Income Tax Appellate Tribunal - Chandigarh
A.K. Trading Company Limited, ... vs Assessee on 15 February, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'B' CHANDIGARH
BEFORE Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 1091/Chd/2010
Assessment Year: 2006-07
M/s A.K. Trading Company Ltd, Vs The Addl. CIT, Range-1,
Chandigarh Chandigarh
PAN No. AABCA2249P
(Appellant) (Respondent)
Appellant By : Shri Anil Kumar Batra
Respondent By : Smt. Jaishree Sharma
Date of hearing : 15.02.2012
Date of Pronouncement : 26.03.2012
ORDER
PER MEHAR SINGH, AM
This appeal filed by the assessee is directed agains t the order of CIT(A), Chandigarh dated 18.5.2010 relating to assessment year 2006- 07 passed u/s 143(3) of the Income-tax Act,1961 (in short 'the Act').
2. The assessee has rais ed the following grounds of appeal:-
1. That the Ld. CIT(A) has without appreciating the facts and circumstances of the case, erred in sustaining the addition of Rs. 1,99,763/- (as goods carrier Rs. 1,05,910/- + Rs. 68,853/- for Truck No. HR-01-8552 + Rs. 25,000/- Shri Tarlok Singh for not deducting the tax at source u/s 194C r.w.s. 40(a)(ia) of the Income Tax Act, 1961. The addition be deleted.2
2. The Ld. CIT(A) has, without appreciating the facts and circumstances of the case, erred in sustaining the addition of Rs. 4,56,000/- on account of shortage in stock. The addition be deleted.
3. The appellant craves leave to add, amend or delete any of the ground of appeal before the same is take up for final hearing.
3. In the course of assessment proceedings , the Assessing Officer noted that certain expenses were debited to the profit and loss account where tax was required to be deducted u/s 194C of the Act. However, no tax was deducted. The Assessing Officer furnished the details of such expenditure as under:-
Name of Date Amount(in Rs.) Head of persons expenses M/s Premier 14.05.2005 20,356 Car repair Motors Tarlok Singh 11.07.2005 25,000 Freight
The Assessing Officer found that no tax at source was deducted on payments / credits in respect of A.S. Goods Carrier and in respect of Truck No. HR-01-8552, although the payments / credits during the financial year exceeded Rs. 50,000/- (w.e.f. 1.10.2004 Section 194C(3) has been amended to cover such payments). When the ass essee was confronted by the Assessing Officer on the issue in question, the assessee admitted that due to some mistake, it failed to deduct tax at source on payment of Rs. 1,05,910/-, credited to M/s A.S. Goods Carrier. It was also admitted that on payments made to driver of said truck number, for an amount of Rs. 68,853/- (30 payments each less 3 than Rs. 3,500/-) no tax at source was deducted. The Assessing Officer also considered the submissions filed by the assessee in respect of expenses reproduced above. The Assessing Officer invoked the provisions of section 194C and held that the assessee was liable to deduct tax, on payments made to truck driver as well as Tarlok Singh and M/s A.S. Goods Carrier. However, the assessee failed to do so. It was categorically observed by the Assessing Officer that it is not disputed by the ass essee that there was a work contract between the assessee and M/s A.S. Goods Carrier or Tarlok Singh, driver or owner of truck No. HR-01-8552, within the provisions of section 194C of the Act and the assessee was liable to deduct tax at source. As regards payments to M/s Premier Motor, the work contract was for repair of vehicle including material. So, the assessee was required to deduct tax at source if gross amount exceeded Rs. 20,000/-. In this context also there is violation of provisions of section 194 C of the Act and, hence, the Assessing Officer made disallowance u/s 40(a)(ia) amounting to Rs. 2,20,119/- (Rs. 20356/- = Rs. 25000 + Rs. 105910 + Rs. 68853). The Ld. CIT(A), allowed the relief to the assessee in respect of payments made for purchase of spare parts mainly to M/s Premier Motors. Labour part of only Rs. 1750/- which is payment for purchase of goods rather than services taken for repair of car. The CIT(A), granted relief of Rs. 22,356/-, on this count and upheld the balance amount as is evident from para 19 and 20 of his order. The same are reproduced herein under:-
4
"19. After considering the rival submissions, facts & judgment referred to, I find that the case quoted supra is entirely different from the present case on facts. In that case, goods were sent by consignor on FOR basis and the consignor deducted tax at source on payments made to transporter s. In that situation, the liability of the consignee was taken care of. As such, in my view, the Assessing Officer has rightly disallowed Rs. 105910/-, 68853/- & Rs. 25000/- applying the provisions of section 40A(a)(ia) of the Income Tax Act.
20. As regards the payment to M/s Premier Motors, it is for purchase of s pare parts mainly. Labour part is only Rs. 1750/-. It is a payment for purchase of goods rather than services taken for repair of car. On facts, provisions of section 40(a)(ia) should not be applied on this payment. Asses see gets a relief of Rs. 20356/- on this count, partly allowing ground No.3."
4. The Ld. 'AR' placed reliance on the decision reported in 45 DTR (Amritsar) (Trib) 49 (ITO v Indian Road Lines) and CIT v Bhagwati Steels [2010} 326 ITR 108 (P&H). Ld. 'DR' relied on the order pas sed by the lower authorities.
5. We have carefully perused the rival submissions, facts of the case, relevant records and also the written submissions filed by the ld assessee, and case laws. The Ld. CIT(A) considered the submissions filed by the assessee in detail along with decisions of the ITAT, Chandigarh Bench in the case of Partap Hoon v Addl CIT, Range-1 in ITA No. 536/Chandi/2009. After considering the rival submissions, factual position of the case and the decisions referred to, Ld. CIT(A), recorded findings, as reproduced above. In view of this, we are of the considered opinion, that the decision quoted by the Ld. 'AR' in CIT v Bhagwati Steels [2010] 326 ITR 108 (P&H) is not applicable to the facts of the present case being different and distinguis hable having 5 regard to the clear findings recorded by the Assessing Officer in his assessment order. Similarly, the decision relied upon by the Ld. 'AR' of Amritsar Bench of the Tribunal in the case of ITO Vs Indian Road Lines, ITAT Amritsar Bench (2010) reported in 45 DTR (Amritsar) (Trib) 49 is not applicable to the facts of the present case being different and distinguishable. Therefore, in view of the fact situation of the case and the findings of the CIT(A), we do not find any substance in the contention raised by the assessee. Therefore, this ground of the assess ee is dismissed and f indings of the Ld. CIT(A) are upheld. The ground of appeal raised by the assessee is dismis sed.
6. Ground No.2 raised by the assessee is as under:-
2. The Ld. CIT(A) has, without appreciating the facts and circums tances of the case, erred in sustaining the addition of Rs. 4,56,000/- on account of shortage in stock. The addition be deleted.
7. The Ld. 'AR', in respect of contention raised in ground No.2 referred to, para 21 of the order of CIT(A), which contain its submissions and findings of the Assessing Officer. The Ld. 'AR' placed reliance on, the decision in the case of Mrs . Hirabai D. Desai & Sons v CIT (1936) 4 ITR 95 (Bom). The Ld. 'DR' on the other hand placed reliance on the assessment order as well as the orders passed by the CIT(A). The Assessing Officer found that the assessee had claimed stock shortage of Rs. 8,14,528/- in the profit and loss account. The assessee was afforded opportunity by the Assessing Officer justify such claim. The Assessing Officer after appreciating the submissions 6 filed by the assess ee passed a detailed order and held that having regard to the figures of total sales, sales to DCM, total shortage and total shortage on account of quantity to DCM incorporated by the Assessing Officer in para 6.1 of the assessment order holding that the shortage claimed by the assessee was highly excessive. Shortage related to short supply of material to the DCM accounts, for Rs. 6.76 lacs. This was not disputed and the assessee had always accepted the version of DCM, regarding shortage of goods supplied. Therefore, it leads to the conclusion that goods were actually supplied in short by the assessee while loading the truck. The findings of Ld. Assessing Officer in para 6.1 of the assessment order are as under:-
"6.1 ...... ..Although some shortage on the way cannot be ruled out due to nature of goods being s crap and so some spillage can be there, but the extent of shortage claimed by the assessee in the year under consideration is highly excessive. If the F.Y. 2004-05 is taken into consideration then such shortage was only 0.092% of the total sales while for year under consideration its is 0. 26%. Further, for DCM the percentage of shortage is 0.12% in F.Y. 2004- 05 and 0.37% in F.Y. 2005-06. While for others it is 0.047% in F.Y. 2004-05 and 0.04% for F.Y. 2005-06. Thus shortage for customers other than the DCM remained almost at same level while for DCM it increased by more than three times without any visible reasons. So the amount of shortage does not appear to be for the reasons mentioned by the assessee in its replies and there was actual short loading of the trucks at the end of the assessee while making sales. Taking into consideration the above facts, the claim of such shortage in relation to DCM is restricted to 0.12% of the total sales to DCM i.e. to an amount of Rs.2.20 lacs. and balance amount of Rs.4.56 lacs is treated as expenditure wrongly claimed by the assessee. Consider ing gross profit r ate of the assessee as being 2.84 %, the value of stock which has been booked in sales would be 4.43 lacs . The same has likely been sold by the assessee outside its books of accounts, as sale rate for different customers varies according to quantity or dered, such stock would have been sold to earn higher margin, and at the same time excessive loss has been claimed to reduce profits. However, since disallowance is 7 being made on estimated basis, no separate addition on account of any additional profits earned by the assessee on such sales has been made and it is treated as being covered by increase in income on account of above said disallowance of Rs.4,56,000/-."
8. The findings of the Ld. CIT(A) are recorded in paras 26 to 28 of the order and the same are reproduced herein-under.
"26. After considering the rival submissions and material on record, I find that the assessee in his letter dated 25.8.2006 admitted that 43% consignment were found where shortage in stock was detected. It is stated that in assessment year 2007-08, shortage was Rs. 766949/- as against turnover of Rs. 310213483/- which means that the shortage was 0.24% only. Percentage of shortage found by the Assessing Officer with respect to DCM is as follows:
Assessment year 2005-06 0.120%
Assessment year 2006-07 0.37 %
Assessment year 2007-08 0.24 %
27. I find that the appellant failed to produce any stock register, evidence of loading & weight and while dispatching the goods or any other evidence to pr ove that the actual goods supplied were the same as those in the billed amount.
28 Considering all the circumstances & facts, action of the Assessing Officer in disallowing Rs. 456000/- for shortage of stock seems correct. The case of Hirabhai D Desai & Sons Vs. C IT [supra] is not applicable on facts since in that case the Assessing Officer made an addition in respect of Kasar i.e. selling by short measure stating that it was a well known fact that all liquor sellers do sell at short measure and that assessee must have adopted this practice. Having gone through this decision, 1 don't think it is at all relevant to the present case."
9. A perusal of the decision relied upon by the assessee in the case of Mrs. Hirabai D. Desai & Sons v CIT (supra) reveals that facts of the case relied upon by the asses see are not similar to the facts of the in hand, consequently the decision relied upon by the asses see is not 8 applicable to the facts of the present case. Having regard to the fact situation of the present case and detailed findings recorded by the Assessing Officer and CIT(A) and after appreciating the factual matrix of the case, we do not find any reason to interfere in the findings of CIT(A). The findings of Ld. CIT(A) are upheld and the ground of appeal is dismissed.
10. In the result, appeal of the assessee is dismissed.
Order Pronounced in the Open Court on this 26 t h day of March, 2012.
Sd/- Sd/-
(SUSHMA CHOWLA) (MEHAR SINGH)
JUDICAL MEMBER ACCOUNTANT MEMBER
Dated : 26 t h March, 2012
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
True Copy
By Order
Assistant Registrar