Nelakuditi Subhadra, Hyderabad V. THE ITO, Vijayawada

ITA 206/VIZ/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6467 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 28-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R M MADHAVI
• Keywords: Difference of opinion
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 2 06 /VIZ/ 201 5 ( / ASSESSMENT YEAR: 2010 - 11 ) SMT. NELAKUDITI SUBHADRA D.NO.6 - 29, MAIN ROAD NANDIGAMA KRISHNA DIST. [ PAN : BEOPS3395R ] VS. THE IT O WARD - 1(3) VIJAYAWADA ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI . C.SUBRAHMANYAM , A R / RESPONDENT BY : S MT . R.M.MADHAVI, DR / DATE OF HEARING : 2 7 . 1 1 .2017 / DATE OF PRONOUNCEMENT : . 1 2 .2017 / O R D E R PER D.S. SUNDER SINGH , ACCOUNTANT MEMBER : ALL THE GROUNDS OF APPEAL ARE RELATED TO THE ORDER PASSED BY THE C OMMISSIONER OF I NCOME T AX(CIT) U/S 263 OF I.T. ACT. IN THIS CASE, THE ASSESSEE FILED RETURN OF INCOME ADMITTING TOTAL INCOME OF RS.3,14,020/ - ON 15.10.2010 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) ON TOTAL INCOME 2 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA OF RS.5,74,020/ - RESULTING IN ADDITION OF RS.2,60,000/ - . SUBSEQUENTLY THE CIT TAKEN UP THE CASE FOR REVISION U/S 263 AND SET A SIDE THE ORDER WITH A DIRECTION TO RE DO THE ASSESSMENT. 2. DELAY : THERE WAS DELAY OF TWO DAYS IN FILING THE APPEAL IN THIS CASE AND THE ASSESSE E FILED THE AFFIDAVIT EXPLAINING THE REASONS FOR THE DELAY. W E HEARD BOTH THE PARTIES AND CONVINCED WITH THE EXPLANATION FOR DELAY AND ACCORDINGLY CONDONE THE DELAY. 3. DURING THE REVISION PROCEEDINGS U/S 263, THE LD.CIT OBSERVED THAT (I) AS PER THE AGRE EMENT ENTERED INTO BY THE ASSESSE E WITH M/S DODL A DAIRY LTD. , THE ASSESSEE REQUIRED TO SUPPLY THE MILK FOR WHICH THE ASSESSEE IS ENTITLED FOR COMMISSION AND OVER HEADS APART FROM THE SALE PRICE OF THE MILK. THOUGH THE ASSESSE E HAS DECLARED THE SALES , THE ASSESSEE HAS NOT ADMITTED THE COMMISSION AND OVERHEADS IN THE INCOME TAX RETURNS . (II ) AS PER THE TRADING PROFIT AND LOSS ACCOUNT, AN AMOUNT OF RS.21,71,35 0/ - WAS SHOWN AS FREIGHT CHARGES AND THE CIT OBSERVED THAT THE ASSESSEE HAD MADE PAYMENTS EXCEEDING RS.50,000/ - IN A YEAR 3 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA WHICH ATTRACTS PROVISIONS OF SECTIO N 40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TAX AT SOURCE. THE AO HAS NOT VERIFIED THE NON DEDUCTION OF TAX AT SOURCE AND RESULTANT ADDITION S TO BE MADE U/S 40(A)(IA) OF I.T. ACT. (III) AS PER THE BALANCE SHEET AN AMOUNT OF RS.22,49,205/ - WAS SHOWN AS SU NDRY CREDITORS BUT THE ASSESSEE HAS FILED THE CONFIRMATION S TO THE EXTENT OF RS.20,40,230/ - AND THE AO HAS NOT MADE THE DIFFERENCE AMOUNT AS ADDITION. (IV) THE FOURTH AND FINAL ISSUE IS THAT THE ASSESSEE HAS SHOWN VERY LOW PROFIT MARGIN . A GAINST THE SALES OF RS. 4,26,55,885/ - THE INCOME DECLARED BY THE ASSESS E E WAS RS.3,14,020/ - WHICH WA S VERY LOW IN TH IS LINE OF THIS BUSINESS. 3.1. IN VIEW OF THE ABOVE REASONS T HE LD. CIT HELD THAT THE ORDER PASSED U/S143(3) DATED 13/08/2012 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY SET ASIDE THE ORDER OF THE AO AND DIRECTED THE AO TO REDO THE ASSESSMENT AFTER EXAMINING THE ABOVE ISSUES. 4 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA 4 . AGGRIEVED BY THE ORDER OF THE LD. CIT, THE ASSESSEE FILED APPEAL BEFORE US. DURING THE APPEAL HEARING, LD.AR ARGUED WITH REGARD TO THE FIRST ISSUE OF COMMISSION FROM M/S DODLA DAIRY LTD. , THAT THE ASSESSEE HAS NOT RECEIVED ANY COMMISSION DURING THE PREVIOU S YEAR RELEVANT TO THE ASSESSMENT YEAR, HENCE THE SAME WAS NOT ADMITTED IN THE RETURN OF INCOME. THE AR FURTHER SUBMITTED THAT THE ASSESSEE WAS A SUPPLIER OF MILK AND SHE HAS PROCURED THE MILK FROM VARIOUS AGRICULTURISTS AND RECEIVED THE SALE PRICE FROM DODLA DAIRY LTD. , AS AGREED BETWEEN THE ASSESSEE AND THE PURCHASER FOR A FIXED PRICE. THE AGREEMENT WAS ONLY FOR UNINTERRUPTED SUPPLY OF MILK AND THE CLAUSES OF AGREEMENT WERE SUBJECT TO CHANGE BY MUTUAL CONSENT. SINCE THE ASSESSEE HAS NOT RECEIVED AN Y C OMMISSION FROM THE PURCHASER , THE SAME WAS NOT OFFERED TO THE INCOME AND THE TAX WAS NOT DEDUCTED . WHATEVER SALE PRICE RECEIVED B Y THE ASSESSEE , WAS DECLARED AS REVENUE IN THE PROFIT AND LOSS ACCOUNT WHICH WAS ACCEPTED BY THE AO. HENCE, LD.AR ARGUED THAT THERE IS NO ERROR IN THE ORDER PASSED BY THE AO WHICH REQUIRE INTERFERENCE U/S 263 OF I.T. ACT, HENCE REQUESTED TO SET ASIDE THE ORDER OF THE LD. C IT AND RESTORE THE ASS ESSMENT ORDER. 5 . ON THE OTHER HAND, LD. DR ARGUED THAT AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT, THE ASSESSEE IS ENTITLED FOR SALE PRICE , 5 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA COMMISSION FOR PROCURING THE MILK AND THE OVERHEADS . THOUGH ASSESSEE HA S ADMITTED THE SALE PRICE IN THE RETURN OF INCOME, THE ASSESSEE HAD NOT ADMITTED THE COMMISSION AND THE OVERHEADS RECEIVED OR RECEIVABLE BY THE ASSESSEE FROM DODLA DAIR Y LTD. S INCE THE ASSESSEE HAS NOT DECLARED THE COMMI SSION AND THE OVERHEADS AND THE AO HAS FAILED TO VERIFY THE QUA NTUM OF COMMISSION AND THE OVERHEADS THE ASSESS E E IS ENTITLED AND RECEIVABLE AS PER THE AGREEMENT , THE LD DR ARGUED THAT T HE ORDER PASSED B Y THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, AND THE CIT HAS RIGHTLY TAKEN UP THE CASE FOR REVISION AND NO INTERFERENCE IS CALLED FOR. 6 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. AS PER THE AGREEMENT ENTERED WITH DODLA DAIRY LTD., THE ASSESSEE HAS TO PROCURE THE MILK FROM VARIOUS AGRICULTURISTS AND SUPPLY THE SAME TO THE PURCHASER AND THE ASSESSEE IS ENTITLED FOR OVERHEADS AS WELL AS THE COMMISSION ON SUPPLY OF MILK. FOR READY REFERENCE, WE EXTRACT THE RELEVANT PART OF THE AGREEMENT DATED 28.09.2009 WHICH IS MADE AVAILABLE IN THE PAPER BOOK . THE TERMS AND CONDITI ONS OF AGREEMENT , CLAUSES 13 & 14 READS AS UNDER : 6 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA 13. IT IS MUTUALLY AGREED THAT THE PRICE OF MILK AND AGENT COMMISSION SHALL BE AT PAR WITH / MAJOR POPULAR PRIVATE DAIRYS DECLARED PRICE PAID TO ITS MILK PRODUCERS AND AGENTS AT THE TIME OF PURCHASE RESPECTIVELY. 14. IT IS MUTUALLY AGREED THAT APART FROM MILK PRICE THE OVERHEADS SHALL BE PAID PER LTR AS HEREUNDER : (I) 01.01.09 TO 31.03.10 - RS.2.00 (II) 01.04.10 TO 30.09.10 - RS.2.75 6.1. AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT, APART FROM THE SALE PRICE OF THE MILK, THE ASSESSEE IS ENTITLED FOR COMMISSION ON PAR WITH KRISHNA DISTRICT CO - OPERATIVE UNIONS . SIMILARLY, THE ASSESSEE IS ALSO ENTITLED FOR OVERHEADS @2/ - PER LITRE FROM 01.01.09 TO 31.03.10 AND RS.2.75/ - PER LITRE FROM 01.04. 10 TO 30.09.10 . FROM THE PROFIT & LOSS ACCOUNT, IT IS OBSERVED THAT THE ASSESSEE HAD ADMITTED ONLY SALE OF MILK BUT NOT ADMITTED THE COMMISSION AS WELL AS THE OVERHEADS. DURING THE APPEAL HEARING, THE BENCH HAS ASKED THE ASSESSEE TO SUBMIT ACCOUNT COPY OF THE ASSESSE E WITH DODLA DAIRY LTD., BUT THE ASSESSEE FAILED TO FURNISH THE SAME. FROM THE AGREEMENT, IT IS EVIDENT THAT THE ASSESSEE IS ENTITLED FOR COMMISSION AS WELL AS THE OVERHEADS, BUT THE SAME WAS NOT ADMITTED IN THE RETURN OF INCOME. THE ASSESSE E IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THE ASSESSE E REQUIRED TO ADMIT THE INCOME ON ACCRUAL BASIS, WHICH THE AO DID NOT VERIFY AT THE TIME MAKING THE ASSESSMENT. THE ASSESSE E DID NOT PLACE ANY EVIDENCE TO ESTABLISH THAT THE COMMISSION HAS NOT ACCRUED OR THERE WAS CHANGE IN TERMS OF THE AGREEMENT. THEREFORE, WE 7 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA HOLD THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY WE UPHOLD THE ORDER OF THE CIT ON THIS ISSUE AND DISMISS THE APPEAL OF THE ASSESSEE . 7 . THE SECOND ISSUE IS NON DEDUCTION OF TAX AT SOURCE ON FREIGHT CHARGES. THE AO DURING THE ASSESSMENT PROCEEDINGS HAS VERIFIED THE FREIGHT CHARGES AND DISA LLOWED A SUM OF RS.2,00,000/ - WHICH INDICATE S THAT THE AO HAS VERIFIED TH E FREIGHT CHARGES AND MADE THE REQUISITE DISALLOWANCE. FURTHER, IN RESPONSE TO THE QUESTIONNAIRE ISSUED BY THE AO, THE ASSESSEE FURNISHED THE DETAILS AS PER THE REPLY DATED 07.08.2012. IN POINT NO.8 OF THE QUESTIONNAIRE, THE ASSESSEE FURNISHED THE DETAIL S OF FREIGHT CHARGES AND REASONS FOR NOT ATTRACTING THE DISALLOWANCE . A FTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE WITH REGARD TO NON DEDUCTION OF TAX AT SOURCE AND GENUINENESS , T HE AO HAS MADE THE DISALLOWANCE . FU RTHER, THE ASSESSEE HAS S UBMITTED BEFORE THE LD. CIT THAT THE ENTIRE FREIGHT CHARGES WERE PAID AND THERE WAS NO EXPENDITURE REMAINED UNPAID AS ON THE DATE OF TAKING UP THE CASE FOR REVISION. AS PER THE SPECIAL B ENCH DECISION IN THE CASE OF MERILYN SHIPPING & TRANSPORTS V. ADDITIO NAL COMMISSIONER OF INCOME - TAX, RANGE - 1, VISAKHAPATNAM*ITAT VISAKHAPATNAM BENCH (SB)[2012] 20 TAXMANN.COM 244 (VISAKHAPATNAM ) PROVISIONS OF SECTION 40(A)(IA) ARE 8 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA APPLICABLE ONLY TO AMOUNTS OF EXPENDITURE WHICH ARE PAYABLE AS ON DATE 31ST MARCH OF EVERY YEAR AND IT CANNOT BE INVOKED TO DISALLOW EXPENDITURE WHICH HAS BEEN ACTUALLY PAID DURING PREVIOUS YEAR, WITHOUT DEDUCTION OF TDS . WHEREAS, THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX, KOLKATA XI. V. CRESCENT EXPORT SYNDICATE, [2013] 33 TAXMANN.COM 250 (CALCUTTA) DECIDED THE ISSUE IN FAVOUR OF THE REVENUE . A S ON THE DATE OF TAKING UP THE CASE FOR REVISION U/S 263, T HERE IS A DIFFERENCE OF OPINION PREVAILING WITH REGARD TO THE LEGAL POSITION ON DISALLOWANCE U/S 40(A)(IA) FOR NON D EDUCTION OF TAX AT SOURCE. IF, TWO VIEWS ARE POSSIBLE ON AN ISSUE AND THE ITO HAS TAKEN ONE VIEW, THE SAID ORDER CANNOT BE TREATED AS PREJUDICIAL AND ERRONEOUS TO THE INTEREST OF THE REVENUE AS HELD B Y HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. [295 ITR 0282]. I N THE INSTANT CASE, THERE IS NO DISPUTE THAT THE FREIGHT PAYMENT ALREADY MADE AND TWO VIEWS ARE POSSIBLE FOR DISALLOWANCE U/S 40(A)(IA) AND THE AO HAS TAKEN ONE OF THE POSSIBLE VIEWS. HENCE , THERE IS NO CASE FOR TAKING UP THE CASE FOR REVISION U/S 263. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND. 8 . THE THIRD ISSUE IS WITH REGARD TO THE ADDITION REQUIRED TO BE MADE ON ACCOUNT OF SUNDRY CREDITORS. THE LD. CIT OBSERVED THAT THERE WAS 9 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA OUTSTANDING SUNDRY CREDITORS OF RS.22,49,205/ - AS AT THE END OF THE YEAR AND T HE ASSESSEE HAS FURNISHED CONFIRMATIONS TO THE EXTENT OF RS.20,40,230/ - AND FOR THE DIFFERENCE AMOUNT OF RS.2,08,975/ - THE ASSESSE E FAILED TO FURNISH THE CONFIRMATION S . HENCE, THE LD. CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THUS D IRECTED THE AO TO CALL FOR THE DETAILS AND DECIDE THE ISSUE. DURING THE APPEAL HEARING, LD.AR SUBMITTED THAT THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS, PURCHASES AND SALES ARE PROPERLY ACCOUNTED BY THE ASSESSEE. THE ASSESSEE HAS PRODUCED LEDG ER ACCOUNTS OF THE VENDORS WHICH WAS VERIFIED BY THE AO. NAMES AND ADDRESSES OF THE CREDITORS WERE FURNISHED FOR OUTSTANDING CREDITORS. THE ASSESSEE HAS SUBMITTED CONFIRMATION LETTERS IN MOST OF THE CASES. SINCE THE AO HAS VERIFIED THE BOOKS OF ACCOUNTS AND COMPLETED THE ASSESSMENT WITHOUT FINDING ANY DEFECTS THERE IS NO CASE FOR REVISION U/S 263 OF THE IT ACT AND REQUESTED TO SET ASIDE THE ORDER OF THE LD.CIT AND ALLOW THE APPEAL OF THE ASSESSEE. 9 . ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDER O F THE LD.CIT. 10 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA 1 0 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. IN THIS CASE, THE OUTSTANDING SUNDRY CREDITORS WAS RS.22,49,205/ - AND THE ASSESSEE HAS SUBMITTED LIST OF CREDITORS ALONG WITH NAMES AND ADDRESSES AND THE AMOUNTS OUTSTANDING. THE ASSESSEE ALSO FURNISHED CONFIRMATIONS TO THE EXTENT OF RS.20,40,230/ - AND THE REMAINING DIFFERENCE WAS RS.2,08,975/ - . THE AO HAS VERIFIED THE BOOKS OF A CCOUNTS AND DID NOT FIND ANY DIFFERENCE WITH REGARD TO THE PURCHASE S AND THE RE WAS DEFECTS IN THE BOOKS OF THE ACCOUNTS AND THE PURCHASES ACCOUNT . AFTER DUE VERIFICATION OF THE BOOKS OF ACCOUNTS, THE AO COMPLETED THE ASSESSMENT. OUTSTANDING SUNDRY CREDITORS IS NOT THE INCOME AND IT IS A LIABILITY TO BE PAID BY THE ASSESSEE. MERELY FOR NOT SUBMITTING THE CONFIRMATIONS, THERE IS NO CASE FOR UNDER ASSESSMENT WHICH IS PREJUDICIAL T O THE INTEREST OF THE REVENUE AND CANNOT BE HELD AGAINST THE ASSESSE E . S INCE THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS AND AFTER DUE VERIFI CATION OF T HE B OOKS OF ACCOUNTS, ASSESSMENT WAS COMPLETED , WITHOUT REFERRING ANY DEFECTS WITH REGARD TO SUNDRY CREDITORS, THE CIT CANNOT HOLD THAT THE ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.CIT ON THI S ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. 11 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA 1 1 . THE LAST GROUND FOR REVISION U/S 263 WAS THE LOW PROFIT MARGIN. THE ASSESSE E HAS MAINTAINED THE REGULAR BOOKS OF ACCOUNTS AND THE SAME WERE AUDITED BY THE QUALIFIED ACCOUNTANT . O NCE THE BOOKS OF ACCOUNTS AND THE RELEVANT VOUCHERS ARE PLACED BEFORE THE AO, AFTER DUE VERIFICATION OF THE BOOKS OF ACCOUNTS THE ASS ESSMENT IS COMPLETED U/S 143(3), THE OBSERVATION OF THE CIT WITH REGARD TO LOW PROFIT MARGIN IS BASELESS AND THERE IS NO CASE FOR REVISION U/S 263. THEREFORE, THE ORDER PASSED BY THE CIT U/S 263 ON THIS ISSUE IS UN SUSTAINABLE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE . 12 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20 TH DEC 20 17 . SD/ - SD/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 20 . 1 2 .2017 L. RAMA, SPS 12 ITA NO .2 06 /VIZ/201 5 SMT.NELAKUDITI SUBHADRA , NANDIGAMA / COPY OF THE ORDER FORWARDED TO: - 1. / THE APPELLANT - SMT. NELAKUDITI SUBHADRA, D.NO.6 - 29, MAIN ROAD, NANDIGAMA, KRISHNA DIST. 2 . / THE RESPONDENT THE ITO, WARD - 1(3), VIJAYAWADA 3 . THE CIT, VIJAYAWADA 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM