M/s National Transport, Cuttack V. DCIT, Sambalpur

ITA 345/CTK/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52401 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTYDR
• Assessee Lawyers: S N SAHU
• Keywords: Depreciation

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. 345/CTK/2011 (ASSESSMENT YEAR 2006 - 07) M/S.NATIONAL TRANSPORT, STATION ROAD, BARBIL, KEONJHAR PAN : AACFN 5605 J VERSUS D.C .I.T.,CIRCLE 1(1), SAMBALPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.N.SAHU, AR FOR THE RESPONDENT SHRI S.C.MOHANTY,DR DATE OF HEARING : 16.09.2011 DATE OF PRONOUNCEMENT : 23.09.2011 ORDER SHRI K.K.GUPTA, AM : THIS APP EAL BY THE ASSESSEE IS AGAINST THE ORDER DT.31.3.2011 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2006 - 07. 2. TWO ISSUES INVOLVED IN THIS APPEAL ARE THAT 3,05,000 HAS BEEN CONSIDERED AS UNEXPLAINED INCOME BY THE ASSESSING OFFICER WHICH ADVANCE WAS ACTUALLY ADJUSTED BY PURCHASE OF A TIPPER FROM A SISTER CONCERN OF THE ASSESSEE WHEN THE ASSESSING OFFICER CHOSE TO DISALLOW THE ADJUSTMENT BETWEEN THE SISTER CONCERN BY HOLDING THE ADVANCE RECEIVED AS BOGUS. ANOTHER ISSUE IS WITH RESPECT TO THE DISALLOWANCE OF EXPENDITURE ON ADVOCATE S FEE WHO APPEARED BEFORE THE ASSESSING OFFICER AS THE PAYMENTS MADE TO HIM W ERE NOT SUBJECTED TO DEDUCTION OF TAX U/S.194J. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM DERIVES INCOME FROM EXEC UTION OF TRANSPORTATION AND LOADING CONTRACTS. BOOKS OF ACCOUNT ARE AUDITED AND WERE SUBJECTED TO SCRUTINY U/S.143(3). THE ASSESSEE HAD FILED INCOME OF 36,46,740 WHEN THE ASSESSING OFFICER VERIFIED THAT AMOUNTS RANGING FROM 20,000 TO 50,000 WERE RECEIVED BY THE ASSESSEE AS ADVANCE FOR PURCHASE OF A TIPPER BY ONE SHRI RANGAD HAR BEHERA. THE SAID ADVANCE WAS ADJUSTED AGAINST PURCHASE BY THE SAID PERSON FOR A TIPPER SOLD BY THE SISTER ITA NO.345/CTK/2011 2 CONCERN OF THE ASSESSEE WHEN THE ADVANCE STOOD ADJUSTED AMONGST THE SISTER CONCERNS. ON THE AFFIDAVITS FILED BY THE COUNSEL FOR THE ASSESSEE BEFORE THE ASSESSING OFFICER, THE ASSESSING OFFICER HELD THE SUM OF 3,05,000 HAVING BEEN RECEIVED BY THE ASSESSEE FIRM BETWEEN 11.4.2005 TO 13.1.2006 AS FALSE AND FABRICATED AND HE SOUGHT TO ADD THE SAME AS UNEXPLAINED ADVANCE FOR TAXATION. HE ALSO CONSIDERED A SUM OF 52,776 PAID BY THE ASSESSEE TO THE COUNSEL WHO WA S RETAINED BY THE ASSESSEE FOR REPRESENTING THE ASSESSEE BEFORE THE AO AND ALSO FOR COMPUTING THE TDS REFUNDS AGAINST WHICH SEPARATE BILLS WERE RAISED BY THE ADVOCATE FOR DIFFERENT YEARS BUT WERE PAID FOR IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFI CER DISALLOWED THE CLAIM HOLDING THE ASSESSEE FIRM IN DEFAULT IN DEDUCTION OF TAX UNDER THE PROVISIONS OF SECTION 194J R.W.S. SECTION 40(A)(IA). AGGRIEVED THE ASSESSE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONFIRMED BOTH THE ADDITIONS/DISALLOWAN CE AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE FACT OF THE CASE WAS THAT THE ASSESSEE S CASE HAS BEEN MISCONSTRUED BY THE ASSESSING AUTHORITIES IN THE LIGHT OF THE F INDINGS OF AN EVENT WHEN THE ADVANCE OWED BY THE ASSESSEE FIRM STOOD ADJUSTED AGAINST THE PAYM ENT MADE BY SHRI RANGADHAR BAHE RA IN VIEW OF THE R TO CERTIFICATE ISSUED IN THE NAME OF SHRI KHAGESHWAR BEHERA, HIS SON. HE POINTED OUT THAT THE LEARNED CIT(A) THE REAFTER CONSIDERED THE LEGAL ISSUE OF A PROFESSIONAL NEGLIGENCE AGAINST THE ASSESSEE AT LEAST OUGHT TO HAVE BROUGHT ON RECORD THE BASIC FACT OF ADJUSTMENT OF ADVANCE AGAINST PURCHASE OF AN ASSET WHICH BY NO STRETCH OF IMAGINATION CAN BE TAXED IN THE HANDS OF THE ASSESSEE. WHEN ALL THE FACTS LEADING TO THE FINDINGS ARE THAT THE DEPRECIATION TO BE ALLOWED TO THE ASSESSEE WAS O N THE TIPPER OWNED BY THE ASSESSEE AND NOT THAT THE TIPPER WAS SOLD BY THE SISTER CONCERN WAS TO BE ADJUSTED AGAINST ADVANCE WAS ITA NO.345/CTK/2011 3 ACKNO WLEDGED BY THE ASSESSEE AS A DEPOSIT ADJUSTED FOR A SUBSEQUENT SALE OF A TIPPER CANNOT BE TAXED AS FALSE AND BOGUS IN THE HANDS OF THE ASSESSEE. FOR THIS PROPOSITION HE HAS SUBMITTED THE COPIES OF VARIOUS AFFIDAVITS AND RTO CERTIFICATE WHICH CLEARLY INDIC ATE THAT THERE WAS NO INTENTION OF A FRAUDULENT TRANSACTION FOR THE PURPOSE OF A LIABILITY TO BE TAXED AS INCOME IN THE HANDS OF THE ASSESSEE. HE SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND THE AMOUNT OF ADVANCE HAS BEEN SHOWN IN TH E ASSESSEES STATEMENT OF AFFAIRS THEREFORE STOOD ADJUSTED WHEN THE TIPPER WAS SOLD BY THE SISTER CONCERN WAS TO BE PAID FOR BY THE ASSESSEE AS PER THE DIRECTION OF SHRI RANGADHAR BEHERA. IN SO FAR AS THE SECOND ISSUE IS CONCERNED, HE SUBMITTED THAT ALL TH E DETAILS OF EXPENSES INCURRED BY THE ASSESSEE WAS SUBMITTED TO THE ASSESSING OFFICER WHICH CLEARLY HELD THAT NO SERVICES WERE RENDERED BY THE AR OF THE ASSESSEE SHRI BISHWABHUSAN DAS , ADVOCATE WHO PREPARED THE TDS RETURNS FOR THE EARLIER YEARS AND RAISED THE BILLS IN THE IMPUGNED ASSESSMENT YEA R. IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE SUM EXCEEDING 20,000 HAS BEEN PAID WITHOUT DEDUCTION OF TAX AT SOURCE BUT SIMPLY CONSIDERED THE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA). HE SUBMITTED THAT THE DETAILS CLEARLY IN DICATE THAT THE SERVICES RENDERED BY THE ADVOCATE WERE FOR THE PURPOSES OF FURNISHING I.T.RETURNS FOR THE EARLIER QUARTERS AS PER THE REQUIREMENT OF LAW THEREFORE COULD NOT BE SUBJECTED TO INVOKING THE PROVISIONS OF SECTION 194J AS HAS BEEN MISCONSTRUED BY THE LEARNED CIT(A) IN HIS ORDER. HE PRAYED THAT THIS DISALLOWANCE MAY ALSO BE DIRECTED TO BE DELETED. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMITTED THAT THE PROFESSIONAL NEGLIGENCE HAS BEEN ESTABLISHED BEYOND DOUBT INSOFAR AS THE ASSESSEE WAS HOLDING THE ADVANCES ON BEHALF OF THE SISTER CONCERN THEREFORE WAS HELD AS FALSE AND BOGUS BY THE ASSESSING OFFICER. ITA NO.345/CTK/2011 4 WITH RESPECT TO DEDUCTION OF TAX AT SOURCE, NO CASE HAS BEEN MADE OUT BY THE ASSESSEE TO ESTABLISH THAT THE AMOUNT PAID COULD EXCEED 20,000 FOR THE PURPOSE OF DISALLOWANCE THEREAFTER UNDER THE DEEMING PROVISIONS OF SECTION 40(A)(IA). 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 FIND FO RCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PROFESSIONAL NEGLIGENCE COULD NOT BE A GROUND FOR THE ASSESSING AUTHORITIES TO ESTABLISH FALSEHOOD WHICH AS PER THE FACT FINDING COULD NOT BE ESTABLISHED. THE ADVANCE HAS BEEN ADJUSTED WHEN PROSPECTIVE BUYERS TRUSTED THE ASSESSEE TO HOLD DEPOSITS IN PETTY AMOUNTS AT 3,05,000 AT THE END OF THE YEAR WHEN THE ADJUSTMENT FOR ACTUAL SALE IN SUBSEQUENT YEAR WILL HAPPEN WITH THE SISTER CONCERN. THE ASSESSING OFFICER OR THE ASSESSEE COULD NOT FORESEE SUCH TURN OF EVENTS TO HOLD THAT THE ADVANCE WAS BOGUS INSOFAR AS THE IMPUG NED ASSESSMENT YEAR IS CONCERNED. THE LEARNED CIT(A) HAS CATEGORICALLY CONSIDERED THE CLAIM OF DEPRECIATION ON TWO TIPPERS WHEN THE SISTER CONCERN ALSO HELD TIPPERS AND ONE OF IT WAS SOLD TO SAID SHRI RANGADHAR BEHERA, SON. UNFORTUNATELY THE RTO CERTIFICA TE AND THE CHANGE IN THE NAME OF THE BUYER COUPLED WITH THE FACT THAT THE DEPOSIT WAS MADE BY THE ASSESSEE AND NOT THE SISTER CONCERN LED TO CONFUSION IN THE MIND OF THE PROFESSIONAL WHICH SHOULD NOT HAVE BEEN HELD AGAINST THE ASSESSEE. WHEN THE ASSESSING AUTHORITIES ULTIMATELY AGREED TO THE SQUARING OFF THE DEPOSITS OF THE SISTER CONCERN AND BOTH BEING ASSESSEES, THERE WAS NO REASON FOR THEM TO HOLD THAT THE ORIGINAL AMOUNT WAS FALSE AND BOGUS. AS NO CORROBORATING EVIDENCE WAS BROUGHT NO RECORD TO SUCH EF FECT, WE ARE UNABLE TO HOLD THE SAME FOR THE PURPOSE OF DISALLOWANCE INSOFAR AS THIS LIABILITY WAS SQUARED OFF BY THE SISTER CONCERN IN A SUBSEQUENT YEAR AGAINST WHICH NO INFIRMITY HAS BEEN POINTED ITA NO.345/CTK/2011 5 OUT . T HE SAID SUM THEREFORE IS FIT FOR DELETION IN THE IMP UGNED ASSESSMENT YEAR. THE ADDITION IN THIS RESPECT IS, THEREFORE, DELETED. 7. IN RESPECT OF THE SECOND ISSUE, WE ARE OF THE CONSIDERED VIEW THAT THE ADVOCATE WHO APPEARED BEFORE THE ASSESSING AUTHORITIES RENDERED PROFESSIONAL SERVICES TO THE EXTENT THAT H E D ID NOT DRAW A BILL YEAR - WISE WHICH COULD BE CONSIDERED FOR ACKNOWLEDGING THAT SERVICES HAVE BEEN RENDERED IN THE IMPUGNED ASSESSMENT YEAR. THE ASSESSING OFFICER, THEREFORE, DISALLOWED THE SAME UNDER THE PROVISIONS OF SECTION 40(A)(IA) WITHOUT CONSIDERIN G THE FACT WHETHER THE ASSESSEE WAS RIGHTLY CONSIDERED VISITED UNDER THE PROVISIONS OF SECTION 194J. THE LEARNED CIT(A) THEREFORE, DID NOT CONSIDER THE CONTENTION OF THE ASSESSEE APPELLANT BEFORE HIM THAT THE BILLS HAVE BEEN RAISED FOR SEPARATE ASSESSMENT YEARS WHICH HAVE BEEN PAID NOT EXCEEDING 20,000 THEREFORE CANNOT BE CONSIDERED FOR DISALLOWANCE U/S.40(A)(IA). THE SUBMISSION OF THE LEARNED COUNSEL THEREFORE THAT AT LEAST 20,000 BE ALLOWED WITHOUT T DS AND 2, 776 PAID TO SHRI R.K.DASH BE ALLOWED IS ACCEPTED. THE ASSESSING OFFICER IS DIRECTE D TO DELETE THE DISALLOWANCE OF 22,776 FROM 52,776. THE SAID ADDITION IS THEREFORE DIRECTED TO BE DELETED. 8. IN THE RESULT, THE APPEAL OF 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. ITA NO.345/CTK/2011 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: M/S.NATIONAL TRANSPORT, STATION ROAD, BARBIL, KEONJHAR 2. THE RESPON DENT: D.C.I.T.,CIRCLE 1(1), SAMBALPUR 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.