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TMI Blog2019 (4) TMI 2015X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2009-10. The return was selected for scrutiny under CASS and accordingly the notices were issued and the assessee also filed the relevant details. After examining the details furnished by the assessee, the Assessing Officer completed the assessment by making disallowance of Rs. 6,15,000/- u/s 40(a)(ia) of the Act since the assessee had made the payment towards professional and legal fees without making TDS. 3. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O. and therefore, the assessee is in second appeal before the Tribunal. 4. Learned Counsel for the Assessee submitted that before invoking the provisions of section 40(a)(ia) of the Act, assessee should be declared a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er XVII B. Where such Assessee is deemed not to be an assessee in default in terms of the first proviso to sub-section (1) of Section 201 of the Act, then, in such event, "it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso". 10. It is pointed out by learned counsel for the Revenue that the first proviso to Section 201(1) of the Act was inserted with effect from 1st July 2012. The said proviso reads as under: "Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er certain contingencies. 12. Relevant to the case in hand, what is common to both the provisos to Section 40(a)(ia) and Section 201(1) of the Act is that as long as the payee/resident (which in this case is ALIP) 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 ITAT in Rajiv Kumar Agarwal's case (supra ), the Court finds that it has undertaken a thorough analysis of the second pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 insert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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