Trilochan Dash, Koraput V. ITO, Keonjhar

ITA 297/CTK/2011

• Counselvise Citation: 29722114 RSA 2011
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 21-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 23-05-2011
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE
• Assessee Lawyers: P K MISHRA
• Keywords: Business income

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 297/CTK/2011 (ASSESSMENT YEAR 2006 - 07) SRI TRILOCHAN DASH, C/O. JAY GURU ROADWAYS, GHSIPURA, DIST.KEONJHAR PAN: AAVPD 1198 D VERSUS INCOME - TAX OFFICER, KEONJHAR WARD, KEONJHAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.MISHRA, AR FOR THE RESPONDENT SHRI A.BHATTACHARJEE, DR DATE OF HEARING : 21.09.2011 DATE OF PRONOUNCEMENT : 23.09.2011 ORDE R SHRI K.K.GUPTA, AM : THIS APPEAL BY THE ASSESSE AGITATES THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER IN HIS ORDER U/S.143(3) BY ESTIMATING THE INCOME ON ACCOUNT OF TRANSPORT CHA RGES AND HIRE CONTRACT RECEIPTS AT 5% ON MISINTERPRETATION OF THE FACTS ON THE FINANCIAL STATEMENTS PERUSED BY THE ASSESSING OFFICER. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESSEE DERIVES INCOME FROM HIRE CHARGES BY ENGAGING SEV EN NUMBERS OF HEAVY GOODS VEHICLES AND ONE WHEEL LOADER WITH FIVE TRANSPORT CONTRACTORS. IN ORDER TO INCREASE HIS BUSINESS INCOME, THE ASSESSEE HAS ADOPTED ADDITIONAL SOURCE OF INCOME NAMELY TRANSPORT CHALLANS DISCOUNTING. THE ASSESSEE EARNED 0.5% FROM THE PAYMENTS MADE TO THE TRUCK OWNERS WHO HAD BEEN ENGAGED BY WAY OF TRANSPORT CONTRACTOR NAMELY M/S.MAA TARINI TRANSPORT, BHADRASAHI. THE AMOUNT WAS REIMBURSED ON THE DIRECTION OF M/S.MAA TARINI TRANSPORT, BHADRASAHI WHEN THE ASSESSEE RETURNED LESS 0.5% THE R E FROM. THE ASSESSEE WAS ABLE TO BIFURCATE THE TRANSPORT CHARGES RECEIVED FROM HIS OWN VEHICLES AND ON THE BASIS THEREOF WAS ABLE TO RENDER INCOME FROM THE GROSS RECEIPTS THEREUPON AS HIRE CHARGES AMOUNTING TO 48,68,226. THE ASSESSING OFFICER ITA NO.297/CTK/2011 2 CONSIDERED THE NET PROFIT TH ERE FROM AT 1 ,59,273 WHICH HE ENHANCED TO 5% UNDER THE PROVISIONS OF SECTION 44AF. THE ASSESSING OFFICER ALSO MISINTERPRETED THE P & L ACCOUNT ON ACCOUNT OF THE COMMISSION EARNED @ 0.5% ON FINANCE REIMBURSED WHICH THE ASSESSEE RETAINED WH EN HE DISCOUNTED THE TRANSPORT CHALLANS RA ISED ON M/S.MAA TARINI TRANSPORT, BHADRASAHI TO BE PAID TO THE TRUCK OWNERS WHEN HE HAD REIMBURSED THE ENTIRE AMOUNT TOTALING 43, 63,164. HE RENDERED THE PROFIT @ 0.5% COMMISSION AMOUNTING AT 1,62,825 WHEN THE A SSESSING OFFICER DEEMED IT FIT TO COMBINE THE TWO GROSS RECEIPTS TOTALING 4,85,31,390 ON WHICH HE COMPUTED INCOME @5% UNDER THE DEEMING PROVISIONS OF SECTION 4 4AF. HE NOTED THAT M/S.MAA TARINI TRANSPORT, BHADRASAHI HAVE DEDUCTED TAX AT SOURCE AT 1.12% ON SUM OF 4,36,63,164 THEREFORE THIS AMOUNT PARTOOK THE NATURE OF HIRING CHARGES AGAINST WHICH THE ASSESSEE OUGHT TO HAVE EARNED 5% AS AGAINST 0.5% RENDERED TO TAX BY THE ASSESSEE COMPUTED BY WAY OF SEPARATE BOOKS OF ACCOUNT MAINTAINED FOR THE PURPOSES. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONSIDERED THE CASE OF THE ASSESSEE APPELLANT BY HOLDING THAT M/S.MAA TARINI TRANSPORT, BHADRASAHI COULD NOT HAVE DEDUCTED TAX ON THE AMOUNT WHICH WAS ACTUALLY REIMBURSED BY THE ASS ESSEE. HE FAILED TO OBSERVE THAT M/S.MAA TARINI TRANSPORT, BHADRASAHI HAD REIMBURSED THE ASSESSEE AS AN ON ACCOUNT PAYMENT INDIVIDUALLY VARYING FROM 1 LAKH TO 3 LAKHS OVER THE PERIOD OF TRANSPORTATION WITHOUT SPECIFYING THE REIMBURSEMENT ACTUALLY CARRIED OUT BY THE ASSESSEE AGAINST WHICH NO TDS WAS MADE ON THE BASIS OF FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. THE LEARNED CIT(A) DISMI SSED THE CONTENTION OF THE ASSESSEE APPELLANT AND CONFIRMED THE ACTION OF THE ASSESSING OFFICER WITHOUT ELABORATING AS TO HOW 5% COULD BE BROUGHT TO ITA NO.297/CTK/2011 3 TAX WHEN THE EXPENDITURE AGAINST 4,36,63,164 HAVE BEEN ACCOUNTED FOR DULY CERTIFIED BY THE CHATTERED ACCO UNTANT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS ON THE ISSUES SUBMITTED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO DISALLOW THE EXPENSES INSOFAR AS AFTER REIMBURSING TRANSPORT CHARGES THE DEDUCTOR HAD CATEGORICALLY ISSUED THE TDS CERTIFICATES INDICATING THAT THE AMOUNT WAS REIMBURSED TO A SUB - CONTRACTOR WHEN THE AMOUNT REIMBURSEME D WAS INCLUDED FOR COMPUTING THE TDS AT 1.12%. THE LEARNED ASSESSING OFFICER ACKNOWLEDGED THE FACT THAT THE AMOUNT OF 4,89,027 WAS GIVEN CREDIT WHEN THE ASSESSEE HAD RETURNED INCOME OF 2,72,050 ONLY. BY NO STRETCH IMAGINATION CAN THE TDS BE MORE THAN THE INCOME SO RENDERED TO TAX SPECIFICALLY WHEN THE ASSESSING OFFICER IS ALLOWI NG AND ADOPTING THE DEEMING PROVISIONS OF SECTION 44AF FOR THE PURPOSE OF COMPUTING TAX ON THE GROSS RECEIPTS. HAVING ACKNOWLEDGED THE GROSS RECEIPTS AMOUNTING TO 4,36,63,164 HE OUGHT TO HAVE CONSIDERED THE PAYMENT WHICH REIMBURSEMENT RETAINED WAS NOT MOR E THAN 0.5%. IN OTHER WORDS, THE 5% PURPORTED COMPUTATION OF INCOME THERE FROM COULD NOT BE POINTED OUT BY THE ASSESSING OFFICER ANYWHERE IN THE BOOKS OF ACCOUNT DULY AUDITED AND CERTIFIED BY A CHARTERED ACCOUNTANT UNDER THE PROVISIONS OF SECTION 44AB. HE SUBMITTED THAT THESE WERE THE CLUES TO ASCERTAIN THAT THE ASSESSEE HA D FAILED TO ACCOUNT FOR PROPER INCOME IN THE BOOKS OF ACCOUNT AND THEREFORE, THE INCOME W AS TO BE ESTIMATED WITHOUT INVOKING THE PROVISIONS OF SECTION 145. THE LEARNED COUNSEL FOR THE ASS ESSEE VEHEMENTLY ARGUED THAT THE BOOKS OF ACCOUNT ARE RECORD OF THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE, WHICH ARE PUT FORTH BEFORE THE ASSESSING OFFICER TO ESTABLISH ITS CLAIM OF INCOME SO RENDERED ARISING THERE FROM ON THE BASIS OF THE ACTUAL BUSINE SS TRANSACTIONS CARRIED OUT. THE TDS CERTIFICATES TOTALLY TALLIED WITH THAT OF THE BOOKS OF ACCOUNT AS PER THE REPORT OF THE CHARTERED ITA NO.297/CTK/2011 4 ACCOUNTANT AND THE AMOUNT OF TDS WAS TO BE CLAIMED ON THE BASIS OF THE AMOUNT RETAINED BY THE DEDUCTEE. THE LEARNED CIT(A ) THEREFORE FAILED TO OBSERVE THAT THE ASSESSING OFFICER RELYING ON THE TDS CERTIFICATE AND NOT ON THE BOOKS OF ACCOUNT LED TO HIS CONFIRMING ESTIMATION OF 5% INCOME ON THE TOTAL GROSS RECEIPTS. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT T HE ASSESSEE HAS ASSETS AMOUNTING TO 21,36,707 AND THE BILLS RECEIVABLE AMOUNTING TO 15,20,592 AGAINST WHICH HE HAD LIABILITIES AMOUNTING TO ONLY ABOUT 27 LAKHS. THIS MEANS THE ASSESSEE COULD NOT BE SUBJECTED TO TAX ON AN INCOME WHICH HAS NOT BEEN PART OF HIS CAPITAL UTILISED IN THE BUSINE SS OF THE ASSESSE AND FURTHER MORE THE INCOME RENDERED TO TAX BY THE ASSESSEE WAS ONLY SUFFICIENT TO MAINTAIN THE FIXED ASSETS OF THE ASSESSEE FOR TRANSPORTATION CHARGES EARNED TO THE EXTENT THAT THE ASSESSEE WAS ABLE TO GENERATE CASH INCOME BY CLAIMING DE PRECIATION ON ITS FIXED ASSETS AT 6,15,956. HE SUBMITTED THAT THE INCOME HAD BEEN COMPUTED CORRECTLY BY THE ASSESSEE ON THE BASIS OF GROSS RECEIPTS ONLY THEREFORE SHOULD NOT BE ESTIMATED MERELY BECAUSE THE ASSESSING AUTHORITIES HAVE NOT BEEN ABLE TO CONSIDER THE BUSINESS TRANSACTION OF RR S DISCOUNTING OF M/S.MAA TARINI TRANSPORT, BHADRASAHI WHEN THE ASSESSEE ACTUALLY DISCOUNTED BILLS RAISED ON THEM ON CHARGING 0.5% THEREOF . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS M/S.MAA TARINI TRANSPORT, BHADRASAHI WHO ERRONEOUSLY DEDU CTED TAX AT SOURCE ON THE PAYMENT OF REIMBURSEMENT TO THE ASSESSEE IN VIEW OF THE FACT THAT THERE CLAIM OF REIMBURSEMENT COULD BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40(A)(IA) . HE POINTED OUT THAT NO SUCH DISALLOWANCE COULD BE MADE IN THE HANDS OF THE ASSESSEE WAS RIGHTLY NOTED BY THE ASSESSING OFFICER WHEN THE PAYMENTS AMOUNTING TO 4,33,91,243 WERE ALLOWED AS EXPENDITURE. THIS IS ONLY THE CASE OF THE ASSESSEE THAT 0.5% HAS BEEN ENHANCED TO 5% AGAINST WHICH THE LEARNED COUNSEL FOR THE ASSESSEE ITA NO.297/CTK/2011 5 AGRE ED TO THE PROPOSITION THAT TH E REFUND OF TDS AMOUNTING TO 4,89,027 WILL BE RENDERED TO TAX AS INCOME WHEN ACTUALLY CLAIMED . 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT IT IS AN AFTERTHOUGHT AS SUBMITTED BY THE LEARN ED COUNSEL FOR THE ASSESSEE IN VIEW OF THE FACT THAT AN ERROR OF DEDUCTION OF TAX CANNOT BE ACKNOWLEDGED AS NON - EARNING OF INCOME BY THE ASSESSE WHEN THE ESTIMATION OF INCOME HAS BEEN DONE AT 5% ON THE BASIS OF FACTS BROUGHT ON RECORD. HE FULLY SUPPORTED T HE ORDER OF THE LEARNED CIT(A) FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE FOUND THAT IT WAS NEVER THE CASE OF THE ASSESSEE TO DISCLOSE INCO ME @5% ON TRANSPORT HIRING CHARGES WHEN THE DISCOUNTING OF THE CHALLANS RAISED ON M/S.MAA TARINI TRANSPORT, BHADRASAHI WERE REIMBURSED WHICH CHALLANS WERE DISCOUNTED RETAINING 0.5% BY THE ASSESSEE. WE HAVE PERUSED THE REIMBURSEMENT OF THE EXPENSES INCURRED BY THE ASSESSEE WHEN THE AMOUNTS HAVE BEEN PAID IN CASH AGAINST WHICH THE ASSESSEE HAD TO UTILISE THE BANK FUNDS WHEN THE FIXED ASSETS UTILISED BY THE A S SESSEE WERE HIRED OUT RENDERING SEPARATE INCOME ON THE GROSS RECEIPTS RENDERED TO TAX AMOUNTING TO 48,68,226. AL THE EXPENSES CLAIMED BY HIRING OUT ASSESSEES OWN VEHICLES , THE ASSESSEE WAS ABLE TO INCUR EXPENSES ON SALARY TO DRIVERS , OIL & LUBRICANTS, REPAIRS AND MAINTENANCE, LOADING AND UNLOADING CHARGES AND THE ASSESSEE EARNED ABOUT 3.75% THERE FRO M WAS ABLE TO CLAIM ADMINISTRATIVE EXPENSES INCLUDING FINANCE CHARGES ON ACCOUNT OF TERM LOAN ETC. THE ASSESSEE RETURNED INCOME FROM HIRING OF ITS VEHICLES AT 1,59,273 WHEN HE CHOSE TO RENDER INCOME OF 0.5% ON COMMISSION EARNED BY IT ON THE TOTAL TRANSACT IONS OF 4,36,63,164 BY MAINTAINING SEPARATE BOOKS OF ACCOUNT . HE RENDERED NET INCOME THERE FROM AS COMMISSION OF 1,62,825 WHICH HE RENDERED TO TAX BY CLAIMING REFUND OF ITA NO.297/CTK/2011 6 4,89,027 WHICH WAS GIVEN TO THE ASSESSEE UNDER THE PROVISIONS OF SECTION 143(1). HOW EVER, DURING THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER INCLUDED THE CLAIM OF THE ASSESSEE BY HOLDING IT UNBELIEVABLE ON THE BASIS OF KEEPING IMPROPER BOOKS OF ACCOUNT. WE ARE UNABLE TO SATISFY OURSELVES TO THIS PROPOSITION OF THE ASSESSING OFFICER INS OFAR AS THE PERCENTAGE OF EXPENSES INCURRED AGAINST THE GROSS RECEIPTS HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WITHOUT INVOKING OTHER PROVISIONS OF THE I.T.ACT INDICATING THAT THE ASSESSEE OUGHT TO HAVE EARNED AT LEAST 5% UNDER THE DEEMING PROVISIONS OF SECTION 44AF. THE LEARNED COUNSEL FOR THE ASSESSEE HAS BEEN ABLE TO DEMONSTRATE AND AGREED TO THE PROPOSITION THAT THE DEDUCT ION OF TAX OF 4,89,027 WAS TO CLAIM EXPENSES THEREOF WAS NOT INCOME OF THE ASSESSEE WAS ON THE WRONG ASSUMPTION THAT THE REIMBURS EMENT PAID BY THE ASSESSEE WERE NOT ITS EXPENSES. THE ASSESSEE COULD HAVE EASILY ACCOUNTED FOR ONLY THE AMOUNT OF DISCOUNT HELD BACK BY IT WHEN THE DEDUCTEE CHOSE TO DEDUCT TAX AT SOURCE ON THE AMOUNTS PAID BY IT AS WELL AGAINST NO CLAIM MADE AS WELL. IT I S CLEA RLY ESTABLISHED THAT THE DEDUCTOR WAS ON THE WRONG FOOTING WHEN HE CHOSE TO DEDUCT TAX ON AMOUNTS RANGING FROM 1 LAKH TO 3 LAKHS AND PAID BY CHEQUES IN THE BANK OF THE ASSESSEE THEREFORE WAS ONLY AGAINST RRS DISCOUNTED . WE ARE THEREFORE INCLINE D TO ACCEPT THE FACT THAT THE ASSESSEE WHO HAD RENDERED 3.75% INCOME FROM HIRING CHARGES ON ITS OWN ASSETS COULD NOT BE SUBJECTED TO TAX @5% ON DISCOUNTING CHARGES ON THE TRANSPORT RECEIPTS DULY ACCEPTED BY THE DEDUCTEE AT 1% TO 1.2%. THE LEARNED COUNSEL F OR THE ASSESSEE AGREED TO THE PROPOSITION THAT THE SUM OF 4,79,027 OUGHT TO BE TAXED IN THE IMPUGNED ASSESSMENT YEAR WILL BE AVAILABLE FOR TAXATION INSOFAR AS THE DEMAND RAISED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT YEAR WAS TO BE ADJUSTED AG AINST THE REFUND. THE COMPUTATION OF INCOME CONFIRMED BY THE LEARNED CIT(A) AT 24,26,570 IS DIRECTED TO BE ITA NO.297/CTK/2011 7 REDUCED TO THE INCOME RENDERED TO TAX BY THE ASSESSEE AT 2,72,050 AND 4,89,027 (REFUND OF INCOME) ON WHICH THE ASSESSING OFFICER IS REQUIRED TO RE COVER THE BALANCE TAX AGAINST THE REFUND VOUCHER ALREADY GRANTED TO THE ASSESSEE WITH INTERST . ALL OTHER PROVISIONS WITH RESPECT TO CHARGING OF INTEREST MAY ALSO BE CONSIDERED BY THE ASSESSING OFFICER IN THE LIGHT OF THE ABOVE DIRECTION. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 23 RD SEPTEMBER, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. CO PY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: SRI TRILOCHAN DASH, C/O. JAY GURU ROADWAYS, GHSIPURA, DIST.KEONJHAR 2. THE RESPONDENT: INCOME - TAX OFFICER, KEONJHAR WARD, KEONJHAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUP LICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.