IN INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. B. R. BASKARAN, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 316/Asr/2015 Assessment Year: 2007-08 Assistant Commissioner of vs. M/s Shabir Transporters, Income Tax, Circle Srinagar Srinagar [PAN: ABEFS 6503K] (Appellant) (Respondent) Appellant by : Sh. M. P. Singh CIT-DR Respondent by: Sh. Joginder Singh (C.A.) Date of Hearing: 22.08.2019 Date of Pronouncement: 22.08.2019 ORDER Per B. R. Baskaran, Accountant Member: revenue has filed this appeal challenging order dated 30-03-2015 passed by Ld CIT(A), Jammu and it relates to assessment year 2007-08. revenue is aggrieved by decision of Ld CIT(A) in deleting disallowance of hire charges of Rs.379.30 lakhs claimed by assessee. 2. assessee is transport contractor. present assessment was completed by AO u/s 143(3) r.w.s. 263 of Act. AO noticed that assessee has paid hire charges and accordingly directed assessee to furnish bills/vouchers in support of same. He also asked assessee to furnish details of tax deducted at source from hire charges. However, assessee stated that it has furnished vouchers in original assessment proceedings and further stated 2 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters that payments made to each of person do not exceed threshold limit for attracting TDS provisions. Not satisfied with reply of assessee, AO disallowed entire hire charges of Rs.379.30 lakhs. 3. Before Ld CIT(A), assessee furnished certain explanations and hence Ld CIT(A) called for remand report from AO. In remand proceedings, AO made independent enquires from certain parties on sample basis. All persons with whom enquiries were made confirmed hire charges received by them. They also confirmed that payment received by them was less than threshold limit of Rs.20,000/- for attracting TDS. After considering remand report furnished by AO and response of assessee to remand report, Ld CIT(A) held that disallowance is not warranted. Accordingly he deleted disallowance. Aggrieved, revenue has filed this appeal. 4. We heard parties and perused record. We notice that Ld CIT(A) has decided issue after considering remand report and reply given by assessee to remand report. Ld CIT(A) has given specific finding that vehicle owners have confirmed receipt of hire charges and amount paid to them did not exceed threshold limit for attracting TDS provisions. For sake of convenience, we extract below relevant portion of order passed by Ld CIT(A):- 4. Remand report dated 25.08.2014 Kindly refer to your office letter dated 25-07-2014 vide which Remand report in case of M/s Shabir Transporters Sonwar Srinagar for Assessment year 2007-2008 has been called for. During course of appellate proceedings assessee has furnished evidences in support of his claim which were forwarded by your kind self for verification and submission of remand report by undersigned. desired report is submitted as under:- 3 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters That assessee is partnership firm having its office at Sonwar, Srinagar, Kashmir. assessee is engaged in Transportation Business for which it hires vehicles from market against which hire charges are paid to concerned vehicle owners. For relevant Assessment year 2007-08, assessment was fixed u/s 143(3) of Income Tax Act, 1961 whereby Total Income of Rs 11,95,905/- was assessed by concerned Assessing Officer dt. 24/12/2009. said order was later set aside u/s 263 vide order no. 18666 dt. 21-03-2012 by Commissioner of Income Tax, J&K on following grounds :- "during course of assessment proceedings, AO had specifically asked assessee to intimate total hire charges paid and also as to why tax deduction had not been made on such payments. From records it is seen that no reply was filed by assessee". Thereafter assessment was framed under section 143(3) read with section 263 of IT Act and made addition of Rs 3,79,30,456/- (Hirer Charges) as unexplained and unsupported on following grounds: "In absence of any primary document from assessee, claim of assessee regarding payment of hire charges can't be relied upon. It is settled position in law that whenever there are claims for expenses made by assessee, onus is upon assessee to establish genuineness of same. In present case, assessee failed to produce any bill or voucher to substantiate payment on account of hire charges. Further, though assessee has claimed that there was no party on whom TDS was liable to be deducted, no documentary evidence in support of this claim was produced by assessee. Even bills or confirmation from parties regarding payment made were also not produced on record. Accordingly, it is held that hire charges to tune of Rs 3,79,30,456/- are unexplained and unsupported and therefore cannot be held as genuine. These hire charges of Rs 3,79,30,456/- are being hereby disallowed and added back to total income of assessee". In this regard, after receiving written submissions and paper book of assessee necessary verification of books of accounts and calling of information u/s 133 of IT Act from various parties to whom hire charges were paid by assessee on sample basis was done in below mentioned parties. 4 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters S. No Name of Assessee Date of issuance of Date of receipt of notice u/s 133 of reply I.T.Act,1961 1 Sh.Mohd Amin Bhat S/o Sh 22-07-2014 4/8/2014 Mohd Sidiq Bhat R/O. Palpora Sonwar Srinagar 2 Sh.Ghulam Mohd Bhat S/O -do- 4/8/2014 Sh Abdul Rashid Bhat R/O.Banasar Sonwar Srinagar 03 Sh Showkat Ahmad Sheikh S/O -do- 1/8/2014 Sh.Abdul Hamid Sheikh R/O Kursoo Rajbagh Srinagar 04 Sh.Ghulam Nabi Bhat -do- 1/8/2014 S/O Sh Mohd Sidiq Bhat R/O. Palpora Sonwar Srinagar 05 Manzoor Hamid Wani -do- 4/8/2014 S/O.Sh Mohd Ramzan Wani R/O.Sonwar Srinagar. 06 Sh Abdul Hamid Bhat -do- 4/8/2014 S/O Sh Abdul Gani Bhat R/O.Chadoora Budgam 07 Sh.Bashir Hamid Kachroo -do- 4/8/2014 S/O Sh Abdul Aziz Kachroo R/O Kani Mohala Rainawari Srinagar 08 Sh Ghulam Hassan Matto -do- 4/8/2014 S/o. Sh Gh Mohd Matto R/O Salina Budgam 5 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters 09 Sh. Mushtaq Ahmad Bhat -do- 4/8/2014 S/O Gh. Mohi-ud-Din Bhat R/O H. No. 2, Ishber Colony Nishat Srinagar parties have confirmed that hire charges payments were received from Assessee firm and payment was below Rs 20,000/- in all cases which confirms contention of assessee firm "that TDS has not been deducted from payments of Hire charges made as no party was paid amount exceeding specified limit. Since booking of vehicles are done by staff members at various locations, assessee works with large number of vehicles which are hired from time to time. assessee gets payments from clients as per rate contracts and makes payment to vehicle owners after retaining fraction of amount as its share and to meet administrative cost. payments made to vehicle owners are debited to hire charges account". 5. Rejoinder to Remand Report: During course of hearing before your honour, assessee filed application under rule 46A of I.T. Rules 1962 for admission of additional evidence. additional evidence are accepted under rule 46A by your honour and forwarded same to Ld AO for further verification and enquiries. assessee in remand proceedings filed written submission and paper book and also produced necessary books of accounts along-with supporting evidence. During course of remand proceedings Ld AO on his own made independent enquiries after calling information under section 133(6) of Income Tax Act 1961 of various parties to whom hire charges were paid for rendering services. Ld AO in his remand report confirmed "that in this regard after receiving written submission and paper book of assessee, necessary verification of books of accounts and calling of information u/s 133 of IT Act from various parties to whom hire charges were paid by assessee on sample basis". Ld AO further reported that the" parties have confirmed that hire charges payments were received from Assessee firm and payment was below Rs 20,000/- in all cases 6 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters which confirms contention of assessee firm " that TDS has not been deducted from payments of Hire charges made as no party was paid amount exceeding specified limit. Since booking of vehicles are done by staff members at various locations, assessee works with large number of vehicles which are hired from time to time. assessee gets payments from clients as per rate contracts and makes payment to vehicle owners after retaining fraction of amount as its share and to meet administrative cost. payments made to vehicle owners are debited to hire charges account". Ld. AO made clear finding in his remand report dated 25.08.2014 that vehicle owners have confirmed to have received payment on account of hire charges and also reported that payments were below Rs 20,000/- in all cases which confirms contention of assessee that no TDS was required to be deducted u/s 194C(3)(i) of Income Tax Act 1961, as all payments are below specified limit. Based on verification made by Ld AO, on basis of books of accounts and independent enquires conducted u/s 133(6) , it is clearly established that book results declared by assessee is actual. assessee firm shown net profit of Rs. 11,95,905 which is computed as per books of accounts regularly maintained by assessee and verified by Ld. AO during remand proceeding and no defects in books of account were pointed by Ld. AO. Since books of account and other relevant documents have been duly verified by Ld. AO during course of remand proceedings, book results declared by assessee may kindly be accepted. Reliance is placed on judgment of Hon'ble jurisdictional Amritsar Bench in case of M/s JEE ENN Engineers Vs ITO (2010) 131 TTJ (Asr)(UO)/82 in which it is held that once assessee has produced books of account before appellate authority or before AO in remand proceedings, original default u/s 142 does not remain intact because original assessment has already been set aside by first appellate authority by sending matter back to AO and assessee has produced all books of accounts. Copy of judgment is enclosed. assessee also placed reliance on another judgment of Hon'ble jurisdictional ITAT Bench Amritsar in case of Income Tax Officer v/s M/s Hemkunt Transport Service ITA NO 154/ASR/2012 in which it is held that assessee has produced books of accounts in 7 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters remand proceedings which have been verified by AO. AO did not brought anything adverse against assessee, therefore, AO is directed to accept book results declared by assessee. In view of above facts and legal position, it is hereby prayed to your good-self to kindly accept book results declared by assessee. 6. Determination : 6.1 Ground of appeal no. 1 is general in nature, requires no adjudication and accordingly dismissed. 6.2 Ground of appeal no. 2, 3 and 4 relates to additions made by AO on account of hire charges amounting to Rs 3,79,34,0456/- are unexplained and unsupportive with documentary evidence. brief facts of case are that appellant is partnership firm and is engaged in business of transportation. assessment in this case was completed under section 143(3) of Income Tax Act, 1961 on 24/12/2009 at total income of Rs 11,95,905. Thereafter, said assessment order was set aside under section 263 on 21/03/2013 by Commissioner of Income Tax J&K, Jammu. CIT Jammu while setting aside order observed that during course of assessment proceedings, AO had specifically asked assessee to intimate total hire charges paid and also as to why tax deduction at source had not been made on such payments, on record it was observed by CIT that no reply was filed by appellant on issue. After receiving directions from CIT, AO started afresh proceedings and asked appellant to file complete ledger account of hire charges with supporting bills/ vouchers and also to furnish details of TDS deductions on hire charges paid to vehicle owners. As per AO, assessee had failed to produce primary records with details of hire charges furnished during course of assessment proceedings and it cannot be ascertained whether payments made on account of hire charges to drivers were incurred or not. Merely filing details of hire charges along with vehicle numbers could not prove genuineness of expenses made for transportation. AO further noted that in absence of primary documents produced by appellant, claim of appellant regarding payment of hire charges cannot be relied upon and accordingly, AO held that whole of hire charges 8 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters incurred for transportation are unexplained and unsupported and disallowed whole hire charges of Rs 3,79,30,456/- and added back to total income of appellant. appellant argued that during course of assessment proceedings complete ledger account of hire charges along with details of vehicle numbers to whom hire charges were paid was furnished at time of assessment proceedings as well as during this proceedings. appellant further argued that primary records in form of bills/ vouchers were produced at time of original assessment proceedings. appellant further argued that with regard to applicability of TDS on hire charges it was submitted that no person was paid amount exceeding specified limit laid down under section 194C (3)(i) of I.T. Act, 1961. appellant further argued that AO has not brought out on record any payment where provision of section 194C (3)(i) of act has been violated. appellant has also placed reliance on Hon'ble jurisdictional ITAT Bench Amritsar in case of M/s JEE ENN Engineers V/s ITO 42 DTR 166 in which it was held that once assessee has produced books of accounts before appellate authority or before AO in remanded proceedings, original default u/s 142 does not remain intact because original assessment has already been set aside by first appellate authority by sending matter back to AO as assessee has produced all books of account. appellant further placed reliance on another judgment of Hon'ble jurisdictional ITAT Bench Amrtisar in case of Income Tax Officer v/s M/s Hemkunt Transport Service ITA NO 154/ASR/2012 in which it is held that assessee has produced books of accounts in remand proceedings which have been verified by AO. AO did not brought anything adverse against assessee, therefore, AO is directed to accept book results declared by assessee. submission of appellant along with supporting documents in form of bills/ vouchers received under Rule 45A of I.T. Rules 1962 as additional evidence, were forwarded to AO for his comments. additional evidences are accepted under Rule 46A after going through application of appellant along with supporting documents. AO in his remand report did not objected to admission of additional evidence. AO in his remand report dated 25/08/2014 stated that after verification of necessary books of accounts and calling of 9 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters information u/s 133(6) of I.T. Act, 1961 from parties to whom hire charges were paid by appellant on sample basis and reported that parties have confirmed that hire charges payments were received from appellant and payments were below Rs 20000 in all cases which confirms contention of appellant firm that TDS has not been deducted from payments of hire charges made as no party was paid amount exceeding specified limit. AO further reported that appellant received payments from clients as per contract rate and made payment to drivers after retaining fraction of amount as its share to meet administrative costs. Having considered assessment order, submission of appellant and remand report, I find that during remand proceedings AO examined issue in detail with respect to books of account along-with supporting evidences and vehicle owners have confirmed on independent enquiries made by AO that payment of hire charges were received by them. It is not justified to presume that amount paid on account of hire charges are unexplained and unsupportive. It is also observed that all payments made to vehicle owners are less than specified limit laid down u/s 194C(3)(i)of Income Tax Act,1961. case of appellant is also supported by Jurisdictional ITAT Bench Amritsar as discussed in supra. In view of facts and legal position, I agree with submission and argument of appellant and ground of appeal number 2,3 & 4 of appellant are allowed and therefore relief of Rs 3,79,34,056/-. 5. During course of hearing, Ld CIT-DR contended that AO has not verified all persons to whom hire charges were paid. However, we notice that AO was given free hand in remand proceedings and it is he, who has chosen to conduct enquiries on sample basis. After concluding enquiries, AO has given remand report. Hence we are unable to agree with contentions of Ld CIT-DR. Before us, no material was placed to contradict findings given by Ld CIT(A). We notice that Ld CIT(A) has deleted addition after duly considering entire gamut of issues and hence we do not find any reason to interfere with order passed by him on this issue. 10 ITA No. 316/Asr/2015 (AY 2007-08) Asstt. CIT v. Shabir Transporters 6. In result, appeal of revenue is dismissed. Order pronounced in open court on August 22, 2019 Sd/- Sd/- (N. K. Choudhry) (B. R. Baskaran) Judicial Member Accountant Member Date: 22.08.2019 /GP/Sr. Ps. Copy of order forwarded to: (1) Appellant: (2) Respondent: (3) CIT(Appeals) (4) CIT concerned (5) Sr. DR, I.T.A.T True Copy By Order Assistant Commissioner of Income-tax, Circle Srinagar v. Shabir Transporter