M/s. Seaking Enterprise, Kolkata V. ITO, Ward - 28(2), Kolkata

ITA 1670/KOL/2009

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4557 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-07-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBASISH BANERJEE JCITSRDR
• Assessee Lawyers: S M SURANA
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 1670 / KOL / 2009 ASSESSMENT YEAR:-2006-07 M/S SEAKING ENTERPRISE 28, CIRCULAR GARDEN REACH ROAD, KIDDERPORE [ PAN NO.AANFS 7339 F ] V/S . INCOME TAX OFFICER WARD-28(2), AYAKAR BHAWAN DAKHIN, 2, GARIAHAT ROAD, KOLKATA-700 031 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.M.SURANA, ADVOCATE /BY RESPONDENT SHRI DEBASISH BANERJEE, JCIT-SR-DR /DATE OF HEARING 20-07-2016 /DATE OF PRONOUNCEMENT 26-08-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-XIV, KOLKATA IN APPEAL NO.287/ CIT(A)-XIV/08-09 DATED 25.05.2009. ASSESSMENT WAS FRAMED BY ITO WARD -28(2), KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) VIDE HIS ORDER DATED 19.12.2008 FOR ASSESSMENT YEAR 2006 -07. GROUNDS RAISED BY ASSESSEE PER ITS APPEAL ARE AS UNDER:- (1) THAT THE LD. CIT(A) HAS ERRED ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN HOLDING THAT HIRING OF LORRIES FROM LOCAL M ARKET ON SPOT BASIS TO CARRY CARGO FROM PART OF ASSESSEES CLIENTS DESTINA TION FALLS WITHIN THE DEFINITION OF SUB-CONTRACT AND THEREBY CONFIRMING T HE ADDITION MADE BY ITA NO.1670/KOL/2009 A.Y. 2006-07 M/S SEAKING ENTERPRISE VS. ITO WD-28(2) KOL. PAGE 2 AO TO THE EXTENT RS.51,49,020/- AGAINST TOTAL ADDIT ION OF RS.52,82,320/- MADE BY APPLYING PROVISION OF SECTION 40(A)(IA) REA D TOGETHER WITH SECTION 194(C) OF INCOME TAX ACT, 1961. (2) THAT THE CONSIDERING THE NATURE OF ASSESSEES B USINESS, THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE HELD THAT THERE BEING NO CONTRACT, ORAL OR WRITTEN OR IMPLIED AS ENVISAGED UNDER SECTION 194(C) OF THE ACT, PROVISION OF SAID SECTIO N AS TO DEDUCTION OF TAX AT SOURCE FROM LOCAL MARKET LORRIES HIRED TEMPORARI LY ARE NOT APPLICABLE. (3) THAT YOUR APPELLANT CRAVES LEAVE TO ADD, TO AME ND, OR WITHDRAW ALL OR ANY OF THE ABOVE GROUNDS ON OR BEFORE THE APPEAL. SHRI S.M. SURANA LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND SHRI DEBASISH BANERJEE, LD. DEPARTMENT AL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. THE INTER-CONNECTED ISSUE RAISED BY THE ASSESSEE IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY SUSTAINI NG THE DISALLOWANCE OF TRANSPORTATION CHARGES PAID BY THE ASSESSEE WITHOUT DEDUCTION OF TDS AMOUNTING TO RS. 52,82,320.00 ONLY. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAS PAI D TRANSPORTATION CHARGES TO VARIOUS PARTIES DURING THE YEAR. THE AO DURING A SSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE ON CERTAIN PAYMENT TO THE PA RTIES DEDUCTED THE TDS BUT AT THE SAME TIME ON CERTAIN PAYMENT TO THE SAME PARTY THE TDS WAS NOT DEDUCTED WHEREAS THE PAYMENT WAS MORE THAN RS. 50,0 00/- IN A YEAR. THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTS AS AN EVID ENCE AS TO WHY THIS AMOUNT SHOULD NOT BE DISALLOWED FOR THE VIOLATION O F PROVISIONS OF SEC 40(A)(IA) AS WELL AS 194C OF THE ACT. SO AO HAS DISALLOWED TH E SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT (A) WHO HAS UPHELD THE DECISION OF AO BY OBSERVING THAT AO HAS GIVEN T HE OPPORTUNITY BUT ASSESSEE FAILED TO BRING ANY EVIDENCE TO ESCAPE FRO M THE PROVISIONS OF THE ITA NO.1670/KOL/2009 A.Y. 2006-07 M/S SEAKING ENTERPRISE VS. ITO WD-28(2) KOL. PAGE 3 TDS. ASSESSEE HAS MADE MOSTLY PAYMENTS TO FIVE PART IES WITH WHOM HE HAS ALREADY ENTERED INTO THE CONTRACT. THE LD. CIT(A) A LSO OBSERVED THAT WHILE MAKING THE PAYMENTS TO THESE PARTIES ON SOME AMOUNT TDS HAS BEEN DEDUCTED AND ON SOME PAYMENT NO TDS WAS DEDUCTED. T HE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSE E CAME IN SECOND APPEAL BEFORE US. 5. BEFORE US LD. AR SUBMITTED THAT THE ASSESSEE H AS CONTRACT TO TRANSPORT ITS CLINENTS GOODS TO PORT AND ASSESSEE HAS ON ITS OWN ONLY THREE TRAILERS. HENCE, TRAILERS ARE HIRED BY THE ASSESSEE TO EXECUTE ITS CONTRACT JOBS. FOR SUCH EXECUTION, NO SUB-CONTRACT, ORAL OR WRITTE N IS EVER GIVEN TO ANY PARTY INCLUDING TRAILER DRIVER OR OWNER. HE FURTHER SUBMI TTED THAT AO HAS NOWHERE STATED WHETHER HE IS MAKING ADDITION U/S. 40(A)(IA) FOR INFRINGEMENT OF SUB- SECTION (1) OR SUB-SECTION (2) OF SECTION-194C. THO UGH IN HIS OPENING STATEMENT IN THE ASSESSMENT ORDER, HE HAS STATED AB OUT THE ASSESSEE THAT HE IS A CONTRACTOR AND THIS IS ALSO NOT DENIED. THEREA FTER, HE HAS NOT STATED THAT ASSESSEE HAD SUB-CONTRACTED WITH ALL OR ANY OF THE PERSONS WHOSE TRUCKS/TRAILERS WERE TAKEN ON HIRE. LD. AR SUBMITTE D THAT LD. CIT(A) HAS ASSUMED OR HAS HELD THAT THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX U/S. 194C(2) AND ON THAT BASIS HE HAS CONFIRMED THE ADDI TION MADE BY AO EXCEPT ALLOWING A MINOR RELIEF. BUT HE HAS SIMPLY PRESUMED THAT PARTIES WHO HAVE PLACED TRAILERS ON HIRE, ARE SUB-CONTRACTORS OF ASS ESSEE WITHOUT AN IOTA OF EVIDENCE AS TO EXISTENCE OF ANY ORAL OR WRITTEN CON TRACT ON RECORD. LD. AR STATED THAT THE POINT WAS RAISED AS TO WHY IN CASE OF SAME PARTY TDS HAS BEEN DEDUCTED ON PART OF PAYMENT AND NOT ON FULL PA YMENT AS DETAILED BY AO IN IS ASSESSMENT ORDER IN FORM OF A CHART AND THE F ACT NO TDS WAS DEDUCTIBLE ON ANY AMOUNT AND THE REASON FOR DEDUCTING ON PART AND NOT ON FULL PAYMENT IS THE LACK OF FULL KNOWLEDGE OF LAW. HE FURTHER STATE D IN ANY CASE, MISTAKE CAUSED BY DEDUCTING TDS ON PART CANNOT AND SHOULD N OT VITIATE THE ASSESSEES ITA NO.1670/KOL/2009 A.Y. 2006-07 M/S SEAKING ENTERPRISE VS. ITO WD-28(2) KOL. PAGE 4 STAND THAT IN LAW NO TDS AT ALL WAS DEDUCTIBLE ON PURE AND SIMPLE HIRE CHARGES INVOLVING NO LABOUR CONTRACT. ON THE OTHER HAND THE LD. DR SUBMITTED THAT AS PER THE PROVISIONS OF EXPLANATION-II BELOW SEC. 194C(2) (AS RELEVANT FOR AY 2006-07), CARRIAGE OF GOODS AND PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS IS INCLUDED IN THE DEFINITION OF WORK. AS PER CIRCULAR NO. 715 DATED 08.08.1995 ISSUED BY CBDT (QUESTION NO.9) EACH GR IS CONSIDERE D AS A CONTRACT. IT IS, THEREFORE, CLEAR THAT THE WORK OF TRANSPORTATION UN DER TAKEN BY THE ASSESSEE SQUARELY FALLS UNDER THE TDS PROVISION OF SECTION.1 94C AND SINCE THE ASSESSEE DID NOT DEDUCT THE TAX AT SOURCE, THE PROV ISIONS OF SEC. 40(A)(IA) ARE ATTRACTED. LD. DR FURTHER STATED THAT DURING THE CO URSE OF HEARING A STATEMENT FIELD BY ASSESSEE DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, REGARDING LORRY HIRE CHARGES PAID DURING FY 2005-06 RELEVANT FOR AY 2006-07. IT CAN BE SEEN THAT IN RESPECT OF TRANSPORTERS AT SL. NO. FR OM 6 TO 17, 27 TO 39 AND 72 TO 77 (ON PAGES 2 AND 3 OF THE ASSESSMENT ORDER) EITHE R OPENING BALANCE OR CLOSING BALANCE OR BOTH IN ARE PRESENT. THIS CLEARL Y INDICATES THAT THE ASSESSEE IS ENGAGING THESE TRANSPORTERS ON A REGULAR BASIS A ND HENCE THERE IS AN ORAL CONTRACT WITH THESE TRANSPORTERS. IT MAY BE MENTION ED HERE THAT CONTRACT INCLUDES ORAL CONTRACT. LD. DR AGAIN STATED THAT TH E TRANSPORTERS AT SL. NO. FROM 4, 5 18 TO 26 AND 40 TO 71 (PAGES 2 AND 3 OF T HE ASSESSMENT ORDER) THE ASSESSEE HAS ITSELF DEDUCTED TAX AT SOURCE ON SOME AMOUNT BUT HAS FAILED TO DEDUCT TAX ON THE REMAINING AMOUNT. THIS CLEARLY IN DICATES THAT THE ASSESSEE IS VERY MUCH AWARE OF THE TES PROVISIONS BUT ON CER TAIN PAYMENTS THE ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE AND THE REFORE THE PROVISIONS OF SECT. 40(A)(IA) ARE CLEARLY ATTRACTED. AGAIN LD. DR STATED THAT TRANSPORTATION CHARGES PAID BY ASSESSEE TO THE TRANSPORTERS MAY BE RELATIVELY A SMALL AMOUNT AS COMPARED TO THE VALUE OF GOODS TRANSPORTE D. IT IS NOT POSSIBLE THAT THE ASSESSEE WILL HAND OVER THE GOODS WORTH LAKHS O F RUPEES TO ANYBODY AND EVERYBODY. IN THE TRANSPORTATION INDUSTRY THE GR (O R ANY OTHER SIMILAR DOCUMENT) IS THE MOST IMPORTANT DOCUMENT WHICH MENT IONS THE STARTING ITA NO.1670/KOL/2009 A.Y. 2006-07 M/S SEAKING ENTERPRISE VS. ITO WD-28(2) KOL. PAGE 5 DESTINATION, ENDING DESTINATION, DESCRIPTION OF THE GOODS, WEIGHT OF THE GOODS, THE DATE ON WHICH THE GR IS PREPARED, THE AMOUNT CH ARGES BY THE TRANSPORTER, THE LORRY NUMBER, THE DRIVERS NAME, ETC., THIS IN ITSELF IS A CONTRACT OF TRANSPORTATION. UNLESS THE ASSESSEE HAS CERTAIN AMO UNT OF ASSURANCE OF REACHING THE GOODS SAFELY, IN REASONABLE TIME, THE ASSESSEE WILL NOT ENTRUST THESE GOODS TO THE TRANSPORT. IN ESSENCE THIS IS NO THING BUT A CONTRACT AND THEREFORE, AS MENTIONED ABOVE, THE BOARD CIRCULAR N O. 715 CLEARLY STATES THAT A GR IS A CONTRACT. 6. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION, WE FIND THAT THE LORRY OWNERS ARE NOT CONNECTED WITH THE PARTY WHO IS GIVING TRANSPORTATI ON WORK TO THE ASSESSEE. THE ASSESSEE HIRED THE LORRIES FROM OUTSIDE AS HE W AS NOT ABLE TO MANAGE THE WORK WITH HIS OWN LORRY. THEREFORE THE ASSESSEE HIR ED THE LORRIES FROM OUTSIDE ON SUB-CONTRACT BASIS AND THERE WAS NO CONTRACT BET WEEN THE PRINCIPAL AND THE LORRY OWNERS. THE REVENUE COULD NOT ESTABLISH THAT THESE SUB-CONTRACTORS / LORRY OWNERS WERE FASTENED WITH ANY OF THE LIABILIT IES FOR THE SAID CARRIED OF THE GOODS. IN THE SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE JURISDICTIONAL HIGH COURT HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN THE CASE OF CIT VS. M/S STUMM INDIA IN ITA NO. 127 OF 2009 AND RELEVANT EXT RACT IS REPRODUCED BELOW:- IT IS URGED BEFORE US THAT THE LEARNED TRIBUNAL OU GHT NOT TO HAVE ACCEPTED THE JUDGMENT AND ORDER OF THE CIT (APPEAL) WHO HAS QUASHED THE DISALLOWANCE OF DEDUCTION OF RS.41,33,710/- AND ON ACCOUNT OF TAX DEDUCTION AT SOURCE. THE LEARNED TRIBUNAL HAS RECOR DED THE FACT THAT THE DEPARTMENT HAS NOT BEEN ABLE TO BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS MADE THE PAYMENT TO THE TRANS PORTERS IN PURSUANCE OF CONTRACT FOR CARRIAGE OF GOODS OF THE ASSESSEE AND THE QUESTION OF DEDUCTION AT SOURCE UNDER SECTION 194C DOES NOT AND CANNOT ARISE. IN THE ABSENCE OF EVIDENCE OF PAYMENT MADE BY THE A SSESSEE TO THE TRANSPORTERS, THE ASSESSEE CANNOT BE SADDLED WITH T HE LIABILITY OF DEDUCTING TAX AT SOURCE. BEFORE US NO OTHER POINT H AS BEEN URGED NOT IT IS SAID THAT THE AFORESAID FACT FINDING IS TRUTHFUL WITHOUT ANY BASIS WHATSOEVER. ITA NO.1670/KOL/2009 A.Y. 2006-07 M/S SEAKING ENTERPRISE VS. ITO WD-28(2) KOL. PAGE 6 HENCE, WE DISMISS THE APPEAL HAVING FOUND NO POINT OF LAW HAVING BEEN INVOLVED. IN VIEW OF ABOVE, WE FIND THAT AS NO PART OF THE CO NTRACT OF THE ASSESSEE WAS TRANSFERRED TO THE LORRY OWNERS / SUB-CONTRACTORS. THE ROLE OF THE LORRY OWNERS WAS VERY LIMITED TO THE EXTENT OF CARRIAGE OF GOODS WITHOUT ANY OTHER LIABILITY. THEREFORE, THEY CANNOT BE CONSIDERED AS SUBS-CONTRA CTORS OF THE ASSESSEE. CONSIDERING THE FACTS AND CIRCUMSTANCES AND CITED C ASE LAW, WE REVERSE THE ORDERS OF AUTHORITIES BELOW. THE GROUND RAISED BY A SSESSEE IS ALLOWED. AO IS DIRECTED ACCORDINGLY. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 26/ 08/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 26 / 08 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S SEAKING ENTERPRISE, 28, CIRCULAR GAR DEN REACH ROAD, KIDDERPORE, KOLK ATA-23 2. /RESPONDENT- ITO WARD-28(2), AYAKAR BHAWAN, DAKHIN, 2 GARIAHAT RD, KOL-31 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,