DCIT, Shimla v. M/s H.P. State Civil Supplies, Shimla

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI N. BARATHVAJA SANKAR VICE PRESIDENT AN D MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NOS. 3 TO 6/CHD/2011 ASSESSMENT YEARS: 2002-03 TO 2004-05 & 2007-08 THE DCIT VS. H.P.STATE CIVIL SUPPLIES CIRCLE SHIMLA SDA COMPLEX KASUMPUTI SHIMLA PAN NO. AABCH4054K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH KUMAR KAUSHAL RESPONDENT BY: SHRI S.K. MITTAL ORDER PER SUSHMA CHOWLA JM THESE FOUR APPEALS BY THE ASSESSEE ARE AGAINST T HE TWO DIFFERENT ORDERS OF CIT(A) SHIMLA DATED 21.10.2010 RELATING TO ASSESSMENT YEARS 2002-03 TO 2004-05 AND 27.10.2010 RELATING TO 2007- 08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. ALL THE APPEALS OF THE REVENUE HAVING IDENTICAL GROUNDS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLID ATED ORDER FOR THE SAKE OF CONVENIENCE. 2 3. THE ASSESSEE HAS RAISED COMMON GROUNDS OF APPEAL IN ALL THE CAPTIONED YEARS. THE GROUNDS OF APPEAL RAISED BY T HE ASSESSEE IN ITA NO. 4/CHD/2011 ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES THE LD. CIT(A) ERRE D IN DELETING THE ADDITION OF RS. 2 42 35 622/- ON ACCOU NT OF COMMISSION PAYABLE TO H.P. GOVT. EVEN THOUGH NO SUCH LIABILITY EXISTED OR WAS CRYSTALLIZED DURING T HE PREVIOUS YEAR. 2. IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE SET AS IDE AND THAT OF ASSESSING OFFICER RESTORED. 4. THE BRIEF FACTS OF THE CASE ARE THE PRESENT BUNC H OF APPEALS ARE AGAINST THE ORDER OF CIT(A) DATED 21.10.2010 PASSED PURSUANT TO THE DIRECTIONS OF TRIBUNAL IN ITA NO. 1044/CHANDI/2005 RELATING TO ASSESSMENT YEAR 2002-03 VIDE ORDER DATED 25.5.2007 AND IN ITA NOS 317 & 511/CHANDI/2007 RELATING TO ASSESSMENT YEARS 2003 -04 AND 2004-05 VIDE ORDER DATED 6.2.2008. A REFERENCE IS BEING M ADE TO THE FACTS RELATING TO ASSESSMENT YEAR 2002-03 IN ORDER TO DEC IDE THE PRESENT ISSUE RAISED BEFORE US. 5. THE ASSESSEE AS ON 31.3.2002 HAD CLAIMED A LIABI LITY OF RS. 2.42 CRORES AS COMMISSION PAYABLE TO THE GOVERNMENT ON H ANDLING OF CEMENT. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID AMOUNT REPRESENTS SHARE OF STATE GOVERNMENT IN THE HANDLING CHARGES RECOVERED BY THE CORPORATION SINCE 1990. AS PER THE GOVERNMENT ORDER DATED 20. 7.1990 THE PROCUREMENT CARRIAGE AND HANDLING OF CEMENT REQUIR ED BY ALL DEPARTMENTS / CORPORATIONS / BOARDS / PARISHADS WAS ENTRUSTED T O THE H.P. STATE CIVIL SUPPLIES CORPORATION I.E. THE ASSESSEE BEFORE US. AS PER THE SAID ORDER THE ASSESSEE WAS ENTITLED TO RECEIVE RS. 1.50 PER B AG AS HANDLING CHARGES OUT OF WHICH CORPORATION WAS TO SPEND RS. 0.50 PER BAG AND REST OF THE 3 AMOUNT I.E RS. 1/- PER BAG WAS TO BE USED IN PROVID ING CHEAP RATIONS TO THE WEAKER SECTION OF SOCIETY AS PER THE SCHEME OF THE GOVERNMENT. THE STATE GOVERNMENT DID NOT FORMULATE ANY SEPARATE SCH EME IN RESPECT OF THE SAID AMOUNT. THE CLAIM OF THE ASSESSEE WAS THAT IT HAD ACCUMULATED THE SAID AMOUNT TO THE TUNE OF RS. 2.42 CRORES AS ON 31 .3.2002. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 41 OF THE INCOME TAX ACT AND BROUGHT THE ENTIRE AMOUNT OF THE LIABILITY TO TAX. IN APPEAL THE CIT(A) HELD THAT THE PROVISIONS OF SECTION 41 ARE N OT ATTRACTED IN THE CASE AS THE ASSESSEE HAD NEVER CLAIMED ANY DEDUCTION IN RESPECT OF THE ACCUMULATED LIABILITY SHOWN IN THE BALANCE SHEET. T HE CIT(A) WAS HOWEVER WAS OF THE VIEW THAT THE AMOUNT IN QUESTIO N COLLECTED BY THE ASSESSEE AT THE RATE OF RS. 1/- WAS ASSESSABLE TO TAX AS THE INCOME OF THE ASSESSEE. THE FINDING OF THE CIT(A) VIDE ORDER DA TED 30.9.2005 ARE INCORPORATED IN PARA 6.2 OF ITS ORDER AND ARE REPRO DUCED BY THE TRIBUNAL UNDER PARA 12 IN ITA NO. 1044/CHANDI/2005 RELATING TO ASSESSMENT YEAR 2002-03. THE TRIBUNAL IN APPEAL FILED BY THE ASSES SEE OBSERVED THAT THE ISSUE RELATING TO THE APPLICABILITY OF THE PROVISIO NS OF SECTION 41 HAD ATTAINED FINALITY AS NO APPEAL WAS FILED BY THE REV ENUE. THE TRIBUNAL UPHELD THE ORDER OF CIT(A) IN THIS REGARD. HOWEVE R WITH REGARD TO THE ISSUE RAISED BY THE ASSESSEE THAT THE CIT(A) WAS NO T JUSTIFIED IN ISSUING THE DIRECTIONS TO ASSESS THE INCOME AS PER LAW IN T HE YEAR IN WHICH THE SAME HAD BEEN RECEIVED THAT TOO WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE THE TRIBUNAL VIDE ORDER DATED 25 TH MAY 2007 VIDE PARA 15 HELD AS UNDER:- 15. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IT IS NOT DISPUTED THAT THE ASSESSING OFFICER HAD ADDRESSED THE AMOUNT SHOWN AS LIABILITY BY INVOKING THE PROVISION OF SECTION 41 OF THE INCOME TAX ACT 1961 . THE CIT(A) HAS HELD THAT THE SAID PROVISION OF THE ACT NAMELY SECTION 41 IS NOT ATTRACTED IN THIS CASE. THE REVE NUE IS NOT IN APPEAL AGAINST THE DECISION OF THE CIT(A) AND THER EFORE HIS 4 DECISION IN REGARD TO THIS ISSUE HAS BECOME FINAL. IN REGARD TO THE DIRECTION OF THE CIT(A) CONTAINED IN PARA 6.2 WE ARE OF THE VIEW THAT THE CIT(A) EXERCISES HIS POWERS OF AS SESSMENT CO-TERMINUS WITH THAT OF THE ASSESSING OFFICER. T HE SUBJECT MATTER OF DISPUTE BEFORE THE CIT(A) WAS THE ADDITIO N OF RS. 2 42 35 622/- AND THEREFORE THE CIT(A) WAS EMPOWERE D TO CONSIDER AS TO WHETHER THE SAID AMOUNT WAS ASSESSAB LE UNDER ANY PROVISION OF THE ACT IF NOT ASSESSABLE UNDER SE CTION 41. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE CIT(A) HAS NOT ACTED WITHOUT JURISDICTION IN EXPRESSING HIS VI EW RELATING TO THE TAXABILITY OF THE AMOUNT IN THE YEAR OF RECE IPT. SO HOWEVER WE FIND THAT THERE IS VIOLATION OF PRINCIP AL OF NATURAL JUSTICE TO THE EXTENT THAT THE ASSESSEE HAS NOT BEE N CONFRONTED WITH THE PROPOSED ACTION BEFORE EXPRESSING THE OPIN ION BY THE CIT(A). WE THEREFORE CONSIDER IT JUST AND REASON ABLE TO RESTORE THIS ISSUE TO THE FILE OF THE CIT(A) WITH T HE DIRECTION TO GIVEN AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN REGARD TO THE DIRECTION ISSUED VIDE PARA 6.2 REPRODUCED EL SEWHERE IN THIS ORDER. 6. THE TRIBUNAL WAS OF THE VIEW THAT THE CIT(A) WAS EMPOWERED TO CONSIDER WHETHER THE AMOUNT WITHHELD BY THE ASSESSE E ON ACCOUNT OF STATE GOVERNMENT WAS ASSESSABLE UNDER ANY OF THE PROVISIO NS OF THE ACT IF NOT ASSESSABLE UNDER SECTION 41. THE TRIBUNAL FURTHE R OBSERVED THE CIT(A) NOT TO HAVE ACTED WITHOUT JURISDICTION IN EXPRESSIN G HIS VIEW RELATING TO THE TAXABILITY OF THE AMOUNT IN THE YEAR OF THE REC EIPT. THE TRIBUNAL HOWEVER FOUND THERE TO BE A VIOLATION OF PRINCIPLE S OF NATURAL JUSTICE TO THE EXTENT THAT THE ASSESSEE WAS NOT CONFRONTED WIT H THE PROPOSED ACTION AND ACCORDINGLY THE MATTER WAS RESTORED BACK TO THE FILE OF CIT(A) WITH THE DIRECTION TO GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN REGARD TO THE DIRECTIONS ISSUED VIDE PARA 6.2 BY TH E CIT(A) VIDE ORDER DATED 30.9.2005 AND DECIDE THE ISSUE OF ASSESSABILI TY OF THE SAID RECEIPTS. 7. THE CIT(A) IN THE SECOND ROUND OF APPELLATE PROC EEDINGS VIDE ORDER DATED 21.10.2010 HAS HELD AS UNDER:- 6.1 I HAVE GONE THOROUGH THE FACTS OF THE CASE SU BMISSION OF THE APPELLANT AND ORDER OF HON'BLE ITAT CHANDIG ARH 5 BENCH A CHANDIGARH. THE ISSUE OF HANDLING CHARGE S / COMMISSION PAYABLE TO GOVT. OF H.P. HAS BEEN SET-AS IDE AND RESTORED TO THE FILE OF THE UNDERSIGNED WITH DIRECT IONS TO GIVE AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT. A CCORDINGLY THE CASE WAS FIXED FOR HEARING ON 19.10.2010. THE APPELLANT FILED A COPY OF BREAK UP OF HANDLING CHARGES RECEIV ED ON CEMENT W.E.F ASSESSMENT YEAR 1991-92 TO 2009-09. T HE AMOUNT RECEIVED AT RS. 1/- PER BAG AT RS. 2.42 CROR ES AS ON 31.3.2002 WAS COLLECTED ON BEHALF OF H.P. GOVT AND WAS SHOWN AS PAYABLE TO GOVT. IT WAS NOT IN THE NATURE OF INCOME. THE SAME WAS LATER CONVERTED INTO WORKING CAPITAL A DVANCE BY THE GOVT. VIDE LETTER DATED 2.1.2008 AT RS. 4.09 CR ORES UP TO 31.3.2006. THE SAME WAS SHOWN AS WORKING CAPITAL A DVANCE UNDER THE HEAD CURRENT LIABILITY AND PROVISIONS AS PER SCHEDULE VII OF BALANCE SHEET FOR 31.3.2007 FOR ASS ESSMENT YEAR 2007-08. 6.1 SUBSEQUENTLY THE AMOUNT OF RS. 4.09 CRORES WAS SHOWN AN UNSECURED FROM GOVT. OF H.P. AS PER SCHEDULE IV TO BALANCE SHEET AS ON 31.3.2008 FOR ASSESSMENT YEAR 2008-09. THEREFORE THE HANDLING CHARGES RECEIVED ARE IN THE NATURE OF LIABILITY AND NOT INCOME. KEEPING IN VIEW THE NATU RE OF RECEIPT OF HANDLING CHARGES AND THE CONVERSION OF T HE SAME INTO WORKING CAPITAL ADVANCE AND UNSECURED LOAN TH E AMOUNT IS HELD AS CRYSTALLIZED LIABILITY TILL THE GOVT. OF H.P. FORGOES ITS CLAIM. THEREFORE THE AMOUNT OF HANDLING CHARG ES TO THE EXTENT OF RS. 4.09 CRORES IS TREATED LIABILITY PAY ABLE TO GOVT. THE LD. ASSESSING OFFICER IS DIRECTED TO COMPUTE TH E AMOUNT PERTAINING TO THE ASSESSMENT YEARS UNDER CONSIDERAT ION AND GIVE CREDIT ACCORDINGLY. 8. FROM THE PERUSAL OF THE PRESENT ORDER OF THE CIT (A) WE FIND THAT THE AMBIT BEFORE THE CIT(A) WAS FIRST TO DECIDE THE ISSUE OF TAXABILITY OF THE AMOUNT IN THE YEAR OF RECEIPT I.E. WHETHER THE SAID AMOUNT OF RS. 1/- PER BAG WITHHELD BY THE ASSESSEE TO BE USED IN LIN E WITH THE GUIDELINES OF THE STATE GOVERNMENT IS IN THE NATURE OF INCOME IN THE HANDS OF ASSESSEE. THE SECOND ASPECT WAS IN CONNECTION WITH THE LIABIL ITY SHOWN BY ASSESSEE OVER PERIOD OF YEARS. THE CIT(A) HAS NOT CONSIDERE D THE ISSUE IN THE PERSPECTIVE OF OBSERVATIONS OF THE TRIBUNAL IN PAR A 15. THE CIT(A) WHILE PASSING THE PRESENT ORDER HAS GIVEN A FINDING THAT THE SAME WAS NOT IN THE NATURE OF INCOME. HOWEVER THE CIT(A) HAS NOT GIVEN ANY REASONINGS FOR THE SAME. UNDER SECTION 250 (6) O F THE ACT IT IS PROVIDED 6 THAT WHILE DISPOSING OF AN APPEAL THE ORDER OF CIT (A) SHALL BE IN WRITING AND SHALL STATE THE POINTS FOR DETERMINATION OF THE DECISION THEREON AND THE REASONS FOR THE DECISION. THE CIT(A) WHILE DECIDI NG THE PRESENT APPEAL HAS FAILED TO ADDRESS THE ISSUES ON THE MERITS OF T HE CASE. THE ISSUE WAS REMANDED BACK TO THE CIT(A) WITH THE DIRECTION AS C ONTAINED IN PARA 15 OF THE ORDER OF THE TRIBUNAL DATED 25.5.2007. THE CIT (A) IS DIRECTED TO ADJUDICATE THE SAME IN ADDITION TO THE DECISION ON THE NATURE OF LIABILITY SHOWN BY THE ASSESSEE. IN THE INTEREST OF JUSTICE WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO THE FILE OF CIT(A) TO DECIDE THE SAME IN LINE WITH THE DIRECTIONS OF THE TRIBUNAL AS PER PARA 15 AND AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGL Y THE GROUND NO.1 RAISED BY THE REVENUE IN THIS REGARD IS ALLOWED FOR STATISTICAL PURPOSES. ACCORDINGLY ALL THE APPEALS FILED BY THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT ALL THE FOURS APPEALS BY THE REVE NUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF FEBRUARY 2011. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 24 TH FEBRUARY 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 7