ACIT, CIR-1, BURDWAN, Burdwan V. Sri Gobinda Gupta, Burdwan

ITA 684/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0904 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PREM NARAYAN KHANDELWAL
• Section: 143(3); 194C

Judgement Text

1 ITA NO. 684/KOL/2016 ASSESSMENT YEAR: 2011-2012 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 684/KOL./2016 ASSESSMENT YEAR: 2011-2012 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...............APPELLANT CIRCLE-1, BURDWAN, AAYAKAR BHAWAN, COURT COMPOUND, BURDWAN-713 101 -VS.- SRI GOBINDA GUPTA,................................. ........................RESPONDENT BOREHAT, NUTANGANJ, DIST. BURDWAN-713 101 [PAN: AHBPG 7660 A] APPEARANCES BY: SHRI PREM NARAYAN KHANDELWAL, FCA, FOR THE ASSESSEE SHRI ARINDAM BHATTACHARJEE, ADDL. CIT, D.R., FOR TH E DEPARTMENT DATE OF CONCLUDING THE HEARING : DECEMBER 04, 2017 DATE OF PRONOUNCING THE ORDER : DECEMBER 06, 2017 O R D E R PER SHRI P.M. JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), BURDWAN DATED 20.01.2016 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE DISALLOWANCE OF RS.32,06,445/- AND RS.3,58,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I A) ON ACCOUNT OF PAYMENT OF CARRIAGE INWARD CHARGES AND TRANSPORT CH ARGES RESPECTIVELY WITHOUT DEDUCTION OF TAX AT SOURCE. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF WHOLESALE TRADING OF PULSES AND OTH ER CEREALS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY HIM ON 29.09.2011 DECLARING TOTAL INCOME OF RS.11,91,052/- . IN THE PROFIT & LOSS A/C FILED ALONG WITH THE SAID RETURN, A SUM OF RS.4 2,29,997/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF CARRIAGE INWARD EXPEN SES. DURING THE 2 ITA NO. 684/KOL/2016 ASSESSMENT YEAR: 2011-2012 COURSE OF ASSESSMENT PROCEEDINGS, THE SAID EXPENSES WERE VERIFIED BY THE ASSESSING OFFICER AND ON SUCH VERIFICATION, HE FOUN D THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE FROM THE PAYMENTS MA DE ON ACCOUNT OF CARRIAGE INWARD CHARGES AND TRANSPORT CHARGES AGGRE GATING TO RS.35,64,445/- AS PER THE PROVISIONS OF SECTION 194 C. SINCE THE ASSESSEE HAD NOT COMPLIED WITH THE SAID REQUIREMENT, THE ASS ESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND MAD E A DISALLOWANCE OF RS.35,64,445/- IN THE ASSESSMENT COMPLETED UNDER SE CTION 143(3) VIDE AN ORDER DATED 24.02.2014. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD . CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDE R SECTION 40(A)(IA) FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORD ER:- I HAVE CAREFULLY EXAMINED .ALL THE MATERIAL ON R ECORD AND THE FACTS AND CIRCUMSTANCE SURROUNDING THE INSTANT CASE . I HAVE ALSO EXAMINED THE BOOKS OF ACCOUNT, BILLS/VOUCHERS PRODU CED BEFORE ME. I FIND MERIT IN THE SUBMISSIONS OF THE APPELLAN T. IT IS CLEAR FROM EVEN A PLAIN READING OF SECTION 194C OF THE AC T THAT FOR THE OPERATION OF THIS SECTION, THERE IS A PREREQUISITE OF A CONTRACTUAL RELATIONSHIP BETWEEN THE PAYER AND THE PAYEE. THIS CONTRACT CAN HAVE MANY FORMS, INCLUDING AN ORAL OR EVEN AN IMPLI ED ONE. BUT ONE INGREDIENT THAT IS ABSOLUTELY IMPERATIVE FOR TH E APPLICATION OF THIS SECTION IS THE EXISTENCE OF A CONTRACTUAL R ELATIONSHIP BETWEEN THE TWO INVOLVED PARTIES. IF THIS INGREDIEN T IS ABSENT, THEN THE SAID SECTION CANNOT BE INVOKED. IT IS ANOTHER SETTLED PRINCIPLE OF LAW THAT THE PERSON WHO ASSERTS A PROPOSITION HAS TO BE THE ONE TO PROV E IT. SO, IF AN AO BELIEVES THAT A PARTICULAR SECTION IS TO BE INVO KED BECAUSE IT IS APPLICABLE IN ANY CASE, THEN THE ONUS OF PROVING THE APPLICABILITY OF THAT SECTION LIES WITH THE AO. THI S IS NOT THE CASE OF AN ASSESSEE HAVING TO PROVE THE ELEMENTS OF HIS RETURN OF INCOME AND HIS BALANCE SHEETS WHERE THE ONUS LIES A T THE DOOR OF THE ASSESSEE WHO HAS MADE THESE ASSERTIONS. IN CASE , THE AO DISAGREES WITH ANY OF THE ELEMENTS OF THE RETURNED INCOME IN THE SENSE OF THE APPLICABILITY, IN THE OPINION OF THE A O, OF ANY PARTICULAR SECTION OR SECTIONS OF THE ACT, THEN THE RESPONSIBILITY OF PROVING THAT THE SAID SECTION IS APPLICABLE BEYO ND DOUBT, LIES WITH THE AO. 3 ITA NO. 684/KOL/2016 ASSESSMENT YEAR: 2011-2012 IN THE INSTANT CASE, THE APPELLANT HAS SUBMITTED A SET OF BOOKS OF ACCOUNT ALONG WITH SUPPORTING MATERIAL TO SHOW THAT THERE DID NOT EXIST A NECESSITY FOR THE APPLICATION OF SECTION 194C OF THE ACT. THE AO HAS DISAGREED WITH IT. THEREFORE , NOW THE ONUS HAS SHIFTED TO THE AO TO PROVE THAT SECTION 194C WA S INDEED APPLICABLE IN THE APPELLANT'S CASE. THIS CAN BE DON E BY ESTABLISHING A CONTRACTUAL RELATIONSHIP BETWEEN THE APPELLANT AND THE TRANSPORTERS. THIS HAS HOWEVER NOT BEEN DON E. THE AO HAS NOT ESTABLISHED THAT THE TRANSPORTERS WERE WORK ING AT THE BEHEST OF THE APPELLANT. HE HAS NOT ESTABLISHED THA T IT WAS THE APPELLANT WHO WAS MAKING THE PAYMENTS TO THE TRANSP ORTERS AS PART OF AN AGREEMENT - EXPLICIT OR IMPLIED - BETWEE N THE APPELLANT AND THE TRANSPORTERS. HE HAS NOT ESTABLIS HED THAT THE ACCOUNTING PRACTICE OUTLINED BY THE APPELLANT WHICH EXPLAINED, CONSISTENTLY THAT THE TRANSPORTATION COSTS WERE PAR T OF THE PURCHASE PRICE AND THAT THE ACCOUNTING ENTRY OF TRA NSPORTERS WAS ONLY A MATTER OF BUSINESS EXPEDIENCY AND THAT N O DIRECT RELATIONSHIP EXISTED BETWEEN THE TRANSPORTER AND TH E APPELLANT - WAS WRONG OR FROM WHICH INCOME OF THE APPELLANT COU LD NOT BE DETERMINED. THUS, THE BASIC INGREDIENTS OF SECTION 194C HAD NOT BEEN ESTABLISHED AND THEREFORE THERE WAS NO QUESTIO N OF APPLYING THE REST OF THE PROVISIONS OF THE SECTION. THIS IS FROM THE POINT OF VIEW OF THE AO. NOW, COMING TO THE EXPLANATION OFFERED BY THE APPELLANT HIMSELF. HE HAS POINTED OUT THAT THE TRAN SPORTERS HAD TO BE APPOINTED BY THE SELLERS THEMSELVES. THIS HOL DS A CERTAIN REASONABLENESS AND THEREFORE CREDIBILITY IN THAT SI NCE THERE ARE SEVERAL SELLERS IN FAR FLUNG AREAS WHO WOULD BE SEN DING THEIR GOODS, DEFINITELY AT TIMES OF SELLING OF SUCH COMMO DITIES - SINCE THESE SALES ARE SEASONAL - WHEN THERE WOULD BE RUSH BY ALL PURCHASERS TO ACQUIRE THESE COMMODITIES - ALL AT TH E SAME TIME, IT WOULD BE REASONABLE TO EXPECT THAT THE SELLER WO ULD BE THE ONES WHO WOULD PICK UP ANY TRANSPORTER THEN AVAILAB LE TO DISPATCH THE GOODS. THE APPELLANT, SINCE HE IS GETT ING THESE GOODS FROM SEVERAL SELLERS, CANNOT BE EXPECTED TO HAVE CO NTRACTS WITH TRANSPORTERS IN ALL THE CASES. THE PREPONDERANCE OF PROBABILITY IS TOWARDS THE SELLERS APPOINTING THE TRANSPORTERS. TH IS HAS ALSO BEEN BORNE OUT BY THE FACT THAT IN SOME CASES, IT W AS FOUND BY THE AO HIMSELF THAT THE APPELLANT HAD SENT ADVANCE FREI GHT CHARGES TO SOME OF THE SELLERS OF GOODS. IF IT WAS THE APPE LLANT WHO WOULD HAVE BEEN THE ONE WHO HAD CONTRACTED THE TRANSPORTE R, THESE ADVANCES WOULD HAVE BEEN SENT TO THE TRANSPORTER AN D NOT THE SELLER OF THE GOODS. THESE INGREDIENTS WERE OVERLOO KED BY THE AO WHILE PASSING HIS ORDER. IN THE CASE OF OTHER TRANS PORTERS ALSO, THE SAME BUSINESS MODEL WOULD APPLY AS THIS IS THE ONLY LOGICAL AND REASONABLE ONE. IT IS FOUND THAT THE APPELLANT WAS IN RECEIPT OF GOODS FROM TRANSPORTERS WHO HAD BROUGHT THESE GO ODS AT THE BEHEST OF THE SELLERS AND THE APPELLANT PAID THE EN TIRE AMOUNT AS PURCHASE PRICE OF THE GOODS. LATER, THE APPELLANT M ADE APPROPRIATE ENTRIES IN THE BOOKS FOR HIS OWN BUSINE SS PURPOSES, AND THESE ENTRIES WERE MADE CONSISTENTLY - THE BOOK S OF THE APPELLANT HAVE BEEN DULY AUDITED. THE RATIOS OF THE DECISIONS 4 ITA NO. 684/KOL/2016 ASSESSMENT YEAR: 2011-2012 RELIED UPON BY THE APPELLANT ALSO POINT TOWARDS THE SAME PROPOSITION. IN VIEW OF THE ABOVE DISCUSSION AND THE FACT THA T NO CONTRACTUAL RELATIONSHIP EXISTED BETWEEN THE APPELL ANT AND THE TRANSPORTERS, AND RESPECTFULLY ABIDING BY THE RATIO S OF THE DECISIONS CITED BY THE APPELLANT, IT IS HELD THAT S ECTION 194C WAS NOT APPLICABLE IN THIS CASE. THE GROUND THEREFORE I S ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. D.R. HAS SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40(A)(IA) ON ACCOUNT OF TRANSPORT AND CARRIAGE INWARD CHARGES IS DELETED BY THE LD. CIT(APPEALS) ON THE GROUND THAT THERE WAS A FAILURE OF THE ASSESSING OFFICER TO DISLODGE THE CASE MADE OUT BY THE ASSESS EE THAT THE PROVISIONS OF SECTION 194C WERE NOT APPLICABLE IN HIS CASE. HE HAS CONTENDED THAT IF AT ALL THERE WAS SUCH FAILURE ON THE PART OF THE AS SESSING OFFICER, THE LD. CIT(APPEALS) SHOULD HAVE GIVEN AN OPPORTUNITY TO TH E ASSESSING OFFICER TO ESTABLISH THAT THERE WAS A CONTRACTUAL RELATIONSHIP BETWEEN THE ASSESSEE AND THE TRANSPORTERS ATTRACTING THE PROVISIONS OF S ECTION 194C. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. D.R. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, A SPECIFIC CONTENTION WAS RAISED ON BEHALF OF THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING TH E COURSE OF ASSESSMENT PROCEEDINGS ITSELF THAT THE TRANSPORT CHARGES IN QU ESTION WERE PAID BY THE SUPPLIERS AND THE SAME WERE SUBSEQUENTLY REIMBURSED BY THE ASSESSEE. IT IS THUS CLEAR THAT THE STAND THAT THERE BEING NO CO NTRACT BETWEEN THE ASSESSEE AND THE CONCERNED TRANSPORTERS, THE PROVIS IONS OF SECTION 194C WERE NOT APPLICABLE, WAS TAKEN BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER AND THE ONUS TO REBUT THE SAME WAS SHIFTED TO THE ASSESSING OFFICER. HE, HOWEVER, FAILED TO DISCHARGE THE SAID ONUS AND PROCEEDED TO MAKE A DISALLOWANCE UNDER SECTION 40(A)(IA) ON THE GROUND THAT THE RELEVANT FREIGHT CHARGES WERE FINALLY DEBITED IN TH E ASSESSEES ACCOUNT. IN THESE FACTS AND CIRCUMSTANCES, IF THE MATTER IS RES TORED TO THE FILE OF THE ASSESSING OFFICER FOR GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER TO 5 ITA NO. 684/KOL/2016 ASSESSMENT YEAR: 2011-2012 REBUT THE STAND OF THE ASSESSEE AS SOUGHT BY THE LD . D.R., IT WILL RESULT IN GIVING A SECOND INNINGS TO THE ASSESSING OFFICER, W HICH IS NOT PERMISSIBLE. MOREOVER, THE CLAIM OF THE ASSESSEE THAT THE TRANSP ORT CHARGES WERE INITIALLY PAID BY THE SUPPLIERS AND THE SAME WERE S UBSEQUENTLY REIMBURSED BY THE ASSESSEE IS DULY SUPPORTED BY THE RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF BILLS RAISED B Y THE SUPPLIERS, WHEREIN THE TRANSPORT CHARGES ARE SEPARATELY CHARGE D BY THE SUPPLIERS TO THE ASSESSEE. IT IS THUS DULY ESTABLISHED BY THE AS SESSEE ON EVIDENCE THAT THERE WAS NO CONTRACT BETWEEN HIM AND THE CONCERNED TRANSPORTERS AND THERE WAS NO REQUIREMENT OF DEDUCTION OF TAX AT SOU RCE AS PER THE PROVISIONS OF SECTION 194C. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(IA) ON ACCOUNT OF TRANSPORT CHARGES BY HOLDING THAT THE PROVISIONS OF SECTION 1 94C ARE NOT APPLICABLE AND UPHOLDING THE SAME, WE DISMISS THIS APPEAL FILE D BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DAY OF DECEMBER, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 6 TH DAY OF DECEMBER, 2017 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, BURDWAN, AAYAKAR BHAWAN, COURT COMPOUND, BURDWAN-713 101 2) SRI GOBINDA GUPTA, BOREHAT, NUTANGANJ, DIST. BURDWAN-713 101 (3) CIT(APPEALS), BURDWAN, (4) CIT- , BURDWAN, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO, INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.