I.R.C. Logistics Services, Kolhapur V. Assistant Commssioner of Income-tax,

ITA 385/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7392 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 06-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Non-deduction of tax; Tangible material; Difference of opinion; Condonation of delay; Change of opinion
• Section: 143(3); 194C

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.385/PUN/2015 / ASSESSMENT YEAR : 2006-07 I.R.C. LOGISTICS SERVICES, 719, E WARD, 3 RD LANE, SHAHUPURI, KOLHAPUR. PAN : AABFI2176A. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 2, KOLHAPUR. . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI AJAY MODI / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) - KOLHAPUR, DT.30.01.2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE CARRYING ON THE BUSINESS OF TRANSPORTATION OF GOODS THROUGH ITS OWN VEHIC LES AS WELL AS TRUCKS TAKEN FROM OUTSIDE PARTIES. ASSESSEE FILED IT S / DATE OF HEARING : 14.09.2017 / DATE OF PRONOUNCEMENT: 29.09.2017 2 RETURN OF INCOME FOR A.Y. 2006-07 ON 23.06.2010 DECLARING TO TAL INCOME OF RS.14,31,900/-. THE CASE WAS TAKEN FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DT.29.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS.3,07,28,379/-. AGGRIEVED BY THE ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORD ER DT.30.01.2014 (IN APPEAL NO.KOP/704/11-12) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT (A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) KOLHAPUR, WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF A.O. INITIATING THE ACTION UNDER S. 147 AND COMPLET ING THE ASSESSMENT U/S 143(3) R.W.S 147 OF THE ACT AS THE A .O. DID NOT COME INTO POSSESSION OF ANY TANGIBLE MATERIAL AND A LSO ANV ESCAPEMENT OF INCOME AFTER ASSESSMENT . THE LD. CIT(A) OUGHT NOT HAVE UPHELD THE ORDER OF THE A.O. AS THE ACTION WAS BASED SIMPLY ON CHANGE OF OPINION AND THEREFORE ILLEGAL . THE ASSESSMENT COMPLETED UNDER S. 143(3) R . W.S 147 BE QUASHED. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ASSESSEE HAD NO LIABILITY TO DEDUCT TAX AT SOURCE W HICH WOULD ATTRACT DISALLOWANCE OF EXPENDITURE U/S. 40(A)(IA) OF THE ACT AS THE ASSESSEE HAD ARRANGED TRUCKS FROM THEIR OWNERS BUT NOT UNDER A CONTRACT EITHER WRITTEN OR ORAL . THE A. O. OUGHT NOT HAVE INITIATED ACTION U/S 147 OF THE ACT. IT BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW AND IN THE ABSENCE OF ANY ORAL OR IMPLIED AND/OR EXPRESS C ONTRACT WITH THIRD PARTY TRUCK OWNERS FOR TRANSPORTATION WORK TH E PROVISIONS OF S. 40(A)(IA) OF THE ACT ARE NOT ATTRACTED. THE ASSE SSEE WAS NOT OBLIGED TO DEDUCT ANY TAX AT SOURCE AND THERE WAS N O VIOLATION OF THAT SECTION. THE ADDITION MADE OF RS.2,92,96,479/- FOR VIOLATION OF PROVISIONS OF S. 40(A)(IA) IS ILLEGAL AND WITHOU T JURISDICTION. THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE A.O. THE LD. CIT(A)S ORDER BE SET ASIDE QUASHING THE ADDITION O F RS. 2,92,96,479/- 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE ASSESSEE HAD ENTERED INTO CONTRACT WITH M/S MAHINDR A & MAHINDRA LTD. SUPPORTED BY IN WRITTEN AGREEMENT AND FROM THIS AGREEMENT IT LEGALLY TRANSPIRED THAT THE ASSESSEE W AS ONLY ENTITLED TO EXECUTION AND NO PART OF ANY LIABILITY WAS TRANSFERRED /FASTENED TO THIRD PARTY TRANSPORTER THEN FOLLOWING THE JUDICIAL PRECEDENTS OF THE HON'BLE HIGH COURT SINCE THE RELA TIONSHIP OF CONTRACTOR AND SUB-CONTRACTOR WAS MISSING IN THIS C ASE THE LIABILITY TO DEDUCT TAX AT SOURCE DID NOT ARISE. IN THE ABSENCE OF 3 SUCH LIABILITY OF TDS THE ADDITION MADE OF RS. 2,92 ,96,479/- FOR VIOLAT I ON OF S. 40(A)(I-A) IS ILLEGAL AND WITHOUT JURISDIC TION. THE ADDITION BE QUASHED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS DECIDED THE APPEAL EXPARTE THEREBY NOT P ROVIDING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN P ROPERLY AND ALSO CONSIDERING THE FACT THAT THE TAX CONSULTANT O F THE ASSESSEE WAS ALSO NOT AWARE OF ANY HEARING FIXED BY CIT(A) T HE MATTER BE REMANDED TO THE FILE OF THE A. O. TO DO COMPLETE JU STICE TO THE ASSESSEE. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE SHORT DELAY OCCURRED IN FILING OF THIS APPEAL BEING OF 23 DAYS AS THE ORDER OF CIT(A) WAS RECEIVED ON 07-01-2015 AND THE APPEAL SHOULD HAVE BEEN FILED WITHIN 60 DAYS THAT IS ON OR BEFORE 8 TH MARCH, 2015. THE AFFIDAVIT WILL BE FILED WITH THE P RAYER FOR CONDONATION OF DELAY AT THE TIME OF HEARING OF THE APPEAL . IN THE INTEREST OF JUSTICE THE DELAY BE CONDONED AND APPEA L BE ADMITTED FOR ADJUDICATION AS PER PROVISIONS OF LAW. 3. THE CASE FILE REVEALS THAT THE ORDER OF LD.CIT(A) WAS RECEIVED BY THE ASSESSEE ON 08.01.2015 AND THEREFORE TH E APPEAL SHOULD HAVE BEEN FILED ON OR BEFORE 09.03.2015 BUT HOWEVER THE SAME WAS FILED ON 06.04.2015 RESULTING INTO DELAY OF 28 DAYS. ASSESSEE HAS FILED THE SWORN AFFIDAVIT OF THE PARTNER OF TH E FIRM WHEREIN INTER-ALIA REASONS FOR THE DELAY HAVE BEEN STATED . CONSIDERING THE AVERMENTS MADE BY THE ASSESSEE IN THE AFFIDAVIT, THE DELAY IN FILING THE APPEAL IS CONDONED AND THE APPEAL IS ADMITTED FOR HEARING. 4. ALL THE GROUNDS BEING INTER-CONNECTED ARE CONSIDERED TOGETHER. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO NOTE D THAT DURING THE YEAR ASSESSEE HAD RECEIVED CONTRACT FR OM M/S. MAHINDRA AND MAHINDRA LIMITED FOR TRANSPORTATION OF THEIR G OODS. ASSESSEE HAD UNDERTAKEN THE TRANSPORTATION WORK AND THE GOODS 4 WERE TRANSPORTED BY OWN TRUCKS AND HE ALSO UTILIZED THE TRUCKS OWNED BY DIFFERENT PERSONS. ON VERIFICATION OF THE PROFIT AN D LOSS ACCOUNT, AO NOTICED THAT THE SUM OF RS.3,29,85,084/- WAS PAID TO VARIOUS OUTSIDE TRUCK OWNERS UNDER THE HEAD FREIGHT PAID TO OUTSIDERS TRUCKS BUT NO TDS WAS DEDUCTED WHILE MAKING THE PAYMENTS. AO WAS OF THE VIEW THAT THE PROVISIONS U/S 40 (A)(IA) OF THE ACT ARE APPLICABLE. SINCE THE ASSESSEE HAD FAILED TO DEDUCT TDS U/S 194C, THE TRANSPORT EXPENSES WERE REQUIRED T O BE DISALLOWED. HE ACCORDINGLY DISALLOWED THE TRANSPORT EXPENS ES AGGREGATING TO RS.2,92,96,479/-. AGGRIEVED BY THE ORDER O F AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO BY HOLDING AS UNDER : 6 . IN APPEAL IT WAS ARGUED THAT IN THE ABSENCE OF ANY SPECIFIC WRITTEN OR ORAL CONTRACT WITH THIRD PARTIES WHO WER E TREATED AS EMPLOYEES OF THE ASSESSEE AS PER TERMS AND CONDITIO NS OF THE AGREEMENT WITH M/S MAHINDRA AND MAHINDRA LTD. AND T HE ENTIRE TAX WAS DEDUCTED AT SOURCE BY M/S MAHINDRA AND MAHI NDRA LTD., THE ASSESSEE FIRM COULD NOT BE SADDLED WITH T HE PROVISIONS OF SECTION 40(A)(IA). THE INITIATION OF PROCEEDINGS UNDER SECTION 147 IS BAD IN LAW IN THE ABSENCE OF ANY ESCAPEMENT OF INCOME LIABLE TO TAX. PROVISIONS OF SECTION 194C(2) ARE NO T APPLICABLE IN THE ABSENCE OF ANY ORAL OR WRITTEN AGREEMENT WITH T HE TRUCK OWNERS . THE ASSESSEE ALSO RELIED ON DECISIONS IN THE CASES OF R R CARRYING CORPORATION V/S ACIT (2009) 126 TTJ 240 A ND JAIPUR VIDYUT VITA RAN NIGAM LTD. V/S DCIT (2009) 123 TTJ 888. 7. ON GOING THROUGH THE SUBMISSION OF THE APPELLANT AND THE ASSESSMENT ORDER I FIND THAT THERE IS BASIS BEHIND THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT AND M AKING THE ADDITION UNDER SECTION 40(A)(IA). THE ASSESSEE HAS BASICALLY TAKEN TWO GROUNDS. FIRST IS THAT AS PER THE CONTRACT WITH M/S MAHINDRA AND MAHINDRA LTD . THE THIRD PARTY TRANSPORTERS ARE TREATED AS EMPLOYEES OF THE ASSESSEE AND, THEREFORE, PROVISION S OF SECTION 194C IS NOT ATTRACTED. LOOKING TO THE FACTS OF THE CASE, BY NO STRETCH OF IMAGINATION THE THIRD PARTY TRUCK OPERAT ORS CAN BE TREATED AS EMPLOYEE OF THE AEEESSEE . THE ASSESSEE MAY ENTER INTO WHATEVER CONTRACT IT WISHES WITH MIS MAHINDRA AND M AHINDRA LTD . AND TREAT A THIRD PARTY AS ITS EMPLOYEE BUT THERE I S NO EMPLOYER AND EMPLOYEE RELATIONSHIP BETWEEN THE ASSESSEE AND THE CONTRACTORS, SECONDLY, IT HAS BEEN ARGUED THAT THER E IS ABSENCE OF 5 ANY WRITTEN OR ORAL CONTRACT WITH THE THIRD PARTY T RANSPORTERS. ON THIS POINT IT MAY BE NOTED THAT THERE WILL NOT BE A N EXPLICIT WRITTEN CONTRACT BETWEEN THE APPELLANT AND THE TRUCK OPERAT ORS. BUT THERE ARE SUBSTANTIAL TRANSPORT WORK CARRIED OUT BY EACH OUTSIDE TRANSPORTER. ASSESSEE NEGOTIATES AND ARRIVES AT MUT UAL AGREEMENT WITH EACH OF THESE TRANSPORTERS REGARDING RATES TO BE CHARGED , DELIVERY SCHEDULE, LOADING AND UNLOADING TERMS ETC. THIS IS ALSO A FACT THAT THESE CONDITIONS ARE REVISED FROM TIME TO TIME DEPENDING 'ON CHANGES IN COST OF DIESEL AND OTHER INPUTS AND OTHER WORKING CONDITIONS . THEREFORE, EVEN IF THERE MAY NOT BE A WRITTEN CONTR ACT, BUT PRESENCE OF VERBAL CONTRACT CANNOT BE DENIED. M OREOVER, IN RESPECT OF SEVERAL CONTRACTORS, THE ASSESSEE COLLEC TS FORM 15 I FOR NON-DEDUCTION OF TAX . THEREFORE, THE ASSESSEE IS VERY WEU AWARE OF THE LEGAL IMPLICATIONS REGARDING DEDUCTION OF TA X FROM PAYMENTS. EACH OF THE TRUCKER PAS RUNNING ACCOUNT WITH THE AS SESSEE. ALL THESE FACTS ESTABLISH THAT PRINCIPAL-CONTRACTOR REL ATIONSHIP EXISTS BETWEEN THE APPELLANT AND THIRD PARTY CONTRACTOR AN D APPELLANT WAS REQUIRED TO MAKE TDS UNDER SECTION 194C. HAVING FAILED TO DEDUCT TAX, THE PAYMENTS WERE VERY WELL ATTRACTED BY SECTION 40(A)(IA). 8. REGARDING THE CASES RELIED UPON BY THE ASSESSEE IN THE CASE OF R R CARRYING CORPORATION V/S ACIT (SUPRA), THE HON OURABLE TRIBUNAL HAD FOUND THAT ASSESSING OFFICER HAD NOT M ADE OUT A CASE THAT THERE EXISTED CONTRACTOR AND SUB-CONTRACTOR RE LATIONSHIP BETWEEN THE: ASSESSEE AND THE ALLEGED SUB-CONTRACTO R. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS ESTA BLISHED THAT THERE WAS A RELATIONSHIP OF PRINCIPAL AND CONTRACTO R AS HAS BEEN DISCUSSED IN THE PREVIOUS PARAGRAPH. IN THE CASE OF JAIPUR VIDYUT VITARAN NIGAM LTD. V/S DCIT (SUPRA) THE HONOURABLE ITAT, JAIPUR RULED THAT THE AMOUNT IN QUESTION WAS ALREADY PAID AND WAS NOT PAYABLE. THEREFORE, PROVISIONS OF SECTION 40(A)(IA) DID NOT ATTRACT. THIS DECISION IS NO MORE APPLICABLE AS THE SIMILAR DECISION OF HONOURABLE VISHAKAPATOAM IT AT IN THE CASE OF MERLI N SHIPPING AND TRANSPORTERS V/ S ACIT 146 TTJ 1 HAS BEEN STOP PED OPERATION BY HONOURABLE CALCUTTA HIGH COURT . (RAJASTHAN HIGH COURT IN THE CASE OF SRI CHOWDHARY TRANSPORT COMPAN Y VIS RRO 225 CTR 125 AND ALLAHABAD HIGH COURT IN THE CASE OF REY'S MEDICAL (UP) PVT. LTD. 316 ITR 445 GO AGAINST THE A PPELLANT . ) IN VIEW OF THE FOREGOING DISCUSSIONS, THE ADDITION MAD E BY THE ASSESSING OFFICER IS HEREBY CONFIRMED AND THE GROUN DS TAKEN BY THE ASSESSEE ARE REJECTED . AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN AP PEAL BEFORE US. 6 6. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THOUGH ASSES SEE RAISED VARIOUS GROUNDS BUT THE SOLE CONTROVERSY IS WITH RESPECT TO DISALLOWANCE OF EXPENSES U/S 40(A)(IA) OF THE ACT. HE FURTHER POINTING TO GROUND NO.5 SUBMITTED THAT LD.CIT(A) HAS DECIDE D THE APPEAL EX-PARTE WITHOUT GRANTING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE FACTS. HE THEREFORE SUBMITTED THAT THE ASSESSEE BE GRANTED ONE MORE OPPORTUNITY TO PUT FORTH HIS CONTENTION AND HE FURTHER UNDERTOOK TO CO-OPERATE BY FILING THE REQUIRED DETAILS. LD.D.R. OBJECTED TO THE PRAYER OF THE A SSESSEE IN GRANTING SECOND INNINGS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DISALLOWANCE OF TRANSPORTATION EXPENSES AGGREGATING T O RS.2,92,96,479/- U/S 40(A)(IA) OF THE ACT. BEFORE US, ASSESSEE HAS TAKEN ONE OF THE GROUNDS THAT THE APPEAL WAS DECIDED E X-PARTE AND THE ASSESSEE WAS NOT GRANTED SUFFICIENT OPPORTUNITY TO PRESENT ITS CASE. FROM THE ORDER PASSED BY LD.CIT(A), IT IS SEEN THAT IT IS AN EX-PARTE ORDER AND HAS BEEN PASSED ON T HE BASIS OF MATERIAL ON RECORD. CONSIDERING THE TOTALITY OF THE AFORESA ID FACTS AND THE PRAYER OF THE ASSESSEE TO GRANT ONE MORE OPP ORTUNITY OF HEARING, WE ARE OF THE VIEW THAT IN THE INTEREST OF NATUR AL JUSTICE, ASSESSEE DESERVES ONE MORE OPPORTUNITY OF HEARING. WE THEREFORE SET ASIDE THE ISSUE BACK TO THE FILE OF AO FOR HIM TO DEC IDE THE ISSUE AFRESH ON MERITS AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN ACCORDANCE WITH THE LAW. NEEDLESS TO S TATE THAT AO SHALL GRANT ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE. 7 THE ASSESSEE IS ALSO DIRECTED TO CO-OPERATE BY PROMPTLY FURNISHING THE REQUIRED DETAILS CALLED FOR BY THE AO. IN CASE THE AS SESSEE FAILS TO SUBMIT THE DETAILS, AO SHALL FREE TO PROCEED AND DECID E THE MATTER ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. WITH TH ESE DIRECTIONS AND WITHOUT DECIDING THE GROUNDS ON MERITS, WE SET ASIDE THE ISSUE BACK TO THE FILE OF AO. THUS, THE GROUND OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 29 TH DAY OF SEPTEMBER, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 29 TH SEPTEMBER, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)- KOLHAPUR. CIT-I/11, KOLHAPUR / CIT(CENTRAL), PUNE. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.