- (1.) The Assessing Officer by his order dated December 28, 2010, disallowed the transportation payments of more than Rs. 50,000 for the assessment year 2006-07 aggregating to a sum of Rs. 86,04,049 on the ground that the aforesaid payments were made to the sub-contractors without deducting tax. Consequently, the aforesaid sum of Rs. 86,04,049 was disallowed under section 40(a)(ia) of the Income-tax Act, 1961, and added to the total income. Similarly, a sum of Rs. 96,01,585 was disallowed for the same reason for the assessment year 2008-09. Both the assessments were made on the same day, i.e., December 28, 2010. The reasons assigned for the aforesaid addition by the Assessing Officer for both the assessment years 2006-07 and 2008-09 are as follows: On being show-caused why Rs. 86,04,049 will not be disallowed and added to the total income as per the provisions of section 40(a)(ia) of the Income-tax Act, 1961, the learned authorised representative, vide letter dated October 20, 2010, replied that as no payment exceeding Rs. 50,000 was given to a vehicle, the provisions of section 40(a)(ia) will not be applicable. Nay, the interpretation of the provisions of section 40(a)(ia) is that the payment made to a transporter below Rs. 50,000 in a year is not liable to deduct tax as per the provisions of section 194C Hence, the payments exceeding Rs. 50,000 to the transporters is liable to deduct the tax. The assessee-company did not deduct tax on such payments to the transporters exceeding Rs. 50,000 to the tune of Rs. 96,01,585. Thus, the submission of the assessee-company is not tenable. Consequently, Rs. 86,04,049 is disallowed under section 40(a)(ia) of the Income-tax Act, 1961, and added to the total income. Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal which was allowed by the Commissioner of Income-tax (Appeals) by his order dated August 10, 2011. The Revenue preferred an appeal before the Tribunal which was dismissed by an order dated June 19, 2012, which is under challenge before us. Mr. Bharadwaj, learned advocate appearing for the assessee, submitted that the assessee had furnished Form No. 15J for the assessment year 2008-09 with copies of Form No. 15-I on June 5, 2008, and with respect to the assessment year 2006-07 he had filed Form No. 15J along with copies of Form No. 15-I on June 6, 2006, and, therefore, the assessee had no authority in law to deduct tax before making payment to the sub-con tractors. The sub-contractors upon submission of Form No. 15-I were entitled to get full payment and the assessee was liable to make full payment without any deduction. There is, as such, no reason why any tax should have been deducted. There is also no reason why either section 194C or section 40(a)(ia) should be applicable in his case. He contended that the legal position was not realised by the Assessing Officer which was subsequently corrected by the appellate authority and the Tribunal. He also relied on an unreported judgment of the Division Bench of the Gujarat High Court dated October 1, 2012, in CIT v. Valibhai Khanbhai Mankad since,2013 1 ITR 405 wherein the following views were taken: In our view, therefore, once the conditions of further proviso to section 194C(3) are satisfied, the liability of the payee to deduct tax at source would cease. The requirement of such payee to furnish details to the income-tax authority in the prescribed form within the prescribed time would arise later and any infraction in such a requirement would not make the requirement of deduction at source applicable under sub-section (2) of section 194C of the Act. In our view, therefore, the Tribunal was perfectly justified in taking the view in the impugned judgment. It may be that failure to comply such requirement by the payee may result into some other adverse consequences if so provided under the Act. However, fulfilment of such requirement cannot be linked to the declaration of tax at source. Any such failure, therefore, cannot be visualized by adverse consequences provided under section 40(a)(ia) of the Act.
(2.) Mr. Saraf, learned advocate for the Revenue, drew our attention to the proviso referred to in the aforesaid judgment of the Gujarat High Court, which reads as follows: Provided further that no deduction shall be made under sub-section (2), from the amount of any sum credited or paid or likely to be credited or paid during the previous year to the account of the subcontractor during the course of business of plying, hiring or leasing goods carriages, on production of a declaration to the person concerned paying or crediting such sum, in the prescribed form and verified in the prescribed manner and within such time as may be prescribed, if such sub-contractor is an individual who has not owned more than two goods carriages at any time during the previous year: Provided also that the person responsible for paying any sum as aforesaid to the sub-contractor referred to in the second proviso shall furnish to the prescribed income-tax authority or the person authorised by it such particulars as may be prescribed in such form and within such time as may be prescribed; or (ii) any sum credited or paid before the 1st day of June, 1972; or....
(3.) Mr. Saraf contended that if the assessee had furnished the requisite forms at the appropriate time, the question would not have arisen at all. The assessee, in fact, was served with a show-cause notice and in reply thereto the assessee contended himself by alleging that the payments were all below Rs. 50,000. Therefore, the section requiring the assessee to deduct tax was not at all applicable. It was never the contention of the assessee that he had omitted to deduct tax because Form No. 15-I was submitted by the sub-contractors. Mr. Saraf in this regard drew our attention to the findings recorded by the Assessing Officer which we have quoted above. Mr. Bharadwaj did not dispute that on the basis of the reply to the show cause, the aforesaid views were taken by the Assessing Officer. It is not in dispute that the letter, written by the assessee in reply to the show-cause notice, did not contain any allegation that appropriate Form No. 15J had been submitted on June 6, 2006, for the assessment year 2006-07 or on June 5, 2008, for the assessment year 2008-09. The assessee, in fact, made an additional/alternative case at the appellate stage that it had duly submitted the requisite Forms Nos. 15I and 15J, as indicated above.;