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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “C”, BENCH KOLKATA BEFORE SHRI A. T. VARKEY, JM & DR. A.L. SAINI, AM ITA No.346/Kol/2018 (Assessment Year: 2013-14) Bimal Kumar Sikaria Vs. ACIT, Circle-40, Kolkata 159, Ramdular Sarkar Street, Kolkata – 700006. �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AURPS0380C (अपीलाथ� /Assessee) (��यथ� / Respondent) ..
Assessee by : Shri Manish Tiwari, FCA Revenue by : Shri Supriyo Pal, JCIT(Sr. DR) सुनवाई क� तार�ख / Date of Hearing : 20/11/2019 घोषणा क� तार�ख/Date of Pronouncement : 19/02/2020 आदेश / O R D E R Per Dr. A. L. Saini, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2013-14, is directed against the order passed by ld. Commissioner of Income Tax (Appeals)-12, Kolkata in Appeal No.105/CIT(A)-12/Kol/Circle-40/2015-16, dated 06.11.2017, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) dated 22.09.2015.
The grounds of appeal raised by the assessee are as under:
“1. For that in the facts and circumstances of the case and in law, the addition of Rs. 45,00,000/- as undisclosed income is wrong, erroneous, excessive, arbitrary, unlawful beyond jurisdiction and deserves to be deleted or reduced. 2. For that in the facts and circumstances of the case and in law, the addition of Rs. 20,69,050/- u/s 40(a)(ia) on alleged ground of non-deduction of tax at source is wrong, erroneous, excessive, arbitrary, unlawful beyond jurisdiction and deserves to be deleted or reduced. 3. For that in the facts and circumstances of the case and in law, the disallowance of the payment made to Joydeb Pathak once u/s 40A(3) partly and again u/s 40(a)(ia) being duplication of disallowance of expense claimed is
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wrong, erroneous, excessive, arbitrary, unlawful beyond jurisdiction and deserves to be deleted or reduced.”
The appeal filed by the assessee is barred by limitation by one day. The assessee filed a petition for condonation of delay requesting the Bench to condone the delay. We have heard both the parties on this preliminary issue and having regard to the reasons given in the condonation petition, we condone the delay and admit the appeal of the assessee for hearing.
Ld. Counsel for the assessee informs the Bench that assessee does not want to press Ground No.3, therefore we dismiss Ground No.3 raised by the assessee as not pressed.
Ground No.1 raised by the assessee relates to addition of Rs.45,00,000/- as undisclosed income.
The facts of the case which can be stated quite shortly are as follows. The assessee runs a proprietary concern in the name and style of M/s National Transport Corporation and engaged primarily in the business of goods transportation. A survey operation was conducted in the business premises of the assessee on 19.12.2012 u/s 133A(1) of the Act. During the survey operation incriminating documents were found and the assessee was confronted on the same calling for explanation from his side. In one such instance, Question No. 9 of the final statement recorded on 20.12.2012 and assessee’s apply thereof is reproduced as below:
Q.9: I am drawing your attention to the page facing page 66. In this page there is an account totalling to Rs. 45,00,000/- and the said account is dated 26.10.12. Please explain the account.
Ans: Sir, this account contains bogus credits which actually is my income from undisclosed sources. I now voluntarily disclose Rs. 45,00,000/- as my undisclosed income for the year.
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However, the assessee at the time of filing return of income for the assessment year 2013-14 did not account for such income from undisclosed sources in its books of accounts. The assessee had retracted from the statement given by him earlier during the course of survey proceedings. During the course of hearing, the assessee was asked to explain the matter relating to the retraction as discussed above. In response the assessee, in his written submission dated July 01, 2015, vide point no. 3 stated, “I have received confirmations from 14 sundry creditor and these are enclosed in original”. Thus, the assessee submitted before AO fourteen confirmations claimed to have been received from those parties. Those papers are found to be written in Bengali, Hindi and English languages.
In order to verify the assessee’s claim in this regard, all of those fourteen parties were issued summons u/s 131 of the I.T. Act, 1961, on 23.07.2015. As per the terms of summons issued, all of them were directed to appear before the Assessing Officer on 31.07.2015. On the same date on 23.07.2015, the assessee was also issued a letter (which was served on 23.07.2015 itself) whereby he was given an opportunity to cross-examine the said Sundry Creditors on the date of hearing on 31.07.2015. Six summons that were sent by “Speed Post” were returned back by the postal department with the remark stated as “Not Known”.
On 31.07.2015, the scheduled date of hearing, neither the assessee nor any of those fourteen parties appeared before the Assessing Officer. The Assessing Officer after conducting further enquiries held that amount of Rs. 45,00,000/- that were claimed as payable by assessee in the names of those fourteen parties should be considered as “Bogus Creditors”. Therefore, the Assessing Officer made addition of Rs.45,00,000/-, as undisclosed income of the assessee.
Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved by the order of the ld CIT(A), the assessee is in appeal before us.
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We have heard both the parties and perused the material available on record. We note that the A.O. added an amount of Rs. 45,00,000/- as bogus creditors based on the survey on the statement recorded during survey proceedings. It is not disputed that the assessee at the time of filing return of income for A.Y. 2013-14 did not account for such income in its books of accounts. The assessee had retracted from the statement given by him during the course of survey proceedings. Subsequently, during assessment proceedings the assessee claimed that Rs. 45,00,000/- was an amount from l4 sundry creditors. The A.O., in order to verify the assessee's claim, issued Summons u/s.131 to all the 14 parties submitted by the assessee. Out of the 14 parties, 6 summons were returned back by the postal department with the remarks 'Not Known", therefore, AO made addition of Rs. 45,00,000/-.
During the appellate proceedings the assessee submitted before ld CIT(A) that Rs. 45,00,000/- due to 14 parties was for payment for hiring of trucks and vehicles. The matter was remanded to the A.O. During the remand stage the assessee could not submit any proof nor produced the 14 parties for recording of their statements. The assessee in his rejoinder to the remand report has submitted a list of sundry creditors and stated that no such expenditure was claimed so the question of adding Rs. 45,00,000/- on account of bogus creditors cannot arise.
The ld CIT(A) noticed that the assessee has retracted from the original statement recorded during survey proceedings and assessee is now insisting that the total amount of Rs. 45,00,000/- was paid to various transporter. During appellate proceedings and the remand report stage the assessee has been unable to provide any document to establish the genuineness of this expenses or to establish the genuineness of the creditors, therefore ld CIT(A) confirmed the addition made by AO.
Before us Ld Counsel submitted group summary of sundry creditors in the books of asssessee (The national Transport Corporation), which is given below:
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The ld Counsel submitted that the disputed sundry creditors were coming as opening balance from previous years therefore no addition should be made. We note that above noted ledger account of sundry creditors were neither submitted by the assessee before AO nor before CIT(A). In addition to this, the assessee never argued before CIT(A) or before AO that alleged sundry creditors were coming as brought forward balance from previous years. Therefore, we are of the view that this fresh document and fresh argument should be remitted back to the file of the AO for his examination. If the AO, on examination of books of accounts finds that alleged sundry creditors are coming as brought forward balance from previous years, then he should delete the impugned addition. For statistical purposes, the ground raised by the assessee is allowed.
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Ground No.2 relates to addition of Rs.20,69,050/- u/s 40(a)(ia) of the Act on account of non-deduction of tax at source.
The brief facts qua the issue are that during the assessment proceedings, the AO noticed that assessee had paid in cash over Rs. 75,000/- to the following parties.
Party Amount paid Party Amount paid
Ajoy Pandey 1,01,470/- Anjan Saha 97,960/- Arup Pandey 1,31,730/- Atul Debnath 1,02,430/- Avay Mitra 1,04,880/- Avinash Yadav 1,04,800/- Badal Sikaria 1,02,020/- Dilip Kr 80,200/- Chandan Das 1,01,040/- Deb Kr Mitra 1,35,930/- Joydeb Pathak 1,05,530/- Manas Chakraborty 85,710/- Manas Hajra 83,710/- Mita Agarwal 1,01,580/- Pradip Saha 1,00,230/- Rabindra Barui 85,540/- Samar Ghosh 1,37,590/- Sitaram Paul 84,590/- Sunil Adhikari 86,900/- Tarun Sarkar 1,35,210/- Rs. 10,55,100/- Rs. 10,13,950/-
The AO asked the assessee that why the amount of Rs.20,69,050/-( Rs.10,55,100 + Rs.10,13,950) should not be disallowed u/s 40(a) (ia) of the Act, as the assessee has failed to deduct TDS? In response, the assessee submitted ( vide assessee`s written submission dated 12.08.2015, vide Point No. 4 ) as follows:
"As stated in earlier I deal with small transporters who do not come under Indian Income Tax System. However those who do have PAN these will be produced shortly." However, AO rejected the contention of the assessee and held that from all angles the instant case is most suitable wherein the provision of section 40(a)(ia) of the I.T. Act, 1961, is attracted and therefore he made addition to the tune of Rs.20,69,050/-.
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Aggrieved by the order of the ld. Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us.
We have heard both the parties and perused the materials available on record. Before us, the ld. Counsel for the assessee submitted that assessee made the payment to the truck operators who were hired form market off and on and there is no any contract between the truck operators and assessee, therefore question of tax deduction at source does not arise. On the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity.
We note that during the assessment proceedings, the method of operation was explained to the AO. For the purpose of delivery/transportation, assessee used to hire from a pool of vehicles available from the market. There is no contract between assessee and pool of vehicles available from the market, hence TDS obligation does not arise. Section 194C of the Act applies to any payment made to a person for carrying out any work in pursuance of a contract between the contractor and the person making the payment. If the condition of "carrying out any work in pursuance of a contract" is not fulfilled then the provisions of this section will not be applicable at all. Here in this case, the contract for carrying out the work was between the individual lorry/truck owners and the assessee. The assessee alone had risk and responsibility for carrying out the contract work as per the agreement entered into by it with its principal. There is no material on record to suggest that there was any contract whether written or oral with the outside lorry/truck owners and the assessee. The outside lorry/truck owners do not have any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the assessee and its principal. Therefore, the payment made to the outside lorry/truck owners do not come or fall within the purview of section 194C of the Act. Therefore, the assessee is not liable to deduct TDS. We note that same identical facts were
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discussed in the judgment of the Coordinate Bench Mumbai in the case of Bhail Bulk Carriers, Mumbai in ITA No.3536/Mum/2011 in Assessment Year 2007-08 dated 07.03.2012 wherein it was held as follows:
“8. We have heard the parties at length and also gone through the findings of the authorities below and the case laws as have been referred in the appellate order as well as relied upon by the learned counsel. The relevant facts for adjudication of the issue are that the appellant is carrying out the business of transportation of oil through tankers. It entered into a contract with various companies (here mainly BPCL) for transporting the oils to various destinations as per the agreement entered into by the said company. The appellant was solely responsible for executing the contract on behalf of its principal. For fulfilling its transportation commitment, the appellant besides using its own tankers was also hiring the tankers from outside parties as and when required. In such a case of hiring from outside, the responsibility of successful completion of transportation work rested upon the appellant. From the record or the findings of the authorities below no where it is borne out that there was any kind of written or oral contract with the principals by such outside tank owners that they will share the risk and responsibility with the appellant. 8.1 At this stage, it is not in dispute that the department's case is that in the present case provisions of section 194C(1) are applicable and not section 194C(2). Once it is held that it is a case of 194C(1) then it would be said that this section applies to any payment made to a person for carrying out any work in pursuance of a contract between the contractor and the person making the payment. If the condition of "carrying out any work in pursuance of a contract" is not fulfilled then the provisions of this section will not be applicable at all. Here in this case, the contract for carrying out the work was between the BPCL and the appellant. The appellant alone had risk and responsibility for carrying out the contract work as per the agreement entered into by it with its principal i.e. BPCL. There is no material on record to suggest that there was any contract or sub- contract whether written or oral with the outside tank owners and the appellant, whereby the risk and responsibility which is associated with a contract has also been passed on to these outside parties. Once the CIT(Appeals) has accepted the fact that the outside tank owners do not had any responsibility or liability towards the principal, then it cannot be held that these outside parties were privity to the contract between the appellant and its principal. Thus the payment made to the outside parties do not come or fall within the purview of section 194C, as the "carrying out any work" indicates doing something to conduct the work in pursuance of contract and here in this case, it was solely between appellant and its principal. 8.2 The judgment of Hon'ble Madras High Court in the case of CIT vs. Pompuhar Shipping Corporation Ltd. (supra) also fortifies the case of the appellant. In this case the assessee which was a Tamil Nadu Government undertaking was engaged in the business of transportation of coal from the ports of Haldia, Visakhapatnam and Paradeep to Chennai and Tuticorin under contracts executed with the Tamil Nadu Electricity Board. The assessee owned three ships. Since three ships were not sufficient to carry out the contracts entered into with Tamil Nadu, the assessee hired ships belonging to other shipping companies and paid hire shipping charges for using the ships. The assessee, however, did not deducted tax under section 194C before the making payment of hire charges to the shipping companies. The Assessing Officer
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directed the assessee to pay tax u/s.201(1) and levied interest u/s.201(1A) on the ground that TDS should have been deducted u/s.194C of the Act. On the these facts, the Hon'ble High Court observed and held as under :- "We heard the arguments of learned counsel. Under section 194C, the tax is to be deducted when a contract was entered into for carrying out any work in pursuance of a contract between the contractor and the entities mentioned in sub-section (1) of section 194C. In the present case, there was no contract between the assessee and the shipping companies to carry out any work. On the other hand, the assessee-company hired the ships belonging to other shipping companies for a fixed period on payment of hire charges. The hired ships were utilised by the assessee in the business of carrying the goods from one place to another in pursuance of an agreement entered into between the assessee and the Tamil Nadu Electricity Board. There was no agreement for carrying out any work or transport any goods from one place to another between the assessee and the other shipping companies. The assessee- company simply hired the ships on payment of hire charges and it was utilised in the business of the assessee at their own discretion. It is not the case of the Revenue that the assessee entered into the said contract with the shipping company for transport of coal from one place to another. The hiring of ships for the purpose of using the same in the assessee's business would not amount to a contract for carrying out any work as contemplated in section 194C. The term "hire" is not defined in the Income-tax Act. So, we have to take the normal meaning of the word "hire". Normal hire is a contract by which one gives to another temporary possession and use of the property other than money for payment of compensation and the latter agrees to return the property after the expiry of the agreed period. Therefore, in our view, when the assessee entered into a contract for the purpose of taking temporary possession of ships in the shipping company it could not be construed as if the assessee entered into any contract for carrying out any work, and when the contract is not for carrying out any work, the Revenue cannot insist the assessee ought to have deducted tax at source under section 194C of the Act. Further, the other argument of counsel was, section 194C was amended with effect from July 1, 1995, incorporating the Explanation and the said Explanation clarifies the existing provision of section 194C of the Act. Hence, it would be applicable retrospectively. We are concerned with the assessment year 1994-95. In a recent judgment, the Supreme Court in the case of Sedco Forex International Drill Inc. v. CIT [2005] 279 ITR 310, considering the scope of the Explanation, held that there is no principle of interpretation which would justify reading the Explanation as operating retrospectively, when the Explanation comes into force with effect from a future date. In this case, the Explanation introduced is with effect from July 1, 1995. Hence it will be applicable only for the future assessment orders and it will not be applicable to the assessment year in consideration. The Tribunal also considered the fact that the shipping companies which received the hire charges are also income-tax assessees and they had shown the hire charges in their respective income-tax returns and paid the taxes on the same. The said fact was also not disputed by the Revenue. So, we are of the view that the payment of hire charges for taking temporary possession of the ships by the assessee-company would not fall within the provision of section 194C and hence no tax is required to be deducted, and there is no error or infirmity in the order of the lower authorities. Hence, no substantial question of law arises for consideration of this court. Hence, we dismiss the above tax case. No costs. Consequently, the connected TCMP No. 1253 of 2005 is closed.
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8.4 Thus in view of the findings given above and the law laid down by the Hon'ble High Court as above, we are of the considered opinion that the appellant was not liable to deduct TDS u/s. 194C(1) for payments made to the outside parties and consequently the disallowance made u/s.40(a)(ia) by the authorities below are deleted. The appellant thus gets relief of 56,03,210/-. 14. The assessee hires trucks as and when he needs from the market and hence there is no contract between the assessee and truch operators therefore, in the absence of any contract between the assessee and the truck operators, the provisions of section 194C is not applicable and hence the assessee is not required to deduct TDS. Therefore, relying on the judgment of the Coordinate Bench of ITAT Mumbai, (Supra), on the similar facts and circumstances, we delete the addition Rs.20,69,050/-.
In the result, assessee`s appeal is partly allowed for statistical purposes.
Order pronounced in the open court on this 19/02/2020. Sd/- Sd/- (A. T. Varkey) (A. L. Saini) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER कोलकाता /Kolkata; Dated:19/02/2020 RS, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Assessee- Bimal Kumar Sikaria 1. 2. ��यथ� / The Respondent.- ACIT, Circle-40, Kolkata आयकर आयु�त(अपील) / The CIT(A), 3. आयकर आयु�त / CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, कोलकाता / DR, ITAT, Kolkata 5. गाड� फाईल / Guard file. 6.
//True Copy// By Order
Assistant Registrar, I.T.A.T, Kolkata Benches, Kolkata.