The Income Tax Appellate Tribunal ( ITAT ) Cuttack on Monday held that if an assessee has filed Form 26A, not before the director general of income tax, then the assessee cannot be treated as an assessee in default and hence cannot be made liable to addition under section 40(a)(ia) of the Income Tax Act.
In this case, the Commissioner of income tax (Appeals) was of the view that Form 26A has to be furnished to Director General of Income-tax (Systems) or to the person authorized by the Director General of Income of Income-tax(systems) in accordance with the procedure, format, and standards, specified. This was not done by the appellant through the amount of return was filed before the CIT(A).
Judicial Member Pavan Kumar Gadale and Accountant Member N.S. Saini of the Cuttack Bench while disposing of the case in favor of the assessee, relied upon the decision of the Tribunal in Karwar Steel traders’ case and suggested that that the assessee may be visited with the penalty but no disallowance of the expenditure can be made.
The bench said that “In the instant case, we find that it is not in dispute that the assessee filed Form 26A together with income tax return of the recipients of the amount before the CIT(A). The only ground for rejecting the explanation of the assessee was that the said Form was not filed with Director General of Income Tax (Systems) or his authorized persons. Hence, in our considered view, for non-filing of the said Form before the Director General of Income Tax (Systems), the assessee can be visited with penalty as provided under the Income Tax Act but no disallowance of the expenditure can be made u/s.40(a)(ia) of the Act in view of the above-quoted decision of the Tribunal in the case of Karwat Steel Traders (supra).”
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