HELIOS LOGISTICS,MUMBAI vs. ITO 25(1)(1), MUMBAI

This is an appeal filed by the assessee and is directed against the order of the Ld. CIT(A)-35, Mumbai dt.14.11.2014 pertaining to A.Y. 2008-09. Despite of service of notice, none appeared on behalf of the assessee, therefore, we proceed to decide the appeal ex-parte without presence of assessee on the basis of material available before us and after hearing the ld.DR.

The issue raised in the ground of appeal is against the confirmation of penalty levied under section 271B of the Income Tax Act, 1961 of Rs.28,231/- by the ld. CIT(A) as imposed by the AO.

Brief facts of the case are that the assessee was reimbursed varius expenses incurred by it by clients/principles and should not have been considered and taken for determination for applicability of section 44AB of the Act.

The return of income was filed by the assessee on 22.12.2008, declaring loss of Rs.47,848/- which was processed under section 143(3) of the Act. The case was reopened under section 147 and notice u/s 148 was issued to the assessee on the ground that the assessee has shown incorrect receipt in the books of account viz aggregate receipt as per the TDS certificates the assessee has shown gross receipt of Rs.14,51,994/- instead of Rs.56,46,246/- as per TDS certificates. Finally, the assessment u/s 143(3) read with section 147 of the Act was completed on 20.12.2011 at a loss of Rs.(-22848/) and penalty proceedings under section 271B was also initiated by the AO for failure to audit account under section 44AB of the Act. The assessee was an agent engaged in the business of clearing and forwarding. In reply to show cause notice, the assessee submitted that the assessee is in the business of clearing and forwarding for its clients and receives service charges as income against the clearing of import, export and handling consignment of its clients. At the same time, the assessee has to make the clients. It is also pertinent to note that the receipt/acknowledgement given by the concerned department were also in the name of payer /clients only and not in the name of assessee, which proved the position of the assessee as an agent and not as a principal. The assessee furnished before the AO, details of Rs.56,46,246/- comprising of customs duty, shipping line charges(freight export), ocean freight charges (import), stamp duty, terminal handling charges paid on behalf of the major clients which were included in Rs.56,46,246/- and thus the total reimbursement worked out to Rs.26 lakhs during the year. The assessee submitted that after reducing the amount reimbursed by the clients, the turnover was less than Rs.40 lakhs. The assessee also relied on CBDT Circular No.452 dated 17.3.1986 which states that in the case of agent whose position is similar to Kaccha arhatia, the turnover is only the commission (1) assessee like the kaccha arhatia brings the private contract between customs authorities, dock authorities and shipping line authorities and the importer/exporter. (2) Assessee does not have dominion or any legal title over goods imported or exported. (3) Assessee is agent and at all times transacts with these authorities as clearing agent only and not as owner of goods to be imported /exported. The assessee also relied on the decision in the case of GA Road Carrier V/s ITO (2011) 44DT 145 (Hyd) wherein it is held that deduction of TDS cannot lead to conclusion that freight charges constituted assessee’s firm turnover or gross receipts. However, the AO not being satisfied with the submission of the assessee imposed penalty of Rs.28321/- being ½% of the turnover. Aggrieved, by the order of the AO, the assessee preferred an appeal before the First Appellate Authority, who also confirmed the action of the AO by holding that even though the agent of others for clearing and forwarding of goods, import and export, the assessee needed to reflect gross picture of his affairs and to that extent the provisions of section 44AB of the Act would be applicable to the agent.