M/S. JENIRICH AGRO PRODUCTS P. LTD.,,TUTICORIN vs. DCIT, CIRCLE -1 , , TUTICORIN

आदेश / O R D E R

PER S. JAYARAMAN, ACCOUNTANT MEMBER:

The assessee filed this appeal against the order of the Principle Commissioner of Income Tax-1, Madurai, passed u/s 263 in C. No. 401/10/PCIT/MDU-1/2018-19 dated 28.03.2019 for the assessment year 2014- 15.

ITA No.2631/Chny/2019 :- 2 -: 2. The assessee filed this appeal 95 days belatedly and it was submitted

that the delay in filing the appeal was on account of understanding the

complexities in the order of the PCIT by the assessee’s Chartered Accountant

and it was neither wilful nor deliberate but due to the circumstances beyond

the control of the assessee. Therefore, it was pleadedthat the delay be

condonedin the interests of justice and for adjudicating the issues on merits .

aside the assessment order passed by the AO u/s. 143(3) dated 27.12.2016 in

the case of M/s. JenirichAgro Products P Ltd., the assessee , for the

assessment year 2014-15, holding , inter alia, that it is erroneous in so far it is

prejudicial to the interest of revenue and directed the AO, to reframe the

assessment after making addition as discussed in Para 5.1 of his order.

Aggrieved against that order, the assessee filed this appeal.

that the PCIT initiated proceedings u/s. 263, pointing out various aspects. In

response, the assessee explained all the transactions. The ld PCIT has

accepted the assessee’s explanations and dropped them but for one, which is

in respect of transport charges claimed at Rs. 1,15,51,643/- without deducting

TDS. The assessee has submitted before the ld PCIT that for this amount it

has complied with the provisions of section 194C (6) by obtaining PAN from

ITA No.2631/Chny/2019 :- 3 -: the transporters which has been furnished to the AO. On due satisfaction, the

Assessing Officer accepted the assessee’s claim and completed the

assessment. In this regard, the assessee relied on before the PCIT that as per

the recent case law in the case of ITO vs M/s. Sugarchemin ITA No. 2071/Mumbai/2016 , wherein the Tribunal held that “Section 194C(6) &194C(7)

are independent of each other, and cannot be read together to attract the

disallowance u/s. 40(a)(ia) r.w.s. 194C of the Act and if the assessee complies

with the provisions of section 194C(6), no disallowance u/s. 40(a)(ia) of the Act

is permissible, even there is violation of the provisions of section 194C(7) of

the Act.” In the assessee’s case also , it has complied with the provisions of

section 194C(6) but not complied with the provisions of section 194C(7).

Hence, disallowance u/s. 40(a)(ia) will not attract. However, the ld PCIT

without appreciating the fact that the twin conditions of error in the original

assessment order and prejudice causing to the Revenue in passing the said

original assessment order were not concurrently satisfied, wrongly assumed

the jurisdiction u/s. 263 of the Act and also passed the impugned order. The

Ld. PCIT failed to appreciate that having noticed the objections of the appellant

for invoking the powers of revision both on technical grounds and on

merits/facts, mechanically set aside the original assessment order with a

direction to the Assessing Officer to make addition as per Para 5.1 r.w. para 7

of the impugned order without considering assessee’s objections and further

without conducting the requisite enquiry on the facts. Therefore, the Ld AR

submitted that order of the ld PCIT was erroneous , unjustified, not

ITA No.2631/Chny/2019 :- 4 -: sustainable in law and hence it should be set aside as it is bad in law. In this

regard, the Ld. AR relied on the decisions in the case of ITO vs Sugarchem in

ITA No. 2071/Mumbai/2016, which was also relied on before the PCIT , ACIT

vs Arihant Trading Co. Bharatpur (2019) 104 taxmann.com 336(Jaipur-Trib)-

176ITD 307 (Jaipur-Trib) dt 19.3.2019, and further relied on the Jurisdictional

High Court decision in the case of M/s. Agasthiya Granite P Ltd vs ACIT in

TCA No. 450 of 2007 dated 16.04.2018. Per contra, the Ld. DR supported the

order of the PCIT.

The only issue in this appeal is in respect of the fact that the assessee paid

transport charges of Rs. 1,15,51,643/- without deducting tax at source as it has

obtained PAN of the transporters and furnished the same to the AO for

allowing its claim and the AO has accepted such explanation and allowed the

claim in the assessment order. The PCIT invoked the proceedings u/s. 263

for the reason that it won’t be sufficient if the assessee complies with the

provisions of section 194C(6) alone, unless otherwise the assessee furnished

the details of compliances made u/s 194C(7) before the Assessing Officer at

the time of assessment. Therefore, the PCIT is of the view that since the

assessee has not furnished the details as stipulated in sub section 7 of section

194C before the Assessing Officer at the time of assessment, the assessment

order passed by the Assessing Officer without disallowing such a claim u/s.

40(a)(ia) is erroneous and prejudicial to the interest of revenue. However,

ITA No.2631/Chny/2019 :- 5 -: before the PCIT the assessee relying on the ITAT decision in the case of

ITO vs Sugarchem, supra, pleaded that when two views are possible, the view

taken by the AO cannot be treated as erroneous and prejudicial to the interest

of the revenue. Thereafter, the Ld. PCIT held that the provisions of section

194C(7) are in continuation of 194C(6) and non compliance to section 194C(7)

does not serve the intended purpose of providing exemption from TDS merely

on furnishing of PAN. The assessee had not furnished the details before the

competent authority as stipulated in sub-section (7) of section 194C. Before

the assessing officer also, the assessee has not furnished the details for

having complied with the provisions of section 194C(7). It shall be sufficient

compliance if the assessee furnished the copies of declaration u/s. 194C(7)

before the assessing officer so as to avoid applicability of section 40(a)(ia) of

the Act. On this reason, he set aside the assessment order u/s. 263. It is

clear from the above that although the assessee has brought to the notice of

the ld. PCIT that as per the Hon’ble ITAT decision ,supra, no disallowance can

be made u/s. 40(a)(ia) even if there is a violation under section 194C(7) of the

Act and when two views are possible on this issue ,proceedings u/s. 263

cannot be initiated etc., the ld PCIT set aside the assessment order u/s. 263

without meeting the assessee’s objections legally. Before us, the assessee

relied on the ITAT Jaipur bench decision in the case of ACIT vs Arihant

Trading Co., supra, the head note of which is extracted as under:

“Where assessee made payments to transporters towards freight without deducting TDS on such payments, since assessee was in receipt of details about PAN of transporters at time of payment of freights and, thus, complied with provisions of section 194C(6), no disallowance could be made u/s. 40(a)(ia).”

ITA No.2631/Chny/2019 :- 6 -: Further the assessee relied on the Jurisdictional High Court decision, supra , and pleaded that when two views are possible on an issue, if the AO has taken one view with which the CIT does not agree, it cannot be treated that the order passed by the AO is erroneous and prejudicial to the interest of revenue. Thus, in this case, the decision of the A O has been subsequently upheld by two different decisions of the Hon’ble ITAT, therefore , the decision taken by the assessing officer does not fall within the scope of section 263 of the Act and hence order of the PCIT is unsustainable in law. Therefore, we hold that the order passed u/s. 263 is not sustainable in law and hence we set aside the impugned order and allow the assessee’s appeal.

Order pronounced on 14th June , 2021 in Chennai.

Sd/- Sd/- (धु�वु� आर. एल रे�डी) (एस जयरामन) (DUVVURU RL REDDY) (S. JAYARAMAN) �या�यकसद�य/Judicial Member लेखासद�य/Accountant Member

चे�नई/Chennai, 1दनांक/Dated: 14th June, 2021 JPV, Sr. PS आदेशक+'�त2ल3पअ4े3षत/Copy to: 1. अपीलाथ*/Appellant, 2. '(यथ*/Respondent, 3. आयकरआयु5त (अपील)/CIT(A), 4. आयकरआयु5त/CIT, 5. 3वभागीय'�त�न�ध/DR 6. गाड%फाईल/GF