ITAT Kolkata: Clerical error doesn't justify disallowance under Income Tax Act

The Appellate Tribunal ITAT Kolkata ruled in favor of the assessee, allowing the appeal and deleting the disallowance made under section 40(a)(ia) of the Income Tax Act, 1961. The tribunal found that the clerical error in naming the entity in the certificate did not warrant the disallowance of expenses, as the actual financial transactions and TDS claims were in line with the assessee's submissions.

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Issues:
1. Disallowance of expenses under section 40(a)(ia) for non-deduction of tax at source.

Analysis:
The appeal before the Appellate Tribunal ITAT Kolkata was directed against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2009-10. The assessee, a firm engaged in trading of tyre and production of chemicals and iron, declared a total income of Rs. 6,73,260. The Assessing Officer (AO) disallowed an amount of Rs. 3,00,001 under section 40(a)(ia) of the Income Tax Act, 1961 for alleged non-deduction of tax at source. This disallowance was related to an amount debited as Exhibition Expenses, out of which Rs. 3,00,000 was paid to Confederation of Indian Industry (CII). The AO contended that the certificate issued authorizing non-deduction of tax at source was in favor of a different entity, leading to the disallowance.

The assessee argued that the incorrect mention of the entity's name in the certificate was a clerical error. It was highlighted that the payment was made to CII by the firm through its bank account, and the entity mentioned in the certificate did not claim any TDS in its return of income. Despite these submissions, the CIT-A upheld the AO's decision, suggesting the assessee should have filed a rectification petition. The Appellate Tribunal noted that the entity mentioned in the certificate had no financial transactions and no TDS claims. It was observed that the mistake in naming the entity was a clerical error, and the addition made by the AO was deemed unsustainable. Consequently, the disallowance was deleted, and the assessee's appeal was allowed.

In conclusion, the Appellate Tribunal ITAT Kolkata ruled in favor of the assessee, allowing the appeal and deleting the disallowance made under section 40(a)(ia) of the Income Tax Act, 1961. The tribunal found that the clerical error in naming the entity in the certificate did not warrant the disallowance of expenses, as the actual financial transactions and TDS claims were in line with the assessee's submissions.

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