GPR MARITIME AGENCIES,VISAKHAPATNAM vs. THE INCOME TAX OFFICER, WARD-1(1), VISAKHAPATNAM

The grounds of appeal taken by the assessee in Form No. 36 are as follows: -

Brief facts emerging from records are that, assessee is partnership-firm carrying on business of shipping agency, Stevedoring, Clearing and forwarding and has filed its return under section 139(1) of the Act on 28.09.2023 declaring a total income of Rs.22,68,888/- which was selected for scrutiny under CASS. In response to statutory notice under section 143(2) of the Act where full details and particulars were filed as per queries raised in notice under section 142(1) of the Act and supporting books of accounts along with purchase and sale registers, party-wise ledgers and invoice were produced which were examined. Finally the assessment was completed on a total income of Rs.1,11,98,415/- (including the addition of Rs.89,29,527/- under section 40(a)(ia) of the Act, ( being 30% disallowance ) for non-deduction of TDS in respect of payments made for office rent amounting to Rs.12,19,028 u/s 194 I and for non-deduction of TDS u/s 194C allegedly covering transactions amounting to Rs.80,15,969/- and Rs.2,05,30,095/- with M/s. Imperial Shipping Services Co., and M/s. Bothra Shipping Services Pvt., Ltd., respectively ).

The matter carried in appeal before the Ld. First Appellate Authority has been dismissed after considering the written submissions filed by the assessee in course of Appellate Proceedings, relevant observation in Para No. 5 of the Appellate Order is as follows: -

Regarding the issues of non-deduction u/s 194C the Ld. CIT(A) dismissed the appeal of the assessee by observing as under: -

Now the assessee is before the Tribunal on the grounds contained in the memorandum of the appeal. In course of hearing, Learned Authorized Representative (for short “Ld.AR”) has submitted a Paper Book consisting of 70 pages which were filed before lower authorities and an additional Paper Book consisting of 34 pages (PB – 2) which is admitted by the Ld.AR to contain fresh evidences not furnished before the lower authorities.

Ld.AR of the assessee submitted that the first disallowance relates to an amount of Rs.3.65 lakhs u/s 40(a)(ia) which is on account of payments made for office rent to various parties at different ports and the claim of the appellant before the Ld.AO was that the payments has been made to each payee which was less than the maximum allowable limit of Rs.2,40,000/- per annum and the said payments are not hit by section 194 I of the Act. The Ld.AO has disallowed the same due to absence of documentary evidences , which is now been filed by way of additional evidences before the Tribunal for the first time , contained in the additional Paper Book Page Nos. 2 to 22 which contains copies of ledger accounts of rents paid to various parties at different ports , all through banking channels and the respective parties has also filed confirmations of receipts along with PAN , certifying payments at different ports being less than the stipulated limit.

Regarding the addition of Rs.85.63 lakhs, sustained by the Ld. CIT(A) on account of payments being made to M/s. Imperial Shipping Services Co., and M/s. Bothra Shipping Services Pvt., Ltd., without TDS u/s 194C , the explanation of the Ld.AR is that, the assessee is a shipping agent acting for various principals ( foreign vessels ) and during its normal business activities the assessee facilitates customs and port clearance and incurs expenditure on behalf of his principals at Vishakhapatnam port and whenever such services are to be provided at different ports outside its home territory , the appellant takes the help of other sub-agents at respective ports for making upward payments to port authorities like “Kakinada Seaports Limited” as in the instant case for arranging clearance of shipping vessels. He further submitted that the first payment of Rs.80,00,582/- was made to M/s. Imperial Shipping Services Co., which was by way of reimbursement of actual expenses incurred by the sub-agent on behalf of the assessee and as documentary evidences the appellant has furnished copies of invoices raised by the two companies and confirmation letters where the sub-agents have confirmed that impugned payments were received as reimbursement of expenses for making payments to Kakinada Seaports Limited. Similarly an amount of Rs.2.05 crores has been paid to the other party ( Sub-agent ) M/s. Bothra Shipping Services Pvt., Ltd., under similar circumstances.

The Ld. CIT(A), has refused to accept this claim on the ground that the payees raised invoices in the name of the assessee company and that the assessee did not prove the fact that these payments were in fact made by the sub-agents to the port authorities (Page 4 Para No. 4.2.3(b) of the Assessment Order and also Para No. 5.3 of the Ld. CIT(A) order).

The Ld. AR further explained referring to the additional documentary evidences in Paper Book-2, (Page Nos.23 to 28) consisting of invoices issued by Kakinada Seaports Limited to M/s. Imperial Shipping Services Co., and copies of Form 16A issued by M/s. Imperial Shipping Services Co., and similar documents contained ( in Page No. 29 to 34 of Paper Book ) relating to M/s. Bothra Shipping Services Pvt., Ltd., where both the parties has deducted TDS from Kakinada Seaports Limited against payments made under section 194C of the Act and also matching the same with bills of identical amounts being raised by the respective parties ( sub agents ) on the assessee and co relating the same for exactly the same work executed by them on behalf of the assessee, as proof that the entire work has been done by sub-agent on behalf of the principal agent ( the assessee in this case ) on cost-to-cost basis and there is no element of profit involved in such transactions, and as such it being a case for reimbursement of expenses by the assessee to the sub agents , no TDS is deductible and hence not deducted and the addition made by the Ld.AO under section 40(a)(ia) of the Act for violation of provisions of section 194C of the Act is not at all legally justified.

Ld. Departmental Representative (hereinafter in short “Ld. DR”) relied on the order of the Ld. CIT(A) but has objected to the furnishing of additional evidences as contained in paper book – 2, consisting of 34 pages, and rightly submitted that opportunity should be allowed to the AO for verification of fresh evidence and for examination of the parties regarding the authenticity of their confirmation and has no objection if the matter is remanded back to the Ld.AO for fresh assessment after verification of the fresh documentary evidences which is now been submitted.

We have heard the rival submissions and considered the materials on record and we are of the opinion that the fresh documents now filed are directly connected to the issue at hand and related to the facts and the material on record, without consideration of which proper justice cannot be done and we are also of the opinion that since these documentary evidences which are filed now before the Tribunal has never been examined or verified by the Ld.AO and the same needs to be examined regarding its authenticity and veracity.

As such, in the interest of justice, we remand the matter back to the files of the Ld.AO for fresh assessment, after verifying all these additional documentary evidences now furnished and the assessee is also directed to file the same along with explanation in support of its contentions and to fully cooperate in fresh assessment.

In the result, appeal of the assessee is allowed for statistical purposes.