IN INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D , KOLKATA (Before Shri N.V.Vasudevan, J.M. &Dr.A.L.Saini, A.M.) ITA No. 623/Kol/2016 : Asstt. Year : 2010-11 Babu Bhai Patel Vs Joint Commissioner of Income PAN: AETPP 6023R Tax, Range-27 P.O C/o D J Shah & Co. Khanjanchak, Dist Purba Kalyan Bhavan, 2 Elgin Road, Medinipur PIN 721602 (WB). Kol-20. (APPELLANT) (RESPONDENT) Assessee by : Shri: Miraj D.Shah, ld.AR Department by: Shri S.M Sarforozut Touhead, JCIT, ld.DR Date of Hearing : 21-09-2016 Date of Pronouncement:-19-10- 2016 ORDER Per Dr. A.L.Saini, A.M.: captioned appeal filed by assessee, pertaining to assessment year 2010-11, is directed against order passed by Commissioner of Income-tax (Appeals)-7, Kolkata in Appeal No. 457/CIT(A)-7/Range-27/14-15, dated 27-01- 2016, which in turn arises out of order passed by Assessing Officer u/s. 143(3) of Income-Tax Act, 1961 (in short, Act),dated 19-03-2013. 2. facts of case are stated in brief. assessee company furnished its return of income for assessment year 2010-11 on 30-09--2010 for total income of Rs.6,31,930/-. return was duly processed u/s. 143(1) of Act. Subsequently, case was selected for scrutiny u/s. 143(3) of Act and notices u/s. 143(2)/142(1) were issued on 28.09.2011 and 18.01.2012 respectively. ITA No. 623/Kol/2016 Babu Bhai Patel 1 Assessing Officer has completed assessment U/s 143(3) of Act, by making two additions which are explained below. Assessing Officer made addition of Rs. 3,61,633/- observing that assessee had made payments on single day but has shown payments on different dates only to avoid provisions of section 40A(3) of Act. AO also made addition of Rs.6,69,560/- stating that assessee had made gross payment of Rs.6,69,560/- to M/s Kajal Roadways for carrying in goods purchased by him from Gujrat. As per section 194C, assessee was liable to deduct tax at source on these payments as prescribed in Act. Since assessee has failed to deduct tax at source on these payments, total payment of Rs. 6,69,560/- is liable to be disallowed as per provisions of section 40 (a) (ia) of Act. 3. Aggrieved from order of Assessing Officer, assessee filed appeal before Commissioner of Income-tax (Appeals), Kolkata, who has also confirmed action of Assessing Officer by observing following:- 2.2 I have gone through submissions made by appellant and assessment order. Though appellant has stated that payments were made to drivers it was noticed that bills were issued regularly by Kajal Roadways, commission agent. terms and conditions of transport were also clearly printed behind receipts. As per terms and conditions delivery of goods should be taken from Company's Godown within seven days of arrival failing which godown rent 00.05 paisa for 1 kg. or part thereof will be charged. From terms and conditions of transport receipts it is clearly evident that payment is covered by section 194C of I.T. Act for deduction of tax at source. Though A/R of appellant stated that payments were made to drivers transport receipts furnished before me clearly show that payments were made to Kajal Roadways through drivers or signatory whoever has received payments. appellant is legally bound to deduct tax at source u/s 194C but failed to deduct same. However appellant contended that out of total amount of ITA No. 623/Kol/2016 Babu Bhai Patel 2 Rs.6,69,560j- amount of Rs.16,218/- was related to labour charges and loading and unloading. Therefore, amount of addition of Rs.16,218/- is deleted and balance amount of Rs.6,43,342/-- is confirmed. This ground of appeal is partly allowed. 3.0 .Considering all aspects of case, it becomes clear that assessee had made these payments on single day but has shown payments on different dates only to avoid provisions of Sec 40A(3) which clearly state that any payment made to person in day, otherwise than by account payee cheque drawn on bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure. assessee is well aware of this provision is evident from fact that barring above noted payments; he has made all other payments through bank drafts. When confronted, A/R could not furnish any satisfactory explanation in this regard. In view of above discussion, it is clear that total cash payments of Rs. 3,61,633/- ( Rs.2,01,633 + Rs. 1,60,000) attract provisions of Section 40A(3) and hence disallowed This way, ld CIT(A) after allowing small relief, has confirmed addition made by AO. 4. Not being satisfied with order of Commissioner of Income-tax (Appeals), assessee is in further appeal before us and has taken following grounds of appeal:- 1. For that in facts and circumstances of case Appellate order passed was in violation of principals of natural justice hence is bad in law and be quashed. 2. For that in facts and circumstances of case Ld. Commissioner of Income Tax Appeals erred in upholding disallowance of Rs.6,43,342/- on account of payment of freight u/s 40(a)(ia) of IT Act \1961. disallowance is not called for hence same be reversed. 3. For that interest computed u/s 234A/B/C/D of IT Act 1961 is over charged and wrongly calculated and or is not applicable to assessee case it be directed to re-compute interest as per law. ITA No. 623/Kol/2016 Babu Bhai Patel 3 4. appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of above grounds at time of hearing of appeal. 5. From above cited grounds of appeal raised by assessee, it seems to us that solitary grievance of assessee is that CIT(A) has confirmed addition of Rs.6,43,342/- on account of payment of freight u/s. 40(a)(ia) of Act. 6. ld AR for assessee has submitted that, regarding addition relating to payments made to transporters to tune of Rs.6,69,560/- u/s. 40(a)(ia) of Act. He further submitted that total cost of transportation of Rs.6,69,560/- included unloading charges to tune of Rs. 16,218/- paid to local labourers. There is no provision for making any TDS from payments relating to labour charges for loading and unloading of goods which is Rs.16,218 in instant case so this disallowance should have been restricted to Rs.6,43,342/-. ld. AR of assessee has further submitted that contention of AO that all goods were brought in by M/S Kajol Roadways, of Chikhodra ,Anand, Gujrat" is not correct. Kajal Roadways was agent who arranged for transportation of goods and direct payments were made not to Kajal Roadways but to individual vehicle owners/ Drivers only with clear direction :- i) payment of freight should be made to Driver of vehicle and ii) in case of TDS it should-be made in name of Truck owners. Assessee received materials transported through different vehicles, details of which was given to Assessing Officer ( O ) in course of assessment proceedings. Photocopies along with original bills were also produced for verification. On study of details -AO in his Assessment Order vide page 2 last para stated :- Photo copies of all transport receipts were produced for verification along with corresponding purchase bills. Subsequently truck wise summary of ITA No. 623/Kol/2016 Babu Bhai Patel 4 expense was also submitted by A/R .From these documents it is seen that all goods were brought in by M/s. Kajol Roadways ,of Chikhodra ,Anand, Gujrat. All these payments were made in cash . Although assessee claimed that individual payments did not exceed Rs.20000/- it was found that in following four cases payments to transporter was in excess of Rs 20 000/- Consignment No. Vehicle No Bill date Amount 542 OR 11 0 5999 25 .04. 2009 Rs. 21 965/- 2219 WB 23 B 3231 18.09.2009 Rs.21 804/- 3304 GJ 12 X9600 18. 12.2009 Rs 23 337/- Total Rs.67 106/- Kind attention is drawn to fact that, AO has verified and found that all bills - Rs.6 69 560/- except Rs 67 106/- ,were below Rs 20 000/- which does not attract provision u/s 194C. Payment relating to above three bills were also made on two different dates each to different three vehicle owners. Part payment made on reaching to drivers for petty expenses on reaching premises with truck and final payment after delivery of goods. That individual payments did not exceed Rs.20 000/-. Which also does not attract provision u/s 194C. Regarding payments of transportation charges of Rs. 67,106/- of above 3 nos Bills. These are evident from recording receipt by drivers, on back of bills itself, which are produced for kind perusal. Payment made against three bills as above, were below aggregate amount of Rs. 50 000/- so TDS provision does not apply on them also. In all of case bill amount was below threshold limit as prescribed by law question of application of TDS provision u/s 194C have has no application in instant case. So there was no violation of provision for making TDS u/s 194C of Act, which attracts application of section 40(a)(ia) of Act against comments of AO that assessee has violated provision of section 194C of Act which attracts disallowance u/s 40(a)(ia) of Act. ITA No. 623/Kol/2016 Babu Bhai Patel 5 6.1 In support of his contentions, ld.AR of assessee has relied on following judgment of Hon`ble ITAT Kolkata:- (1). ITA No. 2453/Kol/2013 & CO No. 139/K/2013 in case of M/s. Saha Agency, order dated 20-05-2016 , wherein ITAT-Kolkata has observed as under:- 3.7 We have heard rival submissions and perused material available on record and case laws cited above. We find in respect of payments made to Air Transport Corporation (Assam) Ltd., Ld. CIT(A) had recorded categorical finding that there was no oral or written contract assessee had with lorry operators as vehicles were hired whenever need arose. This finding has not been controverted by revenue before us. In this regard, reliance placed by Ld.AR on decision of jurisdictional High Court in case of M/s. Stumm India, supra, wherein it has been held as under:- "It is urged before us that learned Tribunal ought not to have accepted judgment and order of CIT (Appeal) who has quashed disallowance of deduction of Rs.41,33,710/- and on account of tax deduction at source. learned Tribunal has recorded fact that department has not been able to bring any material on record to show that assessee has made payment to transporters in pursuance of contract for carriage of goods of assessee and question of deduction at source under section 194C does not and cannot arise. In absence of evidence of payment made by assessee to transporters, assessee cannot be saddled with liability of deducting tax at source. Before us no other point has been urged nor it is said that aforesaid fact finding is truthful without any basis whatsoever." (2). ITA Nos. 1725 & 1791/Kol/2009, dated 20.01.2012, in case of Mohan General Trading Co.,wherein ITAT-Kolkata has observed as under:- ITA No. 623/Kol/2016 Babu Bhai Patel 6 5. Assessee's contention before us and before lower authorities was that as per agreement with suppliers they had to deliver goods at assessee's premises ex godown and they have to engage transporters and not assessee. It was contention of assessee that pursuant to agreement between parties, assessee had taken delivery of goods, paid freight charges directly to transporters, which in turn raised invoice on assessee. Ld. Counsel for assessee relied on decision of Hon'ble Supreme Court in case of India Meters Ltd. Vs. State of Tamil Nadu in Civil Appeal No. 1032-33 of 2003 dated 07.09,2010. We have full respect for proposition of law laid by Hon'ble Supreme Court in case of India Metals Ltd. (supra), wherein it had held that if ownership in goods gets transferred at premises of buyer and supplier has obligation of transporting goods to premises of buyer, then notwithstanding fact that freight charges were recovered separately from buyer, transportation charges shall form part of turnover of supplier, i.e. cost of purchases for buyer. But in present case before us, facts are not clear whether assessee's agreement with suppliers was including transportation charges for delivery of goods to premises of assessee or not? In absence of agreement, we cannot decide this issue at this stage. Hence, for verification to examine agreement or invoices, if any, we set aside this issue to file of Assessing Officer. 7. ld.DR for Revenue has primarily reiterated stand as taken by Commissioner of Income-tax (Appeals), and Assessing Officer which we have already noted in our earlier paras of this order, and is not being repeated for sake of brevity. 8. Having heard rival submissions, we are of view that there is merit in submissions of assessee, as propositions canvassed by ld.AR for assessee are supported by various judgments of Hon`ble ITAT, Kolkata and facts narrated above. As he explained that M/s Kajal Roadways was agent who ITA No. 623/Kol/2016 Babu Bhai Patel 7 arranged for transportation of goods and direct payments were made not to Kajal Roadways but to individual vehicle owners/ Drivers only with clear direction that,i) payment of freight should be made to Driver of vehicle and ii) in case of TDS it should-be made in name of Truck owners. Besides, payment made against three bills as cited above, were below aggregate amount of Rs. 50, 000/-. So TDS provision does not apply on them also. In all of case bill amount was below threshold limit as prescribed by law question of application of TDS provision u/s 194C has no application in instant case. Based on above cited factual position, we do not hesitate to delete addition made by ld CIT(A). 9. In result, appeal filed by assessee is allowed Order Pronounced in Open Court on 19 -10-2016 Sd/- Sd/- (N.V.Vasudevan) (Dr. A.L.Saini) Judicial Member Accountant Member Dated:19/10/2016 *PRADIP (Sr.PS) Copy of order forwarded to: 1. Appellant/Assessee 2 Respondent/Revenue 3. CIT-I, 4. CIT(A)-I, 5. DR, Kolkata Benches, Kolkata True Copy, By order, Asst. Registrar ITAT, Kolkata Benches ITA No. 623/Kol/2016 Babu Bhai Patel 8 Babu Bhai Patel v. Joint Commissioner of Income Tax, Range-27, Mumbai