M/s. Pragati Trading Co., V. The Income tax Officer,Ward-2, Anand

ITA 3478/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9379 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 21-10-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA SRDR
• Assessee Lawyers: N C AMIN
• Keywords: Non-deduction of tax
• Section: 143(3); 234B; 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.3478/AHD/2008 [ASSTT.YEAR 2005-06] M/S. PRAGATI TRADING CO. -VS- INCOME TAX OFFICER NR. SARDAR PATEL STATUE WARD-2, ANAND AT VALSAN-388326 DIST. ANAND PAN NO.AACFP2381B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI H.P. MEENA, SR-DR ASSESSEE BY: SHRI N.C. AMIN , AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-IV, BARODA IN APPEAL NO.CAB/IV -A-134/07-08 DATED 19- 09-2008. THE ASSESSMENT WAS FRAMED BY ITO, WARD-2, ANAND U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) VIDE HIS ORDER DATED 30-09-2007 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENDITURE OF TRANS PORT AND CARTING EXPENSES AT RS.8,87,012/- FOR NON-DEDUCTION OF TDS IN VIEW O F THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUND NO.1-8 :- 1. THAT THE LEARNED CIT(A) HAS ERRED BOTH IN LAW A ND ON THE FACTS OF THE CASE IN CONFIRMING THE ORDER OF THE LEARNED A.O. ITA NO.3478/AHD/2008 A.Y. 2005-06 M/S. PRAGATI TRADING CO. V. ITOWD-2, ANAND PAGE 2 2. ON FACTS AND CIRCUMSTANCES OF THE CASE OF THE AP PELLANT THERE IS NO ORAL OR WRITTEN CONTRACT AND AS SUCH SEC. 194C IS N OT APPLICABLE AND THEREFORE SEC.40(A)(IA) APPLIED AND CARTING EXPENDI TURE OF RS.8,87,012/- DISALLOWED BY THE LEARNED A.O AND CONFIRMED BY CIT( A) IS NOT LEGAL AND VALID IN LAW. 3. THAT THE APPELLANT HAS FILED PAPER BOOK WITH DOC UMENTARY EVIDENCES AND DECISION OF HIGH COURT AND TRIBUNAL, WITHOUT CO NSIDERING IT, IN PROPER PERSPECTIVE, THE ORDER OF LEARNED A.O CONFIR MED BY CIT(A) IS CONTRARY TO THE PROVISIONS OF THE ACT. 4. THAT THE LEARNED A.O ON PRESUMPTION OF CONTRACT U/S 194C AND HAS DISALLOWED CARTING EXPENDITURE OF RS.8,87,012/- US 40(A)(IA) AND CONFIRMED BY CIT(A) HOLDING IT AS ORAL CONTRACT IS AGAINST THE DOCUMENTARY EVIDENCES LYING ON RECORD WHICH DESERVE S TO BE DELETED. 5. ON FACTS AND IN LAW THERE IS O VIOLATION OF SEC. 194C AND AS SUCH SEC. 49\0(A)(IA) IS NOT APPLICABLE. IN THIS REGARD THE APPELLANT HAS FILED RECTIFICATION APPLICATION TO THE LEARNED CIT(A)-IV, BARODA. THE ADDITIONS OF RS.8,87,012 CONFIRMED BY CIT(A) BE DELETED. WITHOUT PREJUDICE 6. THAT THE LEARNED CIT(A) HAS CONFIRMED THE DISALL OWANCE OF OPENING CREDIT BALANCE OF RS.1,24,014/- IN THE ACCOUNT OF B HARAT ROADLINES, KOLKATTA WHICH IS BAD IN LAW, ILLEGAL AND VOID DESE RVES TO BE DELETED. 7. THAT THE LEARNED A.O AS WELL AS LEARNED CIT(A) H AS FAILED TO APPRECIATE THE FACTS THAT THE CONSIGNOR ITSELF IS A RRANGING FOR TRANSPORTATION OF GOODS TO VALASANA AND AS SUCH THE RE IS NO CONTRACT U/S 194C AND HENCE QUESTION DOES NOT ARISE FOR DISA LLOWANCE U/S 40(A)(IA) OF THE I.T. ACT 1961. 8. THAT THE INTEREST CHARGED U/S 234B & 234C BY THE LEARNED A.O AND CONFIRMED BY CIT(A) IS CONTRARY TO THE PROVISIONS O F THE ACT. THE APPELLANT HAS NOT COMMITTED DEFAULT OF SEC. 207 TO 219 OF THE I.T. ACT 1961. 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT THE RETURN OF INCOME WAS FIELD ON 14-10-2005 DECLARING TOTAL INCOME AT R S.11,457/-. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD PAID THE FOLLOW ING AMOUNTS FOR TRANSPORTATION ON GOODS. NAME OF THE TRANSPORTER PAYMENT (IN WHETHER TDFS DEDUCTED U/S ITA NO.3478/AHD/2008 A.Y. 2005-06 M/S. PRAGATI TRADING CO. V. ITOWD-2, ANAND PAGE 3 RS) 194C OF THE ACT. BHARAT ROAD LINE 3,82,824/- NIL ARVIND ROADWAYS 32,811/- NIL SHARMA ROADWAYS 4,42,456/- NIL ROADCO (INDIA) CORPT. 82,921/- NIL TOTAL 8,87,012/- THE ASSESSEE STATED THAT IT IS A PARTNERSHIP FIRM D OING BUSINESS IN TRADING IN OLD AND NEW GUNNY BAGS AND IT HAD SHOWN PURCHASE OF BARDAN WITH CARTING EXPENSES IN THE TRADING ACCOUNT BUT ASSESSING OFFIC ER HAS PRESUMED THAT THE ASSESSEE HAS ENTERED INTO A CONTRACT WITH THE ABOVE FOUR PARTIES AND SINCE SUCH IS NOT THE SITUATION, TDS HAS NOT BEEN DEDUCTE D. LD. COUNSEL FOR ASSESSEE SUBMITTED INDIVIDUAL EXPLANATIONS FOR EACH OF THE TRANSPORTERS FOR FAILURE TO DEDUCT TAX AT SOURCE. THE COMMON REASON SUBMITTED BY LD COUNSEL FOR THE ASSESSEE IS THAT NONE OF THE PARTIES WHO HA VE BEEN TRANSPORTING GOODS IS OWNING ANY TRUCK AND THERE IS NO ORAL OR WRITTEN CONTRACT WITH THEM AND IF A CONTRACT EXISTED, THEN THE FREIGHT AT DIFFERENT RAT ES WOULD NOT HAVE BEEN PAID. SINCE THE AMOUNT PAID TO EACH TRUCK OWNER DOES NOT EXCEED RS.50,000/- AND PROVISIONS OF SUB-SECTION (1) OF SECTION194C ARE NO T ATTRACTED. ACCORDING TO ASSESSING OFFICER THE PROVISIONS OF SECTION 194C AR E APPLICABLE TO THE ASSESSEE AND ACCORDINGLY HE DISALLOWED THE ENTIRE A MOUNT OF TRANSPORTATION EXPENSES BY INVOKING THE PROVISION OF U/S.40 (A)(IA ) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO CONFIRMED THE ACTION OF ASSESSING OFFICER BY GIVING FOLLOWING FIN DING IN PARA-5 OF HIS APPELLATE ORDER:- 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R AN D THE ASSESSMENT ORDER. THE APPELLANT IS TRANSPORTING GOODS FROM CAL CUTTA TO VALASAN. TRANSPORTATION OF GOODS TAKES PLACE THROUGH THE FOU R PARTIES I.E. BHARAT ROAD LINE, CALCUTTA, ROADCO 9INDIA) CORPORATION, KO LKOTA, ARVIND ROADWAYS, SILIGURI AND SHARMA ROADWAYS, SILIGURI. I T IS ONLY THROUGH THESE TRANSPORTERS THAT HE GOODS ARE TRANSPORTED FR OM KOLKATA TO VALASANA. THEREFORE, IT IS ESTABLISHED THAT THE ASS ESSEE HAS A CONTRACT BE IT ORAL WITH THE ABOVE FOUR PARTIES. SECTION 194 C STATES THAT ANY ITA NO.3478/AHD/2008 A.Y. 2005-06 M/S. PRAGATI TRADING CO. V. ITOWD-2, ANAND PAGE 4 PERSON RESPONSIBLE FOR PAYING ANY SUM TO ANY RESIDE NT HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTRACTOR FOR CARRYING OUT ANY WORK INCLUDING SUPPLYING OF LABOUR IN PURSUANCE OF A CONTRACT SHAL L AT THE TIME OF CREDIT OF SUCH SUM TO THE ACCOUNT OF THE CONTRACTOR, OR AT THE TIME OF PAYMENT THEREOF WHICH EVER IS EARLIER DEDUCT INCOME TAX ON SUCH AMOUNTS. IT IS A FACT THAT THE APPELLANT WAS RESPONSIBLE FOR PAYING A SUM TO THE ABOVE TRANSPORTERS WHO ARE RESIDENTS AND WHO HAVE CARRIED OUT WORK FOR THE APPELLANT. THIS WORK HAS BEEN CARRIED OUT IN PURSUA NCE OF AN ORAL CONTRACT FOR TRANSPORTING THE GOODS FROM KOLCOTA TO VALASAN. THE FACT THAT THEY ARE AT THE OWNER OF THE TRUCKS IS NOT MAT ERIAL. THE APPELLANT SHOULD HAVE DEDUCTED TAX AT SOURCE ON TRANSPORTATIO N EXPENSES. SINCE HE FAILED TO DO SO, THE PROVISIONS OF SECTION 40(A) (IA) BECOME APPLICABLE. THE ASSESSING OFFICER WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD CONTRAVENED THE PROVISIONS OF SECTION 194C AND MAKI NG AN ADDITION OF RS.8,87,012/- UNDER SECTION 40(A)(IA) OF THE INCOME TAX ACT. THE ADDITION IS CONFIRMED. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ABOVE F ACTS THAT IT IS A PARTNERSHIP FIRM DOING BUSINESS IN TRADING IN OLD AND NEW GUNNY BAGS AND IT HAD SHOWN PURCHASE OF BARDAN WITH CARTING EXPENSES IN THE TRA DING ACCOUNT BUT ASSESSING OFFICER HAS PRESUMED THAT THE ASSESSEE HA S ENTERED INTO A CONTRACT WITH THE ABOVE FOUR PARTIES AND SINCE SUCH IS NOT T HE SITUATION, TDS HAS NOT BEEN DEDUCTED. WE FIND THAT THE ASSESSEE BEFORE THE LOWER AUTHORITIES HAVE FILED INDIVIDUAL EXPLANATIONS FOR EACH OF THE TRANS PORTERS FOR FAILURE TO DEDUCT TAX AT SOURCE. THE COMMON REASON STATED BY THE ASSE SSEE IS THAT NONE OF THE PARTIES WHO HAVE BEEN TRANSPORTING GOODS IS OWNING ANY TRUCK AND THERE IS NO ORAL OR WRITTEN CONTRACT WITH THEM AND IF A CONTRAC T EXISTED, THEN THE FREIGHT AT DIFFERENT RATES WOULD NOT HAVE BEEN PAID. WE FURTHE R FIND THAT TRIBUNAL IN ASSESSEES SISTER CONCERNS CASE IN ITA NO.3422/AHD/2008 DATED 18-09-2009 IN THE CASE OF M/S PRAMUKH JUTE TRADERS V. ITO WARD-2, ANAND , WHEREIN VIDE PARA-3 HAS ALLOWED THE CLAIM OF ASSESSEE, WHICH IS BEING R EPRODUCED AS UNDER:- 3. IT IS THE CONTENTION OF THE ASSESSEE THAT THE T RANSPORTERS WERE ENGAGED BY AGENTS IN CALCUTTA AND THE ASSESSEE WAS MERELY PAYING THE TRANSPORT CHARGES TO THEM AND THAT THERE WAS NO TRA NSPORT CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORTERS NAMED ABO VE. IT WAS THEREFORE SUBMITTED THAT THERE WAS NO LIABILITY TO DEDUCT TAX UNDER ITA NO.3478/AHD/2008 A.Y. 2005-06 M/S. PRAGATI TRADING CO. V. ITOWD-2, ANAND PAGE 5 SECTION 194C. WE FIND THAT THE CONTENTION IS CORREC T. AT PAGE 9 OF THE PAPER BOOK THE ASSESSEE HAS PLACED A COPY OF THE AC COUNT OF BHARAT ROADLINES FOR THE PERIOD ENDED 31-3-2005. WHICH SHO WS THAT THERE WAS FOUR PAYMENTS AGGREGATING TO RS.1,27,408/-. THE BIL LS OF BHARAT ROADLINES PLACED PAGES 11 TO 15 OF THE PAPER BOOK S HOW THE NAMES OF THE JUTE MILLS IN CALCUTTA FROM WHERE THE JUTE GOOD S WERE TRANSPORTED. FROM THESE BILLS IT APPEARS TO US THAT IT WAS THE J UTE MILLS WHICH ENGAGED THE TRANSPORTERS THROUGH AGENTS IN CALCUTTA AND THE ASSESSEE WAS REQUIRED TO PAY THE TRANSPORT CHARGES. THE MATERIAL ON RECORD DOES NOT SHOW THE EXISTENCE OF ANY TRANSPORT CONTRACT BETWEE N THE ASSESSEE AND THE TRANSPORTERS. THE SAME IS THE CASE WITH ROADCO (INDIA) CORPORATION, CALCUTTA TO WHOM THE ASSESSEE HAS PAID THE TRANSPOR T CHARGES OF RS.44,792/-. THE BILLS AT PAGES 18 AND 19 DO NOT SH OW THAT THERE WAS ANY CONTRACT FOR TRANSPORT BETWEEN THE ASSESSEE AND THE TRANSPORTERS. THESE THE SINGLE TRIPS. CIRCULAR NO.715 DATED 8-8-1995 ISSUED BY THE CBDT SHOWS THAT EACH GOODS RECEIPT CAN BE CONSIDERE D TO BE A SEPARATE CONTRACT IF THE GOODS ARE TRANSPORTED AT O NE TIME. THIS REQUIREMENT IS SATISFIED AS CAN BE SEEN FROM THE BI LLS ISSUED BY THE TRANSPORTERS. THE ORDER OF THE MUMBAI BENCH OF THE TRIBUNAL IN CITY TRANSPORT CORPORATION VS. ITO DATED 12-9-2006 IN ITA NOS.7708 TO 7711/MUM/2003 (COPY PLACED AT PAGE 46 OF THE PAPER BOOK) AND THE JUDGMENT OF THE PUNJAB AND HARYANA HIGH COURT IN CIT VS. UNITED RICE LAND LIMITED DATED 12-45-2008 IN IT APPEAL NO.638 OF 2007 (COPY FILED AT PAGE 41 OF THE PAPER BOOK) SUPPORT THE ASS ESSEES CASE. IN THESE CIRCUMSTANCES WE HOLD THAT THE ASSESSEE WAS N OT LIABLE TO DEDUCT TAX UNDER SECTION 194C FROM THE TRANSPORT CHARGES. CONSEQUENTLY, SECTION 40(A)(IA) IS NOT ATTRACTED. THE TRANSPORT C HARGES OF RS.1,72,200/- IS ACCORDINGLY, DIRECTED TO BE ALLOWED. THE TRANSPO RT CHARGES OF RS.1,72,200/- IS ACCORDINGLY DIRECTED TO BE ALLOWED . THE GROUNDS ARE ALLOWED. WE FIND THAT FACTS ARE EXACTLY SIMILAR IN THE PRESE NT CASE, WHAT WAS BEFORE THE TRIBUNAL IN THE CASE OF M/S.PRAMUKKH JUTE TRADERS (SUPRA). RESPECTFULLY FOLLOWING THE SAME, WE ALLOW THE CLAIM OF ASSESSEE AND THIS ISSUE OF THE ASSESSEES APPEAL IS ALLOWED. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THIS DAY OF 26 TH NOV, 2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 26/11/2010 ITA NO.3478/AHD/2008 A.Y. 2005-06 M/S. PRAGATI TRADING CO. V. ITOWD-2, ANAND PAGE 6 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-IV, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD