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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU R L REDDY, HON’BLE & SHRI S. BALAKRISHNAN, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI DUVVURU R L REDDY, HON’BLE JUDICIAL MEMBER & SHRI S. BALAKRISHNAN, HON'BLE ACCOUNTANT MEMBER I.T.A. No.99/Viz/2021 (Asst. Year :2011-12) M/s. R.P. Transporters, Vs. Dy. Commissioner of D.No.40-16-5, RAVI Income Tax, Labbipet, Vijayawada. Circle-2(1), Vijayawada. PAN: AAGFR 9960 G (Appellant) (Respondent) Assessee by: Shri C. Subrahmanyam Revenue by: Shri M.N. Murthy Naik, CIT-DR Date of hearing: 14/03/2022 Date of pronouncement: 08/04/2022 O R D E R PER S. BALAKRISHNAN, ACCOUNTANT MEMBER: This appeal filed by the assessee against the order of the Ld. Pr. CIT, Vijayawada passed u/s. 263 of the Income Tax Act, 1961 (herein referred to as “Act”) dated 24/03/2021 for the AY 2011-12.
Brief facts of the case are that the assessee is a firm carrying on business as Transport Contractors filed its return of income for the AY 2011-12 on 29/09/2011 declaring total loss of Rs. 28,18,085/-. The case was selected for scrutiny through CASS and assessment u/s. 143(3) was
completed on 11/11/2013 with the assessed income of Rs. 8,20,789/-. The Assessing Officer initiated the proceedings U/s. 147 of the Act after prior approval of the Ld. Pr. CIT, Visakhapatnam and a notice U/s. 148 was issued to the assessee on 21/3/2017. In response to the notice u/s. 148 of the Act, the assessee replied that it had filed its return of income for the AY 2011-12 on 29/09/2011 and requested to treat the same as return of income filed in response to notice u/s.148 of the Act. Accordingly, notices u/s. 143(2) and 142(1) were issued to the assessee. In response to the notices, the assessee’s representative appeared and produced information called for by the Ld. AO. The Ld. AO after verifying the documents produced before him, concluded the assessment by disallowing a sum of Rs.37,47,835/- being the payment made towards hire charges to contractors where the conditions laid down as per provisions of section 194C(7) was not followed by the assessee.
Subsequently, the Ld. Pr. CIT by exercising his powers u/s 263 of the Act, issued a show cause notice u/s. 263 dated 2/2/2021 to the assessee seeking for objections against the proposed revision of assessment. The Ld. Pr. CIT observed that the order of the Ld. AO is erroneous and prejudicial to the interest of the Revenue where the AO allowed a sum of Rs 3,77,80,605/- (Rs - Rs )even though the assessee has not fulfilled the conditions laid down in section
194C(7) of the Act. The Ld. Pr. CIT also referred to para 7 of the assessment order where the Ld. AO has held that the assessee has not fulfilled the conditions laid down in section 194C(7) of the Act and thus committed default of non-deduction of TDS in the case of transporters of lorry owners. However, the Ld. AO allowed the expenditure relating to the period though there is a default of non-deduction of TDS. The Pr. CIT therefore invoked his revisionary powers u/s. 263 of the Act and set- aside the assessment order with a direction to re-do the assessment in accordance with law in respect of the issues mentioned as per the order of the Pr. CIT after providing a reasonable opportunity of being heard to the assessee. Aggrieved by the order of the Ld. Pr. CIT, the assessee is in appeal before the Tribunal by raising the following grounds of appeal.
“1. That under the facts and circumstances of the case, the orders passed under the provisions of section 263 of the IT Act is contrary to the provisions of law. 2. The impugned order passed U/s. 263 of the IT Act is barred by limitation in view of provisions of sub-section 2 of section 263 of the IT Act. Therefore, the impugned order is to be quashed as not maintainable.] 3. The Ld. Pr. CIT ought to have known that assessment was reopened for the impugned AY to examine the applicability of provisions of section 40(a)(ia) on the transport charges paid from the perspective of section 194C(6) and 194C(7)j of the IT Act. Finally Assessing Officer passed the order by disallowing certain amount of Hire Charges. Under these facts and circumstances when the subject issue has
been examined by the AO, exercising jurisdiction U/s. 263 of the IT Act is unwarranted. 3 (sic) 4. The Ld. Pr. CIT has wrongly assumed jurisdiction to examine an issue which AO has already examined of the liability of TDS on hire charges paid vis-à-vis provisions of section 40(a)(ia) of the Act. 4 (sic) 5. The Ld. Pr. CIT ought to have known that the orders passed by the AO U/s. 143(3) r.w.s 147 of the IT Act dated 18/12/2017j is neither erroneous or prejudicial to the interest of the revenue, therefore the order passed U/s. 263 of the IT Act cannot stand the test of judicial scrutiny. 5 (sic) 6. For these and other ereasons that are to be urged at the time of hearing of the appeal the appellant prays that the order passed by the Ld. CIT is erroneous both on facts and as well as in law, therefore, the same needs to be set aside in the interest of justice.” 3. Before us, the Ld. AR admitted the fact that the assessee has failed to furnish declaration U/s. 194C(7) of the Act but has followed the conditions laid down in section 194C(6) of the Act by providing the PANs to the Ld. Assessing Officer. The Ld. Assessing Officer has rightly observed that the accounts of the certain contractors PANs are not matching with the data base of the Department and hence disallowed a sum of Rs 37,47,875/-. The Ld. AR also submitted that the assessment order has been accepted by the assessee. The Ld. AR argued that the provisions of section 194C(6) and 194C(7) are to be read separately and not in conjunction. The Ld. AR also argued that the impugned order passed U/s. 263 is barred by limitation in view of the provisions of sub-
section (2) of section 263 of the Act. He therefore pleaded that the order passed U/s. 263(1) be quashed.
Per contra, the Ld. DR argued that the declarations as required U/s. 194C(7) were not filed by the assessee which is a mandatory requirement for claiming benefit of non-deduction of TDS under the provisions of the Income Tax Act, 1961. Further, the Ld. DR argued that the assessee has not provided the number of lorries owned by the transport operators which is also forming part of the declaration. In the absence of any evidence with regard to fulfilling the conditions of section 194C(7) of the Act, the Ld. DR pleaded that the order of the Ld. Pr. CIT be upheld.
We have heard both the parties and perused the material available on record and the orders of the authorities below. With respect to Ground No.2 raised by the assessee, we find merit in the arguments of the Ld. AR that the order passed U/s. 263(1) of the Act is time barred as per the provisions of section 263(2) of the Act.
Further, on merits of the case, the assessee has complied with the provisions of section 194C(6) of the Act by obtaining the PANs from the transporters which has been furnished to the Ld. AO. The Ld. AO after satisfying the PANs furnished by the assessee, accepted the assessee’s
claim to the extent of Rs. 3,77,80,605/- and concluded the assessment. In the case of ITO vs. Sugarchemin in ITA No. 2071/Mumbai/2016 wherein the Tribunal held that section 194C(6) & 194C(7) are independent of each other, and cannot be read together to attract the disallowance U/s. 40(a)(ia) r.w.s 194C of the Act and if the assessee complies with the provisions of section 194C(6), no disallowance U/s. 40(a)(ia) of the Act is permissible, even there is a violation of the provisions of section 194C(7) of the Act. In the instant case, the assessee has complied with the provisions of section 194C(6) but not complied with the provisions of section 194C(7) of the Act. The Ld. AO also rightly disallowed a sum of Rs. 37,47,875/- where the PANs were not matching with the PAN database. However, the Ld. Pr. CIT without appreciating the fact, wrongly assumed the jurisdiction U/s. 263 of the Act and also passed the impugned order. The Ld. Pr. CIT failed to appreciate the objections of the appellant for invoking the provisions of revision both on technical ground and on merit by setting aside the original assessment order with a direction to the Ld. AO to make addition as per para 5 of the impugned order. The assessee has brought to the notice of the Ld. Pr. CIT that as per the Hon’ble ITAT decision (supra) no disallowance can be made U/s. 40(a)(ia) even if there is a violation u/s. 194C(7) of the Act and when two views are possible on this issue, proceedings U/s. 263
cannot be initiated. In the case of ACIT vs. Arihant Trading Co. [2019] 104 taxmann.com 336 the Jaipur Bench of the Hon’ble Tribunal held that “Where assessee made payments to transporters towards freight without deducting TDS on such payments, since assessee was in receipt of details about PAN of transporters at time of payment of freights and, thus, complied with provisions of section 194C(6), no disallowance could be made U/s. 40(a)(ia)”. Further, the Hon’ble Madras High Court in the case of Agasthiya Granite (P) Ltd vs. ACIT [2018] 403 ITR 279 (Mad.) held that “when two view are possible on an issue, if the AO has taken one view with which the CIT does not agree, it cannot be treated that the order passed by the AO is erroneous and prejudicial to the interest of the revenue”. Thus, in the present case, the decision taken by the Ld. Assessing Officer does not fall within the scope of section 263 of the Act and hence the order of the Ld. Pr. CIT is unsustainable in law. Therefore, we hold that the order passed U/s. 263 is not sustainable in law and hence we set-aside the impugned order and allowed the assessee’s appeal on the issue.
Grounds No.3 & 4 (sic) raised by the asessee at page no.2 of the Grounds of appeal become infructuous since the order passed U/s. 263(1) by the Ld. Pr. CIT is quashed and therefore these grounds need
no separate adjudication. Ground No.5 is general in nature and the same is dismissed as such.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on the 08th April, 2022.
Sd/- Sd/- (DUVVURU R L REDDY) (S. BALAKRISHNAN) Judicial Member Accountant Member Dated: 08th April, 2022. OKK Copy to: 1. The Assessee: M/s. R.P. Transporters, D.No. 40-16-5, “RAVI”, Labbipet, Vijayawada, Andhra Pradesh – 520002. 2. The Revenue: DCIT, Circle-2(1), Vijayawada, Andhra Pradesh. 3. The Principal Commissioner of Income Tax, 1 st Floor, SVR Plaza, D.No.40-6-15, Revenue Colony, Sidharda Public School Road, Moghalrajpuram, Vijayawada – 520010. 4. The D.R., ITAT, Visakhapatnam. 5. Guard file.
By order
Sr. Private Secretary, ITAT, Visakhapatnam.