KUSA APAT,KEONJHAR vs. ACIT, CIRCLE-1(1), SAMBALPUR, SAMBALPUR

आयकर अपीलीय अधधकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM आयकर अपील सं./ITA No.499/CTK/2016 (धनधाारण वषा / Assessment Year :2007-2008) Kusa Apat, Vs. ACIT, Circle-1(1), At/PO. Guali, Barbil, Sambalpur, Orissa Dist : Keonjhar स्थायी लेखा सं./जीआइआर सं./ PAN/GIR No. : AFYPA 4721 M (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) धनधााररती की ओर से /Assessee by : None राजस्व की ओर से /Revenue by : Shri D.K.Pradhan, DR सुनवाई की तारीख / Date of Hearing : 14/06/2017 घोषणा की तारीख/Date of Pronouncement 16/06/2017 आदेश / O R D E R Per Shri Pavan Kumar Gadale, JM: The assessee has filed this appeal against the order of CIT(A), Cuttack, dated 29.09.2014, passed in I.T.Appeal No.0325/2014-15, arising out of the order passed by the AO u/s.143(3)/147 of the I.T.Act. 2. The assessee has raised the sole ground challenging the action of CIT(A) in confirming the addition made by the AO on account of disallowance of transporting expenses being the payments made to vehicle hired u/s.40(a)(ia) of the Act amounting to Rs.12,21,858/-. 3. Brief facts of the case are that the assessee is an individual engaged in the business of raising of iron ore & transportation work and the assessment was completed u/s.143(3) of the Act on 26.11.2009 raising total income to Rs.36,44,180/- from the returned income of Rs.29,44,180/-. The AO on verification found that the assessee claimed excess depreciation and also made payment of more than Rs.50000/- to different vehicle owners without deducting tax u/s.194C of the Act and

2 ITA No.499/14 violation of the provisions u/s.40(a)(ia) of the Act. Accordingly the ld. AO having reason to believe that there is escapement of income and issued notice u/s.148 of the Act. Subsequently, the AO issued notices u/s.143(2) & 142(1) of the Act. In compliance to the same, the ld. AR of the assessee appeared before the AO from time to time and filed written submissions. The AO on perusal of the Audited accounts on the disputed issue of claim of transportation expenses as reported in the Tax Audit report in the Form No.3CD that the assessee had not deducted any tax at source from the payments made towards hire charges and transportation charges. During the course of scrutiny assessment, the assessee submitted ledger accounts showing payments made to different vehicles and on verification found that more than Rs.50000/- was paid during the said financial year. The AO has also referred to the claim of the vehicle owners along with vehicle numbers and payments at page 4 of the order. The assessee also filed submissions explaining that it has not engaged in the transportation contract agreement with any of the vehicle owners and vehicles are hired as and when required. Most of the times the vehicle drivers negotiate the hire charges and commence the transportation, but the AO was not satisfied with the explanations provided and found that there is no contract with the transport vehicle owners and the oral contract are covered by the provisions u/s.40(a)(ia) of the Act, and rejected the claim with other additions and Assessed income of Rs.56,91,950/-, u/s.143(3)/147 of the Act dated 12.02.2013.

3 ITA No.499/14 4. Aggrieved by the order of AO, the assessee preferred appeal before the CIT(A). In the appellate proceedings ld. AR of the assessee argued the grounds and reiterated the submissions made before the AO. Ld. CIT(A) on perusal of the information submitted by the assessee, found that the assessee has made the payments aggregating more than Rs.50000/- as transportation charges and charges are subjected to applicability of TDS provisions. Irrespective of the fact that the contract is a written form or verbal and finally the CIT(A) concurred with the findings of AO and dismissed the appeal of the assessee. 5. Aggrieved by the order of the CIT(A) the assessee has filed further appeal before the Tribunal. 6. None appeared on behalf of the assessee when the matter was called for hearing. However, an adjournment application was placed on record by the assessee seeking for adjournment of hearing on the ground that he is in the process of changing the authorised representative, which in our considered, is not a plausible one and, thus, we reject the application and proceed to dispose off the appeal on the basis of material available on record and the submissions of ld. DR. 7. Before us, ld. DR supporting the orders of authorities below, submitted that the assessee has violated the provisions of section 40(a)(ia) of the Act and provisions u/s.194C of the Act, therefore, the AO was correct in making the disallowance and the CIT(A) has confirmed the order.

4 ITA No.499/14 8. We have heard the submissions of ld. DR and perused the material available on record. Prima facie, on perusal of the assessment order, we find that the assessee engaged in the business of raising of iron ore & transportation work and was also engaged different vehicles for transportation and paying the hire charges. The AO has referred to the vehicle owners to whom the hire charges more than Rs.50,000/- have been paid and TDS provisions are applicable u/s.194C. Similar facts are considered by the Hon’ble Punjab & Haryana High Court in the case of CIT, Vs. Bhagwati Steels, 326 ITR 108 (P&H), wherein it has been held as under :- (ii) That the Tribunal after reading the whole contract in its entirety reached the conclusion that the transaction between the parties was essentially governed by the distribution agreement which was transaction of goods per se and could not be segregated for the purposes of payment of expenses by way of freight. The Tribunal had rightly held that if the freight expenses incurred by T were added to the cost of goods in the invoice raised, it could not be inferred that the assessee had paid any amount of freight separately because it was part of the cost of product purchased. The assessee could not be said to be an assessee in default for non-deduction of tax at source in terms of section 194C of the Act on the amount of freight billed separately by T. As a consequence, the provisions of section 40(a)(ia) of the Act could not be applied to disallow the amount of such freight. We, considering the nature of work of the assessee and the unorganised sector of the transportation, are of the opinion that the assessee was not treated as assessee in default by the Revenue and provisions of Section 40(a)(ia) shall not be applied. Hence, in the interest of justice, we direct the AO to delete the addition and all the grounds of appeal of the assessee are allowed. 9. In the result, appeal of the assessee is allowed.

5 ITA No.499/14

Order pronounced in the open court on this 16/06/2017. Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) लेखा सदस्य / ACCOUNTANT MEMBER न्याधयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनांक Dated 17/06/2017 प्र.कु.धि/PKM, Senior Private Secretary आदेश की प्रधतधलधप अग्रेधषत/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant- Kusa Apat 2. प्रत्यथी / The Respondent-ACIT, Circle-1(1), Sambalpur 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack 5. 6. गाडा फाईल / Guard file. सत्याधपत प्रधत //True Copy// आदेशानुसार/ BY ORDER,

(Senior Private Secretary) आयकर अपीलीय अधधकरण, कटक / ITAT, Cuttack