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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
आदेश / ORDER
PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order dated 30.01.2023, passed by the Learned Principal Commissioner of Income-Tax (in short “Ld PCIT”) under section 263 of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2018-19. Grievances raised by the assessee, are as follows:
“1) The learned Principal Commissioner of Income Tax, Surat-1 (PCIT, Surat-1) has erred in considering the assessment order passed by the assessing officer as being erroneous and prejudicial to interest of revenue, though the impugned assessment order was passed by assessing officer during scrutiny assessment proceeding u/s 143(3) of the Act after verification of TDS compliance on freight expenses. 2) The learned assessing officer has conducted a detailed inquiry for TDS compliance with respect to freight expenses incurred by the assessee. He
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. demanded the details regarding payments to contractors in excess of Rs.10,000/- at one time and above Rs.50,000 in aggregate in the prescribed format vide his notice dated 16-12-2020 u/s 142(1) and notice dated 10-02-2021 and these notices were duly replied by the assessee which is on record of the Department. The learned PCIT was also given the said records again while revisionary actions are taken by the PCIT. 3) The PCIT has also been furnished with the list of transporters where no TDS is deductible in cases of those transporter wherein a specified declaration given by the said transporter along with his PAN. These details were also furnished to the assessing officer. This fact has not taken into consideration while passing order u/s 263. 4) The PCIT has erred in passing order u/s 263 even though no error is committed by the Assessing Officer in accepting the submission of TDS compliance by the assessee during scrutiny assessment proceedings. TDS compliance were supported by receipt issued by CPC. If the same is not apparent technically on screen, it is not fault or lapse on the part of the assessee as these submissions are supported by valid receipts issued by CPC. These receipts must be accepted by the PCIT. 5) The learned PCIT has erred in considering the assessment order as erroneous as many ITAT has decided that in case of a payment is made to sub-contractor, mere because assessee did not file Form No.15-I/J provisional of section 40(a)(ia) should not attract to such a case and therefore simply for technical laps u/s 194(7) it is not appropriate to disallow the transporter expense. 6) The appellant may be permitted to raise new grounds of appeal or to amend, modify, rectify or to withdraw any grounds of appeal duly raised”
The assessee has also raised additional grounds, which is reproduced below: “It is to be held that revisionary order u/s 263 passed by ethe PCIT Surat 1 is null and void as it itself failed to mention any DIN on its body or adhere to Circular No.19/2019 by the CBDT. Show cause notice u/s 263 on 24-11-2022is also without DIN.”
At the outset, Learned Counsel for the assessee, informs the Bench that assessee does not wish to press additional ground raised by it, therefore, we dismiss the additional ground raised by assessee, as “not pressed”.
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. 4. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a Private Limited Company and filed its return of income for assessment year (A.Y.) 2018-19, on 21.09.2018, declaring total income of Rs.1,17,02,490/-. Further the assessee furnished revised return of income, declaring total income at Rs.1,17,02,490/- on 14.12.2018. Subsequently, the assessee`s case was selected for complete scrutiny assessment, under e-assessment Scheme, 2019, for verification of genuineness of expenses and ICDS compliance and adjustment. The assessment u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act, was finalized on 24.03.2021, accepting the returned income of the assessee.
Later on, Learned Principal Commissioner of Income-Tax (in short “Ld PCIT”) exercised his jurisdiction, under section 263 of the Income-Tax Act, 1961. On verification of the records, it was noted by ld PCIT that the assessee has debited expenditure under the head “freight expenses” to the tune of Rs.6,13,22,970/-. As per audit report, there is huge increase of the expenses in comparison to previous year (Rs.6,13,22,970/- for AY 2018-19 against Rs.4,23,79,817/- for AY 2017-18), even though there is slight increase of turnover, for assessment year 2018-19, against turnover of Rs.27,23,62,638/- for A.Y. 2017-18. As per Annexure B available in ITBA, the assessee has debited TDS on the payments to the tune of Rs.3,49,49,390/- only made on account of contract payments. On perusal of submission available in ITBA, it was noticed by the ld PCIT that the assessee has not deducted TDS on expenditure to the tune of Rs.2,35,66,362/- made on account of contract payments in the following cases, which is in contravention to the provisions of Section 40(a)(ia) of the Act and section 194C of the Act. So, 30% of the expenditure worked out to Rs.70,69,910/- (30% of Rs.2,35,66,362/-) was required to be disallowed. As
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd.
per ld PCIT, the details of the payment made to various entries where TDS on expenditure is not made, are as under: Sr.No. Name PAN Amount (in Rs) 1 Adarsh Roadlines APTPK6179A 300035 2 Anil B Kushwaha ACPPK1232K 249000 3 Babulal M Bishnoi AQFPB7084A 251150 4 Bhagwant Singh AVVPD2829J 75550 5 Bhikhu Desurbhai Khodbhaya Transport DGNPK4350R 31129 6 Bhuraram Ganesharam AMFPR9858N 250000 7 Chhanabhai R Vasava-transport AHDPV3139M 123725 8 Ganesh Jagamal Bharvad ATJPB5679G 2477161 9 Govind Prasad Sahu BFVPS6483J 907800 10 Ishwarsingh Chudasama Transporter ANEPC2558G 87316 11 Jahangir Khan Pathan ALJPP1592L 249000 12 Jamanbhai B Tarpara AMYPT3766A 2388749 13 Jay Ashapura Transport AFMPC3158G 15120 14 Jotva Bharat M AMSPJ6020H 76940 15 Kailashchandra S Teli APAPT8644N 249000 16 Kalpeshi Marfatiya (HUF) AADHM5983P 337226 17 Katariya Carting ATCPK6480K 43300 18 Kusumben Bharat Limbasiya BQPPB6683N 96361 19 Manishaben Hiteshbhai Dubhat BRRPS2331B 107591 20 Naranbhai Devsibhai Kandoriya BMIPK5206K 33380 21 Narendrabhai K Solanki AWQPS7798R 250000 22 Nareshsingh Rajpurohit-Transporter ELSPS9380C 2673257 23 Padamsingh Shekhawat Transporter ELAPS2641A 429300 24 Pravin R Kandoriya 47400 25 Ramesh Merubhai Jadeja AJFPJ1092F 245000 26 Roshan Bahadur Sumra BLOPK7391E 121530 27 Saiyad Mumtaz Begum BSRPS3991J 247500 28 Satishbhai Punabhai Vala 61808 29 Shaikh Ikbal Lal DECPS5260O 245000 30 Shishir Kumar Rai DDMPS2826C 88200 31 Shravansingh Rajpurohit ELSPS9384G 2280287 32 Shree Samarth Container BTGPG8539C 76500 33 Siddhivinayak Transporte AAZFS0365B 32415 34 Sudama Prasad Sahu CRWPS1317M 262000 35 Swastik Logistics AMPPS4949H 31000 36 Tejraj Singh Akharam DPAPS7461P 6017075 37 As per bank statement 1503167 38 Tuljaram J Prajapati AZFPP8632D 250000 39 Vasiullah Hakikullah Khan CONPK2282M 85675 40 Veerjeet Logistics AAMFV8955D 130000 41 Vishnu Carting AZPGS0091L 130015 Total 2,35,66,362
Therefore, ld PCIT had issued a show cause notice bearing DIN No.ITBA/COMF/17/2022-23/1047656540(1)on 25.11.2022 and the same was duly served upon the assessee though e-proceedings.
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. 7. In compliance with the show cause notice issued by ld PCIT, the assessee has furnished its reply on 06.12.2022. In the reply, the assessee has contended that during the assessment proceedings, it has furnished detailed submission with respect to the TDS inquiries made by the assessing officer along with necessary documentary evidences and the assessing officer has not committed any error in not considering the said freight expenses Rs.2,35,66,362/- for disallowance, as per the provisions of Section 194C r.ws. 40(a)(ia) of the Act. The assessee has requested to drop the proceedings, initiated u/s 263 of the Act contending that the assessment order passed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 24.03.2021 is neither erroneous nor it is prejudicial to the interest of Revenue.
However, ld PCIT rejected the contention of the assessee and held that assessee has failed to deduct TDS on the expenditure to the tune of Rs.2,35,66,362/- (contract payments) and the same is in contravention to the provisions of Sec.40(a)(ia) of the Income Tax Act. So, 30% of the above expenditure worked out to Rs.70,69,010/- (30% of Rs.2,35,66,382/-) was required to be disallowed and added to the total income of the assessee, which the Assessing Officer failed to do so. Accordingly, the assessment order passed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 24.03.2021, in the instant case was set aside by ld PCIT with a direction to the Assessing Officer to pass fresh assessment order after taking into consideration the issues as may have been already considered together with the issue discussed hereinabove also.
Aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us.
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. 10. Shri Yogesh B. Shah, Learned Counsel for the assessee, argued that assessee submitted every details and documents, during the assessment proceedings in respect of freight and contract expenses. The assessing officer has issued notice u/s 142(1) of the Act, on 10.02.2021 and further notice u/s 142(1) of the Act was issued by the Assessing Officer on dated 16.12.2020. In response to these notices, assessee has submitted the details regarding non-deduction of TDS and Form15-J and other details demanded by the assessing officer. Therefore, considering the factual position, the issue raised by ld PCIT in his revision order, has been examined by the Assessing Officer. The assessing officer has examined this issue during the assessment proceedings, that is, the list of persons with PAN to whom the freight were given without TDS (tax), has been examined by the assessing officer, which is placed at paper book page-20 of the assessee`s paper book. The assessee has submitted before the assessing officer, the list of persons/transporters in whose case TDS at source u/s 194C of the Act, was not made. In said list, item as per serial no-37, a sum of Rs.15,03,1697- is shown "as per bank statement". These persons were hired transporters and not on contract basis. In the similar way, transporters to whom the payment during the year are shown at serial number 4,5,10,13,14,17,18,20,24,28,33,35, and 39, in these cases, receipt of each case is less than Rs. 1,00,000/-, hence TDS is not required to be deducted. These payments of carting in transporters are also hired transporters and not on contract basis and therefore, all compliances pertaining to TDS were made during the assessment stage. The assessing officer has examined all these documents and evidences and then framed the assessment order, hence such assessment order is neither erroneous nor prejudicial to the interest of Revenue. Therefore, ld Counsel contended that order passed by ld PCIT under section 263 of the Act may be quashed.
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. 11. On the other hand, Ld. CIT-DR for the Revenue relied on the findings of Ld. PCIT and stated that assessee has not submitted Form No.- 15-J, relating to TDS. Therefore, Assessing Officer has not examined this issue properly. In case the assessee would have submitted Form No.15J then there would be no requirement to deduct the TDS. Since the assessing officer has not examined Form No.15-J, hence, the order passed by the assessing officer is erroneous therefore order passed by Ld.PCIT may be upheld.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. At the outset, Learned Counsel for the assessee, argued before us that in order to verify the TDS details, the Assessing Officer has issued notice u/s142(1) of the Act, wherein the Assessing Officer has raised the issue regarding submission of TDS details. The query raised by the Assessing Officer in notice u/s 142(1) of the Act is re-produced (to the extent relevant for our analysis) : “9. Regarding large payments made to contractors u/s 194C of Income-tax Act during the year under consideration, kindly submit the below specified details: 1. Kindly provide the details of all payments above Rs.,10,000 at one time and above Rs.50,000 to in aggregate, made to contractors whose TDS is made u/s 194C of the Act in the following format: a. Name, PAN and current address and phone number of the person b. Total payment made during relevant financial year c. Total payment made during one year prior to relevant financial year d. Total payment made during the one year next to” 13. In response to such notice, the assessee submitted its reply, which is placed at paper book page-23, the said reply submitted by the assessee, in respect of TDS issue are reproduced below: “7. Details of tax deducted at source (TDS) in respect of payments made by way of interests, commission, Rent, fees for professional services and transporters are attached as Annexure-6. 8. Details of the all payments made to contractors whose TDS is made u/s 194C, is attached herewith as Annexure-7.”
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd.
The Ld. Counsel contended that with Annexure-6 and Annexure-7, submitted during assessment stage, the assessee submitted relevant Form No.15-J also. The Assessing Officer raised the query regarding non- deduction of TDS and in response to that the assessee submitted required documents along with submission before the Assessing Officer. After examination of all the documents and details, the assessing officer did not make addition. Therefore, the order of the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue.
We note that during the assessment proceedings the assessee submitted relevant copies of PAN number and declarations duly signed by the rest of transporters and the same were submitted, before the ld PCTT, during Revision proceedings, vide Page No. 33 to 98 of the Paper Bock. Needs always be arisen when transporter with whom contract is executed are not available for urgent delivery to customer and company is required to hire trucks from open market. In such a case TDS is not required to be deducted but a declaration in prescribed form is sufficient, so total carting Expenses of Rs.2,35,66,362/- comprised of payment to transporter with whom company has not entered in fix contract and these payment to hired trucks owners were not on contract basis, however, required formalities such as Form No.15-J etc. were done by the assessee-company. Besides, as per assessee, the payment made to these parties are below the required threshold limit, hence no TDS required to be deducted. The Assessing Officer has conducted inquiry, as per his way and satisfied himself with the compliance of tax deducted at source, whereas the learned PCIT differed the way in which the inquiry conducted by the Assessing Officer, though nothing has been done by assessing officer which is unsustainable in law. Every loss of revenue as a consequence of an order of Assessing Officer
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. cannot be treated as prejudicial to interest of the revenue, for an example, when an Income-Tax Officer adopted one of the courses permissible in law i.e random sample checking of voluminous record and it has resulted in loss of revenue, or where two views are possible and the Income-Tax Officer has taken one view with which the Commissioner does not agree it cannot be treated an erroneous order prejudicial to the interest of the revenue. Unless the views taken by the Income-Tax Officer is unsustainable in law.
Let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83 (SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. Therefore, we are of the considered opinion that AO’s order cannot be termed as erroneous as well as prejudicial to the interest of the revenue and therefore, jurisdictional condition precedent as prescribed by statute for invoking revisional jurisdiction is absent and therefore, we are inclined to quash the impugned order passed by ld PCIT under section 263 of the Act.
We also note that direction given by ld PCIT to the assessing officer is not in accordance with the provisions of section 263 of the Act, the direction so given by ld PCIT to the assessing officer is reproduced below: “Accordingly, the assessment order passed u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 24.03.2021, in the instant case was set aside by ld PCIT with a direction to the Assessing Officer to pass fresh assessment order after taking into consideration the issues as may have been already considered together with the issue discussed hereinabove also”
This direction covers entire assessment order, that is, the entire assessment order has to be examined and Assessing Officer has to pass fresh assessment order after taking into consideration the issues as may have been already considered by AO together with the issue discussed by the ld PCIT in his order, which is not acceptable.
The Learned Counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Therefore, in the assessee`s case, it cannot be said that it is a case of 'lack of inquiry'. In view of the facts of the case and judicial pronouncements relied upon, it is well established that the impugned order passed u/s 143(3) of the Act, was passed by assessing officer, after calling for relevant information and after detailed examination of the same. The Assessing Officer has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT’s finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Based on these facts and circumstances, we quash the order passed by the ld PCIT under section 263 of the Act.
In the result, appeal of the assessee is allowed. Order is pronounced on 11/12/2023 by placing record on notice board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER सूरत /Surat �दनांक/ Date: 11/12/2023 Dkp Out sourcing Sr.P.S
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd.
Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM आयकर अपील सं./ITA No.220/SRT/2023 (िनधा�रण वष� / Assessment Year: (2018-19)] (Physical Court Hearing) Litecon Industries Pvt. Ltd. Principal Commissioner of Income Tax-1, Surat, 1, 123, 1st Floor, Block No.255, Navi Pardi, B/h Vs. Kamrej Sugar, Joy N Joy Road, Aaykar Bhavan, Majura Gate, Surat- Kamrej, Surat-394150 395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AABCL 8807A (अपीलाथ�/Appellant ) (��थ�/Respondent)
CORREIGENDUM PER DR. A. L. SAINI, AM: Learned Counsel for the assessee brought to our notice by letter dated 12.12.2023 that there is typographical error in the order of Tribunal in ITA No.220/SRT/2023 in “cause title” mentioning PAN. Therefore, we rectify the said typographical error as follows:
“PAN is noted AABCL8007A” instead of ‘AABCL 8807 A’.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER
ITA No.220/SRT/2023 AY.18-19 Litecon Industries P.Ltd. सूरत /Surat िदनांक/ Date: 19/12/2023 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order //True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat