Recent Tribunal Decision on Retrospective Amendment to Section 40(a)(ia)

The Tribunal held that the amendment to Section 40(a)(ia) is retrospective from 1st April 2005, directing the AO to re-examine TDS payments. The deletion of an addition after rejecting the assessee's books was upheld, with the Revenue's appeal dismissed and the assessee's appeal allowed for statistical purposes.

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Issues Involved:
1. Addition u/s 40(a)(ia) for non-deduction or late deposit of TDS.
2. Deletion of addition after rejecting the assessee's books of accounts.

Summary:

Issue 1: Addition u/s 40(a)(ia) for non-deduction or late deposit of TDS

The assessee contended that TDS was deposited before the due date of filing the return, except for Rs. 85,850/- on which no tax was deducted. The assessee cited the ITAT 'B' Bench decision in Shri Kanubhai Ramjibhai Vs. ITO, which held that the amendment to Section 40(a)(ia) by the Finance Act, 2010 is retrospective. The Tribunal agreed, stating that the amendment is remedial and designed to eliminate unintended consequences, thus applicable retrospectively from 1st April 2005. The Tribunal directed the AO to examine the payment of TDS and disallow only those amounts where TDS was either not deducted or not deposited before the due date of filing the return. The AO was instructed to re-adjudicate after giving the assessee an opportunity to be heard.

Issue 2: Deletion of addition after rejecting the assessee's books of accounts

The Revenue's appeal contended that the CIT(A) erred in deleting the addition of Rs. 12,14,189/- made after rejecting the assessee's books of accounts. The assessee argued that it followed the project completion method, and the project was not completed during the year under consideration. The Tribunal noted that the Revenue accepted this method in preceding and subsequent years and that the project was not substantially completed during the year in question. The Tribunal found no infirmity in the CIT(A)'s order deleting the addition made by the AO and rejected this ground of the Revenue's appeal.

Conclusion:

The assessee's appeal was deemed allowed for statistical purposes, while the Revenue's appeal was dismissed. The order was pronounced in Open Court on 17th June 2011.

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