2019 (11) TMI 987 - HC - Income Tax

Disallowance of expenses booked for lorry hire u/s 37(1) - Exemption from TDS u/s 194C(6) - lorry hire charges - failure to furnish the availability of the permanent account numbers of the payee - Rectification of mistake - HELD THAT - On a perusal of the remand report furnished by the Assessing Officer along with the letter dated 20.2.2017, we find that there was no finding rendered by the Assessing Officer as to the veracity, admissibility and correctness of the details produced by the assessee before the CIT(A), on which, the remand report was called for. Therefore, the exercise, which should have been adopted by the Assessing Officer, is to examine the details and if necessary, call for at least a few of the lorry owners, whose details such as PAN particulars, registration numbers of the trucks were furnished and then should have come to a conclusion as to whether those documents would substantiate the stand taken by the assessee. We find that no such exercise was conducted by the Assessing Officer while the matter was sent back to him for considering the documents produced by the assessee for the first time before the CIT(A). We also find in the remand report, much of which was the view of the Assessing Officer and the scrutiny assessment was incorporated though in a different language. The Tribunal, though recorded the submissions of the assessee that they produced the details of the truck owners by giving their PAN particulars and registration numbers of the trucks, etc., when the Tribunal dismissed the appeal by the impugned order, it did not go into the said aspect, but was largely guided by the month and year, in which, the amounts were settled by the assessee i.e April 2014. This, according to the assessee, is a typographical error in the remand report and the assessee produced records to show that the payments were made in April 2012 itself. Though this mistake was pointed out by the assessee before the Tribunal by filing the miscellaneous application, the Tribunal was not inclined to exercise its jurisdiction. Thus, taking into consideration the above factual position, we are of the considered view that the Assessing Officer should re-examine the correctness of the details, produced by the assessee in the form of freight charges paid by them, before the CIT(A), though not in the scrutiny assessment. Even assuming that the assessee had not furnished the particulars as required under Sub-Section (7) of Section 194C of the Act in the prescribed form, the maximum that could be done is to impose a fine of ₹ 200/- for every day of such non compliance. Therefore, this procedural law, as prescribed under Sub-Section (7) of Section 194C of the Act cannot take away the benefit, which will accrue to the assessee under Sub-Section (7) of Section 194C of the Act. For the above reasons, we are inclined to remand the matter to the Assessing Officer for a fresh consideration. Above tax case appeal is allowed, the orders passed by both the Tribunal are set aside and the matter is remanded to the Assessing Officer to consider the details furnished by the assessee for payment of freight charges, issue notice to the assessee, afford them an opportunity and if deems fit, summon a few of the transport operators and then, after satisfying himself about the veracity, admissibility and correctness of the details furnished by the assessee, shall redo the assessment

Summary

Issues:
- Disallowance of expenses for lorry hire
- Overlooking settlement of accounts
- Failure to consider Section 194C(6) exemption

Issue 1: Disallowance of expenses for lorry hire:
The appellant challenged the disallowance of expenses for lorry hire under Section 37(1) of the Income Tax Act, contending that the expenses were incurred in connection with the business of goods transporters/carriers. The dispute arose from the Assessing Officer's addition of ?21,12,000 to the returned income, claiming the appellant did not furnish particulars for the expenses incurred. The CIT(A) dismissed the appeal, stating the appellant failed to substantiate the claim despite opportunities. The Tribunal upheld the dismissal, considering the settlement of accounts in April 2014 and the net profit earned by the appellant. The appellant filed a miscellaneous application pointing out a factual mistake in the settlement date, but the Tribunal rejected it. The High Court found the Assessing Officer failed to thoroughly examine the details produced by the appellant, remanding the matter for fresh consideration.

Issue 2: Overlooking settlement of accounts:
The appellant argued that the Tribunal overlooked the correct settlement date of accounts in April 2012, as opposed to April 2014 mentioned in the remand report. The High Court noted the discrepancy and emphasized the importance of accurate facts in determining the disallowance of expenses. The Tribunal's reliance on the incorrect settlement date was deemed a typographical error, leading to the remand of the matter for reevaluation by the Assessing Officer.

Issue 3: Failure to consider Section 194C(6) exemption:
The Standing Counsel for the Revenue highlighted Section 194C(7) requirements for claiming a deduction under Section 194C(6), emphasizing the need for compliance with prescribed procedures. The High Court referred to a previous decision rejecting the contention that non-compliance with Section 194C(7) would disentitle the assessee from benefits under Section 194C(6). Even if the appellant did not furnish required particulars, the maximum penalty would be ?200 per day of non-compliance. Consequently, the High Court remanded the matter to the Assessing Officer for a fresh assessment, emphasizing the procedural law's inability to negate benefits under Section 194C(6).

In conclusion, the High Court allowed the tax case appeal, setting aside previous orders and remanding the matter for reevaluation by the Assessing Officer to ensure a thorough examination of the details provided by the appellant regarding freight charges. The substantial questions of law were left open, and no costs were awarded in this judgment.