HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 63 / 2016 Principal Commissioner of Income Tax, Jaipur-2, Jaipur. ----Appellant Versus Mahendra Kumar Sharma Prop. Sikar Ludhiyana Road Lines, Near Sikar Road, VKI Area, Jaipur. PAN: ANWPS 9860 L ----Respondent Connected With D.B. Income Tax Appeal No. 215 / 2016 Principal Commissioner of Income Tax, Jaipur-2, Jaipur. ----Appellant Versus Mahendra Kumar Sharma Prop. Sikar Ludhiyana Road Lines, Near Sikar Road, VKI Area, Jaipur. PAN: ANWPS 9860 L ----Respondent For Appellant(s) : Mr. Prateek Kedawat with Mr. K.D. Mathur for Mr. R.B. Mathur For Respondent(s) : Mr. P.K. Kasliwal HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Judgment 07/11/2017 1. In both these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, appellant has assailed judgment and order of tribunal whereby tribunal has (2 of 11) [ ITA-63/2016] allowed appeal of assessee and reversed view taken by AO as well as CIT(A). 3. This court while admitting appeals framed following substantial question of law:- 3.1 Appeal No.63/2016 admitted on 26.4.2016 Whether on facts and in circumstances of case and in law ITAT has erred in deleting addition of Rs.8797747/- u/s 40(a) (ia) of Act considering that assessee was not liable to deduct tax at source u/s 194C(2) of IT Act. 3.2 Appeal No.215/2016 admitted on 2.5.2017 Whether on facts and in circumstances of case and in law ITAT has erred in deleting addition of Rs.8326631/- u/s 40(a)(ia) of Act considering that assessee was not liable to deduct tax at source u/s 194C(2) of IT Act. 4. facts of case are that assessee is transporter contractor filed its return on 31.3.2009 declaring total income of Rs.3,68,633/-. case was scrutinized u/s 143(3) of Income Tax Act, 1961. assessee is indivisual and enjoys income from commission agency in name and style of M/s. Sikar Ludhiyana Road Lines. During assessment proceeding written submissions were filed and books of account were produced, which were examined on test check basis by Assessing Officer. (3 of 11) [ ITA-63/2016] 5. Counsel for appellant has taken us to order of AO wherein AO has observed as under:- 3.1 counsel of appellant has argued that he had filed Form No.15-I from various truck owners before AO. In this regard, undersigned called for assessment records of AY 2008-09 and on examination, it was found that Form No.15-J had not been filed with CIT(TDS) on or before 30.6.2008. Form No.15-J was dt. 29.6.2008 however it did not bear stamp and signature of concerned receipt clerk. Form No.15-J therefore had no legal sanctity. Annexure forming part of Form No.15-J contained details of individual truck owners and amount of freight credited to their accounts. alleged Form No.15-I were predated so as to give shade of genuineness to alleged documents. Therefore these documents are liable to be rejected. During course of appellate proceedings, appellant vide letter dt. 24.11.2011 filed exrox copy of Form No.15-J which was allegedly claimed to have been filed with Addl. CIT, Range-4, Jaipur on 30.6.2008. appellant has also made request to admit said additional evidence under Rule 46A. Since this additional evidence was required for proper adjudication of present appeal. It was admitted under sub-rule 4 of Rule 46A of IT Rules. same is marked as Annexure-A of this appellate order. On perusal of Form No.15-J, it was baffling to note that it did not contain any receipt number which is always allotted at time of receipt of particular document. In this connection, undersigned called for receipt register of Addl. CIT Range-4, Jaipur and same was examined. following documents were received in office of Addl. CIT, Range-4, Jaipur on 30.6.2008 as per entries in receipt register. same is marked as Annexure-B of this appellate order. S.No. Receiving Receipt Subject Date No. 1 30.06.2008 643 Filing of appeal in case of M/s. Ceramic Industries for (4 of 11) [ ITA-63/2016] AY 2005-06. 2 30.06.2008 644 Filing of appeal in case of M/s. Darshan Art Exports for AY 2004-05. 3 30.06.2008 645 Filing of appeal in case of Sh. Vinod Bothra for AY 2005-06. 4 30.06.2008 646 Approval for issue of refund in case of Sh. R.K. Gupta for AY 2006-07 5 30.06.2008 647 Training cancellation letter 6 30.06.2008 648 Central scrutiny report in case of Sh. Fauza Singh Dadiala for AY 2005-06 7 30.06.2008 649 Certificate of handing over and taking over of charge by ITO (OSD). above entries show that alleged Form No.15-J which should have been filed with CIT(TDS), was neither filed with CIT(TDS) nor filed in office of Addl. CIT, Range-4, Jaipur. appellant is therefore guilty of filing fabricated/forged document during course of appellate proceedings. addition evidence filed by appellant is therefore rejected as it has been forged with sole intention of fraud and evading taxes. 5.1 He has also taken us to order of CIT(A) and contended that AO after taking into consideration facts of case has added income u/s 40(a)(ia) to tune of Rs.87,97,747/-. (5 of 11) [ ITA-63/2016] 5.2 Counsel for appellant has relied upon decision of this court in Shree Choudhary Trasnport Company vs. Income Tax Officer reported in (2009) 225 CTR Reports wherein it has been held as under:- 2. In our view, on language of Sectin 194C(2), and fact that goods received were sent through truck owners by appellant, and there was no privity of direct contract between truck owners and cement factory. According to contract between appellant and cement factory, it was appellant's responsibility to transport cement, and for that appellant hired services of truck owners, obviously as sub-contractors. In that view of matter, we do not find any error in impugned order of Tribunal. appeal is, therefore, dismissed summarily. 6. Counsel for respondent has relied on observations made by tribunal which reads as under:- 6. We have heard rival contentions of both parties and perused material available on record. After considering order of ld Assessing Officer and ld CIT(A), it is found that assessee is transporter but did not own any truck but arrange truck from market. customer is generally made contract to transporter for arranging trucks for transportation of goods. In present case, assessee is intermediary and conduit to make available trucks from market and issue GR in his own name but only charged commission for making builty. It is fact that customers deduct tax in name of appellant but truck owners was to be paid amount of TDS by assessee. assessee got refund and adjust refund against payment made by him to truck drivers. assessee has not debited any expenses on account of freight (6 of 11) [ ITA-63/2016] charges in P&L account. Therefore, Section 40(a)(ia) is not applicable and is also not liable to be deducted TDS U/s 149C of Act. case laws referred by assessee are squarely applicable on it. assessee also had filed Form No. 15J before Addl.CIT and at time of assessment proceedings before Assessing Officer, which has not been controverted by DR. if assessee has produced evidence regarding submission of Form No. 15-J before lower authority, in which some fault had been found on ground that no signature, number of receipts has been provided by Range office, is not any fault on part of assessee. assessee has furnished Form No. 15-J in office of Commissioner. Various Courts also even considered and held justified Form No. 15-J before Assessing Officer at time of assessment proceedings. Therefore, we reverse order of ld CIT(A). Accordingly, this appeal is allowed. 6.1 He also relied upon decision of this court in Tax Appeal No.3/2011 (Commissioner of Income Tax-1 vs. M/s. Daulat Enterprises) alongwith connected matters decided on 31.7.2017 where Division Bench has taken following view which reads as under:- 12. Counsel for respondent Mr. Jhanwar has taken us to provision so Section 194(c) read with 204(iii) and contended that amount of Annexure-9 is deducted completely on payment which is required to be made and if complete amount is not shown in books of account and corresponding debit in books of accounts it will not reach to any final decision to match. Tribunal rightly observed in its judgment which reads as under:- Thus we concur with contention of Ld.A.R. that when payment of freight was made by Mangalam Cement Ltd. directly to truck owners, it was not possible for (7 of 11) [ ITA-63/2016] assessee to make any deduction and payment of tax thereupon. assessee had only received handling charges and all other acts and obligations were carried out by Mangalam Cement Ltd. as such neither these was any obligation on part of assessee nor was it possible for assessee to make any deduction of tax thereupon. We thus do not find justification in observation of Ld. CIT(A) that Mangalam Cement Ltd. was making payment to truck owners only on behalf of assessee and assessee was contractor and truck owner were subcontractors. If there were lapses in making TDS by Mangalam Cement Ltd. on all such payments made to truck owners introduced by assessee, wherein assessee under agreement was getting handling charges, Mangalam Cement Ltd. only is responsible for and not assessee. We have come to this conclusion on basis that Mangalam Cement Ltd. had made freight payments to truck owners as their not being sub- contractors of assessee. On contrary there was agreement, as discussed above, between Mangalam Cement Ltd. and assessee that freight payment would be made by Mangalam Cement Ltd. directly to truck owners and TDS as applicable will be made by them. In case of CIT Vs. United Rice Land Ltd.(Supra) A.O. held assessee liable for deduction of tax only on assumption that assessee was having agreement with parties through whom trucks were arranged for transportation of goods. Hon ble Jurisdictional High Court upheld decision of Tribunal in holding assessee was not liable to deduct tax u/s 194C from payments made to transporters in absence of oral or written agreement between assessee and transporters for carriage of goods nor was it proved that any freight charges were paid to them in pursuance of contract for specific period, quantity or price. l.d. CIT(A) was thus not correct in fixing liability on assessee for non making TDS on payments of Rs.30,99,661/- as freight by Mangalam Cement Ltd. to truck owners. We order accordingly, while deleting disallowance of Rs.30,99,661/- made by l.d.CIT(A) in (8 of 11) [ ITA-63/2016] this regard. ground no.1 of appela preferred by revenue is thus rejected and ground of appeal preferred by assessee is allowed. Consequently, ground no 2 of appeal preferred by revenue is rejected as having become infructuous in view of our finding in ground of appeal preferred by assessee on issue. 13. In view of observations made by Tribunal, he contended that order passed by tribunal is just and proper. 14. He also invited our attention to contract which was entered between company and assessee which reads as under:- With reference to discussion we had with your representative on above subject we are pleased to award this contract on following terms and conditions:- 1. You will arrange transportation of Gypsum of good quality from above mines of M/s. R.S.M.M. Ltd. to our works at Morak. Regarding quantity to be transported we will inform to you from time to time. 2. We will inform you about road freight from mines of R.S.M.M. Ltd to our works at Morak from time to time as per prevailing rate of market and availability of trucks. 3. We shall pay you Rs.20/- perr tonne as handling charges for arranging trucks for transportation of Gypsum on our behalf. Service tax will be paid by company, if applicable and ITDS will be deducted as per Income Tax Rules. 4. Freight will be paid after unloading material at our factory at Morak to truck s driver or to transporter or their authorised agent as case may be. TDS as applicable will be deducted from freight bills as per Income Tax Rules. 5. You will raise your bills on basis of monthly receipt at our works and same will be paid to you within 15 days from date of receipt of same. (9 of 11) [ ITA-63/2016] 6. All Trucks will bring necessary transit papers i.e., challan, Mines Rawanna L.R. etc, failing which trucks will be returned to you at your risk and cost. 7. All trucks/trailors will be weighed at our weigh bridge and weight recorded thereon will be final for all purpose and acceptable to you. 8. Our CST No. is 2033/02700 and RST No. is 2033/02700, both dated 15.03.1978 and our TIN. No. is 08442902696 dated 01.04.2003. 9. You will deposit Rs.20,000/- with us before commencement of supply as security deposit which will not bear any interest and will be refundable only after fulfillment of your commitment or may be adjusted against penalty, when will be decided by us. (Security deposit is already lying with us) 10. In case of any dispute, our decision will be final and binding on you. 11. For all legal matters court at Ramganjmandi, Dist. Kota (Rajasthan) will only be jurisdiction. 12. This contract may be terminated any time without assigning any reason. 13. This Contract is effective from 01.10.2004. 14. This Contract supersedes all our previous contracts. Please give our acceptance on copy of this contract. 14.1 In support of his submission he relied on decision of Calcutta High Court in Hightension Switchgears (P.) Ltd. vs. CIT, reported in (2016) 385 ITR 575 (Calcutta) wherein it has been held as under:- 9. From combined reading of provisions set out above, it would appear that any person responsible for paying any sum to any resident on account of carriage of goods " shall, at time of credit of such sum to account of contractor or at time of payment thereof in cash or by issue of cheque or draft or by any other (10 of 11) [ ITA-63/2016] mode, whichever is earlier, [deduct amount equal to - (iii) one per cent in case of advertising, (iv) in any other case two per cent, of such sum as income-tax on income comprised therein.]" Therefore, relevant question to be asked is, who was responsible for paying any sum to any resident for carriage of goods? answer obviously is that it was seller who was responsible for paying and seller admits to have done that. Therefore, liability to deduct tax was that of seller. In case seller is unable to show that he had made deduction, Section 40(a)(ia) may be applied to his case but not to case of buyer/assessee. 11. In that view of matter, question, quoted above, is answered by holding that Tribunal was wrong in holding that appellant was liable to deduct tax at source in respect of freight component. When assessee was not liable to make any deduction under Section 194C, rigours of Section 40(a)(ia) could not have been applied to him. question is thus answered. appeal is thus allowed. 15. We have heard counsel for parties. 15.1 It will not be out of place to mention that as rightly contended by counsel for respondent Mr. Jhanwar that Section 194(c) read with 204(iii) will come into operation only on payment made by assessee and as rightly discussed since payment is not made by assessee if at all there is default default is of Mangalam. Since payment was not received, same is required to be considered in books of account since TDS is deducted by Mangalam on behalf of assessee completely. Therefore, if there is default in payment made, he is entitled to match balance- sheet and he cannot claim for credit @ Rs. 20 per tonne as handling charges for arranging truck for transportation. (11 of 11) [ ITA-63/2016] 7. In that view of matter, both issues are answered in favour of assessee and against department. 8. appeals stand dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Brijesh 15-16. Principal Commissioner of Income-tax, Jaipur-2, Jaipur v. Mahendra Kumar Sharma