Lal Prasad & Sons v. Commissioner Of Income Tax, Muzaffarpur

IN THE HIGH COURT OF JUDICATURE AT PATNAMiscellaneous Appeal No.678 of 2010 ====================================================== Lal Prasad & Sons, through its partner M.C. Lal, S/o- Jagdish Chandra Lal,Mohalla and P.S.- Chatauni, District- East Champaran. ... ... Appellant/s Versus 1. Commissioner of Income Tax, Muzaffarpur 2. Deputy Commissioner of Income-tax, Circle-1, Muzaffarpur ... ... Respondent/s ======================================================Appearance :For the Appellant/s: Mr. Ajay Kumr Rostoji, Advocate For the Respondent/s: Mrs. Archana Sahi, Sr. Standing Counsel Mr. Alok Kumar, Advocate Mr. Sanjeev Kumar, Advocate Mrs. Shalini Bihari, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE RAJEEV RANJAN PRASADORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 23-04-2018 This is assessee’s appeal under Section 260A of theIncome Tax Act, 1961 calling in question the concurrent orderspassed by the Appellate Authority and the Appellate Tribunal.While admitting the appeal on 15.12.2014, the following twoquestions were formulated for consideration:- “1. Whether on the facts and in the circumstancesof the case the Tribunal is justified inconfirming addition of Rs. 4,36,781/- made onaccount of undisclosed profit fromtransportation of petroleum product pursuantof the case the Tribunal is justified inconfirming addition of Rs. 4,36,781/- made onaccount of undisclosed profit fromtransportation of petroleum product pursuant to agreement with HPCL? 2. Whether invocation of section 198 & 199 ofthe I.T. Act for the purpose of confirmingaddition of Rs. 4,36,781/- is legal and valid onthe facts and in the circumstances of theappellant’s case?”the I.T. Act for the purpose of confirmingaddition of Rs. 4,36,781/- is legal and valid onthe facts and in the circumstances of theappellant’s case?” Facts in a nut-shell go to show that the assesseewas awarded a contract by the Hindustan Petroleum CorporationLimited for transportation of its petroleum product. In theexecution of the contract, from the payments to be made to theasessee firm, tax at source was deducted by HPCL. It is not indispute that the TDS certificate was issued in the name of theassessee firm and not in the name of the so-called owner of thetruck Sri M.C. Lal. It is also an admitted position that paymentswith regard to execution of the work was received by theassesee firm and it is the assessee firm which claimed thebenefit of tax deducted at source. Inspite of all the aforesaid, thefirm did not show the receipts out of the contract in its accountas a result, the entire receipts have been added on the account ofthe appellant assessee. It is the case of the assessee that thetrucks were owned by Sri M.C. Lal, the assessee firm hasentered into a contract with Sri M.C. Lal and as Sri M.C. Lal was the direct transporter to HPCL for various period, theassessee was allowed to use the transportation contract withHPCL and it was M.C. Lal who was owner of the tanker and theentire income has been transferred to Sri M.C. Lal. Contending that the Tribunal in interpreting theprovisions of Section 198 and 199 has committed an error andthe income could not be added to the assessee’s firm, this appealhas been filed. Sri Rastogi took us through the provisions of Sections 198 and 199 and argued that the finding recorded bythe Tribunal to say that both Sections 198 and 199 go together inthe matter of deduction of tax and deriving of income is notcorrect. Both the Sections have different connotation and,therefore, in interpreting the provisions the learned Tribunal, itis said, has misconstrued itself. We have heard learned counsel for the parties atlength and we find that in Paragraph 8 the learned Tribunal hasdiscussed the issue in the following manner:- Contending that the Tribunal in interpreting theprovisions of Section 198 and 199 has committed an error andthe income could not be added to the assessee’s firm, this appealhas been filed. Sri Rastogi took us through the provisions of Sections 198 and 199 and argued that the finding recorded bythe Tribunal to say that both Sections 198 and 199 go together inthe matter of deduction of tax and deriving of income is notcorrect. Both the Sections have different connotation and,therefore, in interpreting the provisions the learned Tribunal, itis said, has misconstrued itself. We have heard learned counsel for the parties atlength and we find that in Paragraph 8 the learned Tribunal hasdiscussed the issue in the following manner:- “8. In this connection, provisions of section198 and 199 are relevant. According to section 198all sums deducted in accordance with Chapter XVIIshall, for the purpose of computing income of theassessee, be deemed to be the income received.Thus tax deducted at source would be deemed to be income of the assessee. Section 199 provides thatany deduction made in accordance with theprovisions of Chapter XVII and paid to the CentralGovernment shall be treated as a payment of tax onbehalf of the person from whose income deductionwas made. Deduction of tax at source by HPCLwould therefore be treated as payment of tax onbehalf of the assessee from whose incomededuction was made. In other words, amount of taxdeducted at source as well as income from whichdeduction is made will travel together. They cannotmove in different directions and towards differentdestinations. TDS being part of the income out ofwhich it is deducted cannot be divorced from suchincome. Part (i.e. TDS) must move with the whole(i.e., income out of which it is deducted). It is notpossible to treat the tax deducted at source as theincome of the assessee and the income out of whichsuch tax were deducted at source as income ofsomebody else. The tax deducted at source comesout of income and therefore is part of the saidincome. Both of them must go together in thehands of same person. Since the amount has beenpaid by HPCL to the assessee and the assessee hasreceived that amount, its subsequent application isof no consequence. Both the Assessing Officer andthe ld. CIT (A) have given cogent reasons fortaxing the impugned sum in the hands of theassessee.” Once the tax were deducted at source and the assessee received the benefit of deduction and when the contractwas between HPCL and the assessee and the entire paymentswere made in favour of the assessee, in adding the income in thename of the assessee, in our considered view, no error has beencommitted. Accordingly, we answer the questions by holdingthat in the peculiar facts and circumstances of this case and onthe basis of the material available on record particularly, thecontract entered into between the assessee firm and HPCL, theTribunal is justified in confirming the addition of Rs. 436781/-on account of undisclosed profit derived from transportation ofpetroleum product and in invoking the provisions of Sections198 and 199 for the said purpose no error has been committedwhich warrants consideration. The appeal is, therefore, dismissed. (Rajendra Menon, CJ) P.K.P./- (Rajeev Ranjan Prasad, J) AFR/NAFRN.A.F.R.CAV DATEN.A. Uploading Date01.05.2018Transmission Date