BABU BHAI PATEL,KOLKATA vs. JCIT, R-27, KOLKATA, PURBA MEDINIPUR

ORDER Per Dr. A.L.Saini, A.M.:

The captioned appeal filed by the assessee, pertaining to assessment year 2010-11, is directed against the order passed by the Commissioner of Income-tax (Appeals)-7, Kolkata in Appeal No. 457/CIT(A)-7/Range-27/14-15, dated 27-01- 2016, which in turn arises out of an order passed by the Assessing Officer u/s. 143(3) of the Income-Tax Act, 1961 (in short, the Act),dated 19-03-2013.

Rs.6,69,560j- an amount of Rs.16,218/- was related to labour charges and the loading and unloading. Therefore, the amount of addition of Rs.16,218/- is deleted and the balance amount of Rs.6,43,342/-- is confirmed. This ground of appeal is partly allowed.

3.0….Considering all the aspects of the case, it becomes clear that the assessee had made these payments on a single day but has shown the payments on different dates only to avoid the provisions of Sec 40A(3) which clearly state that any payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. The assessee is well aware of this provision is evident from the fact that barring the above noted payments; he has made all the other payments through bank drafts. When confronted, the A/R could not furnish any satisfactory explanation in this regard. In view of the above discussion, it is clear that the total cash payments of Rs. 3,61,633/- ( Rs.2,01,633 + Rs. 1,60,000) attract the provisions of Section 40A(3) and hence disallowed”

This way, the ld CIT(A) after allowing a small relief, has confirmed the addition made by the AO.

1. For that in the facts and circumstances of the case the Appellate order passed was in violation of principals of natural justice hence is bad in law and be quashed.

2. For that in the facts and circumstances of the case the Ld. Commissioner of Income Tax Appeals erred in upholding the disallowance of Rs.6,43,342/- on account of payment of freight u/s 40(a)(ia) of the IT Act \1961. The disallowance is not called for hence the same be reversed.

3. For that the interest computed u/s 234A/B/C/D of the IT Act 1961 is over charged and wrongly calculated and or is not applicable to the assessee case it be directed to re-compute the interest as per law. Babu Bhai Patel 3

4. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal.”

6. The ld AR for the assessee has submitted that, regarding the addition relating to payments made to transporters to the tune of Rs.6,69,560/- u/s. 40(a)(ia) of the Act. He further submitted that total cost of transportation of Rs.6,69,560/- included unloading charges to the tune of Rs. 16,218/- paid to local labourers. There is no provision for making any TDS from the payments relating to labour charges for loading and unloading of goods which is Rs.16,218 in the instant case so this disallowance should have been restricted to Rs.6,43,342/-. The ld. AR of the assessee has further submitted that the contention of the AO that all the goods were brought in by M/S Kajol Roadways, of Chikhodra ,Anand, Gujrat" is not correct. Kajal Roadways was the agent who arranged for transportation of goods and direct payments were made not to Kajal Roadways but to individual vehicle owners/ Drivers only with clear direction :- i) payment of freight should be made to the Driver of the vehicle and ii) in case of TDS it should-be made in the name of Truck owners. Assessee received materials transported through different vehicles, details of which was given to the Assessing Officer ( A O ) in course of assessment proceedings. Photocopies along with original bills were also produced for verification. On study of the details -AO in his Assessment Order vide page 2 last para stated :- Photo copies of all transport receipts were produced for verification along with corresponding purchase bills. Subsequently a truck wise summary of Babu Bhai Patel 4

expense was also submitted by A/R .From these documents it is seen that all the goods were brought in by M/s. Kajol Roadways ,of Chikhodra ,Anand, Gujrat. All these payments were made in cash . Although the assessee claimed that individual payments did not exceed Rs.20000/- it was found that in the following four cases the payments to the transporter was in excess of Rs 20 000/-

Consignment No. Vehicle No Bill date Amount 542 OR 11 0 5999 25 .04. 2009 Rs. 21 965/- 2219 WB 23 B 3231 18.09.2009 Rs.21 804/- 3304 GJ 12 X9600 18. 12.2009 Rs 23 337/- Total Rs.67 106/-

Kind attention is drawn to the fact that, the AO has verified and found that all bills - Rs.6 69 560/- except Rs 67 106/- ,were below Rs 20 000/- which does not attract provision u/s 194C. Payment relating to the above three bills were also made on two different dates each to different three vehicle owners. Part payment made on reaching to the drivers for petty expenses on reaching the premises with truck and final payment after delivery of the goods. That individual payments did not exceed Rs.20 000/-. Which also does not attract provision u/s 194C. Regarding payments of transportation charges of Rs. 67,106/- of above 3 nos Bills. These are evident from the recording the receipt by the drivers, on the back of the bills itself, which are produced for kind perusal.

Payment made against three bills as above, were below aggregate amount of Rs. 50 000/- so TDS provision does not apply on them also. In all of the case bill amount was below threshold limit as prescribed by law the question of application of TDS provision u/s 194C have has no application in the instant case.

So there was no violation of provision for making TDS u/s 194C of the Act, which attracts application of section 40(a)(ia) of the Act against the comments of the AO that assessee has violated the provision of section 194C of the Act which attracts disallowance u/s 40(a)(ia) of the Act.

6.1 In support of his contentions, the ld.AR of the assessee has relied on the following judgment of the Hon`ble ITAT Kolkata:-

(1). & CO No. 139/K/2013 in the case of M/s. Saha Agency, order dated 20-05-2016 , wherein the ITAT-Kolkata has observed as under:- 3.7 We have heard rival submissions and perused the material available on record and case laws cited above. We find in respect of payments made to Air Transport Corporation (Assam) Ltd., the Ld. CIT(A) had recorded a categorical finding that there was no oral or written contract the assessee had with lorry operators as vehicles were hired whenever the need arose. This finding has not been controverted by the revenue before us. In this regard, the reliance placed by the Ld.AR on the decision of jurisdictional High Court in the case of M/s. Stumm India, supra, wherein it has been held as under:- "It is urged before us that the learned Tribunal ought not to have accepted the judgment and order of the CIT (Appeal) who has quashed the disallowance of deduction of Rs.41,33,710/- and on account of tax deduction at source. The learned Tribunal has recorded the fact that the department has not been able to bring any material on record to show that the assessee has made the payment to the transporters in pursuance of contract for carriage of goods of the assessee and the question of deduction at source under section 194C does not and cannot arise. In the absence of evidence of payment made by the assessee to the transporters, the assessee cannot be saddled with the liability of deducting tax at source. Before us no other point has been urged nor it is said that the aforesaid fact finding is truthful without any basis whatsoever."

(2). & 1791/Kol/2009, dated 20.01.2012, in the case of Mohan General Trading Co.,wherein the ITAT-Kolkata has observed as under:-

“5. … … … … Assessee's contention before us and before lower authorities was that as per agreement with the suppliers they had to deliver goods at assessee's premises ex godown and they have to engage transporters and not the assessee. It was the contention of the assessee that pursuant to the agreement between the parties, the assessee had taken delivery of goods, paid freight charges directly to the transporters, which in turn raised invoice on the assessee. The Ld. Counsel for the assessee relied on the decision of Hon'ble Supreme Court in the case of India Meters Ltd. Vs. State of Tamil Nadu in Civil Appeal No. 1032-33 of 2003 dated 07.09,2010. We have full respect for proposition of law laid by Hon'ble Supreme Court in the case of India Metals Ltd. (supra), wherein it had held that if the ownership in the goods gets transferred at the premises of the buyer and the supplier has the obligation of transporting the goods to the premises of the buyer, then notwithstanding the fact that the freight charges were recovered separately from the buyer, the transportation charges shall form part of turnover of the supplier, i.e. cost of purchases for the buyer. But in the present case before us, the facts are not clear whether the assessee's agreement with the suppliers was including transportation charges for delivery of goods to the premises of the assessee or not? In the absence of agreement, we cannot decide this issue at this stage. Hence, for verification to examine the agreement or invoices, if any, we set aside this issue to the file of Assessing Officer.