Late Shri Laxmidas H. Kotecha, L/H Ashokkumar L Kotecha, Una V. The Income Tax Officer, Ward-1(4), Veraval

ITA 492/RJT/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1250 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 27-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 13-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R CHHATRE
• Assessee Lawyers: MJ RANPURA
• Section: 143(3); 194C; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER [CONDUCTED THRO UGH E - COURT AT AHMEDABAD] LATE SHRI LAXMIDAS H. KOTECHA, PROP. HIMATLAL HARJIVANDAS & CO. L/H. ASHOKKUMAR L. KOTECHA IBP PUMP, KODINAR ROAD, UNA PAN: AEJPK0916J (APPELLANT) VS THE ITO, WARD 1(4), VERAVAL (RESPONDENT) REVENUE BY : S H RI D.R. CHHATRE , SR. D . R. ASSESSEE BY: S H RI M.J. RANPURA , A.R. DATE OF HEARING : 27 - 06 - 2 016 DATE OF PRONOU NCEMENT : 30 - 06 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S ASSESSEE S APPEAL FOR A.Y. 2005 - 06 , AR ISES FROM ORDER OF THE CIT(A) - I V, RAJKOT DATED 05 - 06 - 2014 IN APPEAL NO. CIT(A) - IV / 0210/11 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; I N SHORT THE ACT . I T A NO . 492 / RJT /20 14 A SSESSMENT YEAR 200 5 - 06 I.T.A NO. 492 /RJT /20 14 A.Y. 2005 - 06 PAGE NO LATE SHRI LAXMIDAS H. KOTECHA VS. ITO 2 2. WE COME TO APPELLANT S PLEADINGS FIRST. THERE ARE TWO SUBSTANTIVE GROUNDS CHALLENGING VALIDITY OF REOPENING AND AGAINST CONFIRMATION OF DISALLOWANCE OF TRANSPORTATION EXPENSES AMOUNTING TO RS. 13,12,481/ - U/S. 40(A)(IA) OF THE ACT ON THE GROUND THAT THE ASSESSEE FAILED TO DEDUCT TDS THEREUPON U/S. 194C OF THE ACT. A PERUSAL OF THE CASE FILE REVEALS THAT AN ADDITIONAL GROUND IS ALSO SOUGHT TO THE RAISED TO THE EFFECT THAT THE IMPUGNED REASSESSMENT FRAMED ON 28 - 11 - 2011 IS NULL AND VO ID SINCE THE SAME IS MUCH AFTER ASSESSEE S DEATH ON 19 - 01 - 2005. EVEN THE REVEN UE IS FAIR ENOUGH IN NOT DISPUTING THAT THIS GROUND GOES TO ROOT OF THE CASE. WE ACCORDINGLY ADMIT THE SAME FOR ADJUDICATION. 3. WE COME TO THE RELEVANT FACTS FIRST. THE DE CEASED ASSESSEE - AN INDIVIDUAL TRADED IN PETROLEUM PRODUCTS. THERE IS NO DISPUTE THAT HE EXPIRED ON 19 - 01 - 2005. HIS SON SHRI ASHOK KUMAR / APPELLANT HEREIN FILED RETURN ON 29 - 10 - 2005 DECLARING INCOME OF RS. 2,38,721/ - WITH AGRICULTURAL INCOME OF RS. 71,062/ - . THE ASSESSING OFFICER FRAMED A REGULAR ASSESSMENT IN HIS CASE O N 24 - 12 - 2007 ADDING A LUMP SUM AMOUNT OF RS. 10,000/ - BY MAKING DISALLOWANCE OF EXPENSES UNDER VARIOUS HEADS OF MISCELLANEOUS AND OTHER NATURE. THE ASSESSING OFFICER THEREAFTER FORMED REASO NS TO BELIEVE THAT ASSESSEE S INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. HE ISSUED SECTION 148 NOTICE DATED 22 - 03 - 2011. 4. ALL THIS FOLLOWED THE IMPUGNED REASSESSMENT . THERE IS NO DISPUTE THAT THE ASSESSEE HAD A TRANSPORTATION CONTRACT WITH IBP OIL I.T.A NO. 492 /RJT /20 14 A.Y. 2005 - 06 PAGE NO LATE SHRI LAXMIDAS H. KOTECHA VS. ITO 3 COMPAN Y . HE RECEIVED CONTRACTUAL INCOME OF RS. 13,12,481/ - IN THE NATURE OF HAULAGE PAYMENT . THE ABOVE STATED PAYER HAD DEDUCTED TDS OF RS. 27,178/ - . THE ASSESSEE DID NOT HAVE OIL TRANSPORTATION VEHICLE OF HIS OWN. HE ENGAGED TWO TANKERS OF SMT. DHANLAXMIBEN K. KOTECHA AND MANISH L. KOTECHA. THE ASSESSEE WOULD NOT CREDIT THE ABOVE STATED AMOUNT IN HIS P & L ACCOUNT BUT APPEARS TO HAVE GIVEN THE SAME TO THE TWO PERSONS HEREINABOVE ON TRIP TO TRIP BASIS AS PER THE LEDGER PLACED ON RECORD. HE ACCORDINGLY EMPHASIZED THAT ALL THESE DOCUMENTS STOOD EXAMINED/VERIFIED IN COURS E OF REGULAR ASSESSMENT FRAMED. THE ASSESSING OFFICER IN THE IMPUGNED REASSESSMENT DATED 28 - 11 - 2011 OBSERVED THAT ASSESSEE S PAYMENT S TO TWO PAYEES IN QUESTION WERE IN THE NATU RE OF CONTRACTUAL SUMS LIABLE TO TDS DEDUCTION U/S. 194C OF THE ACT. HE ACCORDINGLY INVOKED SECTION 40(A)(IA) OF THE ACT SO AS TO DISALLOW THE IMPUGNED PAYMENTS OF RS. 13,12,481/ - . 5. THE APPELLANT FILED APPEAL. HE CHALLENGED VALIDITY OF REOPENING AS WELL AS CORRECTNESS OF THE IMPUGNED SECTION 40(A)(IA) DISALLOWANCE ON MERITS. THE CIT(A) DECLINES BOTH PLEAS. THIS LEAVES THE ASSESSEE AGGRIEVED . 6. WE HAVE HEARD BOTH THE PARTIES. CASE FILE PERUSED. THIS APPELLANT S ARGUMENTS RAISED IN THE COURSE OF HEARING ARE MULTI - FOLDED. HIS FIRST CONTENTION IS THAT THE ORIGINAL ASSESSEE EXPIRED ON 19 - 01 - 2005. THE ASSESSING OFFICER STILL FRAMED ASSESSMENT AS WELL WAS THE IMPUGNED REASSESSMENT IN THE NAME OF DECEASED ASSESSEE I.T.A NO. 492 /RJT /20 14 A.Y. 2005 - 06 PAGE NO LATE SHRI LAXMIDAS H. KOTECHA VS. ITO 4 ONLY. THE CASE ACCORDINGLY SOUGHT TO BE MADE OUT IS THAT THE SAME SUFFERS FROM AN INCURABLE DEFECT THEREBY MAKING THE IMPUGNED REASSESSMENT LIABLE TO BE QUASHED. SECOND PLEA IS THAT THE ASSESSING OFFICER HAD FRAMED A REGULAR ASSESSMENT AFT ER EXAMINING AND VERIFYING ALL DETAILS. THIRD SU BMISSION IS THAT THE IMPUGNED REOPENING IS BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE IMPUGNED ASSESSMENT YEAR. THE APPELLANT FOURTH AND FINAL ARGUMENT ON MERITS IS THAT THE TWO PAYEES IN QUESTION HAVE ALREADY FILED THEIR RETURNS INCLUDING THE PAYM ENTS IN QUESTION IN THEIR RESPECTIVE PROFIT AND LOSS ACCOUNT. IT IS FURT HER SUBMITTED THAT THESE TWO ASSESSEE S PAYEE S WERE ENGAGED ON TRIP TO TRIP BASIS AS PROVED FROM HIS LEDGER ACCOUNTS NOT D ISPUTED TILL DATE. THEY ARE NO T PARTIES TO AS SESSEE S TRANSP ORTATION CONTRACT WITH M/S IBP (SUPRA) SO AS TO COVER U/S. 194C OF THE ACT. 7. LD. CIT (DEPARTMENTAL REPRESENTATIVE) STRONGLY SUPPORTS ACTION OF BOTH THE LOWER AUTHORITIES IN REOPENING THE ABOVE STATED REGULAR ASSESSMENT RESULTING IN THE IMPUGNED SECTION 40(A)(IA) DISALLOWANCE. HE SUBMITS THAT THIS APPELLANT NEVER BROUGHT INTO NOTICE OF THE LOWER AUTHORITIES THAT THE ORIGINAL ASSESSEE HAD EXPIRED MUCH EARLIER. 8. WE HAVE GIVEN OUR THOUGHTFUL CONSIDE RATION TO RIVAL CONTENTIONS. WE COME TO MERITS OF T HE CASE FIRST. THERE IS NO DISPUTE THAT THE ORIGINAL ASSESSEE HAD ENTERED INTO A TRANSPORTATION CONTRACT WITH M/S. IBP. HE ENGAGED THE ABOVE STATED PAYEES ON TRIP TO TRIP BASIS SINCE I.T.A NO. 492 /RJT /20 14 A.Y. 2005 - 06 PAGE NO LATE SHRI LAXMIDAS H. KOTECHA VS. ITO 5 HE DID NOT HAVE HIS OWN OIL TANKERS. THE ASSESSEE RECEIVED GROSS PAYMEN T OF RS. 13,12,481/ - FROM M/S IBP, DID NOT CREDIT IN HIS PROFIT AND LOSS ACCOUNT AND GAVE THE SAME TO HIS TWO PAYEES. B OTH THE LOWER AUTHORITIES HOLD THAT THE SAME OUGHT TO HAVE SUBJECTED TO TDS PROVISIONS U/S. 194C OF THE ACT. THE CIT(A) IS OF THE VIEW TH AT WHENEVER AN CONTRACT IS ENTERED INTO BETWEEN A CONTRACTOR AND A CONTRACTEE, THE LATTER BEARS ALL THE RISKS AND REWARDS THEREFROM AND IF THE ASSESSEE HAS PASSED THE ENTIRE AMOUNT WITHOUT RETAINING ANY PROFIT, THIS MEANS THAT HIS PAYEES HAVE UNDERTAKEN ALL SUCH RISKS. THERE IS HARDLY ANY DISPUTE THAT SECTION 194C OF THE ACT ENVISAGES TDS DEDUCTION IN CASE OF PAYMENTS TO CONTRACTORS IN PURSUANCE TO A CONTRACT BETWEEN A CONTRACTOR AND THE SPECIFIED PERSON CONCERNED. THERE CAN BE HARDLY ANY DISPUTE THAT UNDERTAKING OF RISK AND REWARD IN A PARTICULAR PAYMENT INSTANCE HAS TO BE GAUGED FROM THE MATERIAL ON RECORD. WE FIND FROM THE CASE FILE THAT THE LD. CIT(A) MERELY ASSUMES THAT PASSING OVER OF THE WHOLE OF THE CONSIDERATION MONEY IS SUFFICIENT TO CONCLUDE THAT ASSESSEE S RELATIVES HAD UNDERTAKEN ALL RISKS. IT IS AN UNDISPUTED FACT THAT THIS CRUCIAL OBSERVATION IS NOT SUPPORTED FROM ANY MATERIAL OR SUPPORTIVE EVIDENCE. THERE IS NOT EVEN A REMARK IN THE L OWER APPELLATE ORDER THAT THE A SSESSEE S TWO PAYEES HAVE EVER UNDERTAKEN ANY RISK APART FROM MERE TRANSPORTATION OF OIL FUEL ON TRIP TO TRIP BASIS. WE CONCLUDE IN THESE FACTS THAT THE ASSESSEE HAD NOT ENTERED INTO ANY SUB - CONTRACT WITH THE TWO PAYEES IN QUESTION SO AS TO BE LIABLE SECTION 194C TDS DEDUCTIO N AS HELD BY A CO - ORDINATE BENCH BHAIL BULK CARRIER VS. ITO ITA NO. 3536/MUM/2011 DECIDED ON 07 - 03 - 2012. WE ACCORDINGLY ARE OF THE I.T.A NO. 492 /RJT /20 14 A.Y. 2005 - 06 PAGE NO LATE SHRI LAXMIDAS H. KOTECHA VS. ITO 6 VIEW THAT THE ASSESSING OFFICER ERRED IN INVOKING SECTION 194C R.W.S. 40(A)(IA) QUA THE AMOUNT IN QUESTION OF RS. 13,12,481/ - AS CONFIRMED IN THE APPELLATE PROCEEDINGS. THE SAME IS ACCORDINGLY DELETED. OTHER ARGUMENTS ON LEGAL ASPECT (SUPRA) ARE RENDERED INFRUCTUOUS. 9. THIS ASSESSEE S APPEAL IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 30 - 06 - 201 6 SD/ - SD/ - (MANISH BORAD ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 30 /06 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT