CPC was not justified in making the disallowance u/s 40a(ia) for non deduction of TDS

TDS deductibility being debatable issue and not an apparent incorrect claim, CPC was not justified in making the disallowance

In a recent judgment, ITAT Jaipur has held that whether TDS was deductible being a debatable issue not an apparent incorrect claim, therefore, CPC not justified in making the disallowance

ABCAUS Case Law Citation:
5110 (2026) (04) abacus.in ITAT

In the instant case, the appellant assessee had challenged the order of Commissioner of Income Tax (Appeals) in confirming the addition made by the CPC while processing the return u/s 143(1) of the Income Tax Act 1961 (the Act) in disallowing u/s 40a(ia) the interest payment for non-deduction of tax at sources.

Before the ITAT, the assesse invited attention to the provisions of Section 143(1) of the Act to submit that the CPC has no jurisdiction to make any disallowance on account of non-deduction of TDS.

On the contrary, the Revenue pointed out that as per Section 143 Sub-Section (1) Clause (ii), the CPC is empowered to make the disallowance in respect of an incorrect claim, if such incorrect claim is apparent from any information in the return.

The ITAT observed that in the instant case the appellant assesse had paid interest on housing loan to PNB Housing Finance and there was no such information in the income tax return for any incorrect claim made by the assessee.

The ITAT opined that whether the TDS was deductible or not on the interest remitted to the ‘PNB Housing Finance’ was a debatable issue and it can not be termed an apparent incorrect claim made in the income tax return by the assessee. Therefore, the CPC was not justified in making the impugned disallowance

Accordingly, the ITAT directed the addition to be deleted. 

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