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In the matters of TDS deduction there is always a grey area for the payer whether to deduct or not especially in the modern world of transactions. Any failure may lead to a disallowance.


In the context of default disallowance of an expense for want of deduction of tax at source the Tribunal in (2022] 27 ITR (Trib)-OL 370 (ITAT[Del]) held that creating a demand for non-deduction of tax while the recipient had paid taxes on the same amount would result in recovery of taxes on the same amount twice.


In this case the AO refused to take into consideration additional evidence for technical reasons rejecting simple letters of confirmation from the payees instead of prescribed form and certification under rule 31ACB. 


Allowing relief to the assessee the bench held that the AO has gone strictly by the letter and procedure of the Act leaving aside the spirit of the legislation as taxes cannot be recovered twice. 


The bench however left open the question of action required for initiation of penalty provision under section 271C and intervention in recovery provisions under section 201(1). 




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