Mere non furnishing transporters declaration u/s 194C(7) do not attract disallowance u/s 40(a)(ia)

No furnishing transporters declaration u/s 194C(7) does not mean non compliance of section 194C(6) leading to disallowance u/s 40(a)(ia) – ITAT

ABCAUS Case Law Citation:
ABCAUS 3727 (2023) (05) ITAT

Important Case Laws relied upon:
Sunbeam Auto Ltd. [2011] 332 ITR 167

In the instant case, the assessee had challenged the revisionary order passed by the PCIT u/s 263 the Income Tax Act, 1961 (the Act) on the ground that the appellant did not furnish the transporters declaration u/s 194(C)(6) of the Act.

The appellant assessee was a transport company operator. The return of the assessee was selected for scrutiny assessment and assessment was completed u/s 143(3) of the Act.

Subsequently, PCIT assuming jurisdiction under the provision of Section 263 of the Act and issued a show cause notice.

The main issue considered by the PCIT was the payments of freight were made without TDS u/s 194C(6) of the Act. It was alleged that the assessee had not furnished evidence in respect of declaration obtained from the transporters as per provision of section 194C (6) of the Act. Further, it was alleged that no evidence produced for furnishing of declaration u/s of the Act.

Not satisfied with the reply of the assessee, the PCIT was of the belief that the AO should have invoked the provision of Section 40(a)(ia) of the Act and made appropriate disallowances. The PCIT cancelled the assessment order passed u/s 143(3) of the Act being erroneous and prejudicial to the interest of Revenue.

No disallowance u/s 40(a)(ia) for merely non furnishing transporters declaration u/s 194C(7) 

The Tribunal observed that during the assessment proceedings the Assessing Officer (AO) had made a specific query with respect of TDS and the assessee in reply to the query had specifically stated that for non-deduction of TDS on freight paid, the required declaration and PAN number had been obtained from the parties to whom the payments of freight were made.

The Tribunal observed that provisions of section 194C(6) was amended  w.e.f  1.6.2015  by  the Finance  Act,  2015,  restricting  the applicability of this provision to those transport contractors who own not more than 10 goods carriages. The purpose of amendment was explained by the CBDT in its Circular No.19/2015 dated 27-11-2015.

In view of the above, the Tribunal opined that the payer is required to obtain PAN only from the payee for paying the charges without deduction of tax at source.

The Tribunal noted that in the present case, the assessee had obtained the PAN of the payees and has thus complied with the provision of Section 194C(6) of the Act. 

The AO had made a specific enquiry and after satisfying himself took a plausible view and as held by Hon’ble Delhi High Court if the view taken by the AO is one of the possible views, the assessment order can not be said to be prejudicial to the Revenue.

The Tribunal found no merit in the allegation of the PCIT that assessee had not furnished the requisite declaration. The Tribunal stated that first, the provisions were not applicable for the year under consideration and secondly; the only obligation cast on the assessee was that to obtain the PAN number of the payees which he did obtain.

The Tribunal opined that merely because there is no compliance on the part of the assessee to furnish transporters declarations to the Revenue authorities the same cannot lead to a conclusion that the assessee has not complied with the first statutory obligation as per section 194C(6) i.e. to obtain PAN of the payee.

Accordingly, the Tribunal set aside the order of the PCIT and restored that of the AO.

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