Kayyar Subbanna Shetty , Mangalore V. The Income Tax Officer Ward-2(1), Mangalore

ITA 2563/BANG/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4690 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 11-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKAS K SURYAVAMSHI
• Assessee Lawyers: PRATHIKSHA M PAI
• Section: 201(1); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, SMC : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT ITA NO. 2563/BANG/2018 ASSESSMENT YEAR : 2014-15 KAYYAR SUBBANNA SHETTY, PROP : AKSHAYA POWER SERVICES, D.NO.18-4-179/4 & 5, PRESIDIUM COMMERCIAL COMPLEX, ATTAVAR, MANGALORE-575 001. PAN AKMPS 6397L VS. THE INCOME TAX OFFICER, WARD 2(1), MANGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI SANKETH S NAYAK, C.A & SMT. PRATHIKSHA M PAI, C.A RESPONDENT BY : SHRI VIKAS K SURYAVAMSHI, ADDL.CIT DATE OF HEARING : 04.10.2018 DATE OF PRONOUNCEMENT : .10.2018 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 28.6.2018 OF THE CIT(APPEALS)-10, BENGALURU RELATIN G TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE PAI D INTEREST OF RS.3,10,156 (RS.2,97,146/-) ON CAR LOAN AVAILED FRO M TATA CAPITAL. ITA NO. 2563/BANG/2018 PAGE 2 OF 6 THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE ON PAYMENT OF INTEREST. SINCE THE ASSESSEE FAILED TO DEDUCT TAX AT SOURCE, THE AO DISALLOWED THE SUM OF RS.2,97,146/- WHICH WAS CLAIM ED AS EXPENSES BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT BY INVO KING THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (ACT) . 3. BEFORE CIT(A), THE ASSESSEE SUBMITTED THAT AS PE R THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT READ WITH P ROVISO TO SECTION 201(1) OF THE ACT INSERTED BY FINANCE ACT 2012 W.E. F. 01.04.2013 AND 01.07.2012 RESPECTIVELY, IF IT IS ESTABLISHED THAT THE PERSON TO WHOM MADE THE PAYMENTS MADE ARE DISALLOWED U/S 40(A)(IA) OF THE ACT HAS FURNISHED RETURN OF INCOME U/S 139 OF THE ACT AND H AS ALSO TAKEN INTO ACCOUNT THE SUM RECEIVED FROM THE ASSESSEE IN COMPU TING IN SUCH RETURN OF INCOME AND IF HE HAD PAID TAX ON THE INCO ME DECLARED BY HIM ON SUCH INCOME AND FURNISHED THE CERTIFICATE TO THE ABOVE EFFECT TO THE ACCOUNTANT IN FORM NO.26A, THEN THE ASSESSEE CANNOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT U/S 201(1) OF THE ACT AND NO DISALLOWANCE U/S 40(A)(IA) OF THE ACT SHOULD BE MADE. THE ASSESSEE F ILED CERTIFICATE IN FORM NO.26A AS REQUIRED BY THE PROVISO TO SECTION 2 01(1) OF THE ACT AND PRAYED THAT THE ADDITIONS MADE BY THE AO MAY BE DELETED. 4. THE CIT(A) DID NOT ACCEPT THE PLEA OF THE ASSESS EE FOR THE REASON THAT AS PER RULE 31ACB OF THE INCOME TAX RUL ES, 1962 (RULES), THE CERTIFICATE IN FORM 26A HAD TO BE FILED WITH TH E DIRECTOR GENERAL OF INCOME TAX (SYSTEMS) AND THE ASSESSEE WAS NOT IN A POSITION TO ITA NO. 2563/BANG/2018 PAGE 3 OF 6 CONFIRM WHETHER THERE WAS COMPLIANCE WITH RULE 31AC B OF THE RULES. THE CIT(A) THEREFORE HELD THAT THE DISALLOWANCE U/S .40(A)(IA) OF THE ACT WAS JUSTIFIED. AGGRIEVED BY THE ORDER OF THE C IT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE RIVAL SUBMISSIONS. THE SHORT P OINT THAT ARISES FOR CONSIDERATION IS AS TO WHETHER FILING OF FORM N O.26A NAMELY THE CERTIFICATE OF THE CHARTERED ACCOUNTANT AS PRESCRIB ED UNDER THE PROVISO TO SECTION 201(1) OF THE ACT CAN BE TAKEN AS A CONC LUSIVE PROOF THAT THE RECIPIENTS OF THE PAYMENT FROM THE ASSESSEE HAS TAK EN INTO ACCOUNT THE SUM RECEIVED FROM AN ASSESSEE ON WHICH NO TAX HAD B EEN DEDUCTED AT SOURCE FOR COMPUTING HIS INCOME IN SUCH RETURN OF I NCOME. THE PROVISO TO SECTION 201(1) OF THE ACT INSERTED BY THE FINANC E ACT 2012 W.E.F. 01.07.2012 READS AS FOLLOWS :- PROVIDED THAT ANY PERSON, INCLUDING THE PRINCIPAL OFFICER O F A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF THIS CHAPTER ON T HE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT (I) HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 13 9; (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOM E IN SUCH RETURN OF INCOME; AND (III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME, AND THE PERSON FURNISHES CERTIFICATE TO THIS EFFEC T FORM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED. SECOND PROVISO TO SEC.40(A)(IA) READS AS FOLLOWS: ITA NO. 2563/BANG/2018 PAGE 4 OF 6 PROVIDED FURTHER THAT WHERE AN ASSESSEE FAILS TO D EDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB- SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-C LAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID T HE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INC OME BY THE RESIDENT PAYEE REFERRED TO IN THE SAID PROVISO. 6. IN THE PRESENT CASE, THE ASSESSEE HAS FILED A CE RTIFICATE IN FORM NO.26A OF A CHARTERED ACCOUNTANT, WHICH IS THE PRES CRIBED FORM AS PER RULE 31ACB OF THE RULES. A READING OF THE PROVISO TO SEC.201(1) OF THE ACT AND RULE 31ACB OF THE RULES SHOWS THAT ONCE A DECLARATION IN FORM NO.26A BY A CHARTERED ACCOUNTANT IS FURNISHED THEN THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAU LT AND CONSEQUENTLY NO DISALLOWANCE U/S.40(A)(IA) OF THE A CT CAN BE MADE. THE FURTHER REQUIREMENT IN RULE 31ACB IS PURELY PRO CEDURAL AND NON- COMPLIANCE OF FURNISHING FORM NO.26A BEFORE THE DIR ECTOR GENERAL OF INCOME TAX (SYSTEMS) CANNOT BE THE BASIS TO MAKE DI SALLOWANCE U/S.40(A)(IA) OF THE ACT. IN OTHER WORDS, RULE 31A CB CANNOT OVERRIDE OR PROVIDE FOR MORE CONDITIONS THAN WHAT IS CONTEMP LATED BY THE PROVISIONS OF PROVISO TO SEC.201(1) OF THE ACT. THE PROVISO TO SEC.201(1) REFERS TO ONLY PRESCRIPTION OF PARTICULA R FORM AND DOES NOT AUTHORISE LAYING DOWN ANY FURTHER CONDITION TO BE S ATISFIED TO ESCAPE THE RIGOURS OF SEC.201(1) OF THE ACT. ITS FUNDAMEN TAL THAT RULES CANNOT OVERRIDE THE ACT. ITA NO. 2563/BANG/2018 PAGE 5 OF 6 7. I AM THEREFORE OF THE VIEW THAT THE DISALLOWANCE U/S.40(A)(IA) OF THE ACT, IN THE PRESENT CASE CANNOT BE SUSTAINED AN D THE SAME IS DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF OCTOBER, 2018. SD/- ( N.V. VASUDEVAN) VICE PRESIDENT BANGALORE, DATED, THE 26 TH OCTOBER, 2018. / VMS / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.