Reasonable cause for delay admitted the appeal; clerical replication in tax audit negates TDS disallowance and leads to deletion.

Condonation of a 401 day delay was accepted on the basis of reasonable cause-ill health of a partner, unfamiliarity with procedure and late engagement of counsel-resulting in admission of the appeal. On the substantive tax issue, a disallowance purportedly under the law for failure to deduct tax at source on rent was held unsustainable where the tax audit figures were clerically replicated from a sister concern and no actual rent payment or supporting entries existed; absence of actual payment negated the factual foundation for invoking the disallowance, which was deleted.

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Issues: (i) Whether the delay of 401 days in filing the appeal before the Tribunal should be condoned; (ii) Whether the disallowance under section 40(a)(ia) of the Income-tax Act, 1961 in respect of alleged non-deduction of tax at source on rent expenses (Rs.12,66,080) is sustainable where the tax audit report reflects figures replicated from a sister concern and no such payment was made by the assessee.

Issue (i): Whether the delay of 401 days in filing the appeal should be condoned.

Analysis: The affidavit filed by the assessee explains unfamiliarity with appellate procedures, inadvertent missing of communications due to health issues of the key managing partner, late discovery of an ex-parte order, and time taken to engage new tax counsel. Reliance is placed on established authority recognising 'reasonable cause' for condonation.

Conclusion: Delay of 401 days in filing the appeal is condoned and the appeal is admitted for adjudication in view of reasonable cause.

Issue (ii): Whether the disallowance of Rs.12,66,080 under section 40(a)(ia) for non-deduction of tax at source on rent is sustainable.

Analysis: The tax audit report of the assessee contained the same figures as those in the tax audit report of a sister concern; the profit and loss account and rent expense details of the assessee did not support any such rent payment. The disallowance under section 40(a)(ia) presupposes actual payment where tax was required to be deducted; a clerical replication of figures from another entity's audit report without corresponding payment undermines the basis for invoking section 40(a)(ia). On verification, the disallowance lacks factual foundation.

Conclusion: The disallowance of Rs.12,66,080 under section 40(a)(ia) is deleted and the grounds of appeal on this issue are allowed in favour of the assessee.

Final Conclusion: The appeal is admitted despite delay and allowed on merits by deleting the impugned disallowance under section 40(a)(ia), resulting in an overall decision favourable to the assessee.

Ratio Decidendi: Delay may be condoned where reasonable cause is shown; a disallowance under section 40(a)(ia) cannot be sustained in the absence of actual payments attracting tax deduction at source, and clerical reproduction of another entity's audit figures does not justify such disallowance.

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