Sh. Gurmeet Kumar Verma, Barnala V. ITO, W-1, Barnala

ITA 186/CHANDI/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7484 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; Difference of opinion; Change of opinion
• Section: 40A(3); 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHES SMD, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ITA NO. 186/CHD/2018 ASSESSMENT YEAR: 2010-11 SHRI GURMEET KUMAR VERMA, VS THE ITO, PROP. M/S LUXMI TILE HOUSE, WARD-1, DHANAULA ROAD, BARNALA. BARNALA. PAN : AKXPK8892R (A PPELLANT) (RESPONDENT) APPELLANT BY : SHRI NIKHIL GOYAL, CA RESPONDENT BY : SHRI MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 11.06.2018 DATE OF PRONOUNCEMENT : 16.7.2018 ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASSA ILING THE CORRECTNESS OF THE ORDER DATED 02.11.2017 OF CIT(A)-3 LU DHIANA PERTAINING TO 2010-11 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER WITH REGARD TO THE REOPENING OF THE CASE U/S 147/148 OF THE ACT. 2. THAT THE CONFIRMATION OF ACTION BY THE LD. CIT( A),WITH REGARD TO REOPENING OF THE CASE IS NOT JUSTIFIED SI NCE THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) AND, THERE WAS NO FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE PARTIC ULARS OF INCOME DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING S. 3. THAT THE REOPENING IS OTHERWISE BAD IN LAW SINCE, T HE ASSESSMENT WAS REOPENED ON THE BASIS OF AUDIT OBJEC TIONS AND AS PER THE BINDING JUDGMENT OF HON'BLE SUPREME COURT AND OF DIFFERENT HIGH COURTS, NO ASSESSMENT COULD B E REOPENED IN VIEW OF THE ABOVE SAID JUDGMENTS. 4. NOTWITHSTANDING THE ABOVE SAID GROUNDS OF APPEAL, T HE CONFIRMATION OF ADDITION BY THE CIT (A) ON ACCOUNT OF 40A(3) OF THE I.T. ACT. TO THE TUNE OF RS. ,53,860/- AND RS. 9,6 0,184/- IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSE E DECLARED AN INCOME OF RS. 3,54,980/-. ASSESSMENT ORDER U/S 143 (3) DA TED 31.12.2012 WAS PASSED AT AN INCOME OF RS. 4,05,750/-. SUBS EQUENTLY, THE ASSESSMENT WAS REOPENED IN VIEW OF THE FACT THAT T HE ASSESSEE HAD ITA 186/CHD/2018 A.Y. 2010-11 PAGE 2 OF 5 MADE CERTAIN PAYMENTS IN CONTRAVENTION OF SECTION 40A(3) O F THE INCOME TAX ACT,1961. THE AO NOTED THAT THE ASSESSEE HAD MAD E PAYMENT OF FREIGHT @ RS. 20,000/- PER DAY TO EACH PERSON BEFORE 30.0 9.2009 AND RS. 35,000/- AFTER 01.10.2009 IN A DAY TO A SINGLE PERSON. ACCORDINGLY, NOTICE U/S 148 WAS ISSUED AFTER RECORDING REASONS. THE SE HAVE BEEN SET OUT IN PAGES 3 TO 4 OF THE ORDER. AFTER REQUIRING THE AS SESSEE TO ADDRESS THE SAME ADDITION OF RS. 8,85,772/- WAS MADE FOR THE PAYME NTS MADE TO M/S BHAGWATI ROADLINES AS PER DETAILS SET OUT IN PARA 6 OF THE ASSESSMENT ORDER AND RS. 36,412/- FOR PAYMENTS MADE TO M/S JODHPUR BIKANER TRANSPORT COMPANY AND RS. 38,000/- FOR PAYMENT MADE ON 06.04.2009 IN CASH TO M/S HIGHWAY TRANSPORT COMPANY. 3. THESE ADDITIONS WERE CHALLENGED BY THE ASSESSEE BEFOR E THE CIT(A) ON MERIT AS WELL AS ON THE ASSUMPTION OF JURISDICTION BY T HE AO. THE CIT(A) CONSIDERING THE SUBMISSIONS UPHELD THE ACTION OF THE AO. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 4. THE LD. AR IN THE COURSE OF THE ASSESSMENT, TOOK VAR IOUS OBJECTIONS TO THE DEPARTMENTAL ACTIONS. IT WAS HIS SUBM ISSION THAT THE ADDITION HAVING BEEN MADE IN RESPONSE TO THE AUDIT OBJEC TION AS SUCH IT WAS BAD IN LAW. IT WAS ALSO HIS SUBMISSION THAT THE ISSUE OF CASH PAYMENTS TO THE TRANSPORTERS IN THE CASE OF THE ASSES SEE WHO WAS TRADING IN TILES, HAD BEEN LOOKED INTO BY THE AO IN THE COU RSE OF THE ASSESSMENT PROCEEDINGS IN THE 143(3) ORDER WHEREIN A SPE CIFIC QUERY WAS RAISED BY THE AO ON THE ISSUE VIDE HIS QUERY NO. 5 A S PER QUESTIONNAIRE DATED 23.07.2012 AVAILABLE AT PAGE 21 WHICH R EADS AS UNDER : DETAIL OF FREIGHT AND LABOUR CHARGES PAID AT RS. 3 2,70,584/- GIVING MODE OF PAYMENT. ALSO INTIMATE WHETHER TAX WAS DED UCTED AT SOURCE. 4.1. INVITING ATTENTION TO PAPER BOOK PAGE 23, IT WAS SUBM ITTED THAT IT HAD BEEN REPLIED TO BY THE ASSESSEE VIDE LETTER DATED 2 2.08.2012. IT WAS HIS SUBMISSION THAT THE AO, CONSIDERING THE REPLIES, ULTIMATEL Y MADE AN ADDITION ON ESTIMATING THE PROFIT. ACCORDINGLY, IT WAS HIS SU BMISSION THAT IT IS A CASE OF CHANGE OF OPINION AS THERE WAS NO NE W INFORMATION AND THE PRESENT CASE FALLS IN THE REALM OF REVISION OF DECISIO N OF THE AO AND THUS, CANNOT BE UPHELD. RELIANCE WAS PLACED UPON JIVR AJ TEA CO. V DCIT 88 TAXMANN.COM 539 GUJ-HC,CIT VS JET SPEED AUDIO (P) LTD. 55 TAXMANN.COM 531 BOM-HC. ITA 186/CHD/2018 A.Y. 2010-11 PAGE 3 OF 5 4.2 ON MERITS, IT HAS BEEN ARGUED THAT THE PAYMENTS WER E MADE TO THE TRANSPORTERS ON ACCOUNT OF BUSINESS EXPEDIENCY WHICH FACT HAS BEEN ARGUED BEFORE THE CIT(A) ALSO AS WOULD BE EVIDENT FROM PA GE 8 OF THE IMPUGNED ORDER. RELEVANT EXTRACT IS REPRODUCED HEREUNDER : ON MERITS IT MAY BE EXPLAINED THAT THE TRANSPORTER S ARE NOT KNOWN TO THE ASSESSEE AND ARE AGENTS OF THE VEHICLE OWNERS H IRING THEIR SERVICES. THE ASSESSEE IS ENGAGED IN THE BUSINESS O F PURCHASE AND SALE OF CERAMIC TILES AND THE PREMISES OF THE SUPPL IERS ARE LOCATED AT FAR FLUNG PLACE IN GUJRAT AND THE DISTANCE TO THE P REMISES OF THE ASSESSEE IS AROUND 2000 KMS. THE PAYMENTS ARE INSIS TED IN CASH BECAUSE THE DRIVERS, AFTER UNLOADING THE MATERIAL, HAVE TO RUSH BACK. THEY HAVE ALSO TO INCUR MANY EXPENSES E.G. ON FUEL, REPAIRS TO THE VEHICLE, DIET ETC. THE PAYMENTS MADE ARE ADJUSTED T OWARDS THE TRANSPORTATION CHARGES FOR WHICH THE VEHICLES ARE A RRANGED BY SHREE BHAGWATI ROADLINERS WHO ARE CONCERNED WITH ONLY THE IR FOREMANSHIP CHARGES. THE TRANSPORTATION CHARGES ARE PASSED OVER BY THEM TO THE OWNERS OF THE VEHICLES. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS THE ID. A.O IDENTIFIED AMOUNTS AGGREGAT ING TO RS. 9,22,184/- AS HAVING BEEN MADE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) AND ISSUED SHOW CAUSE AS TO WHY THE SAME MAY NOT BE DISALLOWED. VIDE EXPLANATION FILED ON 30.06.2015 IT WAS EXPLAIN ED THAT THE SUM OF RS. 53,8867- WAS PAID ON 03.01.2010 WHICH HA PPENED TO BE SUNDAY. FOR THIS REASON IT I WOULD BE OUT OF THE PA LE OF SECTION 40A(3). REGARDING OTHERS IT WAS EXPLAINED THAT THE DRIVERS, COVERING DISTANCE OF MORE THAN 2000 KMS REACH THEIR DESTINATION INSIST O N IMMEDIATE UNLOADING OF THE VEHICLE AND SINCE BANKS ARE NOT OP ENED AT THAT TIME, THERE IS NO WAY BUT TO MAKE THE PAYMENT IN CASH. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE ID. A.O MADE ENQUIRIES A S TO WHETHER THE PAYMENTS MADE WERE GENUINE OR NOT? AS PER LAST PARA AT PAGE 5 OF THE ASSESSMENT ORDER IT IS MENTIONED THAT THE ID. A.O M ADE ENQUIRIES REGARDING GENUINENESS OF THE PAYMENT MADE BY ISSUIN G COMMISSION IN THE NAME OF THE INCOME-TAX OFFICER, WARD- 2, GANDHI DHAM WHO SUBMITTED HIS REPORT UNDER REFERENCE NO. ITOA/V-2/G IM/MISC./2015- 16DATED 26.05.2015, THE CONTENTS OF WHICH HAVE BEEN DISCUSSED IN LATER PART OF THE PARA WHICH ARE AS UNDER- 1. THAT SHREE BHAGWATI ROADLINERS, GANDHIDHAM KUTCH HAS FILED ITS RETURN OF INCOME, COPY OF WHICH WAS SUPPLIED. 2. THAT GROSS RECEIPT AMOUNTING TO RS. 3,44,87,000/- H AS BEEN DECLARED IN THE RETURN OF INCOME. 3. THAT AFTER CLAIMING EXPENSES THE RETURN OF INCOME SHOWING NET INCOME OF RS. 4,61,250/-. 4. THAT TDS MADE BY THE ASSESSE AT RS. 17,715/- APPEARS IN FORM NO. 26AS ON THE BASIS OF WHICH PAYM ENT OF TDS HAS BEEN CLAIMED. 5. THAT THE AMOUNT OF FREIGHT PAID BY THE ASSESSE FORMS PART OF THE GROSS RECEIPTS OF RS. 3,44,87,000/ -. 5. THE LD. SR.DR RELYING UPON THE IMPUGNED ORDER SUBMIT TED THAT THE DECISIONS RELIED UPON BY THE CIT(A) IN UPHOLDING THE ACT ION OF THE ITA 186/CHD/2018 A.Y. 2010-11 PAGE 4 OF 5 AO ARE RELIED UPON. IT WAS HIS SUBMISSION THAT NO DOUBT , THE AUDIT OBJECTION FLAGGED THE ISSUE FOR THE AO, HOWEVER, THE AO HA S FORMED HIS OWN INDEPENDENT VIEW ON GOING THROUGH THE RECORD IT WAS ALSO HIS SUBMISSION THAT ON MERITS ALSO, THE ASSESSEE HAS NO CASE AS BANK FACILITIES ARE AVAILABLE IN ALMOST ALL THE PLACES AND ACTIVELY, T HERE IS A POLICY FOR ENCOURAGING THE USAGE OF BANKING FACILITIES AND THE ASSESSEE HAS CROSSED THE LIMIT OF CASH PURCHASE. THUS, THE IMPUG NED ORDER, IT WAS HIS SUBMISSION, MAY BE UPHELD. 6. THE LD. AR IN REBUTTAL SUBMITTED THAT IN THE FACTS OF THE P RESENT CASE, THE AO VIDE HIS ORDER U/S 143(3) DATED 31.10.2012 HAVING REJECTED THE BOOK RESULTS COULD NOT RELY ON VERY SAME BOOKS FOR MAKING THE ADDITIONS EVEN U/S 40(A)(3). RELIANCE WAS PLACED UPON DECISIO N OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT (CENTRAL) LUDHIAN A VS GOBIND RAM (2015) TAXMANN.491 (P&H). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL ON RECORD. WE FIND THAT IN THE FACTS OF THE PRESENT CASE, THE SUBJECT MATTER FOR CONSIDERATION I.E. PAYMENTS MADE IN CASH TO THE VARIOUS TRANSPORTERS HAS SPECIFICALLY BEEN LOOKED INTO BY THE AO IN THE COURSE OF THE ORIGINAL SCRUTINY PROCEEDINGS. OUR ATTENTION HAS BEEN INVITED TO PAGES 27 TO 39 OF THE PAPER BOOK WHICH CONTAINS DETAIL S OF FREIGHT AND LABOUR. A PERUSAL OF THE SAME SHOWS THAT PAYMENT HAVE B EEN MADE NOT ONLY TO SHRI BAGWATI ROADLINES WHICH IS SUBJECT MATTER OF MAJOR ADDITION IN THE FACTS OF THE PRESENT CASE BUT PAYMENTS IN CASH HAVE BEEN MADE TO ALMOST ALL THE TRANSPORTERS WHICH INCLUDE CH AUDHARY TRANSPORT ; SHRI BIKANER TRANSPORT COMPANY ; JODHPUR BIKANER TRANSPORT ; HIGHWAY TRANSPORT COMPANY ; VISHNU FREIGHT CARRIER ; SHRI SACHIYAY TRANSPORT COMPANY ; J.P. SHAHPUR ROADLINES ; HIG HWAY ROADLINES ETC. WHICH EVIDENTLY DEMONSTRATES THE ASSESSEE 'S CLAIM THAT PAYMENTS MADE THROUGH THE TRUCK DRIVERS ETC. AS PAYMENTS WERE MADE TO THE DRIVERS FOR CARRYING THE ASSESSEE'S GOODS, UNLOAD ING THEM AND TO MEET THEIR ON-ROAD EXPENSES OF FUEL, REPAIR, DIET ETC. THU S, THE VERY NATURE OF THE ASSESSEES EXPENSE NECESSITATES IT. IN T HE FACTS OF THE PRESENT CASE, IT IS CHANGE OF OPINION. IT IS FURTHER SEEN THAT WHEN BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THE ADDITION HAS BEE N MADE ON ESTIMATES, THE OCCASION TO RELY UPON THE VERY SAME BOO KS PROPOSING THE ADDITION OF THIS NATURE DOES NOT ARISE. ACCORDINGLY, WE FIND THAT IN THE ITA 186/CHD/2018 A.Y. 2010-11 PAGE 5 OF 5 FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE ASSESS EE SUCCEEDS NOT ONLY ON THE JURISDICTIONAL ISSUE BUT ALSO ON MERITS. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH JULY 2018. SD/- SD/- ( DR.B.R.R.KUMAR) ( DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.