Shikha Distributors (P) Ltd., Kolkata V. ITO, WD-10(3), KOLKATA, Kolkata

ITA 518/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1666 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 25-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT KUMAR KUREEL JCITSRDR
• Section: 43B; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 518 / KOL / 2014 ASSESSMENT YEAR :2006-07 SHIKHA DISTRIBUTORS (P) LTD., 5, KUSTIA ROAD, KOLKTA-700 039 [ PAN NO.AAECS 6768 G ] V/S . INCOME TAX OFFICER, WARD-10(3) /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SUBASH AGARWAL, ADVOCATE /BY RESPONDENT SHRI RAJAT KUMAR KUREEL, JCIT, SR-DR /DATE OF HEARING 26-04-2017 /DATE OF PRONOUNCEMENT 02-06-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA D ATED 11.02.2014. ASSESSMENT WAS FRAMED BY ITO WARD-10(3), KOLKATA U/ S 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 29.12.2010 FOR ASSESSMENT YEAR 2006-07. SHRI SUBASH AGARWAL, LD. ADVOCATE APPEARED ON BEHAL F OF ASSESSEE AND SHRI RAJAT KUMAR KUREEL, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. GROUND NO.1 TO 4 ARE INTER-RELATED AND THEREFORE BEING TAKEN UP TOGETHER TO PASS A CONSOLIDATE ORDER. ITA NO.518/KOL/2014 A.Y 2006-07 SHIKHA DISTRIBUTORS (P) LTD. VS. ITO WD-10(3) K OL. PAGE 2 THE ISSUE RAISED BY ASSESSEE IS THAT LD. CIT(A) ERR ED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUSTAINING THE DISALLOWANCE OF 24,35,564/- ON ACCOUNT OF SHORT REPORTING OF INCOME. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE, A PRIVAT E LIMITED COMPANY IS A C & F AGENT OF CIPLA LTD. THE ASSESSEE ON BEHALF OF C IPLA LTD. IS RECEIVING GOODS, STORING AND DISTRIBUTING THE GOODS AND EARNI NG INCOME FROM SUCH ACTIVITIES. THE ASSESSEE IN THE YEAR UNDER CONSIDER ATION HAS DECLARED TOTAL GROSS RECEIPTS FOR 1,40,07,155/-. HOWEVER, IT WAS OBSERVED BY THE AO F ROM THE TAX DEDUCTED AT SOURCE (TDS) CERTIFICATE THAT T DS WAS DEDUCTED BY CIPLA LTD. AT 1,64,42,719/- ONLY. THUS, AO OBSERVED THE DIFFEREN CE BETWEEN TOTAL GROSS RECEIPT SHOWN BY THE ASSESSEE AND CIPLA LTD., FOR 24,35,564/-. THE AO CALLED UPON THE ASSESSEE TO CLARIFY THE DIFFEREN CE OF 24,35,564/- AS DISCUSSED ABOVE. IN COMPLIANCE THERETO, ASSESSEE SU BMITTED THAT THERE WAS REIMBURSEMENT OF EXPENSES FOR 11,03,562/- AND SERVICE TAX OF 14,28,730/- WHICH WAS RECEIVED FROM CIPLA LTD AND ON THE SAME A MOUNT THE CIPLA LTD. HAS ALSO DEDUCTED TDS THOUGH THE CIPLA LTD WAS NOT LIAB LE TO DEDUCT TDS FROM THE AMOUNT OF REIMBURSEMENT AND SERVICE TAX. THEREFORE, THE IMPUGNED DIFFERENCE ON ACCOUNT OF TDS HAS ARISEN IN THE INCOME DECLARED BY THE ASSESSEE AND THE INCOME OBSERVED BY THE AO. HOWEVER, AO AFTER PERUSA L OF THE AGREEMENT BETWEEN ASSESSEE-COMPANY AND CIPLA LTD. OBSERVED TH AT THE REIMBURSEMENT EXPENSE BY CIPLA LTD. WILL BE OVER AND ABOVE THE CO MMISSION ON SALES. THE ASSESSEE IN SUPPORT OF ITS CLAIM ALSO SUBMITTED A C ERTIFICATE IN THE NAME OF CIPLA LTD SHOWING THAT TDS WAS DEDUCTED ON REIMBURS EMENT AMOUNT AND SERVICE TAX AMOUNT AS WELL. HOWEVER, AO DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE NAME AND DESIGNATION OF THE SIGNING AUTHORITY ON THE CERTIFICATE WAS NOT MENTIONED. FINALLY, AO T REATED THE AMOUNT OF 24,35,564/- AS UNDISCLOSED INCOME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT CIPLA LTD ., HAS REIMBURSED A SUM OF 11,03,562/- ON WHICH THE TDS WAS DEDUCTED BY CIPLA LTD. THE ASSESSEE ITA NO.518/KOL/2014 A.Y 2006-07 SHIKHA DISTRIBUTORS (P) LTD. VS. ITO WD-10(3) K OL. PAGE 3 FURTHER SUBMITTED THAT BALANCE AMOUNT OF 14,28,730/- WAS REPRESENTING THE SERVICE TAX ON WHICH ALSO CIPLA LTD. DEDUCTED THE T DS. AS SUCH, CIPLA LTD WAS NOT LIABLE TO DEDUCT THE TDS ON THE AFORESAID AMOUN T. HOWEVER, LD. CIT(A) DISREGARDED THE CONTENTION OF ASSESSEE AND CONFIRME D THE ORDER OF AO BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS PUT FOR WARD ON BEHALF OF THE APPELLANT ALONG WITH THE SUPPORTING DOCUMENTS/DETAI LS FURNISHED, PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE AO B OTH IN THE ASSESSMENT ORDER AS WELL AS IN REMAND REPORT, THE COUNTER REPLY AND OTHER MATERIALS BROUGHT ON RECORD. THE CRUX OF THE EXPLANATION PROVIDED BY THE APPELLANT WAS SIMILAR TO THAT PROVIDED BEFORE THE ASSESSING OFFICER. THE APP ELLANT EXPLAINED THAT IT WAS ENTITLED TO RECEIVED REIMBURSEMENT OF VARIOUS EXPEN SES INCURRED BY IT ON BEHALF OF CIPLA AND IT RECEIVED AN AMOUNT OF RS.11, 03,562/ ON REIMBURSEMENT OF EXPENSES ON WHICH CIPLA DEDUCTED T AX AT SOURCE. THE APPELLANT ALSO SUBMITTED THAT IT WAS CHARGING SERVI CE TAX OF THE BILLS AND CIPLA EDUCED TAX ON SERVICE TAX OF RS.14,28,730/- W HICH WAS ROUTED THROUGH THE BALANCE SHEET. HOWEVER, AFTER GOING THROUGH THE ENTIRE FACTS OF TH E CASE, I AM UNABLE TO AGREE WITH THE SUBMISSIONS OF THE APPELLANT. THE CE RTIFICATE OF CIPLA DOES NOT CLARIFY THE POSITION EITHER. THE APPELLANT HAS NOT SHOWN THE EXPENDITURE INCURRED AGAINST WHICH THE REIMBURSEMENT OF THE EXP ENSES WERE MADE. THE MAIN ISSUE OF PROVING THE EXPENDITURE INCURRED BY A PPELLANT ON BEHALF OF CIPLA FOR WHICH CIPLA HAS REIMBURSED THE EXPENSES H AS NOT BEEN PROVED AND EXPLAINED BY APPELLANT. WHAT WAS THE QUANTUM OF EXPENDITURE, DETAILS OF PAYMENTS MADE THEREOF, HOW SUCH PAYMENTS WERE REIMB URSED FROM CIPLA WAS NOT EXPLAINED BY APPELLANT AND THE APPELLANT RE MAINED SILENCE ON THIS POINT. PROVING OF THIS ASPECT IS IMPORTANT TO JUSTI FY THE CLAIM OF THE APPELLANT THAT THE REIMBURSEMENT IMPLIES THAT ACTUAL EXPENDIT URE INCURRED/MADE ON BEHALF OF CIPLA IS RECEIVED WHICH IS TO BE ADJUSTED WITH THE EXPENSES AND THEREFORE THERE IS NO QUESTION OF ANY INCOME ON ACC OUNT OF REIMBURSEMENT. EVEN AS PER AGREEMENT WITH CIPLA, IT IS SEEN THAT T HERE IS ONLY MENTIONING OF COMMISSION PAYMENTS. NO TAX IS REQUIRED TO BE DEDUC TED BY THE PAYER ON REIMBURSEMENT OF EXPENSES TO THE PAYEE AND THEREFOR E THE CONTENTION OF THE APPELLANT THAT IT HAS RECEIVED REIMBURSEMENT OF EXP ENSES IN THE GARB OF COMMISSION CANNOT BE ACCEPTED. THE TDS CERTIFICATE CLEARLY SHOW THAT TAX WAS DEDUCTED AT SOURCE U/S. 194H ON COMMISSION PAYM ENTS BY CIPLA AND THE APPELLANT CANNOT DIVERT THE ISSUE BY NOT REFLEC TING THE ENTIRE COMMISSION BY TAKING THE PLEA OF REIMBURSEMENT. IF AT ALL, ANY REIMBURSEMENT HAS BEEN MADE, IT IS FOR THE EXPENSES INCURRED BY APPELLANT WHICH IS SEPARATE AND NOT PART OF THE ACTUAL COMMISSION RECEIVED AS CERTIFIED FROM THE TDS CERTIFICATES FILED CIPLA TO THE APPELLANT AND HERE THE APPELLANT HAS ALSO CLAIMED THE ENTIRE TDS. THEREFORE THE ADDITION OF RS.11,03,562/- MADE BY THE ASSESSING OFFICER STANDS CONFIRMED. THE APPELLANTS FURTHER CONTENTION THE TAX WAS DEDU CTED ON SERVICE TAX ELEMENT HAS ALSO NOT BEEN SUBSTANTIATE BY THE APPEL LANT, BILLS WERE NOT SHOWN AND THE ENTIRE ACCOUNTS WERE NOT EXPLAINED AS TO TH E METHOD OF TREATMENT OF SERVICE TAX. FURTHERMORE, WHAT IS THE METHOD BY WHI CH SERVICE TAX IS PAID AND ITA NO.518/KOL/2014 A.Y 2006-07 SHIKHA DISTRIBUTORS (P) LTD. VS. ITO WD-10(3) K OL. PAGE 4 DEPOSITED WAS ALSO NOT EXPLAINED. THE SERVICE TAX C OMPONENT SHOULD FORM PART OF THE INCOME OF THE APPELLANT AND THE PAYMENT S CAN BE ALLOWED U/S. 43B OF THE IT ACT. IN THE ABSENCE OF THE DETAILS OF SER VICE TAX ELEMENT IN THE COMMISSION BILLS, I AM OF THE VIEW THAT THE ASSESSI NG OFFICER IS JUSTIFIED IN MAKING THE ADDITION OF RS.14,28,730/- ON THIS ACCOU NT AND HENCE, THE SAME IS ALSO CONFIRMED. THUS, THIS GROUND OF APPEAL IS DISM ISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.24,35,564/- MADE BY THE AO ON ACCOUNT OF THE ALLEGED DIFFERENCE BETWEEN THE TOTAL RECEIP TS AS PER TDS CERTIFICATES AND THE GROSS RECEIPTS DISCLOSED IN THE PROFIT & LO SS ACCOUNT. 2. FOR THAT THE LD. CIT FAILED TO APPRECIATE THAT A SUM OF RS.11,03,562/- WAS RECEIVED BY THE ASSESSEE TOWARDS REIMBURSEMENT OF E XPENSES ON WHICH TDS WAS DEDUCTED BY THE PAYER BUT THE SAME CANNOT BE CO NSIDERED AS INCOME OF THE ASSESSEE. 3. FOR THAT THE LD. CIT FAILED TO APPRECIATE THAT O UT OF TOTAL RECEIPTS, A SUM OF RS.14,28,730/- WAS RELATING TO SERVICE TAX COMPONEN T ON WHICH TDS WAS DEDUCTED BY THE PAYER BUT THE SAME CANNOT BE CONSID ERED AS THE INCOME OF THE ASSESSEE. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL. 5. LD. AR FOR THE ASSESSEE FILED PAPER BOOK WHICH I S RUNNING PAGES FROM 1 TO 40 AND SUBMITTED THAT CIPLA LTD. HAS CONFIRMED T HE AMOUNT OF COMMISSION PAID TO THE ASSESSEE IN RESPONSE TO THE NOTICE ISSU ED U/S. 133(6) OF THE ACT. THE LD. AR DREW OUR ATTENTION ON PAGES 22 AND 23 OF THE PAPER BOOK WHERE THE REPLY OF THE ASSESSEE U/S. 133(6) OF THE ACT WA S PLACED. HE REITERATED THE SAME SUBMISSIONS AS WERE MADE BEFORE LD. CIT(A). ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD AND PERUSED THE ORDER OF AUTHORITIES BELOW. WE FIND THAT THERE IS NO DISPUTE WITH REGARD TO THE FA CTS OF THE CASE THEREFORE, THE SAME ARE NOT REPEATED HERE FOR THE SAKE OF BREVITY. AT THE OUTSET, WE FIND THAT THE REIMBURSEMENT OF EXPENSE HAS BEEN SHOWN BY THE ASSESSEE IN ITS INCOME AS REIMBURSEMENT OF EXPENSES FOR 11,03,562/- AS EVIDENT FROM THE PROFIT AND LOSS ACCOUNT PLACED ON PAGE 6 OF THE PAPER BOOK. TH EREFORE, WE FIND THAT THE ITA NO.518/KOL/2014 A.Y 2006-07 SHIKHA DISTRIBUTORS (P) LTD. VS. ITO WD-10(3) K OL. PAGE 5 OBSERVATION OF AUTHORITIES BELOW THAT ASSESSEE HAS NOT SHOWN REIMBURSEMENT OF EXPENSE IN THE INCOME IS FACTUALLY INCORRECT. TH EREFORE WE REVERSE THE ORDER OF LD. CIT(A) IN THIS REGARD AND DIRECT THE AO TO D ELETE THE ADDITION. 6.1 NOW, COMING TO THE ADDITION MADE BY AUTHORITIES BELOW ON ACCOUNT OF SERVICE TAX OF 14,28,730/-, IN THIS REGARD, WE FIND THAT CIPLA LTD . HAS DULY FURNISHED ITS CONFIRMATION BY STATING THAT TDS WAS DEDUCTED ON THE AMOUNT OF SERVICE TAX. THE CONFIRMATION OF CIPLA LTD. IS PLAC ED ON PAGES 24 AND 25 OF THE PAPER BOOK. BESIDES THE ABOVE THE AUTHORITIES BELOW HAVE NOT BROUGHT ANY DEFECT IN THE BOOKS OF ACCOUNT OF ASSESSEE. HAD THE RE BEEN UNDISCLOSED INCOME OF THE ASSESSEE THEN SAME COULD HAVE BEEN AS CERTAINED FROM THE LEDGER COPIES OF CIPLA LTD. AS SUCH, WE FIND THAT T HE ADDITION HAS BEEN MADE BY AUTHORITIES BELOW ON SURMISE AND CONJECTURE. IN REJOINDER LD. DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD CONTRARY TO THE ARGU MENTS PLACED BY LD. AR. IN THIS VIEW OF THIS MATTER WE REVERSE THE ORDER OF LD . CIT(A) AND DIRECTED THE AO TO DELETE THE ADDITION. HENCE, THIS GROUND OF ASSES SEE IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 02/ 06/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 02 / 06 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SHIKHA DISTRIBUTORS (P) LTD., 5, KUSTIA ROAD, KOLKATA-39 2. /RESPONDENT-ITO WARD-10(3), KOLKATA 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 1 /0 ,