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Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI DUVVURU RL REDDY & SHRI S. JAYARAMAN
: Shri S.Sankaralingam, CIT(Retd.) अपीलाथ� क� ओर से/ Appellant by : Shri S.Bharath, CIT ��यथ� क� ओर से /Respondent by : 09.07.2019 सुनवाई क� तार�ख/Date of Hearing : 04.10.2019 घोषणा क� तार�ख /Date of Pronouncement आदेश / O R D E R
PER SHRI S. JAYARAMAN, ACCOUNTANT MEMBER:
The Assessee filed this appeal against the order of the Principal Commissioner of Income Tax, Madurai-1, in C.No.401/74/PCIT/MDU-1/2018- 19 dated 30.03.2019 for the assessment year (AY) 2014-15.
Shri K.Balakrishnan, the assessee, is an individual, and is in contract business and lorry hire business. On examination of the assessment records for the AY 2014-15, the ld. PCIT found that the assessee had claimed total transport charges of Rs. 5,42,78,540/-. The assessee was liable to deduct tax @ 2% as prescribed in s. 194C of the Act. However, on the payments made to 2 -: 14 transport contractors at Rs. 5,09,08,500/-, the assessee obtained the PANs of such parties and submitted that none of the lorry owners had more than 10 lorries. The AO allowed the assessee’s claim in the assessment order dated 30.06.2016. Subsequently, the ld. PCIT found that on the impugned transactions, the assessee had not complied duly before the prescribed authority as required u/s. 194C(7) before the due date. Therefore, the entire payment of Rs. 5,09,08,500/- required to be disallowed u/s. 40(a)(ia) of the Act. Since, this aspect was not considered by the AO, he issued a notice u/s. 263 of the Act and after considering the assessee’s reply etc. held that the order passed u/s. 143(3) of the Act is erroneous in so far it is prejudicial to the interest of Revenue and accordingly set aside the order u/s. 263 of the Act with a direction to the AO to frame the assessment. Aggrieved against that order, the assessee filed this appeal.
The ld. Authorized Representative pleaded that the ld. PCIT failed to note that the AO enquired about the possibility of disallowance u/s. 40(a)(ia) of the Act and he was satisfied that the assessee complied with s. 194C(6), therefore, did not make any disallowance u/s. 40(a)(ia) of the Act. The ld. PCIT also erred in holding that the assessee has failed to comply with s.
194C(6) and s. 194C(7) of the Act in respect of transport contract payments to escape artificial disallowance u/s. 40(a)(ia) of the Act. The ld. PCIT failed to note that s. 194C(6) and s. 194C(7) are independent as held by various judicial pronouncements relied on by the assessee. The ld. AR relied on the same case laws, on which the assessee pleaded its case before the ld. PCIT.
3 -: 4. Per contra, the ld. DR submitted that the assessee submitted details of PAN of those parties to whom Rs. 5,09,08,500/- have been made without deducting the tax, and a declaration that none of the transports have more than 10 lorries. Based on which, the AO allowed the assessee’s claim in the assessment order without undertaking any verification. Subsequently, the ld. PCIT found that on the impugned transactions, the assessee has not made any compliance before the prescribed authority u/s. 194C(7) of the Act.
Therefore, the ld. PCIT taking cognizance of such fact and considering the fact that the AO allowed the assessee’s claim merely on the assessee’s plea, without making due enquiry/verification which is expected of him as held by the Jurisdictional High Courts in the decision reported in 260 ITR 599 and 220 ITR 647, held that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue as the Officer failed to discuss as to why and how the claim was accepted. Therefore, the ld. DR pleaded that the revision order passed u/s. 263 of the Act is very well within the scope of s. 263 of the Act and hence, pleaded to dismiss the assessee’s appeal.
We heard the rival submission and gone through the relevant material.
It is seen from the assessment order that the assessee has filed a letter, which was acknowledged by the Assessing Officer on 30.06.2016, wherein the assessee submitted that “as per s. 194C of the Act, TDS on lorry hire charges has to be deducted. For the lorry owners who are having less than 10 lorries, they have furnished a declaration along with PAN. So liability of deduction of 4 -: TDS will not arise.” On which the AO observed that the explanations of the assessee were found to be acceptable and therefore no addition was made on this issue in his order dated 30.06.2016. Subsequently, the ld. PCIT on examination of the records found that on the impugned transactions, the assessee i.e., deductor or the payee, has not made the due compliance in accordance with s. 194C(7) r/w r. 31A before the prescribed authority within the due date. Taking this fact and the AO’s treatment in the assessment order, the ld. PCIT held that the AO allowed the assessee’s claim without any enquiry regarding the veracity of the declaration made by the assessee. Mere filing of information does not lead to any inference that there was application of mind.
Further, the ld. PCIT holds that the AO is expected to make an enquiry of income and if, he does not make an enquiry, which is expected of him. It would be a ground to interfere with his order since such an order passed by him is erroneous and prejudicial to the interest of Revenue based on the decisions of the Hon’ble Jurisdictional High Court supra. It is also clear from the order that the assessee furnished the letter extracted, supra, on 30.06.2016 and on the same date the Officer has passed the order merely extracting the content of the assessee’s letter. From the above facts and circumstances, it is clear that the AO has not duly examined the issue as required and there is a prima facie case for lack of application of mind.
Further, subsequently, the ld. PCIT found that the assessee has also not made due compliance u/s. 194C(7) of the Act, this fact also supports the view of non- application of mind. Therefore, the case falls within the jurisdiction of s. 263 of 5 -: the Act. When the assessee has adequate opportunity to explain and support its contention in the consequential proceedings in accordance with law, there is no prejudice caused to it also. Therefore, the grounds of the assessee are dismissed.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on 04th October, 2019 in Chennai.