The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), held that disallowance under Section 143(1) of the Income Tax Act, 1961 cannot be in mechanical manner and directed to verify whether TDS needs to be deducted or not.
The assessee, Ripley and Company Stevedoring & Handling (P) Limited is in appeal before the Tribunal against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), passed under section 250 of the Income Tax Act, 1961 in Assessment Year 2019-20.
The grievance of the assessee is that the CIT(Appeals) has erred in confirming the disallowance of Rupees four lakhs, which was added by the Assessing Officer with the aid of section 40(a)(ia) of the Income Tax Act. The disallowance of the above amount was made by the Computer Processing Unit under section 143(1) of the Income Tax Act, 1961.
The aspect of what is the nature of payment, whether TDS is to be deducted or not was not examined properly.
A Bench consisting of Rajpal Yadav, Vice-President (KZ) and Rajesh Kumar, Accountant Member observed that “The disallowance cannot be made in a mechanical manner. The CIT(Appeals) failed to consider this aspect and did not make an analytical observation, rather simply observed that it is seen from the details mentioned in Form 3CD Report submitted by the assessee, it has not deducted the TDS on the expenses paid. Hence, AO, CPC has correctly added a sum of 30%.”
“The CIT(Appeals) ought to have examined the nature of payment and to verify whether TDS was required to be deducted or not, only thereafter such disallowance could be confirmed. Considering the above facts, we remit this issue to the file of the ld. Assessing Officer for re-verification and re-adjudication.”
Dhiman Mandal (on behalf of Prashant Kumar Jaiswal), A.R., appeared on behalf of the assessee and P.P. Barman, Addl. CIT, appeared on behalf of the Revenue.
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