Whether immunity from disallowance of expenses on account of non/short deduction of taxes can be granted if assessee/payer furnishes certificate in prescribed form No. 26A?

Whether immunity from disallowance of expenses on account of non/short deduction of taxes can be granted

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Whether immunity from disallowance of expenses on account of non/short deduction of taxes can be granted if assessee/payer furnishes certificate in prescribed form No. 26A?

Viral Ashish Parikh Vs ACIT
ITA No. 3505/Ahd/2014
Short Overview of the case:
Assessee, an individual engaged in business, had filed ITR for relevant AY. AO noticed that assessee had claimed certain expenses without deducting TDS under relevant section of the Act.
AO treated assessee in default and made disallowance and added it to assessee’s total income.
As CIT (A) confirmed AO’s order, assessee filed present appeal.
On Appeal, the issue before ITAT was whether immunity can be granted from disallowance of expenses on account of non/short deduction of taxes when assessee/payer furnishes certificate in prescribed form.
 ITAT answered it on affirmative. It held as under:
primary onus lied upon assessee to deduct TDS under chapter XVIII-B.
In case, assessee failed to deduct TDS, assessee was not eligible for deduction of corresponding expenditure.
Assessee could be granted immunity from disallowances of expenses on account of non/short deduction of taxes provided that assessee (payer) furnished certificate in prescribed form.
Thus, onus was upon assessee.
However, instant assessee had not furnished necessary certificate in Form 26A prescribed by CBDT.
 Assessee neither furnished certificate of CA before CIT(A) nor certificate in Form 26A prescribed by CBDT before ITAT.
It was assessee’s duty to deduct appropriate tax from amount paid/payable to any party, i.e., payee, if such amount fell under purview of provision of Chapter XVII(B) i.e., deduction at source.
 Further, provision of sec. 40(a)(ia) provided that if assessee failed to deduct or failed to deduct appropriate tax on amount paid on which it was liable to deduct tax then such amount would not be allowed as business expenses.
However, legislator had provided relaxation to assessee by inserting 2nd proviso to sec. 40(a)(ia) on account of failure to deduct tax, if it fulfilled condition prescribed under proviso to sec. 201(1) i.e., furnishing certificate from accountant in Form 26A.
Duty cast on assessee could not be transferred to Revenue.
 If such burden was transferred to Revenue then importance of provision of tax deduction at source under the provision of Chapter XVII(B) i.e., deduction at source would be of no relevance.
 However, in interest of justice and to avoid double taxation, the issue was set aside to file of AO with direction to assessee to submit CA certificate to effect that payees had included amount received in their income return and offered same to tax.

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