The Income-tax Officer, Jammu V. M/s. Hind Kashmir Service Station, Jammu

ITA 107/ASR/2014

• Counselvise Citation: 10720914 RSA 2014
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-03-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 20-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.107(ASR)/2014 ASSESSMENT YEAR:2010-11 PAN ; AAAFH8952J INCOME TAX OFFICER, VS. M/S. HIND KASHMIR SERVICE STATION, WARD-2(1), JAMMU. B.C.ROAD, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.TARSEM LAL, DR RESPONDENT BY:SH.P.N.ARORA, ADVOCATE DATE OF HEARING:11/03/2015 DATE OF PRONOUNCEMENT:11/03/2015 ORDER PER A.D. JAIN, JM: THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEA R 2010-11 AGAINST THE ORDER DATED 16.12.2013 PASSED BY LEARNED CIT(A) , JAMMU, TAKING THE FOLLOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT(A) WAS RIGHT IN ALLOWING THE RELIEF ON ACCOUNT OF ADDITION IN RESPECT OF DIFFERENCE ON GROSS PROFIT WHEN THE ASSESSEE HAD FA ILED TO PRODUCE THE BOOKS OF ACCOUNT DURING THE COURSE OF A SSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS. ITA NO.107(ASR)/2014 2 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. C IT(A) WAS RIGHT IN ALLOWING THE RELIEF ON ACCOUNT OF ADDITION MADE IN RESPECT OF DISALLOWANCE OUT OF DEPRECIATION ON CARS WHEN THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR DURING THE REMA ND PROCEEDINGS. 2. ON THE FACTS AND CIRCUMSTANCES WHETHER THE LD. CIT( A) WAS RIGHT IN ALLOWING THE RELIEF ON ACCOUNT OF ADDITION MADE IN RESPECT OF DISALLOWANCE OUT OF OTHER INCOME CREDITE D TO PROFIT & LOSS ACCOUNT. 4. THE APPELLANT CRAVES TO AMEND, ALTER OR ADD ANY ONE OR MORE GROUNDS OF APPEAL. 2. APROPOS GROUND NO.1, THE FACTS ARE THAT THE ASSE SSEE, A DEALER OF INDIAN OIL CORPORATION LTD., PURCHASES AND SELLS TH EIR PRODUCTS. THE AO HAD COLLECTED INFORMATION FROM INDIAN OIL CORPORATION L TD., WHERE THEY HAD SHOWN MARGIN BETWEEN THE PURCHASE RATE AND SALE RAT E AS COMMISSION. THE AO TREATED THE BUSINESS OF SALE AND PURCHASE OF PET ROL AND DIESEL AS A COMMISSION BASED BUSINESS AND MADE AN ADDITION OF R S.3,25,837/-. 3. THE LD. CIT(A) DELETED THIS ADDITION. 4. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION IN RESPECT OF DIFFERENCE IN GROSS PRO FIT; THAT WHILE DOING SO, THE LD. CIT(A) FAILED TO CONSIDER THAT THE ASSESSEE HAD NOT PRODUCED ITS BOOKS OF ACCOUNT BEFORE THE AO EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS; THAT THE LD. CIT(A) HAS ERR ED IN NOT TAKING INTO ACCOUNT THE OBSERVATION OF THE AO THAT THE TOTAL CO MMISSION ON ACCOUNT OF ITA NO.107(ASR)/2014 3 SALE OF PETROL PRODUCTS WAS RS.21,06,612/- AND THA T ON ACCOUNT OF DIESELF PRODUCTS WAS RS.6,09,563/-, TOTAL AMOUNTING TO RS.2 7,16,175/-, WHEREAS THE ASSESSEE HAD SHOWN GROSS PROFIT OF RS.23,90,338/-; THAT THE AO HAS CORRECTLY ADDED DIFFERENCE OF RS.3,25,837/-. 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTEND ED THAT THE LD. CIT(A) HAS RIGHTLY TAKEN INTO CONSIDERATION THE LETTER DAT ED 22.02.2002 ISSUED BY THE DEPUTY SECRETARY (BUDGET) CENTRAL BOARD OF DIRECT T AXES, WHEREIN, IT HAS CATEGORICALLY BEEN STATED THAT THE INCOME EARNED B Y THE RETAIL DEALERS OF THE PETROLEUM PRODUCTS ON SALE OF SUCH PRODUCTS PURCHAS ED FROM THE OIL COMPANIES IS NOT IN THE NATURE OF COMMISSION OR BRO KERAGE WITHIN THE MEANING OF SECTION 194H OF THE INCOME TAX ACT, 1961 AND AS SUCH, NO TAX IS DEDUCTIBLE AT SOURCE ON THE DEALERS MARGIN OR DEAL ERS COMMISSION U/S 194H OF THE ACT. 6. IN THIS REGARD, IT IS SEEN THAT WHEN THE MATTER WAS REMANDED BY THE LD. CIT(A) TO THE AO, THE AO IN HIS REMAND REPORT (PAGE 19, PARA 4.5 TO PAGE 25 OF THE IMPUGNED ORDER), WITH REGARD TO THE AFORESAI D LETTER ISSUED BY THE CBDT, OBSERVED THAT THE INCOME EARNED BY THE RETAIL DEALERS OF THE PETROLEUM PRODUCTS ON SALE OF SUCH PRODUCTS, PURCHA SED FROM THE OIL COMPANIES, IS NOT IN THE NATURE OF COMMISSION OR BR OKERAGE WITHIN THE ITA NO.107(ASR)/2014 4 MEANING OF THE TERM U/S 194H AND HENCE NO TAX IS DE DUCTIBLE AT SOURCE ON THE DEALERS MARGIN OR DEALERS COMMISSION U/S 194H O F THE ACT. THE AOS INTERPRETATION OF THIS LETTER, THEREFORE, IS THAT T HOUGH THE OIL COMPANIES WERE REQUIRED TO DEDUCT TAX AT SOURCE ON THE COMMISSION PAYMENTS, IT WAS ONLY AS A RESULT OF THIS CLARIFICATION ISSUED BY CBDT THAT THEY WERE SPECIFICALLY EXEMPTED FROM TDS. 7. THE LD. CIT(A), ON THE OTHER HAND, HAS OBSERVED (PAGE 54, PARA 6.3 OF THE IMPUGNED ORDER), THAT: FROM ABOVE, IT IS VERY CLEAR THAT THE PURCHASE AND SALE OF PETROLEUM PRODUCTS IS ON PRINCIPAL TO PRINCIPAL BASIS AND THE GROSS MARGIN IS NOT IN THE NATURE OF COMMISSION/BROKERAGE. THEREFORE, T HE ASSESSING OFFICER WAS NOT JUSTIFIED IN CONSIDERING GROSS MARG IN AS COMMISSION. THE DIFFERENCE HAS ALSO BEEN JUSTIFIED ON ACCOUNT O F EVAPORATION. THE BOOKS OF ACCOUNT OF THE APPELLANT HAVE BEEN DULY AU DITED AND STOCK TALLY HAS BEEN FURNISHED. IN VIEW OF THE ABOVE FIND INGS THE ADDITION OF RS.3,25,837- IS DELETED. 8. WE ARE IN AGREEMENT WITH THE OBSERVATION OF THE LD. CIT(A). THE RELEVANT CONTENTS OF THE CBDT LETTER ARE AS FOLLOWS : THE MATTER HAS BEEN CONSIDERED BY THE BOARD AND IT HAS BEEN DECIDED THAT THE INCOME EARNED BY THE RETAIL DEALER S OF THE PETROLEUM PRODUCTS ON SALE OF SUCH PRODUCTS PURCHASED FROM TH E OIL COMPANIES, IS NOT IN THE NATURE OF COMMISSION OR BROKERAGE WIT HIN THE MEANING OF THE TERM UNDER SEC. 194H. ACCORDINGLY, NO TAX DEDUC TIBLE AT SOURCE ON THE DEALERS MARGIN OR DEALERS COMMISSION UNDER SE CTION 194H OF THE INCOME TAX ACT. 9. A BARE PERUSAL OF THE CBDT LETTER SHOWS THAT TH ERE IS NO AMBIGUITY THEREIN, THE CBDT HAS MADE IT CLEAR THAT INCOME RES ULTING FROM SALE BY RETAIL ITA NO.107(ASR)/2014 5 DEALERS OF PETROLEUM PRODUCTS PURCHASED FROM THE OI L COMPANIES, IS NOT IN THE NATURE OF COMMISSION OR BROKERAGE WITHIN THE ME ANING OF SECTION 194H OF THE ACT. THEREFORE, THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITION ON THIS COUNT. ACCORDINGLY, GROUND NO.1 IS DISMISSED. 10. SO FAR AS REGARDS GROUND NO.2, THE ASSESSEE OWN ED SIX CARS. THE DEPRECIATION WAS CLAIMED THEREON. THE ASSESSEE MAIN TAINED THAT ITS FOUR CARS WERE NOT IN USE AS THEY WERE NOT IN RUNNING CONDITI ON AND THAT TWO CARS WERE BEING USED. THE AO, HOWEVER, ALLOWED DEPRECIATION O NLY IN RESPECT OF TWO CARS, OBSERVING THAT THE ASSESSEE HAD FAILED TO PRO DUCE THE LOG BOOKS OF THESE CARS OR ANY OTHER EVIDENCE IN SUPPORT OF ITS CASE, THE DISALLOWANCE AMOUNTING TO RS.3,02,990/-. 10.1. THE LD. CIT(A) DELETED THIS DISALLOWANCE. 10.2. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HAS ERRED IN DELETING DISALLOWANCE CORRECTLY MADE BY THE AO; THAT HERE AL SO THE ASSESSEE HAD FAILED TO PRODUCE BOOKS OF ACCOUNT DURING THE ASSES SMENT PROCEEDINGS AS WELL AS REMAND PROCEEDING; THAT IN THE ABSENCE OF E VIDENCE TO SUPPORT ASSESSEES CONTENTION, AS NOTED BY THE AO, THE AO W AS JUSTIFIED IN MAKING THE DISALLOWANCE. 10.3. THE LD. COUNSEL FOR THE ASSESSEE, HAS AGAIN R ELIED ON THE IMPUGNED ORDER. ITA NO.107(ASR)/2014 6 11. HERE, IT IS SEEN THAT THE ASSESSEE HAS RELIED O N THE PROVISIONS OF SECTION 43(6) OF THE ACT, AS PER WHICH THE DEPRECIATION IS TO BE ALLOWED ON BLOCK OF ASSETS, ON THE WRITTEN DOWN VALUE THEREOF. THIS PRO VISION WAS NOT TAKEN INTO CONSIDERATION BY THE AO WHILE MAKING THE DISALLOWA NCE. FOR THE ASSESSMENT YEAR 2007-08, THE CLAIM OF DEPRECIATION ON THE OTHE R CARS ALSO WAS ALLOWED TO THE ASSESSEE IN SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT (OTHER CARS WERE OLD). ALL THESE FACTS WERE DULY TA KEN INTO CONSIDERATION BY THE LD. CIT(A) WHILE DELETING THE DISALLOWANCE AND THE DEPARTMENT HAS NOT BEEN ABLE TO RAISE A SPECIFIC CHALLENGE THERE-AGAIN ST. THEREFORE, IN THIS REGARD ALSO, THE LD. CIT(A)S ORDER IS CONFIRMED AND GROU ND NO.2 IS REJECTED. 12. AS REGARDS GROUND NO.3, THE AO MADE A DISALLOWA NCE OF RS.4,06,436/- OUT OF OTHER INCOME CREDITED BY THE ASSESSEE TO THE PROFIT & LOSS ACCOUNT. THIS DISALLOWANCE WAS MADE ON THE BAS IS OF INFORMATION COLLECTED FROM THE INDIAN OIL CORPORATION LTD. THE ASSESSEE HAD CLAIMED THAT IT HAD DECLARED INCOME OF RS.21,26,358/- UNDER THE HEAD OTHER INCOME WHICH INCLUDED NET INCOME OF RS.10,55,765/- FROM TR ANSPORTATION OF PETROLEUM PRODUCTS ON BEHALF OF INDIAN OIL CORPN. L TD. IT WAS ALSO CLAIMED THAT THE AMOUNT RECEIVED FROM INDIAN OIL CORPN. LTD . WAS GROSS RECEIPT AND THE ASSESSEE HAD TO INCUR EXPENDITURE ON ACCOUNT OF DIESEL, MOBILE OIL, ITA NO.107(ASR)/2014 7 DRIVERS SALARY, REPAIR & MAINTENANCE AND OTHER EXP ENSES FOR RUNNING THE VEHICLES, WHICH EXPENDITURE AMOUNTED TO RS.14,77,02 9/-. 12.1. THE LD. CIT(A) DELETED THE DISALLOWANCE. 12.2. THE LD. DR HAS CONTENDED THAT HERE TOO, THE D ISALLOWANCE WAS WRONGLY DELETED, SINCE THE ASSESSEE HAS NOT PRODUCE ANY EVIDENCE TO PROVE ITS CLAIM OF EXPENDITURE EITHER IN THE ASSESSMENT P ROCEEDINGS OR IN THE REMAND PROCEEDINGS. 12.3. THE LD. COUNSEL FOR THE ASSESSEE HAS DUTIFULL Y RELIED ON THE IMPUGNED ORDER WITH REGARD TO THIS GROUND ALSO. 12.4. IN THE REMAND REPORT (PAGE 32 OF THE IMPUGNED ORDER), THE AO OBSERVED THAT NOT ONLY IN THE ASSESSMENT PROCEEDING S, BUT ALSO IN THE REMAND PROCEEDINGS, THE ASSESSEE DID NOT FILE ANY DAY TO D AY LEDGER ACCOUNT OF THE EXPENSES, HEAD-WISE, OR ANY BOOKS OF ACCOUNT, OR SU PPORTING VOUCHERS TO ESTABLISH THE GENUINENESS OF THE EXPENSES CLAIMED. THE LD. CIT(A), HOWEVER, HAD TAKEN INTO ACCOUNT THE FACT THAT THE ASSESSEE HAD FIVE VEHICLES AND THE INCOME SHOWN THEREFROM WAS OF RS.10,55,765/ -, WHEREAS ACCORDING TO THE PROVISIONS OF SECTION 44AE OF THE ACT, AN AM OUNT OF RS.2,10,000/- IS REQUIRED TO BE CONSIDERED. THERE IS NO DISPUTE TO T HESE FACTS. THE ASSESSEE HAS SHOWN INCOME OF RS.10,55,765/-, WHICH IS MUCH H IGHER THAN THE AMOUNT ASSESSABLE U/S 44AE OF THE ACT AT RS.2,10,000/-. TH EREFORE, THE LD. CIT(A) ITA NO.107(ASR)/2014 8 CANNOT BE FAULTED ON THIS SCORE ALSO. ACCORDINGLY, LD. CIT(A)S ORDER IS CONFIRMED AND GROUND NO.3 IS REJECTED. 13. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH MARCH, 2015. SD/- SD/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11TH MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. HIND KASHMIR SERVICE STATION, JAM MU. 2. THE ITO, WARD -2(1), JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.