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Income Tax Appellate Tribunal, BENCH, NAGPUR
Before: SHRI D. KARUNAKARA RAO, AM & SHRI PARTHA SARATHI CHAUDHURY, JM
आदेश / ORDER
PER D. KARUNAKARA RAO, AM:
All the three appeals filed by the Revenue are against respective orders of CIT(A)-III, Nagpur, all dated 04.07.2014 for the assessment years 2005-06, 2007-08 and 2008-09.
ITA No.435/NAG/2014, A.Y. 2005-06
The grounds raised by the Revenue are as under:-
2 ITA Nos.435 to 437/NAG/2014
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.1,87,98,351/- being the bogus expenses claimed by the assessee. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.1,87,98,351/- made u/s. 40(a)(ia) of the I.T. Act, 1961, though no tax at source u/s. 194C has been deducted.
Regarding the appeal in ITA No.435/NAG/2014, at the outset, the Ld. DR submitted this is a case where the assessee made payments to the middlemen for the purpose of disbursement among the truck owners for rendering of transportation services to the assessee i.e. to carry coal from the assessee’s premises to other places. These payments were made without deducting TDS and therefore, the provisions of section 40(a)(ia) of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’) were invoked by the Assessing Officer apart from other reasons. The CIT(A) granted relief to the assessee holding that the addition is uncalled for. However, it is case of Revenue that these payments attract the provisions of section 40(a)(ia) r.w.s. 194C of the Act.
On the other hand, the Ld. Counsel for the assessee submitted that the assessee made payments to M/s. Ramkrishna Transport Company, who in turn, disbursed the amount among the truck owners for the services rendered by truck owners to the assessee. However, there is no finding of fact at the level of Assessing Officer / CIT(A) to demonstrate that M/s. Ramkrishna Transport Company acted in the capacity of an agent between the assessee and truck owners. The CIT(A) granted relief without going into the aforesaid aspects of the issue under consideration.
On hearing both the sides, we are of the opinion that the order of CIT(A) cannot be described as a speaking order since his finding is not given in the
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words in the order with regard to the said agency centric argument of the assessee. For this limited purpose, we are of the opinion that the issue raised in the grounds must be remanded to the file of CIT(A) for want of his speaking order on the issue of agency. The CIT(A) is directed to pass a speaking order after granting reasonable opportunity of hearing to the assessee in accordance with the principles of natural justice. Accordingly, the grounds raised are allowed for statistical purpose.
ITA No.436/NAG/2014, A.Y. 2007-08
With regard to appeal in ITA No.436/NAG/2014, at the outset, Ld. Counsel for the assessee submitted that the appeal of the Revenue is liable to be dismissed on account of low tax effect in terms of latest CBDT Circular No.17/2019 [F.No.279/Misc.142/2007-ITJ (Pt)] dated 08th August, 2019 read with Circular No.3 of 2018 dated 11.07.2018. The Ld. Counsel for the assessee submitted that the Revenue in appeal raised grounds assailing the findings of CIT(A) in deleting the additions. Thus, the tax effect on the said additions is less than Rs.50 lakhs.
The Ld. DR for the Revenue fairly admitted that in the present appeal by the Revenue the tax effect is less than Rs.50 lakhs.
Both sides heard. The Revenue is in appeal against the order of CIT(A) in deleting the additions. Undisputedly, the tax effect involved in appeal is less than the monetary limit prescribed by the recent CBDT Circular No.17/2019 [F.No.279/Misc.142/2007-ITJ (Pt)] dated 08th August, 2019 read with Circular No.3 of 2018 dated 11.07.2018 for filing of appeals before the
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Tribunal by the Department. The CBDT vide circular dated 08-08-2019 (supra) has amended Para 3 of Circular No.3 of 2018 dated 11-07-2018 thereby enhancing monetary limit of tax effect from Rs.20 Lakhs to Rs.50 Lakhs for filing of appeals by the Department before the Tribunal. Thus, without going into merit of the issues raised in the appeal, in view of the CBDT Circular (supra) the present appeal of the Revenue is dismissed on account of low tax effect.
Before parting, we clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeal, with the requisite material to show that the appeal is protected by the exceptions prescribed in Para 10 of the Circular dated 11-07-2018 and its amendment dated 20-08-2018. Thus, appeal of the Revenue is dismissed.
ITA No.437/NAG/2014, A.Y. 2008-09
The grounds raised by the Revenue are as under:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.1,14,56,140/- being the bogus expenses claimed by the assessee. 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs.4,58,24,560/- made u/s. 40(a)(ia) of the I.T. Act, 1961, though no tax at source u/s. 194C has been deducted.
Brief facts relating to the issue are that, the Assessing Officer has made disallowance u/s 40(a)(ia) of the Act on the ground that the assessee has not deducted TDS on the payments made to truck operators. The relevant para of assessment order is extracted as under:-
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“3.5 Disallowance u/s 40(a)(ia):- A) It is seen that the assessee made payments of 57280700/- on account of impugned freight transport charges paid. All these payments have been made in cash. The assessee contented that it did not deduct TDS as the payment did not exceed Rs.4000/- to Rs.5000/-. Needless to mention that M/s Murli Industries Ltd has clearly accounted the payments made to the assessee as freight charges paid and deducted TDS accordingly. Therefore as far as the assessee is concerned, the payments so made are nothing by freight charges paid to the truck operators. B) It is seen that the assessee did not provide any details of the parties to whom the payments were made. The assessee was required to provide the details party wise with their addresses and the total amount of transport charges paid to such parties with their confirmation. The assessee did not provide any such details to substantiate its claim that the payments did not require any TDS. C) It is ample clear that the assessee did not maintain / provide the details to avoid the detection of disallowance u/s 40(a)(ia). The assessee did not route these transactions through profit and loss a/c also to avoid the detection such transactions. Even the assessee did not narrate about such transactions in the notes to its accounts. It clearly shows the intentions of the assessee to conceal these whole transactions. Under the circumstances, I left with no alternative other than to disallow Rs 57280700/- u/s 40(a)(ia). However out of the total payments, payments of Rs 11456140/- has been treated as bogus expenses. Therefore the disallowance is restricted to Rs 45824560/-. Penalty proceedings u/s 271(1)(c) has been initiated separately.”
Before the CIT(A), the assessee has raised the plea that in no case the total payment to truck owners has exceeded Rs.50,000/- and hence, there was no requirement to deduct tax on such amounts. The CIT(A) after considering various submissions of assessee and relying on several judicial decisions including the assessee’s own case has directed the Assessing Officer to delete the disallowance made u/s 40(a)(ia) of the Act. The relevant findings of CIT(A) are extracted as under:- “7. ……. In this case, the appellant had furnished detailed submissions during the course of the appellate proceedings. Accordingly the matter was sent to AO on 17.04.2013 for submission of the Remand Report after examining the documents in detail and also after according an opportunity of being heard to the appellant. The AO submitted his Remand Report in compliance of the said letter. Further in his Remand Report submitted, it is observed that he had again relied heavily upon the findings in the assessment order and has merely reiterated the earlier findings of the AO. In the original assessment order, the AO had mentioned that the payments made on account of freight charges were paid in cash. However it was explained during the course of assessment proceedings as well as before the Appellate Authorities that the payments on account of freight expenses were made in cash. The copy of ledger account giving all the particulars date, and amount were submitted in the Remand Report. The assessee has also submitted the list of the vehicles numbers of the
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various truck operators and the payments made to them. Further all the payments have been found duly recorded in the regular books of accounts of the appellant. The assessee has also submitted the stock statement and has submitted that the coal was loaded from the various collieries to the depots, and the fact that the assessee did not possess any trucks is also clearly evident from the balance sheet of the assessee, I find force in such submissions and as such the said expenses cannot be treated as bogus, which have been summarily treated so by the AO and 20% of the same have been disallowed. The assessee has further contended that the list of the 22 truck operators were given to the A.O. for two A.Y. i.e. 2007-08 & 2008-09. Hence, there was no failure on his side for giving the details of the truck operators for the current assessment year. The A.R. of the appellant submitted that the notices u/s 131 were issued to the Truck Operators in some of the cases which were served in some cases and returned undelivered in a few other cases. The statements u/s 131 recorded in the said case were never supplied to the assessee, nor the appellant was given any opportunity to cross examine the same. Thus the so called Ex-party evidence cannot help the case of the Department. The assessee has relied upon the case of Hon’ble Supreme Court in case of C. Vasantlal and Co. Vs. CIT (45 ITR 206, 209) (SC) in which it was held that: "It is open to the AO to collect material to facilitate assessment even by the Private enquiry but as pointed out by the Supreme Court that if he desires to use the material so collected the assessee must be informed what material, is called and must be given adequate opportunity of explaining it. And that it is exactly what the Ld. AO has not at all done". The counsel for the assessee has also relied upon the Audit conducted by the Superintendent of Excise (Audit), according to which, these payments were treated to be genuine and assessee had been directed to pay the service tax on the same. The copy of this order had also been submitted on record. Further, the AR has relied upon the case of an Nandlal Enterprises i.e. the appellant itself in 1TA No.198/Nagpur/2009 for the AY 2004-05 vide order dated 10.10.2012, wherein the honorable ITAT in that case has held- "We have heard the rival submissions and carefully considered the same along with the order of the tax authorities. The finding of fact given by the CT(A) is that the assessee incurred transport charges through Ramakrishna Transport Company at Rs 1,51,42,000/- during the year. The proprietor of the firm has duly confirmed this fact. Records of the assessee as well as that of Ramakrishna Transport Company also confirmed this fact. No contrary evidence or material was filed before us which may compel us to take a view different from CIT(A). Under these facts and circumstances, we agree with the finding of the CIT (A) deleting the addition of Rs.22,93,417/-." In para 8.5 of the assessment order, the A.O. has observed that the assessee did not deduct TDS u/s.194C and he accordingly held that Rs.5,72,80,700/- being the freight expenses payment, were liable to be disallowed. After deducting the amount of Rs.1,14,56,140/- (which has already been added as mentioned above), the balance amount of Rs.4,58,24,560/- had been disallowed u/s.40(a)(ia) of the I T Act. The AR of the assessee in this regard has submitted a ledger of freight payments to the truck operators and it is evident from the same that none of the payments exceeded Rs.50,000/- to any particular truck operator and thus the assessee company was not required to deduct any TDS.
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Hence, as correctly claimed by the counsel for the assessee, the provisions of the section 194C are not applicable to the assessee. The appellant has relied upon the following decisions:- ACIT V/s. M/s. Nandlal Enterprises ITA No.198/Nagpur/2009. CIT V/s. Excel Industries Ltd. 358 ITR 295 (SC). Kanwar Singh Saini V/s. HC Delhi (2012) 4 SCC pg 308. In the case of CIT vs. Excel Industries Ltd (358 ITR 295), the Apex Court has held as under: "As noted by the Tribunal, a consistent view had been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee, and consequently, there was no reason for if to take a different view unless there were very convincing reasons, none of which were been pointed out by the learned counsel for the Revenue." The gist of the aforesaid cases are quite relevant to the facts of the present case. Thus, after having examined the details furnished by the appellant during the appellate proceedings as well as the Remand Report and in light of the above facts and legal positions settled by the judicial bodies, I am of the firm view that the Freight Expenses are genuine & the appellant was not liable to deduct tax on the same. Hence, the claim of the appellant is allowed and the addition made by the AO amounting to Rs.1,14,56,140/- made on account of 20% of Freight expenses and Rs.4,58,24,560/- on account of disallowance u/s.40(a)(ia) is directed to be deleted.”
On hearing both the sides, we are of the opinion that the CIT(A) has rightly granted the relief to the assessee and the same is fair and reasonable. Hence, the same does not call for interference. Accordingly, the grounds raised by Revenue are dismissed.
In the result, appeal of Revenue in ITA No.435/NAG/2014 is allowed for statistical purpose and appeals of Revenue in ITA Nos.436 & 437/NAG/2014 are dismissed as above.
Order pronounced in open Court on 22nd day of October, 2019.
Sd/- Sd/- PARTHA SARATHI CHAUDHURY D. KARUNAKARA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER पपणे / Pune; ददनधंक / Dated : 22nd October, 2019. GCVSR
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आदेश की प्रनतनलनप अग्रेनषत / Copy of the Order forwarded to : अपऩलधथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(A)-III, Nagpur. 4. The CIT(Central), Nagpur. 5. नवभधगऩय प्रनतनननध, आयकर अपऩलऩय अनधकरण, Nagpur / DR, ITAT, Nagpur. गधर्ा फ़धइल / Guard File. 6. आदेशधनपसधर / BY ORDER, // True Copy // Senior Private Secretary आयकर अपऩलऩय अनधकरण, पपणे / ITAT, Pune.