The Assessing Officer made a disallowance under section 40(a)(ia) of the Income-tax Act, 1961 on the ground that the assessee had made a short deduction of tax on the remuneration paid to its director in violation of section 197(1)  of the Act.. Both the Commissioner (Appeals) and the Tribunal gave concurrent findings that the higher salary paid to the assessee’s director was accepted as remuneration by the Assessing Officer during the scrutiny assessment in the subsequent assessment year and that the Assessing officer did not bring any evidence or material for making disallowance under section 40A(2)(b) and deleted the disallowance under section 40(a)(ia).Dismissing the appeal of the Revenue the Court held that  where there was short deduction of tax at source, disallowance could not be made under section 40(a)(ia) and the correct course of action would have been to invoke the provisions of section 201 of the Act. (AY.2009-10)