Non-deduction of tax at source and related TDS liabilities: additional evidence admitted, some default demands deleted and liabilities recalculated accordingly

Admission of additional evidence under Rule 29 was allowed as it went to the root of the matter and faced no departmental objection, leading to verification of Form 26A certificates. Where certificates for two payees were filed and verified, the assessee cannot be treated as an assessee in default and the demand and interest relating to those payments are deleted. For two other payees the Assessing Officers disallowance is upheld to the extent the assessee already disallowed 30% of expenditure, and the AO is directed to recalculate liabilities accordingly. The AO is directed to verify filing dates of the TDS return and delete any fee under the delayed TDS return provision if the return was timely filed.

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Issues: (i) Whether the assessee is an assessee in default under section 201(1) and liable to interest under section 201(1A) in respect of payments to two payees where Form 26A certificates have since been filed and verified; (ii) Whether the Assessing Officer's determination in respect of two other payees should be sustained subject to a 30% disallowance already made and recomputation of liability; (iii) Whether fee under section 234E is leviable where the assessee contends that the TDS return was filed within prescribed time.

Issue (i): Whether filing and departmental verification of Form 26A negates liability under section 201(1) and corresponding interest under section 201(1A) for specified payments.

Analysis: Form 26A certificates in respect of the two specified payees were filed by the assessee and have been verified by the department; additional evidence admitting these documents was allowed under Rule 29; the factual effect of verified Form 26A is to establish deduction/credit for the payees and remove the basis for treating the assessee as an assessee in default for those payments.

Conclusion: The demand under section 201(1) and interest under section 201(1A) in respect of the two specified payees is deleted in favour of the assessee.

Issue (ii): Whether the Assessing Officer's action in respect of payments to the two other payees should be confirmed subject to the assessee's 30% disallowance and recomputation.

Analysis: The assessee has already recorded a 30% disallowance of the relevant expenditure in the computation of income; no objection was raised to admission of evidence relating to these payments; any remaining liability requires calculation after giving effect to the disallowance.

Conclusion: The Assessing Officer's action in respect of these two payments is confirmed to the extent indicated; the Assessing Officer is directed to recompute the liability in accordance with law after giving effect to the 30% disallowance.

Issue (iii): Whether fee under section 234E is leviable where the assessee asserts that the TDS return was filed within time.

Analysis: The factual question of timely filing of the TDS return was directed to be verified by the Assessing Officer; deletion of the fee under section 234E was made contingent on verification establishing timely filing.

Conclusion: If the Assessing Officer finds that the TDS return was filed within the prescribed time, the fee under section 234E shall be deleted in favour of the assessee.

Final Conclusion: The appeal is partly allowed by deleting the demand and interest for two payees, confirming liability for the other two payees subject to recomputation after giving effect to a 30% disallowance, and directing verification of timely filing of the TDS return for consideration of deletion of section 234E fee.

Ratio Decidendi: Filing and departmental verification of Form 26A certificates removes the basis for treating the payer as an assessee in default under section 201(1); additional evidence may be admitted under Rule 29 when it goes to the root of the matter and affects the entitlement to relief.

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