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Income Tax Appellate Tribunal, “B”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per A.L. Saini, AM:
The captioned appeal filed by the Assessee, pertaining to assessment year 2014-15, is directed against the order passed by the Pr. Commissioner of Income Tax-15, Kolkata, under section 263 of the Income Tax Act, 1961 (in short the ‘Act’) dated 14/02/2019.
The grounds of appeal raised by the assessee are as follows: 1. For that on the facts of the case the order passed by the Ld. Pr. C.I.T. ,Kol - 15, Kolkata u/s 263 of the Income Tax Act, 1961 is completely arbitrary, unjustified and illegal.
For that on the facts of the case the order of the Ld. Pr. C.I.T., Kol - 15, Kolkata passed u/s 263 dated 14.02.2019 should be quashed.
M/s Tulsiram Agarwala ITA No.665/Kol/2019 Assessment Year:2014-15
For that on the facts of the case the Ld. Pr. C.I.T., Kol - 15, Kolkata was wrong in initiating proceeding u/s 263 of the Income Tax Act, 1961 when the assessment was completed u/s 143(3) on 23.11.2016 wherein the impugned issue has been duly requisitioned, examined and considered, therefore, the whole proceeding u/s 263 is completely arbitrary, unjustified and illegal.
For that on the facts of the case, the Ld. Pr. C.I.T., Kol - 15, Kolkata was wrong in passing the order u/s 263 by setting aside the order u/s 143(3) on the limited point for passing a fresh order, therefore, the whole order should be quashed.
For that on the facts of the case, the Ld. Pr. C.I.T., Kol - 15, Kolkata was wrong in passing the order u/s 263 by setting aside the order u/s 143(3) for reexamination the impugned issue of the Provision of sec. 194C with respect of freight charges amounting to Rs. 10,64,175/- debited and consequently failed to apply the Provision of sec. 40(a)(ia) , although the assessee firm has paid on freight charges below Rs.30,000/- at single payments and not liable to deduct TDS u/s. 194C and the A.O. has requisitioned the details, consider the evidences & written submission and passed the order, therefore, the direction given by the Ld. Pr. C.I.T., Kol - 15, Kolkata is completely arbitrary, unjustified and illegal.
For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.
Brief facts qua the issue are that assessee filed its return of income on 23/09/2014 declaring a total income of Rs.3,90,050/-. The assessee`s case was selected for scrutiny through CASS and the assessment was completed u/s 143 (3) of the Act, on 23.11.2016, on an assessed income of Rs. 4,53,200/-. Later on, the Principal Commissioner of income Tax-15,Kolkata exercised his jurisdiction u/s. 263 of the Act.On perusal of assessment order and the assessment records, ld PCIT
M/s Tulsiram Agarwala ITA No.665/Kol/2019 Assessment Year:2014-15 noticed that the assessment order u/s. 143(3) dated 23.11.2016 is erroneous and prejudicial to the interests of revenue on the following issues:-
"On going through the assessment records it is seen that the case was selected for scrutiny through CASS with the reason "Low net profit/loss shown from large gross receipts and mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit Report and ITR". The said assessment was completed on 23/11/2016. Subsequently, it has been brought to my notice that during the year the assessee has paid Rs.10,64,175/- in single payment exceeding Rs.30,000/- towards 'Freight Charges' out of total freight charges paid Rs.1,68,86,917/- and it was not taken into account at the time of assessment u/s. 143(3) though the same attracts provision of section 194C read with section 40(a)(ia) of the Act." Accordingly, Ld PCIT issued a show cause notice dated 01/11/2018 to the assessee.
In response to the show cause notice, the assessee submitted written submissions before the ld PCIT, which are reproduced below:
“The earlier provision (upto May 31, 2015) provides that: No TDS is to be made where such sum is credited to the account of or paid to the contractor in the course of business of plying, hiring or leasing of goods carriages the PAN is furnished by the contractor. Goods carriage shall mean as defined under Motor Vehicle Act 1988. New Provision effective June 1. 2015 The new provision of Section 194C, as was informed earlier at the time of the Union Budget, restricts the cases for non-deduction of tax. Non deduction of tax will be available only for small transport operators owning not more than 10 goods carriages. The relevant extract of the amended provision is as under:- "Section 194C Sub section (6),No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of plying, hiring and leasing goods carriages, where such contractor owns ten or less goods carriage 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.” This provision comes into force from June 1, 2015.That the assessee firm has paid on freight charges below Rs.30,000/- at single payments. The assessee has disclosed truly and fully all the materials facts necessary at the of assessment proceeding and we have submitted ledger copy and statement of day to day freight charges and consolidated freight charges and it was rightly allowed in the assessment after well verification of the AO. I am annexed ledger copy of freight charges. Therefore, the assessee was not liable to deduct TDS under section 194C of the Income Tax Act, and no violation of sec. 40(a)(ia) of the IT Act. Page | 3
M/s Tulsiram Agarwala ITA No.665/Kol/2019 Assessment Year:2014-15 Considering the above facts and circumstances it is very clear that the query raised by you have duly been considered by the AO at the time of making assessment u/s.143(3), therefore, your honour is requested to drop the proceedings u/s. 263 of the IT Act, 1961." 5. However, the ld PCIT rejected the contention of the assessee and held that AO has completely ignored the provisions of section 194C of the Act with respect to freight charges amounting to Rs.10,64,175/- debited and consequently failed to apply the provisions of section 40(a)(ia) of the Actand therefore, such failure of the AO had rendered the assessment order made by the AO dated 23.11.2006 as erroneous and prejudicial to the interest of the revenue.
Aggrieved by the order of the ld. PCIT, the assessee is in appeal before us.
The ld. Counsel for the assessee has relied on the submissions made before the ld PCIT. On the other hand, ld. DR has primarily reiterated the stand taken by the ld PCIT which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. First of all, we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle Page | 4
M/s Tulsiram Agarwala ITA No.665/Kol/2019 Assessment Year:2014-15 of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to theinterest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”.
Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine whether order passed by the AO u/s 143(3) of the Act is erroneous and prejudicial to the interest of Revenue. Sub -section 5 of section 194C states that ‘no deduction shall be made from the amount of any sum credited or paid to the contractor, if such sum does not exceed thirty thousand rupees’. In the course of proceeding u/s 263 of the Act,the issue involved is whether the assessee was required to deduct TDS while making payment towards freight charges and failure to deduct such TDS would result into addition u/s. 40(a)(ia) of the Act. With respect to the aspect of deduction u/s 194C, the assessee has submitted before the ld PCIT that all its payment towards freight charges are below Rs. 30,000/- and therefore, it was not liable to deduct TDS u/s 194C of the Act and this aspect was examined by the AO and therefore, there is no violation of section 40(a)(ia) of the Act. Therefore, the order passed by AO is not erroneous. We note that the assessee firm has paid freight charges below Rs.30,000/- at single payments. The assessee has disclosed truly and fully all the materials facts Page | 5
M/s Tulsiram Agarwala ITA No.665/Kol/2019 Assessment Year:2014-15 necessary at the time of assessment proceeding and assessee has submitted ledger copyof freight charges and statement of day to day freight charges and consolidated freight charges and after verification of these evidences the AO has rightly allowed the claim of the assessee. Therefore, the assessee was not liable to deduct TDS under section 194C of the Income Tax Act, and hence no violation of section 40(a)(ia) of the Income Tax Act. So, the action of AO, who has conducted enquiry on the issue and called for documents and after examination has not drawn any adverse view against the assessee, cannot be held to be erroneous as well as prejudicial to the revenue since the assessment order cannot be found to be erroneous as well as prejudicial on the issue of tax deduction at source u/s 194C(5) of the Act, the condition precedent to invoke revisional jurisdiction u/s. 263 is absent and, therefore, the usurpation of jurisdiction by Ld. Pr. CIT is bad in law and so quashed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 26.02.2020
Sd/- Sd/- (S.S.GODARA) (A.L.SAINI) �या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER �दनांक/ Date: 26/02/2020 (SB, Sr.PS)
Copy of the order forwarded to: 1. M/s Tulsiram Agarwala 2. PCIT-15, Kolkata 3. C.I.T(A)- 4. C.I.T.- Kolkata. 5. CIT(DR), KolkataBenches, Kolkata. 6. Guard File.