M/s. Aashirwad Clearing Agency, Ahmedabad V. The Income tax Officer,Ward-10(1), Ahmedabad

ITA 1174/AHD/2013

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8270 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 26-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: ANKIT TALSANIA
• Section: 143(3)

Judgement Text

ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO.1174/AHD/2013 ASSESSMENT YEAR: 2009-10 AASHIRWAD CLEARING AGENCIES, ..................APPELLANT 101, SHAHJANAND COMPLEX, B/H. BHAGWATI COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD 380 009. [PAN : AAFFA 6440 D] VS. INCOME TAX OFFICER, WARD 10(1), AHMEDABAD. ............................RESPONDENT ITA NO.1284/AHD/2013 ASSESSMENT YEAR: 2009-10 INCOME TAX OFFICER, WARD 10(1), AHMEDABAD. .................................APPELLANT VS. AASHIRWAD CLEARING AGENCIES, .............................RESPONDENT 101, SHAHJANAND COMPLEX, B/H. BHAGAWATI COMPLEX, C.G. ROAD, NAVRANGPURA, AHMEDABAD 380 009. [PAN : AAFFA 6440 D] APPEARANCES BY ANKIT TALSANIA, FOR THE ASSESSEE MUDIT NAGPAL FOR THE REVENUE HEARING CONCLUDED ON: 14.02.2018 ORDER PRONOUNCED ON : 11.05.2018 O R D E R PER PRAMOD KUMAR, AM: ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 6 1. THESE CROSS APPEALS CHALLENGE CORRECTNESS OF THE ORDER DATED 15 TH FEBRUARY 2013 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEA R 2009-10. 2. GRIEVANCES RAISED BY THE PARTIES ARE AS FOLLOWS: - GRIEVANCE RAISED BY THE ASSESSEE: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN CON FIRMING ADDITION OF RS.7,66,775/-, OUT OF TOTAL ADDITION OF RS.139,76,8 47/- ON THE ALLEGED GROUND THAT THE APPELLANT HAS FAILED TO RECONCILE THE FIGURES B ETWEEN THE FIGURE RECORDED IN THE AIR STATEMENT AND BOOKS OF ACCOUNTS. IT IS THER EFORE, PRAYED THAT ADDITION SO SUSTAINED MAY KINDLY BE DELETED. GRIEVANCE RAISED BY THE ASSESSING OFFICER: 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,32,10,072/- WITHOUT CONSIDERING THE FINDINGS B ROUGHT OUT BY THE AO. 2) THE LD. CIT(A) HAS ALSO ERRED IN LAW AND ON FACT S, IN NOT CONSIDERING THE PROVISIONS OF SEC. 198 WHICH SAYS, ALL SUMS DEDUCT ED IN ACCORDANCE WITH [THE FOREGOING PROVISIONS OF THIS CHAPTER I.E. CHAP TER-XVII] SHALL, FOR THE PURPOSE OF COMPUTING THE INCOME OF THE ASSESSEE, BE DEEMED TO BE INCOME RECEIVED. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENCY AND TRANSPORTATION BUSINESS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THERE ARE VARIATIONS IN FIGURES OF REC EIPTS AS SHOWN BY THE ASSESSEE VIS-- VIS THE FIGURES AS AVAILABLE WITH THE HELP OF AIR I NFORMATION GATHERED BY THE INCOME TAX AUTHORITIES. WHEN ASSESSEE WAS CONFRONTED WITH THE SE DISCREPANCIES, IT WAS SUBMITTED BY THE ASSESSEE THAT CERTAIN REIMBURSEMENTS HAVE BE EN INCLUDED, IN DEDUCTION OF TAX AT SOURCE COMPUTATIONS, IN THE AMOUNTS FROM WHICH TAXE S HAVE BEEN DEDUCTED AT SOURCE, AND, CONSEQUENTLY, REPORTED TO THE INCOME TAX AUTHO RITIES. THE ASSESSEE ALSO PLACED ON RECORD A RECONCILIATION STATEMENT. THE ASSESSING OFFICER REJECTED THE SAID EXPLANATION AND PROCEEDED TO ADD ENTIRE AMOUNT OF D IFFERENCE, I.E. RS.1,39,76,847/-, TO THE INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). IN A VERY WELL REASONED ORDER, LEA RNED CIT(A) ACCEPTED THE EXPLANATION OF THE ASSESSEE, EXCEPT TO THE EXTENT OF RS.7,66,77 5/-, BY OBSERVING AS FOLLOWS: 3.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE IN THE LIGHT OF ASSESSMENT ORDER PASSED BY THE AO, AND THE SUBMISSI ONS MADE BY THE APPELLANT. THE APPELLANT IS PRIMARILY ENGAGED IN TH E BUSINESS OF PROVIDING CLEARING AND FORWARDING SERVICES OR WHAT IS POPULAR LY KNOWN AS C & F AGENT, ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 6 TO ITS CLIENTS ENGAGED IN THE BUSINESS OF IMPORT / EXPORT OR OTHER BUSINESSES WHERE GOODS ARE REQUIRED TO BE TRANSPORTED IN OR OU T FROM ONE POINT TO ANOTHER. THUS, THE APPELLANT FACILITATES TO AND FOR MOVEMENT OF CLIENTS GOODS BOTH INLAND AND OVERSEAS, USING ROAD, RAIL, AIR AND SEA ROUTES, INCLUDING TEMPORARY STORAGE OF THE SAME IN CUSTOM BONDING WAR EHOUSES FOR LEGAL / PROCEDURAL PURPOSES. TO PROVIDE THE SERVICES, THE A PPELLANT, ON BEHALF OF ITS CLIENTS, AVAILS SERVICES OF AGENCIES LIKE CONTAINER CORPORATION OF INDIA (CONCORD), CENTRAL WAREHOUSING CORPORATION (CWC) AN D SEVERAL SHIPPING COMPANIES AS PER CLIENTS REQUIREMENT THE APPELLANT CHARGES A SPECIFIC AMOUNT OF COMMISSION / HANDLING CHARGES FOR RENDERI NG THE SERVICES TO ITS CLIENTS. THE APPELLANT HAS INFORMED THAT IN COURSE OF ITS BUSINESS ON BEHALF OF ITS CLIENTS IT MAKES PAYMENTS TO AGENCIES MENTIONED SUPRA WHICH ARE REIMBURSED BY THE RESPECTIVE CLIENTS ALONG WITH APP ELLANTS AGENCY COMMISSION / HANDLING CHARGES. THE AMOUNT OF REIMBU RSEMENT EXPENSES ARE RAISED BY THE APPELLANT THROUGH DEBIT NOTES AND THE COMMISSION / AGENCY CHARGES ARE CREDITED IN HIS BOOKS AS INCOME IN THE P & L A/C. ON PERUSAL OF THE FACTS OF THE CASE, IT IS NOTED THAT THE ONLY CO NTROVERSY IS AS TO WHETHER THE AMOUNTS OF MONIES OF RS.1,39,76,847/- RECEIVED BY T HE APPELLANT FROM HIS CLIENTS AS REIMBURSEMENT OF EXPENSES INCURRED ON BE HALF OF SUCH CLIENTS CAN BE TREATED AS INCOME OF THE APPELLANT OR NOT. THERE IS NO DISPUTE THAT THE AMOUNTS OF MONIES HAVE BEEN CLAIMED BY THE APPELLAN T FROM HIS CLIENTS BY WAY OF DEBIT NOTE AND THAT THE SAID AMOUNTS HAVE NO T BEEN ROUTED THROUGH ITS P & L A/C. IN SUPPORT OF ITS CONTENTION, IN ITS PAP ER BOOK THE APPELLANT HAS FILED COPIES OF BILLS AND VOUCHERS WHICH INDICATE THAT TH E PARTY WHICH HAD PROVIDED THE SERVICES TO THE APPELLANTS CLIENT AND TO WHOM T HE APPELLANT HAD MADE THE PAYMENT, HAD IN THE BILL INDICATED THE NAME OF APPE LLANTS CLIENT AND NOT THAT OF APPELLANT. THUS, THE FACT THAT THE AMOUNTS HAVE BEE N INCURRED BY THE APPELLANT FOR AND ON BEHALF OF ITS CLIENTS GETS EVE NLY ESTABLISHED THE ARGUMENT OF THE AO THAT THE APPELLANT HAS NOT DEDUC TED TDS AT THE TIME OF MAKING PAYMENTS TO PARTIES FOR AND ON BEHALF OF ITS CLIENTS IS ILL-FOUNDED SINCE IT IS A SETTLED PRINCIPLE OF LAW THAT TDS IS NOT TO BE EFFECTED IN CASES OF REIMBURSEMENT OF EXPENSES. SIMILAR VIEW TO THIS EFF ECT HAS BEEN HELD BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IN FORMATION ARCHITECTS 322 ITR 1 (2010). AGAIN, THE SAME WAS REITERATED BY HON 'BLE ITAT JODHPUR BENCH IN THE CASE OF ACIT VS MINPRO INDUSTRIES 143 TTJ (J D) 331 (2012) HOLDING THAT MATTERS INVOLVING C & F AGENTS, TDS PROVISIONS ARE NOT ATTRACTED ON TRANSACTION INVOLVING ON REIMBURSEMENT EXPENSES. CO NSEQUENTLY, THE BLAME OF NON DEDUCTION OF TDS CANNOT BE ATTACHED TO THE A PPELLANT. THERE DO NOT EXISTS AN CONTRACTUAL RELATIONSHIP BETWEEN THE APPE LLANT AND SUCH PARTIES AND HENCE TDS PROVISIONS OF THE ACT ARE NOT ATTRACTED. FURTHER TDS PROVISIONS ARE ONLY ATTRACTED IN A CASE WHEREIN AMOUNTS OF MONIES ARE ROUTED THROUGH P&L ACCOUNTS WHICH HAS NOT BEEN DONE IN THIS CASE. IN T HIS CASE THE APPELLANT IS MERELY AN FACILITATOR BETWEEN HIS CLIENTS AND SUCH AGENCIES IN THE REMAND REPORT OF THE AO MENTIONED SUPRA, THE AO HAS CLEARL Y AND CATEGORICALLY INDICATED THAT 'THE APPELLANT IS MAINTAINING SEPARA TE ACCOUNTS FOR AGENCY CHARGES AND THE REIMBURSEMENT EXPENSES WHICH ARE RE CORDED THROUGH DEBIT NOTES. THE AO IN THE IMPUGNED REPORT HAS CLEARLY ST ATED THAT 'THE PAYMENTS RECEIVED AGAINST DEBIT NOTES ARE REIMBURSEMENT AND THE PAYMENTS RECEIVED AGAINST INVOICES ARE ITS INCOME' THE AO HAS IN THE REMAND REPORT THUS ACCEPTED THAT ONLY THE AGENCY CHARGES IS THE INCOME OF THE APPELLANT. ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 4 OF 6 THE ARGUMENT OF THE AO TAKEN IN THE ASSESSMENT ORDE R ARE THUS, UNTENABLE. IN THIS REGARD, IT IS SEEN THAT IT HAS B EEN HELD BY SEVERAL HON'BLE COURTS THAT AMOUNTS OF MONIES RECEIVED ON ACCOUNT O F REIMBURSEMENT EXPENSES CANNOT BE TREATED AS INCOME OF THE RECIPIE NT. IN THE CASE OF CIT VS INFORMATION ARCHITECTS 322 ITR 1, HON'BLE BOMBAY HI GH COURT WAS TO DECIDE WHETHER AMOUNTS OF MONIES PAID BY AN EMPLOYER TO HI S EMPLOYEE IN THE NATURE OF REIMBURSEMENT OF EXPENSES WOULD CONSTITUT E SALARY IN THE HANDS OF EMPLOYEE OR NOT HON'BLE HIGH COURT HELD THAT REIMBU RSEMENT OF EXPENSES DO NOT PARTAKE THE NATURE OF INCOME AND HENCE WOULD NO T BE CATEGORIZED AS INCOME UNDER THE HEAD SALARY IN THE HANDS OF THE EM PLOYEE DRAWING AN ANALOGY TO THE PRESENT CASE, THE AMOUNTS OF MONIES RECEIVED BY THE APPELLANT FROM HIS CLIENTS WOULD NOT ASSUME THE CHARACTER OF INCOME IN APPELLANTS HAND IT IS FURTHER SEEN THAT HON'BLE JURISDICTIONAL ITAT IN THE CASE OF ITO VS HANS ROAD CARRIERS PVT LTD ITA NO 1792/AHD/2007 HAVE HEL D THAT 'THE DEDUCTION OF TAX ON INCOME DOES NOT IPSO FACTO DECLARE THAT T HE AMOUNT REFERRED TO IN THE TDS CERTIFICATE IS SUBJECT TO TAX ON THE WHO LE FIGURE THAT TOO ON THE SAME YEAR MENTIONED IN THE CERTIFICATE AND FURT HER AN INCOME OF A TAX PAYER IS NOT REQUIRED TO BE COMPUTED MERELY W.R .T. THE TDS CERTIFICATE BUT ASSESSMENT OF AN INCOME IS ALTOGETH ER AN INDEPENDENT EXERCISE 'FURTHER, IN THE CASE OF HETO COSNTRUCTION PVT. LTD. VS. ACIT. ITA NO 218/AHD/2009, IT WAS HELD THAT AN OBSERVATI ON AT THIS STAGE CAN BE MADE THAT THE PROVISIONS RELATING TO TAX DEDUCTI ON AT SOURCE ARE NOT THE PROVISIONS FOR THE COMPUTATION OF INCOME. AN IN COME OF A TAXPAYER IS NOT REQUIRED TO BE COMPUTED MERELY WITH REFERENC E TO THE TDS CERTIFICATE BUT ASSESSMENT OF AN INCOME IS ALTOGETH ER AN INDEPENDENT EXERCISE. WITH THIS UNDERSTANDING OF LAW IF WE COMP ARE THE FACTS OF THE CASE, AND THEN IT IS EVIDENT THAT THE AMOUNT WHICH WAS CERTIFIED ON THE TDS CERTIFICATE COULD OR COULD NOT HAVE BEEN SUBJEC T TO TAX IN THE HANDS OF THE ASSESSEE-RECIPIENT. THE DEDUCTOR HAD CHOSEN SAFE PROCEDURE OF DEDUCTION OF TAX ON THE ENTIRE AMOUNT OF FREIGHT. O THERWISE THE FREIGHT WAS TO BE PAID TO THE TRUCK OWNERS AND NOT TO THE A SSESSEE-COMPANY, WHO IS ONLY A CONDUIT IN ARRANGING THE HIRING OF TH E TRUCKS. THE FREIGHT WAS TO BE PASSED ON TO THE TRUCKS OWNERS, THEREFORE , THE FREIGHT WAS NOT SUBJECT TO TAX IN THE HANDS OF THE ASSESSEE. NEVERT HELESS, ACCOUNTS OF THE ASSESSEE HAVE ALSO DEMONSTRATED THE SAME. WITH THE RESULT, THE AMOUNT ON WHICH THE TDS WAS DEDUCTED HAD NOT MATCHE D WITH THE FIGURES OF THE INCOME DISCLOSED BY THE ASSESSEE IN RESPECT OF THOSE TRANSACTIONS. SUCH A BUSINESS TRANSACTION CAN BE DE ALT WITH IN TWO WAYS; I.E. EITHER TO BE TREATED AS THE RECEIPTS WIT H OVERRIDING LIABILITY OR SECONDLY THAT THE FREIGHT RECEIPTS WERE SUBJECT TO THE EXPENDITURE OF FREIGHT CHARGES TO BE PAID TO THE TRUCK-OWNERS. ON APPRECIATION OF THE FACTS, THE TRANSACTION IN QUESTION HAD FALLEN IN FI RST CATEGORY.' THUS THE REIMBURSEMENT OF EXPENSES RECEIVED BY THE APPELLANT FROM HIS CLIENTS, RECEIVED ON ACCOUNT OF DEBIT NOTES FOR WHICH SEPARA TE ACCOUNTS HAS BEEN MAINTAINED BY THE APPELLANT AND WHICH HAD NOT BEEN ROUTED THROUGH THE P & L A/C., CANNOT BE REGARDED AS THE INCOME OF THE APPEL LANT AVAILABLE FOR TAXATION DURING THE YEAR UNDER CONSIDERATION I E A Y 2009-10 . THE ACTION OF THE AO IN MAKING THE IMPUGNED ADDITION OF RS 1,39,76,847/- TH US SUFFERS FROM THE VICE OF INAPPROPRIATE UNDERSTANDING OF THE FACTS OF THE CASE AND INCORRECT APPLICATION OF LAW HAVING SAID THAT IT IS EQUALLY I MPORTANT TO NOTE THAT IN THE CHART SUBMITTED BY THE APPELLANT WHICH HAS BEEN REP RODUCED AT PARA-3.1 ABOVE, THERE ARE CERTAIN DIFFERENCES OF AMOUNTS APP EARING IN THE INFORMATION ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 5 OF 6 AVAILABLE IN THE AIR MODULE AND IN THE BOOKS OF THE APPELLANT WHICH APPELLANT HAS FAILED TO RECONCILE WITH ANY EVIDENCE WHATSOEVE R. THE TOTAL AMOUNT OF DIFFERENCES, AS PER APPELLANTS OWN CALCULATION COME S TO RS.7,66,775/- . SINCE THIS AMOUNTS REPRESENTS A FAILURE ON PART OF THE AP PELLANT, TO SUBMIT A COMPLETE RECONCILIATION OF FIGURES BETWEEN THE AIR AND ITS BOOKS OF ACCOUNTS THE SAME CANNOT BE ALLOWED. ACCORDINGLY, THE ADDITION MADE BY THE AO IS CONFIRMED TO THE EXTENT OF RS.7,66,775/- ONLY AND T HE GROUND OF APPEAL NO.1 IS PARTLY ALLOWED. 4. NONE OF THE PARTIES IS SATISFIED BY THE ORDER OF THE LEARNED CIT(A). WHILE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF GRANTE D BY THE LEARNED CIT(A) TO THE ASSESSEE, THE ASSESSEE IS NOT SATISFIED WITH LEARN ED CIT(A) CONFIRMING THE ADDITION TO THE EXTENT OF RS.7,66,775/-. BOTH THE PARTIES ARE I N APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE HAVE NOTED THAT THE ASSESSEE HAS DULY EXPLAIN ED VARIATIONS IN THE FIGURES OF THE AIR AND THE FIGURES DISCLOSED BY THE ASSESSEE. THE MERE FACT THAT A PERSON MAKING PAYMENT OF REIMBURSEMENT CLAIM DEDUCTS TAX AT SOURC E DOES NOT CONVERT THE REIMBURSEMENT INTO INCOME. VARIOUS CO-ORDINATE BEN CHES OF THE TRIBUNAL, SUCH AS IN THE CASES OF ITO VS. HANSA ROAD CARRIERS PVT. LTD. [(2011) 45 SOT 149 (AHD)] AND HETU CONSTRUCTION PVT. LTD. VS. ACIT (ITA NO.218/AHD/200 9; ORDER DATED 04.03.2011); HAVE HELD SO. IN THIS VIEW OF THE MATTER, AND HAVING NO TED THAT NO SPECIFIC INFORMATION ARE POINTED OUT IN THE RECONCILIATION STATEMENT FILED B Y THE ASSESSEE, WE APPROVE VERY WELL REASONED FINDINGS OF THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE RELIEF GRANTED BY THE CIT(A). HOWEVER, SO FAR AS THE ADDITIONS OF RS. 7,66,775/- IS CONCERNED, WE HAVE NOTED THAT THERE IS NO EXPLANATIONS WHATSOEVER FOR THESE VARIATIONS AND THE ASSESSEE HAS NOT REALLY CHALLENGED THE BASIS OF AIR INPUTS. IN THIS VIEW OF THE MATTER, TO THIS EXTENT, CONFIRMATION OF ADDITIONS OF RS.7,66,775/- IS INDEED JUSTIFIED. WE, THEREFORE, CONFIRM THIS ACTION OF THE ASSESSING OFFICER. 7. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 11 TH MAY, 2018. SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEM BER) DATED: 11 TH MAY, 2018 ITA NOS.1174 & 1284/AHD/2013 ASSESSMENT YEAR: 2009-10 PAGE 6 OF 6 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD