By TIOL News Service

BANGALORE, OCT 12, 2015: THE issue is - Whether if the Tribunal not only erred in adverse inferring against the Revenue for having failed to disprove the oral assertion of the assessee but also made adverse inference against the assessee for having failed to place material to substantiate its oral assertion, such order stands vitiated. YES is the answer.

Facts of the case

The assessee concern was in the business of transportation. It had entered into a contract with one M/s.Infrastructures Logistics Pvt. Ltd., Goa for transportation of iron ore from Sandur Mines to a place called Redi. As per the terms of the contract, the assessee claimed to had paid a sum as "Freight Paid". AO noticed that the assessee had made aggregate of payment in excess of Rs.50,000/- in a single AY and towards freight charges to various truck owners/operators, without deducting tax at source, on such payments, as mandated under the provisions of Section 194C. Upon noticing the discrepancy, the assessee was called upon to explain. Whereupon it was claimed by the assessee that there was no sub-contract and that he had loaded the vehicle whichever had come to the site and that the heading "freight paid" was a misnomer and a factual error and that the amount paid in fact represent the hire charges and not freight charges. Rejecting the specious contentions AO disallowed certain amounts. AO after noticing the discrepancy was constrained to invoke the provisions of Section 40(a)(ia) and disallowed the amount. On appeal before CIT(A), assessee contended that there was neither an oral or written contract, by which the contract work of transportation was sub-contracted to the truck owners and it was contended that the amounts paid represent the hire charges and are not freight charges. It was also contended that in the absence of the subcontract the amount though described as freight charges ought to be read as "hire charges only". The CIT(A) had thoroughly scrutinized the records and had found that the payments made to the various vehicle owners depended on the quantity transported and in this regard, had relied upon certain vouchers dated between 13th March to 31st March for the year 2005, wherein it was seen that for the same distance, different rates had been paid to different vehicles under different voucher numbers and thus arrived at the conclusion that the amounts expended was indeed freight charges and not hire charges. Though, it was the specific case of the assessee that the amounts paid reflect only the hire charges. No material has been placed to demonstrate the same either before AO or before CIT(A). Thus, CIT(A) concluded that the amounts allegedly paid were indeed freight charges and not hire charges and rejected the contention of the assessee that the entry "freight paid" was on account of the mistake committed by the accountant and in fact such amount represent the hire charges only. As there were no written contract nor bills issued by the transporters and the entire case was sought to be demonstrated and supported only by the vouchers maintained by the assessee.

Held that,

++ there is no controversy regarding the said contention, the provision is clear and unambiguous and the word aggregate has been specifically used. In that view of the matter, the assertion on behalf of the assessee, that only in respect of payment which exceeds Rs.50,000/- is liable to be deducted at source is liable to be rejected and is accordingly rejected. Accordingly, the substantial questions of law as framed by the appellant/revenue is answered in favour of the revenue. The simple issue has been approached by the Tribunal in an erroneous manner. The Tribunal under the guise of broad principles has misdirected itself resulting in adjudication of the dispute on the basis of inferences and assumption, contrary to law. The Tribunal has rendered a finding without reference to the basic and critical facts which were necessary for adjudication. The Tribunal has gravely erred in trying to adjudicate the appeal merely on the basis of broad principles. The Tribunal gravely erred in inferring that, there ought to be a sub-contract in writing and only in a such an event the provisions of the Act can be invoked. It further seriously erred in holding the factual issue in favour of the assessee, when not even a shred as evidence was placed before it. A pointer in this direction, is the finding that no risk was undertaken by the lorry owners. It was not the case of the assessee before the Assessing Authority or CIT(A). The said contention being question of fact, the appellate Tribunal erred in accepting the same and on the contrary ought to have outright rejected the same. It ought to have seen that it is an improvement to the case put forth by the assessee before the original authority. It is not the finding of the Tribunal that any independent material either in the form of say of lorry owners, etc., were placed before it compelling it to take a different view than the one adopted by the original authority. The Tribunal has also gravely erred in holding that the assessee/appellant had made out a case because the revenue failed to place any material before it, contraverting the vague and mere oral assertion of the assessee. The said reasoning is contrary to all known cannons of the law of evidence, logic and law mandates that the burden and onus is on the person, who alleges a fact, to prove the said fact. The assessee has pleaded that the entries "freight paid" is on account of a mistake committed by their accountant and they have come up with the excuse very belatedly. This being the factual issue, the Tribunal did not deem it necessary to call upon the assessee to demonstrate the said fact, but proceeded to accept the statement as a proven fact. It appears that the Tribunal has diverted itself from addressing the core issue, that is whether the assessee has paid any sums, the aggregate of which exceeds Rs.50,000/- in the AY to any single entity. The Tribunal has not addressed itself to any of the findings of fact rendered by the AO. In particular, several instances of the aggregate of payments have exceeded Rs.50,000/- in the assessment year have been placed on record. It does not render any reasoning to unsettle the finding of the original authority, that even the agreement can also be an oral and that the transactions with the lorry owners/transporters is within the purview of the provisions of the Act as it amounts to carriage of goods other than the railways;

++ the finding that the appeal requires to be allowed in view of the decision by the Co-ordinate Bench and that of the Punjab and Haryana High Court in the case of Commissioner of Income Tax Vs. United Rice Land Limited 2008-TIOL-281-HC-P&H-IT is erroneous. Therein the finding of fact, that the amounts paid to the transporter is by way of hire charges, was rendered on the basis of evidence furnished by the alleged transporters. The assessee therein was in the manufacturer and export of rice and there was an identified route, quantity etc., in view of which certain facts could be easily identifiable. The transportation of goods was from its premises to the port and in the course of its export. In the present case, the facts and details are not only hazy but are obfuscated due to lack of clarity. Apart from stating that the ore was required to be transported from point (a) to point (b), no details are provided as to whether the point (b) was a licenced or registered place, where minerals could be stored there, etc., It is seen that a huge sum amounting to Rs.5=00 crorers is spent merely for transportation of iron ore from point (a) to point (b), no details are forth coming whether the transportation is in the course of business or is being transported to the hands of end user. In such situation, this Court finds it hard to believe the version put out by the assessee. The counsel for the respondent is unable to answer the queries in this direction. As stated earlier, the Tribunal gravely erred in adversely inferring against the revenue for having failed to disprove the oral assertion of the assessee. On the other hand, the Tribunal ought to have adversely inferred against the assessee for having failed to place material to substantiate its oral assertion. Consequently, the order of the Tribunal is vitiated and requires to be interfered with. Accordingly, the impugned order under appeal is set aside and the order of the original authority dated 26.12.2007 stands resurrected. The case of the assessee is rejected and the question of law formulated by the appellant stands answered in favour of the revenue.

(See 2015-TIOL-2353-HC-KAR-IT)