The ITO,TDS-3, Surat V. Shree Khedut Sahakari Khand Udhyog Mandli Ltd., Surat

ITA 2341/AHD/2011

• Counselvise Citation: 234120514 RSA 2011
• Duration Of Justice: 3 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 17-06-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 15-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Section: 133A; 194C; 201(1)

Judgement Text

, D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE-PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO.2341/AHD/2011 / ASSESSMENT YEAR: 2004-2005 ITO, TDS - 3 SURAT. VS SHRI KHEDUT SAHAKARI KHAND UDYOG MANDALI LTD. AT & PO BABEN TAL: BARDOLI, DIST. SURAT 394 602. PAN : AAAAS 4554 N ! / (APPELLANT) '# ! / (RESPONDENT) REVENUE BY : SMT.SONIA KUMAR, SR.DR ASSESSEE BY : NONE / DATE OF HEARING : 17/06/2015 / DATE OF PRONOUNCEMENT: 24/07/2015 $%/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(A)-I, SURAT DATED 28.6.2011 PASSED FOR THE ASST T.YEAR 2004-05. 2. THOUGH THE REVENUE HAS TAKEN FOUR GROUNDS OF APP EAL, WHICH ARE NOT IN CONSONANCE WITH THE RULE 8 OF INCOME TAX (AP PELLATE TRIBUNAL) RULES, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE I SSUE, WHEREBY, IT IS TO BE ASCERTAINED WHETHER THE ASSESSEE GOT TRANSPORTED THE SUGAR CANE FROM THE FIELDS OF FARMERS TO ITS PREMISES WITH THE HELP OF TRANSPORTERS, AND IF YES, THEN ON ACCOUNT OF ITS FAILURE TO DEDUC T TDS UNDER SECTION 194C OF THE INCOME TAX ACT, IT IS TO BE HELD AS AN ASSESSEE-IN-DEFAULT LIABLE TO TAX UNDER SECTION 201 AS WELL AS INTEREST UNDER SECTION 201(1A) OF THE INCOME TAX ACT. ITA NO.2341/AHD/2011 2 3. IN RESPONSE TO THE NOTICE OF HEARING, NO ONE HAS COME PRESENT ON BEHALF OF THE ASSESSEE. WITH THE ASSISTANCE OF THE LEARNED DR, WE HAVE GONE THROUGH THE RECORD CAREFULLY AND PROCEED TO DI SPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY REGISTERED WITH THE REGISTRAR OF COOPERATIV E SOCIETIES, GUJARAT. IT IS ENGAGED IN THE MANUFACTURE OF SUGAR AND TRADI NG. SURVEY UNDER SECTION 133A OF THE INCOME TAX, 1961 WAS CONDUCTED AT THE OFFICE PREMISES OF THE ASSESSEE ON 5.2.2004 AND 7.12.2010. ACCORDING TO THE AO, DURING THE COURSE OF SURVEY, IT WAS NOTICED THA T THE SUGAR CANE IS BEING GROWN IN THE FIELDS OF THE FARMERS WHICH WAS SPREAD IN LARGE AREA THE SUGAR CANE WAS BEING TRANSPORTED BY THE SUGAR F ACTORIES. THUS, SUGAR FACTORY OUGHT TO HAVE DEDUCTED TAX ON CONTRAC TUAL PAYMENT OF GETTING AND TRANSPORTING THE SUGAR CANE FROM FIELDS TO THE FACTORY AREA UNDER SECTION 194C. IN THE OPINION OF THE AO, THE ASSESSEE FAILED TO DEDUCTED TDS ON SUCH PAYMENT, THEREFORE, ORDER UNDE R SECTIONS 201(1) AND 201(1A) OUGHT TO BE PASSED. 5. IN RESPONSE TO THE NOTICE OF HEARING, IT WAS CON TENDED BY THE ASSESSEE THAT AS PER THE ARRANGEMENT WITH THE FARME RS, THE SUGAR CANE IS BEING SUPPLIED EITHER BY THE FARMERS OR REGISTER ED SOCIETIES AT THE FACTORY AREA. THE ASSESSEE HAS NOT BEEN INCURRING ANY EXPENDITURE ON THE ALLEGED TRANSPORTATION OF SUGAR CANE. THE ASSE SSEE HAS NARRATED VARIOUS RESOLUTIONS AS WELL AS REFERRED TO BYE-LAWS OF THE SOCIETY. THE RELEVANT PART REPRODUCED BY THE AO FROM THE SUBMISS IONS OF THE ASSESSEE IS WORTH TO NOTE HERE, WHICH READS AS UNDE R: (2) IN ADDITION TO THE SUBMISSIONS MADE EARLIER AS STATED ABOVE, MY CLIENT IS ALSO SUBMITTING HEREWITH THE FOLLOWING RELEVANT DOCUMENTS/STATEMENTS/MATERIALS: ITA NO.2341/AHD/2011 3 (I) BYE LAWS OF THE ASSESSEE SUGAR CO-OPERATIVE SOC IETY DULY REGISTERED, SANCTIONED AND APPROVED BY THE REGISTRA R OF CO- OPERATIVE SOCIETY, THE HIGHEST AUTHORITY OF THE GOV ERNING ACT. I.E. THE GUJARAT CO-OPERATIVE SOCIETIES ACT, 1961. THE R ELEVANT BYE LAWS NO. 7(A) CATEGORICALLY PROVIDES THAT THE CANE GROWER MEMBERS ARE EXCLUSIVELY RESPONSIBLE TO CUT, HARVEST AND TRANSPORT THEIR SUGARCANE FROM THEIR FIELD TO THE FACTORY GAT E FOR WHICH THEY HAD BEEN PAID EX-FACTORY GATE CANE PRICE BY VIRTUE OF THE SUGAR CANE PRICE CONTROL ORDER, 1966 OF THE CENTRAL GOVER NMENT. (II) COPY OF WATER STOP INSTRUCTIONS LETTER/CARD GI VEN TO THE CANE GROWER MEMBERS CONTAINING THEREIN CATEGORICALLY THE CONDITION THAT THE CANE GROWER MEMBER SHOULD CUT AND SUPPLY H IS SUGARCANE GROWN ON HIS FIELD AFTER THE INSTRUCTIONS TO THE FACTORY GATE OF THE SUGAR MILL. (III) THE COPY OF PLANTATION AGREEMENT FOR THE PLAN TATION OF SUGARCANE FOR THE SEASONS 2003-04 CONTAINING THEREI N RULES AND REGULATIONS PARTICULARLY CONDITION NO. 1 I.E. THE C ANE GROWER MEMBER IS RESPONSIBLE TO HARVEST AND CUT HIS SUGARC ANE AND DELIVER THE SAME TO THE FACTORY GATE OF THE ASSESSE E SUGAR MILL. (IV) COPY OF MEMBER ACCOUNT FOR THE SEASON 2003-04 SHOWING THEREIN THE EX-FACTORY PRICE PAID FOR THE SUGARCANE SUPPLIED BY THE CANE GROWER, MEMBER. THIS CLEARLY PROVES THAT THE A SSESSEE, SUGAR, MILL HAS PAID THE, EX-FACTORY PRICE OF RS. 1 ,326/- PER MT IN VARIOUS INSTALLMENTS AS APPROVED BY THE BOARD OF DI RECTORS (FOR WHICH THE COPIES OF RESOLUTIONS WERE ALREADY FURNIS HED. THE COPIES OF LEDGER ACCOUNTS OF THE FOLLOWING MEMBERS ARE FUR NISHED HEREWITH. (A) AMBUBHAI BHIKHABHAI (B) BHAGUBHAI RACHHODBHAI PATEL (C) BHARATBHAI NATHUBHAI PATEL (D) HASMUKHBHAIMAGANBHAI PATEL. (V) DETAILED LEDGER OF CANE PURCHASE ACCOUNT A ND PAYMENTS OF EX-FACTORY CANE PRICE MADE TO, CANE GROWER MEMBERS. FROM THE ABOVE SUBMISSIONS, IT IS CRYSTAL CLEAR THA T MY CLIENT HAS NOT INCURRED AT ALL ANY EXPENDITURE TOWARDS HARVES TING AND TRANSPORTATION OF SUGARCANE NOR CLAIMED SUCH EXPEND ITURE IN THE AUDITED BOOKS OF ACCOUNTS WHICH WERE PRODUCED AND V ERIFIED DURING THE SURVEY PROCEEDINGS CONDUCTED ON 05.02.20 04 AND 07.12.2010 BY THE INCOME TAX AUTHORITIES. HENCE, WH EN MY CLIENT HAS NOT MADE ANY PAYMENT TOWARDS TRANSPORTATION AND HARVESTING OF THE SUGARCANE TO ANY AGENCY OR THIRD PERSON, THE RE IS NO VALID ITA NO.2341/AHD/2011 4 AND LEGAL GROUND IN SUPPORT OF THE ALLEGATION OF DE FAULT U/S. 201(1) AND 201(1A) OF THE ACT. 3. YOUR KIND ATTENTION IS INVITED TO THE VERY FACT THAT THE DIVISIONAL BENCH OF ITAT, AHMEDABAD HAS ALREADY ALLOWED THE AP PEAL IN FAVOUR OF THE ASSESSEE FOR THE ASSTT.YEAR: 2003-04 AGAINST THE ORDER PASSED BY U/S 201(1) AND 201(1 A) OF THE ACT TREATING THE ASSESSEE MILL AS ASSESSEE IN DEFAULT FOR THE ALLEGE D PAYMENT OF TRANSPORTATION AND HARVESTING OF SUGARCANE. THUS, A S A MATTER OF FACT, THE ISSUE BEING IDENTICAL AND THE SAME AS IN THE PRESENT YEAR, HAS ALREADY BEEN RESOLVED BY THE HON'BLE ITAT , AHMEDABAD IN THE ASSESSEE'S OWN CASE. 6. THE LEARNED AO DID NOT APPLY HIS MIND ON THIS EX PLANATION OF THE ASSESSEE. HE SIMPLY CONSIDERED THAT THE ASSESSEE I S RESPONSIBLE FOR TRANSPORTING THE SUGAR FROM THE FIELDS OF THE FARME RS. IT IS PERTINENT TO TAKE NOTE OBSERVATION OF THE LD.AO FROM PARA-11, 12 AND 13 OF THE ASSESSMENT ORDER. IT READS AS UNDER: 11. THE MOST IMPORTANT FACT WHERE ASSESSEE DIFFER S FROM ALL THE CASES MENTIONED BY THE ASSESSEE IS THAT IN ALL THES E CASES, THE DEDUCTEE WERE ASSESSED TO TAX 85 HAVE PAID TAX ON T HE INCOME WHICH THEY RECEIVED FROM THE DEDUCTOR. WHEREAS, IN THE PRESENT CASE, THE ASSESSEE HAS NOT BEEN ABLE TO EVEN FURNIS H THE NAMES OF THESE DEDUCTEE FORGET APART THE DETAILS OF PAYME NTS MADE TO THEM & THEIR ASSESSMENT DETAILS. THIS HAS RESULTED IN LOSS OF REVENUE BY THE DEPARTMENT. THEREFORE, THESE DECISIO NS DIFFER FROM THE CASE OF THE ASSESSEE ON FACTS ALSO. 12. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT FURNISHED ANY DETAILS FOR HARVESTING OF SUGARCANE AND TRANSPORT CONTRACTORS. IT IS THEREFORE, DECIDED TO WORK OUT S UCH PAYMENTS ON THE BASIS OF QUANTITY OF SUGARCANE PURCHASED AND AD VANCE PER METRIC TON OF SUGARCANE GIVEN TO FARMERS WHICH ACTU ALLY WAS UTILIZED FOR PAYMENT TO HARVESTING & TRANSPORT CONT RACTORS. 13. IN THE CASE OF THE ASSESSEE AS PER P & L A/C., IT HAD PURCHASED 17,71,699 MT OF SUGARCANE. FURTHER, IN ABSENCE OF D ETAILS REGARDING AMOUNT PER METRIC TON PAID TO FARMERS AS ADVANCE, THIS RATE IS ADOPTED AT RS. 185/-PER METRIC TON, THE RAT E AT WHICH ASSESSEE PAID FOR THE IMMEDIATE PRECEDING YEAR. ON THE BASIS, THE AMOUNT OF EXPENDITURE ON HARVESTING & TRANSPORT CON TRACTORS IS WORKED OUT AS UNDER :- RS.185 PER MT X 17,71,699 MT ITA NO.2341/AHD/2011 5 OF SUGAR CANE PURCHASED = RS.32,77,64,315/- 7. IN THIS WAY, THE LD.AO HAS HELD THE ASSESSEE LIA BLE FOR TRANSPORTING THE SUGAR CANE FROM THE FIELDS OF THE FAMERS, AND ACCORDING TO THE AO, THE ASSESSEE HAS FAILED TO TDS ON PAYMEN TS OF TRANSPORTATION. THEREFORE, IT IS AN ASSESSEE-IN-DEF AULT. HE HAS PASSED AN ORDER UNDER SECTION 201(1) AND 201(1A) WORKING O UT THE AMOUNT OF TDS DEDUCTIBLE AT RS.67,19,168/- AND INTEREST FOR N OT DEPOSITING THIS AMOUNT IN GOVERNMENT TREASURY AT RS.64,50,400/-. T HE LEARNED AO HAS RAISED DEMAND OF RS.1,31,69,568/-. 8. ON APPEAL, THE LD.CIT(A) HAS DELETED THE ADDITIO NS BY ASSIGNING FOLLOWING TEN REASONS: [1] THE APPELLANT PAYS EX- FACTORY / GATE D ELIVERY CANE PRICE TO CANE GROWERS. [2] THE FARMER MEMBER IS RESPONSIBLE TO CUT HIS SUGARCANE AND SUPPLY THE SAME AT THE FACTORY GATE OF THE APPE LLANT. [3] PAYMENTS MADE TO CANE GROWING FARMER MEM BERS OF THE CO - OP SOCIETY IS IN THE NATURE OF PURCHASE PRIC E, ON WHICH SECTION 194C CASES NOT APPLY. [4] THE APPELLANT PAYS EX- FACTORY / GATE DELIV ERY PRICE TO FARMERS AS PER MAXIMUM PRICE FIXED BY THE CENTRAL G OVERNMENT FROM TIME TO TIME. [5] THE APPELLANT PAYS ADVANCE PURCHASE PR ICE TO CANE GROWING MEMBERS TO MEET EXPENSES LIKE, HARVESTING, CUTTING AND TRANSPORTATION. [6] FIRST INSTALLMENT OF RS 185/- M.T IS GIVEN AS ADVANCE PURCHASE PRICE TO FARMER TO ENABLE THEM TO MEET THE EXPENDITURE OF HARVESTING, CUTTING, AND TRANSPORTING. THEREAFTE R, PURCHASE PRICE IS AGAIN GIVEN TO FARMERS IN INSTALLMENTS. TH IS ACCOUNT IS FINALLY SETTLED WHEN THE FINAL EX-FACTORY CANE PRIC E IS DETERMINED BY THE APPELLANT. [7] COPY OF MEMBER ACCOUNT IN APPELLANTS S BOOKS I NDICATE THAT FIRST INSTALLMENT OF RS 185/ P.M.T GIVEN TO FARMERS IS ACTUALLY ADVANCE PURCHASE PRICE OF SUGAR CANE. ITA NO.2341/AHD/2011 6 [8] THE CASE OF THE APPELLANT FOR A Y 2003-04 HAVIN G IDENTICAL FACTS, HAS BEEN DECIDED IN APPELLANTS'S FAVOUR AND AS SUCH, IT IS BINDING ON LOWER AUTHORITIES. [9] THE A.O. HAS WORKED OUT THE TOTAL PAYMENT COVERED U/S 194C ON THE BASIS OF PURE ESTIMATE BASED ON LAST YE ARS PAYMENT TO FARMER MEMBERS. [10] THE ARGUMENTS OF THE APPELLANT ARE QUITE CONVI NCING. THE A.O. HAS HARDLY BEEN ABLE TO SUPPORT HIS CASE WITH COGENT REASONS / CREDIBLE EVIDENCE. THE CRUX OF THE ARGUMENT OF AP PELLANT IS THAT THEY ARE MAKING ADVANCE PAYMENT OF SUGAR CANE PURCH ASE PRICE TO THEIR FARMER MEMBERS. THE FARMERS ARE AGRICULTUR ISTS. THEIR INCOME IS NOT TAXABLE. IT IS CLEAR THAT SECTION 194 C OF THE IT ACT IS NOT APPLICABLE IN APPELLANTS CASE. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS ARGUMENTS OF THE APPELLANT AND THE JUDGMENT OF H ONBLE ITAT , IT IS HELD THAT THE ASSESSING OFFICER IS NOT JUSTIF IED IN INVOKING THE PROVISIONS OF SEC. 194C AGAINST THE APPELLANT . THE ASSESSING OFFICER'S ACTION OF TREATING THE APPELLANT AS ASSE SSEE IN DEFAULT AND WORKING OUT LIABILITY U/S.201 & 201(1A) IS NOT SUSTAINABLE. 9. THE LD. DR RELIED UPON THE ORDER OF THE AO AND S UBMITTED THAT THE AO HAS RIGHTLY TREATED THE ASSESSEE-IN-DEFAULT. 10. WE HAVE DULY CONSIDERED THE CONTENTIONS OF THE LEARNED DR AND GONE THROUGH THE RECORD CAREFULLY. SECTION 194C PR OVIDES THAT IF ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDE NT FOR CARRYING OUT ANY WORK IN PURSUANCE OF A CONTRACT BETWEEN THE CON TRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIME OF CREDIT OF SU CH SUM TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH, OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVE R IS EARLIER, DEDUCT AN AMOUNT EQUIVALENT TO THE RATES PROVIDED IN C LAUSE NO.(I) (II) AND OTHER SUB-SECTIONS OF SECTION 194C. AS FAR AS THE QUANTIFICATION OF TDS AMOUNT IS CONCERNED, THAT IS NOT IN DISPUTE. T HE DISPUTE IS WHETHER THE ASSESSEE IS LIABLE TO DEDUCT TDS OR NOT. THE A SSESSEE HAS CONTENDED THAT IT HAS NOT GOT THE SUGAR CANE TRANSP ORTED WITH THE HELP OF CONTRACTOR RATHER, IT WAS OBLIGATION OF THE FARM ERS TO SUPPLY SUGAR CANE AT THE FACTORY GATE. BEFORE THE AO ALSO THIS WAS THE CONTENTION OF ITA NO.2341/AHD/2011 7 THE ASSESSEE, BUT THE LD.AO NOWHERE RECORDED ANY FI NDINGS THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO GET THE SUGAR CAN E TRANSPORTED FROM THE FIELDS OF THE FARMERS TO THE FACTORY PREMISES. THE AO IS TOTALLY SILENT IN HIS ORDER. ON THE OTHER HAND, THE ASSESSEE HAS MADE REFERENCE TO THE RESOLUTIONS, BYE-LAWS AND STANDING ORDERS IN TH IS RESPECT. THE LD.FIRST APPELLATE AUTHORITY HAS ALSO CONSIDERED TH E SUBMISSION OF THE ASSESSEE IN DETAILS, AND THEREAFTER RECORDED A FIND ING THAT THE ASSESSEE WAS NOT AT ALL RESPONSIBLE FOR TRANSPORTATION OF TH E SUGAR CANE. THUS, SECTION 194C IS NOT APPLICABLE IN THE PRESENT SITUA TIONS. THE LD.CIT(A) HAS RIGHTLY DELETED THE DEMAND RAISED BY THE AO. WE DO NOT FIND ANY MERIT IN THIS APPEAL. IT IS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE COURT ON 24 TH JULY, 2015 AT AHMEDABAD. SD/- SD/- (G.D. AGRAWAL) VICE-PRESIDENT (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 24/07/2015