2023 (9) TMI 1535 - AT - Income Tax

Denial of the salary expenditure - assessee has not deducted TDS on salary payment to its employees - HELD THAT - The salary and wages register has the particulars of the each of the employees in terms of name, father s name, period of rendering the service during the relevant month, amount of salary and signatures of the respective employees. The assessee has again submitted details of employee wise and month-wise salary paid to the employees vide his submissions dated dt. 29/11/2019 during the course of assessment proceedings. Nothing has been brought on record by the AO as to how the documentation so submitted by the assessee was not found acceptable or for that matter, what more documentation is required to provide the authencity and genuineness of the salary expenditure. The fact that salary payment is below the taxable limit and doesn t carry TDS obligation u/s 192 and hence, where no TDS is done by the assessee doesn t lead to the conclusion that salary expenditure itself is not genuine. Comparative data of salary expenditure for last two years were also submitted and on perusal thereof, it is noted that though there is a marginal increase in the salary expenditure as a percentage of sales but the fact of the matter is that salary expenditure has been incurred by the assessee in the past and the same has been allowed by the Revenue. Therefore, on what basis, the whole of the salary expenditure has been disallowed during the year is beyond any comprehension. CIT(A) has also summarily rejected the same reiterating the findings of the AO. There is no justifiable basis for denial of the salary expenditure and disallowance is hereby directed to be deleted. Disallowance of freight expenses - The fact that the assessee has availed the services of only one truck provider cannot be held against the assessee as the said decision is within the domain of the assessee and its business exigency which cannot be challenged by the Revenue. Regarding the format and contents of the declaration u/s 194C(6), the ld CIT(A) has referred to certain deficiency therein in the impugned order and for removing the said deficiency, we deem it appropriate to set-aside the matter to the file of the AO wherein he shall consider the revised declaration. The assessee is also directed to arrange for the revised declaration as pointed out by the ld CIT(A) and the AO is at liberty to verify the same with M/s Supreme Cargo Carrier and where the same is found to be in order, allow the necessary relief to the assessee. The matter is accordingly set-aside to the file of the AO. In the result, the ground of appeal is allowed for statistical purposes.

Issues Involved:
1. Disallowance of salary expenses due to alleged non-deduction of TDS.
2. Disallowance of freight expenses due to alleged non-deduction of TDS.
3. Validity of the declaration/certificate from M/s Supreme Cargo Carriers.
4. Alleged denial of adequate opportunity of being heard.
5. General challenge to the order of the Ld. CIT(A).

Issue-wise Detailed Analysis:

1. Disallowance of Salary Expenses:
The assessee contested the disallowance of salary expenses amounting to Rs. 13,89,898/- for non-deduction of TDS. The AO disallowed the expenses on the grounds that the list of employees provided was not supported by proper documentary evidence, and the authenticity of the salary payments could not be proved. The Ld. CIT(A) upheld the disallowance, stating that the assessee failed to provide valid documentary evidence to substantiate the number of employees and the salaries paid. However, the Tribunal found that the assessee had submitted the monthly salary and wages register, which included particulars of each employee, such as name, father's name, service period, salary amount, and signatures. The Tribunal observed that the salary payments were below the taxable limit and did not attract TDS under section 192. The Tribunal concluded that there was no justifiable basis for the disallowance and directed the deletion of the disallowance of Rs. 13,89,898/-.

2. Disallowance of Freight Expenses:
The assessee challenged the disallowance of freight expenses amounting to Rs. 25,82,600/- for non-deduction of TDS. The AO disallowed the expenses, stating that the authenticity of the trucks provided by M/s Supreme Cargo Carrier could not be proved, and the declaration under section 194C(6) was not considered. The Ld. CIT(A) upheld the disallowance, noting that the declaration was general in nature and lacked vital information such as freight amount, registration number, and self-attested PAN copy. The Tribunal found that the assessee had submitted the ledger account of freight expenses, supporting bills/vouchers, and a declaration under section 194C(6). The Tribunal held that the decision to avail services from a single truck provider was within the assessee's business domain and could not be challenged by the Revenue. The Tribunal set aside the matter to the AO for consideration of a revised declaration and directed the AO to verify the same with M/s Supreme Cargo Carrier. The Tribunal allowed the ground of appeal for statistical purposes.

3. Validity of Declaration/Certificate from M/s Supreme Cargo Carriers:
The Ld. CIT(A) noted deficiencies in the declaration provided by M/s Supreme Cargo Carrier, such as the absence of freight amount, registration number, and self-attested PAN copy. The Tribunal directed the assessee to arrange for a revised declaration addressing these deficiencies and instructed the AO to verify the revised declaration. If found in order, the AO was directed to allow the necessary relief to the assessee.

4. Alleged Denial of Adequate Opportunity of Being Heard:
The assessee claimed that it was not provided with an adequate opportunity of being heard, violating the principles of natural justice. However, the Tribunal's order does not provide a specific finding on this issue, focusing instead on the substantive issues of disallowance of expenses.

5. General Challenge to the Order of the Ld. CIT(A):
The assessee generally challenged the order of the Ld. CIT(A) as erroneous, arbitrary, and opposed to the facts of the case. The Tribunal's detailed analysis and directions for deletion and reconsideration of disallowances address these general grievances.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the deletion of the disallowance of salary expenses and setting aside the matter of freight expenses to the AO for reconsideration with a revised declaration. The order was pronounced in the open Court on 14/09/2023.

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