The ITO, Ward-2(1)(1), Ahmedabad V. M/s. ETC Logistics Pvt. Ltd, Ahmedabad

ITA 168/AHD/2020

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the decision of the CIT(A) which had favored the assessee, M/s. ETC Logistics Pvt. Ltd. The primary issues in the appeal were related to the non-deduction of TDS on payments made to transporters and the treatment of certain trading liabilities as unexplained cash credits under section 68 of the Income Tax Act. The Tribunal examined whether the assessee had complied with the statutory obligations under sections 194C and 68 of the Act, particularly focusing on the requirements for deducting TDS and the necessity of proving the identity and genuineness of creditors.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135646 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-01-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 12-02-2020
• Other Referred Cases: Valibhai Khanbhai Mankad vs. CIT, ACIT vs. Arihant Trading Co., CIT vs. Ayachi Chandrasekhar Narsangji, Vaghubar Bar Singh vs. DCIT, Ganesh Dass Jain vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; TDS
• Section: 68; 40(a)(ia); 194C

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’A’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No.168/AHD/2020 िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष /Asstt. Year: 2015-2016 I.T.O, Ward-2(1)(1), Ahmedabad. Vs. M/s. ETC Logistics Pvt. Ltd., 7-E, “Suryarath” B/h. White House, Panchvati Circle, Ahmedabad. PAN : AACCE593D (Applicant) (Respondent) Revenue by : Shri Mukesh Kumar Sharma, Sr.D.R Assessee by : Shri Nitin Pathak, A.R सुनवाई क तारीख/Date of Hearing : 03/01/2023 घोषणा क तारीख /Date of Pronouncement: 31/03/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-2, Ahmedabad, dated 28/11/2019 arising in the matter of assessment order passed under s. 143 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-2016. 2. The Revenue has raised the following grounds of appeal: ITA no.95/AHD/2018 A.Y. 2013-14 2 1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance made by the Assessing Officer amounting to Rs.1,52,90,763/- u/s.40(a)(ia) of the Act in the light of provisions of section 194C(7) of the Act, without appreciating the facts of the case. 2. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance made by the Assessing Officer amounting to Rs,l,52,90,763/- u/sAO(a)(ia) of the Act in the light of provisions of section 194C(7) of the Act by relying on the decision of the Hon'ble Gujarat High Court in the case of Valibhai Khanbhai Mankad 216 Taxman 18{Guj) against which the Special Leave .Petition filed by the revenue had been granted/accepted in 227 Taxman 372 (SC) by the Hon'ble Supreme Court. - [ 3. The Ld.CIT(A) has erred in law and on facts in deleting the addition made u/s.68 of the Act of Rs.55,13,134/- without appreciating the fact that the genuineness of the creditors has not been proved by the assesses. 4. The appellant craves leave to amend alter any ground or add a new ground, which may be necessary. 3. The first issue raised by the Revenue in ground Nos. 1 to 2 is that the learned CIT (A) erred in deleting the disallowances of Rs. 1,52,90,763/- made by the AO under section 40(a)(ia) r.w.s. 194C(7) of the Act. 4. The facts in brief are that, during the assessment proceeding, the AO found that the assessee has not deducted tax under section 194C of the Act on the payment made to the transporters being freight and transport charges amounting to Rs. 1,52,90,763/- only. 4.1 The assessee with regard to the payment of freight charges has furnished the list of name and PAN of the transporters. But the AO in view of the provision to sub-section (7) to section 194C of the Act found that the assessee has not reported the PAN detail of the transporter in form 26Q in pursuance to the provision of sub-section (7) to section 194C of the Act before the prescribed authority in prescribed form within prescribed time. Accordingly, the AO held the assessee in default and made addition of Rs. 1,52,90,763.00 being 30% of Rs. 5,09,69,209.00 to the total income of the assessee under section 40(a)(ia) of the Act. ITA no.95/AHD/2018 A.Y. 2013-14 3 5. Aggrieved assessee carried the matter before the learned CIT (A) who deleted the addition made by the AO by observing that assessee complied the provisions of sub-section (6) to section 194C of the Act by obtaining the PAN of the transporters which were also furnished in form 26Q. The ld. CIT-A in holding so has made reference to various judicial pronouncement. 6. Being aggrieved by the order of the ld. CIT-A, the Revenue is in appeal before us. 7. The learned DR before us submitted that the assessee has not deducted the TDS on the expenses and therefore the same cannot be allowed as deduction while computing the income under the head business and profession. 8. On the other hand, the learned AR for the assessee before us filed a paper book running from pages 1 to 52 and submitted that the assessee is not liable for the deduction of TDS under section 194C of the Act and therefore there cannot be any disallowance for the expenses as discussed above. 9. Both the ld. DR and the AR before us relied on the order of the authorities below to the extent favorable to them. 10. We have heard the rival contentions of both the parties and perused the materials available on record. There is no ambiguity that the assessee is liable to deduct the TDS under the provisions of section 194C of the Act on the payment made to the transporters if exceeds the prescribed limit. However, the assessee has been provided an immunity from the deduction of TDS under subsection (6) to section 194C of the Act if the assessee obtains PAN from the transporters. The relevant provisions of subsection (6) to section 194C of the Act reads as under: (6) No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods ITA no.95/AHD/2018 A.Y. 2013-14 4 carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum. 10.1 Admittedly, there is no dispute to the fact that the assessee has obtained PAN from the transporters which were furnished in the TDS return. Thus, in our considered view the claim of the assessee cannot be denied on account of non- deduction of TDS on the payment made to the transporters/freight expenses under sub-section (6) to section 194C of the Act. 10.2 Before parting, it is also important to note that the assessee was also under the obligation, after obtaining the PAN from the transporters, to furnish the same in the prescribed form to the prescribed authority within the prescribed time as provided under sub-section (7) to section 194C of the Act. The relevant provision of sub-section (7) to section 194C of the Act reads as under: (7) The person responsible for paying or crediting any sum to the person referred to in sub-section (6) shall furnish, to the prescribed income-tax authority or the person authorised by it, such particulars, in such form and within such time as may be prescribed. 10.3 At the threshold, we find that though there is provision under the Act to file the necessary details to the prescribed authority but such prescribed authority has not been nominated under the provisions of law. Thus, in the absence of such prescribed authority no fault can be attributed to the assessee for not filing the necessary details as discussed above. In our considered view in the absence of prescribed authority, the details filed by the assessee along with form 26Q should be considered as sufficient compliance on the part of the assessee. Accordingly, we hold that the claim of the assessee cannot be denied in the absence of non- filing of necessary details to the prescribed authority as alleged by the AO. 10.4 It is also significant to note that the provisions as provided under sub- section (6) and (7) to section 194C of the Act are independent to each other and therefore they cannot be read in conjunction. In other words, non-compliance of the provisions of sub-section (7) to section 194C of the Act, the claim of the ITA no.95/AHD/2018 A.Y. 2013-14 5 assessee cannot be denied as there was the compliance on the part of the assessee for the provisions as provided under subsection (6) to section 194C of the Act. 10.5 In holding so we draw support and guidance from the order Jaipur ITAT in ITA No. 1113/JP/2018 in case of ACIT vs. Arihant Tarding Co. reported in 104 taxmann.com 336 wherein it was held as under: In the instant case, once the assessee is in receipt of PAN and has not deducted TDS, it has complied with the first statutory obligation cast upon him and the assessee cannot be penalized for non-deduction of TDS. The provisions of section 40(a)(ia) which are deeming fiction relating to non-deduction of TDS have to be read in the limited context of non- deduction of TDS and the same cannot be extended to ensure that even where the assessee complies with his statutory obligation not to deduct TDS on receipt of PAN, merely because the subsequent obligation in terms of filing of prescribed forms has not been complied with, the assessee should suffer disallowance of the expenditure. [Para 8] 10.6 In view of the above we are of the opinion that the order of the ld. CIT-A does not require any interference as far as the ground of appeal of the Revenue is concerned. Hence, the ground of appeal of the revenue is dismissed. 11. The next issue raised by the revenue is that learned CIT-A erred in deleting the addition made by the AO for Rs. 55,13,134.00 under the provisions of section 68 of the Act. 12. The assesse in the year under consideration has shown certain trading liabilities of Rs. 55,13,14.00 only. However, the assesse, on question by the AO about the identity of the creditors, failed to furnish the necessary details as required under section 68 of the Act. Therefore, the AO treated the same as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. 13. Aggrieved assessee preferred an appeal to the learned CIT-A who deleted the addition made by the AO by observing as under: ITA no.95/AHD/2018 A.Y. 2013-14 6 1 have carefully considered the facts of the case, assessment order and submission of the appellant. The AO has made addition of Rs. 55,13,134/- as the assessee could, not prove the identity and genuineness of the transporters, creditors outstanding as on 31.03.201 5. The appellant has submitted that it has incurred fright and direct expenses of Rs. 5,14,83,794/- out of which Rs. 56,42,574/- remained unpaid. The appellant has submitted that unpaid liability is hardly 11% and which has been subsequently paid by cheque to the transporters/ creditors. The appellant has submitted the list of transporters against whom expenditure of Rs. 5,09,69,209/- has been debited out of which Rs. 56,42,724/- has remained outstanding for payment. The appellant has contended that the payment has been made in the subsequent year and submit the evidences of payment made through bank account. The appellant has contended that section 68 cannot be invoked in case of creditors as it applies only to cash credit and relied upon the decision of Hon'ble Patna Tribunal in case of Vaghubar bar Singh Vs. DCIT (2017) and Chandigarh Tribunal in case of Ganesh Dass Jain Vs. ITO (201 7). It is seen that the AO has not doubted the expenditure of Rs. 5,09,69,209/- debited for the transport expenses but has added the amount outstanding u/s.68 of the I.T Act. The appellant has submitted the list of transporters whose payment was outstanding and evidences of payment made in the subsequent year from its ledger account. The document were forwarded to the AO who requested not to admit the additional evidences and submitted that genuineness claimed by the assesses could not be proved by ne additional evidences. The appellant has submitted that it has already provided details of creditors during course of assessment proceeding? and only subsequent payment details has been furnished which has only in the nature of supporting and therefore the same may be admitted in the nature of justice. I agree with the submission made by the appellant that the AO has not doubted the transport expenses claim but ha; added the outstanding transporter, creditor on the ground of identity and genuineness. The appellant has submitted the evidence that outstanding liability subsequently paid by cheque therefore identity beyond genuineness has been established. The Gujarat High Court in the case of CIT vs Ayachi Chandrasekhar Narsangji 221 Taxman 146 (Guj) has held the payment has subsequently been paid, genuineness cannot be doubted. In view of the above, addition made by the AO is deleted. The ground of appeal is allowed accordingly. 14. Being aggrieved by the order of the ld. CIT-A, the Revenue is in appeal before us. 15. The learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 16. We have heard the rival contentions of both the parties and perused the materials available on record. From the foregoing discussion, we find that the AO has treated the outstanding sundry creditors shown by the assesse as unexplained cash credit under section 68 of the Act in the absence of supporting details of the parties. However, on perusal of the order of the learned CIT-A, we find that it ITA no.95/AHD/2018 A.Y. 2013-14 7 was contended by the assesse that the list of the parties representing outstanding liabilities was furnished during the assessment proceedings. The assesse further has submitted the additional document showing the payment made to the outstanding creditors in the subsequent year. The learned CIT-A called for the remand report from the AO who did not doubt on the genuineness of the details furnished by the assesse but only contended that the document should have not been admitted by the learned CIT-A as there is contravention to the provisions of rule 46A of Income Tax Rule. However, on perusal of the grounds of appeal raised by the Revenue, we note that there is no grievance to the Revenue that the learned CIT-A erred in admitting the additional evidences. Accordingly, we hold that there was no contravention of the provisions of rule 46-A of Income Tax Rules as alleged by the AO in the remand report. At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT-A. Hence, we do not find any infirmity in the order of learned CIT-A and thus we uphold the same. Hence, the ground of appeal of the revenue is dismissed. 17. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 31/03/2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/03/2023 Manish