The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that disallowance can not be made on pretext of Non Deduction of TDS for mere Non-Disclosure of Mode of payment of salary to security guards.
The assessee, Neetu Juneja is an individual and is proprietor of the concern styled Tirupati Indane, engaged in the business of Indane Gas Service at Samalkha. She filed her return of income declaring taxable income. During the course of assessment proceedings, the AO noted that the assessee claimed security expenses at Rs.3,24,000/-. However, she has not deducted TDS as per the provisions of section 194-C of the Income Tax Act, 1961. In absence of any reply to the query raised by the AO, invoking the provisions of section 40a(ia), the AO made disallowance of Rs.3,24,000/-.
The issue raised relates to the disallowance of Rs.3,24,000 paid to four individual security guards appointed by the assessee.
The AO disallowed an amount of Rs.3,24,000/- being the salary paid to the security guards on the ground that such payments have been made to the contractor without deducting tax under section 194-C of the Act.
The assesses submitted that no service of the contractor was availed by her and the payment was made to individual persons and confirmation were also filed before the CIT(A).
However, the CIT(A) rejected the same on the ground that this evidence is not clinching evidence with regard to proof of payment of salary to the persons engaged by her as security guards. The CIT(A) held that the assessee has not produced a copy of any salary register and attendance register.
The coram of Suchitra Kamble and R.K.Panda ruled that the assessee has produced confirmation of the persons on the letter head of its firm as proof of payment of salary to these persons. Merely because the assessee has not disclosed mode of payment of salary i.e. either by cheque or cash, the same should not be doubted by the learned CIT(A) especially when such salary to security guards comes to Rs.27,000/- per month for four persons. Even, if the payment is made in cash, there will be no violation of section 40A(3) of the Act.
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