Can non deduction of tax be treated as income escaping asst.

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Shreyans (Querist)
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23 December 2009 We know that when TDS is not withheld, the expenditure is not allowed as deduction, but allowed as a deduction in the year in which it is paid to the government. Moreover the payee has paid his tax duly for AY 2004-05. Now the assessing officer has reopened the assessment. My question is can dis-allowance u/s 40(a)(ia) be treated as income escaping assessment (i.e. a ground for reassessment). I think it should not be, because the same will anyhow be allowed in the year in whcih Tax is deducted. Please don't mention the case of Hindustan Cola Beverages, and circular of 1997 as it deals with recovery of tax and not disallownace. Pls. quote other case laws. Thanks in advance.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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24 December 2009 If no assessement has been made, the AO can reopen the case under explanation 2(b) of section 147 on the reason that the assessee has understated the income.
Alternatively, if an assessment has been made, time limit for reopening as per proviso to section 147 has to be complied by AO. If it is complied with, reopening of assessment will sustain as per clause (c)(i) of explanation 2 of section 147 of the Income tax Act,1961 on the reason that income chargeable to tax has been under assessed.

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