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Judgment
This appeal is filed by the assessee for assessment year 2014-15 against the order of the ld. Commissioner of Income Tax (Appeals)-28, New Delhi, dated 11.07.2018.
The assessee has raised the following substantive grounds of appeal:-
“1. That the order of the learned appellate authority is arbitrary and against law and facts of the case;
That the learned Commissioner of Income Tax (Appeals)-28 has been wrongly, arbitrarily and against the law and facts of the case, has confirmed the disallowance of Rs.1,06,17,768/- made on account of lower deduction of tax at source u/s 40(ia) of the I. T. Act, 1961.”
Brief facts of the case are that, the assessee is engaged in the business of providing digital cable service through local cable operators. The return of income declaring 8,58,741/- was been filed. The assessment proceedings was initiated against the assessee and the order u/s 143(3) of the Income Tax Act, 1961 (‘Act’ for short) has been passed on 11/07/2018 by disallowing the commission paid to working Directors aggregating to Rs. 23,74,824/-, further disallowed payment of Rs. 46,34,850/- made to India Cast Media Distribution Pvt. Ltd. and disallowed payment of Rs. 1,82,45,461/- made to Media Pro Enterprises (P.) Ltd. and further made addition of Rs. 16,31,850/- u/s 40 (1) (ia) of the Act.
Aggrieved by the assessment order, the assessee has preferred an appeal before the CIT(A). The Ld.CIT(A) has partly allowed the appeal on 11/07/2018 by confirming the disallowance of Rs. 1,06,17,768/- made on account on account of lower deduction of tax at source u/s 40 (1) (ia) of the Act.
As against the order of the Ld.CIT (A) dated 11/07/2018 the assessee has preferred the present appeal on the grounds mentioned above.
None appeared for the assessee, the notice sent to the registered address returned with an endorsement “LEFT”. Therefore, we are constrained to decide the Appeal on hearing the Ld. DR and verifying the material on record.
We have heard the Ld. DR perused the material on record and gave our thoughtful consideration.
The Ld.CIT(A) while confirming the disallowance of Rs. 1,06,17,768/- made by the A.O. has held as under:-
“7.2 The Fourth Ground pertains to the disallowance made on account of lower deduction of tax at source than permitted by the AO. It was observed by AO that the expenses on account of payments of Rs. 1,82,45,461/- to Media Pro Enterprises (P) Ltd and Rs. 46,34,850/- to India Cast Media Distribution (P) Ltd were disallowed in totality, therefore, not considered for making disallowance u/s 40(a)(ia) of IT Act on account of lower deduction of tax at source. During the remand proceedings, it was observed by him that though the aforesaid expenses have been allowed on merit, the provisions of section 40(a)(ia) of IT Act still apply in his case and expenses claimed beyond the permissible limit are not allowable as per the said section. In addition to these two entities, AO found that in respect of another entity namely MSM Discovery (P) Ltd also there was difference of Rs. 16,31,856/- in the amount paid and making TDS than the rate permitted by AO. During the remand proceedings also, such difference was computed by AO at Rs. 59,88,395/-, Rs. 37,33,001/- and Rs. 8,96,372/- respectively against the aforesaid three entities which aggregates to Rs. 106,17,768/- to which, as per AO, appellant agreed for addition u/s 40(a)(ia) of IT Act during the remand proceedings. Confirming the comments of AO, appellant also, in the rejoinder to remand report, stated that due to inadvertent error on the part of accountant of the appellant company who had forgotten that permission for lower deduction had been allowed for a fixed amount of transaction, it could not deduct the required TDS on the payments made to various parties. However, alternatively, appellant has taken the shelter of proviso to section 40(ia) r.w. proviso to sub-section (1) to section 201 of the Act but after going through the legal position as per said section, it transpires that the appellant has not been able to fulfill any of three conditions i.e. by showing or furnishing evidence of the fact that the resident or assessee (in whose case TDS was to be made) has furnished his return of income u/s 139(1) of the Act, the said resident has taken into account the relevant amount on which TDS was to be made for computing income in his return of income and thirdly, the appellant has failed to give any details or evidence that the said person has paid tax due on the income declared by him in such return of income. During the appellant proceedings also, appellant failed to give any reason for not fulfilling the aforesaid conditions as envisaged by Section 201(1) of the I.T, Act. In such situation, it is held that the appellant has failed to deduct tax at source and also failed to fulfill the conditions as per section 201(1) of the Act on the aforesaid payments made to three entities, therefore, the expenses are not allowable as per provisions of Section 40(a)(ia) of the Act. I therefore, confirm the disallowance of Rs. 1,06,17,768/-made by A.O and dismiss the ground taken by the appellant.”
On going through the findings recorded by the Ld. CIT(A) we do not find any infirmity or error in the above findings and conclusion of the Ld. CIT (A). Moreover, the assessee has failed to give any reason for not fulfilling the conditions envisaged by Section 201(1) of the Act. Thus, the assessee has failed to deduct the TDS and also fail to fulfill the conditions as per Section 201 of the Act on the payment made to three entities. Therefore, we are fully agree with the observation of the Ld.CIT (A) that the said expenses on account of payment made to three entities are not allowable as per provisions of Section 40a (ia) of the Act. Thus, we do not find any error in the action of the CIT(A) in upholding the disallowance of Rs. 1,06,17,768/- made by the A.O. Accordingly, the grounds of appeal of the assessee are dismissed.
In the result, appeal filed by the assessee is dismissed.