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Facts
The assessee, a proprietary concern (M/s. Shivam Marble), filed an ITR declaring Rs. 8.61 lakhs, but the AO assessed income at Rs. 43.97 lakhs. The additions were primarily due to disallowance of expenses for non-deduction of TDS on transport charges under Section 194C and undisclosed capital gains. The CIT(A) allowed the capital gains exemption but upheld most of the TDS disallowance, prompting the assessee's appeal to the Tribunal.
Held
The Tribunal condoned a 35-day delay in filing the appeal. It allowed the assessee's claim regarding disallowance for transport payments where individual payments were below Rs. 50,000. For the remaining disallowance under Section 40(a)(ia) concerning transport charges, the matter was remitted back to the AO to examine the applicability of the 30% disallowance limit introduced by the Finance Act, 2014.
Key Issues
1. Condonation of delay in filing appeal. 2. Applicability of TDS provisions under Section 194C on transport charges, especially for payments below Rs. 50,000 or in the absence of a direct contract. 3. Applicability of the 30% disallowance limit under the first proviso to Section 40(a)(ia) retrospectively.
Sections Cited
139(1), 44AB, 143(2), 142(1), 143(3), 40(a)(ia), 194C, 194C(5)
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Income Tax Appellate Tribunal, ‘SMC’ BENCH, KOLKATA
Before: Shri Duvvuru RL Reddy, Vice-(KZ)
Date of concluding the hearing: January 09, 2025 Date of pronouncing the order: February 05, 2025 O R D E R
The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), Kolkata-27 dated 18th January, 2024 passed for Assessment Year 2010-11.
(A.Y. 2010-2011) Bikash Kumar Mondal
The appeal is time barred by 35 days in filing the appeal by the assessee. However, the assessee filed an affidavit dated 03.10.2024 saying that the assessee is not aware of the order passed by the ld. CIT(Appeals) and he has not received the physical copy of the order in time. When the assessee came to know about the order passed by the ld. CIT(Appeals), the assessee approached the ld. A.R. to prefer an appeal, due to that there was a delay of 35 days in filing the appeal before the Tribunal. Therefore, he pleaded to condone the delay.
Considering the facts and circumstances of the case, I am inclined to condone the delay since the delay is not due to negligence on the part of assessee and the assessee has established sufficient cause to condone the delay. Hence the delay is condoned.
Brief facts of the case are that the assessee is a proprietary concern and running his business of marble and granite under the name and style of M/s. Shivam Marble. During the assessment year, the assessee filed his return of income under section 139(1) of the Act declaring total income of Rs.8,61,310/- and the accounts was duly audited under section 44AB of the Act. The case of the assessee was selected for scrutiny and notices were issued under sections 143(2) and 142(1) of the Act. During the scrutiny proceedings, the appellant appeared before the ld. Assessing Officer and placed all the relevant documents to substantiate his claims.
(A.Y. 2010-2011) Bikash Kumar Mondal
After considering the arguments filed by the assessee, the ld. Assessing Officer passed the assessment order under section 143(3) of the Act on 28.03.2013 assessing the total income of Rs.43,97,370/- as against the returned income of Rs.8,61,310/-. The ld. Assessing Officer made the addition on two grounds, firstly disallowance of expenses under section 40(a)(ia) for non-deduction of TDS on transport charges under section 194C of the Act; and secondly, undisclosed income of capital gains for Rs.6,25,000/- on sale of agricultural land as well as undisclosed interest.
On being aggrieved, the assessee preferred an appeal before the ld. CIT(Appeals). The assessee had made his submissions before the ld. Commissioner (Appeals).
After considering the submissions of the assessee, the ld. CIT(Appeals) partly allowed the appeal by allowing the entire claim of exemption on capital gains tax amounting to Rs.6,25,000/- on sale of agricultural land and also allowed only Rs.18,200/- out of total disallowances of Rs.29,19,058/- for non-deduction of TDS inspite of submitting all relevant documents.
On being aggrieved, the assessee preferred an appeal before the Tribunal.
I have heard both the sides. It was the submission of the assessee that he purchased marble and granites from different parts of the country. During the assessment year, the assessee has (A.Y. 2010-2011) Bikash Kumar Mondal shown total purchases of Rs.1,65,15,375/- and incurred carriage inward expenses of Rs.29,19,508/-. It was the further submission of the assessee that the transportation was arranged and organized by the sellers and the payments were made on consignment basis. Since there was no direct contract between the transporter and the assessee, therefore, the provision of section 194C is not applicable to this case. He further submitted that according to Section 194C(5) of the Act, the assessee is entitled to make payment to the transporters and he is eligible if the payments are below Rs.50,000/-, but the ld. CIT(Appeals) did not consider the amounts, which were paid below 50,000 rupees.
On the other hand, ld. Departmental Representative submitted that the assessee made the payment to the transporter without deduction of TDS, therefore, the ld. Assessing Officer as well as ld. CIT(Appeals) rightly applied the provisions of section 194C. He pleaded to confirm the order passed by the ld. CIT(Appeals).
I have perused the material available on record. One of the grievances of the assessee is that the revenue authorities has not followed the proviso of section 194C. On this aspect, I have gone through the section 194C(5) of the Act, where it has been stated 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”.
(A.Y. 2010-2011) Bikash Kumar Mondal 12 Considering the above observation, I am of the view that the assessee made payments below fifty thousand rupees to the following transporters:- (i) M/s/. Khandelwal Transport Rs.47,596/- Co. (ii) M/s. Suman Agency Pvt. Ltd. Rs.27,280/- (iii) M/s. Alwar Assam Road Lines Rs.25,648/- Considering the provisions of section 194C(5), I am of the view that the assessee is entitled for an amount of Rs.1,00,524/-. Hence, this ground raised by the assessee is allowed.
So far as the remaining amount of Rs.28,18,534/- is concerned, the main contention of the assessee is that there is no direct contract between the assessee and the transport companies and the seller has made the arrangements. On this aspect, it is an admitted fact that the entire amount of transport charges was paid by the assessee. Even as per the contention of the assessee that the seller has arranged the lorries on behalf of the assessee, but the assessee has not produced any evidence to establish that the lorries were engaged by the seller. Moreover, there is no mention under section 194C that there should be a direct contract between the assessee and the transporters to deduct TDS under section 194C of the Act. It is an admitted fact that the entire transportation amount was paid by the assessee to the transporters. Therefore, there is a contract between the assessee and the transporters. Hence, whatever the amount paid by the assessee is liable to deduct TDS. Therefore, I have no hesitation to come to a 5 (A.Y. 2010-2011) Bikash Kumar Mondal conclusion that the TDS provision under section 194C is applicable to the present case on hand. Alternatively, the plea of the assessee is that the ld. Assessing Officer is not justified in disallowing the entire amount of Rs.29,00,858/- for non-deduction of tax at source. According to the amendment of the 1st proviso to section 40(a)(ia) of the Act, wherein it has provided to restrict the disallowance to the tune of 30% of the amount of expenditure claimed as retrospectively applicable from 1st April, 2015. However, the assessee has not pleaded before the ld. Assessing Officer as well as ld. CIT(Appeals) about the amendment. Therefore, I remit the matter back to the file of ld. Assessing Officer to examine this issue afresh and pass a speaking order regarding the amendment vide Finance Act, 2014 to the first proviso to section 40(a)(ia) of the Act. The ld. Counsel for the assessee also relied on the decision of ITAT, Rajkot Bench dated 8th June, 2022 in in the case of Punabhai G. Pardava -vs.- ITO.
I have gone through the decision of the ITAT, Rajkot Bench dated 08.06.2022 but they have not discussed anything about the agreement between the assessee and the transport companies. Therefore, the facts are distinguishable and not applicable to the facts of the present case. Hence, I remit this issue back to the file of ld. Assessing Officer with a direction to examine this issue afresh and pass an order on merits after providing an opportunity of being heard to the assessee. The alternative ground raised by the assessee is allowed for statistical purposes.
(A.Y. 2010-2011) Bikash Kumar Mondal 15. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open Court on 05/02/2025.