleted the addition but he misdirected himself. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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