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It is fit case for remand if AO omits to consider relevant documents produced before the CIT(A) & despite directions from the latter to consider the same: HC

 2019-TIOL-2019-HC-MAD-IT

IN THE HIGH COURT OF MADRAS

Tax Case Appeal No.589 of 2019

MR DILIP KUMAR
PROP M/S ANMOL TRANSPORT, CHENNAI-1

Vs

THE ASSISTANT COMMISSIONER OF INCOME TAX
NON CORPORATE CIRCLE-11, CHENNAI

T S Sivagnanam & V Bhavani Subbaroyan, JJ

Dated: August 16, 2019

Appellant Rep by: Mr A S Sriraman
Respondent Rep by: 
Ms V Pushpa, SC

Income Tax – Sections 194C(7) & 254(2)

Keywords – Freight charges – Miscellaneous application

THE assessee had filed the return for the AY 2012-13 declaring a total income of Rs 21.10 lacs. During the scrutiny assessment, the AO pointed out that the assessee had shown lorry expenses payable as per the financial statements. The details, were called for by the AO which were furnished by the assessee and the copies of the ledgers were also produced. The AO came to the conclusion that the assessee did not furnish the particulars for the expenses incurred and hence, a sum of Rs 21.12 lacs was added back to the returned by passing the assessment order. On appeal, the CIT(A) call for a remand report from the AO and on remand report basis he dismissed the appeal of the assessee. Further, on appeal, second appeal, the Tribunal dismissed the appeal as well as the miscellaneous application of the assessee.

On appeal, the High Court held that,

Whether it is a fit case for remand if AO omits to consider the documents as produced by the assessee before the CIT(A) and were earlier remanded to him – YES: HC

++ when the matter was sent back to the AO no such exercise was conducted by him, for considering the documents produced by the assessee for the first time before the CIT(A). The Tribunal, though recorded the submissions of the assessee that they produced the details of the truck owners by giving their PAN particulars and registration numbers of the trucks. when the Tribunal dismissed the appeal by the order, it did not go into the aspect, but was largely guided by the month and year, in which, the amounts were settled by the assessee. Though this mistake was pointed out by the assessee before the Tribunal by filing the miscellaneous application, but the Tribunal did not inclined to exercise its jurisdiction. Thus, this court is of the view the AO should re-examine the correctness of the details, produced by the assessee in the form of freight charges paid by them, before the CIT(A), though not in the scrutiny assessment;

++ this issue was considered by this court in the case of CIT Vs. M/s.Sri Parameswari Spinning Mills Private Limited wherein it was held “ Section 194C(6) & (7) are independent of each other and cannot read together to attract disallowance under Section 40(a)(ia) read with Section 194C of the Act.” Even assuming that the assessee had not furnished the particulars as required u/s 194C(7) in the prescribed form, the maximum that could be done is to impose a fine of Rs.200/- for every day of such non compliance. Therefore, this court is inclined to set aside the orders passed by both the Tribunal as well as the CIT(A) are set aside and the matter is remanded to the AO to consider the details furnished by the assessee for payment of freight charges and after satisfying himself about the veracity, admissibility and correctness of the details as furnished by the assessee, shall redo the assessment in accordance with law.

Case Remanded

Case followed:

CIT Vs. M/s.Sri Parameswari Spinning Mills Private Limited [TCA.No. 601 of 2018 dated 01.7.2019]

JUDGEMENT

Per: T S Sivagnanam:

We have heard Mr.A.S.Sriraman, learned counsel appearing for the appellant – assessee and Ms.V.Pushpa, learned Standing Counsel, accepting notice for the respondent – Revenue.

2. This appeal, filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 30.6.2017 made in ITA.No.928/Mds/2017 on the file of the Income Tax Appellate Tribunal, Chennai ‘B’ Bench (for brevity, the Tribunal) for the assessment year 2012-13.

3. The assessee has filed this appeal by raising the following substantial questions of law :

“i. Whether the provisions of Section 37(1) of the Act was properly applied in making the disallowance of expenses booked for lorry hire, which were incurred in connection with the business of goods transporters/carriers and were booked in computing the taxable total income on the accepted method of accounting namely mercantile/accrued system of accounting consistently followed while recording the perverse findings of facts in para 6 of the Appellate Tribunal’s order dated 30.6.2017 ?

ii. Whether the Appellate Tribunal is correct in overlooking the correct facts namely the settlement of accounts of the lorry owners in the following month namely April 2012 proving perversity in recording the findings of facts while sustaining the disallowance of claim for deduction of lorry hire charges booked in the previous year relating to the assessment year under consideration while computing the taxable total income? And

iii. Whether the Appellate Tribunal is correct in overlooking the provisions of Section 194C(6) of the Act, which exempts the payer from making deduction of tax at source pertaining to lorry hire charges upon furnishing/on the availability of the permanent account numbers of the payee, namely the lorry owners while sustaining the disallowance of the claim for deduction of lorry hire charges despite the availability of the voluminous data including the truck numbers and permanent account numbers in relation thereto?”

4. The assessee is the proprietor of an organization dealing in goods transport and is acting as a carrier. The assessee filed the return of income for the assessment under consideration namely 2012-13 on 30.9.2012 declaring a total income of Rs.21,10,190/-. The return was processed under Section 143(1) of the Act on 06.12.2012. The case was selected for scrutiny and a notice under Section 143(2) of the Act dated 23.9.2013 was issued. During the course of scrutiny assessment, the Assessing Officer pointed out that the assessee had shown as lorry expenses payable amounting to Rs.21,12,000/- as per the financial statements submitted. The details, which were called for by the Assessing Officer, were furnished and the copies of the ledgers were also produced. The Assessing Officer came to the conclusion that the assessee did not furnish the particulars for the expenses incurred and hence, a sum of Rs.21,12,000/- was added back to the returned income by passing the assessment order dated 14.3.2015.

5. As against the said assessment order dated 14.3.2015, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals)-13, Chennai [for brevity, the CIT(A)]. Along with the appeal petition, the assessee produced the details of freight charges paid by them with the names of the persons, to whom, the amounts were paid, their permanent account numbers (PAN), registration numbers of the trucks, etc. The CIT(A), on going through the documents placed before him, which were, admittedly, not placed before the Assessing Officer during the scrutiny assessment, thought fit to call for a remand report from the Assessing Officer.

6. In turn, the Assessing Officer submitted a remand report along with the letter dated 20.2.2017. One of the statements made in the said remand report was that the vouchers produced by the assessee showed that all the payments were cleared in the month April 2014 and ultimately, the Assessing Officer opined that the vouchers were self made and an afterthought. The remaining portion of the remand report pertains to the reasons as to why the said sum of Rs.21,12,000/- was added back to the returned income during the scrutiny assessment. The CIT(A) extracted the remand report and held that the assessee was not able to substantiate the claim towards lorry expenses before the Appellate Authority despite opportunity and in spite of another opportunity before the Assessing Officer at the time when the remand report was called for. The appeal was dismissed by the CIT(A) by order dated 14.3.2017.

7. Challenging the order passed by the CIT(A), the assessee filed an appeal before the Tribunal. It was argued before the Tribunal that the assessee produced PAN particulars of each of the lorry owners and that though the details were given, the Assessing Officer came to an erroneous conclusion that those vouchers were self made. The Tribunal, taking into consideration the findings rendered by the Assessing Officer in the remand report that the amounts were cleared by the assessee in April 2014 i.e. nearly after two years after the end of the relevant previous year and taking note of the net profit earned by the assessee, disbelieved the stand of the assessee and dismissed the appeal by order dated 30.6.2017.

8. Thereafter, the assessee filed a miscellaneous application under Section 254(2) of the Act by filing MP.No.287/Chny/2017 by pointing out that the Assessing Officer, while submitting his remand report, committed a factual mistake stating that the accounts were settled in April 2014 when the fact remains that they settled the accounts in April 2012 and that this had triggered a wrong decision by the Tribunal. However, the Tribunal dismissed the said miscellaneous application vide order dated 16.2.2018 stating that there was no mistake in the order passed by the Tribunal and that the assessee is seeking to revise the order passed by the Tribunal. This is how the assessee is before us challenging the substantive order passed by the Tribunal dated 30.6.2017.

9. The Revenue is precluded from canvassing any of the grounds, which were dealt with by the Assessing Officer in the scrutiny assessment dated 14.3.2015. This is so because the CIT(A), not being satisfied with the additional evidence produced by the assessee for the first time before him, required them to be examined by the Assessing Officer and thought fit to call for a remand report. Therefore, what is required to be seen is as to whether the Assessing Officer, on such direction issued by the CIT(A), conducted a thorough exercise to examine the documents, which were produced by the assessee for the first time before the CIT(A).

10. Admittedly, the assessee did not have any opportunity before the Assessing Officer when such a remand report was called for. On a perusal of the remand report furnished by the Assessing Officer along with the letter dated 20.2.2017, we find that there was no finding rendered by the Assessing Officer as to the veracity, admissibility and correctness of the details produced by the assessee before the CIT(A), on which, the remand report was called for. Therefore, the exercise, which should have been adopted by the Assessing Officer, is to examine the details and if necessary, call for at least a few of the lorry owners, whose details such as PAN particulars, registration numbers of the trucks were furnished and then should have come to a conclusion as to whether those documents would substantiate the stand taken by the assessee.

11. We find that no such exercise was conducted by the Assessing Officer while the matter was sent back to him for considering the documents produced by the assessee for the first time before the CIT(A). We also find in the remand report, much of which was the view of the Assessing Officer and the scrutiny assessment was incorporated though in a different language. The Tribunal, though recorded the submissions of the assessee that they produced the details of the truck owners by giving their PAN particulars and registration numbers of the trucks, etc., when the Tribunal dismissed the appeal by the impugned order, it did not go into the said aspect, but was largely guided by the month and year, in which, the amounts were settled by the assessee i.e April 2014. This, according to the assessee, is a typographical error in the remand report and the assessee produced records to show that the payments were made in April 2012 itself. Though this mistake was pointed out by the assessee before the Tribunal by filing the miscellaneous application, the Tribunal was not inclined to exercise its jurisdiction. Thus, taking into consideration the above factual position, we are of the considered view that the Assessing Officer should re-examine the correctness of the details, produced by the assessee in the form of freight charges paid by them, before the CIT(A), though not in the scrutiny assessment.

12. Ms.V.Pushpa, Standing Counsel appearing for the Revenue points out that Sub-Section (7) of Section 194C of the Act requires that a 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 authorized by it, such particulars, in such form and within such time as may be prescribed, which the assessee failed to do. Therefore, unless and until the assessee complies with the condition stipulated in Sub-Section (7) of Section 194C of the Act, the assessee will not be entitled to claim deduction under Section 194C(7) of the Act.

13. This very issue was considered by us in the decision in the case of CIT Vs. M/s.Sri Parameswari Spinning Mills Private Limited [TCA.No. 601 of 2018 dated 01.7.2019] and we rejected such a contention raised by the Revenue in the following terms :

“6. We find Sub-Section (6) of Section 194C is the provision which grants benefit to the assessee. This benefit comes with the condition of compliance of Sub-Section (7) of Section 194C, which is the procedure to be followed. The question would be as to whether if the procedure under Section 194C(7) has not been adhered to by the assessee would it be fatal and thereby disentitle the assessee to the benefit under sub-Section 6 of Section 194C.

7. It is a submission of Mr.A.S.Sriraman, learned counsel for the appellant/assessee that Section 31A deals with statement of deduction of tax under Sub-Section (3) of Section 200 referring to Section 31(A)(4)(vi). It is submitted that the deductor at the time of preparing statement of tax, deductor shall furnish particulars of amount paid or credited on which tax was not deducted in view of the compliance of provision of Sub-Section (6) of Section 194C by the payee. Section 234(E) was relied to state that if the statement is not filed, a fee of Rs.200/-for every day, during which the failure continues, has to be paid by the assessee. Therefore, it is the submission that the non filing of a statement in terms of Sub-Section (7) of Section 194C cannot take away the benefit which will accrue to the assessee under Sub-Section (6) of Section 194.

………

10. Mr.A.S.Sriraman, learned counsel for the assessee referred to the decision of the ITAT Jaipur in the case of ACIT Vs. Arihant Trading Co. reported in [176 ITD 397 (Jaipur-Tri)] = 2019-TIOL-888-ITAT-JAIPUR. In the said decision it has been held that Section 194C(6) & (7) are independent of each other and cannot read together to attract disallowance under Section 40(a)(ia) read with Section 194C of the Act.”

14. Even assuming that the assessee had not furnished the particulars as required under Sub-Section (7) of Section 194C of the Act in the prescribed form, the maximum that could be done is to impose a fine of Rs.200/- for every day of such non compliance. Therefore, this procedural law, as prescribed under Sub-Section (7) of Section 194C of the Act cannot take away the benefit, which will accrue to the assessee under Sub-Section (7) of Section 194C of the Act. For the above reasons, we are inclined to remand the matter to the Assessing Officer for a fresh consideration.

15. In the result, the above tax case appeal is allowed, the orders passed by both the Tribunal dated 30.6.2017 and 16.2.2018 as well as the CIT(A) dated 14.3.2017 are set aside and the matter is remanded to the Assessing Officer to consider the details furnished by the assessee for payment of freight charges, issue notice to the assessee, afford them an opportunity and if deems fit, summon a few of the transport operators and then, after satisfying himself about the veracity, admissibility and correctness of the details furnished by the assessee, shall redo the assessment in accordance with law. In the light of the remand order passed by us, the substantial questions of law are left open. No costs.

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