SHENAZ ABDUL WAHAB JAGOT, MUMBAI V. ITO 12(1)(2), MUMBAI

ITA 7381/MUM/2011

• Counselvise Citation: 738119914 RSA 2011
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 15-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 03-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Keywords: Additional evidence
• Section: 234B; 194C

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 7381/MUM/2011 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 2008-09 SMT. SHEHNAZ ABDUL WAHAB JAGOT, C/O EMPIRE IMPEX, 2 ND FLOOR, OFFICE NO. 50, ASHOKA SHOPPING CENTRE, L.T. ROAD, G.T. HOSPITAL COMPLEX, MUMBAI 400 001. ( ( ( ( / VS. INCOME TAX OFFICER 12(1)(2), ROOM NO. 116, AAYAKAR BHAVAN, M.K. MARG, MUMBAI- 20. #. !./ PAN : AGZPJ4317J ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) APPELLANT BY SHRI DHARMESH SHAH RESPONDENT BY : SHRI PITAMBAR DAS !($ 2 / // / DATE OF HEARING : 15-10-2013 34- 2 / DATE OF PRONOUNCEMENT : 31-10-2013 [ '5 / O R D E R PER P.M. JAGTAP, A.M . : .. , !'# THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) 23, MUMBAI DATED 15-07-2011. 2. THE MAIN ISSUE RELATING TO THE DISALLOWANCE MADE BY THE A.O. U/S 40(A)(IA) OF THE INCOME TAX ACT, 1961 AND CONFIRMED BY THE LD. CIT(A) IS RAISED BY THE ASSESSEE IN GROUND NO. 1 READS AS UNDER:- A) THE LEARNED CIT (A) HAS ERRED IN PASSING AN ORD ER DISALLOWING RS. 8346873/- U/S 40(A)(IA) ON THE PRESUMPTION THAT THERE ARE PAYMENTS TO A SHIPPING COMPANY WHEREAS HE HAS FAILE D TO APPRECIATE ITA 7381/M/11 2 THAT THESE ARE IN THE NATURE OF REIMBURSEMENT OF EX PENSES TO A CLEARING AGENT TO BE PAID TO A NON-RESIDENT SHIPPING COMPANY . HENCE THE SAME BE ALLOWED. WITHOUT PREJUDICE TO ABOVE, HE HAS MADE AN ADDITION OF RS. 8346873/- U/S 40(A)(IA) ON ACCOUNT OF FREIGHT AND FORWARDING CHARGES TO THE SAID FIRM WITHOUT DEDUCTION OF TDS. THE SAME BE DELETED. B) THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT THE SUPPORTING PROVIDED BY THE ASSESSEE IN THE FORM OF BILL OF LAD ING & THE RESPECTIVE INVOICE OF M/S A.M SODDER & CO IN SUPPORT TO THEIR CLAIM THAT THE SAID PAYMENTS WERE MADE TO THE NON-RESIDENT SHIPPING COM PANY. THE SAME BE CONSIDERED AND ADDITION BE DELETED. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO IS ENGAGED IN THE BUSINESS OF EXPORT OF TILES, CERAMIC GOODS, MACHINE RY AND OTHER GENERAL ITEMS UNDER THE NAME AND STYLE OF HER PROPRIETARY CONCERN M/S WARI INTERNATIONAL. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY HER ON 19-8-2008 DECLARING TOTAL INCOME OF RS. 4,29,760/-. IN THE PROFIT AND LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, TOTAL EXP ENDITURE OF RS. 83,46,873/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF PAYMENT M ADE TO A.M. SODDER & CO. TOWARDS FREIGHT AND FORWARDING CHARGES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT THE SAID PAYMENT W AS MADE BY THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SOURCE. IN THIS REGARD , RELIANCE WAS PLACED BY THE ASSESSEE ON THE CBDT CIRCULAR NO. 723 DATED 19-10-1 995 WHEREIN IT WAS CLARIFIED THAT THE PROVISIONS OF SECTION 194-C OF T HE ACT COULD NOT BE APPLIED IN RESPECT OF PAYMENTS MADE TO THE SHIPPING AGENTS OF NON-RESIDENT SHIP OWNERS OR CHARTERS FOR CARRIAGE OF PASSENGERS ETC. SHIPPED AT A PORT IN INDIA. THE ASSESSEE, HOWEVER, COULD NOT FURNISH ANY DOCUMENTAR Y EVIDENCE TO SHOW THAT M/S A.M. SODDER & CO. WAS THE AGENT OF THE FOREIGN SHIPPING COMPANY AND IN THE ABSENCE OF THE SAME, THE A.O. INVOKED THE PROVI SIONS OF SECTION 40(A)(IA) OF THE ACT AND DISALLOWED THE EXPENDITURE CLAIMED BY T HE ASSESSEE ON ACCOUNT OF PAYMENT MADE TO M/S SODDER & CO. TOWARDS FREIGHT AN D FORWARDING CHARGES. ITA 7381/M/11 3 4. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED I TS STAND TAKEN BEFORE THE A.O. ON THIS ISSUE BY RELYING ON THE CBDT CIRCULAR NO. 723 DATED 19-10- 1995. IT WAS ALSO CONTENDED ON BEHALF OF THE ASSESS EE BEFORE THE LD. CIT(A) THAT SINCE THE PAYMENT MADE TO THE C & F AGENT WAS TOWARDS THE REIMBURSEMENT OF EXPENSES ACTUALLY INCURRED BY THE SAID AGENT, THERE WAS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE AND, THER EFORE, NO QUESTION OF MAKING ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A), HOWEVER, REJECTED BOTH THESE CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE OBSERVING THAT NEITHER BEFORE THE A.O. NOR EVEN BEFORE HIM, T HE ASSESSEE OR M/S A.M. SODDER & CO. COULD FURNISH ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE THEIR CLAIM THAT THE IMPUGNED PAYMENTS WERE MADE TO THE N ON-RESIDENT SHIPPING COMPANY THROUGH ITS AGENT OR THE SAID PAYMENTS WERE MADE TOWARDS REIMBURSEMENT OF EXPENSES ACTUALLY INCURRED. ACCOR DINGLY, THE DISALLOWANCE MADE BY THE A.O. U/S 40(A)(IA) OF THE ACT WAS CONFI RMED BY THE LD. CIT(A). 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E THE TRIBUNAL, THE ASSESSEE HAS FILED THE FOLLOWING DOCUMENTS AS ADDIT IONAL EVIDENCE:- (A) COPY OF THE BILL ISSUED BY C&F AGENT RAISED ON A.M. SODDER & CO. ALONG WITH THE CORRESPONDING INVOICE RAISED BY A.M. SODDER & CO. UPON THE APPELLANT FOR THE IDENTICAL AMOUNT AND THE BILL OF LADING ISSUED BY THE FOREIGN SHIPPING COMPANY. (B) COPY OF THE SHIPPING BILL RELATING TO THE AFORESAID SHIPMENT. (C) COPY OF THE INVOICE OF AGENCY CHARGES RAISED BY A.M . SODDER & CO. 6. THE ASSESSEE HAS ALSO FILED AN APPLICATION SEEKI NG ADMISSION OF THE ABOVE ADDITIONAL EVIDENCE ON THE FOLLOWING GROUNDS: - IT IS SUBMITTED THAT THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO THE DISALLOWANCE OF FREIGHT AND FORWARDING CHARGES AGGR EGATING TO 83,46,873/- U/S. 40(A)(IA) OF THE ACT. DURING THE C OURSE OF THE ASSESSMENT PROCEEDINGS AND IN RESPONSE TO THE QUERY AS TO THE ALLOWABILITY OF THE SAID EXPENSES, THE APPELLANT HA D FILED SEVERAL DETAILS AND EVIDENCES INCLUDING COPIES OF THE BILLS, DETAIL S OF THE FREIGHT AND FORWARDING CHARGES ALONG WITH NAME OF SHIPPING COMP ANY, NAME OF THE ITA 7381/M/11 4 CONSIGNEE, ETC. THE DETAILS WERE FILED BY THE APPEL LANT VIDE LETTER DATED 07.10.2010 AND 14.12.2010. VIDE LETTER DATED 07.10.2010, THE APPELLANT HAD ALS O CLARIFIED THAT THE PAYMENTS MADE TOWARDS FREIGHT AND FORWARDING CHARGE S WERE IN RESPECT OF THE EXPENSES INCURRED BY THE CLEARING AGENT TOWA RDS FORWARDING CHARGES, CUSTOMS DOCUMENTATION CHARGES, UNLOADING C HARGES WAN CHARGES ETC. IT WAS ALSO EXPLAINED THAT THE SAID BI LLS REPRESENTS REIMBURSEMENT OF EXPENSES TO THE CLEARING AGENTS. D URING THE COURSE OF THE HEARING, THE APPELLANT HAD ALSO EXPLAINED THAT THE REIMBURSEMENT OF EXPENSES DOES NOT CALL FOR DEDUCTION OF TAX. THE RELEVANT SUBMISSIONS BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 07.1 0.2010 IS REPRODUCED BELOW: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPORT OF MERCHANDISE GOODS. THE SHIPMENT OF GOODS THROUGH SE A ROUTE AND IT IS THROUGH FOREIGN SHIPPING COMPANY. A.M. SO DDER IS THE AGENT FOR SHIPPING COMPANIES TO BOOK THE CONTAINER SPACE FOR EXPORT OF THE GOODS. HE HAS RAISED BILLS FOR FREIGH T CHARGES PAYABLE TO FOREIGN SHIPPING COMPANY OF S CONVERSION RS., TERMINAL HANDLING CHARGES LEVIED BY PORT TRUST, DOC UMENTATION CHARGES AND SERVICE TAX LEVIED UNDER THE SERVICE TA X ACT. ASSESSEE RELY UPON THE CIRCULAR NO.723 DATED 19.01. 1995. COPIES OF BILLS AND CIRCULAR COPY IS ENCLOSED FOR YOUR KIN D PERUSAL. FURTHER HE SUBMITTED THE BILLS OF DIRECT EXPENSES I NCURRED ON OUR BEHALF I.E. CUSTOM DOCUMENTATION CHARGES, UNLOADING CHARGES, WARI CHARGES (APPLICABLE IN DOCKS) CUSTOM EXAMINATI ON CHARGES, CONTAINER STUFFING EXPENSES, SAMPLE SEALING EXPENSE S. IN ACCOUNT IT IS FORWARDING CHARGES INCURRED TO EXPORT THE GOO DS AT THE STAGE OF CUSTOMS AND AT DOCKS. IT IS REIMBURSEMENT OF EXP ENSES TO A.M. SODDER. 5. HOWEVER, WITHOUT CALLING FOR ANY FURTHER DETAILS AND INFORMATION WITH RESPECT TO THE CLAIM OF REIMBURSEMENT OF EXPEN SES, THE ASSESSING OFFICER PASSED THE ORDER ON 24.12.2010 DISALLOWING THE ENTIRE EXPENSES OF 83,46,873/- ON THE GROUND THAT THE APPELLANT HAD NOT DEDUCTED TAX U/S. 194C OF THE ACT. HOWEVER, THE ISSUE AS TO WHET HER THE PROVISIONS OF S. 194C OF THE ACT WOULD BE APPLICABLE IN RESPECT O F THE REIMBURSEMENT OF EXPENSES WAS NEVER DECIDED BY THE ASSESSING OFFI CER. 6. BEFORE THE HONBLE COMMISSIONER OF INCOME-TAX (A PPEALS), THE APPELLANT HAD FURNISHED THE COPY OF THE INVOICES RA ISED BY THE CLEARING AGENT, A.M. SODDER & CO IN RESPECT OF FREIGHT PAID TO FOREIGN SHIPPING COMPANY ALONG WITH BILL OF LADING WHICH ESTABLISHED THE NATURE OF EXPENSE INCURRED BY THE APPELLANT. THE INVOICE CLEA RLY REFLECTED THAT THE AMOUNTS RAISED BY HIM WERE MERELY SEEKING REIMBURSE MENT OF THE FREIGHT CHARGES IN USD AND OTHER CHARGES LIKE TERMI NAL HANDLING CHARGES, REPO CHARGES, ETC. PAID BY HIM TO THE FORE IGN SHIPPING ITA 7381/M/11 5 COMPANY, CUSTOM PORT AND OTHER PARTIES FOR VARIOUS PURPOSES. THE SAID BILL IS ALREADY FILED BEFORE YOUR HONOUR AT PAGE 12 OF THE PAPERBOOK FILED ON 20.03.2013. IN FACT, THE SAID INVOICE ALSO INCLU DED THE SERVICE TAX CHARGED BY OTHER PARTIES. FURTHER, COPY OF THE BILL OF LADING ISSUED BY THE FOREIGN SHIPPING COMPANY IN THE NAME OF THE APP ELLANT FILED AT PAGE 13 OF THE PAPERBOOK ALSO EXPLAINED THAT THE APPELLA NT WAS THE CONSIGNOR OF THE GOODS AND THAT THE FREIGHT WAS ALR EADY PAID BY THE APPELLANT. THIS ALSO SUPPORTED THE CLAIM OF THE APP ELLANT THAT THE CONTRACT WAS BETWEEN THE APPELLANT AND THE FOREIGN SHIPPING COMPANY. THESE EVIDENCES THUS ESTABLISH THAT THE NATURE OF E XPENSES CLAIMED BY THE APPELLANT WAS IN THE NATURE OF REIMBURSEMENT AN D HENCE CANNOT BE SUBJECTED TO PROVISIONS OF TDS. 7. HOWEVER, THE HONBLE COMMISSIONER OF INCOME-TAX (APPEALS) REJECTED THE SAID CLAIM ON THE GROUND THAT THE APPE LLANT HAD NOT FURNISHED ANY PROOF SUBSTANTIATING THAT THE PAYMENT S HAVE BEEN MADE TO NON-RESIDENT SHIPPING COMPANY AND THAT THESE BIL LS PAID TO THE CLEARING AGENT ARE AS AND BY WAY OF REIMBURSEMENT O F EXPENSES PAID TO THE SHIPPING COMPANY. IN OTHER WORDS, THESE EVIDENC ES ALREADY FILED BEFORE THE HONBLE COMMISSIONER OF INCOME-TAX (APPE ALS) WERE EITHER FOUND INSUFFICIENT OR WERE OVERLOOKED BY HER WHILE DECIDING THE SAID ISSUE. 8. IT IS SUBMITTED THAT SINCE THE ISSUE WAS NEVER D ECIDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER, THE APPE LLANT RELIED UPON THE EVIDENCES WHICH WERE FILED BEFORE THE ASSESSING OFF ICER TO SUBSTANTIATE THEIR CLAIM THAT THE EXPENSES ARE OF REIMBURSEMENT NATURE AND HENCE PROVISIONS OF TDS ARE NOT APPLICABLE. IF THE HONBL E COMMISSIONER OF INCOME-TAX (APPEALS) DID NOT FIND EVIDENCES SUFFICI ENT TO SUBSTANTIATE THE SAID CLAIM (MORE SO WHEN THE ASSESSING OFFICER HAD NOT CONSIDERED AND OVERLOOKED THE SAID ISSUE IN THE ASSESSMENT ORD ER), SHE COULD HAVE CALLED UPON THE APPELLANT TO ADDUCE THE EVIDENCES I N RESPECT OF THE REIMBURSEMENT CHARACTER OF EXPENSES. 9. HOWEVER, EVEN HONBLE COMMISSIONER OF INCOME-TAX (APPEALS) DID NOT GRANT ANY OPPORTUNITY TO EXPLAIN THE NATURE OF EXPENSES WITH THE HELP OF ADDI1IONIL EVIDENCES. 10. THE APPELLANT IS THEREFORE ENCLOSING THE EVIDEN CES AS LISTED IN PARA (2) WHICH PROVES THAT THE AMOUNTS RAISED BY THE M/S . A M SODDER & CO FROM THE APPELLANT WERE THE AMOUNTS PAYABLE TO THE FOREIGN SHIPPING COMPANY, CUSTOM PORT ON ACCOUNT OF TERMINAL, HANDLI NG CHARGES, REPACKING CHARGES LEVIED BY THE CUSTOM AGENTS/ PORT S, ETC. 11. THESE EVIDENCES CLEARLY PROVE THAT THE PAYMENTS MADE BY THE APPELLANT ARE ON ACCOUNT OF REIMBURSEMENT OF EXPENS ES TO A.M. SODDER & CO INCURRED AND PAID ON BEHALF OF THE APPELLANT. ITA 7381/M/11 6 12. FOR THE DETAILED REASONS GIVEN ABOVE, THE APPEL LANT COULD NOT FILE THE AFORESAID EVIDENCES BEFORE THE ASSESSING OFFICE R OR THE HONBLE COMMISSIONER OF INCOME- TAX (APPEALS) TO EXPLAIN TH E SAME. THE APPELLANT THEREFORE PRAYS THAT THE SAID EVIDENCES M AY KINDLY BE ADMITTED AS ADDITIONAL EXPENSES AND THE PRESENT APP EAL. TO BE DECIDED AFTER CONSIDERING THE SAID EVIDENCES, ON THE ABOVE ISSUE, THE APPELLANT RELIES UPON THE DECISION IN THE CASE OF CIT V. PRAB HAVATI S. SHAH [231 ITR 1 (BOM)]. 7. KEEPING IN VIEW THE SUBMISSIONS MADE BY THE ASSE SSEE AS ABOVE AND HAVING REGARD TO THE FACT THAT THE ADDITIONAL EVIDE NCE FILED BY THE ASSESSEE IS RELEVANT TO ADJUDICATE THE ISSUE INVOLVED IN GROUND NO. 1 OF THE ASSESSEES APPEAL, WE HAVE ADMITTED THE SAID ADDITIONAL EVIDEN CE. THE LD. D.R. HAS ALSO NOT RAISED ANY SPECIFIC OBJECTION IN THIS REGARD. HE, HOWEVER, HAS CONTENDED THAT IF THE ADDITIONAL EVIDENCE IS TO BE ADMITTED B Y THE TRIBUNAL, AN OPPORTUNITY MAY BE GIVEN TO THE A.O. TO VERIFY THE SAME. WE FIND MERIT IN THIS CONTENTION OF THE LD. D.R. THE ORDERS OF THE AUTHOR ITIES BELOW ON THIS ISSUE ARE ACCORDINGLY SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH IN THE LIGHT OF THE ADDITI ONAL EVIDENCE FILED BY THE ASSESSEE. GROUND NO. 1 OF THE ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND NO. 2 RAISED BY THE ASSESSEE INVOLVING TH E ISSUES RELATING TO ADDITIONS OF RS. 4300/- AND RS. 4500/- ON ACCOUNT O F PURCHASES MADE FROM AURANGABAD ROTOPLAST AND ADESHWAR RESPECTIVELY IS N OT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEF ORE US. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESSED. 9. THE ISSUES RAISED IN GROUND NO. 3 RELATING TO TH E INTEREST U/S 234B AND 234C OF THE ACT ARE CONSEQUENTIAL IN NATURE AND THE A.O. IS ACCORDINGLY DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSES SEE ON THIS ISSUE. ITA 7381/M/11 7 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2013. . '5 2 34- 6'(7 31-10-2013 4 2 SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 6'( DATED 31-10-2013. $.)(.!./ RK , SR. PS '5 2 0)89 :9- '5 2 0)89 :9- '5 2 0)89 :9- '5 2 0)89 :9-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. ; () / THE CIT(A)23, MUMBAI. 4. ; / CIT 12, MUMBAI 5. 9$> 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, ? / GUARD FILE. '5 '5 '5 '5(! (! (! (! / BY ORDER, !19 0) //TRUE COPY// @ @ @ @/ // /!A !A !A !A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI