M/S. B. M. CHAPALKAR & SONS,,NASHIK vs. ASSISTANT COMMISSIONER OF INCOME TAX,,

Ground No.1 pertains to the question whether u/s.40(a)(ia) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟), disallowance can be made for short deduction of tax.

At the time of hearing, the Ld. AR of the assessee submitted that within the purview of the provision of Section 40(a)(ia) of the Act, there is nothing in the said provision to treat inter alia the assessee as defaulter where there is a shortfall in deduction. That as regards this proposition, the Ld. AR relied on the decision of the Hon‟ble High Court of Karnataka in the case of CIT and Another Vs. Kishore Rao and Others (HUF) in ITA No.660/2015 and therein,

The Ld. DR per contra submitted that it has to be ascertained whether it is the case of short deduction or no deduction at all so far as the assessee is concerned.

We have perused the case records and heard the rival contentions. As demonstrated by the Ld. AR of the assessee so far as the decision of the Hon‟ble Karnataka High Court (supra.) is concerned, the realm of Section 40(a)(ia) of the Act is imposing two fold obligations on the assessee viz. (i) to deduct tax & (ii) to deposit the deducted tax to government account. There is nothing in the said section to treat, inter alia the assessee as defaulter where

With regard to Ground No.2, it is the contention of the assessee that the Assessing Officer was not justified in making the addition of Rs.1,54,977/- when the date of payment is after 01.10.2009 and the party has provided PAN as required. The Ld. CIT(Appeal) was not justified in setting aside the issue for verification. The Ld. CIT(Appeal) has no power to set aside the assessment.

We observe at Para 5.3 of the CIT(Appeal)‟s order that he had directed the Assessing Officer to verify the contention of the assessee from records and re-compute disallowance u/s.40(a)(ia) of the Act.

At the time of hearing, the Ld. AR of the assessee submitted that this issue may be sent back to the file of Assessing Officer for proper verification.

The Ld. DR fairly conceded to the arguments put forth by the Ld. AR of the assessee.

In view of the submissions of the parties herein, we set aside the order of the Ld. CIT(Appeal) on this issue and the matter is restored back to the file of Assessing Officer for proper verification and adjudication as per law. Thus, ground No.2 raised in appeal by the assessee is allowed for statistical purposes.

With regard to ground No.3, it was observed by the Assessing Officer that the assessee had paid interest of Rs.8,60,292/- to Non Banking Financial Companies (NBFC) (L & T Finance Rs.7,61,266/-), Labord Rs.12,091/-, Cholamandalam Finance Rs.86,935/- but failed to deduct tax at source on it. The Ld. AR had made submissions and claimed that such expenditure was not interest expenditure but was financial charges for purchase of vehicles. However, the Assessing Officer noticed from the P & L account of the assessee, the expenditure has been shown as interest expenditure.

The Ld. CIT(Appeal) upheld the order of the Assessing Officer as per the detailed reasons appearing in his order which is on record.

At the time of hearing, the Ld. AR of the assessee submitted that since the major issues are being restored back to the file of Assessing Officer, this issue may also be remitted back to his file in order to verify whether it is interest expenditure or financial charges for purchase of vehicles.

The Ld. DR fairly conceded to the arguments put forth by the Ld. AR of the assessee.

Both the parties heard and the facts and circumstances involved in the issue considered. It is the contention of the Revenue that the amount is interest expenditure as shown in the P & L account of the assessee; whereas the assessee contended that the same are financial charges for purchase of vehicles. These facts need to be ascertained and verified. Therefore, in the interest of justice, we set aside the order of the Ld. CIT(Appeal) on this issue and restore the matter back to the file of Assessing Officer for verification as per law. Thus, ground No.3 raised in appeal by the assessee is allowed for statistical purposes.

The facts pertain to ground No.4 is that the assessee had paid carting charges of Rs.31,50,441/- to various persons. As per the provisions of Section 194C(6) which was inserted w.e.f. 01.10.2009, it implies that if the assessee produces PAN of concerned transporter, he is not required to deduct the tax at source. The Ld. AR made submission dated 09.07.2015 and stated that the provision of Section 40(a)(ia) have been complied by him. From the details provided by the assessee it was seen by the Assessing Officer that the assessee had not deducted tax fully on certain transactions. The Ld. AR of the assessee claimed that such transactions were prior to 01.10.2009 and accordingly no tax was deducted at source as these persons had furnished their PAN. However, the Ld. AR did not furnish PAN in respect of three parties.

It is the contention of the Ld. AR of the assessee at the time of hearing before us that the Assessing Officer disallowed the entire amount of Rs.11,40,530/- however, it is only with regard to the three persons/parties whose PAN has not been produced by the Ld. AR of the assessee, the disallowance should be restricted to these three persons only as per Section 194C(6) of the Act.

The Ld. DR fairly conceded to the arguments put forth by the Ld. AR of the assessee.

We have perused the case records and heard the rival contentions. We find as per the findings of the Assessing Officer, only three persons/ parties have not provided their PAN. However, while making disallowance, the Assessing Officer added entire amount to the total income of the assessee. As per the Provisions of Section 194C(6), it provides “no deduction shall be made from any sum credited or paid or likely to be credited to paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages [where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with] his Permanent Account Number, to the person paying or crediting such sum.”

With regard to Ground No.5, the Ld. AR of the assessee at the very outset submitted that it is consequential and the matter may be sent back to the file of Assessing Officer for verification accordingly. The Ld. DR does not have any objection.

In view of the submissions of the parties herein and facts & circumstances of the case, ground No.5 is also restored back to the file of Assessing Officer for verification and to adjudicate the same after complying with the principles of natural justice. Thus, ground No.5 raised in appeal by the assessee is allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed for statistical purposes.