2021 (9) TMI 1023 - AT - Income Tax

ITAT allows appeal on section 40(a)(ia) disallowance citing compliance with 194C(6) and genuine transportation expenses.

The ITAT allowed the appeal, stating that the disallowance of expenses under section 40(a)(ia) of the Income Tax Act was unjustified due to the ... TDS u/s 194C - Addition u/s 40(a)(ia) - disallowance merely on technical basis that assessee has failed to make compliance with the provision of section 194C(7) - HELD THAT:- As gone through the judicial pronouncements referred by the ld. counsel in the case of the Soma Ghosh [2016 (10) TMI 55 - ITAT KOLKATA] holding that if assessee complies with the provision of section 194(6), no disallowance u/s. 40(a)(ia) is permissible even though there is violation of provision of section 194C(7) of the act. In the case of CIT vs. Marikamba Transport Co. [2015 (6) TMI 181 - KARNATAKA HIGH COURT] held that in case of payment made to sub-contractor non-filing of form no. 15-I/J is only a technical defect and provision u/s. 40(a)(ia) should not attract in such a case. In the light of the above facts and findings, it is observed that in this case assessee has furnished the copies of PAN along with copies of invoices of transportation bill comprising complete address of the transporter, phone no and complete particulars of the goods loaded through the transportation. AO has not taken any step to disprove the genuineness of the transportation expenses by not conducting any inquiry therefore simply for technical lapse u/s. 194C(7) it is not appropriate to disallow the claim of transportation expenses. Looking to the above facts and finding, we consider that the decision of ld. CIT(A) is not justified, therefore, this ground of appeal of the assessee is allowed. Issues:1. Disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961.2. Compliance with the provisions of section 194C(6) and section 194C(7) of the Act.3. Condonation of delay in filing the appeal.Issue 1: Disallowance of expenses under section 40(a)(ia) of the Income Tax Act, 1961:The appeal arose from the order of the CIT(A)-2 confirming the disallowance of a specific amount made by the Assessing Officer under section 40(a)(ia) of the Act. The appellant contended that the disallowance was erroneous and contrary to the provisions of the Act and a decision of the Gujarat High Court. The ITAT found that the Assessing Officer had disallowed the claimed transport expenses of the appellant based on the non-sufficiency of PAN numbers of the transporters. However, the ITAT observed that the appellant had provided relevant documents, including PANs of transporters, invoices, and transportation bills, demonstrating compliance with section 194C(6). The ITAT referred to legal precedents where compliance with section 194C(6) was deemed sufficient, and non-compliance with section 194C(7) did not warrant disallowance under section 40(a)(ia). Consequently, the ITAT allowed the appeal, stating that the disallowance was unjustified, and the Assessing Officer had not disproved the genuineness of the transportation expenses.Issue 2: Compliance with the provisions of section 194C(6) and section 194C(7) of the Act:The ITAT noted that the appellant had submitted detailed evidence, including PANs of transporters and invoices, to establish the genuineness of the payment made for freight. The Assessing Officer had disallowed the expenses, citing non-compliance with section 194C(7). However, the ITAT held that compliance with section 194C(6) was sufficient, and the failure to comply with section 194C(7) did not warrant disallowance under section 40(a)(ia). The ITAT referred to various legal decisions supporting this interpretation and concluded that the appellant had adequately substantiated the transportation expenses. The ITAT allowed the appeal based on the appellant's compliance with section 194C(6) and the lack of justification for disallowance under section 40(a)(ia).Issue 3: Condonation of delay in filing the appeal:The appellant had filed an application for condonation of a 26-day delay in filing the appeal, explaining that the delay was due to circumstances beyond their control. The ITAT considered the explanation provided and found reasonable cause for the delay, ultimately granting condonation. The ITAT acknowledged the marginal delay and the circumstances leading to it, concluding that the delay in filing the appeal was justified. Consequently, the ITAT condoned the delay and proceeded to hear the appeal on its merits.In conclusion, the ITAT allowed the appeal of the assessee, emphasizing compliance with section 194C(6) as sufficient for establishing the genuineness of transportation expenses and rejecting the disallowance under section 40(a)(ia) based on technical lapses. The ITAT also granted condonation of the delay in filing the appeal, considering the circumstances beyond the appellant's control.