ITO, UDAIPUR V. M/s. S.M.t. International, UDAIPUR

ITA 253/JODH/2012

• Counselvise Citation: 25323314 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-12-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Additional evidence; Question of law; Right to appeal
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 253 & 254/JODH/2012 (A.YS. 2005-06 & 2007-08) THE I.T.O., VS. M/S S.M.T. INTERNATIONAL WARD 1(4), UDAIPUR 4 TH FLOOR INDRAPRASTHA COMPLEX SHASTRI CIRCLE, UDAIPUR. PAN NO. AAEFS5074I (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.A. JOSHI, D.R. ASSESSEE BY : NONE DATE OF HEARING : 06/12/2013. DATE OF PRONOUNCEMENT : 12/12/2013. O R D E R PER BENCH THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED A GAINST THE ORDERS DATED 23.03.2012 AND 26.03.2012 OF LD. CIT(A), UDAI PUR FOR THE ASSESSMENT YEARS 2005-06 AND 2007-08. SINCE THE ISSUE INVOLVED IN THESE APPEALS ARE COMMON HAVING SIMILAR FACTS AND THE APPEALS WERE HE ARD TOGETHER, SO THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. 2. DURING THE COURSE OF HEARING, NO BODY WAS PRESEN T ON BEHALF OF THE 2 ASSESSEE, NEITHER ANY ADJOURNMENT WAS SOUGHT. THERE FORE, THESE APPEALS ARE DECIDED EX PARE QUA THE ASSESSEE AFTER HEARING THE LEARNED D.R. ON MERIT. 3. FIRST WE WILL DEAL WITH I.T.A. NO. 253/JODH/2012 , THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER:- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN REDUCING THE DISALLOWANCE F ROM 41,01,878/- TO RS. 1,52,945/- MADE U/S 40(A)(IA) OF THE I.T. ACT. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE DERIVED THE INCOME FROM EXPORT OF MARBLE BLOCKS AND SLABS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE CLAIMED EXPENSES OF RS. 41,01,878/- UNDER THE HEAD CLEARING AND FORWARDING ON ACCOUNT OF EXPORT OF MARBLE BLOCKS AND SLABS. THE A SSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE FAILED TO DEDUCT TAX AT S OURCE FROM THE ABOVE PAYMENTS U/S 194-C OF THE I.T. ACT, 1961 (HEREINAFT ER TO BE REFERRED AS THE ACT) AS REQUIRED BY THE CIRCULAR NO. 715 DATED 08/8 /1995 ISSUED BY THE CBDT. THE ASSESSING OFFICER HELD THAT THE CLEARING AND FO RWARDING AGENT (IN BRIEF CFA) HAD BEEN ASSIGNED THE CONTRACT FOR PROVIDING V ARIOUS SERVICES BY THE ASSESSEE FOR TRANSPORTATION OF ITS GOODS AND IN THE BOOKS OF THE ASSESSEE, CFA HAD BEEN CREDITED AGAINST THE PROVISIONS OF SU CH SERVICES. THEREFORE, THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 41,01 ,878/- U/S 40 (A)(IA) OF THE ACT, FOR WHICH THE ASSESSEE WAS STATED TO HAVE BEEN AGREED. IN THE FIRST 3 APPEAL, THE ASSESSEE SUBMITTED BIFURCATION OF THE A MOUNT CLAIMED UNDER THE HEAD CLEARING AND FORWARDING EXPENSES AND THE LD. C IT(A) BY CONSIDERING THE BIFURCATION AND THE SUBMISSIONS OF THE ASSESSEE, RE DUCED THE DISALLOWANCE TO RS. 77,770/- ON ACCOUNT OF AGENCY CHARGES TO M/S AS HIRVAD CLEARING AGENCY AND THE BALANCE DISALLOWANCE WAS DELETED BY HOLDING THAT NO TAX WAS DEDUCTABLE. 5. BEING AGGRIEVED, THE DEPARTMENT CARRIED THE MATT ER TO THE I.T.A.T. JODHPUR BENCH IN I.T.A. NO. 435/JU/2008 WHEREIN VID E ORDER DATED 17/4/2009, THE ISSUE WAS SENT BACK TO THE FILE OF THE LD. CIT( A). ON THE DIRECTION OF THE I.T.A.T. JODHPUR BENCH, THE LD. CIT(A) DECIDED THE ISSUE AND HAD INCORPORATED THE WRITTEN SUBMISSIONS OF THE ASSESSE E IN PARA 2.1 OF THE IMPUGNED ORDER. FOR THE COST OF REPETITION, THE SAM E IS NOT REPRODUCED HEREIN. 6. THE LD. CIT(A) ASKED THE REMAND REPORT FROM THE ASSESSING OFFICER, WHO SUBMITTED VIDE REPORT DATED 11/11/2011 AS UNDER :- 'IN THIS REGARD, IT IS SUBMITTED THAT THE ADDITIONA L EVIDENCES PRODUCED BY THE ASSESSEE MAY NOT BE ACCEPTED BECAUS E:- I) THE A.O. HAS NOT REFUSED ADMIT EVIDENCE WHICH OU GHT TO HAVE BEEN ADMITTED. 4 II) THE ASSESSEE WAS NOT PREVENTED BY SUFFICIENT C AUSE FROM PRODUCING THE EVIDENCE WHICH WAS CALLED UPON TO PRO DUCE BY THE ASSESSING OFFICER. HERE IT IS SUBMITTED THAT AS PER THE ORDER SHEET ENTRY THE A/R, OF THE ASSESSEE WAS AGREED FOR THE DISALLOWANCE UNDER SECTION 40(A)(IA). III) THE ASSESSEE WAS NOT PREVENTED BY SUFFICIENT C AUSE FROM PRODUCING BEFORE THE AO ANY EVIDENCE WHICH IS RELEV ANT TO ANY GROUND OF APPEAL. IV) THE A.O. HAS MADE THE ORDER BY GIVING SUFFICIEN T OPPORTUNITY TO THE ASSESSEE. HENCE ADDITIONAL EVIDENCES PRODUCED BY THE ASSESSE E AT THE APPELLATE STAGE MAY NOT BE ACCEPTED. 2. IN COMPLIANCE OF LETTER NO. 1116 INQUIRIES HA VE BEEN MADE FROM M/S. KRISHNA CLEARING AGENCY, GANDHI DHAM, KUCHH, M /S. ASHIRWAD CLEARING AGENCIES AHAMEDABAD AND M/S. A.KL BISWAS, AHMEDABAD . COPY OF THE BILLS, DEBIT NOTES AND COPY OF THE LEDG ER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF THESE PERSONS HAVE BEEN RE CEIVED FROM M/S KRISHNA CLEARING AGENCY, GANDHI DHAM, KUCHH, M/S AS HIRWAD CLEARING AGENCIES. AHMEDABAD (COPY ENCLOSED. THE LETTER WRIT TEN TO M/S. A.K. BISWAS, AHMEDABAD HAS BEEN RETURN BACK WITH POST RE MARKS 'LEFT'. 3. SINCE THE ASSESSEE HAD NOT PRODUCED THESE EV IDENCES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE ASSESSEE H IMSELF DEBIT ALL AMOUNT IN THE CLEARING AND FORWARDING EXPENSES ACCO UNT AND CLAIMED AS CLEARING AND FORWARDING EXPENSES IN THE TRADING, PROFIT AND LOSS ACCOUNT, PAYMENTS MADE TO THE CLEARING AND FORWARDI NG AGENTS HENCE ALL PAYMENTS MADE TO THESE PERSONS WERE LIABLE TO T DS. 4. COPY OF THE LEDGER ACCOUNT OF THE ASSESSEE HA S ALSO OBTAINED FROM THE ASSESSEE. IN THE LEDGER ACCOUNT OF THE ASS ESSEE RECEIVED FROM M/S. KRISHNA CLEARING AGENCY. GANDHI DHAM KUCHH, FO R THE F.Y. 2004- 2005 IT IS SEEN THAT M/S. KRISHNA CLEARING AGENCY H AD DEBITED THE ASSESSEE AND CREDIT THE AGENCY COMMISSION ACCOUNT F OR THE TOTAL AMOUNT. 5 IN THIS REGARD, IT IS SUBMITTED THAT THE ISSUE MAY KINDLY BE DECIDED BY YOUR HONOUR ON MERITS IN VIEW OF FACTS SUBMITTED AB OVE.' 7. THE LD. CIT(A) CONFRONTED THE AFORESAID REMAND R EPORT OF THE ASSESSING OFFICER TO THE ASSESSEE WHO MADE THE SUBMISSIONS, W HICH HAVE BEEN INCORPORATED IN PARA 2.3 OF THE IMPUGNED ORDER AND READ AS UNDER:- 01. THAT THE ID. AO IN THE FIRST PARA OF HIS SAID REMAND REPORT MENTIONED THAT THE ADDITIONAL EVIDENCES MAY NOT BE ACCEPTED BECAUSE THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY AND T HERE IS ACCEPTANCE TO SUCH DISALLOWANCE BY THE ASSESSEE. IN THIS CONNECTION, IT IS HUMBLY & RESPECTFULLY SU BMITTED AS UNDER: (I) THE EXTRACT FROM THE ORDER PASSED BY THE THEN AO CANNOT LEAD TO THE CONCLUSION THAT THE EVIDENCES PRODUCED BY THE A PPELLANT-ASSESSEE ARE ADDITIONAL EVIDENCES. IN THE IMPUGNED ORDER ITS ELF, THE ID. AO HAS MENTIONED THAT THE DETAILS WERE FILED, BOOKS OF ACC OUNT & VOUCHERS, ETC. WERE PRODUCED, WHICH WERE EXAMINED. THEREFORE, IT C ANNOT BE SAID THAT THESE ARE ADDITIONAL EVIDENCES. (II) THIS IS UNDISPUTED FACT THAT THE DISALLOWANCE S OF THE C&F EXPENSES HAVE BEEN MADE MERELY ON THE GROUND OF NON -DEDUCTION OF TAX AT SOURCE AND NOT OTHERWISE. ON THE BASIS OF SU CH EXAMINATION, THE THEN AO CAME TO THE CONCLUSION THAT SINCE ON SUCH C &F EXPENDITURE, NO DEDUCTION OF TAX HAS BEEN MADE THE SAME ARE NOT ALL OWABLE U/S 40(A)(IA). IT MEANS THE SAME WAS AVAILABLE FOR VERI FICATION BY THE THEN ID. AO. THE APPELLANT-ASSESSEE ONLY PRODUCED COPIES OF DEBIT NOTES FOR EXPENSES, BILLS OF AGENTS, LEDGER ACCOUNT, EXPORT B ILLS, ETC. FOR RE- VERIFICATION OF THE APPELLATE AUTHORITY THAT CANNOT BY ITSELF LEAD TO THE INFERENCE THAT THE SAME ARE ADDITIONAL EVIDENCES. (III) IN CIT V. PODDAR SWADESH UDYOG (P) LTD. (200 7) 295 ITR 252 (GAU), IT HAS BEEN HELD THAT CIT (A) DOES NOT APPEA R TO HAVE COMMITTED 6 ANY ERROR IN LAW IN RELYING UPON THE DOCUMENTS FILE D SUBSEQUENTLY AT THE APPELLATE STAGE, WHICH ARE IN CONTINUATION OF THE B OOKS OF ACCOUNT AND OTHER DOCUMENTS FILED BEFORE THE AO. WITHOUT PREJUD ICE, IT IS SUBMITTED THAT IN ANY CASE, THE DATA WAS EMANATING FROM THE R EGULAR BOOKS OF ACCOUNT PRODUCED BEFORE THE ID. AO. (IV) IT IS RESPECTFULLY SUBMITTED THAT THE SUB-RUL E (2) OF RULE 46A REQUIRES THE FIRST APPELLATE AUTHORITY TO ALLOW THE AO, A FURTHER OPPORTUNITY TO REBUT THE FRESH EVIDENCE FILED BY TH E ASSESSEE AND AS SUCH, THE SAME HAS NOT CAUSED ANY DAMAGE OR PREJUDI CE TO THE CASE OF THE AO IN REAL TERMS, WHEN HE HAS BEEN PROVIDED SUC H OPPORTUNITY. OTHERWISE ALSO, THE POWERS OF FIRST APPELLATE AUTHO RITY ARE VERY WIDE AND CO-TERMINUS WITH THOSE OF AO AND CAN HAVE THE SCOPE OF IN ITS ADMIT THE EVIDENCE BY VIRTUE OF EXPLANATION TO SECTION 251 OF THE ACT. AS TO THE CONFESSION OF DISALLOWANCES BY THE ASSES SEE, IT IS STATED THAT: (I) THAT THE THEN AO IN HIS ORDER RECORDED THE FO LLOWING OBSERVATIONS: 'THE AR AGREED TO DISALLOWANCE OF EXPENSES INCURRED ON PAYMENTS MADE TO CLEARING AND FORWARDING AGENTS ON WHICH TAX WAS SUPPOSED TO BE DEDUCTED AS PER THE PROVISIONS OF SECTION 194C O F THE IT ACT AND HAD NOT BEEN DONE SO.' THUS, HERE IS A CASE, WHERE THE ASSESSEE CONCEDED CONDITIONALLY ON LAW POINT THAT IF ANY TAX WAS DEDUCTIBLE U/S 194C ON PA YMENTS MADE TO THE C&F AGENTS AND HE FAILED TO DO SO, THEN DISALLOWANC E OF EXPENSES MAY BE MADE. IT IS SUBMITTED THAT THIS CONFESSION IS OF A LEGAL POSITION WHICH DOES NOT BIND THE ASSESSEE. IT IS STATED THAT ADMISSIONS OR CONFESSIONS BASED ON MATERIAL CANNOT BE SAID TO BE CORRECT AND BINDING. (II) THAT EVEN AT THE TIME OF APPEAL BEFORE THE T HEN CIT(A), THE APPELLANT-ASSESSEE HAD MADE EVERY RESERVATION ABOUT THE CONCESSION SO MADE. 7 (III) THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS NOT MERE QUESTION OF FACT BUT IS QUESTION OF LAW AS WELL IN THAT WHET HER PROVISIONS OF SECTION 194C ARE APPLICABLE TO THE ASSESSEE'S CASE. THE RIG HTS OF THE ASSESSEE NEED TO BE DETERMINED ON A TRUE INTERPRETATION OF T HE PROVISIONS OF LAW AND MERELY BECAUSE THE ASSESSEE OFFERS THE INCOME, THE SAME CANNOT BE HELD TO BE RIGHTLY ASSESSED, IF THERE IS NO AUTH ORITY IN LAW TO ASSESS THE SAME. (IV) IT IS A SETTLED LAW THAT NO TAX CAN BE IMPOS ED OR COLLECTED WITHOUT AUTHORITY OF LAW AND MERELY BECAUSE THE ASSESSEE AD MITS OR CONCEDES BEFORE THE AO THAT PARTICULAR AMOUNT IS TAXABLE IN LAW, IT CANNOT BE BROUGHT TO TAX. IF STILL THE AO HAS BROUGHT THE SAM E TO TAX BASED MERELY ON CONFESSION MADE BY THE ASSESSEE, IT CANNOT BE EQ UATED TO A CONFESSION AS REGARDS FACTS, AND IT CANNOT BE SAID THAT THE ASSESSEE CAN HAVE NO RIGHT OF APPEAL WHEN IT LATER ADVISED OR IN FORMED OF CORRECT POSITION OF LAW. (V) THAT THE ID. AO DERIVES THE POWER TO ASSESS AN AMOUNT AS INCOME ONLY FROM THE PROVISIONS OF THE TAXING ENACTMENT AN D NOT FROM THE CONFESSION MADE BY THE ASSESSEE THAT THE SAME IS TA XABLE UNDER THE ENACTMENT. IT DOES NOT RELIEVE THE AO OF HIS DUTY T O EXAMINE WHERE THE INCOME IS PROPERLY SO ASSESSABLE. 02. THE SECOND PARA OF THE REMAND REPORT IS SELF-E XPLICIT AND NEEDS NO COMMENT AS THE ID. AO HAS NOT DISPUTED THE SAME. TH E ID. AO HIMSELF HAS CONFIRMED THAT HE RECEIVED RESPONSES FROM TWO C &F AGENTS WHEREAS ONE SUCH PARTY HAS LEFT. 03. AS TO THE THIRD PARA, IT IS SUBMITTED THAT THE RE IS NO ISSUE OF NOT PRODUCING THESE EVIDENCES DURING THE COURSE OF ASSE SSMENT PROCEEDINGS FOR THE REASONS ALREADY STATED IN PARA NO. 01, SUPRA. THE ID. AO WITHOUT GOING INTO MERITS OF THE CASE, STATE D THAT SINCE THE ASSESSEE DEBITED ALL THE AMOUNT UNDER THE HEAD 'CLE ARING & FORWARDING EXPENSES', THE SAME ARE LIABLE TO DEDUCTION OF TAX AT SOURCE. IT IS REITERATED THAT THE C&F AGENT INCUR CERTAIN EXPENSE S ON BEHALF OF THE 8 ASSESSEE, WHICH ARE REIMBURSED TO HIM UPON SUBMISSI ON OF DEBIT NOTES TO THE ASSESSEE. THE C&F AGENTS, ON BEHALF OF THE A SSESSEE, MAKE PAYMENT AND RAISE SEPARATE DEBIT NOTES FOR REIMBURS EMENT OF EXPENSES INCURRED ON BEHALF OF THE ASSESSEE AND ALSO SEPARAT E INVOICES FOR AGENCY CHARGES ARE RAISED. THEREFORE, THE PROVISION S OF SECTION 194C ARE NOT ATTRACTED ON SUCH PAYMENTS MADE. IT IS FURT HER STATED THAT SECTION 194C SPEAKS OF THE PAYMENTS TO 'RESIDENTS' ONLY AND THE SHIP- OWNERS ARE NOT A 'RESIDENT'. IT IS FURTHER STATED THAT PAYMENTS REFERRED TO ARE NOT PAYMENTS FOR 'CARRYING OUT ANY WORK' WITHIN THE MEANING OF SECTI ON 194C. MOST OF THOSE PAYMENTS ARE BY WAY OF REIMBURSEMENT OF PAYME NTS, MADE BY THE AGENT FOR AND ON BEHALF OF THE ASSESSEE. THEY DO NO T REPRESENT PAYMENTS FOR 'CARRYING OUT ANY WORK' BY THE AGENT. AS ALREADY STATED IN OUR EARLIER SUBMISSIONS, THE PAYMENT MADE BY WAY OF REIMBURSEMENT OF EXPENSES TO THE AGENT DOES NOT ATTRACT ANY PROVISION FOR DEDUCTION OF TAX AT SOURCE. THIS IS O BVIOUS BECAUSE NO 'INCOME' IS EMBEDDED IN SUCH PAYMENT. IT IS FURTHER STATED THAT DEBITING ALL EXPENSES PERTAINING TO C&F ACTIVITY IN ONE COMM ON ACCOUNT HEAD BY THE ASSESSEE IS IN ACCORDANCE WITH THE ACCEPTED ACC OUNTING PRACTICE AND DOES NOT CHANGE CHARACTER OF THE TRANSACTIONS. HENCE, THE STAND- TAKEN BY THE ID. AO IS NOT JUSTIFIED. 04. AS TO THE FOURTH PARA, THOUGH COPY OF THE SAID ACCOUNT IS NOT PROVIDED TO US, IT IS SUBMITTED THAT THE ID. AO HIM SELF IN PARA NO. 3 OF HIS REMAND REPORT STATED THAT HE HAS RECEIVED COPIES OF SEPARATE DEBIT NOTES AND BILLS FROM M/S KRISHNA CLEARING AGENCY AN D AS SUCH, THERE IS NO POINT IN RAISING THE ISSUE THAT THE SAME HAVE BE EN DEBITED TO ONE SINGLE ACCOUNT BY THE SAID PARTY. AS A MATTER OF FA CT, THE SAID PARTY HAS MADE AVAILABLE TO THE AO, A COPY OF LEDGER ACCOUNT OF THE APPELLANT- ASSESSEE, WHICH NATURALLY WILL HAVE ALL TRANSACTION S WITH THE APPELLANT IN A SINGLE ACCOUNT ONLY AND THERE IS NO PERVERSITY IN THE SAME, ESPECIALLY WHEN THE PARTY HAS ALREADY FURNISHED INDIVIDUAL DEB IT NOTES AND BILLS TO THE ID. AO., WHICH ARE NOT IN DISPUTE. AGAIN, IT IS ALWAYS A PRACTICE THAT IN 9 RESPECT OF ONE PARTY, ONLY A SINGLE ACCOUNT IS OPEN ED AND MAINTAINED.' 8. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE REMAND REPORT OF THE ASSESSING OFFICER, SUSTAIN ED THE ADDITION OF RS. 1,52,945/- BY OBSERVING IN PARA 2.4 OF THE IMPUGNED ORDER, WHICH READS AS UNDER:- 2.4. I HAVE CONSIDERED THE DIRECTION OF THE HO NOURABLE TRIBUNAL GIVEN IN THE ORDER MENTIONED SUPRA, REMAND REPORT O F THE A.O. AS WELL AS THE SUBMISSIONS OF THE APPELLANT. (I) AS REGARDING THE FIRST ISSUE OF AGREEMENT OF T HE APPELLANT FOR THE PROPOSED DISALLOWANCE OF RS.40,18,077/-, IT IS NOTE D THAT AS PER THE ORIGINAL ASSESSMENT ORDER, THE A.O. HAS MENTIONED A S UNDER:- 'TO THE ABOVE QUESTION THE A/R. AGREED TO DISALLOWA NCE OF EXPENSES INCURRED ON PAYMENTS MADE TO CLEARING AND FORWARDIN G AGENTS ON WHICH TAX WAS SUPPOSED TO BE DEDUCTED AS PER THE PR OVISIONS OF SECTION 194C OF THE I.T. ACT AND HAD NOT BEEN DONE SO. THE TOTAL AMOUNT ON WHICH TAX WAS SUPPOSED TO BE DEDUCTED WAS RS.40, L8 ,077. THE APPELLANT HAS EXPLAINED THAT THE APPELLANT HAS CONDITIONALLY CONCEDED ON POINT OF LAW THAT IF ANY TAX DEDUCTIBLE UNDER SECTION 194C ON THE PAYMENTS MADE TO C&F AGENTS AND FAILED TO DO SO, THEN DISALLOWANCE OF EXPENSES MAY BE MADE. THIS INVOLVES AN ISSUE OF LAW WHETHER PAYMENTS MADE BY THE APPELLANT WERE LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194C OR NOT. THE RIGHT OF THE APP ELLANT HAS TO BE DETERMINED ON TRUE INTERPRETATION OF LAW AND THE AS SESSEE CAN BE TAXED AS PER THE AUTHORITY OF THE LAW ONLY. THE APPELLANT HAS RELIED ON THE DECISION IN THE CAS E OF CHHAT MULL AGGARWAL V. CIT 8 CTR (P & H) 368 WHERE THE ASSESSE E HAD AGREED TO THE ADDITION IN THE INCOME AND IT HAS BEEN HELD THA T THE PROVISIONS OF SECTION 246(1)( C ) ENTITLE AN ASSESSEE TO FILE AN APPEAL AGAINST THE ORDER OF THE ITO BEFORE THE AAC WHERE THE ASSESSEE DENIED HIS LIABILITY TO BE 10 ASSESSED UNDER THE ACT. IT IS A DIFFERENT MATTER, I F THE AAC COMES TO THE CONCLUSION THAT THE ORDER WAS PASSED ON THE ADMISSI ON OF THE ASSESSEE AND THE ASSESSEE IS UNABLE TO EXPLAIN THAT THE ADMI SSION WAS WRONGLY RECORDED UNDER SOME MISTAKEN BELIEF OF FACT AND LAW ; IN THAT CASE, THE AAC MAY DISMISS THE APPEAL ON MERITS, BUT IT CANNOT BE HELD AS A MATTER OF LAW THAT NO APPEAL IS COMPETENT. FURTHER IT HAS BEEN HELD IN THE CASE OF RAJPAL SINGH VS. ITO 94 ITD 79 (ASR) THAT IF THE ASSESSEE HAD AGREED BEFORE THE AO BECAUSE OF WRONG APPRECIATION OF PROVISIONS OF LAW, DOORS SHOULD NOT BE CLOSED FOR HIM FOR THE SIM PLE REASON THAT HE HAD AGREED BEFORE THE A.O. IN THE PRESENT CASE, THE APPELLANT HAS MADE OUT A C ASE THAT THE ABOVE CONCESSION WAS GIVEN BY APPELLANT CONDITIONALLY ABO UT APPLICATION OF PROVISIONS OF SECTION 194C TO THE PAYMENT MADE BY T HE APPELLANT. IF THE PAYMENTS ARE COVERED UNDER SECTION 194C, THEN ONLY ABOVE ADDITION COULD BE MADE. THE A.O. HELD THAT ABOVE PAYMENTS AR E LIABLE TO TAX DEDUCTION UNDER SECTION 194C WHILE APPEAL HAS BEEN FILED STATING THAT SECTION 194C DOES NOT APPLY TO ABOVE PAYMENTS AND I T IS POINT OF LAW TO BE DECIDED IN FACTS AND CIRCUMSTANCES OF THE CASE. IN VIEW OF ABOVE DISCUSSION, IT IS APPARENT THAT AP PEAL IS ADMISSIBLE AS IT WAS ONLY A CONDITIONAL AGREEMENT FOR ADDITION PROVI DED SECTION 194C APPLIES TO THE PAYMENTS, WHICH IS APPEALABLE POINT OF LAW. (II) THE SECOND ISSUE IS REGARDING AS HOW THE GROS S AMOUNT OF SUM PAYABLE IS NOT LIABLE TO DEDUCTION OF TAX AT SOURCE WITHOUT ESTABLISHING THAT THESE WERE THE REIMBURSEMENT OF EXPENSES. THE THIRD CONNECTED ISSUE IS THE PRINCIPLE SETTLED BY THE HONOURABLE SU PREME COURT IN THE CASE OF ASSOCIATED CEMENT COMPANY LTD -201-ITR 435 AS MENTIONED IN THE ORDER OF THE HONOURABLE IT AT. IN THIS REGARD I T HAS BEEN EXPLAINED THAT PROVISIONS OF SECTION 194C ARE NOT ATTRACTED O N THE PAYMENTS MADE TO C&F AGENTS AS THE C&F AGENTS HAVE INCURRED CERTA IN EXPENSES ON BEHALF OF THE APPELLANT WHICH WERE REIMBURSED TO HI M UPON THE SUBMISSION OF DEBIT NOTE TO THE ASSESSEE. THE C&F A GENTS HAVE RAISED SEPARATE DEBIT NOTE FOR REIMBURSEMENT OF EXPENSES I NCURRED BY THEM ON 11 BEHALF OF THE APPELLANT AND SEPARATE INVOICE FOR TH E AGENCY CHARGES. MOST OF THE PAYMENTS TO C & F AGENTS ARE BY WAY OF REIMBURSEMENT OF EXPENSES WHICH WERE INCURRED BY C& F AGENTS ON BEHA LF OF THE ASSESSEE AND THEY DID NOT REPRESENT PAYMENTS FOR CA RRYING OUT ANY WORK BY THE AGENT. SEPARATE BILLS FOR AGENCY CHARGES HAV E BEEN RAISED FOR THE SERVICES PROVIDED BY THE SAID C& F AGENTS. IN THE A MOUNT REIMBURSED TO THE C & F. AGENT NO ELEMENT OF INCOME IS EMBEDDED I N SUCH PAYMENT AND IN THIS REGARD, THE APPELLANT HAS PLACED RELIAN CE ON THE DECISION IN THE CASE OF ACIT VS. GRANDPRIX FAB (P)LTD -128 TTJ (DEL) 60, UTILITY POWER TECH. LTD VS.ACIT -2010- TIOL 545-ITAT, MUMBA I. THE APPELLANT HAS GIVEN THE DETAILS OF AMOUNT PAID AS R EIMBURSEMENT OF EXPENSES OF RS.39,52,331 IN HIS SUBMISSION AND AGEN CY CHARGES OF RS.1,49,547 AS MENTIONED SUPRA ON PAGE 10 OF THIS O RDER. IN SUPPORT OF THE CLAIM, THE APPELLANT HAS ALSO SUBMITTED SEPARAT E BILLS FOR AGENCY COMMISSION PAID TO THE C & F AGENTS AND DEBIT NOTE REGARDING THE REIMBURSEMENT OF EXPENSES INCURRED BY THE C& F AGEN TS ON BEHALF OF THE ASSESSEE FOR EXPORT OF GOODS. IN VIEW OF ABOVE, IT IS APPARENT THAT THE ABOVE AMOUNT REPRESENT REIMBURSEMENT OF EXPENSE S TO C & F. AGENTS AND THESE EXPENSES WERE INCURRED FOR SHIPPIN G LINE, CONCOR CHARGES, EXAMINATION CHARGES, CUSTOM SEALING CHARGE S, UNLOADING, CHOCKING, SHIFTING, LABOUR CHARGES ETC. FOR WHICH T HE C&F AGENT HAS ISSUED DEBIT NOTE. IN VIEW OF ABOVE FACTS, IT IS AP PARENT THAT THE ABOVE MENTIONED EXPENSES REPRESENT REIMBURSEMENT OF EXPEN SES AS PER DEBIT NOTE RAISED. HOWEVER, AMOUNT OF RS.75,185 (6432 AGE NCY CHARGE + 68,753 EXPENSES) RELATING TO BILL NO.KCA/6L DATED 2 9.4.2004 PERTAINS TO LAST ASSESSMENT YEAR 2004-05 WHICH ARE NOT ALLOWABL E AS THEY ARE PRIOR PERIOD EXPENSES AND ASSESSEE HAS FOLLOWED MERCANTIL E SYSTEM OF ACCOUNTING. IN THIS REGARD, IN THE CASE OF ASSOCIATED CEMENT CO MPANY, IT IS SEEN THAT IT WAS A CASE OF CONTRACTOR. IT WAS A CASE IN WHICH CONTRACT WAS SIGNED BY ACC (ASSESSEE) FOR LOADING PACKED CEMENT BAGS FROM ITS PACKING PLANT NOS. 1 & 2 INTO WAGONS OR TRUCKS FOR WHICH THE CONTRACTOR WAS TO BE PAID OF 41 PAISA CEMENT HANDLED IN PACKIN G PLANT NO.L AND 30 PAISA CEMENT HANDLED IN PACKING PLANT NO.2 FOR EACH TONE AS PER CLAUSE 12 12 OF THE CONTRACT. CLAUSE 13 CONTAINS A RECITAL TH AT 'THE RATE OF LOADING IN CL.12 HAD BEEN WORKED OUT ON THE BASIS OF D.A. H .R.A. PER DAY PER WORKER STIPULATED CERTAIN ADDITIONAL PAYMENT ON ACC OUNT OF DIFFERENCE IN D.A, AS PER THE SECOND WAGE BOARD RECOMMENDATION. T HE ASSESSEE CLAIMED THAT HE WAS NOT LIABLE FOR DEDUCTION OF TAX UNDER SECTION 194C ON THE SUM PAID TO THE CONTRACTOR AS PER CLAUSE 13 OF THE CONTRACT. IN THIS REGARD IT WAS HELD THAT AS PER PROVISIONS OF S ECTION 194C(1), THERE IS NOTHING WHICH PERMITS EXCLUSION OF AN AMOUNT PAID O N BEHALF OF THE ORGANIZATION TO THE CONTRACTOR ACCORDING TO C1.13 O F THE TERMS AND CONDITION OF THE CONTRACT IN REIMBURSEMENT OF THE A MOUNT PAID BY HIM TO WORKERS FROM THE SUM ENVISAGED THEREIN. IN THIS REG ARD, IT HAS BEEN ARGUED THAT BY THE APPELLANT THAT THE ABOVE DECISIO N IS APPLICABLE IF THERE IS A COMPOSITE BILL WHICH DOES NOT DIFFERENTI ATE BETWEEN THE REIMBURSEMENT AND OTHER SUM. WHILE IN THE PRESENT C ASE, THERE IS NO COMPOSITE BILL. THERE ARE SEPARATE BILLS RAISED FOR REIMBURSEMENT OF EXPENSES AND AGENCY CHARGES AND IN THE DECISION SUB SEQUENT TO ABOVE CITED DECISION , MANY COURTS HAVE HELD THAT THERE B EING NO INCOME INCLUDED IN THE AMOUNT REIMBURSED , THE SAME CANNOT BE SUBJECTED TO TAX DEDUCTION AT SOURCE AS HELD IN THE DECISION ITO VS. DR. WILLMAR SCHWABE INDIA (P)LTD -3 SOT 71 AFTER REFERENCE TO T HE DECISION IN THE CASE OF ASSOCIATED CEMENT COMPANY . SO, THE DECISIO N IN THE CASE OF ASSOCIATED CEMENT COMPANY 201-ITR 435 (SC) IS DISTI NGUISHABLE. (III) REGARDING REIMBURSEMENT OF EXPENSES AS IN CO NTEXT OF SECTION 194( C) IT HAS BEEN HELD BY JURISDICTIONAL TRIBUNAL , JODHPUR BENCH IN THE CASE OF ACIT, CIRCLE-L,UDUIPUR VS. PYROECH ELECTRON ICS PVT. LTD IN ITA NO.390/JODH/2010 FOR ASSESSMENT YEAR 2007-08 VIDE O RDER DATED 16.12.2011 WHERE PAYMENT OF RS.8,66,365 ON ACCOUNT OF REIMBURSEMENT WAS HELD ALLOWABLE WITHOUT TAX DEDUCT ION AT SOURCE UNDER SECTION 194C READ WITH SECTION 40(A)(IA) AS U NDER:- 'AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ID. CIT (A) WAS JUSTIFIED IN ALLOW ING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF THAT THESE PAYMENTS WERE ON ACCOUNT OF REIMBURSEMENT OF EXPENDITURE WHICH DO NOT CONSTITUT E ANY INCOME IN THE 13 HANDS OF PAYEE. SIMILAR VIEW HAS BEEN EXPRESSED BY HONOURABLE DELHI HIGH COURT IN THE CASE OF GRANDPRIX FAB PVT.LTD, 34 DTK 248. THEREFORE, WE ARE OF THE VIEW THAT ID. CIT (A) WAS JUSTIFIED IN HOLDING THAT ON ACCOUNT OF REIMBURSEMENT OF EXPENSES NO LIABILIT Y WAS THERE UNDER SECTION 194C'. IN THE CASE OF THE APPELLANT, THE APPELLANT HAS MAD E PAYMENTS ARE AS UNDER: NAME OF C&F AGENT REIMBURSEMENT OF EXPENSES (RS.) AGENCY CHARGE (RS.) PAYMENT ' (RS.) PAID/CREDITED TO THE ACCOUNT OF M/S ASHIRWAD CLEARING AGENCY 1846622/- 77760/- 1924382/- PAID/CREDITED TO THE ACCOUNT OF M/S KRISHNA CLEARING AGENCY 241849/- 30747/- 272596/- PAID/CREDITED TO THE ACCOUNT OF M/S A.K.BISWAS 1863860/- 41040/- 1904900/- TOTAL 3952331/- 149547/- RS.4101878/- AS REGARDS, THE AGENCY CHARGES OF RS. 1,49,547 ON WHICH TDS IS REQUIRED TO BE MADE, IT MAY BE MENTIONED HERE THAT AS PER THE AMENDED PROVISO TO SUB SECTION (3)(I) W.E.F. 1.10.2004, TDS IS ONLY TO BE DEDUCTED IF THE PAYMENT EXCEEDS RS.50,000 IN FINANCIAL YEAR. IN VIEW OF THIS, NO TAX WAS REQUIRED TO BE DEDUCTED ON PAYMENTS MADE TO M/S. KRISHNA CLEARING AGENCY AND OF M/S. A.K. BISWAS AS THE AGGR EGATED AMOUNT PAID IN THE FINANCIAL YEAR IS BELOW THE PRESCRIBED LIMIT OF RS. 50,000. EACH AMOUNT PAID TO M/S. KRISHNA CLEARING AGENCY WA S BELOW RS.20,000/- (RS.5956+4085+3427+ 2772+5354+SERVICE T AX THEREON 9153). SIMILAR IS POSITION REGARDING M/S. A.K. BISW AS (6000+15,000+ 17000+ SERVICE TAX 3040). ONLY THE AMOUNT OF RS. 77 ,760/- TO M/S, ASHIRWAD CLEARING AGENCY WHICH IS MORE THAN RS. 50, 000/- IS DISALLOWABLE U/S. 40(A)(IA). (IV) THE NEXT ISSUE IS WHETHER THE PAYMENTS ARE CO VERED UNDER SECTION 172(8) OF THE ACT AND CIRCULAR NO. 723 OF T HE ACT OR NOT. IT IS SEEN THAT FOR THE PAYMENTS MADE TO THE SHIPPING BUSINESS OF THE NON RESIDENT 14 U/S. 172 , PROVISIONS OF SECTION 194( C ) AND 195 A RE NOT APPLICABLE AND CIRCULAR NO.723 SPECIFIES THAT SHIPPING AGENTS OF N ON RESIDENT SHIP OWNER, STEPS INTO THE SHOES OF THE PRINCIPAL . SO, FOR THE PAYMENTS MADE TO THE SHIPPING AGENT OF NON RESIDENT SHIPPING OWNE R, PROVISIONS OF SECTION 194C AND 195 DO NOT APPLY. FURTHER, SECTION 172(8) SPECIFIES THE AMOUNT OF SUCH PAYMENTS WHICH INCLUDE THE AMOUNT PA ID OR PAYABLE BY WAY OF DEMURRAGE CHARGES OR HANDLING CHARGES OR ANY OTHER AMOUNT OF SIMILAR NATURE. IN THE ASSESSEE'S CASE, VARIOUS PAY MENTS AS PER 1ST ORDER OF THE CIT(A) ARE AS UNDER- DOCUMENTATION CHARGES RS. 190 CONCOR CHARGES RS. 12,65,185 (WRON GLY TAKEN IN EARLIER ORDER AT 12,65,285) SHIPPING LINE CHARGES RS.21,56,157 (- DO - AT RS. 17,56,157) DOC. CHARGES RS.375 SURVEY CHARGES RS.5,700 (- DO - AT RS.6000) EXAMINATION CHARGES RS.30,400 CUSTOM SEALING CHARGES RS.26,600 UNLOADING CHARGES RS.62,018 CHOKING CHARGES RS.2,20,000 SHIFTING CHARGES RS,49,666 LABOUR CHARGES RS.43,189 OTHER RS.92,851 RS.39,52,331 AGENCY CHARGE RS. 149547 TOTAL RS. 41,01,878 THE MAIN EXPENSES ARE CONCOR CHARGES AND SHIPPIN G LINE CHARGES. IN SUPPORT OF THE CLAIM THAT THESE EXPENSE S FALL IN CATEGORY OF EXPENSES MENTIONED UNDER SECTION 172(8), THE APPELL ANT HAS RELIED ON THE DECISION IN THE CASE OF ITO VS. FREIGHT SYSTEMS (INDIA) (P)LTD -103 TTJ (DEL) 103 WHERE IT HAS BEEN HELD THAT PAYMENTS OF OCEAN FREIGHT AND INLAND HAULAGE CHARGES PAID BY THE ASSESSEE THR OUGH THE PERSON ACTING AS C & F AGENT CANNOT BE SUBJECTED TO TDS BY VIRTUE OF SECTION 172 OF THE ACT AND CIRCULAR NO.723 DATED 19.09.1995 . IN THE ASSESSEE'S CASE ALSO, PAYMENTS ARE ON ACCOUNT OF OCEAN FREIGHT AND CONCOR CHARGES THROUGH THEIR AGENT OF SHIPPING LINE FOR WH ICH DEBIT NOTE HAVE 15 BEEN PLACED ON RECORD. MOREOVER, THE JURISDICTIONAL ITAT, JODHPUR BENCH, J ODHPUR HAS ALLOWED THE APPEAL OF THE ASSESSEE IN THE CASE OF ACIT, CIR CLE-L,UDAIUR VS M/S. MINPRO INDUSTRIES ITA NO.394/JODH/2008 ORDER DATED 09.12,2011 ALLOWED OCEAN FREIGHT , REPO CHARGES, CCI CHARGES, TERMINAL HANDLING CHARGES, BILL OF LADING/SHIPPING BILL AND SUNDRY CH ARGES AFTER CONSIDERING THE ISSUE IN DETAILS HOLDING AS UNDER- 'WE HAVE GONE THROUGH THE BOARD CIRCULAR NO.723 CO PY OF WHICH IS PLACED ON RECORD AND CONTENTS OF THE SAME HAVE BEEN TABULATED IN THE ORDER OF ID. CIT (A) ALSO AND FOUND THAT ABOUT CERT AIN PAYMENT IT HAS BEEN CLARIFIED BY THE BOARD THAT ON THESE PAYMENTS PROVISIONS OF SECTION 194 AND 195 WILL NOT APPLY AND PROVISIONS OF SECTIO N 172 WILL BE APPLICABLE. THE CIT (A) HAS TAKEN INTO CONSIDERATIO N AND THIS CIRCULAR AND FOUND THAT CERTAIN PAYMENTS MADE BY THE ASSESSE E TO THE C&F AGENTS WHO HAVE ALREADY MADE THE PAYMENT ON BEHALF OF THE ASSESSEE WERE NOT COVERED EITHER UNDER SECTION 194C OR UNDER SECTION 195, S THEY COVERED UNDER THE PROVISIONS OF SECTION 172. THEREF ORE, WE HOLD THAT ID CIT(A) WAS JUSTIFIED IN HOLDING THAT ON CERTAIN PAY MENTS THE PROVISIONS OF SECTION 194C AND 195 WERE NOT APPLICABLE AND, THERE FORE, ASSESSEE WAS NOT LIABLE TO DEDUCT TDS . SUCH PAYMENTS HAVE BEEN DISCUSSED BY ID. CIT (A) IN HIS ORDER. THEY WERE ON ACCOUNT OF SEA F REIGHT TRANSPORT WHICH WERE AT RS. 1,16,11,550 CCI CHARGES, STEAMER FREIGH T CHARGES, REPO CONTAINER CHARGES. REMAINING EXPENSES REIMBURSED BY THE ASSESSEE WERE ON ACCOUNT OF TRANSPORTATION CHARGES AT RS.20, 31,226 AND ON THIS AMOUNT THE AGENT HAS DEDUCTED TDS BEFORE MAKING PAY MENT TO THE PRINCIPAL. SIMILARLY, TDS HAS BEEN DEDUCTED ON SHIP PING BILL OF RS.2,18,718 . AGENCY CHARGES OF RS.3,61,550 PAID BY THE ASSESSEE ON WHICH TDS HAS BEEN DEDUCTED BY THE ASSESSEE. THERE WERE OTHER SMALL PAYMENT OF RS.9816 ON ACCOUNT OF OTHER EXPENSES ON WHICH TDS WAS NOT APPLICABLE. IN THIS WAY, THE ENTIRE ADDITION OF RS.1,60,41,692 WAS DELETED BY ID. CIT (A). THE ID. CIT(A) HAS DISCUSSE D EACH ITEM IN DETAIL AND THEN ONLY IT HAS BEEN HELD THAT ASSESSEE WAS NO T LIABLE TO MAKE DEDUCTION OF TDS ON REIMBURSEMENT EXPENSES. VARIOUS BENCHES OF THE 16 TRIBUNAL ARE TAKING A CONSISTENT VIEW THAT IF THE P AYMENTS ARE MADE ON ACCOUNT REIMBURSEMENT, THEN NO TDS IS LIABLE TO BE DEDUCTED ON BEHALF OF THE PAYER I.E. ASSESSEE.' (V) AS REGARDING THE EVIDENCE PLACED FOR THE TIME BEFORE CIT (A) WHICH WERE CONSIDERED IN CONTRAVENTION OF RULE 46A OF THE I.T. RULES ,IT MAY BE MENTIONED HERE THAT AS DIRECTED BY THE HONOU RABLE TRIBUNAL, EVIDENCES WERE SENT TO THE A.O. AND HE HAS SUBMITTE D HIS REPORT IN THIS REGARD AS REPRODUCED SUPRA. THE ABOVE EVIDENCES ARE ADMITTED AS IT HAS BEEN MENTIONED BY THE APPELLANT AS WELL AS IN A SSESSMENT ORDER THAT BOOKS OF ACCOUNT AND VOUCHERS AND DETAILS WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS AND IT HAS NOT BEEN POIN TED OUT BY THE A.O. SPECIFICALLY REQUIRED THE SAID BILLS IN SUPPORT OF THE DETAILS OF CLEARING AND FORWARDING EXPENSE BEFORE MAKING THE DISALLOWANCE S TATING IT SAID TO BE ON AGREED BASIS. IN VIEW OF ABOVE, THE EVIDENCE IS ADMITTED UNDER RULE 46A(3), RULE 46A(4) AND THE ISSUE IS DECIDED ON MER IT CONSIDERING THE REPORT OF THE A.O. AND SUBMISSIONS MADE BY THE APPE LLANT THEREON. AS REGARDING THE MERITS, THE AO HAS OBTAINED COPY O F BILLS, DEBIT NOTES AND COPY OF LEDGER ACCOUNT FROM M/S. ASHIRWAD TRADI NG AGENCY AND M/S. KRISHNA CLEARING AGENCY WHILE M/S. A.K. BISWAS HAD LEFT AND THE AO MENTIONED THAT ASSESSEE HIMSELF IS DEBITING THE ABOVE AMOUNT IN CLEARING & FORWARDING EXPENSES A/C AND M/S. KRISHNA CLEARING AGENCY HAS ALSO CREDITED THE AGENCY COMMISSION A/C FOR THE TOTAL AMOUNT. THE APPELLANT HAS REITERATED THAT COPY OF BILLS AS WELL AS THE DEBIT NOTES OBTAINED BY THE AO DIRECTLY FROM THE ABOVE PARTIES SHOW THAT EXPENSES HAVE BEEN REIMBURSED FOR THE DEBIT NOTES ARE NOT LI ABLE FOR TDS U/S. 194C. IT IS IMMATERIAL AS TO IN WHICH ACCOUNT THEY MENTIONED. THE DOCUMENTS OBTAINED BY THE AO SUPPORT CONTENTIONS OF THE APPELLANT REGARDING NATURE OF EXPENSES BEING THE REIMBURSEMEN T OF EXPENSES AND PAYMENT OF AGENCY CHARGES. (VI) AS REGARDING NON ENQUIRY BY THE CIT (A) TO SH OW THAT NON RESIDENT SHIPPING COMPANY OR ITS AGENT HAVE PREPARED AND FUR NISHED RETURN IN 17 TERM OF SECTION 172(3) OF THE ACT OR NO OBJECTION C ERTIFICATES FROM SUCH A.OS. TO DETERMINE THAT THERE WAS NO LIABILITY TO D EDUCT TAX. THE EVIDENCE SUBMITTED BY APPELLANT WERE SENT TO AO FOR EXAMINATION AND HIS COMMENTS HAVE ALREADY BEEN OBTAINED & DISCUSSED , IT MAY BE MENTIONED THAT THE APPELLANT HAS FILED COPIES OF EX PORT DOCUMENTS INCLUDING BILLS OF LADING WHICH SHOWS THAT PAYMENTS HAVE BEEN MADE TO THE NON RESIDENT VESSEL .OWNER OR ITS AGENT. FURTHE R AS PER SEC. 172(6) PORT CLEARANCE CANN'T BE GRANTED UNTIL BY COLLECTOR OF CUSTOMS OR AUTHORIZED PERSON IS SATISFIED THAT TAXES HAVE BEEN PAID OR SATISFACTORY ARRANGEMENT FOR THE SAME HAS BEEN MADE. IN THIS REG ARD, IT HAS BEEN EXPLAINED THAT SECTION 172 CASTS RESPONSIBILITY ON OF PREPARING AND FURNISHING RETURN ON ITS NON RESIDENT SHIPPING LINE OR ITS AGENT AND .NOT ON THE APPELLANT. IN THIS CONTEXT, IT HAS BEEN HELD BY THE HONOURABLE ITAT. AHMADABAD IN THE CASE OF HASHMUK J.PAEL PROP. JASYS HREE INDUSTRIES ITA NO.208/AHD/2009 WHERE CIT (A) HAD DIRECTED THE A.O. TO ALLOW RELIEF SUBJECT TO VERIFICATION OF THE PROOF OF TAX PAID BY THE SHIPPING COMPANY, AS UNDER: 'THE A.O. INVOKED THE PROVISIONS OF SECTION 40(A)(I A) OF THE IT. ACT FOR NON DEDUCTION OF TDS AS REQUIRED UNDER SECT ION 194C OF THE IT ACT. HOWEVER, THE ABOVE PROVISION IS APPL ICATION FOR THE AMOUNTS PAYABLE TO THE RESIDENTS OR THE AMOUNTS PAYABLE TO CONTRACTORS OR SUB- CONTRACTORS BEING RESIDENT. SIMILARLY, THE PROVISIONS OF SECTION 194C OF THE IT ACT APPLY TO T HE AREA OF OPERATION OF TDS WHICH IS CONFINED TO PAYMENTS MADE TO ANY RESIDENTS. THE ASSESSEE IN HIS REPLY SPECIFICALLY P LEADED THAT THE AMOUNT IN QUESTION IS NOTHING BUT REIMBURSEMENT OF FREIGHT CHARGES WHICH WAS PAID TO THE SHIPPING AGENTS FOR C ARRYING MATERIALS FOR SALE. THUS, THE ASSESSEE MADE THE PAY MENT TO THE SHIPPING BUSINESS OF NON RESIDENTS THROUGH SHIP PING AGENT. A SPECIAL PROCEDURE IS PROVIDED UNDER SECTION 172 O F THE IT ACT FOR PAYMENT OF TAXES IN CASE OF ANY SHIP BELONGING TO OR CHARTERED BY A NON RESIDENT WHICH CARRIES PASSENGER , LIVESTOCK, MATERIAL OR GOODS SHIPPED AT A PORT IN I NDIA. IT HAS NOTHING TO DO WITH THE ACTIVITY CARRIED OUT BY THE ASSESSEE. THE 18 BOARD CIRCULAR NO.723 (SUPRA) CLARIFIES BOTH THE PR OVISIONS OF SECTION 172 OF THE IT ACT AND SECTION 194C OF THE I .T ACT AND IT IS PROVIDED THAT IN SUCH CASE THE PROVISIONS OF SEC TION 172 OF THE IT ACT WOULD APPLY AND NO DEDUCTION OF TAX IS R EQUIRED AS PER SECTION 194C OF THE IT ACT. IT IS ALSO CLARIFIE D THAT SINCE THE AGENT ACTS ON BEHALF OF THE NON- RESIDENT SHIP OWNE RS OR CHARTERER, HE STEPS INTO THE SHOES OF THE PRINCIPAL AND ACCORDINGLY, PROVISIONS OF SECTION 194C OF THE IT A CT WOULD NOT APPLY IN THE CASE OF THE ASSESSEE. THE AO HAS ALSO NOT MADE OUT ANY CASE THAT THE ASSESSEE HAS PAID ANY AMOUNT TO THE RESIDENTS. THEREFORE, PROVISIONS OF SECTION 194C OF THE IT ACT HAVE BEEN WRONGLY APPLIED IN THE CASE OF THE ASSESS EE. THE LEARNED CIT (A) WAS, THEREFORE NOT JUSTIFIED IN REM ANDING THE MATTER TO THE FILE OF THE AO FOR VERIFICATION OF TH E DETAILS OF EXPENSES AND DEPOSIT OF THE TAX. THE DIRECTION GIVE N BY THE LEARNED CIT(A) IS CONTRARY TO THE ABOVE PROVISIONS OF LAW. IN VIEW OF THE ABOVE, DISCUSSIONS, WE DO NOT APPROVE T HE FINDINGS OF THE AUTHORITIES BELOW. THE ORDERS OF THE AUTHORI TIES BELOW ARE ACCORDINGLY SET ASIDE AND QUASHED. RESULTANTLY, THE ADDITION IS DELETED.' THE APPELLANT HAS MADE AVAILABLE ALL THE DOCUMENTS AVAILABLE WITH HIM IN SUPPORT OF ITS CLAIM. THERE IS NOTHING CONTRARY ON RECORD TO HOLD AGAINST THE ASSESSEE. IN VIEW OF ABOVE DISCUSSION, ONCE THE SUPPORTING DOCUMENTS ARE SUBMITTED FOR CLAIM OF EXPORT AND PAY MENTS MADE INCIDENTAL THERETO AS PER SECTION 172(8) OF THE I.T ACT, THE ONUS OF THE ASSESSEE IS DISCHARGED. IN THE RESULT, THE DISALLOWANCE OF RS. 77,760/- ON A/C OF AGENCY COMMISSION AND AMOUNT OF RS.75,185 BEING PRIOR PERI OD EXPENSES DISCUSSED EARLIER IS DISALLOWED AND BALANCE AMOUNT OF RS. 39,48,933/- IS ALLOWED. NOW THE DEPARTMENT IS IN APPEAL. 9. DURING THE COURSE OF HEARING, THE LEARNED D.R. S TRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER BUT COULD NOT CONTRO VERT THE AFORESAID FINDINGS GIVEN BY THE LD. CIT(A). 19 10. AFTER CONSIDERING THE SUBMISSIONS OF LEARNED D. R. AND PERUSING THE MATERIAL AVAILABLE ON RECORD, IT APPEARS THAT THE L D. CIT(A) AFTER CONSIDERING THE FACT AND MAKING THE DETAILED DISCUSSION, DELETE D THE IMPUGNED ADDITIONS BY FOLLOWING THE DECISION OF THE I.T.A.T. JODHPUR B ENCH IN THE CASE ACIT CIRCLE-1, UDAIPUR VS. M/S MINPRO INDUSTRIES IN I.T. A. NO. 394/JODH/2008 ORDER DATED 09/12/2011, WE, THEREFORE, ARE OF THE VIEW TH AT THE FACTUAL FINDINGS GIVEN BY THE LD. CIT(A) DO NOT REQUIRE ANY INTERFERENCE O N OUR PART. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 11. IN I.T.A. NO. 254/JODH/2012 FOR THE ASSESSMENT YEAR 2007-08, FACTS ARE SIMILAR TO THE FACTS INVOLVED IN I.T.A. NO. 253/JOD H/2012 FOR THE ASSESSMENT YEAR 2005-06. THE ONLY DIFFERENCE IS THE FIGURES IN VOLVED, THEREFORE, OUR FINDINGS GIVEN IN THE FORMER PARA OF THIS ORDER FOR THE ASSESSMENT YEAR 2005- 06 SHALL APPLY MUTATIS MUTANDIS FOR THE ASSESSMENT YEAR 2007-08. 12. IN THE RESULT, BOTH THE APPEALS OF THE DEPARTME NT ARE DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 12/12/2013). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 12/12/2013 RANJAN* 20 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.