Commissioner Of Income Tax, Alwar v. Shri Ram Niwas Yadav

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 74 / 2015 Commissioner of Income Tax, Alwar ----Appellant Versus Shri Ram Niwas Yadav, Prop. Shri Krishna Freight Carrier, Bansur,Distt.-Alwar. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain withMs. Shiva Goyal For Respondent(s) : _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYASJudgment 11/10/2017 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the department and confirmed the orderof CIT(A). 2.This court while admitting the appeal on 24.01.2017 framedthe following question of law:- “Whether the Tribunal was legally justified indeleting of Rs. 80,71,910/- made on account ofnon deduction of TDS u/s.194C(2), 3(i) specificallywhen freight payments to the subcontractors aboveRs.50,000/- was to be disallowed as per Section40(a)(ia)?” 3. Counsel for the appellant Ms Parinitoo Jain has taken usto the order passed by AO wherein it has been observed as under:- “Income From Own Trucks:During theassessment proceedings details furnished revealedthat assessee I is owner of 4 trucks which have beenutilized for transport by himself in his proprietaryconcern M/s Shree Krishan Freight Carrier as well asother transport operators namely M/s PawanRoadlines, Gandhi Dham, Shree Balaji Roadlines,Mahendra Garh, Shree Ram Roadlines, Gandhi Dhamand such other parties. The assessee has furnishedconsolidated P & L A/c and during the assessmentproceedings separate profit and loss account for owntrucks as well as for other transport companies wereasked for. The separate Profit and Loss accountfurnished revealed that assessee has shown net lossof Rs. 1,22,457/- on account of running of 4 trucks.The detailed Profit and Loss Account filed alongwithletter dated 3.12.2009 was examined and theassessee was asked to furnish necessary details insupport of the expense claimed and also to producecomplete books of accounts and bills and vouchers insupport thereof.” TDS Income: On scrutiny of the records producedby the sub-contractors and the examination of thesub-contractors it is found that all the parties towhom transportation vehicles have been providedhave made TDS out of the payment made to thecontractor and this TDS has been made out of theadvances paid to the truck owner at the time ofloading of the vehicle which has nevern been paid orno credit has been allowed by the assessee to thesub-contractors. The following points are alsorelevant: a) In his statement recorded Shri Lekh Raj Sharmastated that at the time of loading of vehicle thedrivers part of the fare is advance which has beenmentioned in his copy of summary challan which wasissued by the assessee to him. In the summarychallan it is noticed that the concerrned parties hasdeduced TDS from the truck driver for which credithas been allowed to the assessee Shri Ram NiwasYadav as per TDS certificate issued in his favour. ShriLekh Raj Sharma in his statement has stated that theamount of TDS has not been refunded to hi. Thisposition is also applicable in other sub-contractors. b) The above facts regarding non refund of TDS arealso verifiable with the hand written note book of thewitness in respect of his truck No. RJ-32-GA-676 andRJ-32-GA-946. On these papers there is specificmention of TDS deduced by the concerned parties at the time of advance to the truck driver and receipthas been taken of the full advance before makingTDS. The assessee has claimed TDS of Rs.7,20,973/- which has been deduced from the sub-contractors and credit has been claimed by himwithout refunding the same to the sub-contractors. b) The above facts regarding non refund of TDS arealso verifiable with the hand written note book of thewitness in respect of his truck No. RJ-32-GA-676 andRJ-32-GA-946. On these papers there is specificmention of TDS deduced by the concerned parties at the time of advance to the truck driver and receipthas been taken of the full advance before makingTDS. The assessee has claimed TDS of Rs.7,20,973/- which has been deduced from the sub-contractors and credit has been claimed by himwithout refunding the same to the sub-contractors. As in the assessee’s case the entire receipts aresubject to TDS and during the year underconsideration the assessee has claimed TDS of Rs.720936/-, for which he has been issued TDScertificates by respective parties and the assesseehas claimed TDS credit for the same. This TDS hasbeen borne by sub-contractors, therefore a sum ofRs. 720936/- is added to the total income of theassessee. As the assessee has concealed income and furnishedinaccurate particulars of income, penalty u/s 271(1)(c) has been initiated. 4. She has also taken us to the order passed by CIT(A)wherein it has been held as under:- “3.The assessing officer while making the additionof Rs. 8071910/- u/s 40(a) (ia) of the income tax actmainly concentrated that form no. 15-1 required fornon deduction of TDS u/s 194C(2) of the income taxact, though has been obtained by the assesseebefore making the payment of freight from 50 partiesto whom payment of Rs. 8071910/- was made andall were submitted during the assessmentproceedings but has failed to file with competentauthority before the specified date. However, provision of section 194C(2) of the incometax act, is very much clear that if the sub contractorsubmits a declaration to the payer in form no. 15-I,than the payer will not deduct tax at source u/s 194Cof the income tax act. In the instant case, the payer(assessee) has obtained 15-I from the all 50 partiesand such forms were submitted during theassessment proceedings by the and were notdisputed by the assessing officer during theassessment proceedings. The payment to the sub-contractor had not been doubted by the AO. Hence,as per provision of this section assessee is not liableto decut TDS on the payments of freight of Rs.8071910/-. Since, there is no liability to deduct TDSu/s 194C(2) of the income tax act, than disallowanceu/s 40(a)(ia) can not be made. Hence, the action of the AO is totally unlawful and unjustified. So far asnon filing of form No. 15J with the competentauthority within the stipulated period is concerned, itis a procedural matter and technical matter and onsimply a such basis, disallowance u/s 40(a)(ia)cannot be made. In this regard, we rely upon the decision of Hon’bleITAT Ahmedabad Bench “A” Ahemdabad in case ofValibhai Khan Bhai Mankad Ahnmedbad Vs. Dy. CIT(OSD). Ahmedbad (ITA No. 2228/ahd/2009) dated29/04/2011 and it was held that: “assessee had obtained from No. 15-I from the subcontractors whose contents are not disputed orwhose genuineness is not doubted, than assessee isnot liable to deduct tax from the payments made andwhen once assessee is not liable to deduct tax u/s194C, then addition u/s 40(a) (ia) cannot be made-Thus submission of From No. 15J is only a proceduralformality as it takes place only after the contractorhas released the payment to the sub-contractor afterthe contractor has released the payment to the sub-contractor after receipt of form No. 15-I and thatboth the conditions cannot be satisfied together sinceboth the events cannot take place simultaneously atthe same time- It has also been held that noncompliance with the requirement of submission ofform No. 15J become merely a technical default-Accordingly tribunal have deleted the addition byholding that was not liable to be deducted from thepayment made to sub-contractor since form No. 15-Iwere duly submitted by the sub-contractor” Hence, in view of the above, the disallowance Rs.8071910/- u/s 40(a)(ia) of the income tax act, fornon deduction of TDS u/s 194C(2) of the income taxact by the assessing officer is fully unlawful andunjustified and may kindly be deleted. 3.3 I have considered the facts of the case andsubmission of the ld. AR carefully. I have also gonethrough the case laws relied upon by ld. From thefact of the case, the submissions given by theassessee and judicial decisions relied upon in thiscase, it is seen that AO’s action for disallowance ofRs. 80,71,910/- u/s 40(a)(ia) totally unlawful andunjustified as the assessee not liable to deduct TDSu/s 194C(2) of the income tax act as (I) First year oftax audit u/s 44AB of the income tax act (Previousyear assessee was not liable to tax audit because ofpermissible limit of gross receipts Rs. 40 Lacs), (ii)Discharging of liability for obtaining form no. 151before making the payment to sub contractor againstfreight to 50 parties in compliance of provision of section 194C(2) for non deduction of TDS. The delayin submission of form no. 15J to the competentauthority is a procedural formality, (iii) Not bringingany material, oral or written agreement between theassessee in the recipients of goods for transportationon record during the assessment proceeding to provethe relation of sub contract and (iv) The payment tothe subcontractor has not been doubted by the AO.Therefore, my view is in conformity with the decisiontaken by Hon’ble Punjab and Haryana High Court incase of CIT vs Bhagwati Steels and Hon’ble ITATAhmedabad Bench “A” Ahmedabad in case of ValibhaiKhan Bhai Mankad Ahmedabad vs Dy. CIT (OSD),Ahmedabad referred to by the Id AR which has heldthat 1. There was no contract between the assesseeand the recipients of goods for transportation 2.If theassessee has obtained form no. 15-I then it issubstantial compliance of the provision of section194C. Hence, I hereby delete the total disallowanceof Rs. 8071910/- made u/s 40(a) (ia) of the incometax act for non compliance of provision of section194C (2) of the income tax act.” 5.She has also pointed out the observation made by theTribunal which reads as under:-Tribunal which reads as under:- “After going through rival submission and material onrecord, we find that Assessing Officer was not justified inmaking disallowance of Rs. 80,71,910/- under provisionsof Section 40(a) (ia) of the Act. Assessee was not liable todeduct TDS under the provisions of Section 194C(2) of theIncome Tax Act as: I.First year of tax audit u/s. 44AB of the Act(previous year assessee was not liable to tax auditbecause of permissible limit of gross receipt of Rs.40 lacs), Ii.Discharging of liability for obtaining Form No.151 before making payment to Sub-Contractoragainst freight to 50 parties in compliance ofprovisions of Section 194C(2) for non deduction ofTDS. The delay in submission of form No. 15J to thecompetent authority was procedural formality, iii. There is no material, oral or written agreementbetween assessee in recipients of goods fortransportation on record during assessmentproceedings to establish relation of Sub-contractors, Iv.Payment to Sub-contractor has not beendoubted by Assessing Officer. In view of above, CIT(A) was justified in deleting theaddition in question. Same is upheld.” 6.She has relied on Rule 29-D of the Income Tax Act which reads as under:- “[Form of declaration under second proviso/thirdproviso to clause (i) of sub-section (3) of section194C.* 29D. (1) The declaration under the second proviso toclause (i) of sub-section (3) of section 194C by asub-contractor shall be in Form No. 15-I and shall beverified in the manner indicated therein by such sub-contractor. iii. There is no material, oral or written agreementbetween assessee in recipients of goods fortransportation on record during assessmentproceedings to establish relation of Sub-contractors, Iv.Payment to Sub-contractor has not beendoubted by Assessing Officer. In view of above, CIT(A) was justified in deleting theaddition in question. Same is upheld.” 6.She has relied on Rule 29-D of the Income Tax Act which reads as under:- “[Form of declaration under second proviso/thirdproviso to clause (i) of sub-section (3) of section194C.* 29D. (1) The declaration under the second proviso toclause (i) of sub-section (3) of section 194C by asub-contractor shall be in Form No. 15-I and shall beverified in the manner indicated therein by such sub-contractor. (2) The declaration referred to in sub-rule (1) may befurnished to the contractor responsible for paying orcrediting any sum to the account of the sub-contractor before the event of such sum beingcredited or paid to such sub-contractor. (3) The particulars under the third proviso to clause(i) of sub-section (3) of section 194C to be furnishedby a contractor responsible for paying any sum tosuch sub-contractor shall be in Form No. 15J. (4) The particulars referred to in sub-rule (3) shall befurnished,— (i)to the Commissioner of Income-tax, sodesignated by the Chief Commissioner of Income-tax,within whose area of jurisdiction, the office of thecontractor referred to in sub-rule (3) is situated; (ii)on or before the 30th June following thefinancial year.]” 7.The contention which has been raised regarding Rule 29-D was never raised before the Tribunal, in that view ofthe matter it will not be appropriate to allow her to raise thispoint at this stage when no question was framed in thisregard and this contention is rejected. 8.We are in complete agreement with the view taken by the Tribunal. The issue is answered in favour of the assessee and against the department. 9.The appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. B.M.Gandhi/Gourav-53