M/s A.K. Trading Company Limited, Chandigarh V. Addl. CIT, Chandigarh

ITA 1091/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57731 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 19-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: ANIL KUMAR BATRA
• Keywords: Business income
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1091/CHD/2010 ASSESSMENT YEAR: 2006-07 M/S A.K. TRADING COMPANY LTD, VS THE ADDL. CIT, RAN GE-1, CHANDIGARH CHANDIGARH PAN NO. AABCA2249P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL KUMAR BATRA RESPONDENT BY : SMT. JAISHREE SHARMA DATE OF HEARING : 15.02.2012 DATE OF PRONOUNCEMENT : 26.03.2012 ORDER PER MEHAR SINGH, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), CHANDIGARH DATED 18.5.2010 RELATING TO ASSE SSMENT YEAR 2006- 07 PASSED U/S 143(3) OF THE INCOME-TAX ACT,1961 (I N SHORT 'THE ACT'). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A) HAS WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED IN SUSTAINING THE ADDITION OF RS. 1,99,763/- (AS GOODS CARRIER RS. 1,05,910/- + RS. 68,853/- FOR TRUCK NO. HR-01-8552 + RS. 25,000/- SHRI TARLOK SINGH FOR NOT DEDUCTING THE TAX AT SOURCE U/S 194C R.W.S. 40(A)(I A) OF THE INCOME TAX ACT, 1961. THE ADDITION BE DELETED. 2 2. THE LD. CIT(A) HAS, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED IN SUSTAINING THE ADDITION OF RS. 4,56,000/- ON ACCOUNT OF SHORTA GE IN STOCK. THE ADDITION BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY OF THE GROUND OF APPEAL BEFORE THE SAME IS TAKE UP FOR FINAL HEARING. 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSING OFFICER NOTED THAT CERTAIN EXPENSES WERE DEBITED TO THE PRO FIT AND LOSS ACCOUNT WHERE TAX WAS REQUIRED TO BE DEDUCTED U/S 194C OF THE ACT. HOWEVER, NO TAX WAS DEDUCTED. THE ASSESSING OFFICER FURNISH ED THE DETAILS OF SUCH EXPENDITURE AS UNDER:- NAME OF PERSONS DATE AMOUNT(IN RS.) HEAD OF EXPENSES M/S PREMIER MOTORS 14.05.2005 20,356 CAR REPAIR TARLOK SINGH 11.07.2005 25,000 FREIGHT THE ASSESSING OFFICER FOUND THAT NO TAX AT SOURCE W AS DEDUCTED ON PAYMENTS / CREDITS IN RESPECT OF A.S. GOODS CARRIER AND IN RESPECT OF TRUCK NO. HR-01-8552, ALTHOUGH THE PAYMENTS / CREDI TS DURING THE FINANCIAL YEAR EXCEEDED RS. 50,000/- (W.E.F. 1.10.2 004 SECTION 194C(3) HAS BEEN AMENDED TO COVER SUCH PAYMENTS). WHEN THE ASSESSEE WAS CONFRONTED BY THE ASSESSING OFFICER ON THE ISSUE IN QUESTION, THE ASSESSEE ADMITTED THAT DUE TO SOME MISTAKE, IT FAIL ED TO DEDUCT TAX AT SOURCE ON PAYMENT OF RS. 1,05,910/-, CREDITED TO M/ S A.S. GOODS CARRIER. IT WAS ALSO ADMITTED THAT ON PAYMENTS MAD E TO DRIVER OF SAID TRUCK NUMBER, FOR AN AMOUNT OF RS. 68,853/- (30 PA YMENTS EACH LESS 3 THAN RS. 3,500/-) NO TAX AT SOURCE WAS DEDUCTED. TH E ASSESSING OFFICER ALSO CONSIDERED THE SUBMISSIONS FILED BY THE ASSESS EE IN RESPECT OF EXPENSES REPRODUCED ABOVE. THE ASSESSING OFFICER IN VOKED THE PROVISIONS OF SECTION 194C AND HELD THAT THE ASSESS EE WAS LIABLE TO DEDUCT TAX, ON PAYMENTS MADE TO TRUCK DRIVER AS WEL L AS TARLOK SINGH AND M/S A.S. GOODS CARRIER. HOWEVER, THE ASSESSEE FAILED TO DO SO. IT WAS CATEGORICALLY OBSERVED BY THE ASSESSING OFFICER THAT IT IS NOT DISPUTED BY THE ASSESSEE THAT THERE WAS A WORK CONT RACT BETWEEN THE ASSESSEE AND M/S A.S. GOODS CARRIER OR TARLOK SINGH , DRIVER OR OWNER OF TRUCK NO. HR-01-8552, WITHIN THE PROVISIONS OF S ECTION 194C OF THE ACT AND THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SO URCE . AS REGARDS PAYMENTS TO M/S PREMIER MOTOR, THE WORK CONTRACT WA S FOR REPAIR OF VEHICLE INCLUDING MATERIAL. SO, THE ASSESSEE WAS R EQUIRED TO DEDUCT TAX AT SOURCE IF GROSS AMOUNT EXCEEDED RS. 20,000/-. I N THIS CONTEXT ALSO THERE IS VIOLATION OF PROVISIONS OF SECTION 194 C O F THE ACT AND, HENCE, THE ASSESSING OFFICER MADE DISALLOWANCE U/S 40(A)(I A) AMOUNTING TO RS. 2,20,119/- (RS. 20356/- = RS. 25000 + RS. 105910 + RS. 68853). THE LD. CIT(A), ALLOWED THE RELIEF TO THE ASSESSEE IN R ESPECT OF PAYMENTS MADE FOR PURCHASE OF SPARE PARTS MAINLY TO M/S PREM IER MOTORS. LABOUR PART OF ONLY RS. 1750/- WHICH IS PAYMENT FOR PURCHASE OF GOODS RATHER THAN SERVICES TAKEN FOR REPAIR OF CAR. THE CIT(A), GRANTED RELIEF OF RS. 22,356/-, ON THIS COUNT AND UPHELD THE BALAN CE AMOUNT AS IS EVIDENT FROM PARA 19 AND 20 OF HIS ORDER. THE SAM E ARE REPRODUCED HEREIN UNDER:- 4 19. AFTER CONSIDERING THE RIVAL SUBMISSIONS, FACTS & JUDGMENT REFERRED TO, I FIND THAT THE CASE QUOTED S UPRA IS ENTIRELY DIFFERENT FROM THE PRESENT CASE ON FACT S. IN THAT CASE, GOODS WERE SENT BY CONSIGNOR ON FOR BASI S AND THE CONSIGNOR DEDUCTED TAX AT SOURCE ON PAYMENT S MADE TO TRANSPORTERS. IN THAT SITUATION, THE LIABI LITY OF THE CONSIGNEE WAS TAKEN CARE OF. AS SUCH, IN MY V IEW, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED RS. 105910/-, 68853/- & RS. 25000/- APPLYING THE PROVISIONS OF SECTION 40A(A)(IA) OF THE INCOME TAX ACT. 20. AS REGARDS THE PAYMENT TO M/S PREMIER MOTORS, I T IS FOR PURCHASE OF SPARE PARTS MAINLY. LABOUR PAR T IS ONLY RS. 1750/-. IT IS A PAYMENT FOR PURCHASE OF GOODS RATHER THAN SERVICES TAKEN FOR REPAIR OF CAR. ON F ACTS, PROVISIONS OF SECTION 40(A)(IA) SHOULD NOT BE APPLI ED ON THIS PAYMENT. ASSESSEE GETS A RELIEF OF RS. 20356/ - ON THIS COUNT, PARTLY ALLOWING GROUND NO.3. 4. THE LD. AR' PLACED RELIANCE ON THE DECISION REP ORTED IN 45 DTR (AMRITSAR) (TRIB) 49 (ITO V INDIAN ROAD LINES) AND CIT V BHAGWATI STEELS [2010} 326 ITR 108 (P&H). LD. DR RELIED O N THE ORDER PASSED BY THE LOWER AUTHORITIES. 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE, RELEVANT RECORDS AND ALSO THE WRITTEN SUBMISS IONS FILED BY THE LD ASSESSEE, AND CASE LAWS. THE LD. CIT(A) CONSIDERED THE SUBMISSIONS FILED BY THE ASSESSEE IN DETAIL ALONG WITH DECISION S OF THE ITAT, CHANDIGARH BENCH IN THE CASE OF PARTAP HOON V ADDL CIT, RANGE-1 IN ITA NO. 536/CHANDI/2009. AFTER CONSIDERING THE RIVA L SUBMISSIONS, FACTUAL POSITION OF THE CASE AND THE DECISIONS REFE RRED TO, LD. CIT(A), RECORDED FINDINGS, AS REPRODUCED ABOVE. IN VIEW OF THIS, WE ARE OF THE CONSIDERED OPINION, THAT THE DECISION QUOTED BY THE LD. AR IN CIT V BHAGWATI STEELS [2010] 326 ITR 108 (P&H) IS NOT APP LICABLE TO THE FACTS OF THE PRESENT CASE BEING DIFFERENT AND DISTI NGUISHABLE HAVING 5 REGARD TO THE CLEAR FINDINGS RECORDED BY THE ASSESS ING OFFICER IN HIS ASSESSMENT ORDER. SIMILARLY, THE DECISION RELIED U PON BY THE LD. AR OF AMRITSAR BENCH OF THE TRIBUNAL IN THE CASE OF I TO VS INDIAN ROAD LINES, ITAT AMRITSAR BENCH (2010) REPORTED IN 45 DT R (AMRITSAR) (TRIB) 49 IS NOT APPLICABLE TO THE FACTS OF THE PR ESENT CASE BEING DIFFERENT AND DISTINGUISHABLE. THEREFORE, IN VIEW OF THE FACT SITUATION OF THE CASE AND THE FINDINGS OF THE CIT(A), WE DO N OT FIND ANY SUBSTANCE IN THE CONTENTION RAISED BY THE ASSESSEE. THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED AND FINDINGS OF THE LD. CIT(A) ARE UPHELD. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 6. GROUND NO.2 RAISED BY THE ASSESSEE IS AS UNDER:- 2. THE LD. CIT(A) HAS, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED IN SUSTA INING THE ADDITION OF RS. 4,56,000/- ON ACCOUNT OF SHORTA GE IN STOCK. THE ADDITION BE DELETED. 7. THE LD. AR, IN RESPECT OF CONTENTION RAISED IN GROUND NO.2 REFERRED TO, PARA 21 OF THE ORDER OF CIT(A), WHICH CONTAIN ITS SUBMISSIONS AND FINDINGS OF THE ASSESSING OFFICER. THE LD. AR PLACED RELIANCE ON, THE DECISION IN THE CASE OF MR S. HIRABAI D. DESAI & SONS V CIT (1936) 4 ITR 95 (BOM). THE LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE ASSESSMENT ORDER AS WELL AS THE ORDERS PASSED BY THE CIT(A). THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIMED STOCK SHORTAGE OF RS. 8,14,528/- IN THE PRO FIT AND LOSS ACCOUNT. THE ASSESSEE WAS AFFORDED OPPORTUNITY BY THE ASSESS ING OFFICER JUSTIFY SUCH CLAIM. THE ASSESSING OFFICER AFTER APPRECIATIN G THE SUBMISSIONS 6 FILED BY THE ASSESSEE PASSED A DETAILED ORDER AND H ELD THAT HAVING REGARD TO THE FIGURES OF TOTAL SALES, SALES TO DCM, TOTAL SHORTAGE AND TOTAL SHORTAGE ON ACCOUNT OF QUANTITY TO DCM INCORP ORATED BY THE ASSESSING OFFICER IN PARA 6.1 OF THE ASSESSMENT ORD ER HOLDING THAT THE SHORTAGE CLAIMED BY THE ASSESSEE WAS HIGHLY EXCESSI VE. SHORTAGE RELATED TO SHORT SUPPLY OF MATERIAL TO THE DCM ACCO UNTS, FOR RS. 6.76 LACS. THIS WAS NOT DISPUTED AND THE ASSESSEE HAD A LWAYS ACCEPTED THE VERSION OF DCM, REGARDING SHORTAGE OF GOODS SUPPLIE D. THEREFORE, IT LEADS TO THE CONCLUSION THAT GOODS WERE ACTUALLY SU PPLIED IN SHORT BY THE ASSESSEE WHILE LOADING THE TRUCK. THE FINDINGS OF LD. ASSESSING OFFICER IN PARA 6.1 OF THE ASSESSMENT ORDER ARE AS UNDER:- 6.1 ..ALTHOUGH SOME SHORTAGE ON THE WAY CANNOT B E RULED OUT DUE TO NATURE OF GOODS BEING SCRAP AND SO SOME SPILLAGE CAN BE THERE, BUT THE EXTENT OF SHORTAGE C LAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IS HIG HLY EXCESSIVE. IF THE F.Y. 2004-05 IS TAKEN INTO CONSID ERATION THEN SUCH SHORTAGE WAS ONLY 0.092% OF THE TOTAL SAL ES WHILE FOR YEAR UNDER CONSIDERATION ITS IS 0.26%. FURTHER, FOR DCM THE PERCENTAGE OF SHORTAGE IS 0.12% IN F.Y. 2004- 05 AND 0.37% IN F.Y. 2005-06. WHILE FOR OTHERS IT IS 0.047% IN F.Y. 2004-05 AND 0.04% FOR F.Y. 2005-06. THUS SHORTAGE FOR CUSTOMERS OTHER THAN THE DCM REMAINED ALMOST AT SAME LEVEL WHILE FOR DCM IT INCREASED B Y MORE THAN THREE TIMES WITHOUT ANY VISIBLE REASONS. SO THE AMOUNT OF SHORTAGE DOES NOT APPEAR TO BE FOR THE RE ASONS MENTIONED BY THE ASSESSEE IN ITS REPLIES AND THERE WAS ACTUAL SHORT LOADING OF THE TRUCKS AT THE END OF TH E ASSESSEE WHILE MAKING SALES. TAKING INTO CONSIDERATION THE A BOVE FACTS, THE CLAIM OF SUCH SHORTAGE IN RELATION TO DC M IS RESTRICTED TO 0.12% OF THE TOTAL SALES TO DCM I.E. TO AN AMOUNT OF RS.2.20 LACS. AND BALANCE AMOUNT OF RS.4. 56 LACS IS TREATED AS EXPENDITURE WRONGLY CLAIMED BY THE AS SESSEE. CONSIDERING GROSS PROFIT RATE OF THE ASSESSEE AS BE ING 2.84%, THE VALUE OF STOCK WHICH HAS BEEN BOOKED IN SALES WOULD BE 4.43 LACS. THE SAME HAS LIKELY BEEN SOLD B Y THE ASSESSEE OUTSIDE ITS BOOKS OF ACCOUNTS, AS SALE RAT E FOR DIFFERENT CUSTOMERS VARIES ACCORDING TO QUANTITY OR DERED, SUCH STOCK WOULD HAVE BEEN SOLD TO EARN HIGHER MARG IN, AND AT THE SAME TIME EXCESSIVE LOSS HAS BEEN CLAIME D TO REDUCE PROFITS. HOWEVER, SINCE DISALLOWANCE IS 7 BEING MADE ON ESTIMATED BASIS, NO SEPARATE ADDI TION ON ACCOUNT OF ANY ADDITIONAL PROFITS EARNED BY THE ASS ESSEE ON SUCH SALES HAS BEEN MADE AND IT IS TREATED AS BEING COVERED BY INCREASE IN INCOME ON ACCOUNT OF ABOVE SAID DISALLOWANCE OF RS.4,56,000/-. 8. THE FINDINGS OF THE LD. CIT(A) ARE RECORDED IN P ARAS 26 TO 28 OF THE ORDER AND THE SAME ARE REPRODUCED HEREIN-UNDER. 26. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, I FIND THAT THE ASSESSEE IN HIS LETTER D ATED 25.8.2006 ADMITTED THAT 43% CONSIGNMENT WERE FOUND WHERE SHORTAGE IN STOCK WAS DETECTED. IT IS STATED THAT IN ASSESSMENT YEAR 2007-08, SHORTAGE WAS RS. 766949/- AS AGAINST TURNOVER OF RS. 310213483/- WHICH MEANS THA T THE SHORTAGE WAS 0.24% ONLY. PERCENTAGE OF SHORTAGE FO UND BY THE ASSESSING OFFICER WITH RESPECT TO DCM IS AS FOL LOWS: ASSESSMENT YEAR 2005-06 0.120% ASSESSMENT YEAR 2006-07 0.37% ASSESSMENT YEAR 2007-08 0.24% 27. I FIND THAT THE APPELLANT FAILED TO PRODUCE AN Y STOCK REGISTER, EVIDENCE OF LOADING & WEIGHT AND WHILE DI SPATCHING THE GOODS OR ANY OTHER EVIDENCE TO PROVE THAT THE A CTUAL GOODS SUPPLIED WERE THE SAME AS THOSE IN THE BILLED AMOUNT. 28 CONSIDERING ALL THE CIRCUMSTANCES & FACTS, ACTIO N OF THE ASSESSING OFFICER IN DISALLOWING RS. 456000/- F OR SHORTAGE OF STOCK SEEMS CORRECT. THE CASE OF HIRAB HAI D DESAI & SONS VS. C IT [SUPRA] IS NOT APPLICABLE ON FACTS SINCE IN THAT CASE THE ASSESSING OFFICER MADE AN AD DITION IN RESPECT OF KASAR I.E. SELLING BY SHORT MEASURE STAT ING THAT IT WAS A WELL KNOWN FACT THAT ALL LIQUOR SELLERS DO SE LL AT SHORT MEASURE AND THAT ASSESSEE MUST HAVE ADOPTED THIS PR ACTICE. HAVING GONE THROUGH THIS DECISION, 1 DON'T THINK IT IS AT ALL RELEVANT TO THE PRESENT CASE. 9. A PERUSAL OF THE DECISION RELIED UPON BY THE ASS ESSEE IN THE CASE OF MRS. HIRABAI D. DESAI & SONS V CIT (SUPRA) REVE ALS THAT FACTS OF THE CASE RELIED UPON BY THE ASSESSEE ARE NOT SIMILA R TO THE FACTS OF THE IN HAND, CONSEQUENTLY THE DECISION RELIED UPON BY T HE ASSESSEE IS NOT 8 APPLICABLE TO THE FACTS OF THE PRESENT CASE. HAVIN G REGARD TO THE FACT SITUATION OF THE PRESENT CASE AND DETAILED FINDINGS RECORDED BY THE ASSESSING OFFICER AND CIT(A) AND AFTER APPRECIATING THE FACTUAL MATRIX OF THE CASE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT(A). THE FINDINGS OF LD. CIT(A) ARE UPHELD AND THE GROUND OF APPEAL IS DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF MARCH, 2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH MARCH, 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR