Shri Mayurbhai Shankarbhai Jetwani L/H. of late Shri Shakarbhai Udhavdas Jetwani through power of attorney , Shri Bharatbhai Shankarbhai Jetwani, Surat V. The Income Tax Officer, Ward-5(4), Surat

ITA 1137/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6225 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 17-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAILASH D RATNOO
• Assessee Lawyers: MRS P M JAGASHETH
• Keywords: Business income; Additional evidence
• Section: 133(6); 194C; 144

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL CAMP AT SURAT BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.1137/AHD/2014 / ASSTT. YEAR: 2007-2008 LATE SHRI SHANKARBHAI UDHAVDAS JETWANI (LEGAL HEIR SHRI MAYURBHAI SHANKARBHAI JETWANI) THROUGH POWER OF ATTORNEY SHRI BHARATBHAI SHANKARBHAI JETWANI 10, SWATI SOCIETY KADAMPALI TIMALIWAD NANPURA, SURAT. PAN : AASPJ 1198 C VS. ITO, WARD-5(4) SURAT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MRS.P.M. JAGASHETH REVENUE BY : MR. KAILASH D. RATNOO, SR.DR ! / DATE OF HEARING : 10/04/2017 '#$ ! / DATE OF PRONOUNCEMENT: 11/04/2017 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-I, SURAT DATED 22.1.2014 PASSED FOR THE A SSTT.YEAR 2007-08. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.4, 99,986/-. ITA NO.1137/AHD/2014 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HIS RETURN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME AT RS.3 ,74,066/-. AT THE RELEVANT TIME, ASSESSEE, SHRI SHANKARBHAI UDHAVDAS JATWANI WAS CARRYING ON BUSINESS THROUGH THREE CONCERNS, VIZ. A MAR ENTERPRISE, NEW AMAR LIGNITE AND AMAR COAL TRADERS. IN FACT, HE WA S IN THE BUSINESS OF COAL TRANSPORTATION. A NOTICE UNDER SECTION 143(2) OF THE INCOME TAX ACT WAS ISSUED ON 8.8.2008. THEREAFTER, THE ASSESS EE DIED ON 21.6.2009. ACCORDING TO THE AO VARIOUS NOTICES ISS UED UPON THE ASSESSEE COULD NOT BE REPLIED. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSEE HAS SHOWN OUTSTANDING L IABILITY OF RS.60,14,954/- IN THE BALANCE SHEET OF PROPRIETARY CONCERN, M/S. AMAR ENTERPRISES. SINCE THE ASSESSEE DID NOT RESPOND TO THE QUERY AN ASSESSMENT ORDER WAS PASSED ACCORDING TO THE BEST J UDGMENT OF THE AO UNDER SECTION 144 OF THE ACT. THE LD.AO HAS RECORDE D A FINDING THAT THIS OUTSTANDING LIABILITY COULD NOT BE VERIFIED. HE DI SALLOWED 20% OF THIS LIABILITY AT RS.12,02,990/-. 4. ON APPEAL, IT WAS CONTENDED BY THE L/RS. OF THE ASSESSEE THAT THIS LIABILITY RELATES TO TWO CONCERNS, VIZ. FAIRDEAL SU PPLIES PVT. LTD. AND S.L.AGRAWAL & CO. THE LD.CIT(A) CALLED FOR A REMAN D REPORT AND THE AO ISSUED NOTICE UNDER SECTION 133(6) OF THE ACT. BOT H THE ENTITIES HAVE CONFIRMED ABOUT THE OUTSTANDING LIABILITY. HOWEVER , IN THE CONFIRMATION SUBMITTED BY THE CREDITOR, S.L.AGRAWAL & CO., IT WA S SEEN THAT THIS CONCERN HAS SHOWN THE BALANCE OF RS.18,90,903/- WHE REAS THE ASSESSEE HAS SHOWN OUTSTANDING LIABILITY AT RS.23,90,889/- QUA THIS CONCERN. THE LD.CIT(A) ACCEPTED CONTENTION OF THE ASSESSEE AND D ID NOT APPROVE THE ACTION OF THE AO FOR AN ADHOC DISALLOWANCE OF OUTSTANDING LIABILITY AT 20%. THE LD.CIT(A) CONFIRMED THE DIFFERENCE BETWEE N OUTSTANDING LIABILITY SHOWN BY THE ASSESSEE AND CONFIRMATION BY M/S.S.L.AGRAWAL & CO. THIS DIFFERENCE COMES OUT TO RS.4,99,986/-. T HIS DIFFERENCE HAS BEEN ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.1137/AHD/2014 3 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. ADDITION WAS MADE BY ESTIMATED DISALLOWANCE OF THE LIABILITY SHOWN BY THE ASSESSEE . EITHER LIABILITY IS GENUINE OR NON-GENUINE. IT CANNOT BE DISALLOWED AT THE RATE OF 20%. APART FROM THE ABOVE, SECTION 41(1) OF THE INCOME T AX ACT HAS BEEN INCORPORATED TO COVER A PARTICULAR FACT SITUATION. THE SECTION APPLIES WHERE A TRADING LIABILITY WAS ALLOWED AS A DEDUCTIO N IN AN EARLIER YEAR IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE AND T HE ASSESSEE HAS OBTAINED A BENEFIT IN RESPECT OF SUCH TRADING LIABI LITY IN A LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY. IN SUCH A CASE THE SECTION SAYS THAT WHATEVER BENEFIT HAS ARISEN TO THE ASSESS EE IN THE LATER YEAR BY WAY OF REMISSION OR CESSATION OF THE LIABILITY W ILL BE BROUGHT TO TAX IN THAT YEAR. THE PRINCIPLE BEHIND THE SECTION IS THAT THE PROVISION IS INTENDED TO ENSURE THAT THE ASSESSEE DOES NOT GET A WAY WITH A DOUBLE BENEFIT - ONCE BY WAY OF DEDUCTION IN AN EARLIER AS SESSMENT YEAR AND AGAIN BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN A LATER YEAR WITH REFERENCE TO THE LIABILITY EARLIER ALLOWED AS A DEDUCTION. THE ASSESSEE HAS SHOWN OUTSTANDING LIABILITY IN HIS ACC OUNTS. THE LD.REVENUE AUTHORITIES NOWHERE DEMONSTRATED AS TO H OW THIS LIABILITY HAS CEASED. THE LD.CIT(A) HAS MADE REFERENCE TO TH E CONFIRMATION GIVEN BY S.L.AGRAWAL & CO. AND THIS CONFIRMATION OF S.L.AGRAWAL & CO. WOULD NOT BE RELEVANT UPTO AND UNTIL THE ASSESSEE H AS BEEN SHOWING THE LIABILITY IN HIS BOOKS OF ACCOUNTS. IT IS TO BE REC ONCILED THAT IS HOW MUCH DEDUCTION WAS CLAIMED BY THE ASSESSEE REPRESENTING THESE AMOUNTS IN EARLIER YEARS, AND HOW THIS LIABILITY IS CEASED IN THIS YEAR. NO SUCH ASPECT HAS BEEN CONSIDERED EITHER BY THE AO OR BY T HE LD.CIT(A). THE AO SIMPLY BELIEVED THAT 20% OF THE LIABILITY MUST H AVE BEEN CEASED. WE FAIL TO APPRECIATE THIS APPROACH. WHEN THE ASSE SSEE HAS SHOWN THE LIABILITY IN THE ACCOUNT, UNLESS IT IS ESTABLISHED THAT THIS LIABILITY HAS CEASED, IT CANNOT BE ADDED IN THE INCOME OF THE ASS ESSEE. THEREFORE, WE ALLOW THIS GROUND OF APPEAL, AND DELETE DISALLOW ANCE. ITA NO.1137/AHD/2014 4 6. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE IS IM PUGNING CONFIRMATION OF ADHOC DISALLOWANCE OF RS.25,639/- OUT OF CAR EXPENSES. THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL. HENCE, IT IS REJECTED. 7. IN THE NEXT GROUND OF APPEAL, GRIEVANCE OF THE A SSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.30,65,412/-. 8. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IN HIS PROPRIETORSHIP CONCERN VIZ. NEW AMAR LIGNITE HAS CLAIMED TRANSPORT ATION EXPENSES OF RS.1,53,27,061/-. THE AO HAS FURTHER OBSERVED THAT THE CASE OF THE ASSESSEE IS THAT, BASICALLY, HE WAS WORKING AS A MI DDLEMAN FOR ARRANGING TRANSPORTATION TO CERTAIN CONCERNS. HE H AS EARNED NET SUPERVISION CHARGE OF RS.12,30,184/- WHICH WAS OFFE RED AS INCOME. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS RECEIVED T RANSPORTATION CHARGES FROM THE PERSONS FOR WHOM HE HAS ULTIMATELY TRANSPORTED THE GOODS. THE ASSESSEE HAS PAID TRANSPORTATION CHARGE S TO THE TRUCK OWNERS FOR TRANSPORTING GOODS. THUS, THE ASSESSEE OUGHT TO HAVE DEDUCTED TDS UNDER SECTION 194C ON THE TRANSPORTATI ON CHARGES PAID BY HIM. SINCE AT THE TIME OF ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNTS, IT WAS DIFFICULT FOR THE AO TO VERIFY WHETHER TRANSPORTATION CHARGES WERE REQUIRED TO BE PAID AFTER DEDUCTION OF TDS OR NOT. HE CONCLUDED THAT SOME OF THE PAYME NTS MUST HAVE BEEN SUBJECTED TO TDS AND THEREFORE, 20% OF THE TOT AL TRANSPORTATION EXPENSES WERE DISALLOWED. ADDITION OF RS.30,65,412 /- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 9. ON APPEAL, THE LD.CIT(A) HAS CONFIRMED THE ADDIT ION BY OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS OF THE ISSUE AND S UBMISSIONS OF APPELLANT. IT IS ADMITTED FACT THAT THE APPELLANT F AILED TO PRODUCE THE BOOKS OF ACCOUNT AND OTHER SUPPORTING DOCUMENTS IN SUPPORT OF EXPENSES CLAIMED IN THE RETURN OF INCOME DURING ASSESSMENT ITA NO.1137/AHD/2014 5 PROCEEDINGS AS WELL AS REMAND PROCEEDINGS. IN ABSEN CE OF PRIMARY EVIDENCE IN THE FORM OF BOOKS OF ACCOUNT AN D BILLS AND VOUCHERS, APPELLANT'S VERSION CANNOT BE ACCEPTED. T HE ADDITIONAL EVIDENCE FILED DURING THE APPELLATE PROCEEDINGS IN RESPECT OF TRANSPORTATION CHARGES RELATE TO THE YEARS OTHER TH AN THE YEAR UNDER CONSIDERATION. HOWEVER, IN THOSE DOCUMENTS, C OMPLETE DETAILS OF TRANSPORTATION EXPENSES SUCH AS DATES, V EHICLE NUMBERS, NAME OF THE PERSON TO WHOM PAYMENT HAS BEE N MADE, WEIGHT OF MATERIAL, PAYMENTS MADE ETC. HAVE BEEN ME NTIONED. BUT, ALL THESE DETAILS ARE RELATED TO THE YEARS OTH ER THAN A.Y. 2007-08. IN SHORT, NEITHER ANY DETAILS NOR ANY BILL S AND VOUCHERS IN RESPECT OF TRANSPORTATION EXPENSES FOR A.Y. 2007 -08 ARE AVAILABLE, EXCEPT THE FIGURE OF TOTAL AMOUNT OF EXP ENDITURE CLAIMED IN THE RETURN OF INCOME. NOW, I COME TO THE SUBMISSIONS OF APPELLANT. HE HAS CLAIMED THAT HE RECEIVES ONLY NET SUPERVISION CHARGES AND TRANSP ORTATION EXPENSES WHICH NEVER FORM PART OF EXPENDITURE AS IT IS INCURRED ON BEHALF OF THREE COMPANIES NAMELY ATUL PRODUCTS, GAR DEN SILK & CREATIVE AND IN THE THIRD GROUP HE HAS KEPT 'OTHER MILLS'. AS PER HIM, HE INCURRES EXPENSES BY MAKING PAYMENT TO TRUC K OWNERS ON BEHALF OF THESE CLIENTS AND LATER ON THE EXPENSES A RE RECOVERED FROM THESE COMPANIES. IN VIEW OF THIS NATURE OF BUS INESS, APPELLANT HAS CLAIMED THAT HE RECEIVES ONLY NET AMO UNT OF SUPERVISION CHARGES AND WHATEVER SPENT BY MAKING PA YMENTS TO TRUCK OWNERS DOES NOT ATTRACT THE PROVISIONS OF SEC TION 194C OF THE ACT. THE CLAIM OF APPELLANT DOES NOT SEEM CONVI NCING. THE PROVISION'S OF SECTION 194C CLEARLY SAY THAT ANY PE RSON RESPONSIBLE FOR PAYING THE SUM OF RS. 20,000/- OR MORE TO ANY R ESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BE TWEEN THE CONTRACTOR AND SPECIFIED PERSON SHALL DEDUCT CERTAI N PERCENTAGE OF AMOUNT AS TAX AT THE TIME OF PAYMENT. IN THE CASE O F APPELLANT ALSO, HE HAS BEEN MAKING PAYMENTS TO TRUCK OWNERS F OR TRANSPORTING THE LIGNITE FROM ONE EARMARKED PLACE T O OTHER. SINCE THE DETAILS OF PAYMENTS ARE NOT AVAILABLE ON RECORD , IT IS VERY DIFFICULT TO ASCERTAIN TO WHOM THESE PAYMENTS HAVE BEEN MADE AND IN WHAT SUMS. LOOKING TO THE LARGE AMOUNT OF EX PENDITURE OF RS.1,53,27,061/-, IN ALL LIKELIHOOD, IT IS POSSIBLE THAT LARGE NUMBER OF PAYMENTS MUST HAVE BEEN MADE ON WHICH TDS WAS LI ABLE TO MADE AS PER PROVISIONS OF SECTION 194C OF THE ACT. IN MY OPINION, AO HAS RIGHTLY CONCLUDED THAT THERE ARE CHANCES THA T THE TRANSPORTATION EXPENSES WERE COVERED U/S. 194C OF T HE ACT. IN SUCH SITUATION, SINCE THE APPELLANT HAS FAILED TO E STABLISH THAT TRANSPORTATION EXPENSES CLAIMED BY HIM ARE NOT COVE RED BY THE PROVISIONS OF SECTION 194C R.W.S 40(A)(IA) OF THE A CT, THERE IS NO OPTION OTHER THAN TO SUSTAIN THE DISALLOWANCES MADE BY AO. I, ITA NO.1137/AHD/2014 6 THEREFORE, SUSTAIN THE DISALLOWANCE OF RS.30,65,412 /- MADE BY AO AND DISMISS THE GROUND OF APPEAL. 10. THE CASE OF THE ASSESSEE BEFORE THE LD.CIT(A) W AS THAT THE TRANSPORTATION EXPENDITURE WAS NOT THE EXPENDITURE OF THE ASSESSEE. ASSESSEE PAYS TRANSPORTATION CHARGES TO THE TRANSPO RTERS ON BEHALF OF HIS CLIENTS. IT IS A FACILITY PROVIDED BY THE ASSE SSEE TO HIS CLIENT DUE TO THE FACT THAT DELIVERY OF LIGNITE AND COAL IS DONE ROUND THE CLOCK AND CLIENTS OF THE ASSESSEE WOULD NOT BE AVAILABLE 24 H OURS IN THE FACTORY TO MAKE PAYMENT. FOR SUCH CHARGES, THE ASSESSEE GETS SUPERVISION CHARGES AND THE ASSESSEE HAS SHOWN NET AMOUNT OF RS .12,30,184/- AS NET SUPERVISIONS CHARGES. 11. ON DUE CONSIDERATION OF THESE SUBMISSIONS AS WE LL AS FINDING OF THE LD.CIT(A), WE ARE OF THE VIEW THAT THE LD.REVEN UE AUTHORITIES HAVE ASSUMED EXISTENCE OF A CONTRACTOR-SHIP BETWEEN TRAN SPORTERS AND THE ASSESSEE. THEY ASSUMED THAT THE ASSESSEE HAS TAKEN CONTRACT FROM FACTORY OWNERS FOR SUPPLY OF LIGNITE AND COAL, AND IT HAS CARRIED OUT THIS ACTIVITY WITH THE HELP OF TRUCK OWNERS. THEREFORE, THERE IS SUB- CONTRACTOR-SHIP BETWEEN HIM AND THE TRUCK OWNERS, H E WAS REQUIRED TO DEDUCT TDS ON THE PAYMENT MADE TO TRUCK OWNERS. IN OUR OPINION, THERE IS NO EVIDENCE WITH THE AO FOR HARPING ON SUC H A BELIEF. THE AO HAS NOT COLLECTED EVIDENCE OF TRANSPORTATION. HE H AS NOT EXAMINED ULTIMATE SUPPLIERS OF LIGNITE AND COAL. NOR HE HAS EXAMINED TRUCK OPERATORS. WHEN THE ASSESSEE HAS BEEN ALLEGING THA T HE WAS ONLY EXTENDING FACILITY TO HIS CLIENT FOR DELIVERY OF LI GNITE AND COAL, HE HAS NOT ACTED AS AN AGENT BETWEEN CLIENT AND TRUCK OWNERS. THEREFORE, IN OUR OPINION, MERELY ON ASSUMPTION BASIS, THE ASSESSEE S HOULD NOT BE BURDENED WITH TAX LIABILITY. ADHOC DISALLOWANCE ON THIS MAGNITUDE CANNOT BE SUSTAINED. WE ALLOW THIS GROUND OF APPEA L AND DELETE DISALLOWANCE. ITA NO.1137/AHD/2014 7 12. NEXT TWO GROUNDS ARE GENERAL IN NATURE AND DO N OT CALL FOR RECORDING OF ANY SPECIFIC FINDING, HENCE DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 11 TH APRIL, 2017 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER