G.A. Road Carriers, rep. By its Partner Jagjit Singh V. Income-Tax Officer, Ward-I, Nizamabad and others

WP/21357/2009

AI Insights

The case involves M/s G.A. Road Carriers, a partnership firm engaged in transport business, which faced a demand notice from the Income-Tax Officer for arrears of income-tax for the assessment year 2005-06. The firm contested the inclusion of certain freight charges in its gross receipts, which were subjected to tax under Section 40A(3) of the Income Tax Act, 1961. The firm had previously succeeded in a similar appeal for the assessment years 2003-04 and 2004-05, leading to a reversal of the assessing officer's decision. Despite this, the assessing officer applied the same provisions for the 2005-06 assessment, leading to the current writ petition. The court's decision to stay the coercive collection of the disputed tax was based on the principles outlined in the CBDT Circular and the pending appeal's status.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 797130 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 08-10-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year 2005-06; Income tax demand; Section 40A(3); Coercive process
• Section: 40A(3)

Judgement Text

"THE HONOURABLE SRI JUSTICE GODA RAGHURAM AND THE HONOURABLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 21357 of 2009 Dated: 08-10-2009 Between: M/s G.A. Road Carriers, rep. By its Partner Jagjit Singh. …Petitioner and Income-Tax Officer, Ward-I, Nizamabad and others. …Respondents. Oral Order: (Per GR, J) The 7th respondent, on 14-09-2009 issued a notice of demand intimating the petitioner that it is due Rs.27,97,763-00, that this amount should be paid towards arrears of income-tax for the assessment year 2005- 06. Similar notices were issued to the other partners of the petitioner’s firm as well. This notice and the apprehension of consequent coercive process for recovery of this amount, has triggered the filing of this writ petition. The petitioner is a partnership firm carrying on business in transport. As a part of its operations, the firm arranges vehicles and keep them available with several beedi manufacturers in Nizambad and Kamareddy regions who need to transport their products on day to day basis, at the factory site for transporting the stock to their customers. Certain advance amounts are provided by the firm to the drivers of the transport vehicles for meeting operational requirements, like fuel, lubricants, food for drivers and miscellaneous expenses, road tax etc. The firm would eventually raise a bill on the beedi manufacturers with respect to the amount actually paid towards these expenses and transport charges as per the agreed rates. Only the commission charged by the assessee from the vehicle owners is recorded in its books as reflecting business receipts. Against such gross commission receipts the firm claimed certain administrative expenses and the balance was recorded as the net profit of the firm. During the assessment year 2003-04 the Assessing Officer concluded that the gross receipts of the firm would also include the freight charges received from the various beedi companies as they were credited to the bank account of the assessee firm and would form part of its gross business turnover and applying the provisions of Section 40A(3) of the Income Tax Act, 1961 (for short ‘the Act’) levied income-tax. Aggrieved thereby the petitioner preferred an appeal before the Commissioner of Income-Tax (Appeals)-VI, the 4th respondent, who allowed the appeal and reversed the finding of the Assessing authority on the aspect of disallowance under Section 40A(3), by a common order dated 27-7-2007 for the assessment years 2003-04 and 2004- 05. For the assessment year 2005-06 the 1st respondent-Assessing authority again disallowed an amount of Rs.68,04,832-00 applying the provisions of Section 40A(3) of the Act and raised the demand. On 2-2-2008 the petitioner preferred an appeal before the 4th respondent and on 4-2-2008 submitted an application before the 1st respondent seeking stay. On 18-2-2008 the 1st respondent granted stay of collection of the disputed component of tax, on condition that the petitioner pays the demand in monthly instalments of Rs.50,000/- each and ordered further that in default, the entire amount would be liable to be recovered. The petitioner paid some instalments and submitted an application to the 1st respondent for reconsideration of the instalment liability. The petitioner made a further application on 19-6-2008 sensitising the 1st respondent to a circular No. 530 dated 6-3-1989 of the CBDT which is to the effect that in situations where the issue is decided in favour of the assessee in an earlier order by the appellate authority or court in the assessee’s own case, the assessee ought not to be treated as in default except in respect of the amount not attributable to such disputed points. The Circular also classifies that where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or a court alters the situation referred to above, the Assessing Officer will no longer be bound by these instructions and may exercise his discretion independently. On the basis of this Circular of the CBDT the assessee contends that he ought not to be coerced to pay the disputed amount of tax, in view of the decision of the appellate authority dated 27-07-2007 passed in respect of the earlier assessment years 2003-04 and 2004-05. There being no response to his representation, the petitioner applied to the Commissioner of Income-Tax, Range-V. On 19-12-2008 the Commissioner of Income-Tax ordered that the petitioner would not be treated as an assessee in default if 50% of the demand is paid at the rate of two lakhs per month till the disposal of the first appeal or till the demand is cleared whichever is earlier. Undaunted, the petitioner applied to the Chief Commissioner of Income-Tax seeking stay of collection of tax pending its appeal before the 1st appellate authority reiterating the Board Circular instructions. The Chief Commissioner of Income-Tax has not responded. Sri Narasimha Sharma, the learned standing counsel for Income-Tax would strenuously urge that since the petitioner did not comply with either the order of the assessing authority dated 18-2-2008 directing payment of monthly instalment of Rs.50,000/- each or the order of the Commissioner of Income-Tax dated 19-12-2008 directing payment of Rs. 2 lakhs per month, the petitioner ought not to be granted any relief. It is not in dispute that the order of the appellate authority dated 27-7- 2007 for the assessment year 2003-04 and 2004-05 over-turning the decision of the assessing officer in respect of the application of the provisions of Section 40A(3) of the Act is currently in operation though subject to an appeal before the Tribunal. The Board’s Circular No. 530 dated 6-3-1989 thus applies to the facts of the case and disentitles the collection of the disputed tax treating the petitioner as an assessee in default. In any event the petitioner’s appeal preferred to the 4th respondent is stated (by the learned counsel for the petitioner) to have been heard and that orders were reserved on 7-7-2009. Presumably orders would be passed by the appellate authority shortly. In the facts and circumstances and in view of the CBDT Circular No. 530 dated 6-3-1989, the respondents are directed not to pursue any coercive steps for collection of the balance disputed tax from the petitioner in respect of the assessment year 2005-06 quantified as Rs.27,97,763-00 pending passing and communication of the orders in the appeal preferred by the petitioner to the 5th respondent. The writ petition is disposed of as above at the stage of admission, after hearing the learned standing counsel for Income-Tax as well. There shall however be no order as to costs. __________________________ GODA RAGHURAM, J ______________________________ RAMESH RANGANATHAN, J 8th October, 2009. GRR "