ITO, WARD-35(4), Kolkata, Kolkata V. M/s J.L. Goward & Co., Kolkata

ITA 169/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3047 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 02-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR ADD
• Assessee Lawyers: S L KOCHAR
• Keywords: TDS
• Section: 40(a)(ia); 194C

Judgement Text

1 ITA NO.169/KOL/2017 M/S. J.L. GOWARD & CO. AY- 2013-14 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, C AT KOLKATA () . . , . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 169/KOL/2017 ASSESSMENT YEAR: 2013-14 ITO, WARD-35(2), KOLKATA VS. M/S. J.L. GOWARD & CO. PAN : AACFJ 4149 F APPELLANT RESPONDENT DATE OF HEARING 17.12.2018 DATE OF PRONOUNCEMENT 27.02.2019 FOR THE APPELLANT SHRI SAURABH KUMAR, ADD. CIT(DR) FOR THE RESPONDENT SHRI S.L. KOCHAR & SHRI ANIL KO CHAR, ADV. ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) 10, KOLKATA DATED 22.11.2016 FOR ASSESSMENT YEAR 2013-1 4. 2. THE FIRST GROUND OF APPEAL IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE AO U/S 40(A)(IA) OF RS. 1,80,1 0,460/-. 3 THE BRIEF FACT OF THE CASE IS THAT THE ASSESSEE F IRM IS A CLEARING AND FORWARDING AGENT (CFA). THE AO NOTED THAT THE ASSESSEE HAS CLA IMED EXPENDITURE AS DISCUSSED IN THE CHART BELOW: SL NO. HEADS OF EXPENDITURE SECTION UNDER WHICH TDS WAS TO BE MADE AMOUNT (IN RS.) 1. CFS CHARGES 194I/194C 1,29,51,844/- 2. SHIPPING AGENTS CHARGES PAID TO INDIAN SHIPPING AGENTS 194C 46,82,854/- 3. SURVEY FEES 194J 3,75,771/- TOTAL 1,80,10,469/- 2 ITA NO.169/KOL/2017 M/S. J.L. GOWARD & CO. AY- 2013-14 THE AO CONFRONTED THE ASSESSEE AS TO REASON WHY THE TAX HAS NOT BEEN DEDUCTED AT SOURCE FOR THE AFORESAID EXPENDITURE CLAIMED, AND THE ASSE SSEE REPLIED THAT THEIR CLIENT AUTHORIZED THE ASSESSEE WHO IS THE CFA IN ORDER TO ENSURE SMOO TH CLEARING OF IMPORTS AND FORWARDING THEIR EXPORTS EXPENCES ON BEHALF OF THE CLIENT IS M ET WHICH IS LATER REIMBURSED BY THE CLIENTS FOR WHICH NO TDS IS REQUIRED TO BE DEDUCTED. IT WAS EXPLAINED TO THE AO THAT IN THE SAID PROCESS, THERE ARE TWO TYPES OF BILLS GENERATED BY ASSESSEE TO THE CLIENT, ONE BILL WITH THE HEADING REIMBURSEMENT BILL AND THE OTHER BILL REL ATED TO SERVICE CHARGES. THE ASSESSEE POINTED OUT THAT WHEN GOODS IMPORTED TO THE PORT, T HE ASSESSEE BEING CFA USED TO PAY STATUTORY CUSTOMS DUTIES AND OTHER AUTHORIZED CHARG ES FOR AND ON BEHALF OF THEIR CLIENTS WHO IMPORTED THE GOODS AND RAISED THE BILL FOR REIMBUR SEMENT AND GET REIMBURSEMENT FROM THE CLIENTS AND THE AFORESAID EXPENDITURE IS NOTHING BU T REIMBURSEMENT AND THEREFORE, THERE IS NO LIABILITY TO DEDUCT TAX AT SOURCE. HOWEVER, THE AO DID NOT AGREE AND DISALLOWED THE ENTIRE AMOUNT OF RS. 1,80,10,469/-. AGGRIEVED THE A SSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO DELETE THE SAME. AGGR IEVED THE REVENUE IS BEFORE US. 4. THE LEARNED DR ASSAILING THE DECISION OF THE LD. CIT(A), SUPPORTED THE ACTION OF THE AO AND WANT US TO REVERSE THE ORDER OF THE LD. CIT( A) AND RESTORE THE ORDER OF THE AO. PER CONTRA THE LEARNED AR SUPPORTED THE ACTION OF THE L D. CIT(A) AND DOES NOT WANT US TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. WE NOTE THAT THE ASSESSEE IS A CLEARING AND FORWARDING AGENT WORKING ON BEHALF O F SEVERAL CLIENTS, AND IT IS THEIR JOB TO SECURE THE EASY AND EVENT-FREE PASSAGE OF GOODS FOR A SERVICE CHARGE/BROKERAGE FROM SUCH CLIENTS. FROM THE NATURE OF WORK IT IS DISCERNED TH AT CERTAIN PAYMENTS NEED TO BE MADE TO THE GOVERNMENT AND OTHER AGENCIES TO CLEAR GOODS FOR TI MELY SMOOTH PASSAGE AND DELIVERY OF GOODS IMPORTED TO THE CLIENTS. WE NOTE THAT RS. 1,2 9,51,844/- WAS PAID BY THE ASSESSEE FOR CFS CHARGES, SHIPPING AGENT CHARGES PAID TO INDIAN SHIPPING AGENT WAS TO THE TUNE OF RS. 46,82,854/-, SURVEY FEES OF RS. 3,75,771/- THUS TOT AL RS. 1,80,10,469/-. FROM THE LEDGERS, IT IS SEEN THAT THESE AMOUNTS WERE PAID BY THE ASSESSE E TO THE AGENCIES ON BEHALF OF THE CLIENTS AND BILLS WERE RAISED AGAINST THE CLIENTS TO CLAIM REIMBURSEMENT OF THE SAME. WE TAKE NOTE THAT OVER AND ABOVE THE REIMBURSEMENT CLAIM, THE AS SESSEE HAS RAISED BILLS FOR SERVICES RENDERED FOR CLIENTS AND THIS WERE PAID BY THE CLIE NTS AFTER DULY DEDUCTING THE TDS. THE LD. CIT(A) HAS REFERRED TO HIS PREDECESSORS ORDER FOR A Y 2012-13 WHERE IN THE CIT(A) HAS 3 ITA NO.169/KOL/2017 M/S. J.L. GOWARD & CO. AY- 2013-14 GONE IN DETAIL AND HAS EXPLAINED THE MODUS OPERANDI OF THE ASSESSEE AND HAS HELD THAT THERE IS NO ELEMENT OF INCOME IN THE REIMBURSEMENT BILL W HICH EXCLUSIVELY RELATE TO THE AMOUNTS SPEND BY THE ASSESSEE FOR AND ON BEHALF OF THE CUST OMERS / CLIENTS. NO CHANGE IN FACTS OR LAW COULD BE POINTED OUT BY THE LEARNED DR AS THAT OF A Y 2012-13. THEREFORE, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE AND CONFIRM THE ORDER OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 6. GROUND NO. 2 OF REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE OF RS. 50,052/- MADE U/S 36(1)(VA) BY ACCEPTING FRESH EVIDENCE IN VIOLATION OF THE PROVISIONS OF RULE 46A. 7. BRIEF FACT OF THE CASE IS THAT THE AO NOTED THAT EMPLOYEES CONTRIBUTION TO PF AND ESI OF RS. 35,856/- AND RS. 14,196/- WAS DEPOSITED IN T HE GOVERNMENT ACCOUNT AFTER THE PRESCRIBED TIME LIMIT AS STIPULATED BY PF ACT & ESI ACT, THEREFORE, HE DISALLOWED RS. 50,052/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A) WHO TAKING NOTE OF THE EARLIER ORDER OF THE LD. CIT(A) IN ASSE SSEES OWN CASE FOR AY 2012-13 HAS GIVEN RELIEF TO THE ASSESSEE. WE DO NOT COUNTENANCE SUCH AN ACTION OF THE LD. CIT(A) BECAUSE HE HAS TO RECORD A FINDING OF FACT AS TO WH ETHER THE ASSESSEE IN FACT HAD DEPOSITED THE AMOUNT WITH THE GOVT. BEFORE THE RETURN OF INCO ME WAS FILED BY THE ASSESSEE. WE NOTE THAT THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENT BEF ORE THE AO TO SHOW THAT THE LIABILITY HAVE BEEN CLEARED BEFORE FURNISHING OF THE RETURN O F INCOME. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) REMAND THIS ISSUE BACK TO T HE FILE OF THE AO TO VERIFY AS TO WHETHER THE ASSESSEE HAS DEPOSITED THE EMPLOYEES CONTRIBUTI ON TO PF AND ESI BEFORE THE RETURN OF INCOME WAS FILED. IF THE ASSESSEE HAD DEPOSITED THE SAME BEFORE THE RETURN WAS FILED THEN THERE SHOULD BE NO DISALLOWANCE ON THIS COUNT. WIT H THE AFORESAID OBSERVATION, THIS ISSUE GOES BACK TO AO FOR FRESH ADJUDICATION. 8. GROUND NO. 3 IS AGAINST THE ACTION OF THE LD. CI T(A) IN RESTRICTING THE DISALLOWANCE MADE ON EXPENDITURE TO 2% OF CLAIM OF EXPENDITURE A GAINST 10% DECIDED BY THE AO. 9. BRIEF FACT OF THE CASE IS THAT THE AO NOTED THAT THE ASSESSEES CLAIM A TOTAL OF RS. 33,50,500/- ON VARIOUS HEADS OF EXPENDITURE. THE AO ASKED THE ASSESSEE TO PRODUCE LEDGERS BILLS/VOUCHERS TO SUBSTANTIATE THE CLAIM. ACCORDING TO THE AO, THE ASSESSEE ONLY PRODUCED BREAK UP OF SUCH EXPENSES AND PRODUCED CERTAIN SELF -MADE VOUCHERS IN SUPPORT OF THE SAME. 4 ITA NO.169/KOL/2017 M/S. J.L. GOWARD & CO. AY- 2013-14 ACCORDING TO THE AO THOUGH THE EXPENSES ARE ESSENTI AL FOR DAY TO DAY RUNNING OF THE BUSINESS, HOWEVER THERE IS NO IMPARTIAL PROOF IN SU PPORT OF SUCH CLAIM OF EXPENDITURE. THEREFORE, HE DISALLOWED 10% OF TOTAL CLAIM WHICH W ORKS OUT TO RS. 35,35,050/-. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED THE REVENUE IS BEFORE US. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE LD. CIT(A) HAS TAKEN NOTE THAT THE BOOKS OF THE ASSESSEE ARE AUDITED AND THE ASSESSEE HAS PRODUCED THE BOOKS, VOUCHERS AND LEDGERS BEFORE THE AO AND HAS LIMITED DISALLOWANCE FROM 10% TO 2% TO COVER THE PLAUSIBLE LEAKAGE OF REVENUE. WE NOTE THAT THE ASSESSEE IS NOT IN APPEAL AGAINST THE ACTION OF THE LD. CIT(A). THOUGH WE ARE OF THE OPIN ION THAT ADHOC DISALLOWANCES PER-SE IS ARBITRARY AND CANNOT BE DONE WITHOUT REJECTING THE BOOKS. HOWEVER BOTH THE AUTHORITIES HAVE CARRIED OUT THE ESTIMATION WITHOUT REJECTING THE BO OKS AS PER LAW, HOWEVER THE ASSESSEE HAS NOT PREFERRED AN APPEAL AGAINST THE ACTION OF THE L D. CIT(A). THEREFORE, WE DO NOT WANT TO INTERFERE WITH THE PARTIAL RELIEF GRANTED BY THE LD . CIT(A) AND CONFIRM THE SAME. 11. IN THE RESULT, APPEAL OF THE REVENUE IS PARTIAL LY ALLOWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27TH FE BRUARY, 2019 SD/- SD/- (DR. A. L. SAINI) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27TH FEBRUARY, 2019 BISWAJIT (SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT ITO, WARD-35(2), KOLKATA, 110, SHANTI P ALLY, E.M. BYE-PASS, KOLKATA 700 107. 2 RESPONDENT M/S. J.L. GOWARD & CO., 2, CHURCH LANE , 3 RD FLOOR, R. NO. 303-B, KOLKATA 700 001. 3 . THE CIT(A), 4. 5. CIT , DR, / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O ITAT, KOLKATA