Wp/21357/2009 Of M/S. G.a. Road Carriers v. Income Tax Officer

THE HONOURABLE SRI JUSTICE GODA RAGHURAMANDTHE HONOURABLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No. 21357 of 2009 Dated: 08-10-2009 Between: M/s G.A. Road Carriers, rep. By itsPartner Jagjit Singh. …Petitioner and Income-Tax Officer,Ward-I, Nizamabad and others. …Respondents. Oral Order: (Per GR, J) The 7[th] respondent, on 14-09-2009 issued a notice of demandintimating the petitioner that it is due Rs.27,97,763-00, that this amountshould be paid towards arrears of income-tax for the assessment year 2005-06. Similar notices were issued to the other partners of the petitioner’s firm aswell. This notice and the apprehension of consequent coercive process forrecovery of this amount, has triggered the filing of this writ petition. The petitioner is a partnership firm carrying on business in transport. Asa part of its operations, the firm arranges vehicles and keep them availablewith several beedi manufacturers in Nizambad and Kamareddy regions whoneed to transport their products on day to day basis, at the factory site fortransporting the stock to their customers. Certain advance amounts areprovided by the firm to the drivers of the transport vehicles for meetingoperational requirements, like fuel, lubricants, food for drivers andmiscellaneous expenses, road tax etc. The firm would eventually raise a billon the beedi manufacturers with respect to the amount actually paid towardsthese expenses and transport charges as per the agreed rates. Only thecommission charged by the assessee from the vehicle owners is recorded inits books as reflecting business receipts. Against such gross commissionreceipts the firm claimed certain administrative expenses and the balancewas recorded as the net profit of the firm. During the assessment year 2003-04 the Assessing Officer concludedthat the gross receipts of the firm would also include the freight chargesreceived from the various beedi companies as they were credited to the bankaccount of the assessee firm and would form part of its gross businessturnover and applying the provisions of Section 40A(3) of the Income Tax Act,1961 (for short ‘the Act’) levied income-tax. Aggrieved thereby the petitionerpreferred an appeal before the Commissioner of Income-Tax (Appeals)-VI,the 4[th] respondent, who allowed the appeal and reversed the finding of theAssessing authority on the aspect of disallowance under Section 40A(3), by a common order dated 27-7-2007 for the assessment years 2003-04 and 2004- 05. During the assessment year 2003-04 the Assessing Officer concludedthat the gross receipts of the firm would also include the freight chargesreceived from the various beedi companies as they were credited to the bankaccount of the assessee firm and would form part of its gross businessturnover and applying the provisions of Section 40A(3) of the Income Tax Act,1961 (for short ‘the Act’) levied income-tax. Aggrieved thereby the petitionerpreferred an appeal before the Commissioner of Income-Tax (Appeals)-VI,the 4[th] respondent, who allowed the appeal and reversed the finding of theAssessing authority on the aspect of disallowance under Section 40A(3), by a common order dated 27-7-2007 for the assessment years 2003-04 and 2004- 05. For the assessment year 2005-06 the 1[st] respondent-Assessingauthority again disallowed an amount of Rs.68,04,832-00 applying theprovisions of Section 40A(3) of the Act and raised the demand. On 2-2-2008 the petitioner preferred an appeal before the 4[th] respondent andon 4-2-2008 submitted an application before the 1[st] respondent seekingstay. On 18-2-2008 the 1[st] respondent granted stay of collection of thedisputed component of tax, on condition that the petitioner pays the demandin monthly instalments of Rs.50,000/- each and ordered further that in default,the entire amount would be liable to be recovered. The petitioner paid someinstalments and submitted an application to the 1[st] respondent forreconsideration of the instalment liability. The petitioner made a furtherapplication on 19-6-2008 sensitising the 1[st] respondent to a circularNo. 530 dated 6-3-1989 of the CBDT which is to the effect that in situationswhere the issue is decided in favour of the assessee in an earlier order by theappellate authority or court in the assessee’s own case, the assessee oughtnot to be treated as in default except in respect of the amount not attributableto such disputed points. The Circular also classifies that where it issubsequently found that the assessee has not co-operated in the earlydisposal of appeal or where a subsequent pronouncement by a higherappellate authority or a court alters the situation referred to above, theAssessing Officer will no longer be bound by these instructions and mayexercise his discretion independently. On the basis of this Circular of the CBDT the assessee contends thathe ought not to be coerced to pay the disputed amount of tax, in view of thedecision of the appellate authority dated 27-07-2007 passed in respect of theearlier assessment years 2003-04 and 2004-05. There being no response to his representation, the petitioner applied tothe Commissioner of Income-Tax, Range-V. On 19-12-2008 theCommissioner of Income-Tax ordered that the petitioner would not be treatedas an assessee in default if 50% of the demand is paid at the rate of two lakhsper month till the disposal of the first appeal or till the demand is clearedwhichever is earlier. Undaunted, the petitioner applied to the Chief Commissioner of Income-Tax seeking stay of collection of tax pending itsappeal before the 1[st] appellate authority reiterating the Board Circularinstructions. The Chief Commissioner of Income-Tax has not responded. Sri Narasimha Sharma, the learned standing counsel for Income-Taxwould strenuously urge that since the petitioner did not comply with either the order of the assessing authority dated 18-2-2008 directing payment ofmonthly instalment of Rs.50,000/- each or the order of the Commissioner ofIncome-Tax dated 19-12-2008 directing payment of Rs. 2 lakhs per month, the petitioner ought not to be granted any relief. Commissioner of Income-Tax seeking stay of collection of tax pending itsappeal before the 1[st] appellate authority reiterating the Board Circularinstructions. The Chief Commissioner of Income-Tax has not responded. Sri Narasimha Sharma, the learned standing counsel for Income-Taxwould strenuously urge that since the petitioner did not comply with either the order of the assessing authority dated 18-2-2008 directing payment ofmonthly instalment of Rs.50,000/- each or the order of the Commissioner ofIncome-Tax dated 19-12-2008 directing payment of Rs. 2 lakhs per month, the petitioner ought not to be granted any relief. It is not in dispute that the order of the appellate authority dated 27-7-2007 for the assessment year 2003-04 and 2004-05 over-turning the decisionof the assessing officer in respect of the application of the provisions ofSection 40A(3) of the Act is currently in operation though subject to an appealbefore the Tribunal. The Board’s Circular No. 530 dated 6-3-1989 thusapplies to the facts of the case and disentitles the collection of the disputedtax treating the petitioner as an assessee in default. In any event thepetitioner’s appeal preferred to the 4[th] respondent is stated (by the learnedcounsel for the petitioner) to have been heard and that orders were reservedon 7-7-2009. Presumably orders would be passed by the appellate authorityshortly. In the facts and circumstances and in view of the CBDT Circular No.530 dated 6-3-1989, the respondents are directed not to pursue any coercivesteps for collection of the balance disputed tax from the petitioner in respectof the assessment year 2005-06 quantified as Rs.27,97,763-00 pendingpassing and communication of the orders in the appeal preferred by thepetitioner to the 5[th] respondent. The writ petition is disposed of as above at the stage of admission, afterhearing the learned standing counsel for Income-Tax as well. There shallhowever be no order as to costs. __________________________ GODA RAGHURAM, J ______________________________ RAMESH RANGANATHAN, J 8[th] October, 2009.GRR