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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-I, Rajkot dated 06/03/2014 ( in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt. 09/12/2011 relevant to the Assessment Year 2009-2010.
The assessee has raised the following grounds of appeal:
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1.1. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.19,59,975/- although he was requested to follow the decision of the Hon. IT AT Rajkot. The addition needs deletion. 1.2. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 19,59,975/- although he was requested to follow the decision of the Hon. IT AT Rajkot and has thus shown judicial in discipline. The addition needs deletion. 1.3. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.19,59,975/- by placing reliance on an irrelevant decision. The addition needs deletion. 1.4. The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 19,59,975/- although the provisions of section 40(a)(ia) is not applicable. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs.19,59,975/- without verifying proper facts of the case. The addition needs deletion. 3. Taking into consideration the legal, statutory, factual, accounting and administrative aspects, no addition amounting to Rs. 19,59,975/- ought to have been confirmed. The additions need deletion. 4. Without prejudice, the assessment made is bad in law and deserves annulment 5. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing assessment order. The assessment needs annulment. 6. Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment. 7. The appellant craves leave to add/alter/amend and/or substitute any or all ground of appeal before the actual hearing takes place. 2. The effective issue raised by the assessee is that the learned CIT (A) erred in confirming the addition made by the AO for Rs. 19,59,975.00 on account of non deduction of TDS under section 194C of the Act r.w.s. 40(a)(ia) of the Act.
Briefly stated facts are that the assessee in the present case is an individual and carrying on the business of wholesale trading in agricultural products. The assessee in the year under consideration has claimed freight expenses of Rs. 58,61,772.00 in his profit and loss account. The assessee out of such expenses has not deducted the TDS under section 194C of the Act for Rs. 19,59,975.00. Accordingly, the AO disallowed the same and added to the total income of the assessee.
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Aggrieved assessee preferred an appeal to the learned CIT (A)
The assessee before the learned CIT (A) contended that he is not liable to deduct the TDS on the payment to the contractor and engaged in the business of plying, hiring or leasing goods carriages as provided under section 194C(6) of the Act.
4.1 The assessee also claimed that the provisions of TDS will not be applicable upon him where the payment does not exceed ₹20,000 as provided under section 194C(5) of the Act.
4.2 The assessee further contended that the aggregate payment in respect of certain contractors was less than ₹50,000 and therefore he is not subject to the provisions of TDS as per the proviso to section 194C(5) of the Act. As per the assessee such payment covered under the proviso to section 194C(5) of the Act is of ₹5,40,975.00 only,
4.3 The assessee before the learned CIT (A) also contended that there cannot be any disallowance of the expenses on account of non-deduction of TDS as per the amendment under the provisions of section 40(a)(ia) of the Act if the recipient has paid the taxes on such income received from the assessee.
However the learned CIT (A) disregarded the contention of the assessee and confirmed the order of the AO by observing as under: I have carefully considered the submission given by the appellant and the assessment order. I find no merit in the contention of the appellant. As per s.194C(6). no TDS is required to be done if the contractor furnishes his PAN to the person paying or crediting such sum. The appellant has not brought anything on record to show that the payees had submitted the PAN to the appellant. Hence. s.!94C(6) is not applicable. The second
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contention of the appellant is that if the payment is less than Rs.20.000/ - then no lax is required to be deducted as per s. 194C(5). Also, as per proviso to s.194C(5). if the aggregate payment to a party is less than Rs.50,000/-. no TDS is required. 1 do not agree with the appellant on this issue. The first part is correct that if a payment is less than Rs.20,000/-. then TDS is not required to be done. However, as per the proviso, if aggregate of such payments is more than Rs.50.000/-. TDS is required to be done. "Such" refers to the payments less than Rs.20,000/- made to a party. If the aggregate of such payments to a part} is more than Rs.50.000/-. then TDS is required to be done. The appellant's contention that no TDS is required where the aggregate payment is less than Rs.50,000/- is incorrect and based on wrong interpretation of the law. It is seen from the details given by the A.O. thin in al; cases, the aggregates of payments to a part) are exceeding Rs.50,000/- or in individual cases the payments are exceeding Rs.20,000/-. The appellant is well covered by the provisions of s.194C. The last contention of the appellant that all the payees had paid the tax and filed their returns of income, is unsubstantiated. The appellant has not-given any details of the returns filed by the payees or the lax paid by them. The onus on the appellant to prove the same which has not been discharged by the appellant. The appellant's arguments thus are found to be fallacious on all counts. These grounds of appeal are dismissed.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us filed the written submissions which are available on record. The assessee in the written submission reiterated the contentions as placed before the learned CIT (A).
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the learned DR and perused the materials available on record. The assessee in the case on hand has claimed an expense of Rs. 19,59,975/- under the head freight expenses without deducting TDS u/s 194C r.w.s. 40(a)(ia) of the Act. Therefore, the disallowance was made by the AO on account of non-deduction of TDS.
8.1 However, from the preceding discussion, we note that the assessee has not furnished the declaration and the PAN of the contractors to whom the payment for the freight charges were paid. Accordingly, the assessee cannot take the benefit of the provisions of section 194C(6) of the Act.
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8.2 Regarding the contention of the assessee that there will not be any deduction of TDS under section 194C of the Act if the payment the does not exceed ₹20,000.00 However we note that in all the cases the payment is exceeding ₹20,000 therefore we are not in agreement with the contention of the learned AR for the assessee.
8.3 Regarding the applicability of 1st proviso to section 194C(5) of the Act, we do not find force in the contention of the assessee insofar the aggregate payment does not exceed ₹50,000 in the year under consideration. It is because in each case the payment was exceeding ₹20,000 as submitted by the assessee in the written submission. The relevant provision of section 194C of the Act reads as under: “(5) No deduction shall be made from the amount of any sum credited or paid or likely to be credited or paid to the account of, or to, the contractor, if such sum does not exceed twenty thousand rupees : Provided that where the aggregate of the amounts of such sums credited or paid or likely to be credited or paid during the financial year exceeds fifty thousand rupees, the person responsible for paying such sums referred to in sub-section (1) shall be liable to deduct income-tax under this section.”
Thus, in view of the above, we note that the assessee cannot take the shelter of the benefit provided in the proviso to section 194C (5) of the Act.
8.4 However, we find force in the argument submitted by the Learned AR that if the recipient of freight charges has paid the taxes on the amount received from the assessee, then there will be no disallowance. Indeed the said provision, though inserted by the Finance Act 2012 w.e.f. 1-4-2013, has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:-
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“Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?” Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn’t deducted TDS an amount paid to deductee and, in turn, deductee also hasn’t offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn’t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue. The Agra Tribunal in the case of Rajiv Kumar Agarwal-vs-ACIT [2014] 45 taxmann.com 555 (Agra – Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(8) was inserted by the Finance No.(2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005.”
In view of above, we are inclined to set aside the order of the ld. CIT-A to the AO for fresh adjudication in the light of the above discussion. Hence the ground of appeal of the assessee is allowed for the statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 12/12/2019 at Ahmedabad.
-Sd- -Sd- (Ms MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 12/12/2019 Manish