SHANKAR GOODS CARRIER,KOLKATA vs. PCIT, KOLKATA-1, KOLKATA

The brief facts of the case are that the ld. PCIT noted from the assessment records that the assessee, during the year, had made total expenditure on account of freight of Rs.16,03,03,322/-, out of which freight charges of Rs.14,15,11,932/- was paid to Railway and Rs.1,87,91,390/- was paid to different parties, whereupon, Tax Deducted at Source (TDS) as required u/s 194C, was not deducted. The ld. PCIT, therefore, noted that disallowance @30% of the above Assessment Year: 2017-18 Shankar Goods Carrier expenditure was required to be made which the Assessing Officer has failed to do so. He, therefore, show caused the assessee as to why order of the Assessing Officer be not held as erroneous and prejudicial to the interest of Revenue for want of aforesaid disallowance.

In reply, the assessee submitted that the amount of Rs.14,15,11,932/- was paid to railways, whereupon no TDS was required to be deducted. Further that the other parties had submitted declaration, wherein, they have declared that they having less than 10 trucks, were not liable to be subjected to TDS deduction as per the provisions of section 194C. The ld. counsel, in this respect, relied upon to section 194C(6) which provides that no tax needs to be deducted at source, if the contractor who is in the business of plying, hiring or leasing goods carriages and such contractor does not own more than 10 goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number (PAN) to the person paying or crediting such sum for carriage.

The ld. PCIT examined the said declarations furnished by the assessee and found that the declaration was filed only in respect of two contractors namely Daria Singh and Manish Chmaria. He further observed that in case of payment made to one another party that the payment was made to Mr. Sankarlal Tak but the declaration was submitted by another person namely Mr. Sanchin Tak and further that no declaration was submitted in the case of Mr. Sunil Singh and Dalbir Singh. The relevant part of the order of PCIT is reproduced as under:

5. I have considered the facts of the case and submission of the assessee. In this case the TDS was made against expenditure of Rs.16,03,03,322/- on account of freight charges. Therefore, 30% of Rs.16,03,03,322/- i.e. Rs.4,80,90,997/- was required to have been disallowed and added to the total income of the assessee u/s.40(a)(ia) for non-compliance of sec 194C. On perusal of the record it is observed Assessment Year: 2017-18 Shankar Goods Carrier that out of total expenditure on account of freight Rs. 16,03,03,322/-, freight charges of Rs.14,15,11,932/- was paid to Railway and Rs.1,87,91,390/- was paid to different parties for lorry freight. Therefore, tax deduction on Rs.14,15,11,932/- on amount paid to railway was not required u/s.194C. Further, the ledger of lorry freight indicate that Rs.1,00,000/- was credited to Daria Singh on 21.01.2017.From the documents submitted by the assessee during 263 proceedings it is seen that copies of declaration from different parties received by the assessee for non-deduction of tax only in respect of Daria Singh and Manish Chmaria. In one case payment was made to Mr. Sankarlat Tak but the declaration submitted by Mr. Sachin Tak and in the cases of Mr. Sunil Singh and Dalbir Singh no such type of declaration submitted by the assessee during the proceedings u/s.263. The A.O. has passed the assessment order without making enquiries or verification which should have been made in the instant case. Clause (a) and (b) of Explanation-2 to Section 263(1) is attracted in this case. Accordingly, it is held that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue. Hence, in fitness of things, there is no alternative but to set aside the case to the AO, before whom the assessee is given another chance to argue his case.

Though, the ld. AR of the assessee has submitted that entire details were examined by the Assessing Officer and that no further enquiry was needed, however, after going through the relevant part of the order of the PCIT, we find that the ld. PCIT has rightly held that the relevant issue relating to non-deduction of TDS and corresponding declarations submitted by the payees have not been properly examined by the Assessing Officer. The ld. PCIT has categorically found error/discrepancy relating to the non-furnishing of required declarations by certain parties. Therefore, in our view, the PCIT rightly restored the issue to the Assessing Officer for examination of this factual aspect. It is pertinent to mention here that the PCIT thoroughly examined the issue and held that no deduction was required to be made in respect of payment made to railways, whereas, the issue relating to payment to private parties without deduction of TDS and corresponding declarations furnished by the respective parties, is required to be examined by the Assessing Officer. In our view, no