Tribunal Allows Appeal, Condoning Delay & Retrospective Amendment: Income Tax Act Section 40(a)(ia)

The Tribunal allowed the appeal for statistical purposes. The delay in filing the appeal was condoned based on the liberal approach advocated by the Supreme Court. Regarding the disallowance under section 40(a)(ia) of the Income Tax Act, the Tribunal held the amendment to be retrospective from 1st April 2005, directing the AO to re-examine the TDS payments. Disallowance would be sustained for payments with no TDS deducted or deposited after the due date, while no disallowance would apply for payments where TDS was deposited before the return due date. The AO was instructed to re-adjudicate the issue after providing the assessee with a fair opportunity to present their case.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Disallowance u/s 40(a)(ia) of the Income Tax Act, 1961.

Summary:

1. Condonation of Delay:
The appeal was filed late by 403 days. The assessee explained the delay through an affidavit, stating that the previous counsel, Shri Vishnu Patel, did not inform them about the CIT(A)'s order. The assessee became aware of the order only when the AO initiated proceedings u/s 271(1)(c). The assessee then engaged a new counsel and filed the appeal. The Tribunal deemed it proper to condone the delay, relying on the Supreme Court judgment in Collector Land Acquisition Vs. MST. Katiji and Others, 167 ITR 471 (SC), which advocates a liberal approach in condonation of delay to serve the ends of justice.

2. Disallowance u/s 40(a)(ia):
The assessee contended that they had deducted tax on the payment and deposited most of the TDS before the due date for filing the return. The Tribunal referred to the ITAT Ahmedabad Bench's decision in Shri Kanubhai Ramjibhai Vs. ITO, ITA No.3983/Ahd/2008, which held that the amendment to section 40(a)(ia) by the Finance Act, 2010 is retrospective. The Tribunal found that the amendment aimed to eliminate unintended consequences and undue hardship to taxpayers, thus it should be considered retrospective from 1st April 2005. Consequently, the Tribunal directed the AO to examine the payment of TDS by the assessee. For payments where TDS was deposited before the due date of filing the return, no disallowance u/s 40(a)(ia) should be made. However, for items where no TDS was deducted or deposited after the due date, disallowance would be sustained. The AO was instructed to re-adjudicate the issue after giving the assessee an adequate opportunity to be heard.

Result:
The appeal of the assessee was allowed for statistical purposes.

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