The AO held that the assessee had not deducted tax at source and had made a short deduction of tax.  Accordingly, he disallowed the sum under section 40(a)(ia) of the Act.  The CIT(A) confirmed  the order of the AO.  On appeal Tribunal held that according to the special audit report, admittedly, the assessee had not deducted tax at source for the payments made.  Considering the amendments to section 40(a)(ia), the assessee had to prove that the recipient had declared the income in its gross income.  Since the Assessing Officer had not initiated proceedings under S. 201(1), the assessee had not submitted any documents. Hence, the Assessing Officer was directed to delete the addition made under S.  40(a)(ia) and to calculate the interest under S. 201(1A) for the period of default.  (AY.  2007-08, 2008-09)