M/s Om Road Carrier, Cuttack V. CIT, Cuttack

ITA 258/CTK/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52356 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 05-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2011
• Court: TRIBUNAL
• Department Lawyers: P TRIPATHY
• Assessee Lawyers: N GUPTA
• Keywords: Assessment record
• Section: 40A(3); 194C

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 258/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.OM ROAD CARRIER, C/O. S.NANDA, BEH INDGOVERNMENT BUS STAND, BADAMBADI,CUTTACK. PAN: AAFO 9295 R VERSUS COMMISSIONER OF INCOME - TAX, CUTTACK. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI N.GUPTA, AR FOR THE RESPONDENT SHRI P.TRIPATHY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : TH IS APPEAL BY THE ASSESSEE AGITATES THE ORDER U/S.263 PASSED BY THE LEARNED COMMISSIONER OF INCOME - TAX, CUTTACK. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENT S, SUBMITTED THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE FIRM IS IN THE TRANSPO RT BUSINESS ON CONTRACT BUSINESS IN A REMOTE AREA. THE MAJOR WORK WAS TO CARRY MINERALS/ORE FROM THE MINING SITE AND STAKE THEM IN THE RAIL YARD FOR ONWARD TRANSMISSION. THE ASSESSEE WAS SUBJECTED TO SCRUTINY FOR THE IMPUGNED ASSESSMENT YEAR WHEN THE ASSES SING OFFICER PASSED THE ORDER U/S.143(3) ON 31.12.2008 WHICH COPY OF THE ORDER MAY KINDLY BE PERUSED. THE ASSESSEE HAD PRODUCED THE BOOKS OF ACCOUNT AND OTHER DETAILS FOR SUBSTANTIATING THE CLAIM OF ALLOWABILITY U/S.37 OF THE I.T.ACT WHEN THE ASSESSING OFF ICER SPECIFICALLY CONSIDERED THE CASE OF THE ASSESSEE FOR DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40A(3). HE NOTED THAT THE ASSESSEE HAD INCURRED EXPENDITURE OF 167,40,043 BY CASH OTHERWISE THAN ACCOUNT PAYEE CHEQUES WHICH REQUIRE D DISALLOWANCE U/S.40A(3). HAVING NOTED THE SAME HE DISALLOWED A SUM OF 3,05,620 ( 20% ) ON WHICH THE ASSESSEE HAD PAID TAX. HE SPECIFICALLY NOTED ITA NO.258/CTK/2011 2 THAT THE CLAIM WAS FOR MULTIPLE PAYMENT S IN NATURE AND NOT MADE TO ANY SINGLE INDIVIDUAL TRANSPORTER. 3. THE LEARNED CIT ASSUM ING JURISDICTION/S.263 SOUGHT TO CONSIDER THE CASE OF THE ASSESSEE ON THE BASIS OF ASSESSMENT RECORDS AVAILABLE TO IT BY GIVING A FINDING THAT A VERBAL CONTRACT WAS INVI SIBLE FOR THE PURPOSE OF ATTRACTING THE PROVISIONS OF SECTION 194C. ON THE BASIS OF SUCH RE - EXAMINATION OF THE ISSUE, HE DIRECTED THE AO FOR FRESH FINDINGS TO BE RECORDED IN WRITING AS TO WHETHER THE CLAIM OF TRANSPORTING CHARGES EXCEEDING 50,000 IN AGGREGATE TO EACH OF THE TRUCK OWNERS TOTALING TO 1,08,22,418 COULD BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA). FOR THIS PURPOSE AN ANNEXURE FORMING PART OF HIS ORDER INDICATED THE REGISTRATION NUMBER OF THE TRUCKS WHICH WERE PAID TRANSPORTATION CHARGED UNDER THE PROVISIONS OF SECTION 40A(3) OBSERVED BY THE ASSESSING OFFICER. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LEARNED CIT ERRED TO TREAT THE PAYMENTS MADE TO THE TRUCK OWNERS AS CONTRACT PAYMENTS AS PER THE DI RECTION TO THE ASSESSING OFFICER FOR DISALLOWING THE SAME U/S.40(A)(IA) WAS TO BE CONSIDERED AS HOLDING A VIEW OTHER THAN UNDER THE PROVISIONS OF SECTION 40A(3). THE ASSESSING OFFICER ON THE OTHER HAND HAD ALREADY PASSED AN ORDER VERIFYING THE PAYMENTS MA DE TO TRUCK OWNERS AS DAY TO DAY CASH PAYMENTS WITHOUT ANY ELEMENT OF CONTRACT ON CONSIDERATION THAT DISALLOWANCE, IF ANY, COULD ONLY BE MADE UNDER THE PROVISIONS OF SECTION 40A(3). HE POINTED OUT THAT THE CASE LAWS CITED BY THE LEARNED CIT WERE NOT DISTIN GUISHED BY HIM INSOFAR AS IT HAS BEEN HELD BY THE ITAT, CUTTACK BENCH IN THE CASE OF R.R.CARYING CORPORATION V. ACIT ION ITA NO.179/.CTK/2009 DT.23.7.2009 THAT ONCE IT HAS BEEN ESTABLISHED THAT THERE WAS NO CONTRACT PAYMENTS IN CHEQUES OR CASH IT WAS A QUE STION OF DISALLO WANCE U/S.40A(3) OR U/S.40(A) (IA) IS TO BE CONSIDERED UNDER THE PROVISIONS OF SECTION 194C. THE ITA NO.258/CTK/2011 3 ASSESSING OFFICER HAD SATISFIED ITSELF THAT THERE WAS NO NEED TO VISIT THE PROVISIONS OF SECTION 19 4C HAD ENTERED INTO EXERCISE OF COMPUTING DIS ALLOWANCE UNDE R THE PROVISIONS OF SECTION 40A (3). HE SUBMITTED THAT THE INDIVIDUAL TRUCK WHICH REGISTRATION NUMBERS HAVE B EEN NOTED BY THE LEARNED CIT HAD BEEN PAID IN CASH NOT UNDER A CONTRACT ENTERED INTO BY THE ASSESSEE WITH THEM BUT ON THE BASIS OF IND IVIDUAL TR IPS UNDERTAKEN BY THEM WHEN THE TOTAL SUM PAID TO THEM EXCEEDI ED 5 0,000 IN A DAY. IT HAS BEEN ESTABLISHED THAT THE CASH PAYMENTS EXCEEDING 50,000 WERE TO BE ON THE BASIS OF INDIVIDUAL TRIPS CARRIED OUT BY THE TRUCKS WAS ESTABLISHED FOR PART DIS ALLOWANCE ONLY BY THE ASSESSING OFFICER U/S.40A(3). THEREFORE, AS HELD BY THE HONBLE APEX COURT IN THE CASE OF MALBAR INDUSTRIAL CO. LTD (243 ITR 83 ) AND GREEN WORLD CORPORATION (314 ITR 81) WHEREIN IT HAS BEEN CLEARLY HELD THAT A VIEW WHICH THE LEARNED CIT HOLDS MAY BE A PLAUSIBLE VIEW BUT CANNOT BE PITTED AGAINST THE VIEW HELD BY THE ASSESSING OFFICER IN PASSING THE ORDER U/S.143(3) WHICH VIEW HAS BEEN ESTABLISHED TO BE TENABLE IN LAW INSOFAR AS THE DISALLOWANCE WAS NOT FOR THE PURPOSE OF BYPASSING THE DISALLOWANCE UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA) WHEN THE CASE IN DISPUTE WAS TO VISIT THE PROVISIONS OF SECTION 194C IN THE FIRST PLACE. HAVING COMPLIED WITH THE PROVISIONS OF THE I.T.ACT, THE LEARNED CIT COULD NOT ENFORCE HIS VIEW WHEN THE ASSESSING OFFICER HAD COMMITTED NO ERROR AND THAT TOO NOT PREJUDICIAL TO THE INTEREST OF REVENUE. HAVING BROUGHT TO TAX THE DISALLOWANCE UNDER THE PROVISIONS OF SECTION 40A(3) THE LEARNED CIT OUGHT NOT TO HAVE INSISTED ON THE ASSESSING OFFICER HAVING COMMI TTED AN ERROR BY NOT INVOKING THE PROVISIONS OF SECTION 194C. 5. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT BY SUBMITTING THAT THE DEEMING PROVISIONS OF SECTION 40A(3) COULD NOT BE EQUATED WITH THE DEEMING PROVISIONS OF DISALLOWANCE U/S.40(A)(IA ) WHICH ERROR HAS BEEN ITA NO.258/CTK/2011 4 COMMITTED BY THE ASSESSING OFFICER WAS RIGHTLY CONSIDERED FOR ASSUM ING JURISDICTION U/S.263 BY THE LEARNED CIT. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE INCLINED TO HOLD THAT THE LEARNED CIT VIDE HIS SHOW - CAUSE NOTICE REQUIRED THE ASSESSEE TO POINT OUT THE ABSENCE OF FINDIN GS OF THE ASSESSING OFFICER THE APPLICABILITY OF THE PROVISIONS OF SECTION 194C. HE HELD THAT THE GROSS RECEIPTS ON TRANS PORTATION FOR THE IMPUGNED ASSESSMENT YEAR WAS 8.61 CRORES OUT OF WHICH TRANSPORT CHARGES PAID AND CLAIMED AT 8.04 CRORES. HE HELD THAT THE SAME COULD NOT HAVE BEEN INCURRED WITHOUT ENTERING INTO ANY CONTRACT WITH INDIVIDUAL TRUCK OWNERS. HE HELD THAT TH E ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS WHEN HE NOTED THAT HAVING VERIFIED THE BOOKS OF ACCOUNT AND THE PAYMENTS THAT HAD BEEN MADE WERE IN MULTIPLE NATURE AND NOT MADE ANY SINGLE INDIVIDUAL TRANSPORT CHARGES SIGNIFIED THAT THERE WAS NO CONTRACTUAL OBLIGATION FOR TRANSPORTATION. APPLYING THE PROVISIONS OF SECTION 263, HE HELD THAT THE GROSS PAYMENT TOTALING 1.08 CRORES REQUIRE D CONSIDERATION OF INVOKING THE PROVISIONS OF SECTION 194C WHICH IS ANNEXED TO HIS ORDER. WE ARE UNABLE TO SATISFY OURSELVES TO THE FINDING ITSELF WHICH ARE ALREADY THERE IN THE ASSESSMENT ORDER , CANNOT BE FURTHER COMPLICATED TO FIND OUT WHETHER THE INDIVIDUAL TRUCK OWNERS REQUIRED ENTERING INTO A CONTRACT AS THE ASSESSEE HAD REQUIRED THE CONSIDERATION FOR INCURRING EXPENDITURE IN CASH WAS WITHOUT ANY CONTRACT AND THE INDI VIDUAL TRUCKS FOR WHICH PAYMENT EXCEEDING 20,000 HAD BEEN CONSIDERED BY THE ASSESSING OFFICER FOR THE PURPOSE OF DISALLOWANCE WAS UNDER THE PROVISIONS OF SECTION 40A(3). IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO CONSIDER THE ENTIRE PAYMENTS IN THE IMPUGNED ASSESSMENT YEAR WHEN HE HAD SATISFIED HIMSELF THAT THE OTHER PAYMENTS DID NOT REQUIRE A VISIT TO INVOKE THE PROVISIONS OF SECTION 1 9 4C. THIS IS BECAUSE, THE LEARNED CIT HAS ITA NO.258/CTK/2011 5 NOTED THE PAYMENTS TOTALING 1.08 CRORES WHICH THE ASSESSING OFFICER HAD ALREADY VERIFIED WERE INCLUDED IN THE PAYMENTS AMOUNTING TO 1.67 CRORES AND THE ASSESSING OFFICER ENQUIRED IN THE TOTAL PAYMENTS WHICH WERE NOT MULTIPLE IN NATURE WAS 15,28,100 ONLY. THE PREJUDICE TO THE INTEREST OF THE REVENUE WAS NOTED BY HIM IN HIS ORDER BY H OLDING THE EXPENDITURE U/S.40A( 3) TO BE TAXED WAS 3,05,620. THEREFORE, WE FIND THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE JUSTIFIED FOR HOLDING THE ASSESSMENT PASSED BY THE ASSESSING OFFICER U/S.143(3) DID NOT SUFFER FROM ANY INFIRMITY AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE INSOFAR AS THE LEARNED CIT TOOK A VIEW OTHER THAN WAS A PLAUSIBLE VIEW ALREADY TAKEN BY THE ASS ESSING OFFICER THAT THERE WAS NO DEEMED ORAL CONTRACT TO DEDUCT TAX FROM PAYMENTS MADE TO TRUCK OWNERS WHO HAD WORKED ON DAY TO DAY BASIS. THE CASE LAWS CITED CLEARLY INDICATE THAT AN ASSESSEE HAD ENTERED INTO CONTRACT WHICH CONTRACT RECEIPTS ARE SUBJECTED TO TAX THEREFORE COULD NOT BE FURTHER PROBED BY WAY OF A ROVING ENQUIRY ON THE BASIS OF THE IN DIVIDUAL TRUCK OWNERS BEING PAID IN CASH WITHOUT ANY CONTRACT AND HAD ALREADY BEEN VERIFIED AND SUBJECTED TO TAX BY THE ASSESSING OFFICER. IN THIS VIEW OF THE MATTER, THE ORDER OF THE LEARNED CIT IS NOT JUSTIFIED AND THE DIRECTION WAS BE YOND THE SCOPE OF THE PROVISIONS OF SECTION 263. WE, THEREFORE, QUASH THE IMPUGNED ORDER OF THE LEARNED CIT PASSED U/S.263 AND ALLOW THE APPEAL OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 12.08.2011 S D/ - S D/ - (K.S.S.PRASAD RA O) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 12.08.2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.258/CTK/2011 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.OM ROAD CARRIER, C/O. S.NANDA, BEHINDGOVERNMENT BUS STAND, BADAMBADI,CUTTACK 2. THE RESPONDENT: COMMISSIONER OF INCOME - TAX, CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.