Shri Saiyad Saukatali Saiyadmiya, Kheda V. The Income tax Officer,Ward-3, Nadiad

ITA 3167/AHD/2011

• Counselvise Citation: 316720514 RSA 2011
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D V SINGH
• Assessee Lawyers: J P SHAH
• Keywords: Non-deduction of tax
• Section: 234B; 194C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI A. MOHAN ALANKAMONY, AM SHRI KUL BHARA T, JM) ITA NO.3167/AHD/2011 A. Y.: 2006-07 SAIYAD SAUKATALI SAIYDAMIYA, PROP. SAIBABA TRANSPORT, VILLAGE GOBLAJ, DIST. KAIRA PA NO. ASBPS 3510 L VS THE INCOME TAX OFFICER, WARD 3, NADIAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI J. P. SHAH, AR RESPONDENT BY SHRI D. V. SINGH, DR DATE OF HEARING: 04-06-2012 DATE OF PRONOUNCEMENT: 15-06-2012 O R D E R PER A. MOHAN ALANKAMONY: THE ASSESSEE HAS FILED THIS APPEAL AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) -IV, BARODA IN APPEAL NO.CAB/IV-N-227/2010-11 DATED 20-10-2010, FO R THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IN HIS APPEAL HAS RAISED THE FOLLOW ING GROUNDS: 1. THE C. I. T.(APPEALS) ERRED IN UPHOLDING THE RE OPENING OF ASSESSMENT UNDER SECTION 147 BY THE ASSESSING OFFIC ER AND IN FURTHER UPHOLDING THE ADDITION OF RS.14,56,138/- UNDER SECTION 40(A)(IA) FOR NON-DEDUCTION OF TAX UNDER SE CTION 194C, WHICH WAS A PART OF THE CREDIT ENTRY OF RS.15 ,80,362/-. 2. THE C. I. T. (APPEALS) FAILED TO COMPREHEND THE BUSINESS OF THE ASSESSEE AS MERE AGENT WORKING IN TRANSPORT BUS INESS, IN THE COURSE OF WHICH HE WILL BE COLLECTING THE PA YMENT FROM HINDUSTAN COCA COLA BREWERIES PVT. LTD. AND MAKING THE ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 2 PAYMENT TO THE TRUCK OWNERS, IN THE PROCESS MERELY EARNING THE COMMISSION; NONE THE LESS BEING REQUIRED TO MAI NTAIN ACCOUNTS SO THAT AT ALL THE TIMES, HE KNOWS WHAT IS THE AMOUNT TO BE RECEIVED FROM THE COMPANY AND TO BE PA ID TO THE TRANSPORT OPERATORS BY THE COMPANY. THE C. I. T . (APPEALS) COULD NOT APPRECIATE THAT TO SUCH CREDIT ENTRY IN THE BALANCE SHEET, SECTION 194C DOES NOT APPLY, AND IN PARTICULAR, SECTION 40(A) (IA) DOES NOT APPLY. 3. THE C. I. T. (APPEALS) FAILED TO APPRECIATE THAT THE ABOVE AMOUNT OF RS.14,56,138/- OR FOR THAT MATTER, THE AB OUT AMOUNT OF RS.15,80,362/- WAS NOT THE EXPENDITURE WH ICH THE ASSESSEE HAD CLAIMED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OF PROFESSION AS REQUIRED BY THE OPENING WORDS OF SECTION 40, AND THEREFORE, SECTION 40(A) (IA) WILL NOT APPL Y. 4. THE C. I. T. (APPEALS) FAILED TO APPRECIATE THAT IN TERMS OF SECTION 40(A) (IA) WILL NOT APPLY BECAUSE THE ABOVE IS NOT AN AMOUNT WHICH IS PAYABLE TO THE CREDITORS AS CONTRAC TOR FOR CARRYING OUT ANY WORK OF THE ASSESSEE; THE AMOUNTS ARE PAYABLE BY THE COMPANY TO THE TRANSPORT OPERATORS. 5. THE C. I. T. (APPEALS) ERRED IN UPHOLDING THE LE VY OF INTEREST UNDER SECTION 234A, 234B AND 234C 6. THE C. I. T. (APPEALS) ERRED IN UPHOLDING THE OR DER OF THE ASSESSING OFFICER. 3. THOUGH THE ASSESSEE HAS RAISED SIX GROUNDS IN HIS APPEAL, GROUNDS NO.1 TO 4 RELATES TO TWO ISSUES BEING REOPE NING OF THE ASSESSMENT U/S 147 OF THE ACT WHICH IS NOT PRESSED AND ADDITION MADE FOR NON-DEDUCTION OF TAX U/S 194C OF THE ACT F OR RS.14,56,138/-. THE FIFTH GROUND RELATES TO LEVY OF INTEREST U/S 23 4A, 234B AND 234C OF THE ACT WHICH WE HEREBY DISPOSE OFF AS CONSEQUEN TIAL AND THE SIXTH GROUND BEING GENERAL IN NATURE DO NOT SURVIVE FOR A DJUDICATION. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F TRANSPORTATION IN ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 3 THE NAME AND STYLE OF M/S. SAIBABA TRANSPORT HAVING OFFICE OPPOSITE TO COCA COLA FACTORY AT VILLAGE GOBLAJ, DISTRICT KH EDA AND ALSO IS A PARTNER OF M/S. SAIBANA HOTEL HAVING 25% SHARE OF P ROFIT, FILED HIS RETURN OF INCOME FOR AY 2006-07 ON 27-11-2006 DECLA RING TAXABLE INCOME OF RS.3,18,567/-. INITIALLY, THE CASE WAS PR OCESSED U/S 143(1) OF THE ACT ON 28-02-2007 GRANTING REFUND OF RS.1,40 ,907/-. LATER, ON SCRUTINY OF THE ACCOUNTS BY THE LEARNED AO IT WAS N OTICED THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS AS ON 31-03-200 6 FOR PAYMENT DUE TO TRUCK OWNERS AT RS.15,80,362/- OUT OF WHICH MANY OF THE CREDITORS OUTSTANDING EXCEEDED RS.20,000/- AND THUS AS PER THE ACT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE. ACCORDINGLY, THE LEARNED AO WAS OF THE OPINION THAT INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT AS PROVIDED U/S 147 OF THE ACT A ND, THEREFORE, INITIATED PROCEEDINGS FOR RE-ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT DULY RECORDING REASONS. ON FURTHER EXAMININ G IT WAS OBSERVED BY THE LEARNED AO THAT THE ASSESSEE HAD UNDERTAKEN CONTRACT FOR TRANSPORTING THE PRODUCTS OF HINDUSTAN COCA COLA BR EWERIES PVT. LTD. HE FURTHER OBSERVED THAT THE ASSESSEE WAS FULFILLIN G HIS OBLIGATIONS WITH THE ONE TRUCK HE OWNED AND THE OTHER TRUCKS HE HIRED. THE HINDUSTAN COCA COLA BREWERIES PVT. LTD., HAD PAID AN AGGREGATE AMOUNT OF RS.80,64,855/- TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION FOR WHICH THE COMPANY DULY DEDUCTED T DS U/S 194C OF THE ACT FOR A SUM OF RS.1,80,671/-. ON FURTHER SCR UTINY OF THE ACCOUNTS, THE LEARNED AO OBSERVED THAT OUT OF THE T OTAL SUNDRY CREDITORS OF RS.15,80,362/- AS ON 31-03-2006 IN 1 9 INSTANCES, SUNDRY CREDITORS WAS MORE THAN RS.20,000/- AND THE AGGREGATE LIABILITY OF ALL THESE 19 CREDITORS AMOUNTED TO RS. 14,56,138/-. ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 4 THEREFORE THE LD.AO OPINED THAT THE ASSESSEE WAS LI ABLE TO DEDUCT TAX U/S 194C OF THE ACT ON THE AMOUNT CREDITED TO A LL THE 19 CREDITORS AGGREGATING TO RS.14,56,138/-. HOWEVER, IT WAS FOU ND BY THE LEARNED AO THAT THE ASSESSEE HAD FAILED TO DO SO. THE LEARN ED AO SUBSEQUENTLY ISSUED A SHOW CAUSE NOTICE TO THE ASSE SSEE AS TO WHY THIS AMOUNT OF RS.14,56,138/- SHOULD NOT BE ADDED T O INCOME OF THE ASSESSEE. THE ASSESSEE FURNISHED HIS WRITTEN REPLY VIDE LETTER DATED 16-12-2010 AND THE COPY OF CBDT CIRCULAR NO.452 DAT ED 17-02- 1986. THE ASSESSEE HAD CONTENDED THAT THE PROVISION S OF SECTION 194C WERE NOT APPLICABLE TO INDIVIDUAL/HUF FOR THE ASSESSMENT YEAR 2006-07. HOWEVER, THE ARGUMENT OF THE ASSESSEE WAS REJECTED BY THE LEARNED AO SINCE ASSESSEES TURNOVER EXCEEDED THE L IMIT PRESCRIBED UNDER THE ACT. THEREAFTER, THE LEARNED AO MADE AN ADDITION OF RS.14,56,138/- U/S 40(A)(IA) OF THE ACT AND INITIA TED PROCEEDINGS U/S 271 (1) (C ) OF THE ACT. 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A). DURING THE COURSE OF APP ELLATE PROCEEDINGS, THE ASSESSEE SUBMITTED A LETTER DATED 12-09-2011 STATING THAT THE OUTSTANDING PAYMENT OF RS.14,56,13 8/- INCLUDED (I) PAYMENT MADE TO LAXMI AUTO SERVICE FOR RS.30,000/- AND (II) PAYMENT MADE TO KRISHNA PETROLEUM FOR RS.2,68,925/- FOR PURCHASES. THEREFORE, JUDICIOUSLY LEARNED CIT(A) REMITTED BACK THE ISSUE TO THE FILE OF THE LEARNED AO WITH DIRECTION THAT IN CASE IF THESE PAYMENTS ARE FOUND NOT TO BE IN THE NATURE OF CONTRACTS OR S UB-CONTRACTS, DISALLOWANCE U/S 40(A) (IA) OF THE ACT WILL NOT BE APPLICABLE AND ADDITION MADE ON ACCOUNT OF THE SAME SHALL BE DELET ED AND IN CASE IF ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 5 IT IS FOUND THAT THESE PAYMENTS ARE IN THE NATURE O F SUB-CONTRACTS, THE ADDITIONS SHALL BE SUSTAINED. FURTHER, AN AMOUNT OF RS.1,50,000/- AND RS.1,30,000/- BEING SUNDRY CREDITORS FOR NON-C ONTRACTUAL PAYMENTS WAS REMITTED BACK TO THE FILE OF THE LEARN ED AO WITH SIMILAR DIRECTIONS. THEREAFTER, THE LEARNED CIT(A) SUSTAINE D AN ADDITION OF RS.8,77,213/- U/S 40 (A) (IA) OF THE ACT BEING PAYM ENT MADE BY THE ASSESSEE TO THE TRUCK OWNERS FOR SUB-CONTRACTING TR ANSPORTATION WORK. 5. THE ASSESSEE IS NOW, IN APPEAL BEFORE US AGGRIEV ED OF THE ORDER OF THE LEARNED CIT(A). THE LEARNED AR SUBMITT ED BEFORE US THAT THE ASSESSEE HAD UNDERTAKEN CONTRACT FROM M/S. HIND USTAN CO-CO- COLA BREWERIES PVT. LTD., FOR TRANSPORTATION OF THE IR PRODUCTS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE COMPLIED WITH T HE CONTRACTUAL OBLIGATIONS BY TRANSPORTING THE PRODUCTS OF THE COM PANY BY ENGAGING ITS OWN TRUCK AS WELL AS BY HIRING TRUCKS FROM THE MARKET. THE ASSESSEE ARGUED THAT HE HAD NOT SUB-LET THE WORK TO THE SUB- CONTRACTORS BUT HAD HIRED THE VEHICLES AND PERFORME D THE WORK HIMSELF. IT WAS, THEREFORE, CONTENDED THAT THE PROV ISIONS OF SECTION 194C OF THE ACT WILL NOT APPLY IN THE PRESENT CASE. 6. THE LEARNED DR RELIED ON THE ORDERS OF THE REVEN UE AND PRAYED THAT THE ORDER OF THE LEARNED CIT(A) MAY BE SUSTAIN ED SINCE HE HAD JUDICIOUSLY CONSIDERED THE ISSUE AND EVEN REMITTED BACK THE ISSUES RELATED TO PAYMENT FOR RS.2,98,925/-, RS.1,50,000/- AND RS.1,30,000/- FOR VERIFICATION AND ONLY SUSTAINED AN AMOUNT OF RS .8,77,213/- FOR DISALLOWANCE U/S 40 (A) (IA) OF THE ACT. ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 6 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE, IT IS APPARENT THAT THE ASSESSEE IS ONE OF THE MAIN CONTRACTORS FOR TRANSPO RTING THE PRODUCTS OF M/S.HINDUSTAN CO-CO-COLA & BREWERIES PVT. LTD. I N ORDER TO EXECUTE THE ASSIGNMENT GIVEN BY THE COMPANY TO THE ASSESSEE, THE ASSESSEE ENGAGED HIS OWN TRUCK AS WELL AS HAD HIRED TRUCKS FROM OTHER OWNERS. THE ENTIRE PAYMENT OF TRANSPORTATION WAS MADE BY THE COMPANY TO THE ASSESSEE AFTER DEDUCTING TAX. THIS E STABLISHES THAT THERE IS NO NEXUS BETWEEN THE COMPANY AND THE OWNER S OF THE TRUCK ENGAGED BY THE ASSESSEE. THE COMPANY HAS DEDUCTED T DS FOR ALL THE PAYMENTS MADE TO THE ASSESSEE. THEREFORE, IT IS CLEARLY ESTABLISHED THAT THE ASSESSEE IS RESPONSIBLE FOR TH E ENTIRE TRANSPORTATION JOB ASSIGNED BY THE COMPANY TO THE A SSESSEE. IN ORDER TO COMPLY WITH THE ASSIGNMENT, THE ASSESSEE HAD HIR ED VEHICLES FROM THE MARKET. THERE IS NOTHING ON RECORD BEFORE US TO SHOW THAT THE ASSESSEE HAD SUB-LET HIS WORK TO OTHER TRUCK OWNERS . AFTER OBTAINING THE PAYMENTS FROM THE COMPANY, THE ASSESSEE HAD PAI D HIRE CHARGES TO THE OWNERS OF THE TRUCKS FROM WHOM HE HAD HIRED THE TRUCKS RETAINING A PORTION OF THE SAME FOR HIS JOB OF EXEC UTION OF THE WORK. THUS, FROM THE FACTS AVAILABLE BEFORE US IT CAN BE CONSTRUED THAT THE ASSESSEE HAD HIRED THE TRUCKS ALONG WITH DRIVERS AN D EXECUTED THE WORK HIMSELF. IN SUCH CASE THE PROVISIONS OF SECTIO N 194C OF THE ACT WILL NOT BE ATTRACTED. WE PLACE RELIANCE ON THE FOL LOWING DECISIONS: (I) CIT VS POOMPUHAR SHIPPING CORPORATION LTD., 282 ITR 3 (MAD.) (2006) WHEREIN IT WAS HELD THAT PROVISIONS OF ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 7 SECTION 194C WILL NOT BE APPLICABLE WHEN SHIPS ARE HIRED FOR TRANSPORTATION OF GOODS BY THE ASSESSEE. (II) CIT VS UNITED RICE LAND LTD. 217 CTR (P&H) 332 WHEREIN THE HONBLE PUNJAB & HARYANA HIGH COURT WAS PLEASED TO HELD THAT THERE BEING NEITHER ANY ORAL OR WRITTEN AGREEMENT BETWEEN THE ASSESSEE AND THE TRANSPORTERS FOR CARRIAGE OF GOODS NOR IT IS PROVED THAT ANY FRE IGHT CHARGES WERE PAID TO THEM IN PURSUANCE OF A CONTRAC T FOR A SPECIFIC PERIOD, QUANTITY OR PRICE, THE ASSES SEE WAS NOT LIABLE TO DEDUCT TAX UNDER S. 194C FROM THE PAY MENTS MADE TO THE TRANSPORTERS. (III) FURTHER, IN THE CASE K. SRINIVAS NAIDU VS CIT REPOR TED IN 131 TTJ 17 (HYD) IT WAS HELD THAT IN THE ABSENCE OF ANY EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE INDIV IDUAL HAD MADE PAYMENT OF FREIGHT CHARGES TO THE OWNERS O F THE TRUCK IN PURSUANCE OF ANY CONTRACT AS A CONTRAC TOR AND NOT AS A SUB-CONTRACTOR, IT CANNOT BE HELD THAT THE ASSESSEE WAS A CONTRACTOR AND THE PROVISIONS OF S. 194C(1) APPLIED TO SUCH PAYMENT AND NOT S. 194C(2), HOWEVER, AMOUNT HAVING BEEN PAID AND NOT PAYABLE, S . 40 (A) (IA) COULD NOT BE INVOKED TO DISALLOW THE CL AIM. 8. FROM THE FACTS OF THE CASE BEFORE US, WE DO NOT HAVE ANY HESITATION TO HOLD THAT THE ASSESSEE HAD ONLY HIRED OUT THE TRUCKS AND WAS IN POSSESSION AND CONTROL OF THE TRUCKS AND THE REBY CARRIED OUT THE WORK OF TRANSPORTATION HIMSELF. THEREFORE, THE PROVISIONS OF ITA NO.3167/AHD/2011 (AY: 2006-07) SAIYAD SAUKATALI SAIYADMIYA VS ITO, WARD-3, NADIAD 8 SECTION 194C OF THE ACT WILL NOT APPLY IN THIS CASE AND WE HOLD THE ISSUE IN FAVOUR OF THE ASSESSEE. IT IS ORDERED ACCO RDINGLY. SINCE THE ASSESSEE HAS NOT PRESSED THE ISSUE OF REOPENING U/S .147 OF THE ACT WE HEREBY DISMISS THE GROUND AS NOT PRESSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-06-2012 SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: DIRECT DICTATION ON AMS COMP UTER 05-06-12/08-06-12 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: -06-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: