M/s Shree Transport, Keonjhar V. ACIT, Sambalpur

ITA 377/CTK/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4465 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-10-2010
• Court: TRIBUNAL
• Department Lawyers: S K DASH
• Assessee Lawyers: S C BHADRA
• Keywords: Income from undisclosed sources; TDS

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO , JUDICIAL MEMBER / I.T.A.NO. 377/CTK/2010 / ASSESSMENT YEAR 2005 - 06 M/S.SHREE TRANSPORT, MADHUPUR, KEONJHARGARH,KEONJHAR. PAN: ABCFS 6846 H - - - VERSUS - ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), SAMBALPUR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI S.C.BHADRA, AR / FOR THE RESPONDENT: / SHRI S.K.DASH, DR / ORDER . . , , SHRI K.K.GUPTA, ACCO UNTANT MEMBER. THIS APPEAL BY THE ASSESSEE AGITATES THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) DT.30.1.2008 WHICH WAS SUBJECT TO PETITION U/S.154 WHICH ORDER ONCE WAS P ASSED ON 27.11.2008 AND THEREAF TER AGAIN BY A NEW INCUMBENT CIT(A) O N DT. 4.6.2010. 2. THE MAIN CONTENTION OF THE ASSESSEE APPELLANT IN THIS APPEAL IS THAT THE LEARNED CIT(A) WHILE DISPOSING OF THE ORIGINAL APPEAL AGAINST THE ASSESSMENT ORDER U/S.143(3) OF THE I.T.ACT,1961 MENTIONED I N THE BODY OF THE ORDER THAT 32,56,596 AGAINST TRANSPORT OF MATERIALS HAS BEEN INCLUDED IN THE BILL RAISED DURING THE YEAR 2005 - 06. FACTUALLY THE SAME IS NOT CORRECT BECAUSE THE MATERIALS TRANSPORTED HAVE BEEN TAKEN INTO ACCOUNT IN THE SUBSEQUENT ASSESSMENT YEAR AND THE PAYMENTS RECE IVED ACCORDINGLY. AN APPLICATION U/S.1254 WAS MADE TO RECTIFY HIS ORDER BY TAKING INTO ACCOUNT THE SAID 32,56,596 INTO THE SUBSEQUENT ORDER AS WAS RETURNED BY THE ASSESSEE APPELLANT. I. T.A.NO. 377/CTK/2010 2 3. THE BRIEF FACTS, AS HAVE BEEN BROUGHT O N RECORD ON THE ISSUE IN DISPU TE, ARE THAT THE ASSESSEE FIRM DERIVES INCOME FROM CONTRACT OF TRANSPORTATION. IT MAINLY RENDERS TRANSPORTATION UNDER A CONTRACT WITH M/S.BHUSHAN POWER & STEEL LTD., JHARSUGUDA. DURING THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE HAD SHOWN EXPENSES PAYABLE A MOUNTING TO 30,68,795 ON ACCOUNT OF MAINLY TRUCK HIRING CHARGES . THE ASSESSING OFFICER SOUGHT TO VERIFY THAT THESE EXPENSES PAYABLE DO NOT STAND THE TEST OF HAVING BEEN INCURRED FOR CLAIM INSOFAR AS HE OBSERVED THAT THE ASSESSEE HAD NOT SHOWN A SUM OF 32,56,396 BEI NG THE AMOUNT RECEIVED THERE AGAINST BY THE ASSESSEE ON 2.4.2005. THE ASSESSING OFFICER ON THE BASIS OF DELIBERATION BEFORE HIM HELD THAT THIS AMOUNT HAD NOT BEEN DISCLOSED AGAINST THE EXPENSES INCURRED BY THE ASSESSEE UNDER THE MERCANTILE SYSTEM OF ACCOUN TING THEREFORE WAS TO BE BROUGHT TO TAX AS INCOME FROM UNDISCLOSED SOURCES. ACCEPTING THE NET PROFIT AS RETURNED BY THE ASSESSEE AT 9,44,756, THE ASSESSING OFFICER ADDED 52,56,396 CREATING A DEMAND WHICH WAS APPEALED AGAINST BEFORE THE FIRST APPELLATE AUTHORITY. THE LEARNED CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE APPELLANT BEFORE HIM WHO HAD ALSO GIVEN ALTERNATIVE SUBMISS ION S IN RESPECT TO THE FACT THAT THE WORKS RENDERED BY THE ASSESSEE IN THE LAST FOUR DAYS HAVE BEEN PAID FOR BY THE DEDUCTEE ON 2.4.2005 THEREFORE CANNOT BE CONSIDERED AS INCOME FOR THE IMPUGNED ASSESSMENT YEAR AND ALSO IF WAS TO BE CONSIDERED FOR THE SUBS EQUENT YEAR , THE TAX DEDUCTED AT SOUR CE UNDER THE PROVISIONS OF SECTION 199 OF THE ACT SHOULD ALSO BEEN GIVEN RELEVANCE FOR COMPUTATION OF INCOME IN THE SUBSEQUENT YEAR. IN THE ALTERNATIVE HE ALSO SUBMITTED THAT THE WHOLE RECEIPT COULD NOT BE TAXED BEING R ECEIPT ON CONTRACT WORK BUT ON THE BASIS OF NET INCOME THEREIN BEING 2.4% WAS AS OTHERWISE ACCEPTABLE TO THE ASSESSING OFFICER SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE. I. T.A.NO. 377/CTK/2010 3 4. THE LEARNED CIT(A) NEGATED THE CLAIM OF THE ASSESSEE INSOFAR AS HE OBSERVED THA T NO MATERIAL HAD BEEN PLACED BEFORE HIM TO SHOW THAT IN THE BOOKS OF M/S.BHUSHAN POWER & STEEL LTD., THE AMOUNT OF 32,56,396 WAS ACTUALLY CREDITED OR PAID IN FAVOUR OF THE ASSESSEE APPELLANT AFTER 31.3.2005 THEREFORE THE TAX DEDUCTED AT SOURCE STOOD AS ALREADY CLAIMED IN THE ASSESSMENT YEAR 2005 - 06 CANNOT BE CONSIDERED FOR TAXATION OR GIVEN CREDIT TO IN THE ASSESSMENT YEAR 2006 - 07. HE CONFIRMED THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE ON OBSERVING THE AUDIT REPORT U/S.44AB WHICH DID NOT DEVIATE TO THE FA C T THAT THE PORTION OF AN INCOME , WHICH HAS BEEN SOUGHT TO BE TAXED IN THE SUBSEQUENT YEAR , COULD BE LOST SIGHT OF AGAINST THE EXPENSES PAYABLE SHOWN BY THE ASSESSEE AMOUNTING TO 30,68,795. 5. THE ASSESSEE FILED RECTIFICATION PETITION BY INDICATING THAT THE LEARNED CIT(A) HAVING ACCEPTED MERCANTILE SYSTEM OF ACCOUNTING OUGHT TO HAVE FOLLOWED THE METHOD OF ACCOUNTING OF GROSS RECEIPT OF 1,31,07,552 MADE BY M/S.BHUSHAN POWER & STEE L LTD., ON 31.3.2005 WHICH INCLUDED 32,56,396 THEREFORE CANNOT BE SEPARATELY CONSIDERED ONLY ON ITS RECEIPT ON 2.4.2005. THE ASSESSING OFFICER THEREFORE HAD DELIBERATELY MADE A MISTAKE OF DEVIATING FROM THE MERCANTILE SYSTEM OF ACCOUNTING FOR OBSERVING TH IS AMOUNT AS INCOME FROM UNDISCLOSED SOURCES FOR THE IMPUGNED ASSESSMENT YEAR . THE LEARNED CIT(A) DISMISSED THE ASSESSEE - APPELLANTS PETITION BY HOLDING THAT EVEN IF THE AFORESAID OBSERVATION IS MODIFIED OR DELETED , THE ALTERED POSITION IS NOT G OING TO MA KE ANY DIFFERENCE IN FINDING GIVEN BY HIS PREDECESSOR WHICH WAS SUBSEQUENTLY ALSO DISMISSED VIDE ORDER DT.4.6.2010. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE ABOVE FACTS SUBMITTED THAT THE ALTERNATIVE SUBMISSION BY THE ASSESSEE TO EXPLAIN TH E CASE OF THE ASSESSEE HA S BEEN MISS - CONSTRUED INSOFAR AS THE AUTHORITIES I. T.A.NO. 377/CTK/2010 4 BELOW REFUSED TO EVEN ACCEPT THEIR OWN INTERPRETATION OF THE FACTS WHICH ARE GLARING ON THE BASIS OF THE ASSESSING OFFICER SEEKING THE CONFIRMATION OF TDS CERTIFICATES PLACE D ON PAGE D 24 OF THE PAPER BOOK. IT CLEARLY INDICAT ES THAT THE TOTAL TURNOVER OF THE ASSESSEE APPELLANT IS AMOUNTING TO 7.11 CRORES AND THE TURNOVER IS FROM RECEIPTS OF M/S.BHUSHAN POWER & STEEL LTD., SHOWN IN THEIR CERTIFICATE IS 7.19 CRORES. THE DIFFERENCE, IF ANY ,AMOUNTING TO 7 LAKHS APPROXIMATELY THEREFORE CANNOT BE STRETCHED TO 32,56,396 INSOFAR AS THE VERY SAID CERTIFICATE ALSO INDICATES THAT THE TDS HAS BEEN DEDUCTED AMOUNTING TO 2,94,225 DEPOSITED ON 31.5.2005 BY THE DEDUCTOR. THE ALTERNATIVE PLEA THEREFORE WAS TO IGNITE A THOUGHT TO THE ASSESSING OFFICER CONSIDERING THE SOLITARY ISSUE OF TAXATION OF 32,56,39 6 IN THE IMPUGNED ASSESSMENT YEAR WHEN INITIALLY HE STARTED BY HOLDING A VIEW THAT THERE WAS NO BILLS RECEIVABLE SHOWN AGAINST THIS RECEIPT ON 2.4.2005. THE LEARNED COUNSEL ARGUED THAT THE EXPENSES PAYABLE HAVE BEEN SHOWN AT 30 LAKHS APPROXIMATELY AND THE INCOME HAS ALREADY BEEN RENDERED AS TURNOVER IN ACCORDANCE WITH THE BILLS SUBMITTED BY THE ASSESSEE THEREFORE COULD LEAVE NO ROOM FOR A SEPARATE CONSIDERATION UNDER THE MERCANTILE SYSTEM OF ACCOUNTING WHEN THE ASSESSING OFFICER HIMSELF AGREES TO THE PRO POSITION THAT ONLY THE NET PROFIT HAS TO BE TAXED AND THE TAX THEREOF IS TO BE GIVEN CREDIT AS CERTIFIED IN THE TDS CERTIFICATE. THE ALTERNATIVE PLEA THEREFORE WAS TO ONLY EXPLAIN THE DISTINCT FEATURE OF MERCANTILE SYSTEM OF ACCOUNTING VIS - - VIS RECEIPT BA SIS. IT WAS NEVER THE CASE OF THE ASSESSEE THAT IT WAS NOT FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING AS WAS ALSO CERTIFIED BY THE AUDITORS UNDER THE PROVISIONS OF SECTION 44AB. THIS MISTAKE COMMITTED BY THE LEARNED CIT(A) , WHICH IS APPARENT IN THE ORDE R , WAS SOUGHT TO BE RECTIFIED TWICE WHICH WAS REFUSED AND HENCE THIS APPEAL. HE PRAYED THAT THE TAXATION OF INCOME IS TO BE ON THE BASIS OF INCOME GENERATED IN A YEAR AGAINST WHICH CREDIT FOR TDS HAS I. T.A.NO. 377/CTK/2010 5 TO BE GRANTED. THE FACTUAL POSITION IS THAT THE ASSESSI NG AUTHORITIES HAVE TAXED THE APPROPRIATE INCOME AND NOT THE TOTAL RECEIPT CLINCHES THE ISSUE THAT THE EXPENSES HAVE BEEN INCURRED AGAINST THE RECEIPT, WHICH IS NOT DISPUTED. THE RECEIPT HAS BEEN SEGREGATED UNDER THE MERCANTILE SYSTEM OF ACCOUNTING THEREFO RE ONLY INDICATES A MISTAKE COMMITTED BY BOTH THE AUTHORITIES WHICH WAS SOUGHT TO BE RECTIFIED BY WAY OF APPEAL AND PETITION U/S.154 AND REMAINS UNSETTLED INSPITE OF ALL THE FACTS BROUGHT ON RECORD AND ARE ALSO AVAILABLE IN THE RESPECTIVE ORDERS MAY THEREF ORE BE KINDLY CONSIDERED FOR APPROPRIATE DIRECTION. 7. THE LEARNED DR SUBMITTED THAT THE APPEAL HAS BEEN FILED ON THE ORDER OF THE LEARNED CIT(A) DT.4.6.2010 U/S.154. THE LEARNED CIT(A) HAS CONCLUDED THAT NO NEW FACTS OR REASON OR OMISSION HAS BEEN POINTED OUT THEREFORE THERE WAS NO REASON TO INTERFERE WITH THE ORDER OF HIS PREDECESSOR. ON MERITS, HE ARGUED THAT THE ASSESSEE HIMSELF POINTED OUT BY GIVING TWO DIFFERENT VERSIONS WITH RESPECT TO MAINTENANCE OF BOOKS OF ACCOUNT UNDER THE MERCANTILE SYSTEM OF AC COUNTING WHEN THE CERTIFICATE FROM M/S.BHUSHAN POWER & STEEL LTD., CLEARLY INDICATE D THAT THE PAYMENTS HAD BEEN RECEIVED ON 2.4.2005. IT IS UNDISPUTED FACT THAT M/S.BHUSHAN POWER & STEEL LTD., HAS CERTIFIED THAT WORK WAS EXECUTED IN THE LAST FOUR WORKING D AYS OF THE IMMEDIATELY PRECEDING PREVIOUS YEAR AGAINST WHICH NO BILLS RECEIVABLE WAS SHOWN IN THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HAVING SHOWN THE EXPENSES PAYABLE AMOUNTING TO 30 LAKHS APPROXIMATELY, THE ASSESSING OFFICER THEREFORE RIGHTLY OBSERVED THAT 32,56,396 HA D NOT BEEN SHOWN AS INCOME WAS BROUGHT TO TAX AS UNDISCLOSED INCOME REQUIRED NO FURTHER RECTIFICATION AS CONFIRMED BY THE LEARNED CIT(A) IN HIS ORDER DT.30.1.2008. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE UNABLE I. T.A.NO. 377/CTK/2010 6 TO SATISFY OURSELVES TO THE SUBMISSIONS OF THE LEARNED DR AND THE LEARNED CIT(A) INSISTING THAT THERE IS NO MISTA KE APPARENT ON RECORD IN VIEW OF THE FACT THAT THE ASSESSEES ALTERNATIVE SUBMISSION HAS BEEN MISCONSTRUED TO THE EXTENT THAT THE INITIATION OF HOLDING A PARTICULAR AMOUNT TAXABLE WHETHER UNDER M ERCANTILE SYSTEM OF ACCOUNTING , OR IN CASH BASIS OF ACCOUNTIN G HAS BEEN MISCONSTRUED BY THE ASSESSING OFFICER HIMSELF. WE FIND FORCE IN THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSING OFFICER AFTER HAVING OBSERVED THAT 30 LAKHS APPROXIMATELY HAS BEEN SHOWN AS EXPENSES PAYABLE SHOULD HAVE C ORRESPONDING BILLS RECEIVABLE AMOUNTING TO THE LIKE AMOUNT INSOFAR AS THE WORK RENDERED IN THE LAST FOUR DAYS WAS PAID FOR BY THE TAX DEDUCTOR ON 2.4.2005 WAS PROPERLY CONSIDERED BY THE ASSESSEE IN MERCANTILE SYSTEM OF ACCOUNTING . THE ASSESSING OFFICER DID NOT VERIFY THE BALANCE IN BANK WHICH WAS HIGHER THAN THE BANK BALANCE AS SHOWN IN THE BALANCE SHEET WAS THEREFORE RECONCILED AND DID NOT REQUIRE ANY SUBMISSION TO ACCOUNT FOR THE EXPENSES TO BE INCURRED AGAINST THIS PURPORTED UNDISCLOSED SOURCE OF INCOME HELD BY HIM AS NOT PART OF TDS CERTIFICATE AMOUNTING TO 131 CRORES AS GIVEN AT PAGE 20 OF THE PAPER BOOK FILED BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE LEARNED ASSESSING OFFICER THEREFORE, CLEARLY MIXED THE TWO METHODS OF ACCOUNTING ON HIS OWN WITHOUT ANY INDICATION FROM THE ASSESSEE. THE ALTERNATIVE PLEA OF THE ASSESSEE WAS ONLY TO CONSIDER THAT IF RECEIPT BASIS OF ACCOUNTING IS FOLLOWED TO CONSIDER THE EXPENSES THERE UPON IN THE SUBSEQUENT YEAR SUCH INCOME WOULD ONLY BE 2.4% IS ACCEPTABLE TO HIM IN T HE IMPUGNED YEAR AS WELL. HAVING GIVEN CREDIT TO TAX AMOUNTING TO RS,2,94,225 FOR THE TAX DEDUCTED AT SOURCE BY M/S.BHUSHAN POWER & STEEL LTD., IN THE IMPUGNED ASSESSMENT YEAR, THE ASSESSING OFFICER COULD NOT THEREFORE TAX THE SAME AMOUNT ON RECEIPT BASI S IN THE IMPUGNED ASSESSMENT YEAR. THIS OBSERVATION WAS ALSO MADE BY THE LEARNED CIT(A) IN THE ORIGINAL I. T.A.NO. 377/CTK/2010 7 ORDER WHICH WAS SOUGHT TO BE RECTIFIED BY THE ASSESSEE BY WAY OF PETITION/S.154. UNFORTUNATELY THE INCUMBENT CHANGED HANDS WHICH COMPLICATED THE MATTER BUT NOT SOLVED SETTLED EITHER ON THE MERCANTILE SYSTEM OF ACCOUNTING OR ON THE BASIS OF PROVISIONS OF THE I.T.ACT. WE ARE OF THE VIEW THAT THE LEARNED CIT(A) AND THE ASSESSING OFFICER MISDIRECTED THEMSELVES TO HOLD THAT THE LETTER DT.11.7.2007 FROM M/S.BHU SHAN POWER & STEEL LTD., INDICATING THAT THE SUM OF 32,56,396 INCLUDED IN THE TDS CERTIFICATE RELATING TO THE AMOUNT PAID OR CREDITED TO THE ASSESSEE 1,31,07,552 INDICATING TDS OF 2,94,225 WAS MISINTERPRETED ON MERCANTILE SYSTEM OF ACCOUNTING AS WELL AS RECEIPT BASIS OF ACCOUNTING SYSTEM BY THE AUTHORITIES BELOW. A MISINTERPRETA T ION OF THE FACT HAS BEEN BLOWN OUT OF PROPORTION WHICH WE ARE UNABLE TO ACCEPT INSOFAR AS THE LEARNED AR OF THE ASSESSEE GROSSLY OF THE VIEW THAT THE ALTERNATIVE ARRANGEMENT TO T AXATION AS SUBMITTED WAS IN ORDER TO MAKE THE ORIGINAL SUBMISSION FACTUALLY DISTINGUISHABLE INSO F AR AS PROPER APPRECIATION IN ACCORDANCE WITH THE PROVISIONS OF THE I.T. ACT COULD ONLY BE MADE. THE ASSESSEE APPELLANT WOULD HAVE HELD THE AR OF THE ASSESSEE R ESPONSIBLE FOR SUCH ACT IF IT PERPETUATED TO THE EXTENT THAT THE LAW PROVIDES FOR TAXATION ON AN INCOME WHICH COULD BE ADJUSTED AGAINST THE TDS CERTIFICATE FOR THAT YEAR UNDER THE PROVISIONS OF SECTION 199 WAS AKIN TO INDICATING MERCANTILE SYSTEM OF ACCOUN TING. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAD RIGHTY INDICATED THE TAX DEDUCTED AT SOURCE WAS ON THE INCOME WHICH HAD ALREADY BEEN RENDERED TO TAX BY IT N VIEW OF THE TOTAL TURNOVER INDICATED BY M/S. BHUSHAN POWER & STEEL LTD., AND THE ASSESSE E BEING THE SAME WITH A MINOR DIFFERENCE OF 7 .87 LAKHS ONLY. THE ASSESSING OFFICER THEREFORE, COULD NOT SUBSTANTIATE AS TO HOW 32,56,396 ARE BECOMING PART OF INCOME OF THE ASSES SEE FROM UNDISCLOSED SOURCES HAD BEEN RIGHTLY CHALLENGED BY THE ASSESSEE IN T HIS APPEAL. THE I. T.A.NO. 377/CTK/2010 8 RECTIFICATION THEREFORE, WAS TO BE CARRIED OUT WITHOUT ANY DEBATE, CALCULATION OR INTERPRETATION OF FACTS AS OPINED BY THE LEARNED CIT(A) REQUIRES NO FURTHER IFS AND BUTS AS ARGUED BY THE LEARNED DR. THE LEARNED ASSESSING OFFICER IS DIRECTE D TO DELETE THE ADDITION IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS ACCEPTED THE NET PROFIT RETURNED BY THE ASSESSEE ON THE BASIS OF GROSS TURNOVER WHICH INCLUDES 32,56,396 ON WHICH TAX CREDIT AS PER THE TDS CERTIFICATE HAS BEEN VERIFIED BY THE AS SESSING OFFICER HIMSELF. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 13 TH APRIL, 2011 S D/ - S D/ - ( . . . ) , ( K.S.S.PRASAD RAO), JUDI CIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 13 TH APRIL, 2011 - COPY OF THE ORDER FORWA RDED TO: 1 . / THE APPELLANT : M/S.SHREE TRANSPORT, MADHUPUR, KEONJHARGARH,KEONJHAR. 2 / THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), SAMBALPUR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, [ ] SENIOR PRIVATE SECRETARY ( ), ( H.K.PADHEE ), SENIOR.PRIVATE SECRETARY.