WELSET PLAST EXTRUSIONS P.LTD, MUMBAI V. ASST CIT (OSD) RG 8(1), MUMBAI

ITA 77/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3631 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 23-11-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K SHIVARAM
• Keywords: Opportunity of being heard; Additional evidence
• Section: 133(6); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G, BENC H MUMBAI BEFORE SHRI N.K.BILLAIYA, AM & SHRI PAWAN SIN GH, JM ITA NO.77/MUM/2 013 (ASSESSMENT YEAR : 2009-10) WELSET PLAST EXTRUSIONS PVT. LTD., 8, NEW METALAGE INDUSTRIAL PREMISES CO-OP. SOCIETY LTD., SUBHASH ROAD, JOGESHWARI (E), MUMBAI-400060 VS. ACIT(OSD), RANGE- 8(1), ROOM NO. 260C, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. PAN/GIR NO.: AAACW0614K ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI K. SHIVARAM & MISS NEELAM JADH AV. REVENUE BY : SHRI ABANI KANTA NAYAK (DR) DATE OF HEARING : 23/11/2015 DATE OF PRONOUNCEMENT: 15/01/2016 O R D E R PER PAWAN SINGH, JM: 1. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-18, MUMBAI DATED 02.11.2012 ON THE FOLLOWING GROUNDS OF APPEAL. DISALLOWANCE OF COMMISSION RS.13,58,902/- 1.THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER O F ASSESSING OFFICER DISALLOWING THE COMMISSION PAID MERELY ON THE GROUND THAT THE COMMISSION AGENT DID NOT RESPONDED TO NOTICE U/S. 133(6) OF THE ACT WITHOUT APPRECIATING THE CONFIRMATION OF ACCOUNT, BANK STATEMENT, STATEMENT OF INCOME, BALAN CE SHEET AND PROFIT & LOSS A/C. 2. THE LEARNED CIT(A) ERRED IN NOT ALLOWING RS.46 ,644/- TREATING IT AS PRIOR PERIOD EXPENSES WITHOUT APPRECIATING THAT THE EXPE NDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSE DURING T HE RELEVANT YEAR. 3. THE C IT(A) ERRED IN NOT ADMITTING THE ADDITIONAL EVIDENCE FILED UNDER RULE 46A OF THE INCOME TAX RULES WITHOUT APPRECIATING TH AT THE SAME OUGHT TO PARTY (AGENT) WAS NOT RESPONDING TO THE NOTICE U/S 133(6) OF THE ACT. II. DISALLOWANCE OF FREIGHT AND OCTROI CHARGES U/S. 40( A)(IA) 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF FREIGHT & OCTROI CHAR GES PAID OF RS.27,69,384/- U/S.40(A)(IA) OF THE ACT FOR NON DEDUCTION OF TDS U /S.194C OF THE ACT WITHOUT APPRECIATING THAT THE SAID AMOUNT WAS REIMBURSEMENT OF EXPENSES TO THE SUPPLIER OF GOODS. THEREFORE TDS WAS NOT DEDUCTIBLE. 5. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT ONL Y AMOUNT 'PAYABLE' AND NOT AMOUNT 'PAID' COULD BE DISALLOWED U/S. 40(A)(IA) OF THE ACT. 6. THE LAMED CIT(A) ALSO FAILED TO APPRECIATE THAT THE PAYEE ARE ASSESSED TO TAX AN ALREADY PAID TAXES ON THE SAID AMOUNT AND THEREFORE THERE SHOULD NOT BE ANY DISALLOWANCE, THE AFORESAID VIEW IS ALSO SUPPORTED BY THE AMENDMENT MADE BY THE FINANCE ACT 2012 INSERTING PROVISO TO SECTION 40(A) (IA) OF THE ACT WHICH IS CLARIFICATORY IN NATURE AND OUGHT TO BE APPLIED RET ROSPECTIVELY. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OR ALL THE ABOVE GROUNDS OF APPEAL. ITA NO. 77/M/13 WELSET PLAST EXTRUSIONS PV T. LTD. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE W HO IS A COMPANY FILED ITS RETURN OF INCOME FOR AY 2009-10, ON 25.09.2009 DECL ARING TOTAL INCOME AT RS. 32,44,992/-. THE RETURN OF INCOME WAS FILED WIT H THE BALANCE-SHEET, PROFIT & LOSS A/C AND TAX AUDIT REPORT. THE RETURN OF INCO ME WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE WAS SERVED. THE ASSES SING OFFICER (AO) WHILE MAKING THE ASSESSMENT MADE VARIOUS DISALLOWANCE/ADD ITION INCLUDING DISALLOWANCE U/S 40(A)(IA) IN ASSESSMENT ORDER DATE D 30.11.2011, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) INCLUDI NG DISALLOWANCE U/S 40A(IA) FOR THE AMOUNT OF RS. 27,69,384/-. 3. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE GROUND OF DISALLOWANCE U/S 40(A)(IA) IN THE IMPUGNED ORDER DA TED 02.011.2012 AGAINST WHICH THE PRESENT APPEAL IS FILED BEFORE US. 4. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND DEPARTMENTAL REPRESENTATIVE (DR) OF THE REVENUE. AT THE BEGINNING OF MAKING STATEMENT, AR OF THE ASSESSEE ARGUED THAT AS SESSEE IS NOT PRESSING THE GROUND NO. 2. 5. THE AR FURTHER ARGUED IN RESPECT OF GROUND NO. 1 & 3 ARE IN RESPECT OF COMMISSION OF RS. 13,12,258/- WHICH WAS PAID TO ONE RAJESH SINGH, WHO IS ONE OF THE COMMISSION AGENT, THE AO WHILE DEALING W ITH THE DISALLOWANCE IN PARA 4 OF ITS ORDER HAS OBSERVED THAT NOTICE U/S 13 3(6) OF THE ACT ISSUED TO THE RAJESH SINGH, REMAINED UN-COMPLIED AND THE ASSESSEE WAS ASKED TO PROVE THE IDENTITY OF THE PARTIES AND GENUINENESS OF THE TRAN SACTION. THE ASSESSEE PROVIDED HIS PAN NUMBER AND ADDRESS OF RAJESH SINGH AND SHOWN THE LEDGER ACCOUNT ABOUT THE NATURE OF TRANSACTION ON W HICH THE COMMISSION TO BE PAID AND DATE OF PAYMENT AND TDS DEDUCTED, THE A SSESSEE FURTHER EXPLAINED THAT COMMISSION WAS PAID THROUGH ACCOUNT PAYEE CHEQUE AND EVEN RAJESH SINGH WAS COMMUNICATED TO COMPLIANCE TH E NOTICE OF INCOME- TAX DEPARTMENT AND COPY OF MATERIAL FORWARDED TO TH E PARTY WERE PLACED ON RECORD, HOWEVER, THE SUBMISSION MADE BY THE ASSESSE E WAS NOT ACCEPTED OBSERVING THAT MERE FILING OF LEDGER ACCOUNT DOES N OT PROVE THE IDENTITY OF THE PERSON AND THE NATURE OF SERVICES RENDERED BY T HE SAID PARTY AND THUS DISALLOWED THE SAID COMMISSION OF RS. 13,12,258/-. 6. THE CIT(A) WHILE DEALING WITH THIS ISSUE IN PARA 3. 5 AND 5 OF ITS ORDER HAS NOTICED THAT THE ASSESSEE FAILED TO PROVE THE IDENT ITY OF THE PERSON AND GENUINENESS OF THE TRANSACTION EXCEPT MAKING THE AR GUMENT THAT PAYMENT WAS MADE THROUGH BANKING CHANNEL. THE ORDER OF CIT(A) F URTHER REVEALED THAT ASSESSEE FILED AN APPLICATION FOR ADDITIONAL EVIDEN CE U/S 46A AND THE SAME WAS DISMISSED BY OBSERVING THAT APPELLATE AUTHORITY ARE VESTED WITH THE DISCRETION TO ADMIT OR REJECT THE APPLICATION FOR P RODUCTION OF ADDITIONAL EVIDENCE. ITA NO. 77/M/13 WELSET PLAST EXTRUSIONS PV T. LTD. 3 7. THE LD AR FOR THE ASSESSEE ARGUED THAT THE LD. CIT( A) HAS NOT ALLOWED THE APPLICATION FOR LEADING ADDITIONAL EVIDENCE AND MEC HANICALLY REJECTED THE SAME, OTHERWISE THE ASSESSEE COULD PROVE THE IDENTI TY OF THE PARTY AND THE GENUINENESS OF THE TRANSACTION AND FURTHER ARGUED T HAT THE PAYMENTS WERE MADE THROUGH CHEQUE. 8. DR OF THE REVENUE RELIED UPON THE ORDER OF AUTHORIT IES BELOW ON THIS GROUND AND ARGUED THAT THIS ADDITION/DISALLOWANCE DOES NOT REQUIRE ANY INTERFERENCE FROM THIS TRIBUNAL. 9. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AN D CONSIDERED THE RIVAL CONTENTION OF THE PARTIES AND FIND THAT THE AO HAS NOT EXAMINED THE TRANSACTION WHICH WAS MADE THROUGH BANKING CHANNEL NOR DISCUSSED IT IN ITS ORDER WHETHER THE CHEQUE THROUGH WHICH THE PAYMENT WAS MADE WAS CLEAR IN THE ACCOUNT OF ASSESSEE OR NOT ? 10. THE ASSESSEE SEEKS OPPORTUNITY TO LEAD THE ADDITION AL EVIDENCE BEFORE THE CIT(A) TO PROVE THE IDENTITY OF THE PERSON AND GENU INENESS OF THE TRANSACTION BUT THE SAME WAS REJECTED IN A MECHANICAL WAY WITHO UT GIVING ANY REASON, HENCE, WE ARE OF THE CONSIDERED OPINION THAT THIS I SSUE BE REMANDED TO THE FILE OF AO, THE MATTER IS RESTORED AND SEND TO THE FILES OF THE AO. THE AO IS DIRECTED TO DECIDE THE ISSUE AFRESH GIVING REASONAB LE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE IS DIRECTED TO FURNISH NECESSARY DOCUMENTS IN SUPPORT OF ITS CLAIM. THUS, GROUND NO.1 IS ALLOWED FOR STATISTICAL PURPOSE. 11. THE NEXT GROUND FOR OUR CONSIDERATION IS DISALLOWAN CE OF FREIGHT & OCTROI CHARGES U/S 40(A)(IA) OF THE ACT. THE AO WHILE DEAL ING WITH THIS DISALLOWANCE HAS OBSERVED THAT ASSESSEE CLAIMED FREIGHT REIMBURS EMENT OF (1) HALDIA PETROCHEMICALS LTD. O F RS. 21,68,662/- ,(2) NENO M ARKETING & TRADING CO. OF RS. 1,26,940/- (3) UMYA INDIA PVT. LIMITED OF RS . 3,75,742/- & (4) RELIANCE INDUSTRIES LIMITED OF RS. 80,040/- TOTALI NG OF RS. 27,69,384/- IN RESPECT OF WHICH THE ASSESSEE WAS ASKED TO SPECIFY IF TDS HAS BEEN DEDUCTED IN RESPECT OF THE SAID AMOUNT OR NOT AND THE ASSESS EE VIDE ITS REPLY DATED 07.11.2011, EXPLAINED THAT THE FREIGHT & OCTROI CH ARGES WERE SEPARATELY CHARGED IN THE PURCHASE INVOICE BY THE SUPPLIER. WH ILE IN BOOKING PURCHASE INVOICE, IT IS SHOWN SEPARATELY UNDER THE HEAD FRE IGHT & OCTROI CHARGES, THE PAYMENT IS ACTUALLY TOWARDS PURCHASE INVOICE AN D THAT ASSESSEE HAS NOT MADE ANY PAYMENT TO THE TRANSPORTER, FREIGHT CHARGE S ARE RECOVERED BY THE SUPPLIER IN THE PURCHASE INVOICE ITSELF, HENCE, ASS ESSEE IS NOT REQUIRED TO DEDUCT THE TDS ON SUCH PAYMENT. THE CONTENTION OF T HE ASSESSEE WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT AS PER THE PR OVISION OF SECTION 194 OF THE ACT ANY PERSON RESPONSIBLE FOR PAYING ANY SUM T O ANY RESIDENT FOR CARRYING OUT ANY WORK IN PURSUANCE OF CONTRACT BETW EEN THE CONTRACTOR AND SPECIFIED PERSON SHALL DEDUCT IN CONTEXT ON INCOME COMPRISED AND THE ASSESSEE HAD NOT DEDUCTED TAX ON REIMBURSEMENT ON F REIGHT CHARGES AND THE ITA NO. 77/M/13 WELSET PLAST EXTRUSIONS PV T. LTD. 4 SAME IS NOT ALLOWABLE AS EXPENDITURE IN VIEW OF THE PROVISION OF SECTION 40(A)(IA). 12. THE CIT(A) WHILE DEALING WITH THIS GROUND HAS OBSER VED THAT ASSESSEE- COMPANY HAS MADE DISBURSEMENT OF EXPENSES ON ACCOUN T OF FREIGHT AND FURTHER NOTICED THAT ASSESSEE-COMPANY HAS MADE ARRA NGEMENT WITH THE SUPPLIER THAT TRANSPORT PAYMENT ON ACCOUNT OF FREIG HT IS PAID BY SUPPLIER AND THE ASSESSEE-COMPANY HAS MADE THE REIMBURSEMENT ON FREIGHT CHARGES WITH THE SUPPLIER COMPANY AND FURTHER DISCUSSED THE CIRC ULAR NO. 715 DATED 08.08.1995 ISSUED BY THE CBDT WHICH CLARIFIES THAT GOODS ARE RECEIVED ON FREIGHT TO PAY BASIS THE TDS PROVISION WOULD BE APP LICABLE IRRESPECTIVE OF ACTUAL PAYMENT. THE CIT(A) CONCLUDED THAT ARRANGEME NT MADE BY ASSESSEE CLEARLY SHOWN THAT IT WAS MADE ONLY TO AVOID TDS PR OVISION AND THAT NO DOUBT THAT PAYMENT MADE TO THE TRANSPORTER IS MADE BY ASSESSEE-COMPANY NOR DIRECTLY BUT THROUGH SUPPLIER AND THE PROVISION OF SECTION 194C APPLICABLE ON FREIGHT TO PAY BASIS IRRESPECTIVE OF ACTUAL PAYMENT AND THAT THE PROVISION OF SECTION 40(A)(IA) ARE CLEARLY APPLICABLE. 13. THE AR OF THE ASSESSEE IS ARGUED THAT THE AO WELL A S CIT(A) MISCONCEIVED BY CONSIDERING THE CASE OF ASSESSEE AND ARGUED THAT ASSESSEE-COMPANY HAS PLACED ORDER FOR PURCHASE OF RAW-MATERIAL FROM SUPP LIER TO COMPLETE THE TERM IN MANY CASES INCLUDING DELIVERY OF MATERIALS, THE SUPPLIER CHARGED THE TRANSPORT CHARGE IN THEIR INVOICES WHEREAS BETWEEN THE ASSESSEE AND ITS SUPPLIER THERE IS UNDERSTANDING FOR SUPPLY OF THE R AW-MATERIALS ON VARIOUS TERMS AND CONDITIONS AND THE SUPPLIER IS NOT IN THE BUSINESS OF TRANSPORTATION AND IN FACT, THE SUPPLIER USES THE SERVICES OF GOOD S OF TRANSPORT AGENCY TO FULFILL THE COMMITMENT OF SUPPLY OF MATERIAL TO THE ASSESSEE AND FURTHER ARGUED THAT TRANSPORTATION CHARGES ARE PART OF COST OF GOODS AND THE FREIGHT CHARGE WAS NOT PAID SEPARATELY. 14. THE AR OF THE ASSESSEE RELIED UPON THE JUDGMENT OF PUNJAB & HARYANA HIGH COURT TITLED AS CIT(TDS) VS. ASST. MANAGER (AC COUNTS) FOOD CORPORATION OF INDIA, REPORTED VIDE 326 ITR 106 (P& H) & CIT VS. BHAGWATI STEEL 326 ITR 108(P&H). 15. AR OF THE ASSESSEE RELIED UPON THE ORDER OF AUTHORI TIES BELOW. 16. WE HAVE PERUSED THE VARIOUS PURCHASE ORDER WHICH AR E AVAILABLE ON PAGE NOS. 67 TO 113 OF PAPER BOOK WHICH CONTAINS THE REFERENC E AND DETAILS OF FREIGHT AND FORWARDING CHARGES IN RESPECT OF THE ITEMS/MATE RIAL PURCHASED BY THE ASSESSEE. 17. . IN CIT VS. ASST. MANAGER (ACCOUNTS), FCI, THE HON BLE P&H HIGH COURT HAS HELD: THAT ASSESSEE HAS NOT PAID ANY AMOUNT TO PROCUREMEN T ON ACCOUNT OF TRANSPORTATION, INTEREST ON STORAGE CHARGES, NO LIA BILITY FOR DEDUCTION OF TAX BY CONSIDERING THE FACT THAT IF EXPENSES INCURR ED BY THE PERSON ON ITA NO. 77/M/13 WELSET PLAST EXTRUSIONS PV T. LTD. 5 ACCOUNT OF TRANSPORTATION CHARGES, INTEREST ON STORAGE ARE ADDED TO THE COST OF THE GOODS IT CANNOT BE INFERRED THAT THE PE RSON WHO IS BILLED HAD PAID CERTAIN AMOUNT ON ACCOUNT OF THOSE SERVICES SE PARATELY, THE SAME BECOME PART OF COMMODITY, FURTHER IN CIT VS. BHAGWA TI STEEL, THE SAME RATIO WAS ACCEPTED BY THE HONBLE P&H HIGH COURT. 18. HENCE THE CONTENTION OF THE ASSESSEE THAT NO PAYME NT WAS MADE TO THE TRANSPORTER BY THE ASSESSEE AND THUS THE ASSESSEE I S NOT LIABLE TO PAY/ DEDUCT THE TDS IS CONVINCING, HENCE THE PRESENT APPEAL ON THIS GROUND IS ACCEPTED. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IS ACCEPTED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 15/01/2016. SD/- SD/- (N.K.BILLAIYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 15/01/2016 SK, PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY/