Agarwal Transport Corporation, Cuttack V. ACIT, Cuttack

ITA 458/CTK/2012

• Counselvise Citation: 45822114 RSA 2012
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-09-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: D K SHETH MOHIT SHETH ARS
• Section: 144; 142(1)

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. 458 /CTK/2012 / ASSESSMENT YEAR 200 9 - 10 AGARWAL TRANSPORT CORPORATION,MANGLABAG, CUTTACK 753 001 PAN: AAFFA 2795 K - - - VERSUS - ACIT, CIRCLE 2(1), CUTTACK ( /APPE LLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SHETH/ MOHIT SHETH, ARS / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 30.10.2012 / DATE OF PRONOUNCE MENT: 02.11.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THE ASSESSEE IS IN APPEAL AGITATING THE CONFIRMATION OF THE DISALLOWANCE OF COMMISSION PAID AMOUNTING TO 14,76,215 ON THE BASIS OF FACTS AND CIRCUMSTANCES B ROUGHT ON RECORD BY THE ASSESSING OFFICER REQUIRING THE ASSESSEE TO ESTABLISH THE GENUINENESS OF SUCH CLAIMS BY PRODUCTION OF RELEVANT DOCUMENTS, THE ASSESSMENT HAVING BEEN MADE U/S.144. 2. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON RECORD ARE THAT THE ASSESS EE IS IN THE BUSINESS OF TRANSPORTATION AND FILED ITS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR AT 2,08,32,519. THE ASSESSING OFFICER ISSUED NOTICES U/S.143(2) AND 142(1) WHICH WERE COMPLIED WITH. THE ASSESSING OFFICER TOOK NOTE OF A SURVEY OPERAT ION HAVING BEEN CONDUCTED U/S.133A WHEN THE ASSESSEE WAS TO DECLARE ADDITIONAL INCOME AMOUNTING TO 2 CRORES WAS ADHERED TO BY THE ASSESSEE. THE ASSESSEE HAS WRITTEN BACK RECEIPT ON I.T.A.NO. 45 8 /CTK/2012 2 ACCOUNT OF LORRY FREIGHT PAYABLE THE ASSESSEE BEING IN THE BUSINESS OF TR ANSPORTING MINED ORES ON BEHALF OF VARIOUS CONTRACTORS. THE ASSESSING OFFICER HAVING SATISFIED HIMSELF THAT A DECLARATION HAD BEEN MADE BY THE ASSESSEE PROCEEDED TO CONSIDER THAT A SUM OF 14,76,105 WAS INCURRED BY THE ASSESSEE AS COMMISSION PAID WAS NOT S UPPORTED BY ANY DOCUMENTARY EVIDENCE INSOFAR AS THE ASSESSEE HAD NEVER CLAIMED SUCH EXPENDITURE IN THE IMMEDIATELY PRECEDING THREE ASSESSMENT YEARS. HE ALSO INVOKED THE PROVISIONS OF SECTION 144 AFTER INVOKING THE PROVISIONS OF SECTION 184(5) INSOFAR AS HE DISALLOWED THE SALARY AND INTEREST TO THE PARTNERS WHEN NO INSTANCE OF SUCH NON - COMPLIANCE WAS BROUGHT TO THE NOTICE OF THE ASSESSEE OR HIS COUNSEL WHEN THE BOOK RESULTS AFTER THE SURVEY HAD BEEN ACCEPTED BY THE ASSESSING OFFICER. 3. AGGRIEVED, THE ASSES SEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO CONSIDERED THE CASE OF THE ASSESSEE APPELLANT BY UPHOLDING THE ORDER OF THE ASSESSING OFFICER PASSED U/S.144 TOGETHER WITH THE FACT THAT THE COMMISSION CLAIMED BY THE ASSESSEE REQUIRED SUBSTANTIATION IN SOFAR AS THE CASHBOOK, LEDGER AND BILLS, VOUCHERS WERE NOT PRODUCED. 4. THE LEARNED COUNSEL OF THE ASSESSEE INITIATING HIS ARGUMENTS SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER IS CONTRADICTORY ON THE BASIS OF FACTS FOUND ON RECORD INSOFAR AS HE WAS NOT CONS TRAINED TO PASS THE ORDER U/S.1 44 HAVING SATISFIED HIMSELF THAT THE SURVEY RESULTED IN DECLARATION OF ADDITIONAL INCOME WHICH HAD BEEN COMPLIED WITH BY THE ASSESSEE AS PER HIS OBSERVATION IN HIS ORDER ITSELF. NO NON - COMPLIANCE TO THE NOTICES ISSUED U/S.143(2)AND 142(1) HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER LEADING TO HIM PASSING THE ORDER U/S.144 AS BEST JUDGMENT INSOFAR AS HE HAS ACCEPTED THE SURVEYED RESULT. HE POINTED OUT THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO COMPARE THE PAYMENT OF COMMISSION WHICH IS I.T.A.NO. 45 8 /CTK/2012 3 MANDATORY IN THIS BUSINESS WHEN THE TRUCK ER S HAVE TO MEET CERTAIN TIME FRAME FOR LOADING AND UNLOADING AT THE PORT WHEN THE EFFICACY OF THE PORT AUTHORITIES IS AT STAKE. HE POINTED OUT THAT THE ASSESSING OFFICER NOTED TH AT THE ASSESSEE DID NOT INCUR ANY COMMISSION PAYMENT WHEN HE REACHED A TURNOVER OF 80 CRORES IN THE EARLIER YEAR REQUIRED PAYMENT OF COMMISSION WHEN HE REACHED A TURNOVER OF 45 CRORES. THE LEARNED COUNSEL OF THE ASSESSEE ARGUED THAT THE EXIGENCIES AND TH E REQUIREMENT OF PAYMENT OF COMMISSION WAS EMBEDDED TO THE FACT THAT THE ASSESSEE ALONE COULD NOT EXECUTE THE TRANSPORT CONTRACT AWARDED TO IT BY MINE OWNERS AND HAD TO DEPEND ON OTHER TRANSPORTERS FOR THE PURPOSE WHEN AFTER THE SURVEY THE ASSESSEE CHOOSE TO WRITE BACK THE LIABILITY FOR THE PAYMENT OF LORRY FREIGHT PART WHICH REMAINED UNPAID BY THE ASSESSEE WAS ON ACCOUNT OF NOT ENTERING INTO ANY CONTRACT FOR PAYMENT OF COMMISSION HITHERTO EARLIER. THE COMPARISON FOR THE EARLIER YEARS WAS THEREFORE NOT TO B E FOR DISALLOWANCE OF COMMISSION IN THE IMPUGNED ASSESSMENT YEAR. THE COMMISSION WAS NECESSARILY PAID AND WAS INSCRIBED IN THE BOOKS OF ACCOUNT WHEN NO INFIRMITY WAS POINTED OUT BY THE ASSESSING OFFICER WHEN THE BOOKS OF ACCOUNT WERE PRODUCED INSOFAR AS TH E SURVEY WAS CONDUCTED IN THE FY ITSELF WAS VERIFIED BY THE ASSESSING OFFICER CANNOT NOW BE FOR THE FACT THAT THE CASH BOOK AND OTHER VOUCHERS WERE NOT PRODUCED. THE LEARNED COUNSEL OF THE ASSESSEE PERUSED THE DISALLOWANCE WAS ON THE BASIS OF NO CLAIM OF D EDUCTION UNDER THE HEAD COMMISSION PAID PRIOR TO THE PERIOD OF SURVEY CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE TO THE EXTENT THAT IT WA S ONLY AFTER THE SURVEY THAT PART OF THE LORRY FREIGHT PAYABLE WAS RECOGNIZED AS COMMISSION TILL THE DATE OF CLOSE OF THE FY WHEN A SUM OF 2 CRORES WAS WRITTEN BACK. THE LEARNED COUNSEL OF THE ASSESSEE THEREFORE SUBMITTED THAT THE LEARNED CIT(A) ALSO ERRED IN CONFIRMING THE DISALLOWANCE ONLY ON THE FACT THAT ON INVOKING THE I.T.A.NO. 45 8 /CTK/2012 4 PROVISIONS OF SECTION 145(3) , THE AO HAD TO PASS THE ORDER U/S.144. THE DISALLOWANCE OF EXPENDITURE CANNOT BE RECTIFIED UNDER THE PROVISIONS OF SECTION 145(3) WAS ERRONEOUSLY CONSIDERED BY THE LEARNED CIT(A) APPROPRIATE FOR PASSING THE ORDER U/S.144 WHEN THE BASIS OF EXPLANATION OF THE INCOME OF THE ASSESSEE WAS PRIMARILY ON THE BASIS OF SURVEY BEING CONDUCTED DURING THE FY ITSELF. NO DEFICIENCY WHATSOEVER HAS BEEN POINTED OUT EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(A) WHO HAD AGREED TO THE ACCEPTANCE OF DECLARATION OF THE SUM OF 2 CRORES AS ADDITIONAL INCOME WHEN THE INCOME FOR THE IMMEDIATELY PRECEDING AYS IS MUCH BELOW THE BENCH MARK OF 8% ON ACCOUNT OF TRANSPORT CONTRACT. HE PRAYED THAT THE OBSERVATIONS WERE NOT RIPE FOR PASSING AN ORDER U/S.144 INSOFAR AS IT WAS THE A SSESSING OFFICERS OWN CONSIDERING THE ISSUE U/S.184(5) WHEN HE DISALLOWED THE COMMISSION CLAIMED AS COMPARED TO EARLIER YEARS SHOULD NOT BE FOR THE IMPUGNED ASSESSMENT YEAR. HE ACCEPTED THE CORRECT INCOME DECLARED BY THE ASSESSEE PURSUANT TO THE SURVEY TH EREFORE DEMOLISHED HIS OWN STAND FOR INVOKING THE PROVISIONS OF SECTION 145(3). 5. THE LEARNED DR OPPOSED THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT THE COMMISSION OUGHT TO HAVE BEEN CLAIMED IN ACCORDANCE WITH THE PROVISIONS O F THE I.T.ACT INSOFAR AS THE ASSESSEE WAS SURVEYED WHEN HE DECLARED ADDITIONAL INCOME OF 2 CRORES WAS TO BE INDICATING THE METHOD OF CRYSTALLIZING OF THE COMMISSION PAID IN THE IMPUGNED ASSESSMENT YEAR WHEN NO COMMISSION WAS CLAIMED IN THE PRECEDING THREE AYS. SIMILARLY THE ASSESSING OFFICER WAS CONSTRAINED TO PASS THE ORDER U/SD.144 HAVING INVOKED THE PROVISIONS OF SECTION 145(3) WHEN THE ADDITIONAL INCOME OF 2 CRORES WAS DECLARED BY THE ASSESSEE DULY INCORPORATED IN THE BOOKS OF ACCOUNT WAS COMPUTATION OF CORRECT INCOME ON I.T.A.NO. 45 8 /CTK/2012 5 THE BASIS OF SURVEY CARRIED OUT ON THE ASSESSEE. HE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL MADE AVAILABLE ON RECORD. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO FIND THAT THE ASSESSING AUTHORITIES HAVE NOT CONSIDERED THE CASE OF THE ASSESSEE IN TRUE SPIRIT OF THE PROVISIONS OF I.T.ACT INSOFAR AS THE SURVEY RESULTED IN NOT DETERMINING UNDISCLOSED INCOME AS THE ASSESSEE DECLARED ADDITIONAL INCOME BY WRITING BACK THE LORRY FREIGHT PAID BUT REMAINING PAYABLE PERTAINING TO THE EARLIER THREE PREVIOUS YEARS. IT WAS THE ASSESSEE WHO COMPUTED THE CORRECT INCOME AND NOT THAT THE ASSESSING OFFICER HAS COMPUTED THE CORREC T INCOME UNDER THE PROVISIONS OF SECTION 145(3). IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO PASS THE ORDER U/S.144 INSOFAR AS THE ASSESSEE HAD COMPLIED WITH THE NOTICES ISSUED U/S.143(2)AND 142(1 ) WHEN THE BASIS OF ASSESSMENT WA S ACCEPTED INSOFAR PURS UANT TO THE SURVEY CONDUCTED DURING THE FY RELEVANT TO THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE CONTENTION OF THE LEARNED COUNSEL OF THE ASSESSEE HAS TO BE ACCEPTED JUSTIFIED INSOFAR AS THE ASSESSEE HAS TO INCUR FREIGHT WHEN THE WORK LOAD IS MORE AND I N ORDER TO CLAIM THE FREIGHT RECEIPT AS PER CONTRACT HE HAD TO INCUR CERTAIN EXPENSES BEING LORRY FREIGHT PAID WHICH UNDER NO CIRCUMSTANCE CAN BE MORE THAN THE LORRY FREIGHT RECEIPTS. IN OTHER WORDS THE LORRY FREIGHTS WRITTEN BACK PURSUANT TO THE SURVEY WA S THE AMOUNT WHICH THE ASSESSEE OUGHT NOT TO HAVE DECLARED INSOFAR AS THE LIABILITY TO INCUR EXPENDITURE COULD NOT BE MORE THAN THE INCOME EARNED THERE FROM . THE WORD COMMISSION THEREFORE, BECOMES THE MISNOMER INSOFAR AS THE COMMISSION HAS NOT BEEN PAID TO THE LORRY FREIGHT PAID BY THE ASSESSEE TO THE DRIVERS BUT TO THE AGENCIES WHO ACKNOWLEDGED THAT THE SAME GOODS WHICH ARE LOADED IN THE TRUCKS COULD BE GIVEN A NAME PROVIDED PART OF THE FREIGHT PAID TO THE I.T.A.NO. 45 8 /CTK/2012 6 TRUCK DRIVERS WHO WAS AHEAD IN QUEUE FOR MATERIA L BELONGING TO SOME OTHER CONTRACTOR . THE A SSESSEE DOES NOT OWN THE GOODS THEREFORE HAS TO GIVE IT A NAME INSOFAR AS THE LORRY FREIGHT PAID I S ALLOWABLE EXPENSES WHICH THE ASSESSING OFFICER HAS ALLOWED. THE CORRECT INCOME THEREFORE COMPUTED WAS AT THE INST ANCE OF THE ASSESSEE AND NOT THE ASSESSING OFFICER. WE SEE NO REASON TO INVOKING THE PROVISIONS OF SECTION 144 INSOFAR AS NO DEFAULT APPEARS TO HAVE BEEN COMMITTED BY THE ASSESSEE PARTICULARLY BECAUSE THE CLAIM OF EXPE NDITURE HAS BEEN MADE WHEN THE BOOKS OF ACCOUNT AND THE FINANCIAL STATEMENTS DULY AUDITED HAVE BEEN VERIFIED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO VERIFIED THE SAME IN THE ENSUING FY AT THE TIME OF SURVEY WHEN THE ASSESSMENT WAS TO BE MADE A FTER THE CLOSE OF THE FY. THE DISALLOWANCE OF THE INTEREST AND SALARY TO THE PARTNERS U/S.184(5) THEREFORE C OULD NOT BE BROUGHT ON FIRST SIMPLY BE CAUSE THE ASSESSING OFFICER CHO SE S TO PASS THE ORDER U/S.144. THERE WAS NO MATERIAL IN THE HANDS OF THE ASSESS ING OFFICER TO MAKE A BEST JUDGMENT WHEN HE HAS ACCEPTED THE RETURN AS FILED BY THE ASSESSEE IN PURSUANCE TO THE SURVEY WHEN THE BOOKS OF ACCOUNT WERE VERIFIED. IN THIS VIEW OF THE MATTER, WE ARE INCLINED TO HOLD THAT THE ASSESSEE COULD NOT HAVE BEEN SUBJE CTED TO ASSESSMENT U/S.144 FOR DISALLOWANCE OF THE INTEREST AND SALARY TO THE PARTNERS INVOKING THE PROVISIONS OF SECTION 184(5). THE SAME IS DIRECTED TO BE DELETED. 6.1. ON THE ISSUE OF DISALLOWANCE OF COMMISSION, WE ARE OF THE CONSIDERED VIEW THAT IT WA S NOT THE CASE OF THE ASSESSEE TO INFLATE EXPENSES AFTER HAVING DECLARED ADDITIONAL INCOME OF 2 CRORES WHEN FOR THE IMMEDIATELY THREE PRECEDING YEARS THE INCOME DID NOT EXCEED 8% OF THE GROSS LORRY RECEIPTS. THE COMMISSION THEREFORE WAS GIVEN A NAME IN TH E IMPUGNED ASSESSMENT YEAR WHEN THE WORKING OF THE ASSESSEE REQUIRED PAYMENT BEING THE EXIGENCY OF THE BUSINESS OF THE ASSESSEE AND NOT BECAUSE THE ASSESSEE HAD CHOSEN TO I.T.A.NO. 45 8 /CTK/2012 7 FOREGO PAYMENT OF SUCH AMOUNT AS EXPENDITURE IN THE NAME OF LORRY FREIGHT WHICH THE A SSESSING OFFICER HAS ACCEPTED AS DECLARED BY THE ASSESSEE. IN OTHER WORDS, THE COMMISSION WAS INCIDENTAL PAYMENT TO THE BUSINESS OF THE ASSESSEE AND NOT BECAUSE THE ASSESSEE HAD TO INCUR THE SAME AFTER THE SURVEY PERIOD. WE DO NOT FIND ANY MERIT IN THE OBS ERVATION OF THE LEARNED CIT(A) ON THIS SCORE WHICH WE SET ASIDE . 7. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE INCOME AS DECLARED BY THE ASSESSEE INSOFAR AS THE PARTNERS HAVE DECLARED THE INCOME AS SALARY AND INTEREST UNDER THE P ROVISIONS OF SECTION 28(V) WHICH HAS NOT BEEN DISPUTED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : 2 / THE RESPONDENT: 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 45 8 /CTK/2012 8 APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 30.10.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 31.10.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT CO MES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 02.11.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..