Delhi U.P. Golden Transport Service, Ghaziabad V. ITO, Ghaziabad

ITA 5958/DEL/2012

• Counselvise Citation: 595820114 RSA 2012
• Duration Of Justice: 1 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Rule of consistency; Tangible material; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 142(1); 194C; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI I.C. SUDHIR, JM AND SHRI J.SUDHAKAR REDDY, AM ITA NO. 5957 AND 5958 /DEL/201 2 AY : - 200 5 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICE VS. ITO, WARD 1(2) C/O AKHILESH KUMAR, ADVOCATE GHAZIABAD CHAMBER NO. 206 - 207, ANSAL SATYAM, RDC RAJ NAGAR GHAZIABAD PAN: AADFD 8819 M ITA NO.5637 A ND 5638/DEL/2012 AY : - 200 5 - 06 AND 2006 - 07 ITO, WARD 1(2) VS. DELHI UP GOLDEN TRANSPORT SERVICES GHAZIABAD GHAZIABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH KUMAR, ADV. RESPONDENT BY : S MT. PARWINDER KAUR, SR. D.R. O R D E R PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED FOR THE AY 2005 - 06, 2006 - 07 DIRECTED AGAINST THE ORDER OF THE LD.CIT(APPEALS), GHAZIABAD DAT ED 27.8.2012. AS THE ISSUES ARISING IN BOTH THESE APPEALS ARE COMMON, FOR THE SAKE OF CONVENIENCE THEY ARE HEARD TOGETHER AND DISPOSED OF BY WAY OF THIS COMMON ORDER. 2. FACTS IN BRIEF: - THE ASSESSEE IS A TRANSPORT BOOKING AGENT (COMMISSION AGENT) LOCATED AT DELHI - U.P.BORDER. HIS BUSINESS IS TO ARRANGE TRUCKS/VEHICLES FOR VARIOUS PARTIES, MAINLY BY CONTACTING TRUCK DRIVERS WHO ARE RETURNING EMPTY AFTER UNLOADING THEIR GOODS AND PASSI NG THROUGH DELHI - U.P.BORDER, WHICH IS A HUB OF SUCH AGENTS. ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 2 3. THE PARTIES REQUIRING THE TRUCKS, MAKE PART PAYMENT AS ADVANCE TO DRIVERS ETC. A GAINST FREIGHT SETTLED AND THE BALANCE AMOUNT IS PAID TO THE ASSESSEE THROUGH CHEQUES, ON BEHALF OF THE TRUCK OPERATORS, THOUGH TAX IS DEDUCTED ON THE FULL AMOUNT OF PAYMENT MADE TO THE TRUCK, IN THE NAME OF THE ASSESSEE. THE ASSESSEE PAYS THE AMOUNT TO THE TRUCK OPERATOR AFTER RETAINING ITS COMMISSION AT 5% AS PER THE TRADE PRACTICE. IN OTHER WORDS THE ASSESS EE IS A SEE THROUGH ENTITY, AS IT COLLECTS AND PAYS, FREIGHT CHARGES FROM THE PRINCIPAL PARTIES TO THE TRUCK OWNERS AND IN THE PROCESS EARNS 5% COMMISSION. 3.1. IN THE SYSTEM OF ACCOUNTING MAINTAINED BY THE ASSESSEE, ONLY THE COMMISSION EARNED IS CREDITED TO THE PROFIT & LOSS A/C. THE AMOUNT COLLECTED FROM THE PRINCIPALS AND AMOUNTS PAID TO TRUCK OWNERS ARE NOT ROUTED THROUGH THE PROFIT AND LOSS A/C. THIS SYSTEM OF ACCOUNTING HAS BEEN FOLLOWED BY THE ASSESSEE SINCE THE INCEPTION OF ITS BUSINESS AND THE R EVENUE HAS ACCEPTED THE SAME IN SCRUTINY ASSESSMENTS. FOR THE AY 2005 - 06 AN ORDER U/S 143(3) WAS PASSED ON 5.12.2007 AND THE RETURN OF INCOME FILED BY THE ASSESSEE WAS ACCEPTED AFTER CERTAIN DISALLOWANCES . 3.2. LATER A NOTICE U/S 148 WAS ISSUED REOPENING THE ASSESSMENT U/S 147 OF THE ACT. THE REASONS OF REOPENING FOR THE AY 2005 - 06 ARE AS FOLLOWS. REASONS FOR ISSUE OF NOTICE U/S 143 IN THE CASE OF M/S DELHI UP GOLDEN TRANSPORT SERVICE, UP BORDER, CHIKAMBERPUR, GHAZIABAD AY 2005 - 06 27.4.2009 THE ASSESSEE FIRM ENJOYS INCOME FROM TRANSPORT BUSINESS. RETURN FOR THE AY 2005 - 06 DECLARING TOTAL INCOME OF RS.3,01,728/ - WAS FILED ON 29.10.2006. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 5.12.2007 ON A TOTAL INCOME OF RS.3,28,340/ - . IT IS FOUN D THAT THE ASSESSEE HAS CREDITED NET RECEIPTS FROM FREIGHT IN THE PROFIT AND LOSS ACCOUNT AT RS.7,44,555/ - . GROSS RECEIPTS FROM FREIGHT CLAIMED AS PER TDS CERTIFICATES ARE RS.1,29,22,219/ - AGAINST WHICH THE ASSESSEE HAS CLAIMED THAT A SUM OF RS.1,21,77,66 4/ - HAS BEEN PAID AS FREIGHT TO THE TRUCK OWNERS FOR HIRING OF THEIR TRUCKS (VIDE ASSESSEE S RECEIPT DT. 15.11.2007). IN ACCORDANCE WITH THE PROVISIONS OF S.194 C OF THE ACT, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX FROM PAYMENT OF RS.1,21,77,664/ - AND DEP OSIT THE SAME INTO THE GOVERNMENT ACCOUNT WITHIN THE STIPULATED TIME WHICH THE ASSESSEE HAS FAILED TO DO SO. AS SUCH, SINCE THE ASSESSEE HAS FAILED TO DEDUCT TAX FROM THE FREIGHT PAYMENT OF RS.1,21,77,664/ - AND DEPOSIT THE SAME INTO THE GOVERNMENT ACCOUNT , THE ENTIRE EXPENDITURE OF RS.1,21,77,664/ - IS NOT ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 3 ALLOWABLE AS PER PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. I HAVE , THEREFORE, REASON TO BELIEVE THAT THE ASSESSEE S INCOME TO THE EXTENT OF RS.1,21,77,664/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS TO S.147 OF THE ACT. IN ORDER TO ASSESS THE INCOME, PROCEEDINGS U/S 147 OF THE ACT ARE INITIATED. SD/ - ITO, WARD 1(2), GHAZIABAD. 3.4. FOR THE AY 2006 - 07 THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2006 AND THE SAME WAS PROCESSED U/S 143(1) ON 20.3.2007. LATER NOTICE U/S 148 WAS ISSUED AFTER RECORDING THE FOLLOWING REASONS FOR REOPENING. REASONS FOR ISSUE OF NOTICE U/S 148 IN TH E CASE OF M/S DELHI UP GOLDEN TRANSPORT SERVICE, U.P.BORDER, CHIKAMBERPUR, GHAZIABAD AY 2006 - 07 DT. 03.11.2009. THE ASSESSEE FIRM ENJOYS INCOME FROM TRANSPORT BUSINESS, RETURN FOR THE AY 2006 - 07 DECLARING TOTAL INCOME OF RS.3,28,605/ - WAS FILED ON 31.10.2 006. THE SAME WAS PROCESSED U/S 143(1) ON 20.3.2007 AND A REFUND OF RS. 1,41,130/ - WAS GRANTED TO THE ASSESSE. IT IS FOUND THAT THE ASSESSEE HAS CREDITED TOTAL RECEIPTS IN THE PROFIT AND LOSS ACCOUNT AT RS.10,77,402/ - (BOOKING AMOUNT RS.1,78,735/ - + FREIG HT INCOME RS.8,98,667/ - _ GROSS RECEIPTS FROM FREIGHT CLAIMED AS PER TDS CERTIFICATES ARE RS.1,10,92,329/ - . THUS IT IS CLEAR THAT THE ASSESSEE HAS NOT ACCOUNTED FOR THE BALANCE OF RS.1,00,14,927/ - WHILE COMPUTING ITS NET PROFIT WHICH HAVE ESCAPED ASSESSMEN T. I HAVE, THEREFORE, REASON TO BELIEVE THAT THE ASSESSEE S INCOME TO THE EXTENT OF RS.1,00,14,927/ - HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS TO S.147 OF THE ACT. IN ORDER TO ASSESS THE INCOME, PROCEEDINGS U/S 147 OF THE ACT ARE INITIATED. ISSUE NOTICE U/S 148 OF THE ACT. SD/ - ITO, WARD 1(2), GHAZIABAD. 3. 5 . THE AO RECORDS THAT NO RETURN OF INCOME WAS FILED BY THE ASSESSEE IN RESPONSE TO NOTICE U/S 148 FOR BOTH THE AYS. IT IS ALSO RECORDED THAT THE ASSESSEE HAS NOT RESPONDED TO NOTICES ISSUED U/S 142(1) OF THE ACT ON 10.12.2009 AND EARLIER DATES. IT IS ONLY IN RESPONSE TO NOTICE U/S 142(1) ISSUED ON 25.1.2010 THAT THE ASSESSEE RESPONDED THROUGH ITS COUNSEL. THE AO COMPLETED THE ASSESSMENT ON 24.12.2010 ASSESSING THE TOTAL INCOM E AT RS. 1,25,06,504/ - FOR THE AY 2005 - 06 AND AT RS.1,14,20,940/ - FOR THE AY 2006 - 07. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 4 4. ON THE ISSUES WHICH WERE DECIDED BY THE FIRST APPELLATE AUTHO RITY AGAINST THE ASSESSEE, THE ASSESSEE FILED APPEALS ON THE FOLLOWING GROUNDS. 1. THAT, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AS WELL AS IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE SO FAR THE SAME IS RELATED TO THE SUSTAINING THE ADDITION OF RS. 1,52,483/ - AND DISMISSING THE SEVERAL G ROUNDS OF APPEAL. 3. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN OBSERVING THAT, UNDER THE NEW SCHEME IF AO HAS MADE ANY MISTAKE OR ERROR THAN HE CAN INVOKE PROVISION OF 147/148 DESPITE OF DISCLOSURE/EXAMINATION OF FACTS .... AND FUR THER OBSERVING THAT, OLD CONCEPT OF 'CHANGE OF OPINION' IS NOT APPLICABLE WHERE NOTICE U/S 148 IS ISSUED WITHIN FOUR YEAR ... , AND UPHOLDING THE VALIDITY OF NOTICE U/S 148 IS ILLEGAL IN THE ABSENCE OF ANY 'REASON TO BELIEVE' WITHOUT ANY APPLICATION OF MIN D. 4. THAT, WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN NOT CONSIDERING THE FACT THAT THE NOTICE U/S 154 ON THE SAME ISSUE REMAINED INDISPOSED ADMITTING THAT THE ISSUE IS 'DEBATABLE' AND HENCE ERRED IN UPHOLDING THE VALIDITY OF NOTICE U/S 148. 5. THAT, WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED ON MERITS IN NOT APPRECIATING THE FACT THAT NEITHER ASSESSEE CLAIMED ANY EXPENDITURE OF THE AMOUNT UNDER .QUESTION NOR THE SAME IS PART OF FINANCIAL STATEMENTS SINCE THE INCEPTION AND SYSTEM OF ACCOUNTING IS NEITHER REJECTED IN THE CURRENT YEAR NOR IN THE EARLIER YEAR AND HENCE PROVISIONS OF SECTION 40(A)(IA) ARE NOT APPLICABLE TO THE PRESEN T CASE. 6. THAT, WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN NOT APPRECIATING THE FACT THAT NEITHER ASSESSEE IS 'CONTRACTOR'/'SUB - CONTRACTOR' NOR HE MADE ANY PAYMENT ON HIS BEHALF AS IN THE EARLIER YEARS HENCE PROVISIONS OF SECTION 194C/40(A)(IA) ARE NOT APPLICABLE TO THE PRESENT CASE. BESIDE HE ALSO ERRED IN NOT CONSIDERING THE FACT THAT APPLICABILITY OF 194C IS ALSO AGAINST PRINCIPLE OF CONSISTENCY. 7. THAT, WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FURTHER ERRED IN NOT APPRECIATING THE FACT THAT PROVISIONS OF SECTION 194C/40(A)(IA) ARE NOT APPLICABLE TO THE PRESENT CASE WHEN THERE IS ADMITTEDLY NO SINGLE PAYMENT EXCEEDING RS. 20,000 1 - AND THERE IS NO CONTINUING ORAL/WRITTEN AGREEMENT FOR ANY QUANTITY/AMOUNT. 8. THAT, WITHOUT PREJUDICE TO ABOVE AND IN ALTERNATIVE , THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN ERRED IN SUSTAINING THE ADDITION OF ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 5 RS. 1,52,4831 - BEING AMOUNT PAYA BLE AT YEAR END WITHOUT APPRECIATING THE FACT THAT THERE WAS NO PAYMENT EXCEEDING RS. 20,000/ - . AS PER THE ABOVE GROUNDS, NOTICE U/S 148 IS BEYOND JURISDICTION AND PROCEEDINGS U/S 147 ARE VOID AB INITIO/ILLEGAL HENCE IT IS HEREBY PRAYED THAT THE ORDER DATED 24.12.2010 FRAMED U/S 147 OF I.T. ACT,1961 MAY KINDLY BE QUASHED. WITHOUT PREJUDICE TO ABOVE BUT ONLY AS AN ALTERNATIVE, THE ADDITIONS OF RS. 1,52,483/ - ARE ARBITRARY AND BAD IN THE LAW HENCE IT IS HEREBY ALTERNATIVELY PRAYED THAT THE ADDITIONS SUS TAINED MAY KINDLY BE QUASHED IN TOTO. 5. ON THE ISSUES WHERE THE FIRST APPELLATE AUTHORITY ADJUDICATED AGAINST THE REVENUE IT FILED APPEALS ON THE FOLLOWING GROUNDS. 1. THE LD. CIT( A) HAS ERRED IN LAW & ON FACTS BY DELETING ADDITION ON ACCOUNT OF FREIGHT EXPENSES DISALLOWED AS PER PROVISIONS OF SECTION 40A(IA) OF THE I T ACT, 1961 WHEN HE HIMSELF HE ACCEPTED THAT NOT DEDUCTING TDS ON THESE PAYMENTS WOULD RESULT INTO DISALLOWANCE OF RS. 33,99,260/ - U/S 40 A(IA). 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETING ADDITION ON ACCOUNT OF FREIGHT EXPENSES DISALLOWED WITHOUT APPRECIATING THAT THE PROVISIONS OF SECTION 194 C (5) PROVISO CLEARLY SAYS THAT IF THE AGGREGATE OF AMOUNTS OF SUMS CREDITED OR PAI D OR LIKELY TO BE CREDITED OR PAID DURING FINANCIAL YEAR EXCEEDS RS. 50,000/ - , THE PERSON RESPONSIBLE FOR PAYING SUCH SUMS SHALL BE LIABLE TO DEDUCT INCOME TAX U/S 194C. 3.THE LD. CIT A) HAS ERRED IN LAW & ON FACTS BY DELETING ADDITION ON ACCOUNT OF FREIG HT EXPENSES DISALLOWED AS PER PROVISIONS OF SECTION 40A(IA) OF THE I T ACT WITHOUT APPRECIATING THAT THE SIMPLE MEANING OF THE WORD 'PAYABLE' IS AMOUNT OF LIABILITY TO BE PAID TO SOMEONE. THUS, IN SECTION 40A(A)(IA), THE WORD 'PAYABLE' IS USED TO MEAN THE AMOUNT WHICH IS REQUIRED TO BE PAID FOR CARRYING OUT ANY WORK DONE DURING THE PREVIOUS YEAR UNDER CONSIDERATION. 4. THE LD. CIT(A) HAS ERRED IN LAW & ON FACTS BY DELETING ADDITION ON ACCOUNT OF FREIGHT EXPENSES DISALLOWED WITHOUT APPRECIATING THAT THE PRO VISIONS OF SECTION 40(A)(IA) OF THE I T ACT APPLY IF THE ASSESSEE FAILS TO DEDUCT TDS WHEN AMOUNT IS PAID/CREDITED TO THE AMOUNT OF A PAYEE. THEREFORE, IF AMOUNT IS STILL PAYABLE, THE QUESTION OF DEDUCTING TDS THEREON AT THAT STAGE DOES NOT ARISE AND CONSE QUENTLY, PROVISIONS OF SECTION 40(A)(IA) OF THE I T ACT WILL NEVER BE ATTRACTED AND WILL BECOME REDUNDANT. 5. THE LD. CIT(A) HAS ERRED IN LAW & ON FACTS BY DELETING ADDITION ON ACCOUNT OF FREIGHT EXPENSES DISALLOWED WITHOUT APPRECIATING THE INTENTION OF T HE LEGISLATURE PROPERLY. 6. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. CIT(A) IS A PERVERSE ORDER AND THEREFORE, THE ORDER OF THE LD. CIT(A) BE CANCELLED OR ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 6 SET ASIDE AND THE ORDER OF THE A.O. MAY BE RESTORED. 7 . THE APPELL ANT CRAVES LEAVE TO MODIFY /AMEND OR ADD ANYONE MORE GROU N DS OF APPEAL. 6. THE LD.COUNSEL FOR THE ASSESSEE MR.AKHILESH KUMAR SUBMITTED THAT THE REOPENING IS BAD IN LAW FOR THE FOLLOWING REASONS. (A) A NOTICE U/S 154 DT. 12.1.2009 WAS ISSUED FOR DISALLOWING THE EXPENDITURE WHILE APPLYING S.40 (A) (IA) AND THE ASSESSEE REPLIED TO THE SAID NOTICE ON 20.1.2013 AND WHILE THE PROCEEDINGS WERE PENDING, A NOTICE U/S 148 WAS ISSUED ON 12.5.2009 WHICH IS BAD IN LAW. (B) THE REASONS RECORDED ARE ON THE BASIS OF A LETTER F ILED BY THE ASSESSEE ON 15.11.2007 DURING THE COURSE OF ORIGINAL PROCEEDINGS ON THE SAME ISSUE. HENCE THE REOPENING IS ON A CHANGE OF OPINION WHICH IS BAD IN LAW. (C) THE AO DID NOT PROCEED WITH PASSING OF AN ORDER U/S 154, AS HE BELIEVED THAT THE ISSUE IS DE BATABLE AND UNDER SUCH CIRCUMSTANCES THERE CANNOT BE SATISFACTION THAT INCOME HAS ESCAPED ASSESSMENT WARRANTING REOPENING. (D) AS THERE IS NO EXPENDITURE INCURRED OR CLAIMED BY THE ASSESSEE THE QUESTION OF DISALLOWING THE SAME U/S 40(A) (IA ) DOES NOT ARISE. AND HENCE THE QUESTION OF ESCAPEMENT OF INCOME WARRANTING REOPENING DOES NOT ARISE. (E) NO NEW MATERIAL OR INFORMATION CAME TO THE POSSESSION OF THE AO WARRANTING THE REOPENING. 6.1. ON MERITS HE SUBMITTED THAT: (I) S.194C IS NOT APPLICABLE AND HENCE DIS ALLOWANCE U/S 40(A)(IA) IS BAD IN LAW FOR THE REASON THAT (A) THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE OF THE SAID AMOUNT AND HENCE THERE CAN NEVER BE A DISALLOWANCE; (B) THE ASSESSEE HAS NEITHER RECEIVED NOR PAID AMOUNTS WHICH WERE DIRECTL Y PAID BY THE PRINCIPALS TO THE LORRY OPERATORS. HENCE THE QUESTION OF DEDUCTION OF TAX AT SOURCE DOES NOT ARISE ON THESE AMOUNTS. ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 7 (II) THE ASSESSEE IS ONLY A COMMISSION AGENT AND NOT A CONTRACTOR AND HE HAS ONLY ACTED AS A CHANNEL FOR PAYMENTS MADE BY THE PRIN CIPALS TO LORRY OWNERS. (III) TDS HAS BEEN DEDUCTED IN THE NAME OF THE ASSESSEE BY THE PRINCIPALS IN A ROUTINE MANNER. 6.2. THE LD.D.R. SMT.PARWINDER KAUR ON THE OTHER HAND OPPOSED THE CONTENTIONS OF THE ASSESSEE S COUNSEL AND SUBMITTED THAT THE REOPENING IS WITHIN 4 YEARS AND UNDER SUCH CIRCUMSTANCES THE PROVISO TO S.147 DOES NOT APPLY. SHE CONTENDS THAT INFORMATION HAS COME TO THE POSSESSION OF THE AO THAT INCOME HAS ESCAPED ASSESSMENT DUE TO THE FACT THAT THERE IS A VARIATION IN GROSS RECEIPTS FROM FREIGH T CLAIMED AS PER TDS CERTIFICATES AND THE GROSS RECEIPTS DISCLOSED BY THE ASSESSEE CLEARLY POINTING OUT THE ESCAPEMENT OF INCOME. HE RELIED ON THE ORDER OF THE AO AS WELL AS THE LD.CIT(A) AND ARGUED THAT THE ASSESSEE CANNOT TAKE SHELTER OF HAVING DISCLOS ED ALL THE MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT AS THE REOPENING IS WITHIN A PERIOD OF 4 YEARS. 6.3. ON MERITS SHE RELIED ON THE ORDER OF THE AO. SHE CONTENDED THAT TAX WAS DEDUCTED AT SOURCE FROM THE PAYMENTS RECEIVED BY THE ASSESSEE FROM THE PRINCIPALS AND ALSO FROM PAYMENTS MADE BY THE PRINCIPALS DIRECTLY TO THE LORRY OWNERS AND SUBMITTED THAT THIS PROVES THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX O N THE MONEY THAT GOES AS PAYMENT TO THE LORRY OWNERS. 6.4. ON THE REVENUE S APPEAL SHE SUBMITTED THAT THE LD.CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE U/S 40(A)(IA) AS THE AGGREGATE OF AMOUNTS OF SUMS CREDITED OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE FINANCIAL YEAR EXCEEDED RS.50,000/ - TO A SINGLE PERSON. SHE ALSO SUBM ITTED THAT THE LD.CIT(A) HAS WRONGLY RELIED ON THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF MERILYN SHIPPING AND TRANSPORT S VS. ACIT (2012) 136 ITD 23 0 (VISAKHAPATNAM)(SB) AND RELIED ON THE JUDGEMENT OF HON BLE CALCUTTA HIGH COURT IN TH E CASE OF CIT VS. CRESCENT EXPORT SYNDICATE (CAL.) (2013) 33 TAXMAN.COM 250 (CAL.) ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 8 7. IN REPLY THE LD.COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD.CIT(A) AS WELL AS ON THE JUDGEMENT OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. VECTOR SHIPPING S ERVICES (P) LTD. (2013) 38 TAXMANN.COM 77 (ALLAHABAD) 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE HOLD AS FOLLOWS. 9. FOR THE AY 2005 - 06 THE AO RAISED CERTAIN QUERIES. THE ASSESSEE REPLIED ON 16.7.2007 INFORMING THE AO THAT IT IS ENGAGED IN TRANSPORT BUSINESS AS A TRANSPORT COMMISSION AGENT. ON OTHER DETAILS ASSESSEE REPLIED ON 5.11.2007 GIVING A COMPARISON OF GROSS REC EIPTS, OTHER INCOME AND EXPENDITURE UNDER VARIOUS HEADS FOR FY 200 2 - 03, 200 3 - 04 AND 2004 - 05 . ON 15.11.2007 THE ASSESSEE GAVE DETAILED REPLY . 9. 1 . LATER THE AO ISSUED A NOTICE U/S 154 ON 12.1.2009 PROPOSING RECTIFICATION OF A MISTAKE APPARENT ON RECORD. THE MISTAKE PROPOSED TO BE RECTIFIED, AS RECORDED IN THE NOTICE IS EXTRACTED FOR READY REFERENCE. SINCE NO TDS HAS BEEN MADE ON THE FREIGHT PAID AM OUNTING TO RS.1,21,77,664/ - , THE ENTIRE EXPENDITURE OF RS.1,21,77,664/ - IS PROPOSED TO BE DISALLOWED AND ADDED TO THE INCOME IN ACCORDANCE WITH PROVISIONS OF S.40(A)(IA) OF THE ACT. AS SUCH THE ASSESSMENT IS PROPOSED TO BE RECTIFIED U/S 154 OF THE ACT. 10. ON THESE FACTS THE QUESTION IS WHETHER THE REOPENING IS BAD IN LAW. IT IS WELL SETTLED THAT THE REQUIREMENTS PRESCRIBED UNDER THE ACT FOR INVOLVING THE PROVISION OF S.147 HAVE TO BE FULFILLED. HON BLE SUPREME COURT IN THE CASE OF CIT VS. RAJESH JHAVER I STOCK BROKERS P.LTD. (2007) 291 ITR 500 (SC) HAS HELD AS FOLLOWS. SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSM ENT. THE WORD REASON IN THE ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 9 PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME H AD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFICER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUB LIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANGANESE ORE CO. LTD. V. ITO [1991] 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE , BUT NOT THE ESTABLISHED FACT OF E SCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCE RN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION (SEE ITO V. SELECTED DALURBAND COAL CO. P. LTD. [1996] 217 ITR 597 (SC) ; RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC). 10.1. IN THE CASE ON HAND, A PERUSAL OF THE PROFIT AND LOSS A/C DEMONSTRATES THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE ON PAYMENTS MADE TO LORRY OWNERS, NOR HAS HE SHOWN ANY INCOME. IN FACT FOR AY 2005 - 06 THE TOTAL GROSS RECEIPTS DIS CLOSED IS RS.9,17,300/ - CONSISTING OF FREIGHT INCOME OF RS.7,44,555/ - AND COMMISSION INCOME OF RS.1,62,745/ - ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 10 BESIDES INTEREST ON SECURITIES OF RS.10,000/ - . THERE IS NO EXPENDITURE CLAIMED ON ACCOUNT OF FREIGHT CHARGES PAID. SIMILARLY FOR THE AY 2006 - 07 T HE ASSESSEE HAS DISCLOSED TOTAL GROSS RECEIPTS OF RS.10,77,402/ - CONSISTING OF BOOKING/COMMISSION INCOME OF RS.1,78,735/ - AND FREIGHT INCOME OF RS.8,98,667/ - . IN THIS CASE ALSO, THERE IS NO CLAIM OF EXPENDITURE ON ACCOUNT OF FREIGHT PAYMENT. 10.2. IN THE REASONS RECORDED, BASED ON TDS CERTIFICATES, THE AO CAME TO A CONCLUSION THAT THE ASSESSEE HAS NOT ACCOUNTED FOR CERTAIN RECEIPTS IN THE FORM OF FREIGHT CHARGES. IN OTHER WORDS THE ALLEGATION IS UNDER STATEMENT OF THE RECEIPTS. IN OUR VIEW THE RE OPENING OF ASSESSMENT IS VALID FOR THE REASON THAT THE AO HAD MATERIAL TO COME TO A CONCLUSION THAT THE ASSESSEE HAS UNDER STATED ITS RECEIPTS. DURING THE PROCEEDINGS U/S 143(3), NO DIRECT QUESTION WAS ASKED ON THE ISSUE OF UNDERSTATEMENT OF TURNOVER OR ON THE ISSUE OF NON RECONCILIATION OF TURNOVER DISCLOSED WITH THE T.D.S. CERTIFICATES. THE ASSESSEE HAS ALSO NOT FURNISHED ANY EXPLANATION TO THE AO DURING THE ORIGINAL ASSESSMENT PROCEEDINGS ON THESE MATTERS AS THERE IS NO OCCASION FOR DOING THE SAME. U NDER THE CIRCUMSTANCES THE FULL BENCH DECISION OF HON BLE DELHI HIGH COURT IN CIT VS. USHA INTERNATIONAL LTD. REPORTED IN 348 ITR 485 APPLIES AND IT CANNOT BE HELD THAT THERE IS A PRESUMPTION OF APPLICATION OF MIND ON THIS ISSUE WHEN THE ORIGINAL ASSESSME NT ORDER WAS PASSED U/S 143(3) OF THE ACT. 10.3. COMING TO THE ARGUMENT THAT THE INFORMATION OF THE AUDIT PARTY CANNOT CONSTITUTE TANGIBLE MATERIAL, WE FIND FROM THE REASONS THAT THE AO HAS INDEPENDENT LY COME TO SUCH A CONCLUSION AFTER APPLICATION OF HI S MIND. THE FACT THAT THE MATERIAL IS GATHERED FROM AN AUDIT PARTY, DOES NOT LEAD TO A CONCLUSION THAT THE REOPENING IS BAD IN LAW. IT IS ONLY WHEN THE AO DOES NOT APPLY HIS MIND AND EXERCISE S JURISDICTION U/S 147 BASED ON AN OPINION OF THE AUDIT PARTY , THAT THE REOPENING GETS VITIATED. 10.4. PENDING OR DISPOSAL OF PROCEEDINGS U/S 154 , IN OUR VIEW DOES NOT RESULT IN THE REOPENING PROCEEDINGS BECOMING ILLEGAL. ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 11 11. IN THE RESULT THE REOPENING OF THE ASSESSMENT IS UPHELD. 12. WE NOW TAKE UP THE ISSUE W HETHER THE PROVISIONS OF S.40(A)(IA) ARE APPLICABLE TO THE PRESENT CASE. 13. THE ASSESSEE HAS EXPLAINED THE NATURE OF BUSINESS BEFORE THE AO AS WELL AS BEFORE THE LD.CIT(A). THE FACT THAT THE ASSESSEE IS A TRANSPORT COMMISSION AGENT WHO ARRANGES GOODS C ARRIERS FOR VARIOUS PARTIES THROUGH TRUCK OPERATORS/DRIVERS IS NOT DISPUTED BY THE REVENUE. THE PARTIES TO WHOM THE ASSESSEE ARRANGES TRUCKS, MAKE PART PAYMENT TO THE OPERATORS/DRIVERS AS ADVANCE AND THE BALANCE AMOUNT IS ROUTED THROUGH THE ASSESSEE. WHA T THE ASSESSEE GETS IS ONLY COMMISSION. UNDER THESE CIRCUMSTANCES, TO HOLD THAT WHATEVER AMOUNT PASSES THROUGH THE ASSESSEE, IS ITS TURNOVER, IS AGAINST THE FACTS OF THE CASE. THE AMOUNT IS RECEIVED BY THE ASSESSEE AS A TRUST EE . THE ASSESSEE IS ONLY A P ASS THROUGH ENTITY. THE AMOUNT IS RECEIVED ON CAPITAL ACCOUNT AND PAYMENT ALSO IS MADE ON CAPITAL ACCOUNT. THE ASSESSEE NEVER HAD THE RIGHT TO RECEIVE THIS AMOUNT AS ITS INCOME. MERELY BECAUSE TAX HAS BEEN DEDUCTED AT SOURCE ON THE AMOUNTS RECEIVED BY T HE ASSESSEE, IT DOES NOT LEAD TO AN AUTOMATIC CONCLUSION THAT THE ENTIRE AMOUNT IS THE INCOME OF THE ASSESSEE. THE AMOUNT IS NEVER CLAIMED BY THE ASSESSEE AS ITS INCOME NOR WAS PAID BY THE TRUCK OWNERS AS AN EXPENSE . THE AMOUNT IN QUESTION IS THE INCOM E OF THE LORRY OWNERS. 13.1. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT IN QUESTION CANNOT BE TREATED AS GROSS RECEIPTS OF THE ASSESSEE ON REVENUE ACCOUNT. AS THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE ON ACCOUNT OF FREIGHT PAYMENTS THE QUESTION OF DISALLOWANCE U/S 40(A)(IA) DOES NOT ARISE. 14. IN THE RESULT BOTH THE APPEAL S OF THE ASSESSEE ARE ALLOWED. ITA NOS. 5957 AND 5958/DEL/12 AY: 2005 - 06 AND 2006 - 07 ITA NOS. 5637 AND 5638/DEL/2012 AY: 2005 - 06 AND 2006 - 07 DELHI U.P.GOLDEN TRANSPORT SERVICES, GHAZIABAD 12 15. AS WE HAVE ALLOWED THE APPEALS OF THE ASSESSEE ON THE GROUND THAT THE AMOUNTS IN QUESTION ARE NOT ASSESSEE S INCOME, THE GROUNDS RAISED BY THE REVENUE ON THE RELIEF GRANTED BY THE LD.CIT(A) WOULD BECOME INFRUCTUOUS. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMISSED AS SUCH. 16. IN THE RESULT BOTH THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AND BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER,2014. SD/ - SD/ - ( I.C. SUDHIR ) (J.SU DHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 31 ST OCTOBER , ,2014 *MANGA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5.DR; 6.GUARD FILE BY ORDER ASST. REGISTRAR