Evershine Customs (C&F) Pvt. Ltd., Kolkata V. ITO, Ward - 5(3),Kolkata, Kolkata

ITA 654/KOL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8087 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 05-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D J MEHTA JCITSR
• Assessee Lawyers: SAMEER SHARMA
• Keywords: Reassessment proceedings
• Section: 143(3)

Judgement Text

I.T.A. NO.654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 EVERSHINE CUSTOMS (C&F) PVT. LTD ,..APPELLANT 4, N.S. ROAD, 1 ST FLOOR, KOLKATA-700 001 [PAN: AABCE 1953 G] -VS.- INCOME TAX OFFICER,.,....RESPONDENT, WARD-5(3), KOLKATA, AAYAKAR BHAWAN, KOLKATA KOLKATA-700 020 APPEARANCES BY: SAMEER SHARMA, FCA, FOR THE APPELLANT D.J. MEHTA, JCIT(SR. DR), FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 17, 2012 DATE OF PRONOUNCING THE ORDER : OCTOBER 1 9, 2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF LEARNED COMMISSIONER OF INC OME TAX(APPEALS)S ORDER DATED 12 TH JANUARY, 2010, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE I NCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2004-05. I.T.A. NO.654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 PAGE 2 OF 5 2. GROUND NOS. 1, 4 & 5 ARE GENERAL IN NATURE AND D O NOT REQUIRE ANY SPECIFIC ADJUDICATION. ACCORDINGLY, THESE THREE GRO UNDS ARE DISMISSED IN LIMINE. 3. IN GROUND NOS. 2 & 3, THE ASSESSEE HAS RAISED TH E FOLLOWING GRIEVANCES WHICH ARE SOMEWHAT INTERCONNECTED AND WI LL BE TAKEN UP TOGETHER :- (2) FOR THAT THE LD. A.O. ERRED IN ADDING BACK OF RS.10,87,802/- ON ACCOUNT OF DIFFERENCE BETWEEN AMO UNT ON WHICH TDS DEDUCTED OF RS.27,52,235/- AND THE AMOUNT WHICH WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT, I.E. RS.16,64,433/- AS SERVICE CHARGES. THE AMOUNT ON WH ICH TDS HAS BEEN DEDUCTED IS THE BILLED AMOUNT WHICH IN CLUDES REIMBURSEMENT OF CUSTOMS DUTY, PORT CHARGES, ETC. A ND OTHER EXPENSES INCURRED ON BEHALF OF THE PARTIES. THE PAR TIES DEDUCT TDS ON GROSS BILL WHEREAS THE NET SERVICE CH ARGES IS LESS THAN THE GROSS BILL. HENCE, THERE LIES THE DIF FERENCE BETWEEN THE FIGURES. THIS IS THE VERY NORMAL PROCES S IN THE BUSINESS OF CUSTOMS HOUSE AGENTS. (3) FOR THAT THE LD. AO ERRED IN ADDING BACK OF RS.8,33,360/- ON ACCOUNT OF ESTIMATION ON THE GROUN D OF NON VERIFICATION OF EXPENSES INCURRED DURING THE YEAR. WE ARE IN THE PROCESS OF PREPARATION OF DETAILED BREAK UP OF EXPENSES AS REQUIRED BY A SHOW-CAUSE NOTICE DT. 19.12.2006 A ND IN THE MEAN TIME FIRE BROKE OUT ON 20.12.2006 AND DESTROYE D EVERYTHING INCLUDING THE BOOKS OF ACCOUNTS AND RECO RDS, SINCE SE HAVE NOT GOT SUFFICIENT TIME TO PREPARE AN D PRODUCE THE SAME TO THE LD. AO. NOW FOR THIS WE REQUIRE TIM E RECONSTRUCT THE PRESENTABLE RECORDS AFTER ACQUIRING NECESSARY INFORMATION FROM VARIOUS SOURCES. 4. BRIEFLY STATED, RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CLEARING AND FORWARDING AGENCY, AND CUSTOM HOUSE AGENCY. THE ASSESSEE RECEIVES SERVICE CHARGE S FOR THESE SERVICES RENDERED TO IMPORTERS AND EXPORTS, AND IT IS THESE SERVICE CHARGES, I.T.A. NO.654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 PAGE 3 OF 5 WHICH CONSTITUTE ASSESSEES INCOME. TO THIS EXTENT, THERE WAS NO DISPUTE BEFORE THE AUTHORITIES BELOW. HOWEVER, DURI NG THE COURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOT ICED THAT WHILE PROFIT AND LOSS ACCOUNT DISCLOSED SERVICE CHARGES R ECEIPT OF ONLY RS.16,54,433/-, THE ACTUAL SERVICE CHARGES RECEIVED BY THE ASSESSEE, AS PER TDS CERTIFICATES FURNISHED BY THE ASSESSEE ALON GWITH INCOME TAX RETURN, AGGREGATED TO RS.27,52,235/-. IN RESPONSE T O ASSESSING OFFICERS REQUISITION TO EXPLAIN THIS, WHAT HE TERMED AS, AN OMALY, A RECONCILIATION STATEMENT WAS SUBMITTED BY THE ASSES SEE. IT WAS EXPLAINED THAT THE AMOUNT OF DIFFERENCE REPRESENTED REIMBURSEMENT OF EXPENDITURE, AND THAT WHILE REIMBURSEMENT OF EXPENS ES IS NOT CREDITED TO INCOME UNDER THE HEAD SERVICE CHARGES, IN SOME CASES THE CLIENT HAS DEDUCTED TAX AT SOURCE FROM REIMBURSEMENT COMPONENT AS WELL. THE ASSESSEE WAS ALSO CALLED UPON TO FILE COMPLETE DETA ILS IN RESPECT OF REIMBURSEMENT OF EXPENDITURE COMPONENT AND EXPENSES INCURRED IN CONNECTION WITH THE SAME. AS THIS REQUISITION WAS N OT SATISFACTORILY COMPLIED WITH, THE ASSESSING OFFICER RESORTED TO TW O ADDITION- FIRST, IN RESPECT OF DIFFERENCE BETWEEN SERVICE CHARGES SHOWN IN THE PROFIT AND LOSS ACCOUNT (I.E. RS.16,54,433/-) AND SERVICE CHAR GES AS PER TDS CERTIFICATES (I.E. RS.27,52,235/-) BEING ADDED AS U NDISCLOSED SERVICE CHARGES RECEIPT, WHICH WORKED OUT TO RS.10,87,802/- ; AND SECOND, IN RESPECT OF AD HOC DISALLOWANCE @ 2% (I.E. RS.8,33,3 60/-) AS COMPLETE DETAILS OF EXPENDITURE FOR REIMBURSEMENTS RECEIVED WERE NOT FURNISHED BY THE ASSESSEE. AGGRIEVED, ASSESSEE CARRIED THE MA TTER IN APPEAL BEFORE THE CIT(APPEALS) BUT WITHOUT ANY SUCCESS. THE ASSES SEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. I.T.A. NO.654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 PAGE 4 OF 5 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD, AND DULY CONSIDERED FACTUAL MATRIX OF THE C ASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT SO FAR AS THE REASONS OF VARIATIONS BETWEEN SERVICE CHARGES AS PER PROFIT AND LOSS ACCOUNT AND SERVICE CHARGES AS PER TDS CERTIFICATES IS CONCERNED, IT CAN INDEED HAPPEN THA T, AS A MEASURE OF ABUNDANT CAUTION, A CLIENT MAY EVEN DEDUCT TDS FROM REIMBURSEMENT PAYMENT WHICH, STRICTLY SPEAKING, IS NOT OF AN INCO ME NATURE AND WILL, THEREFORE, NOT BE CREDITED TO THE PROFIT AND LOSS A CCOUNT. IT IS NOT THE LAW AND IT CANNOT BE THE LAW THAT WHENEVER PERSON M AKING PAYMENT DEDUCTS AT SOURCE FROM THE SAME, IT HAS TO BE NECES SARILY TREATED AS OF INCOME NATURE BY THE RECIPIENT. HOWEVER, THE ONUS I S ON THE ASSESSEE TO DEMONSTRATE THAT THE PAYMENT AS PER TDS CERTIFICATE DID INCLUDE REIMBURSEMENT COMPONENT SEPARATELY SHOWN SO IN THE BILL. IN OTHER WORDS, IT IS FOR THE ASSESSEE TO PREPARE DETAILED R ECONCILIATION, DULY SUPPORTED BY COPIES OF RELEVANT BILLS, SHOWN THE RE IMBURSEMENT COMPONENT SEPARATELY IN SUCH BILLS, AND DEMONSTRATE THAT THE IMPUGNED DIFFERENCE IS ON ACCOUNT OF TAXES HAVING BEEN DEDUC TED AT SOURCE IN RESPECT OF REIMBURSEMENT COMPONENT AS WELL. LEARNED REPRESENTATIVES FAIRLY AGREED THAT THE MATTER CAN BE RESTORED TO TH E FILE OF THE ASSESSING OFFICER FOR THIS LIMITED PURPOSE, EVEN AS LEARNED D EPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED THAT WHAT IS TERME D AS REIMBURSEMENT OF EXPENSES IS NOT A REIMBURSEMENT SI MPLICITOR AND A SIGNIFICANT PART OF THIS BILLING IS ACTUALLY INCOME OF THE ASSESSEE. THAT ASPECT OF THE MATTER, HOWEVER, IS NOT REALLY RELEVA NT FOR US BECAUSE THE ASSESSING OFFICER HAS ALREADY MADE AN AD HOC DISALLOWANCE @ 2% OF TOTAL EXPENSES, AND, IN THE ABSENCE OF COMPLETE DET AILS OF SUCH I.T.A. NO.654/ KOL. / 2010 ASSESSMENT YEAR : 2004-05 PAGE 5 OF 5 EXPENSES, WE ARE CONFIRMING THE SAID DISALLOWANCE. THE INCOME COMPONENT FROM THE REIMBURSEMENT OF EXPENSES, HOWSO EVER TOKEN ADDITION AS IT MAY BE, HAS BEEN TAXED SEPARATELY AN D WE CANNOT INCREASE SUCH AN ADDITION. THE CASE OF THE REVENUE CANNOT BE IMPROVED AT THIS STAGE. IN VIEWED OF THESE DISCUSSIONS, WHILE WE UPH OLD THE ASSESSEES GRIEVANCE, AS ARTICULATED IN SECOND GROUND OF APPEA L, IN PRINCIPLE BUT REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFIC ER FOR FACTUAL VERIFICATION, IN THE LIGHT OF ABOVE OBSERVATION, WE REJECT ASSESSEES GRIEVANCE IN THIRD GROUND OF APPEAL. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER, 2012. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 19 TH DAY OF OCTOBER, 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.