The ITO, Ward-2(4), Vijayawada V. M/s Annavarapu Enterprises, Vijayawada

ITA 487/VIZ/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 7392 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 18-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D KOMALI KRISHNA
• Assessee Lawyers: SOBHANADRISWARA RAO
• Keywords: Opportunity of being heard
• Section: 194C; 148

Judgement Text

ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.487/VIZAG/2010 ASSESSMENT YEAR: 2006-07 ITO WARD-2(4), VIJAYAWADA VS. ANNAVARAPU ENTERPRISES, VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO: AAEFA 0457 H APPELLANT BY: SMT. D. KOMALI KRISHNA, SR.DR RESPONDENT BY: SHRI SOBHANADRISWARA RAO, CA ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 13.08.2010 PASSED BY LEARNED CIT(A), VIJAYAWADA AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE REVENUE IS ASSAILING THE DECISION OF THE LEA RNED CIT (A) IN DELETING THE ADDITION OF ` 21,21,788/- MADE UNDER SECTION 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE FROM THE PAYMENT MADE TO THE TRANSPORTERS. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE FIRM IS CARRYING ON IN THE BUSINESS OF C&F AGENCY. THE R ETURN FILED BY THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION WAS PROCESSED UNDER SECTION 143 (1) INITIALLY. SUBSEQUENTLY THE ASSESSING OFFIC ER NOTICED THAT THERE WAS DIFFERENCE BETWEEN THE AMOUNT OF CONTRACT RECEIPTS SHOWN IN THE TDS ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 2 OF 6 CERTIFICATES AND THE PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE. ACCORDINGLY THE ASSESSMENT WAS REOPENED BY THE ASSE SSING OFFICER BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAD MADE FOLLOWING PAYMENTS TO THE TRANSPORTERS WIT HOUT DEDUCTING TAX AT SOURCE UNDER SECTION 194C OF THE ACT: A) NAGARJUNA TRANSPORT TRANSPORT CHARGES ` 2,71,851 B) NAVATA TRANSPORT TRANSPORT CHARGES ` 4,19,389 C) DECENT LORRY SERVICE TRANSPORT CHARGES ` 3,62,508 D) KRANTHI TRANSPORT TRANSPORT CHARGES ` 5,50,251 E) KARNOOL NANDYAL TRANSPORT TRANSPORT CHARGES ` 1,54,204 F) BRL FREIGHT TRANSPORT CHARGES ` 2,71,701 G) CHENNUPATI TRANSPORT TRANSPORT CHARGES ` 91,884 TOTAL TRANSPORT CHARGES ` 21,21,788 THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE ABOVE SAID PAYMENTS WERE MADE BY IT ON BEHALF OF ITS PRINCIPAL AND IT ALSO DID NOT CLAIM THE ABOVE PAYMENTS AS ITS EXPENDITURE. ACCORDINGLY , IT WAS CONTENDED THAT THE PROVISIONS OF 194C SHALL NOT APPLY IN THE HANDS OF THE ASSESSEE IN RESPECT OF THE ABOVE SAID PAYMENTS. THE ASSESSING O FFICER WAS NOT CONVINCED WITH THE SAID EXPLANATION. HE REFERRED TO CERTAIN CLAUSES OF A CONTRACT AGREEMENT ENTERED WITH M/S CARGILL INDIA PR IVATE LIMITED AND CONCLUDED THAT THE ASSESSEE IS UNDER THE OBLIGATION TO PROVIDE TRANSPORTATION FACILITIES TO THE PRINCIPALS EITHER THROUGH OWN VEHICLE OF THE ASSESSEE OR THROUGH HIRED VEHICLES. HENCE THE ASSES SEE IS SOLELY RESPONSIBLE FOR TRANSPORTATION OF THE GOODS, IN WHICH CASE, THE ASSESSEE HAS TO NECESSARILY DEDUCT TDS ON THE IMPUGNED TRANSPORT PA YMENTS UNDER SECTION 194C OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO S O DEDUCT TAX AT SOURCE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF ` 21,21,788/- BY ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 3 OF 6 INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. THE APPEAL FILED BY THE ASSESSEE BEFORE THE LEARNED CIT (A) WAS ALLOWED . HENCE THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. DURING THE COURSE OF APPELLATE PROCEEDING BEFORE LEARNED CIT(A), IT WAS BROUGHT TO HIS NOTICE THAT THE AGREEMENT WITH M/S CARGILL INDIA PRIVATE LIMITED, WH ICH WAS RELIED UPON BY THE ASSESSING OFFICER, WAS ACTUALLY ENTERED BY THE SISTER CONCERN OF THE ASSESSEE NAMED M/S ANNAVARPU ENTERPRISES. ACCORDIN GLY IT WAS SUBMITTED BEFORE LEARNED CIT(A) THAT THE ASSESSING OFFICER HA S DRAWN ADVERSE INFERENCES ON THE BASIS OF AN IRRELEVANT AGREEMENT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS ACTING AS C & F AGE NT FOR A COMPANY NAMED M/S MARICO INDUSTRIES LTD AND THE SAID COMPANY HAS ALREADY DEDUCTED TDS ON THE IMPUGNED TRANSPORT PAYMENTS. I N SUPPORT OF THIS FACT, THE ASSESSEE FILED COPIES OF TDS CERTIFICATES ISSUED BY THE PRINCIPAL, VIZ., M/S MARICO INDUSTRIES LTD TO THE TRANSPORTERS. ACCORDINGLY, THE LEARNED CIT(A) DELETED THE IMPUGNED ADDITION WITH T HE FOLLOWING OBSERVATIONS: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE O N BEHALF OF THE APPELLANT. I FIND THAT THE ASSESSING OFFICER HAS RELIED ON THE TERMS AND CONDITIONS OF THE CONTRACT AGREEMENT ENTERED INTO BY M/S ANNAVARAPU ENTERPRISES WITH M/S CARGILL INDIA PVT. LTD. THE LEARNED AUTHORISED REPRESENTATIVE HAS POIN TED OUT THAT M/S ANNAVARAPU ENTERPRISES, A SISTER CONCERN, IS DISTINCT FROM M/S ANNAVARAPU ENTERPRISES (1989), THE APPELLA NT FIRM. THE APPELLANT FIRM APPARENTLY HAS NO BUSINESS DEALI NGS WITH M/S CARGILL INDIA LTD. IT IS A C&F AGENT ONLY FOR M/S . MARICO INDUSTRIES LTD. A COPY OF THE AGREEMENT BETWEEN THE APPELLANT AND M/S MARICO INDUSTRIES LTD HAS BEEN FI LED DURING THE APPEAL PROCEEDINGS. AN EXAMINATION OF THE AGREE MENT WOULD REVEAL THAT THE TERMS AND CONDITIONS SIMILAR TO THOSE ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 4 OF 6 REFERRED TO IN THE ASSESSMENT ORDER AS PER THE CONT RACT AGREEMENT WITH M/S CARGILL INDIA LTD ARE NOT EXISTIN G IN THE AGREEMENT OF THE APPELLANT WITH M/S MARICO INDUSTRIE S LTD. ALL GOODS ARE DISPATCHED BY M/S MARICO INDUSTRIES TO TH E APPELLANT ON A STOCK TRANSFER OR ON CONSIGNMENT BAS IS. FOR THE PROFESSIONAL SERVICES RENDERED, THE APPELLANT FIRM IS ENTITLED TO FIXED REMUNERATION. THE LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED THAT THE APPELLANT AS AN AGENT TO THE PRI NCIPAL, M/S MARICO INDUSTRIES LTD WOULD ONLY DEAL WITH TRANSPORT OPERATORS AND BOOK CONSIGNMENTS IN THE NAME OF THE PRINCIPALS. IN SUPPORT OF THIS, COPIES OF THE LORRY RECEIPTS WERE PRODUCED DURING THE APPEAL PROCEEDINGS. THE LORRY R ECEIPTS ARE ISSUED IN THE NAME OF THE CONSIGNOR M/S MARICO INDUSTRIES LTD. HE FURTHER SUBMITTED THAT THE ORIGINAL LORRY R ECEIPTS ARE SENT TO THE PRINCIPALS FOR REIMBURSEMENT OF THE ACT UAL AMOUNT INCURRED ON BEHALF OF THE PRINCIPALS. FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE STATED THAT TAX DEDUCTION AT SOURCE WAS MADE BY THE PRINCIPALS TO THE TRANSPORTERS AND SERVICE TAX ON PAYMENTS TO THE TRANSPORTS WAS ALSO PAID ONL Y BY THE PRINCIPALS. COPIES OF SOME TDS CERTIFICATES ISSUED BY M/S MARICO INDUSTRIES LTD TO THE TRANSPORTERS HAVE BEEN FILED BEFORE ME. COPIES OF SERVICE TAX CHALLANS AND SERVI CE TAX RETURN FILED BY M/S MARICO INDUSTRIES HAVE BEEN PRO DUCED IN SUPPORT OF THE ARGUMENT THAT TRANSPORTATION OF GOOD S WAS A MATTER BETWEEN M/S MARICO INDUSTRIES AND THE TRANSP ORTERS INDIVIDUALLY. HE FURTHER STATED THAT ON ACCOUNT OF THE TDS BEING MADE ON THE AMOUNTS REIMBURSED TO THE APPELLA NT, IT WAS A CASE OF DEDUCTION OF TAX AT SOURCE TWICE. MER ELY BECAUSE TAX WAS DEDUCTED AT SOURCE BY M/S MARICO IND USTRIES FROM THE REIMBURSED AMOUNTS, IT WOULD NOT ALTER THE NATURE OF THE RECEIPT WHICH WAS IN THE INSTANT CASE, ONLY AMO UNTS REIMBURSED TO THE EXTENT OF EXPENDITURE INCURRED ON BEHALF OF THE PRINCIPAL. I AM INCLINED TO ACCEPT THE ARGUMENTS PUT FORTH BY THE LEARNED AUTHORISED REPRESENTATIVE. IN THE AB SENCE OF ANY CONTRACT BETWEEN THE APPELLANT AND THE TRANSPOR TERS, THE APPLICABILITY OF THE PROVISIONS OF SEC.194C WOULD N OT ARISE. ON THE CONTRARY, THE APPELLANT HAS NOT CLAIMED ANY EXP ENDITURE IN THE P&L ACCOUNT TOWARDS PAYMENTS MADE TO DIFFERE NT TRANSPORTERS AS TRANSPORT CHARGES AGAINST WHICH THE PROVISIONS OF SEC.40(A)(IA) CAN BE INVOKED. IN THE ABSENCE OF ANY ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 5 OF 6 EXPENDITURE CLAIM OR DEBIT TO THE P&L ACCOUNT BY TH E APPELLANT, THERE IS NO JUSTIFICATION FOR INVOKING T HE PROVISIONS OF SEC.40(A)(IA) WHICH WOULD RESULT IN THE DISALLOW ANCE OF ANY CLAIM OF DEDUCTION. EVEN IN THE EVENT OF A REVISED P&L ACCOUNT BEING DRAWN UP INCLUDING THE REIMBURSEMENTS RECEIVED AND EXPENDITURE INCURRED BY THE APPELLANT, IN THE ABSENCE OF A CONTRACT BETWEEN THE APPELLANT AND THE TRANSPORTERS AS STATED ABOVE, THERE CAN BE NO JUSTI FICATION FOR INVOKING THE PROVISIONS OF SEC.194C AGAINST THE APP ELLANT. IN THE LIGHT OF THE FOREGOING DISCUSSION, THE DISALLOW ANCE OF ` 21,21,788/- UNDER SECTION 40(A)(IA) IS HELD TO HAVE NO SANCTION OF LAW AND, THEREFORE, IS DELETED. 5. BEFORE US, THE LEARNED D.R SUBMITTED THAT TH E CLAIM OF THE ASSESSEE THAT THE PRINCIPAL HAS DEDUCTED TDS ON THE IMPUGNED TRANSPORT PAYMENTS IS NOT BORNE OUT OF RECORD AND THE SAME REQUIRES VERIF ICATION. SHE FURTHER SUBMITTED THAT THE ASSESSEE HAS CLAIMED THAT IT IS PAYING FULL AMOUNT OF TRANSPORT CHARGES TO THE TRANSPORTER AND GETTING RE IMBURSEMENT OF THE SAME FROM THE PRINCIPAL. HOWEVER, IT IS NOT CLARIF IED HOW THE TDS AMOUNT IS DEDUCTED/RECOVERED FROM THE TRANSPORT CHARGES SO PA ID. HOWEVER, THE LEARNED A.R COULD NOT READILY CLARIFY THE POINTS RA ISED BY THE LEARNED D.R. HENCE, AS CONTENDED BY LEARNED D.R, WE ARE OF THE V IEW THAT THE CLAIM OF THE ASSESSEE THAT THE TDS HAS BEEN DEDUCTED BY THE PRINCIPAL ON THE IMPUGNED TRANSPORT PAYMENTS NEEDS TO BE VERIFIED AT THE END OF THE ASSESSING OFFICER. IT IS ALSO TO BE VERIFIED HOW TH E TDS AMOUNT IS RECOVERED FROM THE TRANSPORTERS. AS CONTENDED BY LEARNED D.R , THESE FACTS ARE NOT BORNE OUT OF THE RECORD. WE ALSO NOTICE THAT THE L EARNED CIT(A) HAS ACCEPTED THESE CONTENTIONS WITHOUT CONFRONTING THE SAME BEFORE THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, WE SET ASI DE THE ORDER OF LEARNED CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF TH E ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE CLAIM OF THE ASSESSEE AND TAKE APPROPRIATE ITA NO 487 OF 2010 ANNAVARAPU ENTERPRISES VIJAYAWAD A PAGE 6 OF 6 DECISION IN ACCORDANCE WITH LAW. THE ASSESSEE SHOU LD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:08-08-2011 COPY TO 1 THE ITO WARD-2(4) VIJAYAWADA 2 M/S ANNAVARAPU ENTERPRISES, 30-14-6/1 KOTHAVANTHE NA ROAD, DURGAGRAHARAM, VIJAYAWADA-2. 3 4. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM