Disallowance us 40(a)(ia) deleted on non CA certificate basis in the interest of justice and fair play by ITAT

Disallowance us 40(a)(ia) deleted on non CA certificate basis. In the interest of justice and fair play ITAT set aside matter to AO for examination

ABCAUS Case Law Citation:
ABCAUS 1170 (2017) (03) ITAT

The Grievance:
The assessee was aggrieved by the order of CIT(A) upholding disallowance made u/s 40(a)(ia) of the Income Tax Act, 1961 (‘the Act’) in respect of transport charges paid without deduction of tax at source (TDS).

Assessment Year : 2009-10
Date/Month of Pronouncement: March, 2017

Important Case Laws Cited/relied upon:
CIT Vs. Ansal Landmark Township Pvt. Ltd.

Brief Facts of the Case:
The appellant assessee was proprietor of a firm which was engaged in trading in iron ores. During the course of assessment proceedings the Assessing Officer (‘AO’) observed that assessee had debited freight charges in his Profit & Loss Account and which disclosed that several payments were made to various transporters without deduction of tax at source.  Accordingly, the AO disallowed the same u/s 40(a)(ia) of the Act for violation of section 194C of the Act.

This addition was confirmed by the CIT(A) in first appeal. Aggrieved, the assessee was in appeal before the Tribunal.

Contentions of the Appellant assessee:
It was argued that the assessee was able to get a confirmation from one Transporter in the form of certificate stating that it had duly considered the amount received from the assessee by cheque in its accounts and in its income tax returns. Accordingly, the assessee prayed for admission of this additional evidence in terms of Rule 29 of the Income-tax Rules, 1962 and prayed for setting aside this aspect of the issue to the file of the AO to verify the same from the records of the transporter.

With respect to other transporters it was stated that even though the assessee had not been able to procure the certificate from the said parties that those had disclosed the same in their income-tax returns and paid taxes thereon, this issue may also be set aside to the file of the AO so that in the meantime the assessee would make earnest efforts in obtaining the certificate from the said parties to support its case.

Contention of the Respondent Revenue:
The Revenue objected to the admission of additional evidence by arguing that the certificate enclosed in the additional evidence was given by the Transporter and not by the Chartered Accountant in Form No. 26A as is provided in second proviso to section 40(a)(ia) and sec. 201(1) of the Act.

Observations made by the Tribunal:
The Tribunal observed that the certificate from the Transporter contained PAN and income tax particulars of the Transporter.

The Tribunal noted that the said certificate was not signed by the Chartered Accountant of the transporter. However, still in the interest of justice and fair-play, ITAT deemed it fit and appropriate to set aside this issue to the file of the AO with direction to examine the veracity of the contents of the said certificate, and if found to be correct, the assessee would be entitled for taking the benefit of second proviso to sec. 40(a)(ia) of the Act read with section 201(1) of the Act

With respect to other transporters, ITAT found that even though the assessee was not able to adduce any evidence before it, the said payments were made by account payee cheques and those parties being residing at a far away location. In view of those facts, the Tribunal in the interest of justice and fair play set aside this aspect also to the file of the AO to decide the same afresh in accordance with law. The assessee was allowed liberty to adduce fresh evidence in support of his contentions.

Held:
The appeal was allowed on the above grounds.