Sri Sia Ram Mehrotra, H.U.F, Sitapur vs Assessee

This is an assessee's appeal directed against the order passed by learned CIT(A), Bareilly dated 18/11/2014 for the assessment year 2008-2009.

2. The grounds raised by the assessee are as under:

"1. That the learned authorities below have not been fair in invoking and confirming the provisions of section 40(a)(ia).

2. That the learned Income Tax Officer conveniently and adroitly added Rs.1,49,381/- omitted to mention how this lapse occurred.

3. That the appellant was prevented by sufficient cause in short deducting TDS (at 5% instead of 10% from 01/07/07 due to communication gap between the appellant and his counsel.

4. That as stated before the lower authorities, the appellant is a semi literate person (over 80 years) and had no knowledge about the change in deduction of TDS from 5% to 10% w.e.f. 01/06/2007.

5. That 25% of payments on which TDS has been deducted at 5% instead of 10% repre4sent supply expenses on which no deduction (TDS) was required.

2 6. That the learned Income Tax Officer has not been fair in adding Rs.50,000/- for possible leakage in purchase and vehicle expenses ignoring the past history of the case when no such addition was ever made during the existence of this firm since 1968. The books of account had always been accepted in the past over 45 years.

7. That the findings of the learned authorities below are contrary to law, fact and merit of the case."

3. None appeared on behalf of the assessee on the appointed date of hearing but written submissions of the assessee dated 20/03/2015 are available on record in which it is also submitted that the appeal of the assessee may be decided after considering the written submissions of the assessee.

4. Learned D.R. of the Revenue supported the orders of the authorities below.

5. We have considered the submissions of Learned D.R. of the Revenue, perused the material available on record and gone through written submissions of the assessee. The written submissions of the assessee are reproduced below for the sake of ready reference:-

"The appellant has been dealing in Nestle Products and Biri etc. for the last for more than 45 years and the books of a/cs have always been accepted u/s 143(3) in the past.

2. That as mentioned in the 1st Appeal Memo (Statement of facts Form No.15) there has never been any default for payment of tax and deduction of the same. But the same has been deducted and paid at 5% instead of 10% after 31-5-2007 as the Finance Act 2007 has increased the deduction of TDS at 10% instead of 5%. This increase has never been informed by the Counsel/C.A. of the Appellant , not even the Deptt. ever objected to it when the Forms were filed before it regularly at 3 months duration.

3. That the Department did not differentiate between the persons who deducted Tax slightly at lower rate that the 3

persons who did not deduct the same at all. Moreover the appellant paid interest as well much before the mistake was detected by the Ld. ITO at the time of hearing. The learned ITO and the appellate Authority should have considered the facts of the case at length, before making addition in the declared result.

4. That similar has been case of addition of Rs.50,000/ made in the declared results. The Authorities below had not been fair with the appellant specially when the above name firm had not been doing any business and the Prop. of the firm had been over 75 years then (now over 80 years). In view of what has been submitted above, it is prayed, that the above appeal be kindly decided on merit."

6. We also find that it is noted by the Assessing Officer in the assessment order that the assessee has debited an amount of Rs.4,18,319/- under the head commission on sales but TDS was deducted by the assessee only on the amount of Rs.2,68,938/- and on the remaining amount of Rs.1,49,381/-, no TDS was made by the assessee. In the written submissions of the assessee before us, as reproduced above, it is the claim of the assessee that TDS was deducted on the entire amount but the same was deducted @5% and not @10% being the increased rate from 01/06/2007 but no evidence has been produced before us in support of this contention that the TDS in fact was deducted on the total amount although at a lower rate. At this juncture, we feel it proper to reproduce the second proviso added to section 40a(ia) of the Act inserted by Finance Act 2012 with effect from 01/04/2013, which is as under:

"Provided further that where an assessee fails to deduct 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-clause, 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."

6.1 From the above proviso, it comes out that even in those cases where the assessee fails to deduct any part of tax in accordance with the provisions 4

of Chapter XVII-B, then also the assessee is hit by the provisions of section 40(a)(ia) if the assessee has not been able to satisfy that the assessee is covered by first proviso to section 201(1) of the Act. These provisions inserted by Finance Act, 2012 make it clear that even in case of short deduction of tax, the provisions of section 40(a)(ia) are attracted. With effect from assessment year 2013-14, the provisions of section 40(ia) cannot be invoked if the assessee establishes that the assessee is fulfilling requirement as per first proviso of sub section (1) of section 201. But those provisions are not applicable in the present year because these provisions are inserted by Finance Act 2012 with effect from 01/04/2013 and therefore, the assessee cannot get any advantage on this account but it helps in the interpretation of the provisions existing in the present year that even in case of failure of the assessee to deduct part of the TDS, required to be deducted, provisions of section 40(a)(ia) are attracted. Therefore, we find no infirmity in the order of CIT(A) on this issue. Accordingly, we decline to interfere in the order of CIT(A).

7. In the result, the appeal of the assessee stands dismissed.

(Order was pronounced in the open court on the date mentioned on the caption page)

Sd/. Sd/.

(SUNIL KUMAR YADAV) ( A. K. GARODIA ) Judicial Member Accountant Member

Dated:05/06/2015 *C.L.Singh

Copy of the order forwarded to : 1.The Appellant 2.The Respondent. 3.Concerned CIT 4.The CIT(A) 5.D.R., I.T.A.T., Lucknow Asstt. Registrar