Assessee had disallowed certain expenditure u/s 40(a)(i) and 40(a)(ia) of the Act for not deducting tax at source from those expenses. AO initiated proceedings u/s 201(1) & 201(1A) and charged interest u/s 201(1A). It was held that assesses who are following a mercantile system of accounting are required to account for all known expenses and losses, even if bills/invoices have not been received. Point of time at which tax had to be deducted at source is at time of credit to Account of contractor or payment in cash or cheque, whichever r is earlier. Following the decisions of coordinate benches, it was held that TDS provisions are triggered for the amount credited to the Provision for expenses account. Accordingly, it was held that assessee is liable to deduct tax at source from year end provision for expenses. Even if the payer had disallowed expenditure u/s 40(a)(ia) or did not claim the same as expenditure at all, he shall still be liable to deduct tax at source u/s 194A. In view of explanation given u/s 191 of the Act, provisions of S. 201 are triggered when assessee is deemed to be an assessee in default. If there is failure on part of an assessee to deduct tax at source, provisions of S. 191 introduces a deeming fiction as per which said assessee is deemed to be an assessee in default. Disallowance made u/s 40(a)(i)/40(a)(ia) will not absolve assessee from liability u/s 201. However, when assessee cannot ascertain payee who is beneficiary of credit of tax deduction at source, mechanism of Chapter XVII-B cannot be put into service as the mechanism provided under Chapter XVII-B would fail and hence AO would not be entitled to demand tax u/s 201(1) and interest u/s 201(1A). As the assessee has not furnished any detail to AO / CIT(A), the issue is restored to file of AO. Matter remanded.  (AY. 2012-13)