DCIT, Circle - 4, Kolkata, Kolkata V. M/s. Maruti Freight Movers Ltd., Kolkata

ITA 766/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3144 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 18-05-2011
• Court: TRIBUNAL
• Department Lawyers: K K TRIPATHI SRDR
• Keywords: Business expenditure
• Section: 40A(3); 143(3); 194C; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO. 766 / KOL / 2011 ASSESSMENT YEAR :2002-03 D.C.I.T., CIRCLE-4, ROOM NO. 552, MARSHAL HOUSE, 33/1N.S.ROAD, KOLKATA 700 001 V/S . M/S. MARUTI FREIGHT MOVERS LTD., P-7, CHOWRINGHEE SQUARE, 8 TH FLOOR, KOLKATA 700 069 [ PAN NO.ABCM 7485 K ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI K.K. TRIPATHI, SR-DR /BY RESPONDENT SHRI NARENDRA KEDIA, AR /DATE OF HEARING 13-06-2013 /DATE OF PRONOUNCEMENT 11-07-2013 / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE IS ARISING OUT ORDER OF COM MISSIONER OF INCOME-TAX (APPEALS)-IV,KOLKATA (CIT(A) FOR SHORT ) IN APPEAL NO.127/CIT(A)-IV/09-10 DATED 01-11-2010. ASSESSMENT WAS FRAMED BY DCIT, CIRCLE-4, KOLKATA U/S 147 R.W.S. 143(3) OF TH E INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED NIL FOR THE ASSESSMENT YEAR (AY) 2002-03. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE ADDITION OF REIMBURSEMENT OF EX PENSES OF RS.72,83.181/- PAID TO TRUCK DRIVERS BY THE AGENT O F M/S NEWMAN LEFIN PVT. LTD. FOR THIS, REVENUE HAS RAISED FOLLOWING GROUND NO.1:- ITA NO.766/KOL/2011 A.Y. 2002-03 DCIT,CIR-4, KOL V. M/S. MARUTI FREIGHT MOVERS LTD. PAGE 2 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS, IN DIRECTING THE AO TO DEL ETE THE ADDITION OF RS.72,83,181/- ON ACCOUNT OF REIMBURSEMENT OF THE E XPENSES WITHOUT CONSIDERING THE FACT THAT IN ORISSA THERE IS NO OFF ICE OF M/S. NEWMAN LEFIN PVT. LTD. THEN HOW IT IS POSSIBLE FOR THAT COMPANY TO PAY CASH TO TRUCK DRIVERS AND SECONDLY THE LOCATION OF THE ASSESSEE C OMPANY AND M/S. NEWMAN LEFIN PVT. LTD., IS IN THE SAME PREMISES AND CONTROLLED BY THE SAME GROUP / RELATIVES. 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING O FFICER RECEIVED INFORMATION FROM ITO, WARD-6(3) KOLKATA THAT ASSESS EE MADE CONTRACTUAL PAYMENTS OF RS.1,45,14,602/- AS PER TAX DEDUCTED AT SOURCE (TDS) RETURN BUT NO TDS IS DEDUCTED ON THE PAYMENT OF RS.72,93,1 81/-. THIS INFORMATION CAME TO THE AO OF THE ASSESSEE AFTER THE AO, WARD- 6(3) KOLKATA INFORMED HIM. THE ASSESSEE OF THAT AO, CLAIMED THAT THE AMO UNT OF RS.72,83,181/- RELATES TO PAYMENTS OF REIMBURSEMENT MADE BY THE AS SESSEE TO THE AGENT. BUT AO NOTED THAT AS PER SECTION 194C OF THE ACT, T HESE PAYMENTS FALL UNDER THE PURVIEW OF TDS PROVISIONS AND NO TDS IS D EDUCTED ON REIMBURSEMENT. THE ASSESSEE EXPLAINED THAT THESE AR E MERELY REIMBURSEMENT AND NO TDS IS TO BE DEDUCTED. THE SU BMISSION IN REGARD TO REIMBURSEMENT CANNOT BE ACCEPTED AS TRUE AND FAIR A ND ACCORDINGLY AO MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SEC TION 40A(3) OF THE ACT. ACCORDING TO AO, THE ALLEGED REIMBURSEMENT AMOUNT W AS NOTHING BUT INFLATED EXPENSES MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. THEREFORE, THE ASSESSEE HAS UNDERSTATED ITS INCOME BY WAY OF SHOWING OF EXCESS FREIGHT PAYMENT. THE ASSESSEE DURING THE COU RSE OF ASSESSMENT PROCEEDINGS HAD EXPLAINED THAT IT ENTERED INTO AN A GREEMENT WITH M/S. NEWMAN LEFIN PVT. LTD. (NLP FOR SHORT) TO WORK AS AN AGENT FOR THE ASSESSEE FOR THE STATE OF ORISSA WHO WOULD BE ALLOW ED RS.100/- PER TRUCK / PER TRIP AS REIMBURSEMENT SUBJECT TO APPLICABILITY OF TDS FOR MAKING PAYMENT TO TRUCK DRIVERS / OWNERS. THE SAID NLP ACT ING AS AN AGENT IN PURSUANCE OF AN AGREEMENT FOR SUPPLY OF TRUCKS TO T HE ASSESSEE AND AT THE ITA NO.766/KOL/2011 A.Y. 2002-03 DCIT,CIR-4, KOL V. M/S. MARUTI FREIGHT MOVERS LTD. PAGE 3 POINT OF URGENCY THE ASSESSEE MADE ADVANCE PAYMENT TO TRUCK DRIVERS FOR THEIR ROAD EXPENSES ETC., BUT THE BALANCE PAYMENTS WERE MADE BY NLP AT ORISSA. THESE PAYMENTS WERE REIMBURSEMENT BY THE AS SESSEE TO ITS AGENT FOR CARRYING OUT A CONTRACT WHICH WAS IN THE NATURE OF WORK CONTRACT FOR SUPPLY OF TRUCK AND TDS WAS DEDUCTED ON GROSS AMOUN T PAID TO THESE TRUCKS SUPPLIER ON TOTAL FREIGHT INCLUDING THIS AMO UNT OF RS.72,83,181/- WHICH WAS REIMBURSED. THIS REIMBURSEMENT CHARGES ALREADY INCLUDED IN THE TOTAL FREIGHT AND IT WAS CLAIMED BY ASSESSEE. BUT THE AO WAS NOT CONVINCED BY THE REPLY THEN HE MADE DISALLOWANCE. 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION VIDE PARA- 4.1AND 4.2 OF HIS ORDER, WHICH REPRODUCED AS UNDER: - 4.1 I AGREE WITH THE SUBMISSION OF THE APPELLANT T HAT CLAUSE(B)OF SECTION 22(1A) OF THE COMPANIES ACT 1956 REQUIRED THE AUDIT OR TO INQUIRE AND REPORT ABOUT TRANSACTION OF THE COMPANY WHICH REPRESENTED MERELY BY BOOK ENTRIES. THE APPELLANT HAS ALSO GIVEN A EXAMPLE OF PURE BOOK ENTRY. BUT IN THE CASE OF APPELLANT COMPANYS TRANSACTION DOES NO T FALL UNDER THE CATEGORY OF BOOK ENTRY. AS IT WAS EVIDENT FROM THE ASSESSMENT ORDER OF THE AGENT PASSED BY ITO, WARD 6(3)/KOL U/S. 147/143(3) OF THE ACT, SUBMITTED IN THE HEARING WHICH DID NOT HIGHLIGHTS ANY AMBIGUITY IN MAKING PAYMENT TO TRUCK DRIVER/DRIVERS ON BEHALF OF THE PRINCIPAL AS SUCH THE OPINION OF ASSESSING OFFICER THAT THE TRANSACTION OF THE APPEL LANT IS A BOOK ENTRY DOES NOT HOLD WATER AND ALSO EVEN REASONABLE SUSPICION R EQUIRED A HIGHER DEGREE OF CERTAINTY WHICH WAS TOTALLY ABSENT IN THE SAID ASSESSMENT. THE OPINION FORMED BY ASSESSING OFFICER SUFFERED BY ANY CERTAINTY IN HIS FINDINGS. 4.2 ON A CONSIDERATION OF THE RELEVANT FACTS AND EV IDENCES PRODUCED IN THE HEARING I CONCLUDE THAT THE ADDITION UNDER DISALLOW ANCE OF EXPENSES AND ADDED BACK TO THE INCOME OF THE APPELLANT OF THE AM OUNT OF RS.72,83,1891.00 IS UNWARRANTED AND THE OPINION OF THE ASSESSING OFFICER IS NOT BASED ON ANY MATERIAL FACTS. ON CAREFUL OBSERVA TION OF THE FACTS, I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 72,83,181/- AS INFLATED EXPENSES. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. ITA NO.766/KOL/2011 A.Y. 2002-03 DCIT,CIR-4, KOL V. M/S. MARUTI FREIGHT MOVERS LTD. PAGE 4 5. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THESE PAYME NTS MADE TO AGENT FOR FINAL SETTLEMENT OF BILLS AT ORISSA I.E., PAYMENT M ADE TO NLP AS AN AGENT IN PURSUANCE OF AGREEMENT FOR SUPPLY OF TRUCKS ARE MER ELY REIMBURSEMENT. THE ASSESSEE HAS CLAIMED TOTAL FREIGHT CHARGES AT R S.1,45,14,602/- INCLUDING THIS AMOUNT OF REIMBURSEMENT OF RS.72,83, 818/- AND ASSESSEE HAS ALREADY DEDUCTED THE TDS U/S. 194C OF THE ACT ON CO NTRACTUAL PAYMENT OF FREIGHT I.E., TOTAL FREIGHT AT RS.1,45,14,602/- AND NOTHING IS TO BE DEDUCTED FROM REIMBURSEMENT. THESE WERE NEVER CLAIMED AS EXP ENDITURE BY ASSESSEE AND ONCE THE ASSESSEE HAS NOT CLAIMED THE EXPENDITURE QUA THIS REIMBURSEMENT, THE ASSESSEE IS NOT LIABLE TO TDS U/ S. 194C OF THE ACT. FURTHER, THE AO HAS WRONGLY MADE DISALLOWANCE BY HO LDING THAT THE EXPENSES INCURRED ARE NOT FOR PURPOSE OF BUSINESS R ATHER ACCORDING TO HIM, THESE ARE INFLATED EXPENSES BOOKED BY ASSESSEE. TH IS FINDING OF THE AO IS ERRONEOUS FOR THE REASON THAT THE PAYMENTS MADE OF REIMBURSEMENT OF EXPENSES ARE PURELY FOR BUSINESS EXPENSES. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND WE CONFIRM THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMI SSED. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 11.07.201 3 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 11 /07/2013 * PRONOUNCED BY SD/- (PRAMOD KUMAR) SD/- (MAHAVIR SINGH) AM JM ITA NO.766/KOL/2011 A.Y. 2002-03 DCIT,CIR-4, KOL V. M/S. MARUTI FREIGHT MOVERS LTD. PAGE 5 ++, ++, ++, ++, -, -, -, -, / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '/'+0 1 / CONCERNED CIT 4. 1- / CIT (A) 5. ,45 +++0, +0 , / DR, ITAT, KOLKATA 6. 589 :; / GUARD FILE. BY ORDER/ , +0 , *