ITO, WARD - 1(3), BURDWAN, BURDWAN vs. M/S. DAGA TRANSPORT AGENCY, BURDWAN

Brief facts of the case are that the assessee is a transport agency. It did not own any trucks during the assessment year under appeal. The owners of the trucks as well as the persons intending to send material by transport would contact the assessee and the assessee by collecting its commission would arrange the transport and consignments for those trucks. For the AY 2004-05 the assessee filed returns of income on 28.03.2005 declaring a total income of Rs.58,321/-. However, subsequently the CIT, Burdwan passed an order dated 24/27.11.2008 u/s. 263 of the Act directing the AO to examine the receipts and expenditure and to verify the freight paid to the truck owners and to pass fresh orders in accordance with law.

According to AO, the income of assessee is comprised of two components i.e. one “to pay” basis and the other “to be billed” basis. In “to pay” basis the assessee links the truck owners with the consignors and receives a sum of Rs.200/- towards commission and Rs.30/- towards printing and stationery charges per consignment.

During the FY 2003-04 relevant to AY 2004-05, it was found that a total of 1946 consignments were involved in “to pay” basis whereas 68 consignments were involved in “to be billed” basis. It was further found that the assessee made payments directly to the truck drivers and some of the drivers are owners of the trucks. During that year the assessee made payment of Rs.5,79,57,864/- to the truck drivers and out of such amount a sum of Rs.5,58,42,491/- was towards “to pay” basis. To verify the veracity of these payments, the AO issued notices u/s. 133(6) of the Act to the truck owners but no reply has ever been received but a few were returned by the postal authorities as unserved. The assessee tried to explain that there might be change of addresses of the truck owners or the addresses may be incomplete. The AO disbelieved this explanation of the assessee and concluded that the total freight charges paid by the assessee are inflated only to reduce the gross profits, as such, 10% of the freight charges for Rs.5,79,57,864/- which came to Rs.57,95,786/- was added back to the income of the assessee on estimated basis and also initiated penalty proceedings u/s. 271(1)(c) of the Act. Further, according to the AO, one M/s. Ambica Steels Ltd. gave a reply confirming the payment of transport charges to the assessee but the amount is at variance. According to M/s. Ambica Steels Ltd. the amount paid was Rs.17,46,793/- whereas according to the assessee, it was Rs.17,15,503/-. Basing on this, the AO opined that there was concealment of income to the tune of Rs.31,290/-, as such, he added the same to the income of the assessee.

Aggrieved by this order of AO, the assessee carried the matter in appeal before the CIT(A) and the CIT(A) by way of impugned order allowed the appeal deleting the additions made by the AO. Aggrieved by the impugned order the revenue carried the matter in appeal before us on the following grounds:

None appeared on behalf of the assessee despite service of notice through Ld. DR. We find that the assessee had not entered appearance though an Authorised Representative right from 13.03.2014 onwards and in this scenario, we are not inclined to wait for presence of assessee/AR and proceed to dispose off these appeals after hearing the Ld. DR and based on materials availabl4e on record. It is the arguments of the Ld. DR that the order of the Ld. CIT(A) is cryptic and it does not speak of any reasons in reaching the conclusion and, on the other hand, Ld. CIT(A), having held that when 1946 consignments had been sent on “to pay” basis, the AO should have made enquiries with those details by examining the consignors and consignees who are ultimately the payers and receivers of the amount and on verification from its ends the AO should have reached a right conclusion, it is not fair on the part of the CIT(A) to allow the appeal in deleting the additions without the process of verification is complete. On this ground, the Ld. DR prayed to allow the appeal of the revenue and to restore the additions as made by the AO.

We have heard the submissions of the Ld. DR and have gone through facts and circumstances of the case. We find that basing on the above contention the point that arises for our consideration is whether the CIT(A) is justified in deleting the addition made by the AO?

As could be seen from the records, the order of the AO clearly spells out that the assessee partnership firm claims to have been running the transport agency. The AO found out that the income of the assessee is comprised of two components viz., one on “to pay” basis and the other on “to be billed” basis and the majority is derived from “to pay” basis. However, the AO entertained a doubt as to the correctness of the huge amounts paid on “to pay” basis, as such he issued notice u/s. 133(6) of the Act to the truck owners. However, except one, none responded and the AO disbelieved the explanation of the assessee that the truck owners might have changed their addresses or the addresses may be incomplete. On this ground he added 10% of the freight charges of Rs.5,79,57,864/-, which comes to Rs.57,95,786/- to the income of the assessee on estimate basis. However, on this aspect it is pertinent to note that as opined by CIT(A) in his impugned order, the AO did not take

We are in agreement with the ld. DR that having reached to the conclusion that AO did not do what he should have done, in all fairness, the CIT(A) should have remanded the matter to the AO for verification of facts at his ends. Having not done so, the CIT(A) directly proceeded to delete the additions made by the AO on estimate basis. It does not seem to be correct procedure adopted by the CIT(A). We, therefore, agree with the Ld. DR that it is a fit case to set aside the impugned order and to restore the matter to the file of the AO for verification of the details and decide this issue afresh, in accordance with law. Needless to mention that the assessee be given reasonable opportunity of being heard. The assessee is at liberty to produce/furnish fresh evidences to support its claim before the AO. We order accordingly. Therefore, the appeal of revenue is allowed for statistical purposes. , AY: 2005-06 11. Brief facts of the case are that the assessee is a partnership firm claimed to have been conducting transport agency. They have filed their return of income for AY 2005-06 on 31.10.2005. The assessment was reopened u/s. 147 of the Act and a notice dated 11.02.2009 u/s. 148 of the Act was duly served on the firm. However, except writing two letters dated 20.08.2009 and 06.11.2009 with a prayer to transfer the assessment records from Burdwan to Kolkata there was no appearance on behalf of the assessee. However, subsequently, the assessee made a request to CIT(A) that it would not transfer its assessment record to Kolkata. Finally, since nobody appearing on behalf of the assessee during the entire period a detailed show cause notice elaborately mentioning the proposed additions was issued to the assessee on 08.11.2009. To this show cause notice very belatedly i.e. on 04.12.2009 and 17.12.2009 the assessee submitted a representation categorically described themselves as transport broker. However, on verification of the tax audit report, the AO found the nature of business and profession of the assessee as transport agency but not transport broker.

On verification of the assessment records, the AO found that a sum of Rs.6,70,94,952/- was debited against freight charges but without deducting tax at source u/s. 194C of the Act on such amount, which should have been deducted u/s. 40(a)(ia) of the Act,

Challenging the findings of the AO in adding back the entire amount of Rs.6,70,94,952/- to the total income of the assessee, the assessee carried the matter in appeal to the Ld. CIT(A) and the Ld. CIT(A) by way of impugned order allowed the appeal and deleted the addition made by the AO.

Aggrieved by the said order, the revenue carried the matter in appeal before us on the following grounds: “

It could be seen from the records that although his order the AO specifically mentioned that there was no cooperation from the assessee during the assessment proceedings before him. The AO specifically observed that the assessee entertained an idea of getting the matter transferred from Burdwan to another AO of Kolkata only to escape clutches of proceedings against him has not complied with the provisions of section 194C of the Act and with such intention the assessee never entered any appearance before him and thereby compelling him to proceed ex parte. The AO further observed that though at a later point of time the assessee submitted representations claiming themselves as transport brokers but not a transport agent, there was no material to substantiate such a claim.

On a reading of the assessment order the impression gathered by us is that the AO entertained a doubt as to whether the assessee received only a commission, and printing & stationery charges for linking the consignors with the truck owners/drivers or the assessee himself undertook the business of transport and in that pursuit received the freight charges and made payments to the truck owners. Since according to the AO, there was no appearance on behalf of the assessee and there was no material to support either of the versions, AO, perhaps, felt compelled, in the interest of the revenue, to take a view that the entire amount of Rs. 6,70,94,952/- was towards freight charges against which tax should have been deducted at source u/s. 194C of the Act. Briefly these are the circumstances surrounding the assessment order.

The CIT(A) in his impugned order vide para 8 referred to the case reported in M/s. Rakshit transport decided by a Coordinate Bench of ITAT “A” Bench, Kolkata in dated 11.09.2009. The CIT(A) stated that in this decision the Kolkata Bench relied on a decision of Hon’ble P&H High Court in CIT Vs. United Rice Land Ltd. (2008) 174 Taxman 286 and the decision of ITAT, Kolkata “A” Bench in the case of Samanwaya in ITA No. 484/Kol/2008 dated 23.04.2009. As a matter of fact, it is not known whether the material before the CIT(A) was supporting the reliance on these decisions. Without revealing the factual basis, the CIT(A) proceeded to apply the decisions to the case.

Under these circumstances, it has become imperative for us to agree with the Ld. DR and to hold that the order of CIT(A) cannot be sustained for want of reasons on the additional material produced before him. Since it is a matter which requires investigation by the AO in the light of the additional material forwarded by the CIT(A), we are inclined to set aside the order of CIT(A) and restore the matter to the file of the AO for passing a fresh order in accordance with law. The assessee is at liberty to furnish fresh evidences in support of its claim. We hold accordingly. Therefore, this appeal of revenue is also allowed for statistical purposes.

In the result, both the appeals of the revenue are allowed for statistical purposes.