ITO, NEW DELHI vs. SH. KULDEEP KUMAR SHARMA, DELHI

Since in both the aforesaid appeals, identical grounds have been raised and even issues involved are identical, except difference in addition to the income made by the Assessing Officer, with the consent of the Authorized Representatives of the parties, the same are being taken up together for decision to avoid the repetition of discussion.

Briefly stated facts of the are: during the scrutiny of return of income filed by the assessee qua the assessment years 2008-09 and 2009-10, the cases were subjected to scrutiny and consequently notices under Section 143(1) and 142(1) along with questionnaires were served upon and in response thereto the Authorized Representative of the assessee attended the proceedings, furnished the details called for, produced the books of accounts and vouchers, which were test checked. 4. The assessee is into the business of transport and carrying on business as sole proprietor in the name and style of M/s. K.S. Freight Carrier (Regd.) at 137/1, Dariya, Chandigarh UT, entered into an agreement for transportation of goods and material of M/s. M/s Jai Prakash Associates Ltd. From the scrutiny of profit and loss account, it is noticed that the assessee had paid freight at Rs. 9,54,83,227/- to various truck owners whose services have been used for earning of freight and has claimed to have received freight at Rs. 9,77,20,354/-. The assessee was called upon to explain/furnish the proof of deduction of TDS and to submit the copy of daily register of freight P account details of GR numbers, truck number etc. The assessee claimed that since the payment is made directly to truck owners and drivers by their principal owners i.e. M/s Jai Prakash Associates on behalf of M/s K.S. Carrier after due deduction of TDS, there was no question of deduction of TDS by the assessee on the same payment. The assessee brought on record the copy of original GR for ready reference and record information under Section 133(6). The necessary information was called upon under Section 133(6) from M/s Jai Prakash Associates from their Noida Office and in response thereto M/s Jai Prakash Associates has furnished the information and it is noticed that all the GRs have been credited to the account of M/s K.S. Freight Carrier. 5. From the scrutiny of details of truck numbers, it has also come on record that trucks have been rapidly used for the purpose of freight and in most of the cases the freight payments is aggregated to more than Rs. 50,000/- in a complete year. The assessee was again called upon to furnish explanation on the payment to truck owners and drivers amounting to Rs. 6,54,83,227/- and where the TDS has been deducted. The assessee submitted that he has not deducted the TDS since the same had been deducted by M/s Jay Prakash Associates. As per the provisions contained under Section 40(a)(ia), if the assessee fails to deduct the TDS and pays the freight without deducting the TDS, it will not be allowed as deduction on account of such payments as freight, if such sum exceeds Rs. 20,000/- or payment exceeds Rs. 50,000/- in aggregate during the financial year.

It has come on record that the assessee failed to deduct the TDS on freight payment made by him. The AO by invoking provisions contained under Section 40(a)(ia) of the Act, disallowed the payment claimed as freight paid without deduction of TDS keeping in view the status and capacity of the assessee vis-à-vis M/s Jai Prakash Associates Ltd., they being his principal and consequently added an amount of Rs. 9,54,83,227/- to the total income in its P/L account.

It is further noticed that the claim of Rs. 51066/- has been made on account of telephone expense. The assessee claimed that even those telephones which have been installed at residence are expedient for business purpose and for the telephones which have been installed at office premises are purely for business purposes. The Assessing Officer held that irrespective of the facts that the telephones are installed at residence or at business premises the possibility of personal use of telephones cannot be ruled out.

The assessee carried the matter before the CIT(A) in appeal who has partly allowed the same. Feeling aggrieved, the Revenue has come up by filing the present appeals before the Tribunal qua assessment years 2008-09 and 2009-10.

The learned DR challenging the impugned orders contended inter alia that when the entire amount has been credited in the books of account of the assessee, CIT(A) has erred in deleting the addition by wrongly relying upon the decision of Hon’ble ITAT; that assessee is undisputedly a contractor and the entire payment has been directly made to him; that for the assessment year 2009-10, books of account have not been produced by the assessee to conceal the facts from the tax authorities and the assessee was under liability to deduct the TDS.

However, on the other hand, the learned AR for the assessee to repel the argument addressed by learned DR contended inter alia that the CIT(A) has passed valid orders by relying upon the judgment of the Hon’ble ITAT, it being a covered case; that the books of account along with the vouchers have been duly produced before the AO for scrutiny; that there was no privity of contract between the assessee and the truck owners and the assessee was only earning 2% as commission and no appeal has been filed by the Revenue against the order passed by Tribunal qua A.Y. 2007-08 and relied upon the order passed by ITAT, Delhi Bench ‘A’, New Delhi in the case of ITO Vs. Sh. Anoop Khandelwal, in dated 17.10.2014; the order passed by ITAT, Delhi Bench ‘D’, New Delhi in the case ITO Vs. Mrs. Kanak Singh, ITA No. 5530/Del/2012, dated 19.09.2014; the order passed by ITAT, Delhi bench in the assessee’s own case passed for AY 2007-08, in ITA No. 5672/Del/2010, dated 30.03.2012; and the order passed by ITAT, Visakhapatnam Bench, in the case of Mythri Transport Corporation Vs. ACIT, in ITA No. 183/Vizag/2008 passed for AY 2005-06, dated 9th January, 2009.

We have heard the learned Authorized Representatives of the parties, gone through the documents relied upon, case laws cited in the light of the facts and circumstances of this case.

Undisputed facts of this case are, inter alia, that during the year under consideration, the assessee received an amount of Rs. 9,77,20,354/- after deducting TDS of Rs. 22,14,376/- under Section 194C(1) of the Act; that the assessee is undisputedly a contractor who entered into a contract with M/s Jay Prakash Associates to transport his goods and materials; that the assessee has hired lorries from various truck owners as per his requirement to perform the contract; that the assessee had debited an amount of Rs. 9,54,83,227/- on account of freight payments to various truck owners whose truck the assessee had utilized for transporting material of M/s Jai Prakash Associates Ltd.

Considering the facts and circumstances, the submission made by the assessee and information received from M/s Jay Prakash Associates, the Assessing Officer disallowed the freight payments claimed by the appellant in the profit and loss account and added the same to the assessee’s income under Section 40(a)(ia) of the Act on the ground that no tax has been deducted at source on the same. The Assessing Officer has primarily made an addition to the assessee’s income under Section 40(a)(ia) of the Act on the sole ground that since the assessee has availed services of the truck drivers from the transporters for carrying out the work of M/s Jay Prakash Associates there exists sub-contractorship and the assessee was required to deduct the tax at source. The CIT(A) set aside the assessment order by relying upon the order passed by a co-ordinate bench of ITAT, Delhi in assessee’s case in for AY 2007-08 and thereby deleted the identical disallowances. The coordinate bench of ITAT, Delhi in the assessee’s case supra, followed the order passed by ITAT, Visakhapatnam Bench in the case of Mythri Transport Corporation (supra).

Learned DR vehemently contended that the order passed by the Hon’ble ITAT, Delhi, in the assessee’s own case by relying on the decision of Hon’ble ITAT, Visakhapatnam in the case of Mythri Transport Corporation (supra) is not applicable being on difference footing, on the following grounds: i. Appellant claimed two types of income, one shown as gross receipts on the use of own trucks and the other commission income on the use of other trucks which is not the case of the appellant. ii. Appellant claims that all the work in dome by hired truck owners themselves and he has only arranged the work and earned commission income which is not the case of the appellant.

Now, the sole question arises for determination in this case is “as to whether lorry/vehicles hired by the assessee to execute the transport contract entered into between the assessee and M/s Jay Prakash Associates, can be treated as sub-contract requiring the assessee to deduct tax from the payment made for such vehicle under Section 194C(2) of the Act.”

Identical issue has come up before the coordinate bench of ITAT, Visakhapatnam in the identical facts and circumstances in the case of Mythri Transport Corporation (supra) and has been decided against the Revenue by making following observations: “8.5 It is not established by the revenue that other lorry owners, from whom the vehicles were hired, have also been fastened with any of the above said liabilities. In a sub-contract, a prudent contractor would include all the liability clauses in the agreement entered into by him with the subcontractor. The assessee has also claimed before the tax authorities that the responsibility in the whole process lies with it only. Though the passing of liability is not the only criteria to decide about the existence of sub-contract, yet this contention of the assessee read with the liability clauses of the work order cited above, supports its submission that the individual vehicle owners are simple hirers of the vehicles.”

Following the order passed by the ITAT, Visakhapatnam in Mythri Transport Corporation (supra), the Hon’ble ITAT, Delhi Bench in the assessee’s own case in ITA 5672/Del/2010 for AY 2007- 08, held that the Revenue failed to prove any subcontract between the assessee and the truck owners for part performance and its work with joint liability and as such, the Assessing Officer was not justified in making disallowance under Section 40(a)(ia) of the Act. The ld. DR contended that since the order passed by ITAT, Delhi in the assessee’s own case for AY 2007-08 (supra) is already under challenge before the Hon’ble High Court, the Assessing Officer has rightly passed the assessment order in this case. However, the learned DR has failed to bring on record any such order passed by the Hon’ble High Court staying the operation of order dated 30.03.2012 passed by a coordinate bench of ITAT, Delhi in the assessee’s own case or setting aside the orders relied upon by the assessee.

Now, adverting to the case at hand, we are of the considered view, inter alia, that the case of the assessee is covered by the order passed by the Hon’ble ITAT, Visakhapatnam Bench, in the case of Mythri Transport Corporation (supra) and by Hon’ble ITAT, Delhi Bench, in the assessee own case passed for AY 2007-08; that no doubt, under the Indian Contract Act, there can be an oral contract between the parties, but the Assessing Officer in this case has not brought on record an iota of evidence to prove any such contract entered into between assessee and the alleged truck owners for part performance of its work with joint liability; that it is proved on record that the assessee was solely responsible for all the acts and default committed by him in due performance of its contract entered into with M/s Jay Prakash Associates; that the Assessing Officer has also not brought on record any evidence that the assessee has earned another income except the commission which has not otherwise been disputed by the Assessing Officer; that no doubt, in the assessment order for the year 2009-10, the Assessing Officer has pointed out in para 2 of the assessment order that under Section 133(6) of the Act, a letter dated 25.11.2011 was issued to M/s Jai Prakash Associates to furnish the copy of account of the assessee for producing their books of accounts by 07.12.2011 positively but no reply was filed by him, however, from the assessment order dated 28.12.2011 for AY 2009- 10, it has come on record that the Assessing Officer has hastily passed the assessment order without applying coercive method in order to obtain the requisite information; that on the other hand, the requisite information called upon by the Assessing Officer at the time of assessment for the year 2008-09, has been filed by M/s Jai Prakash Associates as has been comprehensively discussed in para 3 of the assessment order; that when the tax has been duly deducted at source by M/s Jay Prakash Associates and provided receipt of freight, the question of deduction of tax at source by the assessee does not arise; that since the assessee’s claim on the same issue has already been accepted in the assessment years 2004-05, 2005-06 and 2006-07, the Assessing Officer has erred in making the addition who was required to follow the rule of consistency, as held by Hon’ble Apex Court in the case of Radha Soami Satsang Vs. CIT(A), 193 ITR 321; that from the confirmation made by M/s Jai Prakash Associates and the record collected by the AO, it is proved that the assessee has received payment after deduction of tax at the hands of M/s Jai Prakash Associates again deducting the tax at source would have amounted to double taxation; that the Assessing Officer has also not disputed the fact that the assessee only gained advantage of a sum of Rs.22,37,127/- paid to him after tax deduction at source by the payee; that the coordinate bench in the assessee’s own case In for AY 2007-08, has categorically held that the carriers/transporters engaged by the assessee to carry out the transportation work of M/s Jay Prakash Associates are not sub- contractors by applying the ratio of the order passed by ITAT, Visakhapatnam Bench, in the case of Mythri Transport Corporation Vs. ACIT, 124 TTJ 970; that Hon’ble Jurisdictional High Court in the case of CIT Vs. Hardarshan Singh, 350 ITR 427, decided the identical issues. The operative para of the judgment is as under: “DEDUCTION OF TAX AT SOURCE-LORRY BOOKING BUSINESS-ASSESSEE COLLECTING FREIGHT CHARGES FROM CLIENTS WHO INTENDED TO TRANSPORT THEIR GOODS THROUGH SEPARATE TRANSPORTERS-ASSESSEE PAYING TO TRANSPORTERS ENTIRE AMOUNT COLLECTED FROM CLIENTS AFTER DEDUCTING HIS COMMISSION-NO PRIVITY OF CONTRACT OF CARRIAGE OF GOODS BETWEEN ASSESSEE AND HIS CLIENTS- ASSESSEE NOT A PERSON RESPONSIBLE BUT ONLY A FACILITATOR-TAX NOT DEDUCTIBLE AT SOURCE- INCOME-TAXACT, 1961, s. 194C.”

The learned DR has failed to put on record the distinguishable facts of the case at hand to ignore the order passed by the coordinate bench of ITAT, Delhi in for AY in the assesee’s own case. In view of what has been discussed in the preceding paras, we are of the considered view that there is not illegality or perversity in the findings that “disallowance made by the Assessing Officer under Section 40(a)(ia) of the Act on account of deduction of TDS under Section 194C(2) are not justified” returned by the ld. CIT(A). Resultantly, both the appeals under consideration are hereby dismissed. The decision is pronounced in the open court on 04th December, 20. 2015.