Sri Elumalayan Transports, CHENNAI V. ACIT, Salem

ITA 567/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96420 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 19-03-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Reopening of assessment; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , . ! ' , # '$ % [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO.567/MDS/2015 / ASSESSMENT YEAR : 2004-05 M/S SRI ELUMALAYAN TRANSPORTS 1, KANAVAIPATTI POST GANESPURAM(VIA) NAMAKKAL VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE SALEM [PAN AAEFS 6383 C] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI A.V SREEKANTH, JCIT / DATE OF HEARING : 23 - 1 1 - 2015 / DATE OF PRONOUNCEMENT : 27 - 1 1 - 2015 * / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-18, CHENNA I, DATED 27.1.2015 FOR ASSESSMENT YEAR 2004-05. 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARD TO V ALIDITY OF REOPENING OF ASSESSMENT. THE SECOND GROUND IS AGAI NST SUSTAINING THE ADDITION OF ` 15,34,235/- BEING THE DIFFERENCE BETWEEN THE GROSS ITA NO. 567/15 :- 2 -: RECEIPTS AS PER THE TDS CERTIFICATES AND THE INCOME AND EXPENDITURE ACCOUNT IN THE COMPUTATION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 3. FACTS OF THIS ISSUE ARE THAT FOR THE ASSESSMENT YE AR 2004-05, THE ASSESSEE FILED ITS RETURN OF INCOME ON 5.5.200 5 DECLARING TOTAL INCOME OF ` 71,950/-. THE RETURN WAS PROCESSED U/S 143(1) ON 26.5.2005 AND SUBSEQUENTLY, ASSESSMENT WAS COMPLETE D U/S 143(3) ON 22.12.2006. ON VERIFICATION OF TDS CERTIFICATES ENCLOSED WITH THE RETURN OF INCOME THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS UNDERSTATED ITS RECEIPTS IN THE INCOME AND EXPENDIT URE ACCOUNT. THEREFORE, THERE WAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 1 47 AND NOTICE U/S 148 WAS ISSUED AND SERVED ON THE ASSESSEE. CO NSEQUENTLY, THE ASSESSING OFFICER BROUGHT TO TAX THE DIFFERENCE OF ` 15,34,235/- AS PER THE RECEIPTS SHOWN TDS CERTIFICATES AND INCOME AND EXPENDITURE ACCOUNT. AGGRIEVED, THE ASSESSEE WENT IN APPEAL B EFORE THE CIT(A) AGAINST THE REOPENING OF ASSESSMENT AND ALSO ON TH E MERIT OF ADDITION OF ` 15,34,235/-. THE CIT(A) DISMISSED BOTH THE GROUND S OF THE ASSESSEE AGAINST WHICH THE ASSESSEE IS IN APPEAL B EFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE CHALLENGED THE RE OPENING OF ASSESSMENT ON THE BASIS OF DIFFERENCE IN GROSS R ECEIPTS SHOWN IN ITA NO. 567/15 :- 3 -: THE TDS CERTIFICATES AND INCOME AND EXPENDITURE ACC OUNT FILED ALONGWITH THE RETURN OF INCOME. ACCORDING TO THE L D. REPRESENTATIVE, THE TDS CERTIFICATES ON THE BASIS OF WHICH THE ASSE SSING OFFICER ISSUED NOTICE U/S 148 WAS ALREADY AVAILABLE ON RECORD WHI LE PASSING THE ASSESSMENT ORDER U/S 143(3) ON 22.12.2006 AND THER E WAS NO FRESH TANGIBLE MATERIAL TO ISSUE A NOTICE U/S 148 AND IT IS ONLY A CHANGE OF OPINION AND THE CHANGE OF OPINION CANNOT BE A REASO N TO REOPEN THE ASSESSMENT. 5. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND THE MA TERIAL AVAILABLE ON RECORD. THE MAIN CONTENTION OF THE LD . REPRESENTATIVE FOR THE ASSESSEE IS THAT THE CONCLUDED ASSESSMENT COUL D NOT BE REOPENED MERELY BECAUSE OF DIFFERENCE BETWEEN THE RECEIPTS MENTIONED IN THE TDS CERTIFICATES AND AS SHOWN IN THE INCOME AND EXP ENDITURE IS CONCERNED. A PERUSAL OF THE RE-ASSESSMENT ORDER SH OWS THAT ASSESSMENT WAS REOPENED ONLY DUE TO THE DIFFERENCE BETWEEN THE GROSS RECEIPTS SHOWN IN THE TDS CERTIFICATES AND TH E INCOME AND EXPENDITURE ACCOUNT SUBMITTED ALONGWITH THE RETURN OF INCOME. THERE WAS NO OTHER FRESH TANGIBLE MATERIAL AVAILABL E BEFORE THE ASSESSING OFFICER APART FROM THE TDS CERTIFICATES S UBMITTED INDICATING ITA NO. 567/15 :- 4 -: THAT THERE WAS ANY REASON FOR FORMING A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN OUR VIEW, THE ASSESSMENT CO ULD NOT HAVE BEEN REOPENED ONLY ON THE BASIS OF DIFFERENCE IN RE CEIPTS SHOWN IN THE TDS CERTIFICATES AND IN THE INCOME AND EXPENDITURE ACCOUNT. ON AN IDENTICAL ISSUE, THE CO-ORDINATE BENCH OF THE KOLKA TA TRIBUNAL IN THE CASE OF MEHERA REID & CO. VS ITO, 81 DTR (CAL.TRIB) 376 HAS HELD AS UNDER: IN THE INSTANT CASE, ASSESSMENT HAS BEEN REOPENE D ON THE GROUND THAT THERE IS DISCREPANCY BETWEEN PROFESSION AL INCOME DECLARED BY THE ASSESSEE AND THE PROFESSIONAL INCOM E AS PER TDS CERTIFICATES AND THAT IT REQUIRES VERIFICATION TO FIND OUT WHETHER ANY TAXABLE INCOME HAS ESCAPED ASSESSMENT THERE IS NOTHING IN THE REASONS TO INDICATE THAT THERE IS ESCAPEMENT OF INCOME A VARIATION IN THESE TWO FIGURES DOES N OT NECESSARILY LEAD TO ESCAPEMENT OF INCOME MERE NEE D TO VERIFY THE DISCREPANCY DOES NOT BRING THE MATTER WI THIN THE SCOPE OF CASES IN WHICH REASSESSMENT PROCEEDINGS CA N BE VALIDLY INITIATED THERE IS SUBTLE, THOUGH SIGNIFI CANT, DISTINCTION BETWEEN REASON TO BELIEVE AND REASON TO SUSPECT WHILE THE FORMER IS GOOD ENOUGH TO HOLD THAT INCOME HAS ESCAPED ASSESSMENT AND INITIATE SUITABLE REMEDIAL M EASURES IN RESPECT THEREOF, THE LATTER CAN, AT BEST, BE THE GR OUND TO VERIFY AND EXAMINE THE MATTER FURTHER MERE FACT TH AT MATTER NEEDS TO BE VERIFIED AND EXAMINED FURTHER CAN NEVER BE A REASON GOOD ENOUGH TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND TO INVOKE THE REASSESSMENT PROCEEDIN GS THEREFORE, THE VERY INITIATION OF REASSESSMENT PROC EEDINGS ON THE FACTS OF THE INSTANT CASE WAS DEVOID OF LEGALLY SUSTAINABLE MERITS REASSESSMENT QUASHED. 7. FOLLOWING THE ABOVESAID DECISION OF THE KOLKATA BEN CH, THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF RAFE EQ IQBAL VS ITO IN I.T.A.NO. 709/HYD/2013, DATED 13.9.2013, HAS HELD A S UNDER: ITA NO. 567/15 :- 5 -: 13. FOLLOWING THE AFORESAID DECISION OF THE KOLKATA BENCH, THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH IN CASE OF M/S. VANSU ERECTORS PRIVATE LIMITED, HYDERABAD VS. ITO, WARD-3(2), HYDERABAD (ITA NO.456/HYD/2012 DATED 5-4-2013) ALSO CANCELLED THE REASSESSMENT MADE U/S 143(3) READ WITH S ECTION 147 OF THE ACT FOR THE ASSESSMENT OF ESCAPED INCOME ON THE BASIS OF RECEIPTS SHOWN IN THE TDS CERTIFICATE. IN VIEW OF T HE RATIO LAID DOWN AS ABOVE BY THE CO-ORDINATE BENCHES OF THIS TR IBUNAL, WE HOLD THAT THE REOPENING OF ASSESSMENT ON THE BASIS OF THE RECEIPTS SHOWN IN THE TDS CERTIFICATE IS NOT SUSTAI NABLE IN LAW. THUS, ON THIS GROUND ALONE THE IMPUGNED ASSESSMENT ORDER IS LIABLE TO BE ANNULLED. HOWEVER, SO FAR AS THE MERIT OF THE ADDITION IS CONCERNED, IT IS A FACT ON RECORD THAT THE REVENUE AUTHORITIES HAVE NOT DISPUTED THE FACT THAT THE ASSESSEE IS CAR RYING ON BUSINESS AS CLEARING AND FORWARDING AGENT. IT IS AL SO A FACT ON RECORD, WHICH HAS ALSO BEEN CONFIRMED BY THE CUSTOM ERS OF THE ASSESSEE, THAT THE ASSESSEE INCURS EXPENDITURE ON BE HALF OF HIS CLIENTS AS A CLEARING AND FORWARDING AGENT WHICH IS SUBSEQUENTLY REIMBURSED BY THE CLIENT. IN FACT, LETTERS WRITTEN BY THE CLIENTS AT PAGES 6 AND 7 OF THE PAPER BOOK CLEARLY REVEAL THAT T HE CLIENTS HAVE CONFIRMED THIS FACT BY MENTIONING THEREIN THAT THE ASSESSEE INCURS EXPENDITURE RELATING TO CUSTODIAN CHARGES, CU STOM DUTY, DELIVERY ORDERS CHARGES ETC., ON THEIR BEHALF FOR C LEARING THE GOODS AND SUBSEQUENTLY THESE EXPENDITURES ARE REIMBU RSED TO THE ASSESSEE. IN FACT, LEDGER ACCOUNT OF THE ASSESSEE I N THE BOOKS OF ACCOUNTS OF THE CONCERNED PARTIES WAS ALSO PRODUCED FOR VERIFICATION. A PERUSAL OF THE ORDER OF THE CIT (A) ALSO REVEAL THAT THE CIT (A) DOES NOT DISPUTE THE FACT THAT THE ASSESSEE HAS INCURRED EXPENDITURE AS A CLEARING AND FORWARDING AG ENT ON BEHALF OF HIS CLIENTS. HOWEVER, BY MERELY OBSERVING THAT N O BIFURCATION OF THE RECEIPTS HAVE BEEN SUBMITTED, THE CIT (A) HA S REJECTED THE CLAIM OF THE ASSESSEE WHEN THE ASSESSEES CLAIM OF INCURRING OF EXPENDITURE HAS BEEN CONFIRMED BY THE RESPECTIVE CLIENTS AND NECESSARY EVIDENCE IN THIS REGARD HAS BEEN PRODUCED , IN OUR VIEW, THE CIT (A) WAS NOT JUSTIFIED IN REJECTING SUCH CLA IM BY SIMPLY SAYING, NO BIFURCATION IS AVAILABLE. WHEN THE LED GER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE CONCER NED PARTIES HAS BEEN FURNISHED, THE NATURE OF EXPENDITURE INCURR ED COULD HAVE EASILY BEEN ASCERTAINED BY THE CIT (A) FROM SU CH ACCOUNT. IN AFORESAID VIEW OF THE MATTER, WE DO NOT FIND ANY VA LID REASON TO ITA NO. 567/15 :- 6 -: REJECT THE CLAIM OF THE ASSESSEE. IT IS ALSO A FACT , THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON R ECORD TO SHOW THAT THE AMOUNT OF RS.50,98,842/- WAS TOWARDS SERVICES CHA RGES. MERELY BECAUSE TAX WAS DEDUCTED AT SOURCE ON REIMBU RSED EXPENSES, IT WILL NOT CONSTITUTE INCOME OF THE ASSES SEE. IN THIS REGARD WE DRAW SUPPORT FROM THE DECISION OF THE INC OME-TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN CASE OF ITO VS. TRAVELS & SHIPPING (P) LTD. (SUPRA). IN SUCH VIEW OF THE MATT ER, THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN TREATING TH E DIFFERENTIAL AMOUNT OF RS.50,98,842 AS INCOME OF THE ASSESSEE WITHOUT PROPERLY EXAMINING THE EXPLANATION SUBMITTED BY THE A SSESSEE. 8. BEING SO, IN OUR OPINION, THE PRESENT CASE IS SQUA RELY COVERED BY THE ABOVE ORDERS OF THE TRIBUNAL. TAKIN G A CONSISTENT VIEW, WE ARE OF THE OPINION THAT REOPENING OF THE ASSESSM ENT IN THIS CASE IS BAD IN LAW AND THEREFORE, WE QUASH THE RE-ASSESSMEN T ORDER PASSED BY THE ASSESSING OFFICER. SINCE WE HAVE QUASHED THE R EOPENING OF ASSESSMENT, THE OTHER GROUNDS RAISED BY THE ASSESS EE ARE ONLY ACADEMIC IN NATURE AND DO NOT REQUIRE ADJUDICATION. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ' ) (G. PAVAN KUMAR) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 27 TH NOVEMBER, 2015 RD ITA NO. 567/15 :- 7 -: $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF