Sikka International Freight Services Pvt. Ltd, New Delhi v. ITO, New Delhi

CO 134/DEL/2009 | 2004-2005
Pronouncement Date: 18-02-2010 | Result: Dismissed

Appeal Details

RSA Number 13420123 RSA 2009
Bench Delhi
Appeal Number CO 134/DEL/2009
Duration Of Justice 8 month(s) 1 day(s)
Appellant Sikka International Freight Services Pvt. Ltd, New Delhi
Respondent ITO, New Delhi
Appeal Type Cross Objection
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 18-02-2010
Assessment Year 2004-2005
Appeal Filed On 16-06-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G : NEW DELHI BEFORE SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.2617/DEL/2008 ASSESSMENT YEAR : 2004-05 INCOME-TAX OFFICER M/S. SIKKA INTERNATIONAL FREI GHT WARD 8(4) NEW DELHI. VS. SERVICES PVT. LTD. 28 MIDDLE CIRCLE CON. PLACE NEW DELHI. C.O. NO.134/DEL/2009 ASSESSMENT YEAR : 2004-05 M/S. SIKKA INTERNATIONAL FREIGHT INCOME-TAX OFFICE R SERVICES PVT. LTD. VS. WARD 8(4) NEW DELHI. NEW DELHI. (APPELLANTS) (RESPONDENTS) DEPARTMENT BY : SHRI VIVEK KUMAR SR. DR. ASSESSEE BY : DR. RAKESH GUPTA ADVOCATE . O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY T HE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIO NER OF INCOME-TAX (APPEALS)-XI NEW DELHI DATED 13.05.2008 IN AN AP PEAL AGAINST ORDER UNDER SECTION 147 OF THE INCOME-TAX ACT 1961 (THE ACT). 2 2. IN THE CROSS OBJECTION THE ASSESSEE CHALLENGES I NITIATION OF RE- ASSESSMENT U/S 147 OF THE ACT. THE APPEAL BY THE R EVENUE IS AGAINST DELETION OF ADDITION OF RS.63 76 387/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE IN GROSS RECEIPTS AS PER TDS CERTIFICATE AND THAT SHOWN IN PROFIT AND LOSS ACCOUNT. 3. THE ASSESSEE FILED RETURN OF INCOME DECLARING TO TAL INCOME OF RS.4 86 770/-. THE SAME WAS ACCEPTED UNDER SECTION 143(1)(A) OF THE ACT. THE ASSESSEE IS CARRYING ON BUSINESS OF FORWARDING AND CLEARING AGENT. THE A.O. NOTED THAT TOTAL CONTRACT RECEIPT AS PER TDS C ERTIFICATE IS RS.2 48 60 944/ WHEREAS THE SAME AS PER PROFIT & LO SS ACCOUNT IS RS.1 84 84 557/-. NOTICING THIS DISCREPANCY AS POI NTED OUT BY AUDIT OBJECTION THE ASSESSING OFFICER RECORDED THE REASONS AND PROC EEDED FOR FRAMING RE- ASSESSMENT. THE ASSESSEE IN CROSS OBJECTION CHALLE NGES THE SAID ACTION. 4. THE LEARNED COUNSEL FOR THE ASSESSEE DR. RAKESH GUPTA SUBMITTED THAT TO EXAMINE THE VALIDITY OF RE-ASSESSMENT ONLY THE R EASONS RECORDED ARE TO BE LOOKED INTO. THE REASONS AS SUPPLIED TO THE ASSESS EE MENTIONED THAT INCOME OF RS.63 76 387/- HAS ESCAPED ASSESSMENT ON ACCOUNT OF ASSESSEES UNDER STATEMENT OF NET PROFIT. THIS IS WITHOUT ANY BASIS . THEREFORE THE RE- ASSESSMENT HAS TO BE CANCELLED. RELIANCE WAS PLACE D ON THE FOLLOWING DECISIONS:- 3 (1) CIT VS. BATRA BHATTA CO. 220 CTR 531 (DEL); (2) ITO VS. TAKSHILA DISTRIBUTORS (P) LTD. 121 TTJ 973 (DEL) IN REPLY THE LEARNED DR SHRI VIVEK GUPTA SUBMITTED THAT THE REASONS WERE SPECIFIC. IT WAS FOUND THAT THOUGH THE CREDIT FOR TDS IS ON HIGHER AMOUNT SUCH AMOUNT IS NOT CREDITED TO THE PROFIT & LOSS AC COUNT. THEREFORE IT AMOUNTS TO INCOME ESCAPING ASSESSMENT. THE ORIGINA L ASSESSMENT WAS FRAMED UNDER SECTION 143(1)(A). THERE WAS NO OCCAS ION TO FORM AN OPINION AT THAT TIME. HENCE ON THE SPECIFIC INFORMATION IN POSSESSION OF THE A.O. RE- ASSESSMENT PROCEEDING IS VALID. RELIANCE WAS PLACE D ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJES H JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500. IN THE SAID CASE I T HAS BEEN HELD THAT REOPENING HAS TO BE ON THE BASIS OF SUBJECTIVE SATI SFACTION OF THE A.O. THIS CONDITION IS FOUND SATISFIED IN THE PRESENT CASE AN D HENCE RE-ASSESSMENT PROCEEDING IS VALID. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E IN AGREEMENT WITH THE SUBMISSION OF THE LEARNED DR. THE ASSESSING OF FICER HAD SPECIFIC INFORMATION THAT THOUGH THE CREDIT FOR TDS CLAIM IS MUCH MORE CORRESPONDING AMOUNT IS NOT FOUND CREDITED IN THE P ROFIT & LOSS ACCOUNT. IN VIEW OF THE SPECIFIC INFORMATION THE ASSESSING OFFI CER RIGHTLY ASSUMED JURISDICTION FOR FRAMING RE-ASSESSMENT. THE CASE L AWS RELIED UPON BY THE 4 LEARNED COUNSEL ARE DISTINGUISHABLE ON FACTS. IN T HE CASE OF BATRA BHATTA CO. (SUPRA) THE REASONS RECORDED REVEALED THAT RE-ASSE SSMENT WAS INITIATED TO EXAMINE WHETHER THE LAND IS AGRICULTURAL LAND OR NO T AND NOT WITH THE INFORMATION THAT THOUGH THE LAND IS NOT AGRICULTURA L CAPITAL GAIN WAS CHARGEABLE TO TAX. SIMILARLY IN THE CASE OF TAKSHI LA DISTRIBUTORS (P) LTD. (SUPRA) THE FINDING OF THE TRIBUNAL IS THAT IN THE REASONS RECORDED THE A.O. HAS NOT REFERRED TO ANY MATERIAL ON THE BASIS OF WH ICH OPINION IS FORMED REGARDING INCOME ESCAPING ASSESSMENT. IT IS ALSO F OUND THAT THERE IS NO APPLICATION OF MIND AND NOTICE WAS ISSUED IN A CASU AL MANNER. WHETHER THE RE-ASSESSMENT IS ON THE BASIS OF INFORMATION IN POS SESSION OF THE A.O. IT DEPENDS UPON THE FACTS OF THE CASE. SINCE IN THE P RESENT CASE THE INFORMATION WAS SPECIFIC ON THE BASIS OF WHICH A RATIONAL PERSO N CAN FORM RATIONAL BELIEF REGARDING INCOME ESCAPING ASSESSMENT AND SINCE SUCH OPINION IS ON THE BASIS OF SUBJECTIVE SATISFACTION OF THE A.O. AS HELD BY T HE HONBLE SUPREME COURT THE RE-ASSESSMENT PROCEEDINGS WERE VALID. 6. AS REGARDS MERITS OF THE ADDITION WE FIND THAT THE ADDITION IS MADE ONLY BECAUSE OF THE DIFFERENCE BETWEEN THE RECEIPTS AS PER TDS CERTIFICATE AND THE RECEIPTS AS PER PROFIT & LOSS ACCOUNT. HOW EVER BEFORE THE A.O. AS WELL AS THE CIT(A) IT WAS SUBMITTED THAT THE APPELL ANT WAS WORKING AS CLEARING AND FORWARDING AGENT AND WAS EARNING INCOM E BY WAY OF 5 COMMISSION AND SERVICE CHARGES ETC. THE SEA/AIR FR EIGHT ON THE SHIPMENT BOTH IMPORT AND EXPORT WAS THE EXPENDITURE WHICH WA S TO BE BORNE BY THE CLIENT. THE ACTUAL FREIGHT CHARGED BY THE SHIPPING COMPANY OR THE CONCERNED AIRLINES WAS RECOVERED FROM THE CLIENT ALONG WITH T HE SERVICES CHARGE FOR WHICH APPEAL WAS RAISED. AS PER THE ACCOUNTING PRO CEDURE REGULARLY FOLLOWED THE SERVICE CHARGES/COMMISSION WAS SHOWN A S INCOME OF THE APPELLANT IN THE P&L ACCOUNT. SINCE THE FREIGHT RE CEIPT FROM THE CLIENT WAS NOT INCOME OF THE APPELLANT BUT WAS PAYABLE ON HIS BEHALF TO THE SHIPPING COMPANY IT WAS CREDITED TO SEPARATE ACCOUNT AND TH E PAYMENT MADE FOR FREIGHT ETC. WAS DEBITED TO THAT ACCOUNT. HOWEVER SINCE THE CUSTOMER MAKING GROSS PAYMENT INCLUDING SEA/AIR FREIGHT TDS WAS DEDUCTED ON WHOLE AMOUNT AND NOT MERELY THE SERVICE CHARGES. IT WAS BECAUSE OF THE ACCOUNTING PROCEDURE IN WHICH FREIGHT WAS SEPARATEL Y CREDITED THAT THE DIFFERENCE APPEARED IN THE GROSS RECEIPTS AS PER TD S CERTIFICATES WHAT WAS SHOWN IN P&L ACCOUNT. IT WAS EXPLAINED THAT THE WH OLE ACCOUNTING PROCEDURE ALONG WITH RELEVANT DOCUMENTS INCLUDING T HE BILLS/VOUCHERS AND LEDGER ACCOUNT WAS EXPLAINED TO THE AO AND WAS VERI FIED BY HIM. NO DISCREPANCIES IN THE RECORDING OF ANY BILLS FREIGH T OR INCOME WAS NOTICED BY A.O. IN THE VERIFICATION. HOWEVER THE A.O. REJECTE D THE APPELLANTS EXPLANATION ON FLIMSY GROUND THAT THE COMPANY FAILE D TO SHOW THE PROOF OF 6 PAYMENT CLAIMED TO HAVE MADE TO VARIOUS PARTIES. I T WAS CONTENDED THAT FIRSTLY THE FREIGHT PAID WAS NOT AN EXPENDITURE OF THE APPELLANT AND WAS PAID ON BEHALF OF CUSTOMERS. IT WAS ALSO NOT PART OF TH E P&L ACCOUNT OF THE APPELLANT AND WAS DEBITED/CREDITED IN THE SEPARATE ACCOUNT. WITHOUT PREJUDICE TO THIS THE COMPLETE DETAILS OF THE RECEI PT AND PAYMENT OF FREIGHT WERE SUBMITTED BEFORE THE A.O. IN THE FORM OF CHART WHERE NAMES AND ADDRESS OF THE CLIENTS WERE ALSO GIVEN. ALL THE DE TAILS AND RELEVANT EVIDENCE WERE PRODUCED BEFORE THE AO AND VERIFIED BY HIM. T HEREFORE THE DISALLOWANCE MADE ON ARBITRARY BASIS WAS NOT JUSTIF IED. THE LEARNED CIT(A) EVEN ASKED FOR FURTHER INFORMAT ION WHICH WERE SUPPLIED BY THE ASSESSEE AND ON THE BASIS OF FURTHE R INFORMATION AVAILABLE TO THE COMMISSIONER (APPEALS) HE HELD AS UNDER:- 3.4 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF APPELLANT. THE APPELLANT HAS DULY EXPLAI NED THE ACCOUNTING PROCEDURE FOLLOWED BY IT REGULARLY WHERE IN THE FREIGHT RECEIPT AND PAID IS SEPARATELY ACCOUNTED FO R WITHOUT ROUTING THROUGH THE P&L ACCOUNT. HOWEVER SINCE THE CUSTOMERS MADE GROSS PAYMENT INCLUDING THE FREIGHT TO BE PASSED ON TO SHIPPING COMPANY/AIRLINES THE TDS WAS DEDUCTED OF SAID GROSS AMOUNT. THIS WAS THE REASON FOR DIFF ERENCE IN THE GROSS AMOUNT AS PER TDS CERTIFICATE AND WHAT WAS SH OWN IN P&L ACCOUNT. THE EXPLANATION SUBMITTED THE QUITE R EASONABLE AND LOGICAL. IN FACT FROM THE DISCUSSION IN THE AS SESSMENT ORDER IT APPEARS THAT ALL BOOKS OF ACCOUNTS AND RELEVANT BILLS/VOUCHERS ETC. WERE PRODUCED BEFORE THE AO WHO VERIFY THEM. THE AO APPEARS TO HAVE BEEN SATISFIED BY THE EXPLANATION A ND THE DETAILS SUBMITTED BEFORE HIM. HOWEVER HE MADE ADDITION ON FLIMSY GROUND WHICH IS FOR THE SAKE OF ADDITION. THE RECO NCILIATION OF 7 THE GROSS RECEIPT AS PER TDS CERTIFICATE AND THE IN COME SHOWN IN P&L ACCOUNT FILED IN APPEAL IS MADE ART OF THIS ORDER FOR READY REFERENCE AS ANNEXURE-A. IT IS SEEN FROM THE RECONCILIATION STATEMENT THAT GROSS RECEIPT AS PER TDS CERTIFICATES IS RS.2 48 05 055 WHICH IS ABOUT THE S AME AMOUNT AS TAKEN BY THE AO. HOWEVER THE CORRESPONDING BILL ING AMOUNT WAS RS.2 99 07 120. THE DIFFERENCE WAS DUE TO THE FACT THAT THE TDS WAS DEDUCTED BY THE PAYERS ON THE AMOUNT ACTUAL LY PAID WHEREAS THE AMOUNT CREDITED TO P & L A/C WAS ON THE BASIS OF BILLS RAISED. IN RESPECT OF SOME PAYMENTS NO TDS W AS DEDUCTED WHILE SOME PAYMENT WAS MADE IN THE NEXT YEAR. APAR T FROM THIS THERE ARE RECEIPTS AGGREGATING TO RS.11 34 42 155 IN RESPECT OF WHICH NO TDS WAS DEDUCTED. TAKING INTO A/C THAT AMOUNT GROSS REVENUE RECEIPT FOR THE YEAR ARE RS.14 33 49 275/- OUT OF WHICH OPERATIONAL EXPENSES OF RS.12 48 64 710/- WER E DEDUCTED TO ARRIVE AT THE NET RECEIPT OF RS.1 84 84 565 WHIC H WAS SHOWN IN THE P & L A/C. THEREFORE THE COMPARISON MADE BY THE AO ABOUT RECEIPT IN TDS CERTIFICATE & THOSE SHOWN IN P &L A/C WAS INCORRECT ON FACTS. THE RECEIPT SHOWN IN P&L A/C A RE NET RECEIPT AS PER REGULAR ACCOUNTING PROCEDURE FOLLOWED BY THE APPELLANT. IN VIEW OF THIS THE FIGURES AS PER TDS CERTIFICATE & THOSE IN P&L A/C HAVE BEEN DULY RECONCILED BY THE APPELLANT. THERE DOES NOT REMAIN ANY DOUBT ABOUT THE GENUINENESS OF EXPLANATION. HENCE THE ADDITION OF RS.63 76 387 IS WITHOUT ANY BASIS AND DELETED. 7. WHEREAS THE LEARNED DR SHRI VIVEK KUMAR SOUGHT T O RELY UPON THE FINDING OF THE ASSESSING OFFICER THE LEARNED COUNS EL FOR THE ASSESSEE DR. RAKESH GUPTA REITERATED THE SUBMISSIONS MADE BEFORE THE COMMISSIONER (APPEALS) AND HIS FINDING THEREON. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE R EASON FOR ADDITION IS DISCREPANCY BETWEEN THE GROSS RECEIPTS AS PER TDS C ERTIFICATE AND AS CREDITED TO THE PROFIT & LOSS ACCOUNT. HOWEVER WE FIND THA T THE DIFFERENCE IS DULY 8 RECONCILED BY THE ASSESSEE WHICH HAS BEEN ANNEXED A S ANNEXURE-A TO THE APPELLATE ORDER. WHEN INCOME IS ASSESSED AS BUSINE SS INCOME THE SAME IS TO BE ON THE BASIS OF METHOD OF ACCOUNTING REGULARLY E MPLOYED BY THE ASSESSEE. THE TAX IS REQUIRED TO BE DEDUCTED AT SOURCE AT THE TIME OF CREDIT TO THE ACCOUNT OF PAYEE OR AT THE TIME OF ACTUAL PAYMENT T HEREOF. THUS THE DEDUCTION OF TAX AT SOURCE DOES NOT DETERMINE THE Y EAR OF TAXABILITY OF THE RECEIPT STATED IN THE TDS CERTIFICATE. AT BEST IF CORRESPONDING INCOME IS NOT TAXABLE IN A PARTICULAR YEAR THE CORRESPONDING CRE DIT FOR TAX DEDUCTED MAY NOT BE GRANTED IN VIEW OF SECTION 199 BUT REVERSE I S NOT TRUE. MERELY BECAUSE CREDIT WAS CLAIMED FOR TAX DEDUCTED AT SOURCE IT D OES NOT MEAN THAT THE CORRESPONDING INCOME IS CHARGEABLE TO TAX. SINCE T HE INCOME IS CHARGEABLE TO TAX ON THE BASIS OF METHOD OF ACCOUNTING REGULAR LY FOLLOWED BY THE ASSESSEE AND IN RESPECT OF WHICH NO DISCREPANCY HAS BEEN NOTICED BY THE ASSESSING OFFICER THE ADDITION WAS RIGHTLY DELETED BY THE LEARNED CIT(A). 9. IN THE RESULT THE APPEAL AND CROSS OBJECTION AR E DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18-02-2010. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18-02-2010. 9 ITA NO.2617/DEL/2008 & C.O. NO.134/DEL/2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.