ITO, WD-33(2), KOLKATA, Kolkata V. M/s Jay Bharat Construction, Kolkata

ITA 1009/KOL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3311 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 15-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOULEN HANGSHING
• Assessee Lawyers: M D SHAH
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

ITA NO.1009/KOL/2015 M/S JAY BHARAT CONSTRUCTION A. Y.2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI S.S.GODARA, JM & DR.A.L.SAIN I, AM ] ITA NO.1009/KOL/2015 ASSESSMENT YEAR : 2010-11 I.T.O., WARD-33(2) -VERSUS- M/S. JAY BHARAT CONSTRUCTION KOLKATA KOLKATA (PAN: AADFJ 7557 J)) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI GOULEN HANGSHING, CIT, DR FOR THE RESPONDENT: SHRI M.D.SHAH, AR DATE OF HEARING : 30.07..2018. DATE OF PRONOUNCEMENT : 24.08.2018. ORDER PER S.S.GODARA, JM: THIS REVENUES APPEAL FOR A.Y.2010-11 ARISES AGAI NST THE CIT(A)-9, KOLKATAS ORDER DATED 12.03.2015 PASSED IN APPEAL NO.64/CIT(A)-9/CIR-33/2014- 15/KOL, INVOLVING PROCEEDINGS U/S 143(3) OF THE IN COME TAX ACT, 1961 (ACT). HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUE HAS RAISED THREE SUBSTANTIVE GROUND S IN THE INSTANT APPEAL IN INTER ALIA PLEADING THE CIT(A) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE ADDITION OF RS.7,84,28,827/- TO RS.13,60,158/- THER EBY ESTIMATING THE TAX PAYERS PROFIT @ 12% AND IN FURTHER CONCLUDING THAT SECTION 40(A)(IA) OF THE ACT DOES NOT APPLY IN THE GIVEN FACTS OF THE CASE; RESPECTIVELY. LEARNED REPRESENTATIVES TAKE US TO THE CIT(A)S DETAILED COMMON DISCUSSION QUA THESE THREE ISSUES READING AS UNDER :- 6- GROUND NO. (II) TO (IV) RELATE TO THE CONTENTI ON OF THE APPELLANT AGAINST DISALLOWANCE OF RS.7,82,12,027/- WHICH WAS CLAIMED ON ACCOUNT OF TRANSPORT EXPENSES. THE FACT OF THE CASE IS THAT THE AO OBSER VED THAT THE APPELLANT MADE PARTIAL COMPLIANCE AND DID NOT PRODUCE BOOKS OF ACC OUNT DURING THE ASSESSMENT PROCEEDINGS, HE FOUND THAT THE APPELLANT WAS ENGAGE D AS A CIVIL CONTRACTOR AND HAD ALSO SHOWN INCOME OF RS 8,75,71,214/- FROM TRAN SPORT BUSINESS AND AGAINST THIS INCOME THEY CLAIMED AN EXPENDITURE OF RS.7,84, 28,827/-. THE AO OBSERVED THAT THE APPELLANT HAD CLAIMED EXPENDITURE OF 89.56 % TO THE INCOME SHOWN. THE ITA NO.1009/KOL/2015 M/S JAY BHARAT CONSTRUCTION A. Y.2010-11 2 PARTNERSHIP DEED DID NOT MENTION TRANSPORT AS ONE O F ITS BUSINESS, THE APPELLANT HAD NEVER IN THE PAST DONE TRANSPORT BUSINESS, AND THEY FAILED TO PRODUCE ANY DETAILS, REGARDING TRANSPORT EXPENSES AND IN VIEW O F SUCH CIRCUMSTANCES THE AO HELD THAT THE EXPENSES COULD NOT BE ACCEPTED AS GEN UINE AND HELD THAT THERE WAS ALL POSSIBILITY THAT THE TRANSPORT EXPENDITURE WAS ACCOMMODATION ENTRY TO NULLIFY THE TRANSPORT INCOME. HE ALSO FOUND THAT THE FIRM H AD NO INFRASTRUCTURE TO PROVIDE TRANSPORT SERVICE AND THEREFORE HE CONCLUDED THAT T HE TRANSPORT EXPENDITURE WAS BOGUS. HE ALSO OBSERVED THAT THE TRANSPORT EXPENDIT URE WAS LIABLE TO TDS AND HENCE THE SAME WAS TO BE DISALLOWED U/S 40(A)(IA) OF THE IT ACT 1961. HOWEVER, THE APPELLANT SUBMITTED THAT AS IT WAS A FACT ON RE CORD THAT IT DID NOT HAVE TRUCKS TO EXECUTE THE WORK AND IF THE TRANSACTION WAS TO BE H ELD GENUINE THEN THE APPELLANT HAD TO TAKE TRUCKS ON HIRE OTHERWISE IT WOULD BE IM POSSIBLE TO RENDER THE TRANSPORT SERVICES. THE APPELLANT ALSO SUBMITTED THAT IT HAD SHOWN A NET INCOME OF RS. 91,42,387/- ( RS 8,75,71,214 RS.7,84,28,827) WHICH WORKED OUT TO 10.44% OF GROSS MARGIN ON TRANSPORT AND SUCH MARGIN WAS MORE THAN REASONABLE IN THE LINE OF BUSINESS. THEY FURTHER SUBMITTED THAT AS THE BIL LS, VOUCHERS AND DETAILS OF THE TRANSPORT EXPENSES WERE NOT PRODUCED AND THE AO HAD HELD THE EXPENDITURE TO BE BOGUS THEN THE QUESTION OF DISALLOWANCE U/S 40(A)(I A) OF THE ACT COULD NOT APPLY. THE APPELLANT ALSO SUBMITTED THAT UNDER THE INCOME TAX ACT ONLY REAL INCOME COULD BE ASSESSED AND HENCE THE INCOME FROM TRANSPO RT BUSINESS IF HELD GENUINE THEN THE REAL INCOME SHOULD BE ESTIMATED AND IF THE TRANSPORT BUSINESS WAS HELD TO BE BOGUS THEN THE INCOME AND EXPENDITURE BE EXCLUDE D. AFTER GOING THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE, :SUBMISSION OF THE APPELLANT AND PERUSAL OF THE ASSESSMENT ORDER, I FIND THAT THE APPELLANT HAD DISCLOSED A NET INCOME OF RS.91,42,387/- (RS. 87571214- RS 78428827) WHICH WO RKED OUT TO 10.44% OF THE GROSS RECEIPTS. I ALSO FIND THAT ONCE THE AO HAS HE LD THE TRANSPORT EXPENDITURE TO BE BOGUS THEN THERE CANNOT BE ANY BASIS TO MAKE DIS ALLOWANCE U/S 40(A)(IA) OF THE ACT. THIS IS BECAUSE IN ORDER TO DISALLOW EXPENDIT URE U/S 40 (A)(IA) THE EXPENDITURE SHOULD FIRST BE ALLOWABLE U/S 30-38 OF THE IT ACT 1961. WHEN THE AO HIMSELF FOUND THAT THE APPELLANT DID NOT PRODUCE BO OKS/DETAILS AND HE REJECTED THE DETAILS GIVEN BY THE APELLANT RELATED TO THE IMPUGN ED EXPENDITURE BY HOLDING THE SAME TO BE NONGENUINE. IN SUCH CIRCUMSTANCES, THE D ISALLOWANCE U/S 40(A)(IA) WAS NOT APPLICABLE IN THE FACTS OF THIS CASE AS THE EXP ENSES WERE NOT HELD TO BE GENUINE WITH REGARDS TO THE TRANSPORT BUSINESS. THE RE IS MERIT IN THE ARGUMENT OF THE APPELLANT THAT WHEN THEY DID NOT HAVE THEIR OWN TRUCKS THEN IT WAS NOT POSSIBLE TO CONDUCT THE TRANSPORT BUSINESS AND ACHI EVE A TURNOVER OF RS.8,75,71,214/-. THE AO HAS IN FACT TREATED THE EN TIRE RECEIPTS FROM TRANSPORT BUSINESS AS INCOME. HE FAILED TO APPRECIATE THAT TH E TAX IS TO BE DETERMINED ON INCOME AND NOT TURNOVER. IN ORDER TO PROVIDE TRANSP ORT SERVICE THE APPELLANT WOULD HAVE TO HIRE TRUCKS FROM THIRD PARTIES. HOWEV ER, IN ABSENCE OF BOOKS OF ACCOUNT AND SUPPORTING BILLS/VOUCHERS AND RECORDS T HE INCOME FROM THE TRANSPORT BUSINESS HAD TO BE ESTIMATED. THE APPELLANT HAS DIS CLOSED A PROFIT OF 10.44% WITH RESPECT TO THE TRANSPORT BUSINESS. AFTER CAREFUL CO NSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT WH EN BOOKS OF ACCOUNT ARE NOT FOUND TO RELIABLE AND ALL THE EXPENSES WERE FOUND T O BE NON GENUINE THEN ITA NO.1009/KOL/2015 M/S JAY BHARAT CONSTRUCTION A. Y.2010-11 3 DISALLOWANCE U/S.40(A)(IA) IS NOT CALLED FOR. IN TH AT SITUATION IT WOULD BE PROPER TO REJECT BOOKS OF ACCOUNT AND ESTIMATE THE PROFIT AS PROVIDED U/S.L44 OF THE I.T. ACT. IN THIS CASE, SINCE, THE ENTIRE TRANSPORT BUSINESS WAS CLAIMED TO HAVE BEEN CARRIED OUT THROUGH HIRED TRUCKS AND NOT THROUGH OWN TRUCKS , THEREFORE, IT WOULD BE REASONABLE IN THE INTEREST OF NATURAL-JUSTICE THAT THE PROFIT IS ESTIMATED AT 12% AS AGAINST THE ADDITION MADE BY THE AO OF THE ENTIRE T URNOVER, THEREBY, THE AO IS DIRECTED TO MAKE ADDITION OF RS.13,60,158/- (RS.1,0 5,08,545 - RS.91,42,387) AND THE BALANCE ADDITION IS DIRECTED TO BE DELETED. THI S GROUND IS PARTLY ALLOWED. 3. .LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY CONTENDS THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED ASSESSEES EXPENDITU RE CLAIM OF RS.7,84,28,827/- AND CORRECTLY APPLIED SECTION 40(A)(IA) OF THE ACT. WE FIND NO MERIT IN EITHER OF THESE SUBMISISONS. THE FACT REMAINS THAT THE ASSESSING OF FICER HAD HIMSELF ACCEPTED AND ASSESSED ASSESSEES TOTAL TURNOVER OF RS.8,75,71,21 4/- TO HAVE BEEN DERIVED FROM TRANSPORT BUISNESS. HE THEREAFTER DISALLOWED ITS CO RRESPONDING TRANSPORT EXPENDIUTRE AMOUNTING TO RS.7,84,28,827/- TO BE NOT PROVED AS G ENUINE. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THE CLINCHING FACT THAT THIS ASSESSEE IS IN TRANSPORT COMMISSION AGENT BUSINESS RATHER THAN OWNING VEHICL ES OF ITS OWN. THAT BEING THE CASE, IT WAS VERY MUCH NECESSARY FOR THE TAX PAYER TO ENGAGE OTHER LORRIES FOR TRANSPORTATION OF GOODS. THIS IS THEREFORE A CASE OF ACCEPTING CORRECTNESS OF THE ENTIRE RECEIPTS AS INCOME AND DISALLOWING THE ENTIRE EXPE NDITURE CLAIM WHICH IS NOT PERMISSIBLE IN OUR CONSIDERED OPINION. THE CIT(A) HAS ESTIMATED ASSESSEES PROFIT @12% THESE PECULIAR CIRCUMSTANCES ONLY BY EXERCIS ING HIS CO-TERMINUS POWERS AS WELL AS TO THAT OF THE ASSESSING OFFICER THE FIRST APPELLATE JURISDICTION AS WELL. NEEDLESS TO SAY, THE ASSESSEES BOOKS ADMITTEDLY STOOD REJCT ED. THE CIT(A) HAS CORRECTLY APPRECIATED THE ENTIRE FACTS THEREAFTER IN HOLDING THAT SECTION 40(A)(IA) PRE-SUPPOSES GENUINE BUSINESS EXPENDITURE WHICH CANNOT GO SIDE B Y SIDE TO AN INSTANCE INVOLVING REJECTION OF BOOKS. WE THUS AFFIRM CIT(A)S WELL RE ASONED FINDINGS. THE REVENUE FAILS IN ALL OF ITS THREE FOLDED GROUNDS. ITA NO.1009/KOL/2015 M/S JAY BHARAT CONSTRUCTION A. Y.2010-11 4 4. THIS REVENUES APPEAL IS DISMISSED. O RDER PRONOUNCED IN THE COURT ON 24.08.2018. SD/- SD/- [DR.A.L.SAINI ] [ S.S.GODARA ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24.08.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.M/S JAY BHARAT CONSTRUCTION, 11, CLIVE ROW, KOLKA TA-700001. 2. I.T.O., WARD-33(2), KOLKATA. 3. C.I.T.(A)-9, KOLKATA 4. C.I.T-11, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES