20 November 2008
i got a assessment order passed for my client in which the A.O. has disallowed rs 350000/- on account of Non deduction of TDS and added back this amount as income on which tax is to be paid, similarly he has initiated a penalty proceeding against the company under section 271(1)(c),as the payment on which the amount on which tds has not been deducted was not intentional,it was paid to our contractor on the basis of Debit note sent the company,as was making deduction on the same while making payment to the transporter directly,can there be a ground or case law to qoute that when once tax has been deducted by the contractor the liability to deduct tax does not arise on the company. kindly help me out with this situation
20 November 2008
In the instant case, the disallowance is purely technical in nature. Due to nondeduction of tax, the disallowance has arisen u/s40(a)(1). Once the tax is deducted in the subsequent year, the amount which was disallowed shall get allowed. Further Sec271(1)(c) comes into play, only when there is a "concealment" or "furnishing of inaccurate particulars". In your case, neither there is concealment nor furnishing of inaccurate particulars, hence invoking penalty u/s271(1)(c) may not be in order.
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