M/s Royal Agencies, Visakhapatnam V. The ITO, Ward-1(2), Visakhapatnam

ITA 56/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50153 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: R L N SOMAYAJULU
• Section: 143(3); 194C; 154

Judgement Text

ITA NO 56 OF 2010 ROYAL AGENCIES VISAKHAPATNAM 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 56/VIZAG/2010 ASSESSMENT YEAR: 2005-06 M/S ROYAL AGENCIES, VISAKHAPATNAM VS. ITO WARD-1(2) VISAKHAPATNAM (APPELLANT) PAN NO:AABRR 5572 M (RESPONDENT) APPELLANT BY: SHRI R.L.N. SOMAYAJULU, CA RESPONDENT BY: SHRI R.K. SINGH, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.12.2009 PASSED BY LEARNED CIT(A), VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE ASSESSEE IS ASSAILING THE DECISION OF THE LE ARNED CIT (A) IN CONFIRMING THE DISALLOWANCE OF RS.3,58,789/- MADE B Y THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) OF THE ACT IN THE ORDER PAS SED UNDER SECTION 154 OF THE ACT. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE FIRM IS TRADING IN GI PIPES AND FITTINGS. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS COMPL ETED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT ON 18.12.20 07. LATER IT WAS NOTICED THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.5,92,102/ - UNDER THE HEAD FREIGHT CHARGES, WHICH INCLUDED PAYMENTS MADE TO M/S EAST COAST TRANSPORT COMPANY TO THE TUNE OF RS.3,58,789/-. TH E ASSESSING OFFICER WAS OF THE VIEW THAT THE PAYMENTS MADE TO M/S EAST COAST TRANSPORT COMPANY IS LIABLE FOR DEDUCTION OF TAX AT SOURCE UN DER SECTION 194C OF THE ACT AND THE FAILURE TO SO DEDUCT THE TAX WOULD ATTR ACT THE DISALLOWANCE OF ITA NO 56 OF 2010 ROYAL AGENCIES VISAKHAPATNAM 2 THE SAID CLAIM UNDER SECTION 40(A)(IA) OF THE ACT. SINCE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO SO DEDUCT TDS, THE A SSESSING OFFICER ISSUED NOTICE UNDER SECTION 154 PROPOSING TO DISALLOW THE CLAIM OF RS.3,58,789/- UNDER SECTION 40(A)(IA) OF THE ACT. BEFORE THE ASS ESSING OFFICER THE ASSESSEE SUBMITTED THAT THE WHOLESALE SUPPLIERS, FR OM WHOM THE ASSESSEE HAS PURCHASED GOODS, HAVE ACTUALLY ENGAGED THE LORR IES AND HAVE SEND THE GOODS THROUGH THEM. THE ASSESSEE WOULD MAKE PAYMEN T TO THE TRUCK DRIVERS BOTH FOR THE COST OF THE GOODS AND TRANSPOR T AT THE TIME OF TAKING DELIVERY OF GOODS. ACCORDINGLY IT WAS CONTENDED T HAT THERE WAS NO CONTRACT BETWEEN THE ASSESSEE AND THE TRANSPORT AGENCY AND H ENCE THE PROVISIONS OF SECTION 194C SHALL NOT APPLY TO THE ASSESSEE. THE A SSESSING OFFICER WAS NOT CONVINCED WITH THE SAID EXPLANATIONS AND HENCE, HE DISALLOWED THE ABOVE SAID CLAIM OF RS.3,58,789/- UNDER SECTION 40(A)(IA) OF THE ACT. THE ASSESSEE COULD NOT SUCCEED BEFORE THE LEARNED CIT (A). HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE UNDISPUTED FACT IS THAT THE ASSESSING O FFICER HAS MADE THE IMPUGNED DISALLOWANCE IN THE ORDER PASSED UNDER SEC TION 154 OF THE ACT. THERE CANNOT BE ANY DISPUTE THAT AN ORDER UNDER SEC TION 154 OF THE ACT CAN BE PASSED WITH A VIEW TO RECTIFY THE MISTAKE APPARE NT FROM THE RECORD. THE HON'BLE SUPREME COURT HAS EXPLAINED THE MEANING OF MISTAKE APPARENT FROM THE RECORD IN THE CASE OF BALARAM (T .S) ITO VS. VOLKART BROS (1971)(82 ITR 50) AS UNDER: A MISTAKE APPARENT FROM THE RECORD MUST BE AN OBVI OUS AND PATENT MISTAKE AND NOT SOME THING WHICH CAN BE ESTA BLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON W HICH THERE MAY CONCEIVABLY BE TWO OPINIONS. 5. IN THE INSTANT CASE, THE CONTENTION OF THE ASS ESSEE IS THAT THE TRUCKS, TO WHICH THE FREIGHT CHARGES WERE PAID, HAVE BEEN E NGAGED BY THE SUPPLIERS OF THE GOODS AT THEIR END AND THE ASSESSEE HAS MADE THE PAYMENT TO THE TRUCK OWNERS BOTH FOR THE COST OF GOODS AND THE TRA NSPORT CHARGES. THUS, ACCORDING TO THE ASSESSEE, THERE IS NO CONTRACT BET WEEN IT AND THE TRUCK ITA NO 56 OF 2010 ROYAL AGENCIES VISAKHAPATNAM 3 OWNERS. HOWEVER, THE ASSESSING OFFICER HAS TAKEN T HE VIEW FROM THE RETURN OF INCOME OF THE ASSESSEE THAT THE ASSESSEE IS LIAB LE TO DEDUCT TAX AT SOURCE ON THE SAID FREIGHT PAYMENTS. THUS IT CAN BE NOTIC ED THAT THE INFERENCE DRAWN BY THE ASSESSING OFFICER IS NOT AS SIMPLE AS IT WAS CONSIDERED BY HIM. THE MATTER REQUIRES A DETAILED VERIFICATION OF FACT S. FURTHER THE CONTENTIONS MADE BY THE ASSESSEE WOULD SHOW THAT THERE ARE CONC EIVABLY TWO OPINIONS ON THE IMPUGNED ISSUE. THUS IT IS HARD TO ACCEPT TH AT THE IMPUGNED ISSUE WOULD FALL IN THE CATEGORY OF OBVIOUS AND PATENT MI STAKE. HENCE, IN OUR VIEW, THE ASSESSING OFFICER COULD NOT HAVE PASSED T HE ORDER UNDER SECTION 154 OF THE ACT FOR MAKING THE IMPUGNED DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT. IN VIEW OF THE FOREGOING, WE SET ASIDE THE ORDER OF LEARNED CIT(A) AND ALSO THE ORDER PASSED UNDER SECT ION 154 OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 12 TH APRIL, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 12-04-2011 COPY TO 1 M/S ROYAL AGENCIES, D.NO. 28 - 9 - 29 SURYABAGH, VISAKHAPATNAM 2 THE ITO WARD-1(2) VISAKHAPATNAM 3 4. THE CIT 1, VISAKHAPATNAM THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM