By Advs.sri.harisankar v. Menonsmt.meera V.menonsri.harisankar V. Menonsmt.meera V.menon

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGHWEDNESDAY, THE 2 DAY OF AUGUST 2023 / 11TH SRAVANA, 1945WP(C) NO. 2255 OF 2017 PETITIONERS: 1KOZHIKODE DISTRICT PETROLEUM DEALERS ASSOCIATION,EVERGREEN SYNDICATE BUILDING,EVERGREEN SYNDICATE BUILDING, DOOR NO.4/228, ARABIND GHOSH ROAD, KOZHIKODE - 673 032, REPRESENTED BY ITS SECRETARY, SHAMSUDHIN. 2K.P.SIVANANDAN, M/S.CHOISONS, KANNUR ROAD, KOZHIKODE - 673 001.KANNUR ROAD, KOZHIKODE - 673 001. 3M/S.GREEN FUEL SERVICESNARAYANA NAGAR, VADAKARA,KOZHIKODE DISTRICT, NARAYANA NAGAR, VADAKARA,KOZHIKODE DISTRICT, REPRESENTED BY ITS MANAGING PARTNER K.VINOD. BY ADVS.SRI.HARISANKAR V. MENONSMT.MEERA V.MENONSRI.HARISANKAR V. MENONSMT.MEERA V.MENON RESPONDENTS: 1THE INCOME TAX OFFICER,WARD - 2(3), KOZHIKODE - 673 001.WARD - 2(3), KOZHIKODE - 673 001. 2THE INCOME TAX OFFICER,WARD - 2 (2), KOZHIKODE - 673 001.WARD - 2 (2), KOZHIKODE - 673 001. 3JOINT COMMISSIONER OF INCOME TAX,RANGE - 2, KOZHIKODE - 673 001.RANGE - 2, KOZHIKODE - 673 001. 4THE REGIONAL MANAGER,M/S.HINDUSTAN PETROLEUM CORPORATION LTD.,M/S.HINDUSTAN PETROLEUM CORPORATION LTD., SEAPORT AIRPORT ROAD, IRUMPANAM, ERNAKULAM, KOCHI - 682 309.ERNAKULAM, KOCHI - 682 309. 5THE MANAGERM/S. INDIAN OIL CORPORATION,GLOBNET MEDIA, PANAMPILLY NAGAR AVENUE,M/S. INDIAN OIL CORPORATION,GLOBNET MEDIA, PANAMPILLY NAGAR AVENUE, MIG HOUSING SOCIETY, ERNAKULAM, KOCHI - 682 036. BY ADVS.CHRISTOPHER ABRAHAMSRI.M.GOPIKRISHNAN NAMBIAR-R4 & R5SRI.K.JOHN MATHAICHRISTOPHER ABRAHAMSRI.M.GOPIKRISHNAN NAMBIAR-R4 & R5SRI.K.JOHN MATHAI W.P.(C). NO. 2255 OF 2017 2 SRI.JOSON MANAVALANSRI.KURYAN THOMASSRI.PAULOSE C. ABRAHAMSRI. K.V.M.PANDALA-R1 TO R3SRI. JOSE JOSEPH-SC CHRISTOPHER ABRAHAM-INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 02.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 3 JUDGMENT Dated this the 2[nd ]day of August, 2023. 1. Heard Sri. Harisankar V. Menon, learned counsel for thepetitioners and Sri. Christopher Abraham, learned StandingCounsel. 2. This writ petition has been filed impugning the letter inExt.P6 dated 01.01.2016 passed by the Joint Commissioner of Income Tax, Kozhikode under Section 144A of Income Tax Act, 1961 (Inshort 'the Act'). 3. Petitioners are Association of Petroleum product Dealers. The members of the Petitioner's Association purchase thepetroleum products from the oil companies. The dealers are paidcommission on sale of the petroleum products from the petrolpumps of dealership establishment. The oil companies fix thedealer's commission considering the various factors such asonoperating costs, stock loss, return on working capital and return W.P.(C). NO. 2255 OF 2017 4 net fixed asset. 4. It is not in dispute that some losses do occur during thetransportation of the petroleum products from the petroleumcompanies to the dealer's place. 5. During assessment proceedings, the Assessing Officer wasproceeding to tax entire commission. However, the petitioners wereof the view that the commission also included the losses which dooccur during the transportation of the petroleum products from thepetroleum companies to the dealer's place and therefore, theproportionate portion of the commission was not liable to be taxed.Petitioners moved an application under Section 144A of the Actbefore the Joint Commissioner of Income Tax for his guidance anddirection to the Assessing Officer. Ext.P2 read as under: “Respected sir, Ours is a partnership concern with two partners K. Vinod and K.Biyu Kumar, Shailaja Nivas, Vadakara. We are assessed with Income TaxOfficer, Ward 2(2) with PAN. AAGFG 6453 R. We have filed our return of income for the Assessment Year 2013-14 on 30.11.2013declaring a total income of Rs. 2,951,097/- after providing Interest to 5 “Respected sir, Ours is a partnership concern with two partners K. Vinod and K.Biyu Kumar, Shailaja Nivas, Vadakara. We are assessed with Income TaxOfficer, Ward 2(2) with PAN. AAGFG 6453 R. We have filed our return of income for the Assessment Year 2013-14 on 30.11.2013declaring a total income of Rs. 2,951,097/- after providing Interest to 5 Partners Rs. 4,31,256/- and Salary to Working Partners Rs. 6,01,646/-. Thecase was selected for scrutiny under CASS as high turnover but low profitand the assessment proceedings are in progress. During the course ofassessment proceedings, the Assessing Authority ts of the opinion that theevaporation loss and accidental loss cannot be allowed, the quantity ofwhich has already been disclosed in the Trading Account for the year end31% March 2013. The evaporation loss for the year is 5,503 Litres of Petroland 6,034 Litres of Diesel and the tanker accidental loss in the case of Petrol1,215 Lities and Diesel 602 Litres. We have not disclosed the value for theselosses in the Trading Account as the value is to be credited in the TradingAccount and debited in the Profit and Loss Account. So the net result willnot affect the Trading and Profit and Loss Account or profit of the unit. Thepermissible evaporation loss as per the oil company norms is 0.6 % in thecase of Petrol and 0.2% in the case of Diesel. We are getting an averagecommission of Rs 1.63/Litre in the case of Petrol and Rs. 1.00/Litre in thecase of Diesel (Confirmation from IOC). This commission receipt isinclusive of all the losses which we have to suffer in selling the products. Sowe request you to consider these issues and suitable direction may be givento the assessing authority to consider these aspects while completing theassessment. For your ready reference we are furnishing here with the details ofquantity purchased, sold, opening Stock, closing stock and evaporationloss, etc as Annexure I.If the evaporation loss and accidental are taken in to considerationfor calculating G.P, the commission receipt of Petrol and Diesel will bemore than Rs. 1.63/Litre and Rs. 1.00/Litre respectively, the working ofwhicharegivenbelow.” 6. The Joint Commissioner gave his opinion in Ext.P6 letter W.P.(C). NO. 2255 OF 2017 6 dated 01.01.2016. The Joint Commissioner was of the opinion thatpetitioner itself has not shown the loss of evaporation and otherincidental loss in the closing stock of petrol. And therefore, thecommission was paid on the actual sale of the petroleum products.It was not on the losses in transportation of the petroleumproducts. 7. Sri. Harishankar V. Menon, learned counsel for thepetitioners submits that it was incumbent upon the JointCommissioner to have taken opinion from the oil companiesregarding the fact that whether the commission paid to the dealerswould also include the losses during transportation which includesevaporation and other incidental loss. Without taking the opinionfrom the oil companies, the Joint Commissioner has given theopinion in Ext.P6 and therefore, he did not exercise the discretionvested under Section 144A of the Act properly.Therefore, theimpugned opinion of the Joint Commissioner is liable to be set asideand the matter be remanded to him to consider the application ofthe petitioner afresh. W.P.(C). NO. 2255 OF 2017 7 8. Sri. Raja Kannan, learned counsel for respondents 4 and 5submits that the commission includes the losses which do occurduring transportation. However, it is for the Income TaxDepartment to assess the tax in accordance with the provisions ofthe Act. W.P.(C). NO. 2255 OF 2017 7 8. Sri. Raja Kannan, learned counsel for respondents 4 and 5submits that the commission includes the losses which do occurduring transportation. However, it is for the Income TaxDepartment to assess the tax in accordance with the provisions ofthe Act. 9. Sri. Christopher Abraham, learned Standing Counsel for theIncome Tax Department submits that on an application of thepetitioner the Joint Commissioner has given the opinion underSection 144A of the IT Act, 1961 which is justified in law and nointerference is required by this Court in the discretion exercisedwhile passing order dated 01.01.2016 by the Joint Commissioner onthe application filed under Section 144A of the Act. It is furthersubmitted that the assessment order which has been finalised hasbeen challenged in the appeal before the commissioner (Appeal).The petitioner will take all the grounds available to them in respectof inclusion or non inclusion of the commission as income. 10. I have considered the submission of learned counsel for 8 the parties. Section 144A of the Act is reproduced and read asunder: “144A. Power of Joint Commissioner to issue directions incertain cases:-- A Joint Commissioner may, on his own motion or on areference being made to him by the Assessing Officer or on the applicationof an assessee, call for and examine the record of any proceeding in whichan assessment is pending and, if he considers that, having regard to thenature of the case or the amount involved or for any other reason, it isnecessary or expedient so to do, he may issue such directions as he thinksfit for the guidance of the Assessing Officer to enable him to complete theassessment and such directions shall be binding on the Assessing Officer: Provided that no directions which are prejudicial to the assesseeshall be issued before an opportunity is given to the assessee to be heard. Explanation: - For the purposes of this section no direction as to thelines on which an investigation connected with the assessment should bemade, shall be deemed to be a direction prejudicial to the assessee.” The said provision contemplates discretion of the JointCommissioner to give his opinion for guidance of Assessing Officer.The opinion is binding on the Assessing Officer. If the JointCommissioner gives the opinion then the Assessing Officer has to W.P.(C). NO. 2255 OF 2017 9 finalise the assessment in accordance with the opinion given by theJoint Commissioner. I do not find the Joint Commissioner hascommitted an error of law or jurisdiction in giving his opinion onExt.P6 impugned in the present petition. The IT Act, 1961 does notmandate the Joint Commissioner to take an opinion of a third partywhile giving his opinion under Section 144A of the IT Act, 1961.Petitioners have already filed appeals against the assessmentfinalised by the Assessing Officer and they may take all groundswhich may be available to them under the law before theCommissioner. 11. In the aforesaid, I do not find any substance in the writpetition. Hence, the writ petition fails and is hereby, dismissed. Sd/- rps/ DINESH KUMAR SINGH, JUDGE 10 APPENDIX OF WP(C) 2255/2017 PETITIONER EXHIBITS