ADGLOBAL360 INDIA PRIVATE LIMITED,GURGAON V. ADIT, DELHI

ITA 434/DEL/2025

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The case involves Adglobal 360 India Pvt. Ltd., the appellant, contesting an order by the Commissioner of Income Tax (Appeals) which upheld an adjustment by the Assistant Director of Income Tax. The adjustment was based on a short deduction of TDS amounting to Rs. 87,47,488 under section 40a(ia) of the Income Tax Act, 1961. The appellant argued that the issue was covered by a previous High Court decision, which supported their position that if tax is deducted under a different provision but the payment is genuine and tax is deposited, disallowance under section 40(a)(ia) should not apply. The Department's representative sought dismissal of the appeal, relying on the lower authorities' decisions. The Tribunal, referencing the High Court's decision, ruled in favor of the appellant, allowing the appeal and setting aside the lower order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712632 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2019-2020
• Other Referred Cases: Pr. CIT Vs. Future First info Services (P.) Ltd. [2022]145 taxmann.com 35 (Del)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: SANJEEV GUPTA; ALOK
• Keywords: Set aside; Difference of opinion; TDS; Non-deduction of tax
• Section: 40(a)(ia)

Judgement Text

"1 ITA No. 434/Del/2025 Adglobal 360 India Pvt. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI [ DELHI BENCH : “B” NEW DELHI] BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER I.T.A. No. 434/DEL/2025 (A.Y 2019-20) Adglobal 360 India Pvt. Ltd. Plot No. 685 & 686 UdyogVihar, Phase V, Gurugram, Haryana, 122016 PAN: AAICA3224D Vs ADIT Circled 1(1), C. R. Building, Delhi Delhi Appellant Respondent Assessee by Sh. Sanjeev Gupta, Adv and Shri Alok Shukla, Adv Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 29/07/2025 Date of Pronouncement 29/07/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals)(‘Ld. CIT(A)’ for short), New Delhi dated 29/11/2024 for the Assessment Year 2019-20. 2. The sole grievance of the Assessee in the present Appeal is against order of the Ld. CIT(A) in upholding the adjustment made by the Assistant Director of Income Tax (CPC) u/s 143(1) of the Income Tax Act, 1961 ('Act' for short)to the tune of Rs. 87,47,488/- u/s 40a(ia) of the Act for short deduction of TDS on the basis of the reporting in the Tax Audit Report. Printed from counselvise.com 2 ITA No. 434/Del/2025 Adglobal 360 India Pvt. Ltd. 3. The Ld. Counsel for the Assessee submitted that the issue of disallowance u/s 40a(ia) of the Act on account of short deduction of tax at source is squarely covered by the order of the Jurisdictional High Court in the case of Pr. CIT Vs. Future First info Services (P.) Ltd. [2022]145 taxmann.com 35 (Del)]. Thus, the ld. Assessee's Representative sought for allowing the Appeal of the Assessee. 4. Per contra, the Ld. Department's Representative by relying on the orders of the Lower Authorities sought for dismissal of the Appeal. 5. We have heard both the parties and perused the material available on record. The sole issue to be considered in the present Appeal is as to whether the disallowance made by the CPC u/s 40a(ia) of the Act amounting to Rs. 87,47,488/- on account of short deduction of tax at source is sustainable or not. The said issue is no more res-integra. The Jurisdictional High Court in the case of Future First info Services (P.) Ltd. (supra) held as under:- \"We are satisfied that the order under challenge is a just order. The reasoning appearing at paragraph 6 of the judgment and/or order under challenge reads as follows: \"In the present case before us the assessee has deducted tax u/s. 194C(2) of the Act being payments made to sub-contractors and it is not a case of non-deduction of tax or no deduction of tax as is the import of section 40a(ia) of the Act.But the revenue's contention is that the payments are in the nature of machinery hire charges falling under the head 'rent' and the previous provisions of section 194I of the Act are applicable. According to revenue, the assessee has deducted tax @ 1% u/s. 194C(2) of the Act as against the actual deduction to be made at 10% u/s. 194I of the Act, thereby lesser Printed from counselvise.com 3 ITA No. 434/Del/2025 Adglobal 360 India Pvt. Ltd. deduction of tax. The revenue has made out a case of lesser deduction of tax and that also under different head and accordingly disallowed the payments proportionately by invoking the provisions of section 40(a)(ia) of the Act. The Ld. CIT, DR also argued that there is no word like failure used in section 40(a)(ia) of the Act and it referred to only non-deduction of tax and disallowance of such payments. According to him, it does not refer to genuineness of the payment or otherwise but addition u/s. 40(a)(ia) can be made even though payments are genuine but tax is not deducted as required u/s.40(a)(ia) of the Act. We are of the view that the conditions laid down u/s.40(a)(ia) of the Act for making addition is that tax is deductible at source and such tax has not been deducted. If both the conditions are satisfied then such payment can be disallowed u/s. 40(a)(ia) of the Act but where tax is deducted by the assessee, even under bonafide wrong impression, under wrong provisions of TDS, the provisions of section 40(a)(ia) of the Act cannot be invoked. Here in the present case before us, the assessee has deducted tax u/s. 194C(2) of the Act and not u/s. 194I of the Act and there is no allegation that this TDS is not deposited with the Government account. We are of the view that the provisions of section 40(a)(ia) of the Act has two limbs one is where, inter alia, assessee has to deduct tax and the second where after deducting tax, inter alia, the assessee has to pay into Government Account. There is nothing in the said section to treat, inter alia, the assessee as defaulter where there is a shortfall in deduction. With regard to the shortfall, it cannot be assumed that there is a default as the deduction is not as required by or under the Act, but the facts is that this expression, 'on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction has not been paid on or before the due date specified in sub-section (1) of section 139'. This section 40(a)(ia) of the Act refers only to the duty to deduct tax and pay to government account. If there is any shortfall due to any difference of opinion as to the taxability of any item or the nature of payments falling under various TDS provisions, the assessee can be declared to be an assessee in default u/s. 201 of the Act and no disallowance can be made by invoking the provisions of section 40(a)(ia) of the Act.\" (emphasis supplied) 6. By respectfully following the order of Jurisdictional High Court in the case of Future First info Services (P.) Ltd. (supra), we allow the Printed from counselvise.com 4 ITA No. 434/Del/2025 Adglobal 360 India Pvt. Ltd. Grounds of Appeal of the Assessee and set aside the order impugned of the Ld. CIT(A). 7. In the result, the Appeal of the Appellant is allowed. Order pronounced in the open court on 29th July, 2025 Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 29 .07.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTR ITAT, NEW DELHI Printed from counselvise.com "