ITO, New Delhi V. M/s. Helper Express Pvt. Ltd., New Delhi

ITA 4050/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53027 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: RAHUL KAMPANI
• Section: 148; 194C

Judgement Text

I.T.A. NO.4050/DEL./2010 (A.Y. : 2005-06) 1 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH `C : NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER ITA NO. 4050/DEL./2010 (ASSESSMENT YEAR : 2005-06) ITO, WARD 12(3), VS. M/S HELPER EXPRESS PVT. LTD ., NEW DELHI. 332-A, SANT NAGAR, EAST OF KAILASH NEW DELHI. (PAN/GIR NO.AAACH9559G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAHUL KAMPANI, CA REVENUE BY : SHRI SALIL MISHRA, DR ORDER PER C.L. SETHI: JM THE MAIN EFFECTIVE GROUND IN THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 11.6.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2 005-06 IS AS UNDER: ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, WHE THER THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.36,95,517 MADE BY TH E ASSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT E STABLISH THE RELATION OF PRINCIPAL AND AGENTS BETWEEN THE ASSESSEE AND AIRLINES/AITA A GENTS DURING THE ASSESSMENT PROCEEDINGS. 2. IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 18.10.2005, DECLARING TOTAL INCOME AT RS.17,250/-. THIS RETURN WAS INITIALLY P ROCESSED U/S 143(1) OF THE I.T. ACT, 1961. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED N OTICE U/S 148 ON 12.5.2006 AFTER RECORDING THE REASON THAT IN THE RETURN OF INCOME, THE ASSESSEE HAD DECLARED GROSS RECEIPTS AT RS.4,92,583/- WHEREAS, THE GROSS RECEIPTS AS PER TDS CERTIFICATES WERE OF RS.41,88,100/- HAVING A DIFFERENCE OF RS.36,95,517/ - WHICH HAD ESCAPED ASSESSMENT DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY WHOLE MATERIAL FACTS, NECESSARY FOR COMPUTATION OF ASSESSEES INCOME. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 19.7.20 06 AND 11.12.2007 SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ASSESSEE IS A CLEARING A ND FORWARDING AGENT INVOLVED IN THE CLEARANCE OF THE GOODS AND IT ACTS ON BEHALF OF VAR IOUS AIRLINES/AITA AGENTS AND RENDERS I.T.A. NO.4050/DEL./2010 (A.Y. : 2005-06) 2 SERVICES IN RESPECT OF BOOKING OF SHIPMENT, AND IT GETS COMMISSION FROM VARIOUS AIRLINES/IATA AGENT @ 4%. IT WAS THUS CLARIFIED TH AT THE ASSESSEE HAD SHOWN ONLY COMMISSION INCOME IN THE RECEIPTS, AND THE AMOUNT O F THE FREIGHT CHARGES RECEIVED FROM EXPORTERS WHICH WAS REQUIRED TO BE PAYABLE TO THE T RANSPORTER WAS NOTHING BUT AN AMOUNT REIMBURSED BY THE PARTIES TO THE ASSESSEE AND, THER EFORE, THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF REIMBURSEMENT WERE NOT APPE ARING IN THE P&L A/C. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE ASSESSEES C ONTENTION AND TAKEN A VIEW THAT THE DIFFERENCE OF RS.36,95,517/- IS REQUIRED TO BE ADDE D AS INCOME IN THE HANDS OF THE ASSESSEE IN THE ABSENCE OF CONFIRMATION OF ACCOUNTS FROM RESPECTIVE PARTIES. THE ASSESSING OFFICER, THEREFORE, MADE THE ADDITION OF RS.36,95,517/- TO THE TAXABLE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE ADVANCED THE FOL LOWING SUBMISSIONS: (I) THAT THE ASSESSEE WAS MERELY A CLEARING AND FOR WARDING AGENT, RUNNING THE BUSINESS OF CLEARING GOODS FROM CUSTOMS AUTHORITIES AND HANDING THEM OVER TO THE VARIOUS TRANSPORT OPERATORS/CARRIERS, N AMELY, AIRLINES, SHIPPING AGENTS AND ROAD TRANSPORTERS FOR FORWARDING THEM TO THEIR DESTINATION; (II) THAT RECEIPT OF THE FREIGHT AND CUSTOM CLEARIN G EXPENSES FROM THE EXPORTERS FOR ONWARD PAYMENT TO TRANSPORT OPERATORS /CARRIERS WAS NOT THE ASSESSEES INCOME, BUT REIMBURSEMENT OF AN EXPENSES INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF EXPORTERS AND ON THE AFORESAID AMOUNT REIMBURSED TO THE ASSESSEE BY THE EXPORTERS, THE EX PORTERS DEDUCTED TAX AT SOURCE U/S 194C OF THE I.T. ACT, 1961; (III) THAT THE ASSESSEE RECEIVED COMMISSION FROM IN DIAN AIRLINES/SHIPPING AGENTS ON WHICH TDS WAS DEDUCTED AT SOURCE U/S 194H OF THE ACT. (IV) THE AMOUNT OF TDS DEDUCTED ON COMMISSION WAS OF RS.6,637/-, AND THE AMOUNT OF TDS DEDUCTED ON FREIGHT AND CUSTOM CLEARI NG CHARGES WAS RS.84,898/-; (V) THAT NO ELEMENT OF INCOME WAS INVOLVED IN THE R EIMBURSEMENT OF FREIGHT AND CUSTOM CLEARING CHARGES, WHICH WERE REIMBURSED BY THE EXPORTERS TO THE ASSESSEE AGAINST THE PAYMENT MADE BY THE ASSESS EE TO TRANSPORTERS; I.T.A. NO.4050/DEL./2010 (A.Y. : 2005-06) 3 (VI) THE TOTAL AMOUNT OF THE FREIGHT RECEIPTS REIMB URSED TO THE ASSESSEE BY THE EXPORTERS WAS NEVER INCLUDED AS INCOME IN THE HANDS OF THE ASSESSEE IN EARLIER YEARS. 5. AFTER CONSIDERING THE ASSESSEES SUBMISSION AND ASSESSING OFFICERS ORDER INCLUDING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: THESE SUBMISSION HAVE BEEN CAREFULLY CONSIDERED. IT IS SEEN THAT ASSESSING OFFICER HAS ENHANCED THE INCOME MORE THAN TWO HUNDRED TIMES BY TREATING THE ENTIRE GROSS RECEIPTS AS INCOME ON THE BASIS OF TDS CERTIFICATES. IT HAS BEEN EXPLAINED BY THE APPELLANT THAT THEY ARE ENTIT LED TO A FIXED COMMISSION TO 4% ONLY ON THE TOTAL FREIGHT CHARGES WHICH IS BORNE OU T BY THE COPIES OF VARIOUS AGREEMENTS WHICH HAVE BEEN FILED BY THE ASSESSEE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER. AS PER T HE APPELLANT, NECESSARY CONFIRMATIONS WERE ALSO FILED. IT HAS ALSO BEEN ST ATED THAT THIS IS THE ONLY ISOLATED YEAR IN WHICH THE ASSESSING OFFICER HAS ADOPTED THI S APPROACH. THEIR INCOME HAS BEEN ASSESSED IN THE PRECEDING AS WELL AS SUCCEEDIN G YEARS ON THE BASIS OF NET COMMISSION EARNED BY THEM ON THE GROSS RECEIPTS. KEEPING IN VIEW THE ABOVE FACTS AND CIRCUMSTANCES I T IS HELD THAT THE ASSESSING OFFICER WAS NOT RIGHT IN HIS APPROACH. T HE ASSESSEE IS SHOWING THE NET COMMISSION INCOME TO WHICH HE IS ENTITLED AND THERE IS NOTHING ON RECORD TO SHOW THAT THE TOTAL GROSS FREIGHT RECEIVED BY THE APPELL ANT CONSTITUTES THEIR INCOME. HENCE, THE ACTION OF THE ASSESSING OFFICER IS LIABL E TO BE HELD AS NOT CORRECT. ACCORDINGLY, THE ADDITION IS DELETED. 6. HENCE, REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE V ARIOUS MATERIALS AND PAPERS PLACED IN THE PAPER BOOK FILED BY THE ASSESSEE. 8. ON PERUSAL OF DETAILS OF TDS DEDUCTED FROM THE P AYMENT MADE TO THE ASSESSEE, WE FIND THAT AN AMOUNT OF RS.6,637/- HAS BEEN DEDUCTED FROM THE TOTAL PAYMENT OF COMMISSION OF RS.1,26,812/- PAID BY SKYWAYS AIR SER VICES PVT. LTD., UNIQUE FREIGHT MOVERS AND TROPICAL TRANSPORT SYSTEMS (I) (P) LTD., AND AN AMOUNT OF RS.84,898/- HAS BEEN DEDUCTED FROM FREIGHT CHARGES OF RS.40,61,288/ - BY M/S SSP (PVT.) LTD., M/S JAISHREE TEXTILES AND ATLANTIS TRADING. IT IS THU S CLEAR THAT THE PAYMENT OF RS.40,61,288/- WAS MADE TO THE ASSESSEE ON ACCOUNT OF FREIGHT ON WHICH TDS OF RS.84,898 WAS DEDUCTED. IT IS ALSO CLEAR THAT A SU M OF RS.1,26,812/- WAS PAID TO THE I.T.A. NO.4050/DEL./2010 (A.Y. : 2005-06) 4 ASSESSEE AS COMMISSION ON WHICH TDS OF RS.6,637/- W AS DEDUCTED. THE GROSS RECEIPTS OF THE AFORESAID TWO TDS CERTIFICATES THUS COMES TO RS .40,61,288/- + RS.1,26,812/- = RS.41,88,100/-. IN OTHER WORDS, THE TOTAL RECEIPT OF RS.41,88,100/- CONSISTS OF FOLLOWING TWO ITEMS: (1) FREIGHT CHARGES - RS.40,61,288 (2) COMMISSION - RS. 1,26,812 RS.41,88,100 WE HAVE ALSO GONE THROUGH THE SUB AGENT AGREEMENT E NTERED INTO BETWEEN SKYWAYS AIR SERVICES PVT. LTD. AND THE ASSESSEE. BY THIS AGREE MENT, THE ASSESSEE WAS APPOINTED AS SUB AGENT OF SKYWAYS AIR SERVICES PVT. LTD., FOR WHICH, THE ASSESSEE WAS ENTITLED TO 4% IATA COMMISSION ON FREIGHT PRE-PAID/CHARGES COLLECT ED SHIPMENT EXECUTED THROUGH AIRWAYS BILL OF SKYWAYS AIR SERVICES PVT. IN THIS AGREEMENT, IT HAS BEEN MENTIONED THAT IN CASE ANY FREIGHT GUARANTEE IS REQUIRED TO BE GIV EN TO THE CARRIER/OPERATOR, THE SAME SHALL BE GIVEN BY SKYWAYS AIR SERVICES PVT. LTD. ON BEHAL F OF THE ASSESSEE TO THE AIRLINES PROVIDED THE CHEQUE FOR THE EQUIVALENT AMOUNT PERTA INING TO THE SAID TRANSACTION WAS DEPOSITED BY THE ASSESSEE WITH THE SKYWAYS AIR SERV ICES PVT. LTD. IT IS FURTHER PROVIDED THAT ALL THE PAYMENT SHALL BE MADE AT LEAST TWO DAY S PRIOR TO IATA/AIRLINES PAYMENT DATES. THE IDENTICAL AGREEMENT HAS BEEN MADE WITH TROPICAL TRANSPORT SYSTEM (I) (P) LTD. AND OTHER AGENTS. IN THIS CASE, THE ASSESSEE HAD PAID FREIGHT CHARGES TO CARRIERS/OPERATORS WHICH HAS BEEN REIMBURSED BY EXP ORTERS TO THE ASSESSEE TO THE EXTENT THE AMOUNT ACTUALLY PAID BY THE ASSESSEE TO CARRIER S/OPERATORS. THE AMOUNT REALISED BY THE ASSESSEE FROM THE EXPORTERS AGAINST THE AMOUNT OF FREIGHT PAID BY ASSESSEE TO CARRIERS/OPERATORS IS THUS NOTHING BUT A REIMBURSEM ENT OF EXPENSES INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF EXPORTERS AND NO ELEM ENT OF PROFIT IS INVOLVED THEREIN. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED I N TAKING THE TOTAL DIFFERENCE OF RECEIPTS AMOUNTING TO RS.36,95,517/- AS INCOME OF THE ASSESS EE WITHOUT ASCERTAINING THE NATURE AND CHARACTER OF THE RECEIPTS. THE ASSESSEE INCOME IS ONLY BY WAY OF COMMISSION, WHICH HAS BEEN DULY INCLUDED IN THE P&L A/C. EVEN IF THE AMOUNT OF FREIGHT CHARGES RECEIVED BY THE ASSESSEE FROM THE EXPORTERS IS INCLUDED IN T HE GROSS RECEIPTS, THE CORRESPONDING AMOUNT OF FREIGHT CHARGES PAID BY THE ASSESSEE TO C ARRIERS/OPERATORS IS TO BE DEBITED TO THE P&L A/C, AND IN THAT WAY THE NET RESULT WILL BE THE SAME ARISING NO INCOME TO THE ASSESSEE I.T.A. NO.4050/DEL./2010 (A.Y. : 2005-06) 5 FORM THE FREIGHT CHARGES PAID BY THE EXPORTER TO TH E ASSESSEE ON ACCOUNT OF REIMBURSEMENT OF THE CHARGES PAID BY THE ASSESSEE TO CARRIERS/OPE RATORS. THEREFORE, MERELY BECAUSE THE EXPORTERS HAVE DEDUCTED TDS FROM THE FREIGHT CHARGE S PAID TO THE ASSESSEE, THE WHOLE OF THE FREIGHT CHARGES PAID TO THE ASSESSEE CANNOT BE CONSIDERED TO BE AN INCOME OF THE ASSESSEE LIABLE TO TAX WITHOUT DEDUCTING THEREFROM THE AMOUNT OF THE FREIGHT CHARGES PAID BY THE ASSESSEE TO DIFFERENT CARRIERS/OPERATORS. S INCE IN THE PRESENT CASE, THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF FREIGHT CHAR GES AND AMOUNT OF FREIGHT PAID BY THE ASSESSEE TO CARRIERS/OPERATORS IS ONE AND SAME, NO INCOME HAS ACTUALLY ARISEN OUT FROM THE SAID TRANSACTION AND, THEREFORE, THE QUESTION OF MA KING ANY ADDITION ON THAT ACCOUNT DOES NOT ARISE. IN THE LIGHT OF THE DISCUSSION MADE ABO VE, WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS.36,95,517 /- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE GROSS FREIGHT RECEIPTS. THUS, THE O RDER OF THE CIT(A) IS UPHELD. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 25 TH OCTOBER, 2011. SD/- SD/- (K.G. BANSAL) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, OCT. 25, 2011. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-X, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR/ITAT