ITO, Virudhunagar V. LPL Sons Roadlines, Virudhunagar

ITA 955/CHNY/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0935 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 14-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Additional evidence; Non-deduction of tax
• Section: 143(3); 194C; 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 955/MDS/2010 (ASSESSMENT YEAR : 2008-09) THE INCOME TAX OFFICER, TDS WARD, I.T. OFFICE, RAILWAY FEEDER ROAD, VIRDHUNAGAR. (APPELLANT) V. M/S LPL SONS ROADLINES, 293, MAIN ROAD, SATTUR, VIRDHUNAGAR DISTRICT. PAN : AABFL 2460 L (RESPONDENT) APPELLANT BY : SHRI GURU BASHYAM, JCIT RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE DATE OF HEARING : 07.01.2013 DATE OF PRONOUNCEMENT : 10.01.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : TWO GRIEVANCES HAVE BEEN RAISED BY THE REVENUE IN THIS APPEAL, DIRECTED AGAINST AN ORDER DATED 26.2.2010 O F COMMISSIONER OF INCOME TAX (APPEALS)-II, MADURAI. FIRST IS WITH REGARD TO THE VIEW TAKEN BY THE CIT(APPEALS) THAT SECTION 201(1) AND S ECTION 201(1A) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') WERE NOT APPLICABLE TO THE ASSESSEE WITH REGARD TO PAYMENTS OF ` 13,98,57,884/- MADE BY THE I.T.A. NO. 955/MDS/10 2 ASSESSEE TO TRANSPORTERS WITHOUT DEDUCTING TAX AT S OURCE. SECOND GRIEVANCE IS WITH REGARD TO THE VIEW TAKEN BY THE C IT(APPEALS) THAT TDS PROVISIONS WERE NOT APPLICABLE ON PAYMENTS TO T HE TUNE OF ` 17,30,764/- SHOWN BY THE ASSESSEE AS COMMISSION. O N BOTH THE ABOVE ISSUES, REVENUE MENTIONS THAT CIT(APPEALS) HA D NOT FOLLOWED RULE 46A OF INCOME-TAX RULES, 1962 AND HAD ADMITTED ADDITIONAL EVIDENCE. 2. FACTS APROPOS ARE THAT ASSESSEE, DOING BUSINESS OF TRANSPORT CONTRACT AND COMMISSION AGENCY, WAS SUBJECTED TO AN INSPECTION BY THE REVENUE AUTHORITIES WHEREUPON, IT SEEMS, SOME L ORRY FREIGHT PAYMENTS, WITHOUT DEDUCTING THE TAX AT SOURCE, WERE FOUND TO HAVE BEEN EFFECTED BY THE ASSESSEE. AS PER THE A.O., IN THE INCOME & EXPENDITURE ACCOUNT FILED BY THE ASSESSEE ALONG WIT H ITS RETURN FOR IMPUGNED ASSESSMENT YEAR, IT WAS MENTIONED THAT LOR RY FREIGHT TO VARIOUS PERSONS TO THE TUNE OF ` 13,98,57,884/- WERE PAID. A SWORN STATEMENT WAS RECORDED FROM ONE SHRI L. ARUMUGASAMY , MANAGING PARTNER OF THE ASSESSEE ON 9.7.2009. AS PER THE A.O ., IN SUCH SWORN STATEMENT, SAID SHRI ARUMUGASAMY MENTIONED THAT NO TDS WAS DEDUCTED AT SOURCE THOUGH ASSESSEE WAS HAVING A TAX DEDUCTION ACCOUNT NUMBER, FOR A REASON THAT THEY WERE IGNORAN T OF TDS I.T.A. NO. 955/MDS/10 3 PROVISIONS. AS PER SHRI L. ARUMUGASAMY, THEY HAD P RACTICAL DIFFICULTIES IN DEDUCTING INCOME-TAX. DURING THE C OURSE OF INSPECTION, FORM NOS. 15-I AND 15-J WERE FOUND ALONG WITH A REG ISTER. NEVERTHELESS, IN SUCH FORMS, SIGNATURES OF LORRY OW NERS WERE NOT AVAILABLE. IT SEEMS SHRI ARUMUGASAMY AGREED TO REM IT THE TAX DEDUCTIBLE ON THE PAYMENTS EFFECTED. THEREAFTER, I T SEEMS A SUM OF ` 1 LAKH WAS PAID ON 23.7.2009 TOWARDS TDS FOR THE IM PUGNED ASSESSMENT YEAR. ASSESSEE ALSO CLAIMED THAT FOR A SUM OF ` 1.95 CRORES PAID TO LORRY OWNERS TDS PROVISIONS WERE NOT ATTRACTED SINCE PAYMENTS IN EACH CASE AGGREGATED LESS THAN ` 50,000/-. HOWEVER, A.O. DID NOT ACCEPT THIS VERSION. ACCORDING TO HIM , ASSESSEE WAS MAINTAINING A DAILY REGISTER BASED ON LORRY REGISTR ATION NUMBERS AND NOT PARTY-WISE. EFFECTIVELY, HE CAME TO A CONCLUSI ON THAT THE ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE AS REQU IRED UNDER SECTION 194C FOR LORRY PAYMENTS TO THE TUNE OF ` 13,98,57,884/-. 3. ASSESSEE HAD ALSO SHOWN BROKER COMMISSION EXPENS ES OF ` 20,01,839/- ON WHICH ALSO TAX WAS NOT DEDUCTED AT S OURCE. AS PER THE A.O., ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOUR CE ON SUCH PAYMENTS UNDER SECTION 194H OF THE ACT. HE, THEREF ORE, TREATED SUCH I.T.A. NO. 955/MDS/10 4 AMOUNT ALSO AS PAYMENTS EFFECTED BY THE ASSESSEE WI THOUT DEDUCTING TAX AT SOURCE. 4. THUS, THE A.O. TREATED THE ASSESSEE AS ONE IN-DE FAULT UNDER SECTION 201(1) OF THE ACT FOR BOTH THE ABOVE PAYMEN TS. ASSESSEE WAS REQUIRED TO REMIT A SUM OF ` 15,11,398/- UNDER SECTION 201(1) AND INTEREST OF ` 4,30,736/- UNDER SECTION 201(1A) OF THE ACT. 5. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT VIS--VIS THE PAYMENTS ALLEGED TO HAVE BEE N EFFECTED TO LORRY OWNERS, SECTION 194C WAS NOT APPLICABLE. AS PER TH E ASSESSEE, IT WAS TRANSPORTING COTTON FROM AHMEDABAD AND RAJKOT F OR MANUFACTURE OF YARN AND SUCH COTTON WAS TRANSPORTED ON BEHALF O F VARIOUS SPINNING MILLS SITUATED IN AND AROUND TIRUPPUR. FOR TRANSPO RTING SUCH COTTON, AGENTS WERE ENGAGED. GOODS CONSIGNMENT NOTE WAS PR EPARED INCORPORATING NAME OF THE CONSIGNOR, NAME OF THE CO NSIGNEE AND LORRY REGISTRATION NUMBER. AT THE DESTINATION, CONSIGNEE HAD SETTLED LORRY FREIGHT DIRECTLY TO THE DRIVER AFTER DEDUCTING TAX AT SOURCE. HOWEVER, WHERE THE CONSIGNEE HAD PAID FREIGHT CHARGES DIRECT LY TO THE ASSESSEE, SETTLEMENT WAS MADE BY THE ASSESSEE ITSEL F AND TAX WAS ALSO DEDUCTED. ACCORDING TO ASSESSEE, THERE WAS NO NECESSITY TO DEDUCT TAX ON THOSE PAYMENTS WHICH WERE EFFECTED BY THE CONSIGNEE I.T.A. NO. 955/MDS/10 5 DIRECTLY TO THE LORRY OWNERS. WITH REGARD TO COMMI SSION PAYMENTS, SUBMISSION OF THE ASSESSEE WAS THAT THESE WERE ONLY COOLY CHARGES FOR LOADING. 6. ASSESSING OFFICER WAS REQUIRED TO COMMENT ON THE ABOVE SUBMISSIONS OF THE ASSESSEE. A.O. STATED THAT A CO NTRACT FOR THE PURPOSE OF APPLICATION OF SECTION 194C, INCLUDED AN IMPLIED CONTRACT ALSO. AS PER THE A.O., EVEN WHEN PAYMENTS WERE DIR ECTLY MADE BY THE RECEIVER OF THE GOODS TO THE LORRY OWNERS, SUCH PAYMENTS WERE BEING DEBITED TO THE BOOKS OF THE ASSESSEE. LORRY RECEIPTS WERE ISSUED IN THE NAME OF THE ASSESSEE. INSOFAR AS BRO KER COMMISSION WAS CONCERNED, A.O. NOTED THAT ASSESSEE DID NOT PRO DUCE ANY VOUCHERS NOR ACCOUNT BOOKS IN SUPPORT. 7. LD. CIT(APPEALS), AFTER GOING THROUGH THE SUBMIS SIONS OF THE ASSESSEE, WAS OF THE OPINION THAT OUT OF ` 13,98,57,884/-, A SUM OF ` 10,47,78,664/- WAS DIRECTLY PAID BY THE CONSIGNEES TO THE VEHICLE OWNERS. AS PER THE LD. CIT(APPEALS), ASSESSEE HAD NOTHING TO DO WITH THESE TRANSACTIONS. ASSESSEE RECEIVED ONLY CO MMISSION FROM THE TRANSPORTERS. LD. CIT(APPEALS) NOTED THAT IN A N ASSESSMENT DONE FOR ASSESSMENT YEAR 2007-08 UNDER SECTION 143(3) OF THE ACT, ASSESSEE WAS NOT GIVEN CREDIT ON THE TDS CLAIMED BY IT, TAKING A VIEW I.T.A. NO. 955/MDS/10 6 THAT ASSESSEE WAS NOT THE RECIPIENT OF FREIGHT CHAR GES. ACCORDING TO HIM, THERE WAS NO ADDITION WHATSOEVER UNDER SECTION 40(A)(IA) OF THE ACT IN THE ASSESSMENT DONE ON THE ASSESSEE. INSOFA R AS THE BALANCE AMOUNT OF ` 3,50,79,220/- WAS CONCERNED, LD. CIT(APPEALS) WAS OF THE OPINION THAT THERE WAS NO CONTRACT BETWEEN ASSE SSEE AND TRANSPORTERS. IN THIS VIEW OF THE MATTER, HE DELET ED THE DEMAND OF TAX UNDER SECTION 201(1) AND ALSO INTEREST CHARGES UNDE R SECTION 201(1A) OF THE ACT. 8. WITH REGARD TO BROKER COMMISSION, CIT(APPEALS) W AS OF THE OPINION THAT SUCH PAYMENTS TO THE EXTENT OF ` 17,30,764/- WAS IN THE NATURE OF WAGES HAVING BEEN PAID AS COOLY. THEREFO RE, HE RULED THAT OUT OF TOTAL COMMISSION OF ` 20,01,839/-, ASSESSEE COULD BE SADDLED WITH LIABILITY UNDER SECTION 201(1) AND 201(1A) ONL Y FOR A SUM OF ` 2,71,075/- ONLY. 9. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT ASSESSEE HAD IN ITS IN COME AND EXPENDITURE ACCOUNT CLEARLY MENTIONED THE TOTAL FRE IGHT PAYABLE AS ` 13,98,57,884/-. IT COULD NOT NOW SAY THAT THIS FRE IGHT WAS NOT PAID DIRECTLY. ACCORDING TO LEARNED D.R., ASSESSEE HAD FAILED TO DEDUCT TAX AT SOURCE. POINTING TO THE TAX AUDIT REPORT FILED ALONG WITH THE RETURN, I.T.A. NO. 955/MDS/10 7 LEARNED D.R. SUBMITTED THAT ASSESSEE HAD NOT DEDUCT ED TAX AT SOURCE ON LORRY FREIGHT PAID TO LORRY OWNERS. IN SUPPORT, RELEVANT COLUMNS OF TAX AUDIT REPORT WAS RELIED BY THE LEARNED D.R. IN ANY CASE, ACCORDING TO LEARNED D.R., THERE WAS A VIOLATION OF RULE 46A SINCE LD. CIT(APPEALS) HAD ACCEPTED LETTERS FILED BY THE ASSE SSEE FROM THE CONSIGNEES WHICH STATED THAT AMOUNTS WERE PAID BY T HE CONSIGNEES TO VEHICLE OWNERS DIRECTLY AND NOT TO THE ASSESSEE. SIMILARLY, FOR BROKER COMMISSION ALSO, CIT(APPEALS) HAD ACCEPTED V EHICLE OWNERS RECEIPTS AND COOLY RECEIPT GIVEN BY THE ASSESSEE, W HICH DETAILS WERE NEVER BEFORE THE ASSESSING OFFICER. ACCORDING TO H IM, SECTION 194C WAS SQUARELY APPLICABLE ON THE PAYMENTS OF LORRY FR EIGHTS AND HAVING NOT DEDUCTED TAX AT SOURCE, ASSESSEE WAS LIABLE FOR TAX UNDER SECTION 194C OF THE ACT. SIMILARLY, ON THE PAYMENT EFFECTE D ON THE BROKERAGE, TAX WAS TO BE DEDUCTIBLE UNDER SECTION 1 94H OF THE ACT, WHICH THE ASSESSEE HAD FAILED TO DO. LD. CIT(APPEA LS), ACCORDING TO HIM, FELL IN ERROR IN TAKING THE VIEW THAT PAYMENTS WERE EFFECTED BY THE CONSIGNEE DIRECTLY TO THE LORRY OWNERS. ASSESSEE H AD FAILED TO PRODUCE ANY BOOKS IN SUPPORT OF ITS CLAIM AND FAILE D TO SHOW THAT THE AMOUNTS WERE NOT PAID BY IT TO THE LORRY OWNERS. I.T.A. NO. 955/MDS/10 8 10. PER CONTRA, LEARNED A.R., STRONGLY SUPPORTING T HE ORDER OF CIT(APPEALS), SUBMITTED THAT INCOME & EXPENDITURE A CCOUNT FILED BY THE ASSESSEE ALONG WITH RETURN OF INCOME, PLACED AT PAPER-BOOK PAGES 3,4 AND 5, CLEARLY SHOWED THAT THE FREIGHT CH ARGES PAID BY THE ASSESSEE THROUGH ITS BANK ACCOUNT WAS ` 3,50,79,220/- ONLY. THE BALANCE AMOUNTS WERE DIRECTLY SETTLED BY THE CONSIG NEES TO THE VEHICLE OWNERS. ASSESSEE COULD NOT BE SADDLED WITH LIABILITY OR THE ENTIRE AMOUNT UNDER SECTION 201(1) AND SECTION 201( 1A). AT THE BEST, ASSESSEE COULD HAVE BEEN LIABLE ONLY FOR NON- DEDUCTION OF TAX OF ` 3,50,79,220/- EFFECTED THROUGH ITS BOOKS. EVEN FO R THIS AMOUNT, THERE WAS NO CONTRACT WHATSOEVER WITH LORRY OWNERS AND THERE WAS NO NECESSITY FOR THE ASSESSEE TO DEDUCT ANY TAX AT SOU RCE. VIS--VIS THE CLAIM OF COOLY CHARGES, LEARNED A.R. SUBMITTED THAT ASSESSING OFFICER WAS PRESENT BEFORE CIT(APPEALS) DURING THE COURSE O F HEARING BEFORE HIM, AND THEREFORE, REVENUE CANNOT SAY THAT THERE W AS VIOLATION OF RULE 46A. THE PAYMENTS TO THE EXTENT ` 17,30,764/- WERE EFFECTED TO LOAD-MEN. THERE WAS NO REQUIREMENT FOR DEDUCTING A NY TAX AT SOURCE THEREON. THUS, ACCORDING TO HIM, LD. CIT(APPEALS) WAS JUSTIFIED IN CANCELLING THE LEVY OF TAX UNDER SECTION 201(1) AND INTEREST UNDER SECTION 201(1A) OF THE ACT. I.T.A. NO. 955/MDS/10 9 11. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. NOTE GIVEN UNDER INCOME & EXPENDITURE ACCOUNT, PLAC ED AT PAPER- BOOK PAGE 3, IS REPRODUCED HEREUNDER:- NOTE: TOTAL FREIGHT PAYABLE ` 13,98,57,884/-. TOTAL FRIGHT PAID BY US THROUGH OUR BANK ` 3,50,79,220/- AND BALANCE ` 10,47,78,664/- AT BILLS DIRECTLY TO THE VEHICLE OW NERS. THE INCOME & EXPENDITURE ACCOUNT FILED BY THE ASSES SEE, PLACED AT PAGES 3-5, DOES NOT SHOW ANY LORRY HIRE CHARGES PAI D BY THE ASSESSEE. THE TOTAL LORRY HIRE CHARGES RECEIVED BY THE ASSESSEE WERE ` 2,76,77,205/-. THE QUESTION HERE IS WHETHER ASSES SEE HAD FAILED TO DEDUCT TAX AT SOURCE ON THE LORRY HIRE CH ARGES PAID BY IT. NEITHER THE ASSESSING OFFICER NOR THE CIT(APPEALS) HAS VERIFIED THE BOOKS BEFORE COMING TO A CONCLUSION THAT ASSESSEE H AD FAILED TO DEDUCT TAX AT SOURCE. WE ARE UNABLE TO FIND WHETHE R THE SUM OF ` 13,98,57,884/- ALLEGED TO HAVE BEEN BY THE ASSESSEE FOR LORRY HIRE WERE SHOWN IN ITS BOOKS OF ACCOUNTS. IF THE VEHICL E OWNERS RECEIVED PAYMENTS DIRECTLY FROM CONSIGNEES AND IF SUCH AMOUN TS WERE NOT REFLECTED IN THE BOOKS OF THE ASSESSEE, THEN THERE WAS NO QUESTION OF ASSESSEE BEING LIABLE TO DEDUCT TAX AT SOURCE. TAX CAN BE DEDUCTED AT THE BEST BY THE PAYER ONLY AND WHEN THE PAYER IS THE CONSIGNEE, THERE IS NO WAY FOR THE ASSESSEE TO DEDUCT TAX. IF THE ASSESSEE HAD I.T.A. NO. 955/MDS/10 10 CLAIMED CREDIT FOR TDS IN ITS REGULAR ASSESSMENT FO R THE TAX DEDUCTED AT SOURCE BY THE CONSIGNEES, THEN NO DOUBT THE REVE NUE WAS WELL WITHIN ITS RIGHTS NOT TO GIVE CREDIT FOR SUCH CLAIM . IN FACT, AS NOTED BY THE LD. CIT(APPEALS), FOR ASSESSMENT YEAR 2007-08, WHEN THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3), ASSE SSEE WAS NOT GIVEN CREDIT FOR ITS CLAIM OF TDS TAKING A VIEW THA T ASSESSEE WAS NOT RECIPIENT OF FREIGHT CHARGES. HOWEVER, INSOFAR AS THE SUM OF ` 3,50,79,220/- PAID BY THE ASSESSEE, IF IT IS APPEAR ING IN ITS BOOKS, THEN WITHOUT DOUBT, IT WAS LIABLE TO DEDUCT TAX AND FAILURE TO DEDUCT TAX AT SOURCE WILL DEFINITELY INVITE APPLICATION OF SEC TIONS 201(1) AND 201(1A) OF THE ACT. AS STATED BY THE LEARNED D.R. , ASSESSEE COULD NOT HAVE EFFECTED SUCH PAYMENTS WITHOUT HAVING ANY CONTRACTS WITH THE LORRY OWNERS. 12. IN THE CASE OF BROKER COMMISSION, CIT(APPEALS) HAS GIVEN A FINDING THAT THE PAYMENTS TO THE EXTENT OF ` 17,30,764/- ON WHICH TAX WAS NOT DEDUCTED, WAS ACTUALLY COOLY TO LOAD MEN. AGAINST THIS, FINDING OF THE A.O. IS THAT DETAILS IN THIS REGARD WERE NEVER FILED BY THE ASSESSEE. 13. IN THE FITNESS OF THE THINGS, WE ARE OF THE OPI NION THAT BOTH THE ISSUES REQUIRE A RE-LOOK BY THE ASSESSING OFFICER. ASSESSING OFFICER I.T.A. NO. 955/MDS/10 11 HAS TO VERIFY THE BOOKS OF THE ASSESSEE AND SEE WHE THER THE PAYMENTS OF FREIGHT HAD GONE FROM THE BOOKS OF THE ASSESSEE. IF THE PAYMENTS HAD GONE FROM THE BOOKS OF THE ASSESSEE, T O THAT EXTENT ASSESSEE IS LIABLE TO DEDUCT TAX AND RIGOURS OF LAW WILL BE ATTRACTED IF IT HAD NOT EFFECTED THE TAX DEDUCTIONS AS STIPULATED. HOWEVER, FOR THE PAYMENTS NOT APPEARING IN THE BOOKS OF THE ASSESSEE , WHICH HAVE BEEN DIRECTLY PAID BY THE CONSIGNEES TO THE VEHICLE OWNERS, ASSESSEE CANNOT BE SADDLED WITH ANY TAX UNDER SECTION 201(1) AND/OR INTEREST UNDER SECTION 201(1A) OF THE ACT, FOR A SIMPLE REAS ON THAT ASSESSEE CANNOT DEDUCT ANY TAX ON PAYMENTS EFFECTED BY SOMEB ODY ELSE. NO DOUBT IF ASSESSEE DOES NOT PRODUCE ITS BOOKS, A.O. IS FREE TO REACH AN ADVERSE INFERENCE. 14. VIS--VIS BROKERAGE PAYMENT TO THE EXTENT OF ` 17,30,764/- IS CONCERNED, ASSESSING OFFICER HAS TO GIVE A CHANCE T O THE ASSESSEE TO PROVE THAT THESE WERE INDEED COOLY CHARGES PAID. 15. WITH THE ABOVE OBSERVATION, WE SET ASIDE THE OR DERS OF AUTHORITIES BELOW AND REMIT THE ISSUE BACK TO THE F ILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH, IN ACCORDANCE WIT H LAW. I.T.A. NO. 955/MDS/10 12 THE ORDER WAS PRONOUNCED IN THE COURT ON THURSDAY, THE TENTH OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 10 TH JANUARY, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-II, MADURAI (4) CIT(TDS), CHENNAI (5) D.R. (6) GUARD FILE