Per George George K. Judicial Member. - This appeal by the assessee is directed against the CIT(A)’s order dated 26-3-2010. The assessment year concerned is 2005-06.

2. The assessee has raised 15 exhaustive grounds. However, the crux of the issues is two fold, namely,

(i)Whether the CIT(A) is justified in confirming the Assessing Officer’s action in disallowing the expenditure to the tune of Rs. 2,40,09,915 on the ground that the tax has not been deducted at source for the said expenditure under section 40(a)(ia) of the IT Act.

(ii)Whether the CIT(A) is justified in confirming the levy of interest under section 234A, 234B and 234C of the Act to the tune of Rs. 35,29,873.

3. The brief facts of the case are as follows:-

The assessee is a firm. It is engaged in the business of mining sea shells. For the concerned assessment year, return of income was filed on 30-1-2006 declaring a total income of Rs. 34,92,050. The Assessing Officer completed scrutiny assessment under section 143(3) on 12-12-2007, disallowing contract payment of Rs. 2,40,09,915 under section 40a(ia) of the Act and determined the firm’s total income at Rs. 2,74,01,965. The Assessing Officer disallowed the expenditure of Rs. 2,40,09,915 on the ground that tax has not been deducted at source and hence, as mandated under section 40(a)(ia) of the Act, the said expenditure is to be disallowed.

3.1 Aggrieved, the assessee took up the issue before the CIT(A) for redressal. However, there was no personal representation on the part of the assessee on the date of hearing. The CIT(A), however, decided the matter on merits and dismissed the appeal of the assessee by stating that provisions of section 40(a)(ia) of the Act is applicable for the assessment year 2005-06 and when the TDS is not made on the payments to the sub-contractors during the relevant previous year, the amount of wages paid to the sub-contractors would have to be disallowed and added back to the total income of the assessee. The CIT(A) concluded that there is no scope for relief and there is no discretion given to the Assessing Officer regarding disallowance of any payment made to the sub-contractors without TDS.

3.2 Disenchanted with the finding of the CIT(A), the assessee filed appeal before the ITAT.

3.3 The assessee in the grounds of appeal had challenged the disallowance made under section 40(a)(ia) of the Act. The assessee had also raised additional grounds wherein he had challenged the validity of levy of interest under section 234A, 234B and 234C of the Act. The Tribunal remanded the matter to the CIT(A) for fresh consideration in the light of its observation in paras 6.3 and 6.4 of its order dated 22-1-2010. The CIT(A), after the remand of the matter, decided both the issues, namely, on merits as well as on the levy of interest, against the assessee vide his order dated 26-3-2010.

4. The assessee, being aggrieved by the order of the CIT(A) dated 26-3-2010, is in appeal before us.

4.1 As regards the issue on merits, it was submitted that the wage payments to the contractors was verified by the Assessing Officer as per para 2, page 2 of the assessment order dated 12-12-2007. The Assessing Officer has not doubted the genuineness of the payment. It was submitted that for the default of non-payment of TDS amounting paltry sum of Rs. 5,04,074 within the stipulated time limit has resulted in huge tax liability amounting to Rs. 1,00,63,655, which is very illogical and unjustified. The learned AR has also cited the decision of the Calcutta Bench of the Hon’ble ITAT in the case of Jahangir Biri Factory (P.) Ltd. v. Dy. CIT [2009] 126 TTJ (Kol.) 567 wherein it was held that payment of biri binding charges made through munshis, who were also part of labourers and paid at the same rate as piece-rated workers, could not be considered as commission as defined in Explanation (i) to section 194H. It was submitted that, following this decision, the disallowance of wages under section 40(a)(ia) ought to be cancelled.

4.2 As