M/S PARDEEP PUBLICATIONS, JALANDHAR V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-IV, JALANDHAR

ITA 100/ASR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7115 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-01-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 26-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT MOHAN JINDAL
• Keywords: Business expenditure; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SH. N. K. SAINI, HONBLE VICE PRESIDENT AND SH. RAVISH SOOD, JUDICIAL MEMBER ITA NO.166/ASR./2017 : ASSTT. YEAR : 2013-14 ITA NO.100/ASR/2018 : ASSTT. YEAR : 2014-15 M/S PRADEEP PUBLICATIONS, PRATAP ROAD, OPP. SITLA MANDIR, JALANDHAR VS DCIT, CIRCLE-IV, JALANDHAR (APPELLANT) (RESPONDENT) PAN NO. AAFP9576A ASSESSEE BY : SH. SANDEEP VIJH, CA REVENUE BY : SH. LALIT MOHAN JINDAL, DR DATE OF HEARING : 16.01.2019 DATE OF PRONOUNCEMENT : 17.01.2019 ORDER PER N. K. SAINI, VICE PRESIDENT: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST THE SEPARATE ORDERS DATED 8.2.2017 AND 13.12.2017 FOR THE ASSESSMENT YE AR 2013-14 AND 2014-15 RESPECTIVELY PASSED BY THE LEARNED CIT(A)-2 JALANDH AR. SINCE THE ISSUE INVOLVED IS COMMON IN BOTH THESE APPEALS WHICH WERE HEARD TO GETHER SO THESE ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. AT THE FIRST INSTANCE, WE WILL DEAL IN ITA NO. 1 66/ASR/2017. THE ONLY GROUND RAISED IN THIS APPEAL READS AS UNDER:- I. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), HAS ERRED IN SUSTAINING DISALLOWANCE OF TRAVELLING & CONVEYANCE EXPENSES AT RS. 423,967/- @ 10% OF EXPENSE. THE FACTS OF THE CASE AS WELL AS THE SUBMISSI ONS MADE HAVE NOT BEEN PROPERLY APPRECIATED. ITA NO. 166/ASR./2017 ITA NO. 100/ASR/2018 2 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED A RETURN OF INCOME ON 29.11.2013 DECLARING AN INCOME OF RS. 13,26,04,7 00/-. LATER THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED TRAVELLING & CONVEYANCE EXPENSES OF RS. 42,39,674/-. THE AO ALSO NOTICED THAT ON VARIOUS OC CASIONS THESE EXPENSES INCLUDED THE PAYMENT OF TAXI FARE BETWEEN RS. 10000 /- TO RS. 18000/-WITHOUT ANY BILL FROM THE TRANSPORTER. HE ALSO MENTIONED THAT S ALESMEN HAD FURNISHED THE BILLS FOR PETTY EXPENSES LIKE PETROL & TOLL TAX BUT NO BILL OF ANY TRANSPORT COMPANY WAS FOUND FOR THE TAXI HIRE CHARGES, ALTHOU GH THE EXPENSES WERE VERY MUCH INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. TH E AO, DISALLOWED 15% OF THE EXPENSES AND MADE THE ADDITION OF RS. 6,35,950/-. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND SUBMITTED AS UNDER:- THE THIRD GROUND OF APPEAL IS THAT THE LEARNED ASSESSING OFFICER HAS ERRED IN MAKING A DISALLOWANCE OF RS. 635,950 FROM OUT OF TRAVELLING & CONVEYANCE @ 15 % OF THE EXPENSE. AS EXPLAINED IN GROUND NO 2 ABOVE, EVEN THIS DISALLOWANCE WAS MADE WITHOUT EVEN CONFRONTING THE PROPOSED DISALLOWANCE. THE DISALLOWANCE THUS MADE IN BAD IN LAW SINCE THE PRINCIPLES OF NATURAL JUSTICE WERE NOT COMPLIED WITH AND DESERVES TO BE DELETED ON T HIS SCORE ITSELF. THE ASSESSING OFFICER HAD ALSO EXAMINED THE VOUCHERS FOR T RAVELLING & CONVEYANCE AND OBSERVED THAT THE EXPENSE IN FOR THE TOUR EXPENSE OF SALES REPRESENTATIVES. THE SALES REPRESENTATIVES SUBMIT EXPENSE SHEETS FOR THEIR EXPENSES AND IN RESPECT OF TAXI FARE CONTAINED THEREIN IT WAS STATE D THAT THIS IS NOT SUPPORTED BY BILLS FROM THE TRANSPORTER AND THERE ARE MULTIPLE OCCAS IONS FOR SUCH PAYMENTS. THE ASSESSING OFFICER HAS ALSO POINTED OUT THAT BILLS FOR OTHE R ITEMS OF EXPENDITURE SUCH PETROL, TOLL TAX ARE AVAILABLE BUT FOR TAXI HIRE NO BILLS ARE THERE. IT IS SUBMITTED AGAIN THAT SINCE OPPORTUNITY TO EXPLAIN THE POSITION WAS NOT GIVEN, THE EXACT POSITION COULD NOT BE EXPLAINED. THE FACTS ARE THAT SAL ES REPRESENTATIVES ARE SENT WITH BOOKS TO DIFFERENT PLACES TO PROMOTE T HE SALES OF THE BOOKS PUBLISHED BY THE ASSESSEE. THE ASSESSEE NORMALLY HIRES VEHICL ES FROM INDIVIDUAL TAXI OPERATORS WHO PREPARE THEIR CHARGES ON A SHEET OF PAPER WIT H THEIR STAMP SINCE THEY ARE NOT RUNNING A LARGE BUSINESS. THESE SHEETS ARE ALSO REFERRED TO BY US AS BILLS THOUGH THESE ARE NOT REGULAR BILLS. THE FACT T HAT TRAVEL ITA NO. 166/ASR./2017 ITA NO. 100/ASR/2018 3 FOR BUSINESS WAS ACTUALLY CARRIED OUT IS SUBSTANTIATED BY OTHER EXPENSES INCLUDING TOLL TAX RECEIPTS WHICH HAS BEEN ADMITTED BY THE ASSESSING OFFICER. IN FACT IN THE ASSESSMENT YEAR 2005-06 THE DATE OF CASH PAYMENT TO THE TAXI DR IVERS WAS DOUBTED AND THE EXPENSE WAS HOWEVER CONSIDERED AS A GENUINE BUSINESS EXPENDITURE EVEN WHEN THE BILLS OF TAXI WAS ON A PLAIN PAPER. COPY OF THE ORDER OF THE ITAT HAS BEEN ENCLOSED ABOVE AT PAGE NO. 1 TO 5 [PLEASE SEE PAGE NO. 1 TO 4. THE ASSESSEE HAS BEEN FOLLOWING SIMILAR BUSINESS PRACTICE MUCH PRIOR TO ASSESSMENT YEAR 2005-06 AND SUBSEQUENTLY ALSO. IT IS PERTINENT TO MENTION T HAT EVEN IN THE TWO IMMEDIATELY PRECEDING ASSESSMENT YEARS ALSO NO SUCH DISALLOWANCE WAS MADE. COPY OF THE ASSESSMENT ORDERS HAS BEEN ENCLOSED ABOVE AT PAGE NO. 7 TO 12. IF THE ASSESSING OFFICER TO MAKE SOME ADDITION HE SHOULD HAVE AT LEAST INQUIRED ABOUT THE NATURE OF EXPENDITURE, MADE PROPER INQUIRY, SOUGHT EXPLANATION LOOKED INTO THE PAST HISTORY OF THE CASE AND THEN APPLIED HIS MIND IF ANY ADDITION WAS CALLED FOR. HOWEVER IN THIS CASE, THE ASSESSING OFFICER WAS IN A HURRY TO COMPLETE THE ASSESSMENT MUCH BE FORE THE CASE GOT TIME BARRED AND THAT TOO WITHOUT EVEN UNDERSTANDING THE ISSUE AND THE PAST HISTORY OF THE CASE. IN VIEW OF THE ABOVE, IT IS PRAYED THAT THE DI SALLOWANCE OF RS. 6,35,950 MAY PLEASE BE DELETED. IN THE CONTEXT OF THE THIS GROUND OF APPEAL AS WELL AS THE FIRST GROUND OF APPEAL, IT IS AGAIN REITERATED THAT THE ASSESSEE IS SHOWING THE HIGHEST G.P RATE IN THIS LINE OF BUSINESS IN THIS REGION AND FOR THE YEAR UNDER ASSESSMENT HAS SHOWN THE HIGHEST G.P RATE IN THE LAS T FOUR YEARS. THIS ALSO SUBSTANTIATES THE FACT THAT THE ASSESSEE IS C ONDUCTING HIS BUSINESS IS AN HONEST AND TRANSPARENT MANNER. COPY OF THE G.P CHART FILED WIT H THE ASSESSING OFFICER IS ENCLOSED AT PAGE NO. 13. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE FAILED TO BRING ON RECOR D ANY EVIDENCE TO SUBSTANTIATE ITS CLAIM AND MADE A BALD STATEMENT WITHOUT FURNISH ING A COPY OF THE BILLS IN SUPPORT OF CLAIM OF EXPENSES. THE LEARNED CIT(A) CO NSIDERED IT FAIR TO RESTRICT THE DISALLOWANCE TO 10% OF THE EXPENSES CLAIMED ON THE BASIS OF DECISION OF THE ITAT FOR THE A.Y. 2005-06. ACCORDINGLY, DISALLOWANC E OF RS. 4,23,963/- WAS SUSTAINED. 6. NOW THE ASSESSEE IS IN APPEAL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE EXPENSES UNDER CONSIDERATION WERE INCURRED BY THE ASSESSEE FOR THE BUSINESS PURPOSES AND EVEN ITA NO. 166/ASR./2017 ITA NO. 100/ASR/2018 4 THE AO HAD ACCEPTED THAT THE SALESMEN OF THE ASSESS EE FURNISHED THE BILLS FOR PETROL AND TOLL TAX ETC., WHICH WERE INCURRED FOR T HE TAXIES HIRED BY THE ASSESSEE. THEREFORE, THE LEARNED CIT(A) WAS NOT JUS TIFIED IN SUSTAINING THE DISALLOWANCE @ 10% ON THE BASIS OF THE DECISION OF THE ITAT FOR THE ASSESSMENT YEAR 2005-06. IT WAS POINTED OUT THAT IN THE TWO IM MEDIATELY PRECEDING YEARS, NO SUCH DISALLOWANCE HAS BEEN MADE BY THE AO. THEREFOR E, THERE WAS NO JUSTIFICATION IN SUSTAINING THE IMPUGNED ADDITION B Y THE LEARNED CIT(A). 8. IN HIS RIVAL SUBMISSIONS, THE LEARNED DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT IS NOTICED THAT THE DISALLOWANCE HAS BEEN MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) FOR THE REASONS THAT ALL THE DETAILS RELATING TO THOSE EXPENSES WERE NOT FURNISHED. HOWEVER, THE AO HAD MENTIONED THAT THE ASSESSEE FUR NISHED BILLS FOR PETTY EXPENSES LIKE PETROL AND TOLL TAX ETC., AND ALSO ME NTIONED THAT EXPENSES WERE VERY MUCH INCIDENTAL TO THE BUSINESS OF THE ASSESSE E. IN OUR OPINION, WHEN THE INCURRING OF EXPENSES FOR THE BUSINESS PURPOSE HAS NOT BEEN DOUBTED, THE DISALLOWANCE MADE BY THE AO @15% WAS NOT JUSTIFIED. AT THE SAME TIME, THE ASSESSEE COULD NOT FURNISH ALL THE DETAILS RELATING TO THE BILLS FROM TRANSPORT FROM WHOM VEHICLES WERE HIRED BY THE SALES TEAM THEREFOR E, SOME DISALLOWANCE IS CALLED FOR TO COVER THE LEAKAGE OF REVENUE, IF ANY. IN OUR OPINION, THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT(A) @ 10% APPEARS TO BE EXCESSIVE. WE, THEREFORE, TO MEET THE ENDS OF JUSTICE DEEM IT APPROPRIATE TO REDUCE THE DISALLOWANCE TO THE EXTENT OF 5% INSTEAD OF 10% SUS TAINED BY THE LEARNED CIT(A). ITA NO. 166/ASR./2017 ITA NO. 100/ASR/2018 5 10. FOR THE ASSESSMENT YEAR 2014-15, THE FACTS WERE SIMILAR AS WERE IN ASSESSMENT YEAR 2013-14. THE ONLY DIFFERENCE IS IN THE AMOUNT OF DISALLOWANCE SUSTAINED BY THE LEARNED CIT(A), THEREFORE OUR FIND INGS IS GIVEN IN THE FORMER PART OF THIS ORDER SHALL APPLY WITH THE SAME FORCE FOR BOTH THE ASSESSMENT YEARS. 11. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 17/01/2019) SD/- SD/- (RAVISH SOOD) (N. K. SAINI) JUDICIAL MEMBER V ICE PRESIDENT DATED: 17/01/2019 *SH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 16.01.2019 PS 2. DRAFT PLACED BEFORE AUTHOR 17.01.2019 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.