2018 (10) TMI 857 - AT - Income Tax

TDS u/s 194C - genuineness of transactions and the payments made for booking/hiring truck - additions/disallowance u/s 40(a)(ia) on account of non deduction of tax at source - Held that - When on the basis of the record it is not disputed that the requirements of further proviso were fulfilled, the assessee was not required to make any deduction at source on the payments made to the sub-contractors. If that be our conclusion, application of section 40(a)(ia) would not arise. Once the condition of further proviso of Section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. Examining the facts of the instant appeal we find that the assessee received Form 15I from the truck owner namely Shri Kishorilal Birla on various dates in which detail of only one truck was mentioned. The conditions provided in further proviso of 194C(3) of the Act was duly complied as Form 15I was received by the assessee from the truck owner who was stated to be a owner of not more than two goods carriers. Due to this reason the assessee did not deduct tax at source accepting the details provided in Form 15I as genuine. It is true that Shri Kishorilal Birla owned more than two trucks but for the wrong statement given by him in Form 15I the assessee cannot be penalized. The assessee being engaged in transport business and come across with hundreds of truck owners and at the time of payment when Form No.15I is received he cannot just raise doubts about the genuineness of the details mentioned therein. If the truck owners make wrong statement then the revenue authorities are free to take action against them as per provisions of law because the details on Form 15I received by the assessee are furnished to the Commissioner of Income Tax within whose area of jurisdiction the office of the contractor is situated. Thus following the Hon ble High Court of Gujarat in the case of CIT Vs Valibhai Khanbhai Mankad 2012 (12) TMI 413 - GUJARAT HIGH COURT are of the considered view that no disallowance was called for u/s 40(a)(ia) - decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?22,19,660/- under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-deduction of TDS.
2. Applicability of Sections 194C and 194I of the Income Tax Act on payments made to truck operators.
3. Validity and genuineness of Form 15I submitted by truck owners.

Detailed Analysis:

Issue 1: Addition of ?22,19,660/- under Section 40(a)(ia) of the Income Tax Act, 1961 due to non-deduction of TDS.
The primary issue in this case is the addition of ?22,19,660/- under Section 40(a)(ia) of the Income Tax Act, 1961 due to the assessee's failure to deduct TDS on payments made to truck operators. The Assessing Officer (AO) made this disallowance because the assessee did not deduct tax at source under Section 194C. The assessee argued that they had received duly filled Form 15I from the truck owner, Shri Kishorilal Birla, who falsely declared that he owned only one truck. The Tribunal found that the assessee acted in good faith, relying on the genuineness of Form 15I, and thus should not be penalized for the false declaration made by the truck owner.

Issue 2: Applicability of Sections 194C and 194I of the Income Tax Act on payments made to truck operators.
The Commissioner of Income Tax (Appeals) [CIT(A)] directed the AO to examine the applicability of Sections 194C and 194I on payments made to truck operators. The AO concluded that the assessee failed to deduct tax at source as required under Section 194C because the truck owner, Shri Kishorilal Birla, owned more than two trucks, making Form 15I invalid. However, the Tribunal referred to the judgment in CIT Vs Valibhai Khanbhai Mankad, which stated that once the conditions of the further proviso of Section 194C(3) are satisfied, the liability of the payee to deduct tax at source ceases. The Tribunal concluded that the assessee had no liability to deduct TDS as they had received Form 15I in good faith.

Issue 3: Validity and genuineness of Form 15I submitted by truck owners.
The Tribunal examined whether the assessee was justified in not deducting TDS based on the Form 15I submitted by the truck owner. The Tribunal found that the assessee received Form 15I from Shri Kishorilal Birla, who falsely declared ownership of only one truck. The Tribunal held that the assessee cannot be penalized for relying on the genuineness of Form 15I, as it is not the assessee's responsibility to verify the correctness of the declaration. The Tribunal emphasized that any false declaration by the truck owner should be addressed by the revenue authorities, not the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and deleting the disallowance of ?22,19,660/- under Section 40(a)(ia) of the Act. The Tribunal concluded that the assessee acted in good faith by relying on the Form 15I submitted by the truck owner and should not be penalized for the false declaration made by the truck owner. The Tribunal's decision was based on the precedent set by the Gujarat High Court in CIT Vs Valibhai Khanbhai Mankad.