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Income Tax Appellate Tribunal, “RAJKOT” BENCH, RAJKOT
Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
IN THE INCOME TAX APPELLATE TRIBUNAL “RAJKOT” BENCH, RAJKOT [Conducted through E-Court at Ahmedabad] BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR
आयकर अपील सं./I.T.A. No. 180/Rjt/2014 (�नधा�रण वष� / Assessment Year : 2009-10)
Kodinar Taluka Roo बनाम/ The J.C.I.T. Range -1, Junagadh Vechan Mandali Ltd. Vs. Nr. Pani Darwaja, Reti Office, Kodinar �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAAJK1111E .. (अपीलाथ� /Appellant) (��यथ� / Respondent)
अपीलाथ� ओर से/Appellant by : Written Submission ��यथ� क� ओर से / Shri B. D. Gupta, CIT D.R. Respondent by : सुनवाई क� तार�ख / Date of 22/02/2022 Hearing घोषणा क� तार�ख /Date of 28/02/2022 Pronouncement
ORDER PER MAHAVIR PRASAD, JM:
The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-IV, Rajkot (‘CIT(A)’), dated 23.12.2013 arising in the assessment order dated 17.11.2011 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY. 2009-10.
The grounds of appeal raised by assessee read as under:
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 2 -
“1. The Ld. CIT(A) has erred in law and facts in confirming assessment order passed by the Ld. A.O. The assessment needs annulments.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 1,42,41,750/-. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 1,42,41,750/- based on presumption and cermises. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 6,11,490/-. The addition needs deletion.
The Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 6,11,490/- based on presumption and cermises. The addition needs deletion.
Taking into consideration the legal, statutory, factual, accounting and administrative aspects, no addition amounting to Rs. 1,42,41,750/- and Rs. 6,11,490/-ought to have been confirmed. The addition needs deletion.
Taking into consideration the legal, statutory, factual, accounting and administrative aspects, no addition amounting to Rs. 1,42,41,750/- and Rs. 6,11,490/-ought to have been confirmed. The addition needs suitable reduction.
Without prejudice the Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 1,42,41,750/- resulting in double taxation. The addition needs deletion.
Without prejudice the Ld. CIT(A) has erred in law and facts in confirming addition of Rs. 6,11,490/- resulting in double taxation. The addition needs deletion / suitable reduction.
Without prejudice, the assessment made is bad in law and deserves annulment.
Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while framing assessment. The assessment needs annulment.
Without prejudice, no adequate, sufficient and reasonable opportunity has been provided while passing appeal order. The assessment needs annulment.”
The brief facts of the case are that the assessee is a co- operative society and during the year under consideration it has
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 3 - entered into an agreement with Food Corporation of India (‘FCI’ in short) for procurement of wheat at minimum support price (‘msp’ in short) from farmers and transportation of the so procured wheat to the godowns/specified places of FCI. The wheat was to be procured @Rs.1000/quintal for which entire payment was to be made to farmers by FCI through assessee society. The assessee society was entitled and paid commission @ 2.5% of the total purchases of wheat. The transporation charges were reimbursed by the FCI to assessee. Thus, purchase price and transportation cost of the procured wheat was the expenditure in the hands of FCI, a Government of India agency. As per the agreement gunny bags for packaging the procured wheat were also supplied to the assessee by the FCI. Thus, assessee’s income from this contract was mainly commission receipts which was @2.5% of the total purchases.
3.1 During the year assessee had made purchases of Rs. 1,02,60,24,177/- for FCI, on which assessee had received commission of Rs. 2,54,37,224/-. Apart from commission income, assessee had received contract receipts of Rs. 2,70,50,672/- (2,20,99,512/- + 49,51,160/-) from FCI, on account of transportation of the procured wheat. These receipts are verifiable from the form No. 16A filed with the return of income. However against gross transport contract receipts of Rs. 2,70,50,672/- assessee had claimed transportation charges of Rs. 3,12,78,600/- besides other expenses on account of loading / unloading, packing expenses, Kata Tolai expenses and other expenses. Thus expenses claimed by assessee were more than the receipts from transportation contract. Against this backdrop;
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 4 - assessee was asked to file separate expenditure account for commission receipts and for transportation receipts.
3.2 The assessee had filed separate income and expenditure account in respect of (i) Transportation contract receipts from FCI Rajkot (ii) Transportation contract receipts from FCI Vadodara and (iii) Commission receipts of Rs. 2,54,37,224/- from FCI, Rajkot and Vadodara. All these three statements (Income & Expenditure Account) are made part of this order as Annexure-A, Annexure-B, and Annexure-C respectively. Since assessee had claimed transportation expenditure of Rs. 1,42,41,750/- against commission receipts, another statements (Income & Expenditure Account) in respect of commission receipts and transportation receipts were filed with letter dated 02.09.2011.
3.3 The explanation filed by the assessee vide letter dated 16.11.2021 is reproduced as under:
"1) Commission is paid at Rs. 2.5% of price of wheat i.e. 2.5% of Rs. 1,000/- Rs. 25=for purchasing, packing, stacking, shifting, transporting of goods from purchasing centres i.e. market yards and villages to transit godowns occupied by the FCI. It is clearly mentioned in Para-2 of the agreement. From transit godowns to permanent godowns of FCI the transport charges are to be borned by the FCI. It is a seasonal "purchase. Whole operation was to be completed in wheat season. FCI had purchased wheat throughout the country. There were numbers of such agencies. And we were one of such agencies. Wheat was purchased by the Govt. FCI in very big-bulk quantities from market yards and villages. In market yards FCI has no own space-godowns etc. In season the wheat was procured through such agencies and were stored in nere by temporary godowns; by FCI and then after completion of procurement of decided quantity the same were stored to FCI's fixed storages at various places for smooth storage and movement
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 5 - through out the year. Thus in the agreement transport part from mandli-market yard-village to the transit godowns in our scope alongwith other expenses. We have occurred such expenses as per terms of the agreement only. Copies of bills submitted to FCI in this regard to FCI is produced. 2) Accounting material is produced 3) FCI has paid Rs. 25/- per MT (2.5% of Rs. 1,000/-) for the work-job-duty as narrated in the agreement. This work order is received in keen competition with others. We have to complete whole seasonal wheat procurement work on behalf of FCI. As stated in the agreement labour towards acquisition, total (weighment), packing, shifting, stacking, and loading. We have to arrange and pay the labourers for whole operation. FCI has no other expense to pay in this regard. We had arranged and paid the labourers for the work down by them. They are paid considering their presence on daily - weekly basis. Vouchers are produced for verification. This is a labour cum transport work contract. And we are paid for these activities only. So naturally first we have to perform the duties and get the work done. Presence register, wage sheets, vouchers etc. are produced. It was a temporary time bound labour - transport work contract. Then after no such work order is received. At present turnover is NIL No EPF / ESI registration was applicable and not paid. 4). Gross transportation receipt is Rs. 2,70,50,672/-. We were the aency appointed for commission / labour and transit godown transportation work and have further done the transportation of these goods from transit godowns to FCI's regular warehouses and are paid as per rates fixed by the FCI. Bills were raised to FCI as per quantity transported and at the rate fixed by the FCI. Bills were raised to FCI as per quantity transported and at the rate fixed by FCI. On the other hand we had paid to the truck owners for the quantity transported by them on production of endorsed LRs by FCI. It was just a transport contract. Payment registers to the truck owners and copies of bills raised toFCI for goods transported are produced. Just like labour com transport contract as discussed above this was purely a transport contract and on the basis of work done we were paid the transport charges, on the other hand truck owners were paid and we had earned our margin."
3.4 As per agreement dt. 8.03.2008 between the FCI and the assessee, the assessee society is to (a) procure wheat from farmers at purchase centres (b) The entire operation under the agreement is to be carried out under the supervision of the officers of the State Government (c) Deliver the wheat to delivery centres specified by FCI (d) The wheat is to be bagged in new gunny bags. (e) The bags will be stenciled / marked / stiched in accordance
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 6 - with the specifications. The agreement also provides that expenses on transportation of wheat reimbursed by the FCI.
3.5 Thus as it transpires from the agreement, the assessee does not have to incur any expenditure on transportation of wheat (FCI making separate payment to assessee for transportation) which could be claimed against commission receipts. However as is evident from Trading / Profit & Loss Account, assessee has claimed expenditure on transportation which is far more than the gross receipts from FCI for this purpose.
3.6 Examination of Annexure-C (Income & Expenditure account for commission income) of this order, reveals that expenditure of Rs. 1,42,41,7507- is claimed against commission receipts of Rs. 2,54,37,224/-. As per agreement, transportation expenditure were separately reimbursed by FCI in the form of transportation payments of Rs. 2,70,50,672/- to assessee. In fact assessee has claimed inflated, rather bogus expenses on transportation to reduce its commission income and thereby its taxable income. Bogus claim for transportation expenses is proved when Annexure-D and Annexure-A of this order are compared. Annexure-A is computation of net profit from transportation receipts from FCI, Rajkot and Annexure-D is computation of net profit from commission receipts. Following are common in these two annexures. (i) Rs. 3,10,978/- chadai utrai (loading/unloading) (ii) Rs. 37,10,118/- packing expenses (iii) Rs. 11,29,110/- silai sutli & suya expenses (iv) Rs. 38,09,524/- Kata Tolai expenses 3.7 Thus bogus claim for transportation expenses against commission receipts is established as exactly similar amounts have been claimed by assessee twice, once against commission receipts and again against transportation receipts. Foregoing analysis establishes another very vital point against assessee and that is that loading unloading expenses, packing expenses, silai expenses, Kata Tolai expenses are all transportation expenses and for that reason these expenses find place in Annexure-A and assessee is reimbursed those transportation receipts from FCI.
3.8 Assessee's main argument against disallowance is that FCI paid for transportation of wheat from transit godowns/places to warehouses of the FCI and assessee had to incur extra expenses for transportation from purchase centres to transit godowns/places. This argument is not acceptable for reasons mentioned in para-3.6 & 3.7, supra. Moreover the assess 26 could not produce any evidence to prove that it incurred expenditure on transportation which exceeded the payment received by it from FCI, for this purpose. Further assessee could not produce clinching evidence and authentic vouchers for payment of transportation charges. Despite specific and repeated requirement
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 7 - assessee did not file details of Name & address of payees, their PAN, amount paid and TDS, on the plea that Truck owners/drivers were paid on L/R to L'R basis and no single payment was more than Rs. 20,0007- and hence TDS liability did not arise. Assessee has not been able to substantiate his claim for expenditure on transportation, neither identity of payee nor genuineness of the expenditure is established. 3.9 In view of the above mentioned facts and circumstances, expanses of Rs. 1,42,41,750/- claimed as transportation expenses against commission receipts of Rs.2,54,37,224/- are held to be bogus as these expenses have also been claimed by assessee against transportation receipts of Rs. 2,70,50,672/-. Accordingly an addition of Rs. 1,42,41,750/- is made to the declared income by disallowing these expenses against commission receipts.”
“4. DISALLOWANCE OUT OF LABOUR EXPENSES : As per the Trading / Profit & Loss account, assessee had claimed expenditure of Rs. 61,14,978/- as labour charges. Further details filed by the assessee show that these expenses were claimed against commission receipts of Rs. 2,54,37,224/- (Refer Annexure- C of this order). The business of assessee is exclusively that of procurement of wheat for FCI from farmers at purchase centres and delivery of the same at the godown 7 specified places of, FCI. Prima facia the huge expenditure of Rs. 61,14,978/- as labour charges appears to be higher, more particularly when the assessee has incurred further expenses of Rs. 33,78,6507/ on salary. $o the assessee was asked to substantiate the expenses on labour charges of Rs. 61,14,978/-. Assessee was also asked to file brief reasons justifying the quantum of such expenses. Necessary evidence / records were required to be produced. However no authentic record or reliable evidence was filed by assessee. Internal vouchers with no authenticity were only maintained and produced. No independent evidence was available. Therefore 10% of these expenses are disallowed, resulting in an addition of Rs. 6,11,490/-.”
Finally, an amount of Rs.1,42,41,758/- was disallowed for transport expenses and an amount of Rs.6,11,490/- was disallowed for labour charges.
Against the said appeal, assessee preferred first statutory appeal before the CIT(A), but, because of some reasons it could
ITA No. 180/Rjt/2014 [Kodinar Taluka Roo Vechan Mandali Ltd. vs.JCIT] AY 2009-10 - 8 - not file its submission. The learned CIT(A) confirmed the action of the AO without going into the facts of the case.
Since, learned CIT(A) has not passed his order on merit of the case and same order was passed ex parte, therefore, in the interest of justice, we set aside this matter back to the file of the CIT(A) who will decide this matter afresh after giving opportunity of being hearing to the assessee to the subject to the cost of Rs.1000/- to be paid by the assessee to the department as it has wasted precious time of the CIT(A) for non-filing of its submissions.
In the result, the appeal of the assessee is allowed for statistical purposes.
This Order pronounced in Open Court on 28/02/2022
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 28/02/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
Deputy/Asstt. Registrar ITAT, Rajkot