ITO 2 (4), Kanpur V. M/s Setis Carriers, Kanpur

ITA 503/LKW/2011

• Counselvise Citation: 50323714 RSA 2011
• Duration Of Justice: 3 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2014
• Assessment Year: misc
• Appeal Filed On: 26-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 69C; 143(3); 133(6); 194C

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.503/LKW/2011 ASSESSMENT YEAR:2006 - 07 M/S SETIA CARRIERS, 123/234, PRATAP GANJ, KALPI ROAD, NEAR CHAR KHAMBA KUWAN, KANPUR. PAN:ABGFS3229N VS INCOME TAX OFFICER - 2(4), KANPUR. (RESPONDENT) (APPELLANT) SHRI Y. B. SRIVASTAVA, D. R. APPELLANT BY SHRI RAKESH GARG, ADVOCATE RESPONDENT BY 03/11/2014 DATE OF HEARING 17 /12/2014 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR DATED 20/06/2011 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.24,63,336/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF 'RECEIPTS NOT SHOWN BY THE ASSESSEE, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. ON FACTS AND IN CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.22,69,756/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF 'NON - DEDUCTION OF TDS ON PAYMENTS MADE TO VARIOUS PARTIES', 2 WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. 3. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR DATED 20/06/2011 NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFICER DATED 30/12/2008 BE RESTORED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSME NT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). HE ALSO PLACED RELIANCE ON A JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS. HARDARSHAN SINGH REPORTED IN [2013] 350 ITR 427 (DELHI). HE ALSO SUBMITTED THAT THE ASSESSEE IS WORKING AS A COMMISSION AGENT AND THIS FACT HAS BEEN ACCEPTED BY THE REVENUE IN EARLIER YEARS AND THE INCOME DECLARED BY THE ASSESSEE WAS ACCEPTED AND IN ONE OF THE YEARS I.E. IN ASSESSMENT YEAR 98 - 99, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. HE ALSO SUBMITTED THAT THE FACTS IN THE PRESENT YEAR ARE SIMILAR AND THEREFORE, DIFFERENT STAND TAKEN BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT BOTH THE ISSU ES IN DISPUTE WERE DECIDED BY LEARNED CIT(A) AS PER PARA 7 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 7. I HAVE GONE THROUGH THE ASSTT. ORDER, SUBMISSION MADE BY THE LEARNED COUNSEL AND VARIOUS CASE LAWS RELIED UPON BY THE LEARNED COUNSEL. I FIND FROM THE RECORDS THAT THE BUSINESS OF THE APPELLANT HAS BEEN OF COMMISSION AGENCY IN TRANSPORT SERVICES WHICH HAVE BEEN ACCEPTED BY THE DEPARTMENT IN ALL THE PRECEDING YEARS. THE ASSESSMENT FOR A.Y. 1998 - 99 WAS COMPLETED U/S 14 3(3) OF THE ACT IN WHICH SPECIFIC FINDING ABOUT THE NATURE OF BUSINESS HAS BEEN GIVEN BY THE ASSESSING OFFICER AND COMMISSION INCOME HAS BEEN ACCEPTED IN THE ASSESSMENT. I HAVE ALSO SEEN THE BOOKS OF ACCOUNTS MAINTAINED BY THE APPELLANT. THE RECEIPT OF F REIGHT BY THE APPELLANT HAS BEEN CREDITED IN RESPECTIVE TANKER ACCOUNTS AND IN THE ACCOUNTS OF THE PARTIES WHO HAS MADE PAYMENT TO THE APPELLANT. SUCH FREIGHT 3 AMOUNT WAS PAYABLE TO THE TANKER OWNERS AND THE SAME WAS PAID FROM TIME TO TIME. THE ONLY BASIS ADOPTED BY THE ASSESSING OFFICER IN MAKING AN ADDITION OF RS . 24,63,336 / - IS TD5 CERTIFICATES ISSUED BY THE PARTIES IN THE NAMES OF THE APPELLANT ON ACCOUNT OF PAYMENTS OF FREIGHT MADE DIRECTLY TO THE DRIVERS OF THE TANKER OWNERS OR TO THE APPELLANT FIRM. THE ASSESSING OFFICER HAS ASSESSED THE ENTIRE GROSS RECEIPT AS INCOME OF THE APPELLANT. EVEN THE ELEMENT OF ANY DEDUCTION RELATING TO PLYING OF TANKERS INCURRED BY THE TANKER OWNERS HAS NOT BEEN CONSIDERED BY HIM. I FAIL TO UNDERSTAND AS TO HOW THE FRE IGHT RECEIPT WHICH BELONGS TO THE TANKER OWNERS CAN BE CONSIDERED AS INCOME OF THE APPELLANT. IN PLYING OF TANKERS, VARIOUS RUNNING EXPENSES LIKE DIESEL, TYRES, REPAIRING, SALARY, INSURANCE ETC. ARE BEING INCURRED WHICH IN THIS CASE HAVE BEEN I NCURRED BY THE TANKER OWNERS, WHO HAD EARNED FREIGHT RECEIPT. IN MY VIEW, THE GROSS RECEIPTS AS REFLECTED IN THE TDS CERTIFICATES CANNOT BE CONSIDERED AND ASSESSED IN THE HANDS OF THE APPELLANT. THE LEARNED ASSESSING OFFICER HAS ALSO REFERRED TO THE PROVIS IONS OF SECTION 69C BUT HE HAS FAILED TO EXPLAIN AS TO HOW SUCH PROVISIONS ARE APPLICABLE IN THE CASE OF THE APPELLANT WHEN NO ITEM OF EXPENDITURE HAS BEEN FOUND TO BE UNEXPLAINED OR INCURRED OUTSIDE BOOKS OF ACCOUNTS. ON THE OTHER HAND, IT IS SEEN FROM TH E ASSESSMENT ORDER THAT THE ASSESSING OFFICER HIMSELF HAS MENTIONED THAT A SUM OF RS.22,69,756/ - HAS BEEN PAID AS FREIGHT TO VARIOUS TANKER OWNERS. CONSIDERING ALL THE FACTS, SUBMISSION OF THE LEARNED COUNSEL, I HOLD THAT THE ADDITION OF RS.24,63,336/ - IS NOT AT ALL JUSTIFIED AND THE SAME IS HEREBY DELETED. THE OTHER ADDITION OF RS.22,69,756 / - HAS BEEN MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE APPELLANT BEING A CONTRACTOR HAD NOT MADE DEDUCTION OF TAX AT SOURCE U/S 194C(2) ON THE PAYMENT OF FREIGHT OF RS.22,69,756 / - TO VARIOUS TANKER OWNERS WHO WERE SUB - CONTRACTOR OF THE APPELLANT AND AS SUCH THE AMOUNT OF RS.22,69,756 / - WAS NO T ALLOWABLE AS DEDUCTION UNDER THE PROVISIONS OF SECTION 40A(IA). THE LIST OF SUCH TANKER OWNERS ARE GIVEN AT PAGE 8 OF THE ASSTT. ORDER. I ALSO FIND FROM THE RECORDS THAT THE ASSESSING OFFICER MADE ENQUIRY U/S 133 (6) OF THE ACT FROM VARIOUS OWNERS OF THE TANKERS ENGAGED BY THE APPELLANT. ALL THE PARTIES HAD FILED THEIR REPLIES CONFIRMING THAT THE APPELLANT FIRM WAS DOI NG BUSINESS OF COMMISSION AGENCY IN TRANSPORTATION WORK AND THEIR VEHICLES WERE ENGAGED IN SUCH BUSINESS. ALL THE PARTIES CONFIRMED THEIR BALANCES OUTSTANDING IN 4 THE BOOKS OF THE APPELLANT. FURTHER, THE VERIFICATIONS U/S 133(6) HAVE ALSO BEEN DONE BY THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. NOW THE QUESTION TO BE DECIDED IS AS TO WHETHER THE PROVISIONS OF SECTION 194C WERE APPLICABLE IN THE CASE OF THE APPELLANT. FOR THE APPLICABILITY OF THESE PROVISIONS IT IS TO BE SEEN AS TO WHET HER THE APPELLANT CAN BE CONSIDERED AS A CONTRACTOR AND THE TANKERS OWNERS AS SUB - CONTRACTORS. FROM THE RECORDS, IT IS SEEN THAT THE APPELLANT HAD SUBMITTED THAT THERE WAS NO AGREEMENT OR CONTRACT WITH THE TANKER OWNERS VIS - A - VIS THE PARTIES WHOSE GOODS WE RE TRANSPORTED. IN THE VARIOUS CASE LAWS, AS CITED HERE IN ABOVE, IT HAS BEEN HELD THAT IF THERE IS NO CONTRACT RELATING TO THE WORK, THE PROVISIONS OF SECTION 194C WERE NOT ATTRACTED. I THEREFORE AGREE WITH THE CONTENTION OF COUNSEL OF THE APPELLANT THAT THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE ON SUCH PAYMENTS MADE BY THE APPELLANT. CONSEQUENTLY THE PROVISIONS OF SECTION 40A (IA) ARE NOT APPLICABLE. HENCE ADDITION OF RS.22,69,756/ - MADE BY THE ASSESSING OFFICER IS DELETED. 5. IN THE LIGHT OF T HESE FINDINGS OF CIT(A), WE NOW EXAMINE THE OBSERVATIONS OF THE ASSESSING OFFICER. IT IS NOTED BY THE ASSESSING OFFICER ON PAGE NO. 2 OF THE ASSESSMENT ORDER THAT IN PROFIT & LOSS ACCOUNT OF THE ASSESSEE, THE ASSESSEE HAS SHOWN INCOME OF RS. 1,30,515/ - ON ACCOUNT OF COMMISSION AND RS.73,086/ - ON ACCOUNT OF MISC. RECEIPTS. THE ASSESSING OFFICER HAS OBSERVED THAT VARIOUS TDS CERTIFICATES WERE FILED ALONG WITH THE RETURN OF INCOME AND FROM THE SAME, IT IS SEEN THAT VARIOUS PERSONS HAVE DEDUCTED TAX AT SOURCE BUT THOSE GROSS RECEIPTS ARE NOT CREDITED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. ON PAGE NO. 4 TO 7 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS RE PRODUCED A CHART CONTAINING DETAILS OF TDS CERTIFICATES, AMOUNT OF FREIGHT PAYMENT TO THE ASSESSE E AND THE CORRESPONDING AMOUNT CREDITED BY THE ASSESSEE AND FREIGHT SHORT CREDITED IN THE BOOKS OF THE ASSESSEE. THE ASSESSING OFFICER CAME TO A TOTAL OF RS.24,63,336/ - AS FREIGHT SHORT CREDITED IN THE BOOKS OF THE ASSESSEE. AS PER THE SAME CHART, THE TO TAL OF COLUMN WITH THE HEADING AMOUNT OF FREIGHT CREDITED IN THE BOOKS, COMES TO RS.14,21,742/ - . THE ASSESSING OFFICER IS ALSO SAYING THAT THE ASSESSEE HAS 5 MADE PAYMENT OF FREIGHT WITHOUT TDS OF RS.22,69,756/ - . WE FAIL TO UNDERSTAND THAT WHEN THE ASSESS EE HAS ACCOUNTED FOR THE FREIGHT RECEIPT OF RS.14,21,742/ - , HOW THE ASSESSEE CAN MAKE PAYMENT OF FREIGHT OF RS. 22,69,756/ - AND STILL THE ASSESSEE CAN SHOW AN INCOME OF RS.1,30,515/ - . BE THAT AS IT MAY BUT THIS IS TRUE THAT THE ASSESSEE IS CONSIDERING ONLY COMMISSION AS INCOME AND NOT THE ENTIRE FREIGHT RECEIPTS. A CLEAR FINDING IS GIVEN BY CIT(A) IN PARA REPRODUCED ABOVE THAT THE ASSESSEES CLAIM THAT IT HAS BEEN ENGAGED IN THE BUSINESS OF COMMISSION AGENT IN TRANSPORT HAS BEEN ACCEPTED BY THE DEPARTMENT I N ALL THE PRECEDING YEARS OUT OF WHICH THE ASSESSMENT FOR ASSESSMENT YEAR 98 - 99 WAS COMPLETED U/S 143(3) OF THE ACT IN WHICH SPECIFIC FINDING ABOUT THE NATURE OF BUSINESS HAS BEEN GIVEN BY THE ASSESSING OFFICER AND COMMISSION INCOME HAS BEEN ACCEPTED IN TH E ASSESSMENT. REGARDING THE METHOD OF ACCOUNTING OF THE ASSESSEE, IT IS OBSERVED THAT HE HAS EXAMINED THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND T HE RECEIPT OF FREIGHT BY THE ASSESSEE HAS BEEN CREDITED IN RESPECTIVE TANKER ACCOUNTS AND IN THE ACCOUNTS OF THE PARTIES WHO HA D MADE PAYMENT TO THE ASSESSEE . HE HAS ALSO NOTED THAT S UCH FREIGHT AMOUNT WAS PAYABLE TO THE TANKER OWNERS AND THE SAME WAS PAID FROM TIME TO TIME. THIS IS THE OBJECTION OF CIT(A) THAT IF SUCH RECEIPT ON ACCOUNT OF FREIGHT ALLEGED TO BE SHORT ACCOUNTED FOR BY THE ASSESSEE IS ADDED AS INCOME OF THE ASSESSEE THEN CORRESPONDING DEDUCTION ON ACCOUNT OF EXPENSES HAS TO BE ALLOWED, WHICH HAS NOT BEEN ALLOWED BY THE ASSESSING OFFICER. HE HAS NOTED THAT SUCH EXPENSES WERE IN FACT N OT INCURRED BY THE ASSESSEE BUT BY THE TANKER OWNERS. NO SUCH FACT HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT THE ASSESSEE WAS IN FACT NOT WORKING AS COMMISSION AGENT BUT AS A TRANSPORT OPERATOR. HENCE, EVEN IF THE RECEIPTS AS PER TDS CERTI FICATE ARE TO BE CONSIDERED AS INCOME OF THE ASSESSEE THEN THE PAYMENT MADE BY THE ASSESSEE HAS TO BE ALLOWED AS EXPENSES AND IT WILL NOT RESULT IN ADDITION IN THE HANDS OF THE ASSESSEE. 6 6. REGARDING THE SECOND ASPECT I.E. DISALLOWANCE OF RS.22,69,756/ - ON THE BASIS THAT NO TDS WAS DEDUCTED BY THE ASSESSEE, WE FIND THAT THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF HARDARSHAN SINGH (SUPRA) SUPPORTS THE CASE OF THE ASSESSEE. IN THAT CASE ALSO, THE ASSESSEE WAS ENGAGED IN LORRY BOOKING BUSINESS. IN THAT CASE ALSO, THE ASSESSEE WAS COLLECTING FREIGHT CHARGES FROM CLIENTS WHO INTENDED TO TRANSPORT THEIR GOODS THROUGH SEPARATE TRANSPORTERS AND THE ASSESSEE WAS PAYING TO TRANSPO RTERS ENTIRE AMOUNT COLLECTED FROM CLIENTS AFTER DEDUCTING HIS COMMISSION. UNDER THESE FACTS, IT WAS HELD THAT THERE IS NO PRIVITY OF CONTRACT OF CARRIAGE OF GOODS BETWEEN ASSESSEE AND HIS CLIENTS AND THEREFORE, THE ASSESSEE WAS ONLY FACILITATOR AND THERE FORE, NOT REQUIRED TO DEDUCT TDS U./S 194C OF THE ACT. THE FACTS IN THE PRESENT CASE ARE SIMILAR, IF NOT IDENTICAL, AND HENCE, RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE DELHI HIGH COURT, WE HOLD THAT THE ASSESSEE IN THE PRESENT CASE WAS NOT REQUIRED TO DEDUCT TDS AND THEREFORE, DISALLOWANCE MADE BY ASSESSING OFFICER IN RESPECT OF PAYMENT OF RS.22,69,756/ - IS NOT PROPER AND THE SAME WAS RIGHTLY DELETED BY CIT(A). IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) ON BOTH THE ISSUES. 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 /12/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR