ITO 18(3)(4), MUMBAI vs. TOPLINE FOODS, MUMBAI

On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that interest u/s 234B is not chargeable without appreciating the fact that charging of interest u/s 234B of the I.T. Act is mandatory and it is charged on the assessed income as reduced by TDS and Advance Tax paid by the assessee.

Brief facts of the case are that the assessee-firm is engaged in the business of manufacturing therapeutic foods and supplier of Mid-day Mill in the Scheme of Government of Maharashtra. The assessee filed return of income for relevant AY on 26.09.2009. The assessment was completed u/s. 143(3) on 30.12.2011. While making the assessment, the Assessing Officer (AO) made the disallowance of Rs. 91,13,629/- u/s 40a(ia) of the Act holding that the assessee has not deducted Tax at Source (TDS) on the aforesaid amount. On appeal before the ld. CIT(A), the disallowance was restricted to Rs.7,15,643/- (Rs.6,93,713/- + Rs,21,930) thereby granted substantial relief to the assessee. Hence, being aggrieved by the order of ld CIT(A) the Revenue has filed the present appeal before us.

We have heard the ld. Departmental Representative (DR) for the Revenue and the ld. Authorized Representative (AR) for assessee and perused the material available on record. The ld. DR for Revenue argued that assessee has not made TDS on the payment of transportation charges to the extent of Rs. 1,07,12,587/-. The assessee has deducted the TDS only on the payment of Rs. 15,98,958/- only. During the assessment the assessee has not provided the details of payment made to the various transporters. As incomplete details were provided by the assessee, the details which were filed, were only self-made vouchers. In absence of complete details, the AO disallowed the payment on account of transportation charges to the extent of Rs. 91,13,629/- u/s 40a(ia) of the Act. It was further argued that the ld. CIT(A) admitted the additional evidence without appreciating the conditions mentioned under rule 46 of IT Rules. On the other hand, ld. AR of the assessee argued that assessee filed application under Rule 46A of the Act for admitting the additional evidence. The ld CIT (A) forwarded the application and the additional evidence to the AO for his remand report. In response to the additional evidence, the AO furnished his remand report on 08.01.2014. After considering the remand report of AO the ld. CIT(A) granted partial relief to the assessee.

We have considered the rival contention of the parties and gone through the orders of authorities below. During the assessment proceedings, the AO observed that the assessee has not made TDS on the payment of transport charges for outward freight from factory. The assessee made the freight payment of Rs. 1,07,12,587/- during the year. The AO asked the assessee to explain as to why the above payment should not be disallowed u/s 40a(ia). In response to the queries of AO, the assessee contended that assessee-firm engaged in the transport contract as well as engaged individual transporter for outward freight for material dispatched from the factory. No TDS is deducted on the payment made to the individual, transport operators as they insist on cash payment without TDS. The contention of assessee was not accepted by AO. The AO observed that out of the total payment made on account of transportation charges, the assessee has made TDS only on Rs. 15,98,958/-. Thus, disallowed remaining amount of Rs. 91,13,629/- u/s 40a(ia). Before the ld. CIT(A), the assessee filed an application under Rule 46A along with certain details. The application for additional evidence was admitted by ld. CIT(A). Application of the assessee was forwarded to the AO for his remand report. The AO furnished his remand report dated 08.01.2014. In the remand report, the AO mentioned that the transport charges amounting to Rs. 91,13,629/- were paid to individual Truck owners in cash. The payment to three contractor’s turnover exceeding Rs. 50,000/- was paid bearing the following Truck Number: Truck Number Amount (Rs.) MH-18-2818 52,625/- MH-43-E-8759 50,090/- MH-18-4657 5,90,998/- It was further mentioned in the remand report that a number of vouchers do not accompany the third party evidence like Lorry receipt or Octari receipt etc. Two vehicle Number provided by assessee are Motorcycle and not Truck i.e. Vehicle No. MH-18-2818 & MH-18-5579. The ld. CIT(A) considered the remand report of AO and observed that there is no discrepancy in making the payment on self-made voucher as assessee is dealing with the individual Truck driver who were not well- educated and have to make the operational expenses during the journey and they demand the payment in cash. It was further observed that such cash payment does