THE DCIT, Ratlam V. M/S. BHARAT KUMAR VERMA, Neemuch

ITA 513/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5843 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 13-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIRAJEEV JAIN
• Assessee Lawyers: SHRI; S N AGRAWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T.GARASIA, HON'BLE JUDICIAL MEMBER AN D SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER ITA NO. 512 & 513/IND/2015 (ASST. YEARS : 2007-08 AND 2009-10) DY. CIT, RATLAM. VS. M/S.BHARAT KUMAR VERMA, PROP. M/S. VERMA TANKER TRANSPORT, NEEMUCH PAN NO. AAKPV9226H (APPELLANT) (RESPONDENT) C.O.NO.2/IND/2016 (ARISING OUT OF ITA NO. 512/IND/2015) (ASST. YEAR : 2007-08) M/S.BHARAT KUMAR VERMA, PROP. M/S. VERMA TANKER TRANSPORT, NEEMUCH VS. DY. CIT, RATLAM. PAN NO. AAKPV9226H (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY : SHRI SHRI RAJEEV JAIN, DR. ASSESSEE BY : SHRI S.N. AGRAWAL AND SHRI PANKAJ MOGRA, CAS DATE OF HEARING : 13/07/2016. DATE OF PRONOUNCEMENT : 13/07/2016. 2 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H O R D E R PER N.S.SAINI, ACCOUNTANT MEMBER THESE ARE THE APPEALS FILED BY THE REVENUE AGAINS T THE SEPARATE ORDER OF THE CIT(A), UJJAIN DATED 17.4.2015 FOR ASS ESSMENT YEAR 2007- 08 AND DATED 28.4.2015 FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS FILED CROSS OBJECTION IN THE ASSESSMENT YEAR 20 07-08. 2. IN THE REVENUES APPEAL, THE SOLE ISSUE INVOLVED I S THAT THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 51 ,51,054/- IN ASSESSMENT YEAR 2007-08 AND RS. 71,94,258/- IN ASSE SSMENT YEAR 2009-10 MADE BY THE AO U/S 40(A)(IA) OF THE INCOME- TAX ACT, 1961. 3 . ON GOING THROUGH THE PROFIT AND LOSS ACCOUNT OF T HE ASSESSEE, THE AO OBSERVED THAT THE WORK RELATING TO TRANSPORTATIO N WAS ENTRUSTED TO THE TRUCK OWNERS BY THE ASSESSEE. THEREFORE, THE AS SESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE ON THE FREIGHT PAYMENTS TO TRUCK OWNERS. SINCE NO TAX WAS DEDUCTED AT SOURCE ON FREIGHT PAYMENT MA DE TO TRUCK OWNERS, THEREFORE, THE AO DISALLOWED FREIGHT PAYMEN TS MADE UNDER THE HEAD FREIGHT TO PAY R.R. AMOUNTING TO RS. 51,51,0 54/- IN THE ASSESSMENT YEAR 2007-08 AND RS. 71,94,258/- IN ASSE SSMENT YEAR 2009-10. 4. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE B Y OBSERVING AS UNDER : 3 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H 4.1.1 I HAVE CONSIDERED THE FINDINGS OF THE A.O. AN D WRITTEN SUBMISSIONS OF THE APPELLANT CAREFULLY. THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN G BEFORE THE ASSESSING OFFICER AND IN APPEAL HAS EXPLAINED THE MODUS OPERANDI OF HIS BUSINESS. THE PROFIT & LOSS ACCOUNT OF THE APPELLANT HAS BEEN EXAMINED. THE APPELLANT HAS SHOWN FREIGHT RECEIPT FROM DIFFERENT CLIENTS AT RS.6,02,90,213/- AND COMMISSION INCOME OF RS.25,21,924/-. ON DEBIT SIDE OF THE PROFIT & LOSS ACCOUNT, THE AMOUNT OF FREIGHT PAID OF RS.5,94,92,147/- AND FREIGHT IN RESPECT OF' TO PAY' LR SHOWN AS RS.96,23,0201-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO STATED THAT OUT OF THE ABOVE ' TO PAY' LR AMOUNTING TO RS.96,23,020/-, RS.24,28,762/- BELONGS TO THE APPELLANT'S OWN TANK LORRY AND THE APPELLANT NEED NOT TO DEDUCT THE TDS. THE AO MADE THE ADDITION OF RS. 71,94,258/- IN RESPECT OF THE 'TO PAY' LR ON OTHER TANK LORRY. 4.1.2 THE APPELLANT DURING THE COURSE OF APPEAL HA S CLARIFIED THAT HE HAS CARRIED ON TRANSPORTATION BUS INESS FOLLOWING TWO METHODS:- (A) BOOKING OF TANKERS AND TRANSPORTING ON BEHAL F OF ITS CLIENTS AS A PRINCIPAL. 4 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H (B) BOOKING OF TANKERS AND TRANSPORTING ON BEHAL F OF CLIENTS AS AGENTS. (1) THAT IN CASE OF BUSINESS CONDUCTED IN MANNER AS MENTIONED IN (A) ABOVE, THE ASSESSEE RECEIVED THE TRANSPORTATION INCOME DIRECTLY FROM THE CUSTOMERS A ND CORRESPONDINGLY AMOUNT OF FREIGHT PAID BY HIM WAS SEPARATELY PAID/DEBITED IN BOOKS OF ACCOUNTS. THAT IN SUCH CASE TDS IS ALSO DEDUCTED BY THE ASSESSEE ON PAYMENT MADE TO OTHER TRANSPORTERS TOWARDS FREIGHT PAID WHEREVER APPLICABLE. SUCH BUSINESS IN GENERAL TERMS OF TRANSPORT BUSINESS IS UNDERSTOOD AS TO BE BILLED' (2) THAT IN CASE OF BUSINESS CONDUCTED IN MANNER AS MENTIONED IN (B) ABOVE, THE ASSESSEE ONLY RECEIVES COMMISSION INCOME FROM THE TRUCK OWNER. TH AT FREIGHT AMOUNT DIRECTLY PAID BY THE SUPPLIERS/CONSI GNEE TO THE TRUCK OWNER. SINCE THE BILTY OF THE ASSESSEE REMAINS WITH THE TRUCK OWNER THEREFORE TDS IN THE NAME OF ASSESSEE WAS DEDUCTED BY THE PERSON AT THE TIME OF PAYMENT OF FREIGHT. HOWEVER, IN FACT THE ASSESSEE NEITHER RECEIVED TRANSPORTATION INCOME DIRECTLY FROM THE CUSTOMERS NOR IT IS LIABLE TO PAY FREIGHT TO ANYBODY. THE AMOUNT OF COMMISSION AS RECEIVED BY THE ASSESSEE HAS ALREADY BEEN OFFERED BY HIM AS HIS INCOME. THE BUSINESS IN GENERAL TERMS OF TRANSPORT BUSINESS IS UNDER STOOD AS 'TO PAY LR'. IN THIS TYP E OF BUSINESS THE ASSESSEE RECEIVES JUST THE COMMISSION INCOME ON BOOKING OF TRUCKS WHICH IT RECEIVES FROM TRUCK OWNER. SINCE, IN THIS CASE IT DOES NOT HAVE A NY DIRECT RELATION WITH THE CUSTOMER/CONSIGNEE HOWEVER 5 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H SINCE THE BOOKING OF GOODS FOR TRANSPORTATION WAS DONE BY THE ASSESSEE AND THE NAME OF ASSESSEE IS MENTION ED IN THE LR AS BOOKING AGENT, THE CONSIGNEE DEDUCTS T HE TDS ON FREIGHT PAYMENT IN RESPECT OF BOOKING AGENTS LIKE ASSESSEE. THAT JUST TO RECONCILE THE AMOUNT OF TDS IN THE BOOK OF ASSESSEE WITH THE DEPARTMENTAL RECOR D. THE ASSESSEE PASSED AN ENTRY IN RESPECT OF THE TDS AS DEDUCTED BY DEBITING THE TDS ACCOUNT, FREIGHT PAID AND CREDITING THE CORRESPONDING AMOUNT OF FREIGHT ON TO PAY LR. BASICALLY THE SAID ENTRY WAS PASSED JUST TO RECONCILE THE AMOUNT OF TDS WITH THE INCOME TAX DEPARTMENT. 4.1.3 THE ASSESSING OFFICER WHILE P ASSING THE ASSESSMENT ORDER HAS NO DISPUTED ABOUT THE BOOKING OF TANKERS AND TRANSPORTING ON BEHALF OF ITS CLIENTS A S A PRINCIPAL. HOWEVER, THE ASSESSING OFFICER HAS DISAL LOWED THE AMOUNT OF RS.71,94,258/- AS FREIGHT PAID 'TO PA Y' LR AS SHOWN IN THE DEBIT SIDE OF THE PROFIT & LOSS ACCOUNT BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. THE APPELLANT DURING THE COURSE OF ASSESSM ENT AND IN APPEAL HAS CLARIFIED THAT IN THE CASE OF 'TO PAY' LR THE APPELLANT HAS SIMPLY ENGAGED TRUCK AND CHARGED HIS COMMISSION. THE AMOUNT OF COMMISSION AS RECEIVED BY THE APPELLANT HAS ALREADY BEEN OFFERED FOR TAX IN T HE PROFIT & LOSS ACCOUNT. HOWEVER, LR OF THE APPELLANT WAS WITH THE TRUCK DRIVER, THE PERSON AT THE TIME OF MAKING THE 6 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H PAYMENT TO THE DRIVER FOR FREIGHT DEDUCTED TDS OF T HE APPELLANT. 4.1.4 THE APPELLANT JUST TO RECONCILE THE AMOUNT OF TDS AS DEDUCTED IN THE NAME OF THE APPELLANT THOUGH T HE FREIGHT AMOUNT WAS NOT ACTUALLY RECEIVED BY HIM, TH E APPELLANT PASSED A NOTIONAL ENTRY IN HIS BOOKS OF A CCOUNT IN RESPECT OF FREIGHT RECEIVED AND FREIGHT PAID. HO WEVER, TO DISTINGUISH THE SAME THE SAID AMOUNT HAS SEPARATELY BEEN SHOWN BY THE APPELLANT UNDER THE HEAD OF FREIGHT ON ('TO PAY' LR). SIMPLY REPRESENT THE AMOUNT OF TDS AS DEDUCTED IN THE NAME OF THE APPELLANT. 4.1.5 THAT FROM THE BOOKS OF ACCOUNT OF THE APPE LLANT IT IS CLEAR THAT THE APPELLANT HAS NEITHER RECEIVED NOR P AID FREIGHT IN RESPECT OF TO PAY LR BUT THE SAID ENTRY WAS MADE BY THE APPELLANT ON THE BASIS OF TDS CERTIFICATE AS RECEIV ED BY HIM. THE APPELLANT HAS ALREADY BEEN OFFERED THE AMOUNT O F COMMISSION AS RECEIVED AT THE TIME OF BOOKING IN RE SPECT OF FREIGHT RECEIPT AND PAID ON 'TO PAY' LR BASIS AND T HE ENTRY AS PASSED ON THE BASIS OF TDS CERTIFICATE IS JUST T O RECONCILE THE AMOUNT OF TDS AND WHEN NO ACTUAL PAYMENT WAS PA ID BY THE APPELLANT TO TRUCK OWNER. IN THAT CASE THE A SSESSING OFFICER WAS NOT JUSTIFIED IN INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. 7 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H 4.L.6 THE DECISION OF THE HON'BLE JODHPUR B ENCH OF ITAT AS RELIED BY THE A.O WAS IS ON DIFFERENT FOOTING. IN TH E CASE OF M/S SHRI CHOUDHARY TRANSPORT COMPANY, THE APPELLANT WAS AWARDED A WORKS CONTRACT BY M/S. GRASIM INDUSTRIES LTD., A CEMENT MARKETING DIVISION OF M/S. ADITYA CEMENT LTD. THE SAID AGREEMENT WAS ON PRINCIPAL TO PRINCIPAL BASIS WHEREBY THE APPELLANT WAS AWARDED CEMENT TRANSPORTATION WOR K AND IN THE TERMS OF AGREEMENT THE SCOPE OF WORK WAS TO INCLUDE PLACEMENT OF TRUCKS FOR CEMENT TRANSPORTATION FROM THEIR PLANT AT SHAMBHUPURA ON REGULAR BASIS IN THE STATE OF RAJASTHAN. THUS THE APPELLANT WAS ACTING AS A CONTR ACTOR IN THIS CASE. 4.L. 7 HOWEVER, IN THE PRESENT CASE OF THE APPELL ANT, HE IS JUST ACTING AS BOOKING AGENT. HE IS NEITHER RECEIVI NG NOR PAYING ANY PAYMENT FROM THE COMPANY DIRECTLY. HE IS JUST RECEIVING AN AMOUNT AS COMMISSION INCOME ON BOOKING OF TRUCKS FROM THE TRUCK OWNER. SINCE, IN THIS CASE IT DOES NOT HAVE ANY DIRECT RELATION WITH THE CUSTOMER/CONSIGNE E, THE DECISION AS RELIED UPON BY THE AO IS NOT APPLICABLE. 4.L.8 THE DECISION OF THE HON'BLE BILASPUR BENCH O F ITAT IN THE CASE OF ACIT VS. REETA LOIYA AS REPORTED IN 20 ITJ 29 SUPPORT THE CASE OF THE APPELLANT. HON'BLE B ILASPUR BENCH OF ITAT HAS DISCUSSED THE PROCEDURE AS FOLLOWE D IN THE CASE OF 'TO PAY LR'. IN THE CASE OF THE APPELLAN T 8 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H HIMSELF IN PAST YEAR I.E. IN THE ASSESSMENT YEAR 200 5-06 AND 2007-08 WHEN THE NATURE OF BUSINESS IS SOMEHOW SIMILAR BUT NO DISALLOWANCES WERE MADE BY THE THEN AO BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. IN VIEW OF FACTUAL BACKGROUND OF THE PRESEN T CASE WHEN THE APPELLANT HAS NOT MADE ANY PAYMENT TOWARDS FREIGHT TO THE TRUCK OWNER AND THE AMOUNT OF FREIGH T WAS SIMPLY DEBITED TO RECONCILE THE AMOUNT OF TDS AS DE DUCTED. HENCE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN D ISALLOWING THE AMOUNT OF FREIGHT BY INVOKING THE PROVISION OF SECTION 40(A)(IA) OF THE INCOME TAX ACT. IN THE APPELLANT'S OWN CASE PERTAINING TO ASSESSMENT YEAR 2009-10 THEN CIT (A.) VIDE APPEAL NO.U-47112011-12, ALLOWED THE APPEAL OF THE APPELLANT ON THE SAME GROUND. HENCE, ADDITION MADE BY THE A.O. AT RS.71,94,258/- IS NOT SUSTAINABLE AND IT IS HEREBY DELETED. THIS GROUND OF THE APPEAL OF THE APPELLANT IS ALLOWED. 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO AND LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSE E SUPPORTED THE ORDERS OF THE CIT(A). 6. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT P OINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT PRODUCE ANY EVIDENCE TO R EBUT THE FINDING OF 9 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H THE CIT(A) THAT IN THE CASE OF THE ASSESSEE ITSELF IN THE ASSESSMENT YEAR 2005-06 AND 2007-08, NO SUCH DISALLOWANCE WAS MADE. THEREFORE, WE DO NOT FIND ANY GOOD AND JUSTIFIABLE REASON TO INTE RFERE WITH THE ORDERS OF THE CIT(A), WHICH ARE CONFIRMED AND GROUNDS OF A PPEAL OF THE REVENUE ARE DISMISSED IN BOTH THE YEARS UNDER APPEA L. 7. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THE CROSS OBJECTION FILED BY THE ASSESSEE AND HENCE, THE SAME IS DISMISSED FO R WANT OF PROSECUTION. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING ON WEDNESDAY, THE 13 TH DAY OF JULY, 2016 AT INDORE. SD/- SD/- (D.T.GARASIA) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH JULY, 2016. CPU COPY TO: 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT 4. THE CIT(A) 5. THE D.R. 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., INDORE 10 DY. CIT, RATLAM VS. M/S. BHARAT KUMAR VERMA, NEEMUC H