Income Tax Appellate Tribunal - Chandigarh
Ito, Barnala vs M/S The Truck Operator Union, Barnala on 14 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 688/CHD/2016
Assessment year: 2004-05
The Income Tax Officer, Vs The Truck Operator Union,
Ward - 2, Sehna Bhadaur, Distt. Barnala.
Barnala.
PAN No. : AAAAT9000E
&
CO No. 30/CHD/2016
In ITA 688/CHD/2016
The Truck Operator Union, Vs The Income Tax Officer,
Sehna Bhadaur, Distt. Barnala. Ward-2,
Barnala.
PAN No. : AAAAT9000E
(Appellant) (Respondent)
Department By : Shri Manjit Singh,DR
Assessee By : Shri Sudhir Sehgal
Date of hearing : 24.05.2017
Date of Pronouncement : 14.07.2017
ORDER
PER MS. DIVA SINGH,JM The present appeal has been filed by the Revenue alongwith CO/30/CHD/2016 assailing the correctness of the order dated 29.02.2016 of ld. CIT(Appeals) Panchkula pertaining to 2004-05 assessment year on the following grounds :
"1. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 19,20,000/- made on account of difference in receipts as per Form No.l6A vis-a-vis Profit and Loss Account.
2. In the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs.28,20,508/- to the extent of Rs.26,26,700/- made on account of difference in receipts as per bank accounts vis-a-vis Profit and Loss Account."
2. The ld. Sr.DR addressing the background of the case submitted that the assessee is a Truck Operator Union and in the course of proceedings before the AO, it was noted that the assessee had received a payment of Rs. 3,66,32,394/- whereas as per the Profit & Loss Account, the assessee had shown gross receipt of Rs. 3,47,12,394/-. Thus, noting the difference of Rs. 19,20,000/-, the assessee was required to explain the same. Inviting attention to the reply dated 28.08.2006, taken note of ITA 688/CHD/2016 A.Y. 2004-05 Page 2 of 9 by the AO at page 2, it was submitted that the assessee had submitted the following reply :
"There was a difference of Rs.19,20,000/- between the freight received credited to the profit and loss account and TDS certificates due to the fact that some payments were directly made to the members from the freight received account instead of debiting in the Freight Paid account. The list of all these members is enclosed as per annexure-I."
2.1. Inviting attention to page 3 of assessment order it was submitted that the addition of the said amount was made by the AO since despite providing ample opportunity, the assessee failed to furnish any documentary evidence.
2.2 Apart from that, an addition of Rs. 28 lacs was also made as there were differences noted in the bank statements. The addition, it was submitted was confirmed in appeal by the CIT(A). However, the assessee had filed an appeal before the ITAT and the issue was remanded to the CIT(A) vide order dated 25.11.2011 in ITA 959/CHD/2010.
2.3 Accordingly, in the second round before the CIT(A), it was submitted though the remand reports were obtained and copy of the same is extracted in the order, the additions have been largely deleted.
2.4 Inviting attention to the remand report dated 27.09.2012, it was submitted that the assessee could not justify the necessity of preparing the Imprest Account. In fact, the following observation of the AO was highlighted :
"As during the course of assessment proceedings an addition of Rs.19,20,000/- was made on account of freight received from Punjab Agro and the same was not reflected in the books of accounts. The assessee could not justify the necessity of preparing Imprest account rather showing these transactions in regular books of account."
3. The ld. AR, on the other hand, submitted that in the facts of the present case it is an accepted fact that the assessee does not own any trucks and exists only for its members for which some nominal commission is charged. The matter has been enquired into at length by the AO during the remand proceedings. Remand report is extracted in the order. Reply of the assessee to the remand report, it was submitted , is also extracted. In the facts and circumstances of the case, as has been considered by the CIT(A), it was his submission the addition on facts is correctly deleted. It was submitted that the assessee also, in fact, has come in Cross Objections against the part addition sustained in appeal by the CIT(A) .
ITA 688/CHD/2016 A.Y. 2004-05 Page 3 of 9
4. We have heard the rival submissions and perused the material available on record. On consideration thereof, we find that the arguments on behalf of the Revenue by ld. Sr.DR Shri Manjit Singh, are not supported by the specific findings of the AO in the remand report which has been extracted in para 3.2 of the impugned order. A perusal of the same shows that the Assessing Officer accepts the fact that there were no assets with the assessee in the shape of trucks and the trucks have been provided by the members of Union and on going through the record which includes statements of the Operators, the specific bank accounts, the conclusions have been drawn that as far as the amount of Rs. 19,20,000/- is concerned, the explanation of the assessee is fully supported. Similarly, in regard to the second amount of Rs. 26,20,508/- , the AO in the remand proceedings, again taking into consideration the statements of the concerned persons has concluded that the amount which was so stated to have been handed over to the original owner by Shri Mool Raj, on facts was found to have been handed over to the Munshi of the Truck Union who deposited the amount in the bank account who later on withdrew and distributed the same to the members as per their work. Statement of the members have been recorded. Statement of Munshi Shri Baljit Singh has also been recorded by him and he has given a categoric finding that the statement co-relates to what is recorded in the earlier remand report and only in regard to the limited amount wherein explanation was not offered, the addition was stated to have been rightly made. It is seen that the assessee's submission on the remand report is recorded in para 3.3 and infact reliance is placed upon the observations of the AO in the remand proceedings. Considering these submissions, CIT(A) in para 3.4 restricted the addition to an amount of Rs. 1,93,808/- and a commission income @ 1% on the amount of Rs. 45,46,700/- amounting to Rs. 45,467/- has been sustained.
4.1 On a consideration of the specific findings, arguments and consideration of facts and circumstances wherein we note that qua the additions sustained to the extent of Rs. 1,93,808/-, the ld. AR though argued that only the commission income could have been sustained, did not offer any specific explanation in regard to the same. Accordingly, in the aforementioned peculiar facts and circumstances, we find that no ITA 688/CHD/2016 A.Y. 2004-05 Page 4 of 9 interference is called for in the impugned order. Relevant extract from the said order is reproduced hereunder, which is upheld by us :
3.2 In view of the specific observation of Hon'bl e ITAT the matter was remanded back to the A.O. u/s 250(4) of IT Act, 1961 for necessary enquiry and verificati on of the facts and t he submission made by the appellant was forwarded to the A.O. The submissions of the appellant was sent to the A.O. vide this office letter No. 605 dated 04.09.2012 for his comments. The AO filed reply vide letter No. 338 dated 27.09.2012, the relevant portion of which is reproduced as under:
"The brief facts of the case are that during the course of assessment proceedings, the addition of Rs. 19,20,000/- was made on account of difference in gross receipts as per books of account and TDS certificates and further addition of Rs.28,20,508/- was made being the difference in the total receipts and the total receipts credited in the bank of the assesses besides this there was an addition on account of disallowance of expenses debited in profit and loss account. It is a fact that the truck operator union is formed for collective bargain of its members to avoid unhealthy competition. The account books of assessee have been duly audited and its balance sheet reflects that union does not own any truck of its own and it merely receives commission/certain fees from its members. The Govt. Agencies like FCI, Markfed who required transportat ion of food grains i n buld find its convenient to enter agreement with the union for supply of trucks. The payments received from these agencies are distributed amongst it s members as per thei r work and a nominal fee is extracted from gross receipt to run day expenses. As per your directions, I issued notice to the assessee t o provide complete list of members along with their complete address and assessee provided the list of its members.
As during the course of assessment proceedings an addition of Rs.l9,20,000/- was made on account of freight received from Punjab Agro and the same was not reflected in the books of accounts. The assessee could not justify the necessity of preparing Imprest account rather showing these transactions in regular books of account.
There after I have called upon som e of the operators of the union for their statem ents. The statements of the operators recorded and enclosed herewith. Statem ent clearly reveals that the operators had received the paym ent out of the am ount of Rs.19,20,000/- as per work done. In their statem ents, operators have adm itted that they had received all their dues upto 31.03.2004 and nothing is pendi ng with the union.
This fact was also co-related with the office records that the details of truck num bers and nam es of the owners of the truck had been placed on record to whom the paym ents is m ade. The detail of profit and loss account as filed with the return of incom e show the freight am ount received and against that, the m ajor expenses are with regard to freight to the m em bers and others are only very nom inal expenses. I have perused the balance sheet of t he truck operators union and find that, there are no assets in the shape of trucks. Thus, when the trucks had been provided by the m embers of the union, then the paym ent of freight has to be m ade by the union and against such paym ent m ade to the truck operators, since they bear all day to day expenses of the runni ng and repairs of the truck and union is not responsible for the sam e. In the bank accounts of the assessee, the am ount of Rs.19,20,000/- has been deposited and ITA 688/CHD/2016 A.Y. 2004-05 Page 5 of 9 the sam e had been withdrawn on different dates for distributing am ongst its m em bers.
Second addition of Rs.26,20,508/- was made on account of difference in credit summation in the bank and as per books of accounts. Out of total addition, the main addition of Rs.26,26,700/- was due to excess deposit in bank account on different dates.
The assessee stated that the am ount was received from Mool Raj HTC on behalf of its m em bers who had individually supplied their truck for special and to ensure that paym ent is distributed to the ori ginal owner, Mool Raj handed over t he entire am ount to Munshi of the truck uni on who deposited the am ount in bank account and later withdrawn and distributed the sam e to the m em bers as per their work.
During the course of assessment proceedings, it was noticed that this amount was credited in the bank accounts of assessee whereas the same was not reflected in P&L account on gross receipts side. The income of Rs. 26,26,700/-was received from the market.
However as per directions, I called upon t he contractor Mool Raj and recorded his statem ent which is appended herewith. Mool Raj in his statem ent has adm itted that he engaged trucks indivi dually from the operators for carrying the work of special. He al so adm itted that he had individually m ade the paym ent to operators of the union through Munshi of the union so that payment m ay not fall in wrong hands. The m embers whose stat em ent have been recorded have also adm itted that they had received their share from am ount of Rs. 26,26,700/- from Mool Raj through Munshi of the union. The statem ent of Munshi Sh. Baljeet Singh has also been recorded and he has also adm itted that the paym ent was routed through him . In view of the above, I am of the view that the accounts stated supra are the part and parcel of gross receipts, however were not shown in t he profit and loss account as the m em bers of the union have adm itted in their statem ent that they had received the paym ent as per their work done and nothing is due at the closing of year 31.03.2004.
This fact also co-relates to statem ent of som e of its m embers recorded at tim e of earlier rem and proceedings available on file. All the m em bers had admitted that they had worked for Sh. Mool Raj, HTC and their share of paym ent was received through Munshi of the Union. In the statem ent of Sh. Mool Raj, HTC whi ch had been placed on record, he has adm itted that instead of distributing the paym ent am ongst the m embers, the sam e was handed over to Munshi of the Union for better account and control.
The rest of the addi tion is due to difference in bank account and in regular books of accounts. The assessee had filed detail in this regard to justify the difference in bank account. During the course of assessm ent proceedings the assessee could not prove the genuineness of these deposits. Hence this addition was rightly m ade."
3.3 During the appellate proceedings, the Counsel of the The relevant portion of the same is reproduced as under:
"Respectfully submitted that in continuation of my early submissions, some more details are furnished.
It is again submitted that Ld. AO has admitted in his remand report that Truck Operators union i s formed for collective ITA 688/CHD/2016 A.Y. 2004-05 Page 6 of 9 bargain of its members and to avoid unhealthy competition. He has further admitted that union itself does not own any truck of its own and it m erely receives comm ission / certain fee from its m embers to regulate day to day work and running of daily office expenses of the union.
The payments received from the agencies are distributed amongst its members as per their work done and a nominal fee i s extracted from the gross receipts to run day to day expenses.
Firstly there was an addition of Rs. 1920000/- was made on account of freight received from PB. Agro and the same was not reflected in the gross receipt account. Ld. AO in his remand report admitted that details of truck members and name of the owners of the trucks had been placed on record to whom the payment of 1920000/- was made. The detail of profit and loss account as filed with the return of income shows that freight amount received and against that the major expenses with regard to the freight to the members and other expenses are very nominal. He also admitted that appellant did not own any truck of its own, therefore when the trucks have been provided by the members of the union, then the payment of freight has to be made to its members. As against such payment made to the truck operators they bear all day to day expenses of the running and repairs of truck and union is not responsible for the same. In the bank accounts of the assessee the amount of Rs. 1920000/- has been deposited and the same has been withdrawn on different dates to distribute the same amongst the members.
In view of the forgoing finding of the Ld. AO after going through assessment record it shows that appellant has deposited the amount Rs. 1920000/- in the bank after receiving it from PB Agro and the same was distributed amongst the members of the union (as per list given during the assessment proceedings). Ld. AO has wrongly made the addition only on the ground that appellant has not produced any vouchers. I t is submitted that on one side Ld. AO admits that appellant retains only small amount for its day to day work expenses and balance is remitted to the members of the truck union, secondly he has also admitted that appellant has not owned any truck of its own and the amount has to be made to its members. Therefore, the amount of Rs. 1920000/ - withdrawn from bank account on different dates to disburse it amongst the members. Simply mere non production of voucher does not itself survives for addition of the amount of Rs. 1920000/-.
Second addition of Rs. 2820508/- was made on account of difference in credit summation in the bank and as per books of accounts. Out of this addition major addition is of Rs. 2626700/ - which was due to excess deposit in bank account on different dates. Ld. AO during t he assessment proceedings made addition of Rs. 2626700/- only on the ground that the same was not reflected in profit and loss account on gross receipt side. Reply / fact s submitted by the appellant were categorically not taken into account. Whereas Ld. AO in his remand report has admitted that during the first remand report statement of Mool Raj Contractor reveals that members of the union had individually supplied their trucks for special and to ensure that payment is distributed to the original owner, Mool Raj Contractor handed over the amount to Munshi of the union. Munshi deposited the amount in the bank account of union and l ater the same was wit hdrawn and distributed amongst the members. Statement of some members of the union was also taken and all the members stated that they have individually worked for the contractor and amount was received from the contractor through munshi of the union.
ITA 688/CHD/2016 A.Y. 2004-05 Page 7 of 9 Appellant had furnished the detail list of the payment of Rs. 2626700/- distributed amongst the members of the union during the assessment proceedi ngs and Ld. AO in his first remand report receded the statement s of the members as well as the contractor from whom the payment was received have justify the claim of the appellant.
On rest of the addition Ld. AO only states that assesses could not prove the genuineness of these deposits. Appellant during the assessment proceedings explained all the entries, which itself explain the genuineness of the entries. Appellant has filed all the relevant details during assessment proceedings as well as before your good self during appellant proceedings, which itself explain the nature of entries.
With regards to addi tion of Rs. 1920000/ and sum of Rs. 2626700/- out of 2820508/- it is submitted as under ----- The amount of Rs. 1920000/ received from PB Agro a govt agency has made the payment on 09/05/2003 for an amount of Rs. 1850235/ after deducting TDS and other charges in Sangrur Central Co operative Bank Senna Bhadaur and the same was distributed among the members. (Details of payments t o members was already furnished with earlier replies. Similarly the payments of Rs. 2626700 out of Rs. 2820508/- the same was also deposit in The Sangrur Central Cooperative Bank LTD Senha Bhaduhar on 28/07/2003 to 25/11/2003 by the contractors. The same was repaid to the members (List of Payment made to members was already furnished on earlier hearings.) Photo copy the bank a/c from the assesses book and from bank are furnished in its support that all the payments were first deposit in the bank and thereafter the same was repaid to the members.
A gist of payments received from agencies and credited in bank also attached which narrates agencies wise deposit and other deposits. Gist of the payments shows that in The Sangrur Central Co-operative Bank comes to Rs. 35973531/- and in SBOP comes to Rs. 3479271/-, thus totaling of Two comes to Rs. 39452802/-, Appellant receives gross freight as per books of Rs. 34712394-00 Gross Freight from PBAgro as per Form No. 16A Rs. 1920000-00 Total Comes to Rs.36632394-00 Freight received from Contractors deposit in bank Rs. 2626700-00 Total Comes to Rs. 39259094-00 With regard to balance of Rs. 2820408 - 2626700 - 93708/- is concerned the same is explained as under -
Amount TDS deducted Rs. 202885-00
Securities Deducted Rs. 281009-00
Bank Charges Rs. 8097-00
Total comes to_______________________
Rs. 491991-00
Less refund of securities Rs. 364699-00
Net balance comes to Rs. 321000-00
Net effect comes to Rs. 193708- The same is added. Thus, the amount of Rs. 2626700 + 193708 comes to Rs. 2820408/-.
Therefore the addition of Rs. 192000/- and Rs. 2820408/- stands explained and deserves to be deleted.
Thirdly the addition of Rs. 22323/- on account of disallowance of expenses out of misc., repair & maintenance, telephone, travelling and pooja & langer expenses. Only on the ground the vouchers are ITA 688/CHD/2016 A.Y. 2004-05 Page 8 of 9 not produced. These expenses are incidental to business and part and parcel of the busi ness hence deserves to be allowed.
In view of the forgoing submissions additi ons made by the Ld. AO may kindly be deleted and grounds raised by the appellant be admitted."
3.4 I have considered the submissions of the appellant and the remand reports of the A.O. u/s 250(4) of IT Act' 1961. As per record and details submitted during appellate proceeding t he gross receipts of the appellant as per Bank A/c is Rs.3,94,52,802/- which is inclusive of Rs. 35,97,351/- in Sangrur Central Co-op. Bank and Rs. 34,79,271/- in SBOP while the appell ant has shown gross receipts at Rs.3,92,59,094/-. The gross receipts as per Form-16A stated at Rs.3,66,32,394/-. The difference of Rs.26,26,700/- between gross receipt shown by appellant and gross receipts as per Form-16A said to be due to a payment pertaining to Sh. Mool Raj. The A.O. has, however, added Rs.28,20,508/- on account of difference in the gross receipt shown in Bank A/c and gross receipt as per Form-16A. The A.O. has also contended that the balance in Sangrur Central Co-op. Bank was at Rs.3,36,017/- but the appellant has shown in Balance Sheet only Rs.15,017/-. The balance Rs.3,21,000/- was said to be a collection of funds by the operator members from among themselves for some Union working which was deposited in the Bank on 29.03.2009, whereas the same was entered in t he Books on 01.04.2004. However, the A.O. didn't accept the contention of the appellant and considered Rs. 3,21,000/- as undisclosed income but made no separate addition as the same was included in Rs.28,20,508/-. On perusal of the remand report of the A.O., it is seen that the appellant's submission in respect of the distribution of the amounts to the members is corroborated. It is also observed that such enquiry was undertaken during the original remand proceedings also wherein the members had confirmed receipt of such payments. No discrepancy is noted by the A.O. in the submission made by the appellant. It is also pointed out that the details of truck numbers and names of persons to whom payments were made are placed on record. During the earlier appellate proceedings, the Id. CIT(A) had confirmed the addition due to the fact that the appellant didn't co- operate during the remand processing. Thereafter, Hon'ble ITAT restored the matter back to the C1T(A) with the observation as reproduced in para 2.2 of this order. Now, the A.O. has submitted the remand report as reproduced in para 3.2. However, it is also seen that during the remand proceedings, the truck operators etc. have given the replies and in some cases, the exact amount received could not be confirmed though the same is confirmed by appellant. However, the A.O. in the rem and report has subm itted that trucks are supplied by the m em bers of the Union and, therefore, paym ents had to be m ade to them . Even otherwise, logically speaking the truck operator union which is only facilitat ing agency has rendered its services only for the benefits of its members and the entire gross amount received by it directly or otherwise cannot be its total income because for rendering services logically speaking they have to get the truck from its members to whom the payment has to be made and therefore, the total amount of Rs. 47,40,508 (19,20,000 + 28,20,508) by no stretch of imagination can be its total income. However, the very fact that the appellant has furnished the details of only Rs. 45,46,700/- (19,20,000 + 26,26,700) to the A.O. out of the tot al amount of Rs, 47,40,508/-, the addition t o the extent of balance amount of Rs. 1,93,808/- i s confirmed. 3.5 Regarding the gross receipt of Rs. 45,46,700/-, I direct the A.O. to consider expenses only to the tune of 99 % to income as shown by appellant in its books of account and add 1% of Rs. 45,46,700/- to the ITA 688/CHD/2016 A.Y. 2004-05 Page 9 of 9 total income of the appellant. Hence, addition to the tune of Rs. 45,467/- is also confirmed."
(emphasis provided)
5. In the result, appeal of the Revenue and C.O. of the assessee is dismissed.
Order pronounced in the Open Court on 14th July,2017.
Sd/- Sd/-
(ANNAPURNA GUPTA) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CI T(A)
5. The DR
Asstt. Registrar
ITAT,Chandigarh.