MR NARENDRA MAGANLAL MEHTA ,MUMBAI vs. ITO 17 (2)(4), MUMBAI

The assessee is a dealer in steel and alloys and it had incurred transportation charges of Rs. 19,27,941/-. The Assessing Officer noticed that the assessee has not deducted tax at source under section 194C of the I.T. Act from the payment of transportation charges amounting to Rs.13,26,555/-. The Assessing Officer also referred to the provisions of section 194C(6) and 194(7) of the Act and took the view that the assessee has not furnished PAN of the payees. Accordingly, he disallowed the above said sum of Rs. 13,26,555/- under section 40(a)(ia) of the Act.

Before learned CIT(A), the assessee furnished details of PAN of each of the payees. However, learned CIT(A) took the view that the assessee has obtained PAN subsequent to making of payment of transport charges. He took the view that the assessee should have obtained PAN prior to making of payment in order to avoid disallowance u/s 40(a)(ia) of the Act. Accordingly, he confirmed the disallowance made by the Assessing Officer under section 40(a)(ia) of the Act.

The Learned AR submitted that learned CIT(A) has erroneously presumed that the assessee has obtained PAN only subsequent to making of payment. He submitted that the assessee had duly obtained PAN number from the payees before making the payment. The payments of transport charges made without deduction of tax at source is required to be reported in Form No.26Q. The said Form was amended w.e.f. 19.2.2013 to make furnishing of PAN details of the payees mandatory. Prior to that, details of payments made without deduction of tax at source on the basis of declaration given under section 197A of the Act are only required to be given. Accordingly, learned AR submitted that furnishing of PAN of the deductee became mandatory w.e.f. 19.2.2013 only. Accordingly, he submitted that addition sustained by learned CIT(A) on mere presumption is liable to be deleted.

Learned DR, on the contrary, supported the order passed by learned CIT(A).

Having heard the rival submission I find merit in the submission made by learned DR. First of all, I notice that the assessee had furnished PAN of each of the payees to learned CIT(A). As contended by Ld A.R, I find that there is no material to suggest that PANs were obtained subsequent to making of payment to the payees, as observed by Ld CIT(A). Secondly, I noticed that furnishing of PAN of deductees has been made mandatory only w.e.f. 19.2.2013 in Form No. 26Q. Hence for the assessment year under 3 Narendra Maganlal Mehta consideration, there was no mandatory requirement of furnishing of PAN in form No. 26Q. Since PAN was available with the assessee and the same was furnished to learned CIT(A), I am of the view that the assessee has complied with the provisions of section 194C(6) of the Act. Hence, disallowance made by the Assessing Officer under section 40(a)(ia) of the Act is liable to be deleted. Accordingly I set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to delete the disallowance made under section 40(a)(ia) of the Act.

In the result, appeal filed by the assessee is allowed.