NEW CARRYING CORPORATION,CHENNAI vs. ITO, NON CORPORATE WARD-12(1)I/C, CHENNAI

At the outset, we find that there is a delay of 330 days in appeal filed by the assessee. During the course of hearing,

The learned DR, on the other hand, fairly agreed that delay may be condoned in the interest of justice.

Having heard both sides and considered reasons given by the learned AR, we find that the Hon’ble Supreme Court in suo moto Writ Petition No.3 of 2020, has extended limitation applicable to all proceedings in respect of Courts and Tribunals across the country on account of spread of Covid-19 infections w.e.f. 15.03.2020, till further orders and said general exemption has been extended from time to time. We further noted that delay noticed by the Registry pertains to the period of general exemption provided by the Hon'ble Supreme Court extending limitation period applicable for all proceedings

The assessee has raised the following grounds of appeal: 1. The order of the Principal Commissioner of Income-tax - 8, Chennai (for brevity's sake hereinafter referred as PCIT-8) under section 263 of the Income-tax Act, 1961 is contrary and bad in law, to the facts of the case, and opposed to the principles of natural justice. 2. The PCIT-8, Chennai erred in passing the order under section 263 of the Income-tax Act, 1961 ( the Act), by holding that the Assessment order passed by the Income-tax Officer, Non- Corporate Ward 12(1), Chennai (hereinafter referred to as AO) u/s. 143(3) of the Act, dated 30.11.2017 as erroneous and prejudicial to the interest of the revenue; 3. The PCIT-8, Chennai erred in holding that the AO has failed to make necessary enquiry and bring on record all facts without appreciating that the specific query was raised in the assessment proceedings on the issue under consideration of application of second proviso to 40(A)(3A) of the Act, cannot be invoked for payments below Rs. 35,000/- by a Goods Transporter as against in excess of Rs. 20,000/- applicable to other than Goods Transporters; 4. That the PCIT -8, Chennai failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of the revenue and thus u/s. 263 is bad in law, ultra- vires in excess of and/ or in want of jurisdiction and otherwise void; Difference in the Freight income in the P&L Account: 5. That the PCIT-8, Chennai failed to appreciate the explanation provided With respect to the discounts I rebates debited to the income account on account of short realisation to the extent of Rs. 73,813/. accepted by the AO. Invoking the provisions of section 40(a)(ia): 6. That the PCIT -8, Chennai erred in invoking the provisions of section 4o(a)(ia) of the Act on the payments made towards the Railway container charges paid through the Transporter as it is

The brief facts of the case are that the assessee, M/s. New Carrying Corporation is a partnership firm engaged in the business of transporter, filed its return of income for the assessment year 2015-16 on 28.09.2015, declaring a total income of Rs. 8,05,410/-. The case has been selected for complete scrutiny on various issues and the assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 30.11.2017, and determined total income of Rs. 9,26,190/-, by making additions towards disallowance of cash payments in excess of prescribed limit under second proviso to section 40A(3) of the Act for Rs. 74,230/- and also adhoc disallowance on certain expenses amounting to Rs. 46,553/-.

In response to show cause notice, the assessee appeared through its Authorized Representative and explained all three issues and submitted that the AO has considered difference in turnover noticed by the PCIT, and after considering relevant explanations of the assessee, has accepted the claim. The AO had also verified the issue of hire charges paid to Containers Corporation of India in light of provisions of section 194C of the Act and after considering relevant explanation of the assessee, has accepted the claim. The assessee had also explained applicability of provisions of section 40A(3) of the Act in light of second proviso, and submitted that in case of transporters payment in excess of Rs. 35,000/- in cash can only be considered, but not payment in excess of Rs.20,000/-. The AO has considered the issue and allowed the claim. Therefore, it cannot be said that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue.

The PCIT, after considering relevant submissions and also by following certain judicial precedence including the

The Ld. Counsel for the assessee, submitted that the Ld. PCIT erred in invoking powers u/s. 263 of the Act and set aside the assessment order passed by the AO u/s. 143(3) of the Act dated 30.11.2017, without appreciating fact that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue on all three issues questioned by the PCIT in revision proceedings. The ld. Counsel for the assessee referring to letter filed before the PCIT submitted that the assessee has explained difference in turnover at Rs. 73,813/- with necessary evidences including ledger extract of one customer, where the assessee has allowed discount. If discount allowed to customer is excluded, then there is no difference in turnover reported in financial statement. The ld. Counsel for the assessee further submitted that payment made to Container Corporation of India does not come under the definition of works, because any payment to

The Ld. DR, supporting the order of the PCIT submitted that the AO did not verify the issues questioned by the PCIT in right perspective of law which renders the assessment order to be erroneous and prejudicial to the interest of Revenue. The PCIT had given elaborate reasons to come to the conclusion that how and why the assessment order passed by the AO is

We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The provisions of section 263 of the Act confers right to the PCIT to assume jurisdiction and set aside the assessment order, if the PCIT satisfies himself that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue. In order to invoke jurisdiction u/s. 263 of the Act, the PCIT should explain how and why the assessment order passed by the AO is erroneous which caused prejudice to the interest of the Revenue. In this case, the PCIT has taken three issues for revision proceedings, the first and foremost issue taken by the PCIT is difference in turnover reported in financial statement for the impugned assessment year. According to the PCIT, there is a difference of Rs. 73,813/- in turnover reported by the assessee and the same was not reconciled. We find, that the assessee has explained reasons for difference in turnover of Rs. 73,813/- and as per explanation, the assessee has allowed discount to the customer by issuing debit note and if

Going back to second issue taken up by the PCIT, the PCIT has taken up payment made to Container Corporation of India for hire charges without deducting tax at source u/s. 194C of the Act. We find that the assessee has filed detailed submissions on the issue, when the AO has issued notice u/s. 142(1) dated 22.05.2017, along with specific questionnaire, where the AO has called for details of deduction of TDS on various expenses and a copy of Form no. 26Q filed before the Department for which the assessee has filed various details, including explanation for non-deduction of TDS for payment made to Container Corporation of India. The AO after satisfying with explanation furnished by the assessee has accepted the claim. Therefore, we are of the considered view

As regards the third issue taken up by the PCIT, in light of provisions of section 40A(3) of the Act, we find that the PCIT is fundamentally wrong in applying provisions of section 40A(3) of the Act and considering cash payment in excess of Rs. 20,000/-, even though second proviso to section 40A(3) of the Act specifies that in case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-section (3) to section 40A shall have effect as if for the words twenty thousand rupees, the words thirty five thousand rupees has been substituted, which means in case of payment made by transport contractor for hire, any payment in excess of Rs. 35,000/- in cash can only be considered for disallowance u/s. 40A(3) of the Act. In this case, the PCIT has considered cash payment in excess of Rs. 20,000/- and observed that the assessee has made total cash payments of Rs. 1,55,15,941/-, ignoring second proviso to section 40A(3) of the Act. Therefore, we are of the considered view that the assumption of jurisdiction by the PCIT on this issue is fundamentally wrong and also fails. Moreover, the issue of payments in cash

The assessee has relied upon various judicial precedence in support of its arguments and relevant case laws relied upon by the Counsel for the assessee are reproduced as under: 11. The Hon'ble Allahabad High Court, has held in the case of Meerut Roller Flour Mills (P) Ltd Vs. Commissioner of Income-tax, in 110 taxmann.com 170, that "the Ld. AO having raised number of queries from the assessee, which was also replied by it along with documentary evidences in respect of each query, the Assessment Order would not render the same as erroneous and prejudicial to the interest of revenue, under the CIT, brings on record to show that the order was erroneous and without application of mind or incorrect application of law, except when CIT has certain materials and document as evidence. The revision u/s. 263 is unsustainable in such case. 12.Madras High Court has held in the case of Venkata Krishna Rice Co., vs CIT 30 Taxman 528 (Madras) that where the it was referred as an extraordinary revisional power and is sui generis, in nature and not to be invoked as jurisdictional corrective or as a review of subordinate' s order in exercise of supervisory power. It has to be invoked only for setting right distortions and prejudices to the revenue, upon a unique conception has to be understood in the context of interests of revenue administration and to keep the morale of the officers manning the revenue administration.

In this view of the matter and considering facts and circumstances of the case, we are of the considered view that the assessment order passed by the AO u/s. 143(3) of the Act dated 30.11.2017 is neither erroneous nor prejudicial to the interest of the Revenue and thus, in our considered view, assumption of jurisdiction by the PCIT under provisions of section 263 of the Act is totally uncalled for. Therefore, we quashed order passed by the PCIT u/s. 263 of the Act.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the court on 09th November, 2022 at Chennai. Sd/- Sd/- (वी दुगा� राव) (जी. मंजुनाथ) (V. DURGA RAO) (G. MANJUNATHA) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member