40(a)(ia) Disallowance for TDS default if books rejected by AO

By | August 5, 2015

Question : whether disallowance u/s 40(a)(ia) for TDS default shall be attracted even if income is estimated by AO after rejecting books ?

Answer yes .Disallowance for TDS default shall be attracted even if income is estimated by AO after rejecting books
  The estimation of income upon rejection of the assessee’s accounts as not reliable for assessment of income u/s.145(3) is to be made transparently, in two steps. The first being toward assessment of commercial profits, and then again the specific allowances or disallowances that stand to be effected, as u/s. 40(a)(ia), an artificial, statutory disallowance.

  1.  There being nothing to show that the disallowance of the impugned sum/s u/s.40(a)(ia) was factored into while estimating the income on global basis, which exercise is thus essentially toward ascertaining commercial profit on normative basis/conditions, it cannot at all be considered, on facts, that deduction u/s.40(a)(ia) stood already effected.
  2. It would be equally incorrect to say that section 40(a)(ia) is not attracted merely because the income stands estimated, the same being only on a summary basis, to be made, taking into account all the relevant facts and circumstances, consistent with the relevant provisions of law.

IN THE ITAT PATNA BENCH

Prabhat Construction Company

v.

Commissioner of Income-tax-1, Patna

IT APPEAL NO. 31 (PAT.) OF 2013
[ASSESSMENT YEAR 2008-09]

JULY  17, 2015

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