ITO, CHENNAI V. Swamy Agencies, CHENNAI

ITA 1226/CHNY/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3829 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-06-2013
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 234B; 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . ! , ' !# $ [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO. 1192/MDS/2013 / ASSESSMENT YEAR : 2009-10 M/S SWAMY AGENCIES 13, BAZAR STREET SECOND FLOOR ROYAPURAM, CHENNAI 600 013 VS. THE INCOME TA X OFFICER BUSINESS WARD XII(2) CHENNAI [PAN ABLFS 4391 Q] ( %& / APPELLANT) ( '(%& /RESPONDENT) ./ I.T.A.NO. 1226/MDS/2013 / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER BUSINESS WARD XII(2) CHENNAI VS. M/S SWAMY AGENCIES 13, BAZAR STREET SECOND FLOOR ROYAPURAM, CHENNAI 600 013 ( %& / APPELLANT) ( '(%& /RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI SHIVA SRINIVAS, JCIT / DATE OF HEARING : 24 - 08 - 2016 / DATE OF PRONOUNCEMENT : 26 - 09 - 2016 ) / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THESE APPEALS OF THE ASSESSEEE AND THE REVENUE A RE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-IV, CHENNAI, DATED 25.2.2013 IN I.T.A.NO. 1049/13-14/A-15 ITA NO.1192 & 1226/13 :- 2 -: 547/2011-12 FOR ASSESSMENT YEAR 2009-10 PASSED U/S 143(3) AND 250 OF THE INCOME-TAX ACT, 1961(I SHORT THE ACT). 2. FIRST WE TAKE UP REVENUES APPEAL IN I.T.A.NO. 1226/MDS/2013. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CA SE . 2. THE LD.CIT(A) ERRED IN HOLDING THAT THERE IS N O CONCEALMENT OF RECEIPT BY THE ASSESSEE AND THAT THE ENTIRE RECEIPTS HAVE BEEN PROPERLY ACCOUNTED FOR. 3. THE LD. CIT(A) FAILED TO APPRECIATE THAT THERE WAS A DIFFERENCE OF RS.160.22LAKH BETWEEN THE AMOUNT OF C ONTRACT RECEIPTS( ATTRACTING TDS UNDER SECTION 194C) AS PER 26 AS STATEMENT, AND THE AMOUNT ADMITTED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT. 4. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE DOES THE WORK OF CLEARING AND FORWARDING, ONLY AS A PACKAGE AND THERE IS NO BIFURCATION OF CONTRACT, SE RVICE CHARGES ETC. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FIRM , A CLEARING AND FORWARDING AGENT, FILED ITS RETURN OF INCOME FO R THE IMPUGNED ASSESSMENT YEAR ON 5.1.2010 DECLARING TOTAL INCOME OF ` 11,41,760/- AND WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUE NTLY, THE CASE WAS SELECTED UNDER CASS AND NOTICE U/S 143(2) DATED 25 .8.2010 WAS ISSUED. IN COMPLIANCE O THE NOTICE, THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED INFORMATIO N. THE ASSESSING OFFICER ON PERUSAL OF THE RECORDS FOUND THAT THE A SSESSEE-FIRM HAS DISCLOSED THE COMMISSION CHARGES OF ` 39,77,411/- AND REIMBURSEMENT ITA NO.1192 & 1226/13 :- 3 -: OF CLEARING LOADING AND UNLOADING CHARGES OF ` 7,54,35,859/-. ON VERIFICATION OF THE BOOKS OF ACCOUNT AND BANK ACCOU NT STATEMENT AND ALSO THE DETAILS OF VARIOUS EXPENSES DEBITED TO PRO FIT & LOSS ACCOUNT. THE ASSESSING OFFICER FOUND THAT ASSESSEE HAS CLAI MED EXPENSES OF ` 7,54,34,723/- TOWARDS STEAMER AGENT, STORAGE AND OT HER CLEARING EXPENSES WITHOUT DEDUCTION OF TDS U/S 194C OF THE ACT ON PAYMENTS MADE TO CONTRACTORS/SUB-CONTRACTORS WHO ARE RESIDEN TS IN INDIA. IN RESPONSE TO THE QUERY RAISED BY THE ASSESSING OFFIC ER, THE ASSESSEE FILED DETAILED SUBMISSIONS AS REFERRED BY THE ASSES SING OFFICER IN HIS ORDER. THE ASSESSEE-FIRM IS IN THE BUSINESS OF CU STOMS HOUSE AGENT AND PROVIDING SERVICES TO THE IMPORTERS AND EXPORTE RS IN THE MATTER OF CUSTOM CLEARANCE FORMALITIES FOR WHICH PAYMENTS WER E MADE TOWARDS TRANSPORT CHARGES, BONDING EXPENSES, STORAGE CHARGE S ETC. THE ASSESSEE INCURRED THE TOTAL EXPENDITURE ON BEHALF O F THE IMPORTERS WITH WHOM WORKS CONTRACTS ARE EXECUTED. ON PERUSAL O F THE PROFIT & LOSS ACCOUNT, THE ASSESSING OFFICER IS OF THE OPINION T HAT THE ASSESSEE HAS PAID CFS CHARGES OF ` 3,84,52,046/- TO THE CONTRACTORS AND SUB- CONTRACTORS WITHOUT DEDUCTING TDS. THE CONTENTION OF THE ASSESSEE WAS THAT IT IS PROVIDING SERVICES TO THE IMPORTERS AND EXPORTERS TO PASS THROUGH CUSTOMS FORMALITIES AND THE PAYMENT OF CUST OMS DUTY WERE MADE BY THE IMPORTERS. THE ASSESSEE WAS PLAYING A LIMITED ROLE FOR CLEARING CARGO FROM VARIOUS SERVICE PROVIDERS, SHIP PING COMPANIES, ITA NO.1192 & 1226/13 :- 4 -: CUSTOMS HOUSE, CONTAINER FREIGHT STATIONS(CFS) AND IF THE PAYMENTS WERE NOT MADE TO THESE AGENCIES THE ASSESSEE WAS N OT RESPONSIBLE AND THE IMPORTERS WERE LIABLE TO PAY AND FURTHER T HE ASSESSEE WAS ACTING AS A MIDDLEMAN. THE MODUS OPERANDI BEING TH E ASSESSEE-FIRM MAKES THE PAYMENT TO THE CONTRACTORS AND RECEIVES R EIMBURSEMENT OF EXPENSES FROM THE IMPORTERS AND THE SAME AMOUNT WA S CLAIMED IN THE PROFIT & LOSS ACCOUNT. ALL THESE PAYMENTS WERE DIRECTLY PAID BY THE ASSESSEE ON BEHALF OF THE IMPORTERS. FURTHER, IT WAS FOUND THAT THE CFS CHARGES OF ` 1,82,68,551/- WAS PAID TO MADRAS PORT TRUST AND NO TDS WAS DEDUCTED. WITH THIS FINDING AND APPLYING P ROVISIONS OF SEC. 40(A)(IA) OF THE ACT, THE ASSESSING OFFICER MADE AN ADDITION OF ` 2,01,83,495/-. 4. SIMILARLY, THE ASSESSEE HAS NOT DEDUCTED TDS ON PA YMENT OF TRANSPORT CHARGES U/S 194C OF ` 3,79,194/-. THESE PAYMENTS WERE MADE TO CONTRACTORS AND SUB-CONTRACTORS OF TRANSPOR TERS. CONSIDERING THE PROVISIONS APPLICABLE TO THE TRANSPORTERS U/S 194C OF THE ACT THE INFORMATION OF NAME AND ADDRESS OF THE TRANSPOR TERS, PAN WERE NOT FILED BEFORE THE ASSESSING OFFICER, AND WAS DIS ALLOWED. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE-FIRM HAD DECLARED INCOME FROM SERVICE CHARGES OF ` 39,77,411/- AS AGAINST DISCLOSED IN FORM 26AS ` 2,00,00,283/-. THEREFORE, THE ASSESSING OFFICER W AS OF THE OPINION THAT THE ASSESSEE HAS NOT DISCLOSED COMPL ETE SERVICE CHARGES ITA NO.1192 & 1226/13 :- 5 -: RECEIVED AND MADE ADDITION OF ` 1,60,22,872/- AND PASSED ORDER U/S 143(3) DATED 30.12.2011. 5. AGGRIEVED THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A). IN APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND EXPLAINED THAT THE ASSESSEE IS ONLY A FACILITATOR AND THE IMPORTERS ARE LIABLE FOR THESE EXPENSES WHICH WERE INCURRED ON BE HALF OF THE IMPORTERS. THE CIT(A) CONSIDERED THE SUBMISSIONS O F THE ASSESSEE AND FINDING OF THE ASSESSING OFFICER AND THE FACTS NARRATED IN THE COURSE OF APPELLATE PROCEEDINGS. ON THE ISSUE OF S ERVICE CHARGES, IT WAS FOUND IN FORM 26AS THAT SERVICE CHARGES OF ` 2,00,00,283/- WAS RECEIVED BY THE ASSESSEE. IT WAS REITERATED THAT THE ASSESSEE HAS CARRIED ON VARIOUS ACTIVITIES OF CLEARING FROM CUST OMS AND PORTS ON BEHALF OF THE PRINCIPALS. THESE ACTIVITIES INCLUDE CUSTOMS CLEARANCE FROM THE AUTHORITIES, UNLOADING THE GOODS FROM THE SHIP, LOADING INTO THE TRUCKS FOR DELIVERY OF THE GOODS AND THESE ACTI VITIES ARE CARRIED ON BEHALF OF PRINCIPALS AS PER THE INSTRUCTIONS ISSUED , AND FINALLY, BILLS ARE RAISED IN THE NAME OF PRINCIPALS CONSISTS OF TWO PO RTIONS (I) BILLS SUBMITTED BY VARIOUS PARTIES FOR THE WORK DONE FOR THE PRINCIPALS AND (II) SERVICE CHARGES/COMMISSION. IN RESPECT OF THE BILLS SUBMITTED BY VARIOUS PARTIES, THE MODUS OPERANDI BEING THE ASSE SSEE MAKES THE PAYMENT ON BEHALF OF THE IMPORTERS AND THE SAME AMO UNT IS REIMBURSED AND THE COMMISSION BEING ACTUAL INCOME RECEIVED FOR ITA NO.1192 & 1226/13 :- 6 -: HANDLING AND COORDINATING THE ACTIVITIES. THEREFOR E, THE ACTIONS OF THE ASSESSEE ARE IN THE NATURE OF SERVICES, WHEREAS T HE IMPORTERS HAVE ALSO DEDUCTED TDS ON REIMBURSEMENT OF EXPENDITURE . THEREFORE, THE ASSESSEE HAS DISCLOSED THE SERVICE CHARGES/COMMISSI ON OF ` 39,77,411/- AND THE BALANCE BEING REIMBURSEMENT OF EXPENDITURE INCLUDED IN THE TOTAL EXPENSES CLAIMED IN THE PROFI T & LOSS ACCOUNT ` 7,54,35,849/- AND THERE WAS NO SUPPRESSION OF INCO ME AND FILED DETAILS AND EXPLANATION BEFORE THE CIT(A) VIDE LETT ER DATED 5.2.2012, THE RELEVANT PORTION OF WHICH READS AS UNDER: SINCE THE TDS HAS TO BE DEDUCTED ON THE GROSS VALUE , THE SAME IS REFLECTED IN FORM 26AS WHICH INCLUDE SERVIC E CHARGES' AND REIMBURSEMENT OF EXPENSES. WHEREAS THE .SERVICE CHARGES AMOUNT OF RS.39,77,411 IS THE SERVICE CHARGES RENDERED BY THE ASSESSEE. THE REIMBURSEMENT OF EXPENSES VALUE OF RS.1,60,22,872 IS INCLUDED IN THE TOTAL VALUE OF RS.7,54,35,849 UNDER THE HEAD OF INCOME O F CLEARING, LOADING & UNLOADING EXPENSES COLLECTED. BOTHE SERVICE CHARGES AND REIMBURSEMENT OF EXPENSES HAVE BEEN TAKEN TO PROFIT AND LOSS ACCOUNT AND PRESENTED AS INCOME. SO IT IS CLEAR THAT THE ASSESSEE HAS NOT OMITTED ANY INCOME AND ALL THE RECEIPTS HAVE BEEN PRESENTED IN PROFIT AND LOSS ACCOUNT AS INCOME. IT IS INCORRECT TO ADD RS.1,60,22,872 AS DIFFERENCE BETWEEN SERVICE CHARGES DECLARED AS INCOME AND GROSS VALUE AS PER FORM 26 AS. 6. THE CIT(A) CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AND THE WORK SYSTEM OF THE ASSESSEE AND THE IMPORT ERS AND FORM 26AS, WAS OF THE OPINION THAT TDS WAS DEDUCTED BY T HE IMPORTERS ON SERVICES CHARGES AND ALSO ON REIMBURSEMENT OF EXPEN SES AND THERE IS NO INCOME TO THE ASSESSEE ON REIMBURSEMENT OF EXPE NDITURE WHICH ITA NO.1192 & 1226/13 :- 7 -: WAS INCLUDED IN THE TOTAL EXPENDITURE CLAIMED BY TH E ASSESSEE UNDER THE HEAD CLEARING, LOADING AND UNLOADING CHARGES I N THE PROFIT & LOSS ACCOUNT. THEREFORE, ACTION OF THE ASSESSING OFFICE R IN MAKING ADDITION OF ` 1,60,22,872/- TOWARDS SUPPRESSION OF SERVICE CHARG ES IS NOT ACCEPTABLE AND DIRECTED THE ASSESSING OFFICER TO DE LETE THE ADDITION OF ` 1,60,22,872/-. 7. ON THE ISSUE OF DEDUCTION OF TDS ON TRANSPORT CHARG ES OF ` 3,41,544/-, THE ASSESSEES CONTENTION WAS THAT THI S AMOUNT WAS TOWARDS TRANSPORT CHARGES TO CONTRACTORS AND SUB-CO NTRACTORS AND THERE IS DIFFICULTY TO IDENTIFY THE TRUCK OWNERS AN D SOME OF THE EXPENSES WERE IN RESPECT OF THE LABOUR CHARGES AND CRANE CHARGES ETC. THE CIT(A) HAS ELABORATELY DISCUSSED THE FACTS AT P AGE 4 TO 6 OF HIS ORDER AND IS OF THE OPINION THAT TDS HAS TO BE DEDU CTED IN RESPECT OF PAYMENT OF TRANSPORT CHARGES OF ` 3,41,544/-. SIMILARLY, CFS CHARGES PAID TO THE MADRAS PORT TRUST WHERE NO TDS WAS DEDU CTED AND THE PAYMENT DOES NOT TAKE THE CHARACTERISTICS OF EXPEND ITURE REIMBURSEMENT AND, THEREFORE, CFS CHARGES WAS SUBJE CT TO TDS AND CONFIRMED THE DISALLOWANCE OF ` 2,01,83,495/- AND PARTLY ALLOWED THE APPEAL. 8. AGGRIEVED, THE REVENUE HAS ASSAILED APPEAL BEFORE T HE TRIBUNAL. ITA NO.1192 & 1226/13 :- 8 -: 9. NONE ATTENDED ON BEHALF OF THE ASSESSEE INSPITE OF SERVICE OF NOTICE THROUGH DEPARTMENT. THEREFORE, WE PROCEE D TO DECIDE THE APPEALS AFTER HEARING THE LD. DR AND CONSIDERING TH E DOCUMENTS AVAILABLE ON RECORD. 10. LD. DR ARGUED THAT THE CIT(A) HAS ERRED IN NOT CONS IDERING THE ENTIRE RECEIPTS AS DISCLOSED IN FORM 26AS AND N O RECONCILIATION WAS PROVIDED IN RESPECT OF THIS DIFFERENCE AND THERE WA S NO BIFURCATION OF CONTRACT SERVICE CHARGES. THE ASSESSEE HAS CLAIME D A TOTAL AMOUNT OF ` 754.35 LAKHS AND OUT OF THIS ` 160.22 LAKHS WAS INCLUDED IN THE TOTAL REFLECTED IN THE RECEIPTS AND EXPENDITURE SIDE OF P ROFIT & LOSS ACCOUNT . THE CONTENTION OF THE LD. DR IS THAT THE ASSESSEE HAS NOT DISCLOSED COMPLETE INFORMATION AND THE CIT(A) HAS ALSO NOT C ALLED FOR ANY COMMENTS OR REMAND REPORT IN RESPECT OF THE INFORMA TION SUBMITTED DURING APPELLATE PROCEEDINGS AND PRAYED FOR SETTING ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE GROUNDS OF THE REVENUE. 11. WE HAVE HEARD THE SUBMISSIONS OF LD. DR AND PERUS ED THE MATERIAL ON RECORD. THE CONTENTION OF THE LD. DR T HAT THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE ADDITION OF ` 1,60,22,872/- IN RESPECT OF SERVICE CHARGES. THESE FACTS WERE NOT DISCLOSED IN THE ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER ITA NO.1192 & 1226/13 :- 9 -: AND THE ASSESSEE HAS ALSO VIOLATED PROVISIONS OF S EC. 40(A)(IA) OF THE ACT. CONSIDERING THE APPARENT FACTS AND PROVISIO NS OF LAW AND ALSO THE PRINCIPLES OF NATURAL JUSTICE, WE ARE OF THE OP INION THAT THE MATTER NEEDS TO BE EXAMINED BY THE ASSESSING OFFICER BASE D ON BOOKS OF ACCOUNT AND FORM 26AS FROM THE INCOME-TAX WEBSITE D ISCLOSING THE INCOME. FURTHER THERE IS NO CLARITY WHETHER CONFIRM ATION WAS OBTAINED FROM THE IMPORTERS THAT THEY HAD REIMBURSED THE EXP ENSES. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RE MIT THE ISSUE OF SERVICE CHARGES TO THE FILE OF THE ASSESSING OFFICE R TO CONSIDER AFRESH AFTER PROVIDING AN OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. 12. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 13. NOW COMING TO ASSESSEES APPEAL IN I.T.A.NO.1192/M DS/ 2013, THE ASSESSEE HAS RAISED THREE GROUNDS - (I) DISALLOWANCE OF ` 3,41,544/- U/S 40(A)(IA) OF THE ACT IN RESPECT OF TRANSPORT CHARGES, (II) CFS CHARGES PAID TO MADRAS PORT TRUST AND (III ) INTEREST LEVIED U/S 234A, 234B AND 234C OF THE ACT. 14. WE HEARD THE SUBMISSIONS OF THE LD. DR, THE FACTS AND THE PROVISIONS OF SEC. 40(A)(IA) OF THE ACT. THE LD. A RS ARGUMENT BEFORE THE CIT(A) WAS THAT TDS IN RESPECT OF TRANSPORT CHA RGES IS NOT APPLICABLE AS THE ASSESSEE WAS WORKING ON BEHALF O F IMPORTERS. SIMILARLY, CFS CHARGES PAID TO MADRAS PORT TRUST AL SO TAKES THE ITA NO.1192 & 1226/13 :- 10 -: CHARACTER OF CONCEPT OF CONCERNED PARTIES WHERE THE ELEMENT OF USING OF THE SERVICES ARE BY THE IMPORTERS AND THE ASSES SEE IS ONLY RECEIVED THE AMOUNT ON BEHALF OF THE IMPORTERS FOR MAKING PA YMENT TO THE CLEARING AGENTS IN COMPLIANCE WITH THE TERMS OF AGR EEMENT WITH THE IMPORTERS. SINCE WE HAVE SET ASIDE THE ORDER OF T HE CIT(A) TO THE FILE OF THE ASSESSING OFFICER IN REVENUES APPEAL, WE RE MIT THESE DISPUTED ISSUES BACK TO THE ASSESSING OFFICER TO CONSIDER TH E PROVISIONS AND DECIDE AFRESH AFTER MAKING ENQUIRIES AND PASS ORDER ON MERITS. 15. CHARGING OF INTEREST U/S 234A, 234B AND 234C IS CONSEQUENTIAL AND MANDATORY IN NATURE AND TO BE COM PUTED BY THE ASSESSING OFFICER IN ACCORDANCE WITH LAW. ORDERED ACCORDINGLY. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. 17. TO SUMMARIZE, THE APPEALS OF THE REVENUE AND ASSES SEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MONDAY, 26 TH SEPTEMBER, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) ' / JUDICIAL MEMBER / CHENNAI / DATED: 26 TH SEPTEMBER, 2016 RD ITA NO.1192 & 1226/13 :- 11 -: ! ' #$ %$ / COPY TO: 1 . &' / APPELLANT 4. ( / CIT 2. ')&' / RESPONDENT 5. $*+ ' , / DR 3. ( () / CIT(A) 6. +/ 0 / GF