Transporter TDS Exemption Declarations and Form 26A Physical Filingcs Require Detailed Verification Upon Remand

By | October 17, 2026
0 Comment
Transporter TDS Exemption Declarations and Form 26A Physical Filingcs Require Detailed Verification Upon Remand

Issue

  1. Validity of Section 194C(6) Declarations: Whether a transporter declaration lacking specific freight details or registration numbers can be rejected without confronting the assessee with discovered discrepancies, or solely because it is not formatted as per Circular No. 19/2015.
  2. Acceptance of Physical Form 26A: Whether Form 26A certificates submitted in physical form—rather than electronically—must be evaluated by the Assessing Officer under the first proviso to Section 201(1) to establish that payee transporters paid their taxes.

Facts

  • Business Transaction: During AY 2021-22, the assessee made freight payments to transporters without deducting tax at source (TDS) under Section 194C, relying on declarations received under Section 194C(6).
  • Discrepancies in Declarations: Spot enquiries conducted by the Revenue revealed errors, omissions, and missing information (such as freight amounts and goods carriage registration numbers) in the declarations provided by the third-party transporters.
  • Format Defect Alleged: The Assessing Officer rejected the declarations, noting that they failed to strictly follow the format prescribed under CBDT Circular No. 19/2015 dated 27-11-2015.
  • Alternative Defense Raised: The assessee raised an alternative plea under the first proviso to Section 201(1) stating that the payee transporters had included the freight payments in their income tax returns and paid the corresponding taxes due.
  • Physical Form 26A Rejected: In support of its alternative plea, the assessee submitted Form 26A accountant certificates in physical paper format. The Assessing Officer refused to consider them on the ground that Rule 31ACB mandates electronic submission.

Decision

  • Procedural Fairness Required for Section 194C(6): Declarations cannot be rejected purely on formalistic grounds or because they lack strict alignment with Circular No. 19/2015, provided essential details are present. Before rejecting declarations due to third-party discrepancies or omissions, the Assessing Officer must confront the assessee with the findings.
  • Mandatory Evaluation of Physical Form 26A: The Assessing Officer erred in summarily rejecting Form 26A certificates merely because they were filed physically instead of electronically. Physical Form 26A submissions must be considered to verify if the payees declared the income and paid taxes.
  • Remand for De Novo Examination: Both issues were remanded back to the Assessing Officer for de novo consideration and verification on merits after providing a fair hearing to the assessee. (Matter remanded)

Key Takeaways

  • Substance Over Circular Format in Section 194C(6): Non-deduction of TDS under Section 194C(6) cannot be denied solely due to minor formatting discrepancies or non-adherence to Circular No. 19/2015 if the fundamental information is available.
  • Right to Confront Adverse Findings: When spot inquiries uncover defects in third-party transporter declarations, natural justice mandates that the Assessing Officer disclose these discrepancies to the assessee before passing an adverse order.
  • Substantive Relief under Section 201(1) Proviso: Procedural non-compliance (such as submitting Form 26A physically instead of electronically) should not defeat the substantive statutory protection available under the first proviso to Section 201(1) when payees have fulfilled their tax obligations.
IN THE ITAT AHMEDABAD BENCH ‘C’
Voltamp Transformers Ltd.
v.
Deputy Commissioner of Income-tax, TDS
Dr. B.R.R. Kumar, Vice President
and Rahul Chaudhary, Judicial Member
IT Appeal No. 797 (AHD) of 2026
[Assessment year 2021-22]
SEPTEMBER  14, 2026
Dhinal Shah and Smit Agarwal for the Appellant. C. Dharni Nath, Sr. DR. for the Respondent.
ORDER
Rahul Chaudhary, Judicial Member.- The present appeal preferred by the Assessee is directed against the Order, dated 27/01/2026, passed by the Learned Commissioner of Income Tax (Appeals), ADDL/JCIT(A) – Faridabad [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had dismissed the appeal against the Order, dated 19/06/2023, passed by Assessing Officer under Section 201 & 201(1A) of the Act for the Assessment Year 2021-2022.
2. The Assessee has raised following grounds in the present appeal:
1. The learned Addl. JCIT(A) has erred in confirming the Order of DCIT, Circle TDS by declaring the assessee company as assessee-in-default and determining the liability of tax under Section 201(1) and interest under Section 201(1A) of Rs.31,34,257 on the ground that the assessee company has not deducted tax at source towards the transportation expense under Section 194C inasmuch as the assessee company has obtained a declaration to the effect that those transporters own ten OR less goods carriages and its Permanent Account Number which is in compliance with the provision of sub-Section (6) of Section 194C and therefore there is no liability on the part of the assessee company to deduct tax under Section 194C on such payments.
2. The learned Addl/JCIT(A) has erred in confirming the declaration by DCIT, Circle TDS as assessee in default and determining the liability of tax under Section 201(1) and interest under Section 201(1A) of Rs. 31,34,257 on the ground that the declaration given by the transporters are false declaration inasmuch as the obligation of the assessee company is to obtain the declaration which in compliance with the provision of sub-Section (6) of Section 194C and there cannot be an obligation to verify the correctness OR truthfulness of such declaration.
3. The learned Addl/JCIT(A) has erred in taking a view that the format given in Circular No. 19/2015 dated 27th November 2015 is mandatory in nature inasmuch as there is no prescribed format of declaration to be obtained under Section 194C(6) under the Income Tax Act OR Rules and that the format given in the circular 19/2015 is suggestive one and not mandatory for the assessee company as per the accepted judicial principles.
4. Without prejudice to the above grounds of appeal, the learned Addl./JCIT(A) has erred in declaring the assessee company as assessee-in-default and determining the liability of tax under Section 201(1) and interest under Section 201(1A) of Rs. 31,34,257 on the ground that forms 26A furnished by the assessee company are in physical mode and not an electric mode inasmuch as the assessee company has furnished forms 26A in the physical mode which is sufficient compliance with the requirement laid down under the proviso to sub-Section (1) of Section 201.”
3. The relevant facts in brief are that the Assessee-company is engaged in the manufacturing of industrial transformers. A spot verification proceeding under Section 133A(2A) of the Act was conducted at the business premises of the Assessee on 31/01/2023 to examine compliance with Tax Deduction at Source (TDS) provisions. The Assessing Officer discovered that the company had made substantial transportation payments without deducting Tax Deduction at Source (TDS) under Section 194C of the act. Although the company claimed exemption under Section 194C(6) based on declarations that payee transporters owned ten or fewer goods carriages, scrutiny revealed that (a) declarations accepted by the Assessee omitted crucial statutory details (specifically the freight payment amounts and the registration numbers of the goods carriages deployed); (b) internal email correspondence revealed that the Assessee was fully aware of CBDT Circular No. 19/2015 dated 27/11/2015; (c) the Assessee company circulated its own declaration forms to various transporter; (d) substantial payments running were made without TDS to large transport operators (such as M/s. Om Road Carriers Pvt. Ltd. and Shri Karni Road Carrier); (e) Payee/transporters maintained audited books of account, reported high annual turnovers and were incorrectly filing returns claiming benefit of Section 44AE of the Act. Based on the aforesaid findings, the Assessing Officer issued a show-cause notice to the Assessee. In response, the Assessee, inter alia, contended that Section 194C(6) of the Act did not imposes any statutory duty the Assessee-deductor to verify the truthfulness or correctness of a declaration, and that the format of declaration given in Circular No. 19/2015 issued by the CBDT was purely suggestive and was not mandatory. The Assessing Officer rejected these contentions, holding that (a) the Assessee had knowingly accepted declaration/documents which were non-est on account of discrepancies and omissions; (b) declarations obtained did not confirm to the format provided in Circular No. 19/2015 ssued by the CBDT; and (c) the Assessee had failed to discharge its primary statutory obligation to carry out necessary verification under Section 194C(6) of the Act.
3.1. The Assessee had also raised alternative plea in term Proviso to Section 201(1) of the Act contending that the payee/deductees had included the transport charges paid in their respective tax returns and had offered the same to tax and therefore, the Assessee should not be treated as Assessee-in-default in respect of the same. The Assessing Officer noted that the Assessee had furnished Form 26A manually in physical paper mode rather than through electronic mode on the TRACES portal as mandated by Rule 31ACB of the Income Tax Rules, 1962 and CBDT Notification No. 11/2016 dated 02/12/2016. Therefore, the Assessing Officer rejected the alternative plea of the Assessee.
3.2. Consequently, the Assessing Officer passed an Order, dated 19/06/2023, under Section 201(1) and 201(1A) of the Act, treating the Assessee as an ‘Assessee-in-Default’ and determining a total demand at INR.31,34,257/- [comprising tax liability under Section 201(1) and interest under Section 201(1A) of the Act) for Assessment Year 20212022.
4. Aggrieved by the Assessment Order, the Assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), vide Order, dated 27/01/2026, dismissed the appeal and confirmed the order of the Assessing Officer.
5. Being aggrieved, the Assessee had preferred the present appeal before this Tribunal. Ground No. 1 to 3 raised by the Assessee pertain to applicability of Section 194C(6) of the Act while Ground No. 4 contains the alternative plea of the Assessee based upon submission of Form 26AS during the course of hearing.
6. The Learned Authorised Representative for the Assessee appearing before us submitted that under Section 194C(6) of the Act, the sole statutory obligation cast upon a deductor is to obtain a declaration from the transport contractor to the effect that they own ten or fewer goods carriages, accompanied by their PAN. It was contended that the statute does not impose any duty or obligation on the deductor to verify the veracity, truthfulness, or factual correctness of the declaration so furnished. In support of this contention, the Learned Authorised Representative for the Assessee relied upon judicial precedents. The Learned Authorised Representative for the Assessee further submitted that CBDT Circular No. 19/2015, dated 27/11/2015, was in the nature of administrative guideline and did not provide any mandatory format. It was contended that neither the Act nor the Income Tax Rules, 1962 prescribe a mandatory format for declarations under Section 194C(6), and therefore, the format contained in Circular No. 19/2015 is merely suggestive/illustrative, rather than mandatory. As an alternative contention, the Learned Authorised Representative for the Assessee submitted that physical submission of Form 26A constituted sufficient compliance in terms of Proviso to Section 201(1) of the Act as the same proves that the deductees had accounted for the freight payments in their returns and paid taxes thereon.
7. Per contra, the Learned Departmental Representative strongly relied upon the findings contained in the Assessment Order and the order of the Learned CIT(A).
8. We have considered the rival submissions recorded hereinabove and have perused the material on record.
9. The primary contention of the Assessee is that the Assessee/deductor had no obligation to verify the truthfulness of a declaration, and that any declaration accompanied by a PAN satisfied the requirement of Section 194C(6) of the Act. In our view the aforesaid contention of the Assessee is required to be consideration in the light of the prevailing facts in present case. It is admitted position that the Assessee was subjected to spot verification under Section 133A(2A) on 31/01/2023, and it was discovered that substantial payments were made to the transporters without deducting Tax Deduction at Source (TDS) under Section 194C of the Act. During the proceedings the Assessee-company had claimed exemption under Section 194C(6) of the Act on the basis on declarations received (to the effect that the payeetransporters owned ten or fewer goods carriages). However, the scrutiny revealed that the declarations furnished by the Assessee had errors/omissions. The Assessing Officer has recorded that the Assessee had itself circulated a declaration format which did not contain necessary details. The Assessing Officer also took note of the fact that the basic details such as vehicle registration numbers and freight details were missing in the declarations. Thus, as per the Assessing Officer there were apparent discrepancies/omissions in the declarations (apart from the fact that the declaration were not in the format CBDT Circular No. 19/2015, dated 27/11/2015).
10. In view of the above, we find that the reliance placed by the Assessee on the judgment of the Hon’ble Gujarat Court in the case of Principal Commissioner of Income Tax – 3 v. Sikandarkahn V Tunvar: R/Tax Appeal No. 85 of 2020, dated 27/07/2026 is misplaced and more so. We note that in paragraph 10 of the said judgment the Hon’ble High Court has observed as under:
“10. On perusal of the orders passed by the Assessing officer and the CIT (Appeals), it is discernible that the Assessing Officer has not doubted the receipt of the Form Nos. 15-I by the assessee but raised an objection that the said Form Nos. 15-I was not verified by the assessee with respect to the truck owners. Moreover, the Tribunal has rightly held that no further investigation is carried out either by the Assessing officer or by CIT (Appeals) by issuing summons under section 131 or recording statement under section 133(6) of the Act.”
(Emphasis Supplied)
On perusal of above it becomes clear that in the case of assessee before the Hon’ble High Court that the Assessing Officer had failed to carry out necessary inquiry/verification. As noted hereinabove, in the case before this Tribunal the Assessee was subjected to spot verification under Section 133A(2A) on 31/01/2023. Statement of the employee of the Assessee-company was also recorded. Thus, the Assessing Officer carried out inquiry/verification.
Further, a perusal of substantial question of law which came up for consideration before the Hon’ble High Court (recorded in paragraph 2 of the said judgment) shows that the issues before the Hon’ble High Court did not relate to declaration issued in terms of Section 194C(6) of the Act and/or content thereof. The reporting obligation contained in Section 194C(7) of the Act is separate and distinct from the eligibility to claim benefit of Section 194C(6) of the Act. The Assessee would contend that in the above judgment, the Hon’ble High Court has held that the Assessee claiming benefit of Section 194C(6) of the Act on the basis of declarations furnished by the transporter is not under obligation to verify the same. Even if the aforesaid contention of the Assessee is accepted, we are of the view that on the basis of the aforesaid judgment it can be contended that the benefit of Section 194C(6) of the Act should be granted even if the declaration is incomplete or laden with discrepancies/errors/omission. In our view such an inference would defeat the very purpose of such declaration. We have already noted hereinabove that in the case before us, the Assessing Officer has, in addition to pointing out failure of the Assessing Officer to carry out verification of declaration, pointed out discrepancies including omission of details such as the freight payment amounts and the registration numbers of the goods carriages. Therefore, we hold that the above judgment of the Hon’ble Gujarat High Court does not advance the case of the Assessee.
11. However, having noted as above, we do find some merit in the contention of the Assessee to the extent that the present case the factum of the Assessee having failed to verify the declarations issued by the transporters did weigh heavily with the Assessing Officer while passing the Order under Section 201 & 201(1A) of the Act. It is apparent that at the relevant time the Assessing Officer also did not have the benefit of the recent judgment of the Hon’ble Gujarat High Court in the case of Sikandarkahn V Tunvar (supra).
12. We further note that the Assessing Officer was also of the view that the declarations were not in specified format. In this regard we find merit in the contention of the Assessee that the format specified in Circular No. 19/2015, dated 27/11/2015, issued by the CBDT containing Explanatory Notes to the Finance Act, 2015 was to ensure uniformity and was not mandatory in nature. We note that Paragraph 43.7 of the said Circular specifically provided that for the purpose of ensuring uniformity in the declaration a format was being provided. The relevant extract of Paragraph 43.7 of Circular No. 19/2015 reads as under
“43.7 Further, for the purposes of ensuring uniformity in the format of declaration to be furnished by the payee under section 194C(6) of the Income-tax Act for receiving the payment without deduction of tax, the following format for furnishing of declaration is specified.”
13. Thus, it is clear that to ensure uniformity Paragraph 43.7 specified a standard declaration format requiring the payee to expressly list the registration numbers of the goods carriages owned and details of freight payments.
14. While the format may have been provided to ensure uniformity, we are of the view that the requirement of providing the amount of freight/transport charges and registration number of goods carriage is necessary to achieve the very object of the legislative amendments made to Section 194C(6) of the Act. It would be pertinent to note Section 44AE of the Act contained provisions for computation to profits and gains of business of assessee plying/hiring/leasing of goods carriage and owning less than 10 goods carriage. The intention of the legislature was to limit the aforesaid benefit to small transport operators. Prior to 01/06/2015, Section 194C(6) of the Act provided that no tax was required to be deducted from payments made to a transport contractor upon the mere furnishing of their PAN. However, to curb misuse where large transport operators claimed blanket TDS exemption, Section 194C(6) of the Act was amended via the Finance Act, 2015 w.e.f. 01/06/2015. The amended Section 194C(6) read as under:
“No deduction shall be made from any sum credited or paid or likely to be credited or paid during the previous year to the account of a contractor during the course of business of plying, hiring or leasing goods carriages, where such contractor owns ten or less goods carriages at any time during the previous year and furnishes a declaration to that effect along with his Permanent Account Number, to the person paying or crediting such sum.”
(Emphasis Supplied)
15. Section 194C(7) of the Act, therefore, casts a reporting obligation upon the person responsible for making payments without deducting any tax on receiving declarations in terms of Section 194C(6) of the Act.
16. In view of the above we hold that, a declaration given under Section 194C(6) of the Act that does not provide the basic details such as freight/transport charges and registration number of goods carriage (which would in any case be available and can be extracted from the underlying invoice and transport challan) cannot be the sole basis of grating the benefit of Section 194C(6) of the Act in a case where the spot enquiries reveal discrepancies/errors/omissions in the declaration/documentation. At the same time, we are of the view that prior the rejection of such declaration (issued by a third party) the Assessee should be confronted with the discrepancies/errors/omissions in the declaration/documents.
17. We note that the Assessment Order does not point out the deficiencies in the declaration forms pertaining to payments made to each of the 9 transporters in respect of which the Assessing Officer has treated the Assessee as assessee-in-default. Therefore, we deem it appropriate to set-aside the order passed by the Assessing Officer and restore the issue back to the file of the Assessing Officer for denovo consideration in view of our findings/adjudication hereinabove. It is clarified that the claim/contentions of the Assessee would not be rejected merely on the ground that the Assessee had failed to carry out verification or the declaration was not in the format provided in the Circular No. 19/2015 (provided necessary details are stated in the declaration).
18. Since we are restoring the issue back to the file of the Assessing Officer, all the rights and contentions of the Assessee are left open. Therefore, the Assessee would be at liberty to raise the alternative plea in terms of First Proviso to Section 201(1) of the Act before the Assessing Officer. It has not been disputed by the Revenue that the Assessee had filed Form 26A during the assessment proceedings. Further we note that in the Assessing Officer has recorded in the Assessment Order that the payee/transporters were filing return of income (albeit, allegedly incorrectly under Section 44AE of the Act) and maintaining books of account which were audited. Given the fact that the Assessee has raised this plea as an alternative plea, we direct the Assessing Officer to consider the certificates in Form 26A furnished by the Assessee in physical paper form establish that the payee transporters had included the freight income in their returns of income and paid taxes due thereon.
19. In terms of the above, all the grounds raised by the Assessee are allowed for statistical purposes.
20. In result, present appeal preferred by the Assessee is allowed for statistical purposes.