ITAT: No Addition for Typo in Tax Audit Report When Taxpayer Has Already Made Voluntary TDS Disallowance
The Income Tax Appellate Tribunal (ITAT), Delhi, has held that once a taxpayer has already made a voluntary disallowance for not deducting TDS, the department cannot make a further addition.
The assessee company, Deliverhealth Services Private Limited, had made provision for professional and other expenses at the end of the financial year. The invoices were to be received later, so the TDS was required to be deducted at the time of actual payment. Due to the non-deduction of TDS at the time of filing the Income Tax Return (ITR), the company voluntarily disallowed 30% of the expenses under Section 40(a)(ia) of the Income-tax Act.
Section 40(a)(ia) is a provision under the Income Tax Act, which requires the company to disallow some expenses when it fails to deduct TDS with the government within the specified time limits. The section is applicable to payments made to residents.
Due to a typographical error in the tax audit report, the disallowance was mistakenly reported under Section 40(a)(i), which applies to payments made to non-residents.
Based on this, the CPC disallowed the whole amount of Rs 16,57,106. The CIT(A) partly upheld the disallowance, allowing only 30% of the payment and the balance addition was upheld. Therefore, the assessee filed an appeal before the Income Tax Appellate Tribunal (ITAT), Delhi, challenging the CIT(A)’s order.
The Tribunal analysed the case and noted that all payments were made to a resident of India. The Tribunal held that section 40(a)(ia) proposes disallowance of only 30% of the payments on which TDS is not deducted, and the assessee had voluntarily disallowed 30% of the payment on which TDS was not deducted. Therefore, since the assessee had itself complied with the requirements, there was no need to propose extra additions by the lower authorities. As a result, the tribunal deleted the addition.
Case Citation: Deliverhealth Services Private Limited Vs DCIT; ITA No.3339/Del/2025; 07/01/2026; 2021-22
