Dy Comm of Income-tax, Nashik V. Shri Sohanlal Mohanlal Bhandari, Nashik

ITA 990/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9922 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-10-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 03-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Corroborative evidences
• Section: 194C

Judgement Text

N THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 990/PN/2011 (ASSTT. YEAR : 2 008-09) DEPUTY COMMISSIONER OF INCOME TAX, APPELLANT CIRCLE-1, NASHIK V. SHRI SOHANLAL MOHANLAL BHANDARI RESPONDENT OPP. POLICE STATION, NIPHAD, TAH. NIPHAD DIST. NASHIK PAN :ABTPB2116L C.O. NO. 89/PN/2011 (ARISING OUT OF ITA NO. 990/PN/2011) (ASSTT. YEAR : 2008-09) SHRI SOHANLAL MOHANLAL BHANDARI CROSS OBJECTOR OPP. POLICE STATION, NIPHAD, TAH. NIPHAD DIST. NASHIK PAN :ABTPB2116L V. DEPUTY COMMISSIONER OF INCOME TAX, RESPONDENT CIRCLE-1, NASHIK ASSESSEE BY : SHRI AB HAY AVCHAT REVENUE BY : MS. ANN KAPTHUAMA DATE OF HEARING : 04/10/1 2 DATE OF PRONOUNCEMENT : 15-10-12 O R D E R PER R.S. PADVEKAR, JM IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE IM PUGNED ORDER OF THE LD CIT(A), NASIK, DATED 16/5/2011 FOR THE A.Y. 2008-09. 2. THE FIRST ISSUE IS THE ADDITION MADE BY THE A.O OF RS.8,92,667/- ON ACCOUNT OF BAD DEBT WHICH WAS DELETED BY THE LD CI T(A). 3. THE FACTS REVEAL FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS ENGAGED IN THE TRADING IN ONION AND GRAINS AS WELL AS ACT AS A COMMISSION AGENT AND TRANSPORT AGENT. FOR THE A.Y. 2008-09, T HE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.60,24 ,620/-, WHICH WAS 2 ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHANDARI A.Y.2008-09 SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S. 143(3). IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE HAS CLAIMED D EDUCTION TOWARDS THE BAD DEBT TO THE EXTENT OF RS. 8,92,667/-. THE A.O. HAS OBSERVED THAT AS PER THE COPY OF THE LEDGER A/C. OF THE DEBTORS & BA D DEBT A/C. SHOWED THAT ALL SIX ACCOUNTS ARE THE RUNNING ACCOUNTS AND THE ASSESSEE IS HAVING REGULAR TRANSACTIONS WITH SIX PARTIES. THE A.O ASKE D THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS AND THE ASSESSEE WAS REQUESTED TO PRODUCE SUPPORTING EVIDENCE. THE ASSE SSEE STATED THAT THE MATERIAL WHEN LOADED FOR TRANSPORT IS GOOD CONDITIO N BUT WHEN THE SAME ACTUALLY REACHED THE PARTIES, THE QUALITY GOT DEGEN ERATED. THE ASSESSEE STATED BEFORE THE A.O THAT WHEN THE MATERIAL IS SP OILED, IT BECOMES DIFFICULT TO RECOVER THE AMOUNT, EVEN IF THE SALES ARE MADE IN THE CURRENT YEAR. THE A.O. MADE THE DISALLOWANCE TO THE EXTENT OF RS. 8,92,677/- BY STATING THAT THE ASSESSEE WAS UNABLE TO FURNISH THE DETAILS OF THE TRANSACTIONS WHERE THE LOSS OCCUR DUE TO DEGENERAT ION OF MATERIAL, AND WHICH WERE NOT ACCEPTED BY THE CONSIGNEE. IN SUM A ND SUBSTANCE, THE A.O HELD THAT ASSESSEE FAILED TO PROVE THAT THE DE BT WAS IRRECOVERABLE. THE LD CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE ADDITION. 4. WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE R EASONS GIVEN BY THE AUTHORITIES BELOW. IN THIS CASE, THERE IS NO D ISPUTE THAT THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNT CLAIMED AS A BA D DEBT IN HIS BOOKS OF ACCOUNT. THE ASSESSEE IS IN THE TRADING OF THE ONI ONS AND THE CASE OF THE ASSESSEE IS THAT THE AMOUNT TO THE EXTENT OF SPOILE D ONIONS CANNOT BE RECOVERED AND HENCE, THOSE AMOUNTS ARE WRITTEN OFF EVEN IF THEY PERTAINED TO CURRENT YEAR. NOWHERE IT IS DISPUTED THAT CONDITIONS OF SEC. 36(2) ARE COMPLIED. IN OUR OPINION, THE ISSUE STA NDS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE S UPREME COURT IN THE CASE OF TRF LTD. VS. CIT, 323 ITR 397 AS WELL AS BY THE DECISION OF HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. STAR CHEMICALS (BOMBAY) PVT. LTD., 313 ITR 126. WE FIND NO REASO N TO INTERFERE WITH THE ORDER OF THE LD CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED AND GROUND TAKEN BY THE REVENUE IS DISMISSED ON THIS IS SUE. 5. THE NEXT ISSUE IS DISALLOWANCE MADE BY THE A.O O F RS. 10,20,000/- U/S. 40A(IA) OF THE ACT FOR NON-COMPLIANCE OF TDS P ROVISION. THE A.O HAS OBSERVED THAT LEDGER EXTRACT OF COMMISSION SUBMITTE D BY THE ASSESSEE SHOWED THAT THE ASSESSEE HAD PAID COMMISSION OF RS. 51,000/- TO 20 3 ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHANDARI A.Y.2008-09 PARTIES, WHICH LIST IS GIVEN ON PAGE NO. 3 OF THE A SSESSMENT ORDER. THE A.O ASKED THE ASSESSEE TO JUSTIFY THE PAYMENT OF CO MMISSION PAID TO THOSE PARTIES AND ALSO TO JUSTIFY NON-DEDUCTION OF TDS FROM THE PAYMENT MADE TO THOSE PERSONS. THE ASSESSEE CONTENDED THAT THE AMOUNT IS PAID TO A GROUP OF PERSONS (TOLI) AT THE STATION TOWARDS CLEANING EXPENSES OF RAILWAY WAGONS AND OTHER CHARGES. THE ASSESSEE FURN ISHED THE PHOTO COPIES OF THE VOUCHERS FOR THE PAYMENT MADE TO ONE OF THE RECIPIENT SHRI RAJENDRA AMBADAS SHINGARE, WHO HAS RECEIVED ALL THE PAYMENTS. THERE WERE 24 VOUCHERS WHICH HAVE BEEN SIGNED BY SHINGAR E. THE AMOUNT HAS BEEN ACCOUNTED IN THE BOOKS OF ACCOUNT UNDER THE HE AD COMMISSION. THE A.O MADE THE DISALLOWANCE BY GIVING THE REASON THAT THERE WERE CONFLICTING AND DIVERGENT STANDS OF THE ASSESSEE I N RESPECT OF THE SAID PAYMENT AND HENCE, THE SAID PAYMENT CANNOT BE CONSI DERED GENUINE. HE FURTHER HELD THAT EVEN IF IT IS A GENUINE PAYMENT M ADE TO A PERSON ORGANIZING LABOUR FOR CARRYING OUT WORK OF RAILWAY WAGONS, IT IS IN THE NATURE OF A CONTRACTUAL PAYMENT AND ASSESSEE WAS D UTY BOUND TO MAKE THE TDS U/S. 194C OF THE ACT. THE A.O., THEREFORE, ON THIS REASON ALSO MADE THE DISALLOWANCE AND MADE THE ADDITION TO THE EXTENT OF RS. 10,20,000/- IN HIS TOTAL INCOME. 6. THE LD CIT(A) DELETED THE ADDITION MADE BY THE A .O. THE REASONS GIVEN BY THE LD CIT(A) ARE AS UNDER : 6.4. FROM THE ABOVE OBSERVATIONS OF THE LD. AO, IT IS APPARENT THAT HE HAS MADE THE IMPUGNED DISALLOWANCE ON TWO GROUNDS. FIRSTLY, ACCORDING TO HIM, THE ENTIRE COMMISSION PAYMENT OF RS. 10,20, 000/- IS NOT GENUINE AS THE APPELLANT HAS TAKEN DIFFERENT STAND WHILE WR ITING THE BOOKS OF ACCOUNT AND FILING THE RETURN OF INCOME. SECONDLY , THE PAYMENT MADE FOR ORGANIZING LABOUR WORK FOR CARRYING OUT THE CL EANING OF RAILWAY WAGON WAS, IN THE AOS OPINION IN THE NATURE OF CONTRACTU AL PAYMENT ON WHICH TDS WAS REQUIRED TO BE DEDUCTED U/S 194C. SINCE T HE APPELLANT HAS NOT DEDUCTED THE TDS, THE IMPUGNED AMOUNT WAS DISALLOWE D. THE APPELLANTS BUSINESS IS THAT OF COMMISSION AND TRANSPORT AGENT. IN THIS PROCESS, THE APPELLANT IS REQUIRED TO TAKE RAILWAY WAGONS ON HIR E FROM THE RAILWAYS AND BEFORE THE WAGONS ARE PUT TO USE AND AFTERWARDS ALS O, THE APPELLANT IS OBLIGED TO KEEP THEM CLEAN AND PROPERLY WASHED. TH EREFORE, THE APPELLANT WAS REQUIRED TO TAKE THE SERVICES OF GROU P OF PERSONS WHO WERE PAID LABOURERS FOR CLEANING THE RAILWAY WAGONS. TH EREFORE, IT IS FOUND TO BE AN INTEGRAL PART OF THE APPELLANTS BUSINESS. THE LD. AO HAS NOT INVOKED THE PROVISIONS OF SECTION 40A(IA), INSTEAD HE HAS PRIMARILY TREATED THE ENTIRE COMMISSION PAYMENT AS NOT GENUINE. HOWEV ER, WHILE GIVING THE FINDING, THE LD. AO HAS NOT PROPERLY APPRECIATED TH E FACTS OF THE CASE AND THE NATURE OF BUSINESS. THE LD. AR HAS CANVASSED B EFORE ME THAT PROPER UPKEEP AND CLEANLINESS OF THE RAILWAY WAGON TAKEN B Y THE APPELLANT FROM THE RAILWAYS IS THE APPELLANTS RESPONSIBILITY. TH E WORK AND SERVICES RENDERED BY THE VARIOUS PERSONS TO WHOM THE IMPUGNE D AMOUNT WAS PAID HAS NOT BEEN DISPUTED OR DENIED BY THE ASSESSING OF FICER. WITH REGARD TO THE FACT RECORDED BY THE AO THAT ALL THESE PAYMENTS WERE RECEIVED BY ONE 4 ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHANDARI A.Y.2008-09 INDIVIDUAL SHRI RAJENDRA AMBADAS SHINGARE, THE LD. AR HAS ARGUED THT PAYMENT IN AFFECT WAS MADE TO 20 DIFFERENT PERSONS WHICH ARE REPRODUCED ON PAGE 3 OF THE IMPUGNED ASSESSMENT ORDER, HOWEVER , THE PERSON SHRI RAJENDRA AMBADAS SHINGARE WAS ONLY THE TOLI LEADER WHO HAS BROUGHT ALL THESE WORKERS FOR KEEPING THE JOB OF CLEANING DONE . THE APPELLANT HAS FURNISHED COPIES OF VOUCHERS FOR PAYMENT BEFORE THE ASSESSING OFFICER AND THE FACT OF PAYMENT HAS NOT BEEN DISPUTED. ON GOIN G THROUGH THE FINDINGS OF THE ASSESSING OFFICER, IT IS SEEN THAT HE HAS DI SPUTED THE INCREASE IN THE PAYMENT TO THESE WORKERS FROM RS. 1500 TO RS. 4000/ - AND CONCLUDED THAT THE PAYMENTS WERE NOT GENUINE. THE LD. AR H AS SUBMITTED THAT THERE IS NO DIVERSITY IN THE STAND TAKEN BY THE APP ELLANT IN THE BOOKS OF ACCOUNT AND IN THE RETURN OF INCOME. WHATEVER HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT, THE SAME HAS BEEN INCORPORATED WH ILE FILING RETURN OF INCOME. THIS CONTENTION IS FOUND TO BE CORRECT. W ITH REGARD TO THE INCREASE IN THE PAYMENTS UNDER THIS HEAD, IT WAS S UBMITTED BY THE LD. AR THAT THE PAYMENTS HAVE INCREASED PER PERSON FROM RS . 1500 TO RS.4000/- KEEPING IN VIEW THE AMOUNT OF JOB REQUIRED TO BE DO NE AND THE AVAILABILITY OF THE WORKERS FOR THE JOB. IN MY CONSIDERED VIEWS , THIS CANNOT BE HELD AGAINST THE APPELLANT. WITH REGARD TO THE SECOND GROUND TAKEN BY THE ASSESSING OFFICER FOR MAKING THE IMPUGNED DISALLOWA NCE, IT IS NOTED THAT THIS IS NOT A CONTRACTUAL PAYMENT WITHIN THE MEANIN G OF SECTION 194C. THERE WAS NO CONTRACT BETWEEN THE APPELLANT AND THE PERSONS WHO CARRIED OUT THE WAGON CLEANING JOB. INSTEAD THE PA YMENTS HAVE BEEN MADE TO INDIVIDUAL WORKERS THROUGH THEIR TOLI LEADE R VIS. RAJENDRA AMBADAS SHINGARE. THE TOLI LEADER BY NO STRETCH OF IMAGINATION CAN BE CALLED A LABOUR CONTRACTOR. THEREFORE, THERE IS NO APPLICATION OF SECTION 194C ON THESE FACTS. AS A NATURAL COROLLARY TO THI S FINDING, SECTION 40A(IA) IS ALSO NOT APPLICABLE, WHICH THE ASSESSING OFFICER HAS OTHERWISE NOT INVOKED WHILE MAKING THE IMPUGNED DISALLOWANCE. TH E APPELLANTS CASE IS, THEREFORE, SUPPORTED BY THE DECISION OF THE HON BLE TRIBUNAL IN THE CASE OF SAMANWAYA V. ASSTT. CIT (SUPRA) AND THE APEX COURT IN THE CASE OF BIRLA CEMENT WORKS VS. CBDT (SUPRA). IN VIEW OF THESE FINDINGS OF FACT AND THE POSITION OR LAW, THE IMPUGNED DISALLOW ANCE OF RS. 10,20,000/- IS UNJUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS, THEREFORE, ALLOWED. NOW, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. WE FIND THAT SO FAR AS GENUINENESS OF THE PAYMENT IS CONCERNED, IT IS NOT THE CASE OF THE A.O THAT THE ASSESSEE IS NOT USING RAILWAY WAGO NS FOR TRANSPORTATION. THE LD COUNSEL ARGUED THAT IT IS A CUSTOM THAT THE TOLI LEADER ACCEPTS THE PAYMENT AND IN THE GROUP THEY CARRY OUT THE CLEANIN G JOB. HE FURTHER ARGUES THAT INCREASE IN THE PAYMENT WAS DUE TO MARK ET DEMAND I.E. FROM RS. 1500/- TO RS. 4000/-. HE ALSO ARGUED THAT EXCEP T SUSPICION, NOTHING IS THERE TO SUPPORT THE VIEW TAKEN BY THE A.O. 8. PER CONTRA, THE LD. D.R. SUBMITS THAT IT IS CER TAINLY STRANGE THAT THE PAYMENT IS INCREASED FROM RS. 1500/- TO RS. 4000/- . IN OUR OPINION, THE A.O SHOULD HAVE TAKEN SOME PAINS TO BRING ON RECORD SOME MATERIAL TO SHOW THAT THE AMOUNTS PAID BY THE ASSESSEE WHICH W ERE DULY RECORDED IN 5 ITA NO. 990/PN/2011 & C.O.NO.89/PN/11 SOHANLAL MOHANLAL BHANDARI A.Y.2008-09 THE BOOKS OF ACCOUNT WERE INFLATED AS ADMITTEDLY, I T IS NOT DISPUTED BY THE A.O THAT ASSESSEE WAS REQUIRED THE SERVICES FOR CL EANING THE RAILWAY WAGONS. 9. SO FAR AS THE SECOND REASON OF THE A.O IS CONCER NED, IN OUR OPINION, IT IS A CUSTOM IN THAT PARTICULAR TRADE TO MAKE A G ROUP AND UNDERTAKE CLEANING WORK. IN OUR OPINION, IT CANNOT BE SAID AS A SUPPLY OF LABOURERS BUT, THE GROUP OF LABOURERS IS ENGAGED THEMSELVES A ND PROVISIONS OF SEC. 194C ARE NOT APPLICABLE AS RIGHTLY HELD BY THE LD C IT(A). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) ON THIS ISSUE. ACCORDINGLY, RELEVANT GROUND TAKEN BY THE REVENUE I S DISMISSED. 10. NOW WE TAKE CROSS OBJECTION FILED BY THE ASSESS EE. FROM THE GROUND TAKEN BY THE ASSESSEE, IT IS SEEN THAT SAME IS SUPPORTING THE ORDER OF LD. CIT(A) AND NO GRIEVANCE IS MADE. ACCO RDINGLY, SAME IS DISMISSED AS INFRUCTUOUS. 11. IN THE RESULT, BOTH THE REVENUES APPEAL AND AS SESSEES CROSS OBJECTION ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 15TH OCTOBER, 2012 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT -I, NASIK 4. THE CIT(A)- I, NASIK 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /- TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE