AZAAD TIMBER,THENI vs. ITO WARD 1, THENI

The Assessee raised the following grounds of appeal :

Briefly, the facts of the case are that the appellant is a partnership firm engaged in the business of buying and selling of timber and bar wood and other related items. The Return of Income for the Assessment Year 2022-23 was filed on 01.10.2022 disclosing total income of Rs.97,120/-. Against the said Return of Income, the assessment was completed by the e-Assessment Unit of the Department(hereinafter called ‘AO’) vide order dated 20.03.2024 passed u/s.143(3) of the Act r.w.s 144B of the Act at a total income of Rs.19,59,389/-. While doing so, the Assessing Officer made the following additions : 3.1 Cash payment in excess of Rs.35,000/- In respect of Lorry freight payment Rs.70,370/- 3.2 Non deduction of TDS on Port Expenses Rs.6,77,421/- 3.3 Non deduction of TDS on Ocean Freight Rs.8,15,250/- 3.4 GST tax and Penalty Rs.2,98,868/- 4. Being aggrieved by the above assessment order, the appellant filed appeal before the ld.CIT(A) contending that the appellant paid lorry freight charges not exceeding a sum of Rs.35,000/- as prescribed u/s.40A(3) of the Income Tax Act, 1961. Similarly, it is contended that the appellant was not liable to deduct tax at source on the payment of port expenses of Rs.6,77,421/- as the appellant had to deduct tax at source on port charges paid to C & F Agent only on services component. Further, without prejudice to the above argument, it was submitted that the payees were regular Income Tax Payees filed the Return of Income disclosing the income received from the appellant, the certificate issued by Chartered Accountant in Form 26A was submitted. Therefore, the benefit of section proviso to section 40(a)(ia) of the Act should be granted to the assessee.

The ld.CIT(A) on due consideration of submission made on behalf of the appellant had confirmed the disallowance of 40A(3) on the ground that in the absence any supporting documentation, the submissions cannot be accepted. The ld.CIT(A) on due consideration had made submission confirmed addition u/s.40A(3) and 40(a)(ia) on the ground that the submissions cannot be accepted in the absence of supporting documents. The ld.CIT(A) however granted relief in respect of GST Component of Rs.1,49,434/- and confirmed the addition in respect of GST penalty of Rs.1,49,434/-, thus, appeal filed by the appellant came to be partly allowed by the ld.CIT(A).

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The ld.Counsel submits that the ld.CIT(A) ought not have dismissed the appeal without giving a clear finding as to what supporting documents are required in support of the submissions made by the appellant. He further submitted that the ld.CIT(A) ought not have denied the benefit of provisions of section 40(a)(ia) of the Act and the ld.CIT(A) ought not have confirmed the addition on account of penalty under GST Act and he also submitted copy of the vouchers placed at page no.1 to 14, copy of the Form No.26A, he submitted that the disallowance of late fee paid to GST does not partake the character of penalty placing reliance on the decision ITAT Bangalore Tribunal in Vyoma Technologies Vs. ACIT in ITA No.1253/BANG/2024.

On the other hand, learned Sr.DR submits that the evidence filed by the assessee requires verification by the Assessing Officer. He submits that the appellant had failed to respond to the notices issued by the Assessing Officer u/s.143(2) of the Act and the appellant filed the evidence for the first time before this Tribunal. Therefore, it requires verification by the Assessing Officer and the matter may be remitted back to the file of assessing Officer for denovo assessment.

We heard rival submissions and perused the material available on record. We find that during the course of assessment proceedings, the appellant had failed to respond to notice issued u/s.143(2) of the Act. In the circumstances, Assessing Officer drew an adverse, made addition on several items. However, before the ld.CIT(A), the appellant made detailed submissions in respect of each item of addition made by the Assessing Officer. However, the ld.CIT(A) dismissed the claim of the appellant solely for the reason that the appellant had not furnished the documentary evidence in support of the submissions made. Therefore, in our considered opinion, the interests of justice would be met, if the matter is restored to the file of Assessing Officer for denovo assessment in accordance with law after affording an opportunity of being heard to the assessee.

In the result, appeal filed by the assessee is partly allowed for statistical purpose. Order pronounced in the open Court on 13th July, 2026.