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Facts
The assessee, Jai Singh Jadeja, filed an appeal against an order restricting TDS credit. The assessee claimed TDS credit of Rs. 1,06,151/- under sections 194H and 194Q, but it was restricted to Rs. 43,464/- by the AO and confirmed by the JCIT(A). The assessee contended that as a 'Kachha Arthia' (commission agent), the TDS was wrongly made in his PAN and he was not required to offer the turnover as his own income.
Held
The Tribunal noted that the JCIT(A) had not specifically discussed the TDS credit claim under Section 194H. The Tribunal also considered the submissions and judicial precedents supporting the assessee's claim as a Kachha Arthia. They found it appropriate to remand the matter back to the AO.
Key Issues
Whether the assessee, a 'Kachha Arthia', is entitled to credit for TDS deducted in his PAN on behalf of farmers/clients, and whether the AO/JCIT(A) were justified in restricting the TDS credit.
Sections Cited
194H, 194Q, 143(1), 37BA, 199
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Income Tax Appellate Tribunal, JAIPUR BENCHES, “SMC” JAIPUR
Before: SH. SANDEP GOSAIN & DR. M. L. MEENA
The captioned appeal has been filed by the assessee against the order dated 12.07.2024 of the ld. CIT, Appeal/ADDL/JCIT(A)-9, Mumbai (hereinafter referred to as “the JCIT(A)” which is arising out of the Act, 1961 (in short “the Act”) by the ADIT, Centralized Processing Centre, Bengaluru (in short “The AO”) in respect of Assessment Year: 2023-24.
The ld. counsel for the appellant has requested for condonation of delay of 9 days in filing the appeal before the Tribunal. The ld. DR has no objection to the short delay of 9 days in filing the appeal before the Tribunal and hence, the delay is condoned and appeal is admitted for adjudication on merits of the case.
The ld. counsel for the assessee has submitted that the ld. JCIT(A)
was not justified in confirming the finding of the AO in order passed u/s 143(1) of the Act by restricting the credit of TDS at Rs.43,464/- as against the claimed at Rs.1,06,151/- u/s 194H and 194Q of the Act in the return of income by invoking provisions of Rule 37BA of Income Tax Rules, 1962, despite the fact that the intimation passed u/s 143(1), does not contain any basis/justification for rejecting the claim of the assessee who had made a legal and justified claim of TDS being a Kaccha Adhitya (Commission agent). In support, the appellant has filed a written synopsis which reads as under:
“As per the provisions of section 199 of the Act and Rule 378A (2) of Rules, both income and TDS are to be considered in the hands of the same person. It is an admitted fact that the TDS made by the purchaser are not his sales but that of the agriculturist/farmer. Hence the TDS had been made wrongly in the PAN of the appellant and the credit thereof ought not to have been claimed by the appellant. Instead, as provided u/s 199 and Rule 37BA (2) of the Act the appellant ought to have filed the declaration with the deductor that the sales are not his sales and he is a merely a commission agent facilitating the sale and purchase transactions. The appellant ought to have got the TDS certificates issued in the name of the clients on whose behalf he claims to have acts as an agent, or in the alternative, ought to have got appropriate corrections carried out in the TDS statements filed by the deductor, by filing with the deductor the necessary declarations requesting that TDS be issued in the name of clients. Despite the deficiency letter issued by the AO CPC, no such action has been carried out by the appellant and the TDS continues to appear in his own PAN without offering the corresponding Income." Further, the Id. Addl. CIT/JCIT(Appeals) has relied on the following decisions to confirm the action of the Id. AO, who restricted the credit of TDS claimed by the appellant u/s 194H & 1940 of the Act at Rs. 43,464/-
1. 1. Decision of Hon'ble Gujrat High Court in the case of Naresh Bhavani Shah (HUF) Vs Pr. CIT [2017] 84 taxmann.com 53 (Gujrat) The observations/holdings of the Hon'ble High Court have been mentioned on page no. 13 & 14 of the appellate order.
2. Decision of Hon'ble ITAT, Delhi SMC Bench in the case of Shri Rajesh Kumar vs DDIT Bengaluru in (2022-23) dated 27/03/2024. The relevant extract of this decision (as mentioned by the Id. Addl./JCIT(Appeals)-9 Mumbai in his appellate order on Page no. 14) is as under: - "7. I have carefully considered the orders of the authorities below. There is no dispute that the assessee is a Kachha Arthia and CBDT Circular No. 452 squarely applies. However, I am of the considered opinion that the assessee should not get benefit of tax erroneously deducted by the payer in as much as the assessee has not shown the same as its income. In my considered opinion, the findings of the Id. CIT (A) mentioned elsewhere do not call for any interference". Submission of the Appellant: The Id. Addl./JCIT (Appeals)-9 Mumbai is not justified in relying on the above decisions. To support this following facts are submitted: - i. The Id. Addl./JCIT(Appeals) is not justified in not relying on the decision of Hon'ble Jurisdictional ITAT SMC Bench Jaipur (as mentioned above) merely in view of provisions of section 199 and rule 378A despite the fact that the provisions of rule 378A are not applicable in the case of the assessee being Kachha Arthia, who is not required to disclose turnover as mentioned in Form 26AS on which tax was deducted u/s 1940 of the Act as neld by the above Jurisdictional ITAT. ii. Decision of Hon'ble Gujrat High Court as mentioned above in para- 1, is not applicable in the case of the assessee, in view of the fact that the assessee is a Kachha Arthia, registered with Krishi Upaj Mandi Samiti, Kota, is not required to disclose turn over as mentioned in the Form 26AS on which tax was deducted u/s 194Q of the Act, in view of circular no.452 dated 17/03/1986, issued by the Central Board of Direct Taxes, New Delhi. iii. Decision of Hon'ble ITAT, Delhi SMC Bench as mentioned above in Para-2. Is not applicable in the case of the assessee, when the Hon'ble ITAT Delhi itself has observed that "there is no dispute that the assessee is a Kachha Arthia and CBDT Circular no. 452 squarely applies. In view of facts mentioned above and in view of the fact that the Id. AddI. CIT/JCIT(A) has nowhere discussed in the appellate order regarding credit of TDS claimed by the appellant u/ 194H of the Act, it is amply clear that the Id. Addl. CIT/JCIT (Appeals)-9 Mumbai is not justified in confirming the intimation passed u/s 143(1) of the Act, by the Id. AO, CPC Bengaluru, restricting the credit of TDS claimed u/s 194H and 1940 of the Act at Rs. 43,464/- as against claimed in the return at Rs. 106,151/- (Rs. 98,684/- u/s 194H- Rs. 7,467/- u/s 194Q of the Act.) in support of this reliance is placed on the following decisions of Hon'ble Jurisdictional ITAT Jalpur: -
1. 1. Latest decision of Hon'ble Jurisdictional ITAT-SMC Bench-Jaipur in the case of Santosh Choudhery, Baran Vs ITO Ward-Baran-ITA NO. 555/JP/2024-Dated- 29/08/2024 (Paper Book-Page No.26-32) The Hon'ble Member, after considering the entire discussion with regard to the factual as well as legal preposition as mentioned in the above decision credit of TDS deducted u/s 194H and 194Q has been allowed to the assessee.
2. Decision of Hon'ble Jurisdictional ITAT SMC Bench-Jaipur in the case of Shri Madan Lal Gupta Vs Income Tax Officer-Ward-2(1) Kota-ITA Jai Singh Jadeja v. ITO No. 192/JPR/2024 -Dated- 30/04/2024 [Paper Book-Page no.33-37). In this case it was held/observed as under: - "Under these given facts and circumstances, we find that on account of new amendment brought in section 1940 of the Act the principal of the assessee agent has deducted TDS u/s 194H of the Act in addition to section 194H for the commission paid to the assessee and, therefore, the assessee is entitled to credit of tax deducted u/s 194H as well as 1940 and we further hold that assessee is not required to disclose the turnover appearing in the deduction details u/s 194Q because he acting as the kachha Arthia i.e. an agent and the tax turnover appearing in the sale invoices are merely the sales made against the equal amount of purchase made from the farmers and effectively is not turnover of the assessee." In the light of above facts and the above decisions of Hon'ble Jurisdictional ITAT- SMC Bench Jaipur -Dated, 27/08/2024 and dated 30/04/2024, on which reliance has placed in support of claim of the appellant regarding entitlement of credit of TDS u/s 194H and 1940 of the Act, it is submitted that the order of the Id. Addl./JCIT (Appeals) -9 Mumbai deserves to be reversed. Accordingly, is humbly prayed that credit of TDS deducted u/s 194 H and 1940 of the Act, as claimed by the appellant may kindly be allowed.”
The Ld. DR stands by the impugned order.
5 We have heard both the sides, perused material on record, impugned order, written submission and case laws cited. The Ld. AR submitted that the appellant assessee is a Kachha Arthia and that the TDS made by the purchaser are not his sales but that of the agriculturist/farmer. It is seen that the Id. JCIT(A) has nowhere discussed that the appellant has claimed credit of TDS u/s 194H of the Act. Meaning thereby, the Id. JCIT (A) was not justified in confirming the order passed u/s 143(1) of the Act, by the Id.
AO, CPC Bengaluru, by restricting the credit of TDS claimed u/s 194H and 106,151/- (Rs. 98,684/- u/s 194H- Rs. 7,467/- u/s 194Q of the Act.) with examination and verification of the fact of the case.
The ITAT SMC Bench-Jaipur in the case of Shri Madan Lal Gupta Vs Income Tax Officer-Ward-2(1) Kota-ITA No. 192/JPR/2024 -Dated- 30/04/2024 [Paper Book-Page no.33-37) has observed that on account of new amendment brought in section 194Q of the Act, the principal of the assessee agent has deducted TDS u/s 194H of the Act, in addition to section 194Q for the commission paid to the assessee and, therefore, the assessee is entitled to credit of tax deducted u/s 194H as well as 194Q and it was held that assessee was not required to disclose the turnover appearing in the deduction details u/s 194Q because he was acting as the kachha Arthia i.e. an agent and the tax turnover appearing in the sale invoices are merely the sales made against the equal amount of purchase made from the farmers and effectively is not turnover of the assessee.
In our view, under the provisions of section 199 of the Act and Rule 37BA (2); both income and TDS are to be considered in the hands of the same person. It is an admitted fact that the TDS made by the purchaser are not his sales but that of the agriculturist/farmer. Hence the TDS had been to have been claimed by the appellant. Instead, as provided u/s 199 and Rule 37BA (2) of the Act the appellant ought to have filed the declaration with the deductor that the sales are not his sales and he is a merely a commission agent facilitating the sale and purchase transactions. The appellant ought to have got the TDS certificates issued in the name of the clients on whose behalf he claims to have acts as an agent, or in the alternative, ought to have got appropriate corrections carried out in the TDS statements filed by the deductor, by filing with the deductor the necessary declarations requesting that TDS be issued in the name of clients.
The Ld. JCIT(A) has observed that although a deficiency letter was issued by the AO/CPC, but no such action has been carried out by the appellant and the TDS continues to appear in his own PAN without offering the corresponding Income. However, the AR for appellant have explained that the sales are not the appellant sales and he is merely a commission agent facilitating the sale and purchase transactions. Considering the factual matrix and judicial precedents, we consider it deem fit to remand the matter back to the file of the AO to examine and verify the status of the assessee as being claimed to be a Kaccha Arthia (Commission Agent) and its claim of TDS deduction under U/s 194H and 194Q of the act afresh after assessee shall cooperate with the AO in the examination and adjudication of the issue of TDS in the de novo proceeding.
Accordingly, impugned order is set aside, and the matter is restored to the file of the AO to examine and adjudicate the matter as per law.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 03.10.2024 Sd/- Sd/- (Sandeep Gosain) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The ld. CIT (4) The ld. CIT(A) (5) The DR, I.T.A.T., Jaipur (6) Guard File By Order,
Asstt. Registrar
Date Initial 1. Draft dictated on 30.09.24 Sr.PS/PS 2. Draft placed before author 30.09.24 Sr.PS/PS 3. Draft proposed & placed before the JM/AM Second Member 4. Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr. Sr.PS/PS P.S./P.S. 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order