M/s Sri Venkateswara Padmavathi Trading Company, Hyderabad V. ITO,Ward-2, Khammam

ITA 1186/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6440 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Condonation of delay
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC) : HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA.NO.1186/HYD/2014 ASSESSMENT YEAR 2009-2010 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. PAN AB J P S2495K VS. THE INCOME TAX OFFICER, WARD-2, KHAMMAM. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. M. CHANDRAMOULESWARA RAO. FOR REVENUE : MR. M. SITARAM DATE OF HEARING : 14.06.2016 DATE OF PRONOUNCEMENT : 17 .06.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT, VIJAYAWADA DATED 20.0 3.2014 PASSED UNDER SECTION 263 OF THE ACT AND PERTAINS TO THE A.Y. 2009-2010. 2. AT THE OUTSET, THERE IS A DELAY OF 19 DAYS IN FILING OF THE APPEAL. AFTER PERUSING THE PETITION F OR CONDONATION OF DELAY ALONG WITH THE AFFIDAVIT AND A FTER HEARING RIVAL CONTENTIONS, I CONDONE THE DELAY AND ADMIT THE APPEAL. 3. THE ASSESSEE, IN THIS CASE IS A PARTNERSHIP FIR M AND IS IN THE BUSINESS OF TRANSPORTATION OF COAL AS A 2 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. CONTRACTOR. IT FILED ITS RETURN OF INCOME FOR THE A .Y. 2009- 2010 ON 21.10.2010, ADMITTING TOTAL INCOME OF RS.14,53,190. THE A.O. COMPLETED THE ASSESSMENT UND ER SECTION 143(3) ON 22.12.2011. THE LD. CIT, VIJAYAWA DA PASSED AN ORDER UNDER SECTION 263 OF THE ACT, SETTI NG ASIDE THE ASSESSMENT AND DIRECTING THE A.O. TO RE-D O THE ASSESSMENT DE-NOVO ON THE MATTER SPECIFIED IN PARA- 2(A)(B)(C) WHICH READS AS FOLLOWS : 2. ON EXAMINATION OF THE ABOVE PROCEEDINGS AND CONNECTED RECORD, IT IS SEEN THAT THE A.O. HAS NOT CONDUCTED DUE PROBE (ENQUIRIES) ON VARIOUS ISSUES, OF WHICH, THE CORE ISSUES ALONE ARE SPECIFIED BELOW. (A) THE ASSESSEE, IN ITS LETTER DT.15~12-2011 STATED THAT THERE ARE NO PAYMENTS THAT ARE REQUIRED TO BE SUBJECTED TO TDS U/S.194C OF THE ACT. BUT AS PER THE LEDGER EXTRACT COPY OF 'FREIGHT', THE ASSESSEE CLAIMED FREIGHT PAID TO TWENTY VEHICLES AND DEBITED RS.L,26,97,222 UPON WHICH NO TDS WAS MADE. THOUGH IT WAS CLAIMED AS MOST OF THE FREIGHT PAYMENTS WERE OUTSTANDING AND SHOWN UNDER 'SUNDRY CREDITORS' AND HENCE NO TDS WAS MADE, PROVISIONS OF SEC.194C OF THE ACT APPLY AND FAILURE TO COMPLY WITH THEM CALL FOR DISALLOWANCE O F SUCH EXPENDITURE U/S 40(A)(IA) OF THE ACT. (B) THE NATURE OF 'LOADING CHARGES' AT RS.L,50,000/- DEBITED TO THE P & L A/C HAS NOT BEEN ENQUIRED INTO APART FROM FINDING THE NEXUS OF SUCH EXPENSES WITH THE TYPE OF BUSINESS CARRIED OUT BY THE ASSESSEE-FIRM. (C) IN ITS LETTER DT.11-11-2011 AT PARA NO.4, THE ASSESSEE EXPLAINED THAT IT WILL RAISE THE ENTIRE FINANCIAL CHARGES PAYABLE TO SUNDARAM FINANCE LIMITED AS AND WHEN THE AMOUNTS ARE BORROWED OR THE LOANS TAKEN AND IT TRANSFERRED THE SAME TO 'UNMATCHED FINANCIAL CHARGES ACCOUNT I.E., CREDIT- 3 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. SIDE IN THE BALANCE SHEET AND ALSO CONFIRMED THAT AN OF RS.L0,35,345/- IS PAYABLE BY IT IN FUTURE. BU T, THE RECORD REVEALED THAT THE ASSESSEE HAS SHOWN THE ABOVE OUTSTANDING PAYMENTS ON THE DEBIT SIDE (ASSETS SIDE) OF THE BALANCE SHEET. THE AO OBTAINED ANY CLARIFICATION/EXPLANATION NOR EXAMINED THE SAME. 4. AFTER HEARING THE RIVAL CONTENTIONS, I HOLD AS FOLLOWS. 4.1. THE FIRST ISSUE ON WHICH THE REVISION WAS DIRECTED BY THE LD. CIT WAS THAT THE A.O. HAD FAILE D TO INVOKE SECTION 40(A)(IA) OF THE ACT ON FREIGHT CHAR GES PAID BY THE ASSESSEE TO 20 VEHICLES WITHOUT DEDUCTING TA X AT SOURCE. THE ASSESSEE RELIES ON THE FOLLOWING CASE L AWS AND SUBMITS THAT THERE IS NO REQUIREMENT OF DEDUCTING T AX AT SOURCE UNDER SECTION 194C, WHEN THERE IS NO WRITTEN CONTRACT BETWEEN THE TRUCK OWNERS AND THE ASSESSEE. I. CIT-I VS. VALIBHAI KHANBHAI MANKAT (2013) 216 TAXMANN 18 (GUJ.) II. CHANDRAKANT THACKAR VS. ACIT (2010) 129 TTJ 1 (ITAT CUTTACK BENCH) III. ITO VS. BHORUKA ROADLINES LTD., 115 TTJ 383 (MUM.) IV. CITY TRANSPORT CORPORATION VS. ITO 13 SOT 47 (MUM.) 4.2. IT IS THE CASE OF THE ASSESSEE THAT EACH TRIP SHOULD BE TREATED AS A SEPARATE CONTRACT AND UNDER THOSE CIRCUMSTANCES, THERE IS NO OBLIGATION ON THE PART O F THE ASSESSEE TO DEDUCT TAX AT SOURCE. IT WAS FURTHER SU BMITTED 4 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. THAT THE A.O. HAD EXAMINED THIS MATTER AND THE ASSE SSEE HAD FILED FORM 15-I OBTAINED FROM THE TRANSPORTERS BEFORE THE LD. CIT AND THAT THESE FORMS WERE PRODUCED BEFO RE THE A.O. DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND UNDER SUCH CIRCUMSTANCES, THE A.O. COULD NOT TO HAV E MADE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE AC T. IT WAS SUBMITTED THAT THE A.O. HAS TAKEN A CORRECT VIE W ON THIS ISSUE AND UNDER THOSE CIRCUMSTANCES, THE REVIS ION CANNOT BE MADE BY THE LD. CIT UNDER SECTION 263 OF THE ACT. 5. THE SECOND ISSUE IS THE FINDING OF THE LD. CIT THAT THE LOADING CHARGES OF RS.1,50,000 DEBITED TO THE P & L A/C, HAS NO NEXUS WITH THE BUSINESS OF THE ASSESS EE AND HENCE, SHOULD HAVE BEEN DISALLOWED BY THE A.O. THE GENUINENESS OF THIS EXPENDITURE WAS DOUBTED BY THE LD. CIT. 5.1. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REVISION CANNOT BE MADE MERELY ON SUSPICIO N. HE SUBMITTED THAT DURING THE COURSE OF TRANSPORTATION OF COAL, THERE WILL BE SITUATIONS WHERE TRUCKS ARE SUB JECTED TO MECHANICAL DEFECTS AND BREAKDOWNS AND NEW TRUCKS HA VE TO BE ENGAGED AND COAL HAS TO BE TRANSFERRED FROM T HE BROKEN DOWN TRUCK TO THE NEW TRUCK TO TRANSPORT COA L TO THE DESTINATION AND HENCE, THERE IS NECESSITY TO IN CUR LOADING CHARGES. HE FURTHER SUBMITTED THAT THE EXPENDITURE WAS INCURRED BY WAY OF ACCOUNT PAYEE CHEQUES AND WERE VERIFIED DURING THE ASSESSMENT 5 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. PROCEEDINGS BY THE A.O. AND HENCE THE GRIEVANCE CAN NOT BE DOUBTED. HE ARGUED THAT THERE IS NEITHER ERROR I N THE ASSESSMENT ORDER NOR PREJUDICE WAS CAUSED TO THE REVENUE AND HENCE, REVISION ON THIS GROUND IS BAD I N LAW. 6. ON THE THIRD ISSUE OF UNMATCHED FINANCIAL CHARGES, THE LD. COUNSEL FOR THE ASSESSEE, EXPLAINE D THAT THE LOAN LIABILITY OF THE ASSESSEE IS TAKEN ON A GR OSS FIGURE (I.E., PRINCIPAL + INTEREST) AND THE CONTRA ENTRY O F INTEREST AMOUNT IS SHOWN ON THE ASSETS SIDE OF THE ASSESSEE S BALANCE SHEET AND IS DISCLOSED AS UNMATCHED FINANCI AL CHARGES. THE INTEREST CHARGED DURING THE YEAR IS RE DUCED BOTH FROM THE UNMATCHED FINANCIAL CHARGES AND THE L OAN ACCOUNT. THUS, IT WAS ARGUED THAT THERE IS NO ERROR MUCH LESS PREJUDICE CAUSED TO THE REVENUE BY THIS METHOD OF ACCOUNTING. HE RELIED ON NUMBER OF CASE LAWS IN SUP PORT OF HIS CONTENTION THAT THE ORDER PASSED UNDER SECTI ON 263 IS BAD IN LAW. 7. THE LD. D.R. ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE HAD NOT APPEARED BEFORE THE LD. C IT AND IT WAS DUE TO THIS REASON THAT THE CIT HAS PASSED A N EXPARTE ORDER. HE RELIED ON THE FOLLOWING DECISIONS FOR THE PROPOSITION THAT TAX SHOULD BE DEDUCTED AT SOURCE U NDER SECTION 194C WHEN THE ASSESSEE HIRES VEHICLES, FROM OWNERS OF VEHICLES, FOR THE PURPOSE OF UTILISING TH EM IN THE TRANSPORT CONTRACT HE HAS ENTERED INTO WITH ITS PRI NCIPAL. 6 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. I. SMT. J. RAMA VS. CIT AND ANOTHER (2012) 344 ITR 608 II. SHREE CHOUDHARY TRANSPORT COMPANY VS. ITO (2009) 225 CTR 125 7.1. HE FURTHER RELIED ON THE CIRCULAR NO.715 DATE D 8 TH AUGUST, 1995 AND SUBMITTED THAT AN ERROR WAS FOUND IN THE ORDER OF THE A.O. AND THIS ERROR CAUSE PREJU DICIAL TO THE INTEREST OF THE REVENUE. ON THE OTHER ISSUE HE RELIED ON THE ORDER OF THE LD. CIT. 8. AFTER HEARING RIVAL CONTENTIONS, I HELD AS FOLLOWS : 8.1. AS FAR AS THE ISSUE OF DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C ON FREIGHT PAID BY THE AS SESSEE TO THE TRUCK OWNERS IS CONCERNED, THE ASSESSEE HAS OBTAINED FORM 15-I FROM ITS TRANSPORTERS AND FILED THE SAME BEFORE THE COMMISSIONER OF INCOME TAX. COPIES OF THESE FORMS WERE ALSO PRODUCED BEFORE THE A.O. DURI NG THE ORIGINAL ASSESSMENT PROCEEDINGS. THE A.O. HAS VERIF IED THESE FORMS AND CAME TO THE CONCLUSION THAT THE ASS ESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 194C OF THE ACT. THIS IS A POSSIBLE VIEW. WE DO NOT FIND ANY ERROR I N THE ORDER OF THE A.O. THUS, THE ORDER OF THE LD. CIT ON THIS ISSUE IS BAD IN LAW. THERE IS NO ERROR IN THE ORDER OF THE A.O. WARRANTING REVISION UNDER SECTION 263 OF THE A CT. 8.2. ON THE SECOND ISSUE OF DISALLOWANCE OF LOADIN G AND UN-LOADING CHARGES, THE LD. CIT HAS BASED HIS 7 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. CONCLUSIONS ON SURMISES AND CONJECTURES. THERE IS N O MATERIAL BEFORE THE LD. CIT TO COME TO THE CONCLUSI ON THAT THE CLAIM OF THE ASSESSEE IS NOT GENUINE. SUCH SUSP ICION CANNOT BE A GROUND FOR REVIEW. HENCE, THE SAME IS QUASHED. 8.3. ON THE THIRD ISSUE OF UNMATCHED FINANCIAL CHARGES, THERE IS NO FINDING OF THE LD. CIT THAT TH ERE IS AN ERROR IN THE ASSESSMENT ORDER MUCH LESS PREJUDICE T O THE REVENUE. THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS BEING FOLLOWED YEAR AFTER YEAR. THERE I S NO FAULT THAT COULD BE FOUND IN THIS SYSTEM OF ACCOUNTING. U NDER THESE CIRCUMSTANCES, THE REVISION IS BAD IN LAW. 9. IN THE RESULT, I QUASH THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 OF THE ACT AND ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 17.06. 2016. SD/- (J.SUDHAKAR REDDY) ACCOUNTANT MEMBER HYDERABAD, DATED 17 TH JUNE, 2016. VBP/- 8 ITA.NO.1186/HYD/2014 M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. COPY TO 1. M/S. SRI VENKATESWARA PADMAVATHI COMPANY, SATTUPALLI, KHAMMAM DISTRICT. C/O. SHRI M. CHANDRAMOULESWARA RAO, CHARTERED ACCOUNTANT, C-3, SKYLARK APARTMENTS, BASHEERBAGH, HYDERABAD 500 029. 2. THE INCOME TAX OFFICER, WARD - 2 , KHAMMAM . 3. CIT , 1 ST FLOOR, SVR PLAZA, D.NO.40 - 6 - 15, REVENUE COLONY, SIDDHARTHA PUBLIC SCHOOL ROAD, MOGHALRAJPURAM, VIJAYAWADA 520 010. 4. ADDL. CIT, KHAMMAM RANGE, KHAMMAM 5. D.R. ITAT A BENCH (SMC) HYDERABAD. 6. GUARD FILE