Form 26A compliance defeats disallowance under section 40(a)(ia); Rule 31ACB filing is only procedural.

Furnishing Form 26A by a chartered accountant satisfies the statutory conditions in the proviso to section 201(1) where the resident payee has filed the return, accounted for the income and paid the tax due, so the payer is not treated as an assessee in default. The same consequence applies under the second proviso to section 40(a)(ia), and the disallowance cannot survive once Form 26A is provided. The requirement under Rule 31ACB to file the form before the Director General of Income Tax (Systems) is only procedural and cannot create an additional substantive condition beyond the Act; the disallowance under section 40(a)(ia) was therefore deleted.

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Issues: Whether furnishing of Form 26A by a chartered accountant under the proviso to section 201(1) of the Income-tax Act, 1961 was sufficient to prevent disallowance under section 40(a)(ia), and whether non-filing of the form before the Director General of Income Tax (Systems) under Rule 31ACB of the Income-tax Rules, 1962 could sustain the disallowance.

Analysis: The proviso to section 201(1) deems the payer not to be an assessee in default where the resident payee has filed the return, taken the amount into account, paid tax due, and the payer furnishes the prescribed accountant's certificate. The corresponding second proviso to section 40(a)(ia) applies the same consequence for disallowance. Once Form 26A is furnished, the statutory conditions stand satisfied. The requirement in Rule 31ACB regarding filing before the Director General of Income Tax (Systems) is only procedural and cannot add a further substantive condition beyond the Act.

Conclusion: The disallowance under section 40(a)(ia) could not be sustained and was directed to be deleted.

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