Jyothi Gas Agency, V. CIT,

ITA 1855/BANG/2013

• Counselvise Citation: 185521114 RSA 2013
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 30-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SUNDAR RAO
• Assessee Lawyers: V K GURUNATHAN
• Keywords: Opportunity of being heard; Bonafide belief; Additional evidence; Bonafide mistake
• Section: 143(3); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO. 1855/BANG/2013 ASSESSMENT YEAR : 2009-10 M/S. JYOTHI GAS AGENCY, A.M. BUILDING, P.B. ROAD, DAVANGERE. PAN: AACFJ 0751B VS. THE COMMISSIONER OF INCOME TAX, DAVANGERE. APPELLANT RESPONDENT APPELLANT BY : SHRI V.K. GURUNATHAN, ADVOCATE RESPONDENT BY : SHRI C.H. SUNDAR RAO, CIT(DR) DATE OF HEARING : 30.12.2014 DATE OF PRONOUNCEMENT : 23.01.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 21.11.2013 OF THE CIT, DAVANGERE PASSED U/S. 263 OF THE ACT RE LATING TO ASSESSMENT YEAR 2009-10. ITA NO. 1855/BANG/2013 PAGE 2 OF 10 2. THE ASSESSEE IS A PARTNERSHIP FIRM. IT ACTS AS DISTRIBUTORS OF HP GAS. FOR THE A.Y. 2009-10, THE ASSESSEE FILED A RE TURN OF INCOME DECLARING INCOME OF RS.4,68,870. AN ORDER OF ASSESSMENT DATE D 24.11.2011 WAS PASSED BY THE AO DETERMINING THE TOTAL INCOME AT RS .5,44,390 U/S. 143(3) OF THE ACT. 3. THE CIT IN EXERCISE OF HIS POWERS U/S. 263 OF TH E ACT WAS OF THE VIEW THAT THE AFORESAID ORDER OF AO WAS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE. IN THE SHOW CAUSE NOTICE ISS UED BY THE CIT U/S. 263 OF THE ACT, THE COMMISSIONER HAS POINTED OUT THAT F REIGHT CHARGES PAID BY THE ASSESSEE WAS AS FOLLOWS:- DETAILS OF FREIGHT CHARGES PAID 1 AUTO KA 17 1173 34,619.00 2 AUTO KA 17 1483 22,981.00 3 AUTO KA 17 6496 26,678.00 4 AUTO KA 22 M 2858 28,392.00 5 FREIGHT & HAMALI 6,47,570.00 6 LORRY KA 17 4224 10,69,627.58 7 LORRY KA 17 8352 33,945.00 8 LORRY KA 17 A 7183 5,40,026.00 9 LORRY KA 17 B 9797 5,84,997.50 10 LORRY KA 17 B 9898 4,82,022.36 TOTAL 34,70,858.44 4. OUT OF THE ABOVE, A SUM OF RS.6,47,570 WAS FREIG HT AND HAMALI CHARGES. OUT OF THE ABOVE, RS.6,35,102 HAD BEEN PAI D BY THE ASSESSEE TO ONE SHRI SHASHIKANT KORI. ACCORDING TO THE CIT, TH IS SUM WAS PAID TOWARDS MAINTENANCE CHARGES, WHICH HAD BEEN ENTRUSTED TO SH ASHIKANT KORI AND ITA NO. 1855/BANG/2013 PAGE 3 OF 10 THEREFORE COULD BE A PAYMENT FOR CARRYING OUT OF WO RK WITHIN THE MEANING OF SECTION 194C OF THE ACT. ACCORDING TO THE CIT, THE ASSESSEE OUGHT TO HAVE DEDUCED TAX AT SOURCE ON THE AFORESAID PAYMENT MADE TO SHASHIKANT KORI AND SINCE THE ASSESSEE HAD NOT DONE SO, THE ENTIRE SUM OF RS.6,35,102 OUGHT TO HAVE BEEN DISALLOWED BY THE AO AND ADDED T O THE TOTAL INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDING TO THE CIT, THE AO DID NOT EXAMINE THIS A SPECT WHILE COMPLETING THE ORIGINAL ASSESSMENT PROCEEDINGS AND THEREFORE O RDER OF AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. 5. IN RESPONSE TO THE AFORESAID SHOW CAUSE NOTICE, THE ASSESSEE FIRSTLY POINTED OUT THAT THE AO WHILE COMPLETING THE ORIGIN AL ASSESSMENT ISSUED A NOTICE U/S. 142 OF THE ACT IN WHICH IN QUERY 12, TH E AO RAISED THE FOLLOWING QUESTION:- 12. A/C EXTRACTS FREIGHT (HOW ABOUT TDS), BUILDI NG MAINTENANCE, COMPENSATION TO EMPLOYEES, INSURANCE, STAFF WELFARE EXPENSES, SALES PROMOTION EXPENSES, TRAVELL ING EXPENSES, TELEPHONE EXPENSES, OTHER EXPENSES. 6. THE ASSESSEE, IN REPLY TO THE QUERY OF THE AO, G AVE THE ACCOUNT EXTRACT OF FREIGHT. THE ASSESSEE THEREFORE POINTED OUT THAT THE AO HAD MADE DUE ENQUIRIES BEFORE COMPLETING THE ASSESSMENT AND WAS SATISFIED THAT THE AMOUNT IN QUESTION WAS NOT A PAYMENT FOR W ORKS WHICH WARRANTS DEDUCTION OF TAX AT SOURCE U/S. 194C OF THE ACT. ITA NO. 1855/BANG/2013 PAGE 4 OF 10 7. THE LD. CIT, HOWEVER, FOUND THAT THE ASSESSEE H AD IN A LETTER DATED 1.12.2011 FILED BEFORE THE AO SUBMITTED THAT THE PA YMENT MADE TO SHASHIKANT KORI REPRESENTS PAYMENTS TOWARDS ASSESSE E'S VEHICLE MAINTENANCE AT MANGALORE POINT AS A REPRESENTATIVE OF THE ASSESSEE'S TRANSPORT OPERATION ACTIVITIES. VEHICLES COMMUTING IN THE AREA OF MANGALORE FOR DELIVERY WERE LOOKED AFTER BY HIM AND DAY TO DA Y AFFAIRS WERE HANDLED BY HIM. ACCORDING TO THE CIT, THIS STAND TAKEN BY THE ASSESSEE BEFORE THE AO OUGHT TO HAVE PROMPTED THE AO TO EXAMINE AS TO W HETHER THE ASSESSEE WAS BOUND TO DEDUCT TAX AT SOURCE ON THE PAYMENTS M ADE TO SHASHIKANT KORI U/S. 194C OF THE ACT. HE THEREFORE EXPRESSED OPINION THAT FAILURE ON THE PART OF AO IN NOT DOING SO RENDERED THE ORDER O F ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. 8. AFTER EXAMINING REPLY FILED BY THE ASSESSEE BY L ETTER DATED 25.09.2013 FOLLOWING FURTHER INFORMATION WAS CALLED FOR BY THE CIT AS FOLLOWS:- 5. IN CONNECTION WITH THE PROCEEDINGS INITIATED U/ S. 263 TO REVISE THE ASSESSMENT COMPLETED U/S. 143(3) FOR THE A.Y. 2009-10 IN YOUR OWN CASE, YOU ARE REQUESTED TO FURNISH THE FOLLOWING INFORMATION:- 1. IN THE SUBMISSION MADE BEFORE THE ASSESSING OFFI CER (AO) WITH REGARD TO THE AMOUNT PAID TO SH. SHASHIKA NTH KORI, THE ISSUE WHETHER THE VEHICLES BELONG TO YOU OR TAKEN ON HIRE HAS NOT BEEN BROUGHT OUT CLEARLY. TH IS MAY PLEASE BE CLARIFIED. 2. WHETHER SRI SHASHIKANTH KORI UNDERTAKEN ANY MAINTENANCE WORKS ON HIS OWN OR GETS IT DONE ITA NO. 1855/BANG/2013 PAGE 5 OF 10 ELSEWHERE IS NOT EXAMINED BY THE AO. THIS ISSUE REQUIRES TO BE CLARIFIED. 3. IN THE LETTER DATED 01.12.2011, YOU HAVE MENTION ED THAT SRI SHASHIKANTH KORI IS PAID THE AMOUNT AS YOU R REPRESENTATIVE. PLEASE CLARIFY WHETHER HE IS AN EMPLOYEE WITH YOU AT MANGALORE AND IF NOT WHAT IS T HE AGREEMENT BETWEEN YOU AND SRI SHASHIKANTH KORI. 9. IN REPLY TO THE AFORESAID LETTER, THE ASSESSEE S UBMITTED AS FOLLOWS:- 1. THE VEHICLES USED ARE OUR OWN VEHICLES. 2. SRI SHASHIKANTH KORI HAS NOT UNDERTAKEN ANY MAIN TENANCE WORK ON OUR BEHALF. WE HAVE ALSO NOT GOT DONE ANY MAINTENANCE WORK ON OUR BEHALF FROM ANY OTHER PARTY. 3. SRI SHASHIKANTH KORI IS NOT AN EMPLOYEE WITH US. FURTHER, THERE IS NO AGREEMENT BETWEEN US AND SRI SHASHIKANT H KORI FOR ANY MAINTENANCE WORK ETC. THERE WAS AN INFORMAL AG REEMENT WITH HIM TO TAKE CARE OF THE NEEDS OF OUR DRIVERS W HO WENT TO MANGALORE TO TAKE DELIVERY OF THE GAS CYLINDERS FRO M HPCL FUEL DEPOT. 10. THEREAFTER THE CIT CONCLUDED ON THE ISSUE AS FO LLOWS:- IN THE LETTER DATED 21.10.2011, IT IS CLEARLY MEN TIONED THAT THE AMOUNT IS MAINTENANCE CHARGES PAID TO SHASHIKAN T KORI AND THESE AMOUNTS ARE BOOKED UNDER FREIGHT & HAMALI LED GER ACCOUNT. IN THE LETTER DATED 01.12.2011, IT IS REI TERATED BY THE ASSESSEE THAT THE AMOUNT IS PAID TO SHASHIKANT KORI AS A REPRESENTATIVE OF TRANSPORT OPERATION ACTIVITIES. COPY OF THE LETTER IS ENCLOSED AS ANNEXURE A. HOWEVER, IN SU BMISSION MADE ON 22.10.2013, THEY CLAIM THAT THERE IS NO BUS INESS RELATION BETWEEN THEM AND SHASHIKANT KORI WHILE AGREEING THA T THERE IS AN INFORMAL ARRANGEMENT TO TAKE CARE OF THE NEEDS OF D RIVERS WHO WENT TO MANGALORE. THEY HAVE ALSO CONFIRMED THAT S HRI SHASHIKANT KORI IS NOT EMPLOYED WITH THEM. THEY HA VE NOT BEEN ABLE TO CLARIFY WHETHER SRI SHASHIKANT KORI HAS SEN T A STATEMENT ITA NO. 1855/BANG/2013 PAGE 6 OF 10 FOR THE AMOUNTS RECEIVED BY HIM. GOING BY THE ABOV E FACTUAL MATRIX AND TAKING INTO ACCOUNT THE INFORMAL ARRANGE MENT CLAIMED BY THE ASSESSEE, IT HAS TO BE CONCLUDED THAT THERE WAS AN IMPLIED CONTRACT BETWEEN THE ASSESSEE AND SRI SHASHIKANT KO RI. THE ENTIRE AMOUNT PAID TO HIM HAS BEEN SHOWED AS FREIGH T AND HAMALI IN THE LEDGER ACCOUNT OF SHASHIKANT KORI. COPY ENC LOSED AS ANNEXURE B. IN THIS SCENARIO, THE AO OUGHT TO HA VE DRAWN A CONCLUSION THAT THESE PAYMENTS ARE HIT BY PROVISION S OF SECTION 194C AND WHEN THE TDS IS NOT DONE, THE AMOUNT REQUI RES TO BE DISALLOWED U/S. 40(A)(IA). IN NOT DOING SO, THERE IS INCORRECT APPLICATION OF LAW ON PART OF THE AO. INCORRECT AP PLICATION OF LAW RENDERS THE ASSESSMENT ORDER ERRONEOUS. BY NOT DRA WING PROPER CONCLUSION ON THE BASIS OF THE FACTS, AS STATED ABO VE, THE ASSESSMENT HAS BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN VIEW OF THIS, THE ASSESSMENT OR DER PASSED BY THE AO ON 24.12.2011 FOR A.Y. 2009-10 REQUIRES TO B E SET ASIDE WITH A DIRECTION TO THE AO TO REDO THE ASSESSMENT B Y DETERMINING THE INCOME OF THE ASSESSEE, BY DISALLOWING THE ENTI RE EXPENDITURE OF RS.6,35,102/- U/S. 40(A)(IA) OF THE I.T. ACT. FOR DOING SO, THE AO SHALL AFFORD AN OPPORTUNITY O F BEING HEARD TO THE ASSESSEE. 11. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT, T HE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 12. IN THE APPEAL BEFORE THE TRIBUNAL, THE ASSESSE E HAS FILED THE FOLLOWING DOCUMENTS AS ADDITIONAL EVIDENCE:- SL NO. PARTICULARS PAGE NOS. 1 COPY OF NOTICE OF THE AO U/S. 142 DT. 23.08.2011. 1 - 2 2 COPY OF SUBMISSION DATED 05.09.2011 TO THE AO. 3 14 3 COPY OF SUBMISSION DATED 21.10.2011 TO THE AO. 15 17 4 COPY OF BANK STATEMENTA/C NO.00021370002815 18 35 5 COPY OF VEHICLE-WISE BREAK-UP OF FREIGHT PAID INC LUDING DETAILS OF PAYMENT OF FREIGHT AND HAMALI CHARGES PA ID THROUGH SHASHIKANTH P.KORI. 36 54 ITA NO. 1855/BANG/2013 PAGE 7 OF 10 6 COPY OF DATE-WISE BREAK UP OF PAYMENTS OF HAMALI AND DRIVER ALLOWANCE PAID THROUGH SHASHIKANTH P. KORI. 55 64 7 COPY OF ASSESSMENT ORDER DT. 24.12.2011 U/S. 143( 3) OF THE ACT FOR AY 2009-10 65 66 13. IN THE APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE FILED UNDER RULE 29 OF THE ITAT RULES, 1963, THE ASSESSEE HAS S TATED THAT THE ABOVE DOCUMENTS WERE NOT FILED BEFORE THE AO OR THE CIT(A ) UNDER THE BONAFIDE BELIEF THAT WHATEVER DETAILS WERE ALREADY FURNISHED WERE ADEQUATE. IT HAS FURTHER BEEN PRAYED THAT NON-PRODUCTION OF SUCH DOC UMENTS WAS BONAFIDE MISTAKE AND NOT DELIBERATE. IT HAS ALSO BEEN SUBMI TTED THAT THE AFORESAID DOCUMENTS ARE VERY MUCH ESSENTIAL TO PROVE THAT PAY MENT IN QUESTION DOES NOT ATTRACT THE PROVISIONS OF SECTION 194C OF THE A CT. 14. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMI TTED THAT INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT BY THE CIT WAS NOT PROPER, AS THE AO BEFORE COMPLETING THE ASSESSMENT HAD MADE DUE ENQUI RIES. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. SUNBEAM AUTO LTD., 322 ITR 167 (DEL) , WHEREIN THE HON'BLE DELHI HIGH COURT HELD THAT JURISDICTION U/S. 263 OF THE ACT CANNOT BE INVOKED FOR INADEQUATE ENQUIRY. IT WAS POINTED OUT BY HIM THAT THE HON'BLE DELHI HIGH COURT HAS DRAWN A DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY AND HAS FURTHER LAID DOWN THAT IT IS ONLY W HEN THERE IS A LACK OF ENQUIRY THAT JURISDICTION U/S. 263 OF THE ACT CAN B E INVOKED AND NOT IN A CASE WHERE THE CIT FEELS THAT THE ENQUIRY MADE BY T HE AO WAS INADEQUATE. ITA NO. 1855/BANG/2013 PAGE 8 OF 10 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT BEF ORE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT, THE AO HAD MADE DUE ENQUIRIES AND THEREFORE THE CIT COULD NOT HAVE EXERCISED JURISDIC TION U/S. 263 OF THE ACT. 15. THE LD. DR, ON THE OTHER HAND, RELIED ON THE O RDER OF THE CIT. 16. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPL AIN AS TO HOW PAYMENTS MADE TO SHASHIKANT KORI WAS NOT IN THE NAT URE OF PAYMENT COVERED UNDER THE PROVISIONS OF SECTION 194C OF THE ACT. IT IS EQUALLY TRUE THAT THERE WAS NO MATERIAL BEFORE THE CIT TO COME T O THE CONCLUSION THAT THE AMOUNTS PAID BY THE ASSESSEE TO SHASHIKANT KORI WAS IN THE NATURE OF PAYMENT COVERED U/S. 194C OF THE ACT. THE ADDITION AL EVIDENCE SOUGHT TO BE FILED BY THE ASSESSEE BEFORE US, IN OUR VIEW, WI LL EXPLAIN THE ACTUAL NATURE OF PAYMENT MADE BY THE ASSESSEE TO SHASHIKAN T KORI. THE BREAK- UP OF PAYMENTS SO MADE ARE GIVEN AT PAGE 55 TO 64 O F THE PAPERBOOK FILED BY THE ASSESSEE. IT IS CLEAR FROM THE SAID DETAILS THAT THE SUM OF RS.6,35,102 HAD BEEN PAID OVER TO VARIOUS PERSONS A ND ARE CLAIMED TO BE HAMALI AND TRAVELLING ALLOWANCE PAID BY SHASHIKANT KORI ON BEHALF OF THE ASSESSEE. IT THUS APPEARS THAT PAYMENTS WERE MADE BY THE ASSESSEE THROUGH SHASHIKANT KORI. AS TO WHETHER THERE EXIS TED ANY CONTRACT FOR CARRYING OUT ANY WORK BETWEEN ASSESSEE AND SHASHIKA NT KORI IS NOT CLEAR. WE ARE OF THE VIEW THAT THE ADDITIONAL EVIDENCE SOU GHT TO BE FILED BY THE ASSESSEE IS NECESSARY FOR ADJUDICATION OF THE ISSUE , WHETHER PROVISIONS OF ITA NO. 1855/BANG/2013 PAGE 9 OF 10 SECTION 194C OF THE ACT ARE ATTRACTED TO THE PAYMEN TS IN QUESTION. WE ACCORDINGLY ADMIT THE SAME. 17. THE CIT HAS COME TO THE CONCLUSION THAT THERE EXISTED INFORMAL ARRANGEMENT BETWEEN THE ASSESSEE AND SHASHIKANT KOR I AND THEREFORE THERE WAS A CONTRACT FOR WORK ATTRACTING PROVISIONS OF SECTION 194C OF THE ACT. IN OUR VIEW, THIS CONCLUSION OF THE CIT IS WI THOUT ANY BASIS. IN THE IMPUGNED ORDER OF THE CIT, THERE IS A DIRECTION TO THE AO TO ADD THE ENTIRE EXPENSES OF RS.6,35,102 HOLDING THAT THE SAME IS CO VERED BY THE PROVISIONS OF SECTION 194C OF THE ACT AND THEREFORE THE EXPENDITURE HAS TO BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. IN OUR VI EW, THE FACTS AND CIRCUMSTANCES JUSTIFIES INVOKING JURISDICTION U/S. 263 OF THE ACT, BUT DOES NOT WARRANT DIRECTING THE AO TO MAKE THE IMPUGNED ADDIT ION U/S. 40(A)(IA) OF THE ACT. IN OUR VIEW, THE LD. CIT OUGHT TO HAVE DI RECTED THE AO TO EXAMINE THE APPLICABILITY OF PROVISIONS OF SECTION 194C OF THE ACT AND AFTER AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE, OUGHT T O HAVE DIRECTED THE AO TO DECIDE THE ISSUE DE NOVO . WE ACCORDINGLY MODIFY THE ORDER OF THE LD. CIT AND DIRECT THE AO TO EXAMINE AS TO WHETHER THE SUM OF RS.6,35,102 PAID BY THE ASSESSEE TO SHASHIKANT KORI IS A PAYMEN T COVERED BY SECTION 194C OF THE ACT IN THE LIGHT OF THE ADDITIONAL EVID ENCE FILED BY THE ASSESSEE BEFORE US. THE AO WILL AFFORD THE ASSESSEE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE BEFORE DECIDING THE ISSUE. ITA NO. 1855/BANG/2013 PAGE 10 OF 10 18. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY TREA TED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JANUARY, 2015. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 23 RD JANUARY, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.