Income Tax Appellate Tribunal - Pune
Vijay Siddhraj Bashte,, Ratnagiri vs Assessee on 12 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
Before Shri Shailendra Kumar Yadav, Judicial Member
and Shri R.K. Panda, Accountant Member
ITA No. 1127/PN/2014
(Assessment Year : 2011-12)
Shri Vijay Siddhraj Bashte,
C/o. Yogesh Transport Company,
774, Udyamnagar,
Ratnagiri - 415612
PAN No. ABAPB5121C .. Appellant
Vs.
Addl.CIT, Ratnagiri Range,
Ratnagiri. .. Respondent
Assessee by : Shri Nikhil Pathak
Revenue by : Shri B.C. Malakar
Date of Hearing : 07-08-2014
Date of Pronouncement : 12-08-2014
ORDER
PER R.K. PANDA, AM :
This appeal filed by the assessee is directed against the order dated 19-03-2014 of the CIT(A), Kolhapur relating to Assessment Year 2011-12.
2. Grounds of appeal No.1 to 4 by the assessee read as under :
"On facts and in law,
1. The learned CIT(A) erred in confirming the disallowance of Rs.28,05,995/- u/s 40(a)(ia) of the Act.
2. The learned CIT(A) erred in holding that the disallowance made u/s 40(a)(ia) was justified since the assessee had furnished incorrect PAN of the deductees and therefore, the assessee ought to have deducted TDS in respect of the transport charges paid of Rs.28,05,995/-.2
3. The learned CIT(A) failed to appreciate that the assessee had furnished the correct PANs of the deductees in the course of asst. proceedings and therefore, the assessee was not required to deduct TDS in respect of the transport charges of Rs.28,05,995/- u/s. 194C and accordingly, the disallowance made, u/s 40(a)(ia) should have been deleted.
4. The learned CIT(A) ought to have appreciated that the assessee had duly complied with the provisions of Section 104C and hence, the assessee was not required to deduct TDS on the transport charges of Rs. 28,05,995/- and accordingly, the disallowance made should have been deleted."
2.1 Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of Transport contractor/Transporter. He filed his return of income on 19-04-2012 declaring total income at Rs.13,53,520/-. During the course of assessment proceedings the Assessing Officer noted from the details furnished by the assessee that the assessee has received transport charges of Rs.3,41,32,614/- besides hiring charges and unloading charges. The assessee had paid transport charges of Rs.2,65,14,217/-. Since the assessee has not deducted TDS he asked the assessee to explain why provisions of section 40(a)(ia) should not be invoked. It was explained by the assessee that the owners as well as transport operators had submitted their PAN Nos. and therefore as per provisions of section 194C (6) TDS was not required to be made. The assessee filed party-wise list of details of truck owners, addresses, truck nos. PAN Nos. and amounts paid. From the various details furnished by the assessee, the Assessing Officer noted that in a number of cases the PAN Nos. mentioned by the assessee are not correct. He observed that in some cases PAN Nos. had been given without proper verification and in a casual manner by offering either wrong PAN Nos. or wrong name.
32.3 The Assessing Officer, therefore, gave an opportunity to the assessee. The list furnished by the assessee has been reproduced at pages 4 to 6 of the assessment order. Assessee was asked to explain the above anomoly noticed. It was replied that in some cases by mistake wrong PAN are typed. In some cases, the vehicle was transferred to other person who operates the vehicle but his name in the RC record was not immediately changed and such transport operator has furnished his PAN. The assessee has furnished correct PANos. along with his reply. The assessing officer noticed that even now in respect of some PANos. the same were not furnished correctly and also the explanation was not acceptable. Assessee was again show caused and was informed that since he has furnished wrong PAN in the initial submission it was presumed that correct PAN of the parties were not obtained and correct PAN subsequently given is an afterthought. Therefore, provisions of section 194C(6) were not complied. The assessing officer also pointed out that as per Rule 31 A(4) the deductor at the time of preparing statements of tax deducted, shall furnish particulars of amount paid or credited on which tax was not deducted. Further, as per section 206AA(6) where the PAN provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his PAN to the deductor. Further, the assessee had mentioned that in respect of persons from whom TDS was not made, form nos. 151 and 15J were obtained and submitted with CIT-II, Kolhapur. The assessing officer enquired from the office of CIT-II and found that forms submitted with the CIT-II were those containing inaccurate PAN and, therefore, in effect, the forms were not submitted. On these facts, assessing officer inferred that since the 4 forms were not submitted properly, the assessee was liable to make TDS from payment and having failed to do so, the amount of this payment is disallowable under section 40(a)(ia). Out of the list furnished by the assessee, the amount involved in defective cases was Rs.28,05,995/- which was disallowed by the assessing officer.
3. Before the CIT(A) it was submitted that the disallowances made u/s.40(a)(ia) was without properly appreciating the facts. It was argued that the provisions are not at all applicable since the assessee has obtained a declaration in Form 15I from truck company and that mistakes in PAN or spelling of deductee were mainly technical in nature. 3.1 However, the Ld.CIT(A) was not satisfied with the explanation given by the assessee and upheld the disallowance made by the Assessing Officer. He noted that the assessee did not comply with the provisions of section 194C by making TDS from the payments. The Assessing Officer has established that the information submitted to CIT-II contain incorrect PAN Nos. In other cases and as per section 206AA(6) where the PAN Nos. is incorrect, it is deemed that PAN has not been furnished. He, therefore, held that in the case of wrong PAN Nos. the assessee is deemed to have not submitted Form No.15 to the CIT and therefore, he violated the provisions of section 194C of the I.T. Act. 3.2 Aggrieved with such order of the CIT(A) the assessee is in appeal before us.
4. The Ld. Counsel for the assessee reiterated the same arguments as made before the Assessing Officer and the CIT(A). He submitted that 5 subsequent to noticing the incorrect PAN Nos., the assessee filed the details of correct PAN Nos. of all the recipients before the Assessing Officer. Although the Assessing Officer accepted the PAN Nos. in respect of persons where wrong spelling of PAN mentioned due to clerical mistakes, change in name due to marriage and wrong spelling of name is mentioned due to clerical mistakes, he, however, did not accept the rectified PAN Nos. given in case of 16 persons out of the 17 persons mentioned in the list at Page 12 of the assessment order. He submitted that the assessee has given incorrect PAN Number in the rectified statement only in the case of Shri Balbir Farman Singh and the amount involved is Rs.82,170/-. Therefore, at best, only Rs.82,170/- can be disallowed and not the amount of Rs.28,05,995/-.
5. The Ld. Departmental Representative on the other hand heavily relied on the order of the Assessing Officer and the CIT(A). He submitted that the assessee, in a very casual approach, had filed the details of PANs giving incorrect PAN Nos. for which the disallowance was made. He has not given any satisfactory explanation as to why those were not given correctly. Referring to the order of the CIT(A) he submitted that he has passed a very reasoned order that requires no interference. He accordingly submitted that the order of the CIT(A) should be upheld.
6. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We find on being questioned by the Assessing Officer the assessee furnished the party-wise details of the 6 truck owners, addresses, truck numbers, PAN numbers, amount paid etc., the details of which are appearing at Para 3.2 of the assessment order (pages 4 to 6 of the assessment order). We find the Assessing Officer on verification of the PAN numbers of the truck owners from the AST on online maintained at the Income Tax Office, noted that in a number of cases of transporters/truck owners, the PAN Nos. were not correct or the PAN Numbers had been given without proper verification and in a casual manner by furnishing either wrong PAN numbers or wrong names. We find on being questioned by the Assessing Officer the assessee furnished the list of truck owners along with PAN Numbers and other details. We find the Assessing Officer categorised such numbers into six categories. He allowed the claim of the assessee for non deduction of TDS in case of persons where wrong spelling of names were mentioned due to clerical mistakes, wrong spelling of PAN mentioned due to clerical mistakes and change in name due to marriage. He, however, did not accept the list given by the assessee in the case of persons where PAN numbers of transport operators were subsequently rectified but originally not given correctly. Similarly, he disallowed the claim of the assessee where wrong PAN Numbers were given originally and in one case, i.e. in the case of Shri Ashish Sham Talathi he noted that neither the PAN nor the name was included in the list submitted.
6.1 It is the submission of the Ld. Counsel for the assessee that only in one case, i.e. Shri Balbir Farman Singh, the PAN Number was wrongly given initially as well as in the rectified statement and therefore only to 7 this extent the disallowance can be made u/s.40(a)(ia). However, in all other cases the Assessing Officer has not pointed out any mistake in the PAN Numbers, therefore, he cannot have two sets of standards. 6.2 After going through the details furnished by the assessee, we find the action of the Assessing Officer is not justified. When he has accepted the rectified PAN Numbers in case of certain persons due to wrong spelling of names mentioned due to clerical mistakes, wrong spelling of PAN Numbers or change in name due to marriage, we fail to understand how he can deny the assessee the same benefit where the assessee had rectified the PAN Numbers of the transport operators subsequently who had given the wrong PAN Numbers originally. This approach of the Assessing Officer in our opinion is not correct. However, from the details furnished by the assessee, we find in the case of Shri Balbir Farman Singh, PAN Number given originally as well in the rectified statement was wrong and therefore the amount paid to Shri Balbir Farman Singh amounting to Rs.82,170/- has to be disallowed u/s.40(a)(ia) for not giving the correct PAN Number. In this view of the matter, the disallowance made at Rs.28,05,995/- is restricted to Rs.82,170/- . The grounds raised by the assessee are accordingly partly allowed.
7. Grounds of appeal No.5 to 7 by the assessee read as under :
"5. The learned CIT(A) erred in confirming the disallowance of Rs.1.1,32,445/- u/s 40A(2)(b) in respect of the transport charges paid by the assessee to his relatives.
6. The learned CIT(A) erred in holding that the assessee had paid excessive transport charges to his relatives and therefore, the disallowance made by the A.O. @ 15% of total transport charges paid to the relatives was justified.8
7. The learned CIT(A) failed to appreciate that the assessee had not paid any excessive transport charges to his relatives and accordingly, the disallowance made on an adhoc basis should be deleted."
7.1 Facts of the case, in brief, are that from the details furnished by the assessee the Assessing Officer noted that the assessee has made payments towards transport charges to various persons covered u/s.40A(2)(b) of the I.T. Act. The Assessing Officer, therefore, asked the assessee to give a comparative chart of transportation charges paid to third parties, vis-a-vis to the related persons. The assessee filed the details of transportation charges paid to others, vis-a-vis the related parties. From the details furnished by the assessee, the Assessing Officer noted that the assessee has paid transportation charges of Rs.1,93,49,440/- to outside parties and Rs.75,49,633/- to parties covered u/s.40A(2)(b) of the I.T. Act. The payment of road transportation charges to related parties was to the extent of 28.12% and the same were paid to Dilip S. Bashte (brother of the assessee) Shri Prasad Bashte and Kunaal Bashte (Sons of the assessee) and Mrs. Madhura Bashte (Wife of the assessee). To ascertain the reasonableness of the transportation charges paid to the related parties, the Assessing Officer asked the assessee to give the details of rate paid to the third parties, vis-a-vis to persons covered u/s.40A(2)(b) of the I.T. Act. In absence of any details given by the assessee, the Assessing Officer held that this is nothing but bifurcation of segregation of income in different hands to avoid proper payment of tax. He further noted that none of the sons of the assessee is filing Income Tax returns as submitted by the assessee. Since the assessee did not furnish any satisfactory explanation the Assessing 9 Officer held that the payments made towards transportation charges to the related parties covered u/s.40A(2)(b) of the Act is more than adequate in as much as unreasonable and in contravention to provisions of section 40A(2)(b) of the I.T. Act. He, therefore, disallowed 15% of such payments made to the aforesaid persons amounting to Rs.11,32,445/- as excess and unreasonable payment not pertaining to the business expenditure.
8. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer by observing as under :
"14. On these facts it is seen that appellant has not furnished details of payments made to family members trip wise and also to outside persons to establish that rates paid to each of these categories are comparable. Appellant has also not furnished at least some sample cases of transport job done by him to establish that whenever the payments to family members were made at higher rate, the destination of the delivery was difficult or at remote places. Hence, appellant's contention is not supported by any data. These details were specifically asked by the assessing officer. In fact, he has admitted in the submission made during appellate proceedings that these data are not available. Appellant has also relied on several decisions of various authorities. However, first he has to establish the case with factual figures of supporting data in which he has failed. Therefore, the disallowance made by the assessing officer is confirmed and the ground taken by the appellant is rejected."
8.1 Aggrieved with such order of the CIT(A) the assessee is in appeal before us."
9. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. There is no dispute to the fact that the assessee has paid transportation charges to outsiders as well as to related persons. The assessee has not given any details to justify trip-wise payment paid to the related parties as compared to the outsiders 10 as reasonable. The submission of the Ld. Counsel for the assessee that whenever the payments to family members were made at higher rate the destination of the delivery was difficult or at remote places is not borne out from records or with any evidence. Therefore, invoking the provisions of section 40(A)(2)(b) of the I.T. Act by the Assessing Officer and upheld by the CIT(A) is justified. However, considering the fact that the Assessing Officer has also not brought out any comparative case and the disallowance made by the Assessing Officer at 15% of the transportation charges being on adhoc basis appears to be on the higher side, therefore, we restrict such disallowance to 7.5% of the total payment. Thus, the disallowance is restricted to Rs.5,66,222/- as against Rs.11,32,445/- disallowed by the Assessing Officer and upheld by the CIT(A). The grounds raised by the assessee is accordingly partly allowed.
10. In the result, the appeal filed by the assessee is partly allowed.
Pronounced in the open court on 12-08-2014.
Sd/- Sd/-
(SHAILENDRA KUMAR YADAV) (R.K. PANDA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune Dated: 12th August, 2014
Satish
Copy of the order forwarded to :
1. Assessee
2. Department
3. The CIT(A), Kolhapur
4. The CIT, Kolhapur
5. The D.R, "A" Pune Bench
6. Guard File
By order
// True Copy //
Senior Private Secretary
ITAT, Pune Benches, Pune