MARIYAPPAN DHANALAKSHMI,KUMBAKONAM, TAMIL NADU vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), TRICHY, TRICHY, TAMIL NADU

आदेश / O R D E R

PER ABY T. VARKEY, JM: These are appeals preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter in short "the Ld.CIT(A)”), Delhi, both dated 30.10.2023 for the Assessment Years (hereinafter in short "AY”) 2015-16 & 2016-17. & 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi :: 2 ::

2. At the outset, the Ld.AR of the assessee submitted that the Ld.CIT(A) as well as the AO has made additions/disallowances only on the basis that assessee was not able to file for AY 2015-16 PAN details of the persons plying lorry; and likewise, for AY 2016-17 for non-filing of PAN & declaration from the contractors that they do not own more than ‘10’ goods carriers at any time during the previous year. According to the Ld.AR, the assessee was a wholesale dealer of garlic and had filed return of income for AY 2015-16 on 27.09.2015 admitting total income of Rs.13,01,297/-; and for AY 2016-17, return was filed on 17.10.2016 admitting total income of Rs.20,86,870/-. According to the Ld.AR, a survey u/s.133A of the Income Tax Act, 1961 (hereinafter in short "the Act”) was conducted in the assessee’s business premise on 07.03.2017 and the survey team took all the books & documents kept in the Office, because of which, assessee couldn’t produce the aforesaid PAN details/declaration from the transport-contractors. According to the Ld.AR, this fact of confiscation of books/documents have been admitted by the AO in both the Assessment Orders by admitting that “during the course of survey proceedings certain books of accounts and documents have been impounded from the premise of the assessee”. According to the Ld.AR from perusal of assessment order and especially the reasons recorded for re-opening, it would be discernable that AO alleged escapement of income for both years for non-deduction of TDS in respect & 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi :: 3 ::

of lorry freight expense of Rs.1,30,50,761/- for AY 2015-16 and Rs.1,54,53,580/- for AY 2016-17. During the assessment proceedings, the AO asked the assessee ‘as to why’ TDS was not deducted while making the payment for lorry transport owners, and the assessee pointed out that at the time of survey, he had answered to Q.No.15 of the survey team that “it is stated that TDS was not made for freight expenses payment for lorry transport owners, since declaration for deduction/exemption obtained from lorry transport owners”. Therefore, the AO asked the assessee to file TDS exemption i.e. declaration from the owners as required u/s.194C(6) of the Act. Pursuant to which assessee pointed out that assessee has collected those declaration from the lorry owners as required u/s.194C(6) of the Act, but they all had been impounded by the Department during the survey carried out on 07.03.2017; and therefore, assessee requested the AO to arrange a copy of the impounded documents, so that he can place it on record. Pursuant to the assessee’s request, the AO asked the assessee to take a copy of the same vide order dated 03.12.2019 and gave assessee two days to take copies of the documents. But, assessee submitted that time given to him was too short and he couldn’t take copies of declaration from lorry owners for these assessment years, which was running more than 10,000 pages and according to Ld AR, it was impossible to take copies of all declarations. However, according to the AO, the assessee had taken & 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi :: 4 :: copies of the impounded materials as per their need and since, the assessee couldn’t place the copies of declaration from lorry owners, the AO disallowed the expenses claimed by the assessee alleging non- deduction of TDS to the tune of Rs.39,15,228/-. Thereafter, the AO proceeded further to another issue, which according to the Ld.AR was not subject matter of reasons recorded for re-opening of assessment i.e. about the payment made by the assessee to these lorry transporters which though was less than Rs.20,000/- per day, however according to the AO, this was done splitting the payments to avoid deduction of tax at source; and therefore, he applied sec.40A(3A) of the Act and disallowed the payments to the tune of Rs.1,06,21,452/-. On appeal, the Ld.CIT(A) has confirmed the action of the AO for AY 2015-16 for non-filing of PAN details of the transport contractors and for AY 2016-17 for non-filing of declaration as well as PAN details as per sec.194C(6) of the Act. Before us, the assessee has filed a copy of the letter received from Office of the ACIT, Circle-2(1), Trichy, who has conveyed permission to the assessee to take photo copies of the impounded documents vide order dated 07.03.2024 and according to the Ld.AR, pursuant to that permission, the assessee had taken copies of the declaration of transport contractor as required under sub-section (6) of Sec.194C of the Act along with PAN details and since, assessee didn’t get proper opportunity before the AO, during the course of assessment proceedings, pleaded that the case may & 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi :: 5 :: be restored back to the file of the AO and cited the decision of the Hon’ble Supreme Court in the case of TIN Box Company v. CIT reported in [2001] 249 ITR 216 (SC), wherein, the Hon’ble Supreme Court has held that if the assessee didn’t get proper opportunity before the AO, then, the assessment need to be restored back to the file of the AO for de novo assessment. It would be gainful to take note of the Hon’ble Supreme Court order which reads as under:

"We will straightaway agree with the assessee's submission that the Income-tax Officer had not given to the assessee proper opportunity of being heard."

The first question reads thus:

"1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee?"

4. In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the asses-see.

& 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi :: 6 ::

3. We find that the assessee could not file the relevant documents before the AO because, it was impounded by the survey team on 07.03.2017, which fact has been admitted by the AO in the first part of the Assessment Order itself; and it is noted the assessee during the survey had stated that the payments (freight expenses) were made by the assessee directly to the transport owners. The AO has disallowed the freight expenses, since, assessee couldn’t file the copies of the declaration as required u/s.194C(6) of the Act, which as noted had been impounded by the survey team. This action of the AO cannot be countenanced for the reasons that relevant documents including the PAN details/declaration from transport contractors have been admittedly impounded by the department during survey and is in their possession; and still insisting assessee to produce the same is arbitrary exercise of power and cannot be accepted. In any case, it has been brought to our notice that assessee has been provided with copies of the relevant documents (seized by survey team), so for ends of the justice and fair play, we set-aside the impugned order of the Ld.CIT(A) and restore the issue back to the file of the AO with a direction that de novo assessment on the issue for which re-opening was resorted be carried out and thereafter, if the law permits proceed to the other issue (regarding payments made to transport contractors); and we add that for verification of facts, the AO may use the service of the verification team of the Department; and the AO to & 1558/Chny/2023 (AYs 2015-16 & 2016-17) Mariyappan Dhanalakshmi pass assessment in accordance to law after hearing the assesee. Assessee is at liberty to file documents as well as raise legal issues in accordance to law and the AO is directed to frame assessment after hearing the assessee.

Order pronounced on the 25th day of June, 2024, in Chennai.