False declaration of trucks by transporter-assessee cannot be held guilty for non deduction of TDS u/s 194C as his liability ceased with declaration
ABCAUS Case Law Citation:
ABCAUS 2606 (2018) (11) ITAT
Important Case Laws Cited/relied upon:
Steel Authority of India Limited v. Additional Commissioner of Commercial Tax (2012) 56 VST 84 (MP).
The State of Madras Vs M/s. Radio and Electricals Ltd (1967) AIR 234, 1966 SCR 198 (S.C)
CIT Vs Valibhai Khanbhai Mankad 216 Taxman 18 (Guj.)
CIT Vs Shri Marikamba Transport Co. 379 ITR 129 (Kar.)
CIT Vs United Rice Land Ltd 322 ITR 0594 (P&H)
CIT Vs Poompuhar Shipping Corporation Ltd 282 ITR 0003 (Mad)
The appellant assessee had filed an appeal against the order of Commissioner of Income Tax (Appeals) arising out of the order u/s 143(3)/263 of the Income Tax Act 1961 (the ‘Act).
The assessee was an individual engaged in the business of transport booking. His assessment was initially completed u/s 143(3) of the Act. Subsequently the Commissioner (CIT), under the powers of Section 263 of Act passed order directing the Assessing Officer (AO) to examine the applicability of the provisions of 194C as well as 194I of the Act on the payments to truck operators.
The Assessing Officer complying to the order of CIT(A) initiated the assessment proceedings and completed it u/s 143(3) / Section 263 of the Act after making disallowance u/s 40(a)(ia) of the Act for non deduction of tax at source (TDS) u/s 194C of the Act.
The Assessing Officer during the course of assessment proceedings observed that the assessee was not deducting tax at source u/s 194C of the Act on account of relevant provisions of Section 194C of the Act if the truck owner submits a declaration. Under the said provisions, Truck owners can give the declaration if they do not own more specified number of trucks.
However the AO while going through the list of trucks vis-à-vis name of truck owners observed that one payee owned more than specified number of trucks, he therefore could not file declaration and therefore the assessee was liable to deduct tax at source u/s 194C which he failed to do so.
It was pleaded by the assessee that it had no mechanism to verify the correctness of the declaration submitted by the truck owners. It was submitted that as per Section 194C of the Act if at the time of making payment to the truck owner a declaration is submitted to the buyer i.e. the assessee, then there is no liability to deduct the tax at source.
The AO was not convinced with this submission and he went ahead making the disallowance u/s 40(a)(ia) of the Act.
The CIT(A) was also not convinced and the assessee failed to get any relief.
Before the Tribunal the assessee submitted that the declaration was duly received from the said truck owner and he did not mentioned about the ownership of more than specified number of trucks rather he gave declaration mentioning that he owns only one truck. For this reason the tax was not deducted at source by the assessee.
Ld. Counsel for the assessee further submitted that in the normal course of business the assessee relies on the genuineness of the documents submitted before him by the payee. It is not the assessee’s responsibility to verify the documents submitted to it. The assessee cannot be penalized for action undertaken in good faith and in normal practice of business transactions.
It was pleaded that the declaration was obtained from the payee in a bonafide manner with the belief that the same are genuine and correct. The assessee could not be made liable for the false or wrong declaration given by the payee and therefore tax cannot be levied on the assessee on this ground that the declaration was invalid.
He also added that no criteria was available to the assessee to verify the genuineness of the declaration nor assessee had a duty to do so in the normal course of carrying out its business.
The Tribunal noted that there was no dispute about the genuineness of transactions and the payments made for booking/hiring truck and the only question was whether the AO was justified in making disallowance u/s 40(a)(ia) of the Act even when the assessee received duly filled declarations from the truck owners.
The Tribunal noted that the Hon’ble High Court had an occasion to adjudicate on the similar issues. The Hon’ble High Court held that once the relevant condition of Section 194C of the Act are satisfied, the liability of the payee to deduct tax at source would cease.
The Tribunal noted that the assessee had received the declaration from the said truck owner on various dates in which detail of only one truck was mentioned. Due to this reason the assessee did not deduct tax at source accepting the details provided as genuine. It was true that the payee owned more than specified number of trucks but for the wrong statement given by him in the declaration, the assessee cannot be penalized.
The Tribunal observed that as the assessee was engaged in transport business and come across with hundreds of truck owners and at the time of payment when the declaration 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 received by the assessee were furnished to the Commissioner of Income Tax within whose area of jurisdiction the office of the contractor was situated.
The Tribunal set aside the order of CIT(A) and allowed the appeal of the the assessee.
