D.C.I.T Wd - 9(3),kolkata, Kolkata V. M/s Indian Leasing & Trading Pvt Ltd, Kolkata

ITA 1278/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4889 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 02-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2013
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A, KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANES H, AM] ITA NO.1278/KOL/2013 ASSESSMENT YEAR : 2007-08 I.T.O., WARD-9(3) -VERSUS- M/S. INDIAN LEASING & T RADING KOLKATA PVT.LTD., KOLKATA (PAN:AAACF3904D) ( APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SALLONG YADEN, ADDL. CIT, SR.DR FOR THE RESPONDENT : NONE DATE OF HEARING : 02.05.2016. DATE OF PRONOUNCEMENT : 04.05.2016. ORDER PER SHRI M.BALAGANESH, AM 1. THIS APPEAL OF THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED CIT(A)-VIII, KOLKATA IN APPEAL NO.126/CIT(A)-VIII/KOL/09-10 FOR THE ASST YEAR 2007-08 PASSED AGAINST THE ORDER OF ASSESSMENT FRAMED BY THE LEARN ED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER, THE LEARNED CIT(A) IS JUSTIFIED IN RESTRICTING THE DISALLOWANCE OF LORRY OPERATIONAL EXPENSES TO RS.2,50,000/- AS AGAINST RS.38,89,499/- DISALLOWED BY THE LEARNED AO. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES, LD. CIT( A) IS NOT JUSTIFIED IN CONSIDERING THE FACT THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY PARTICULAR VOUCHER IN RESPECT OF SUCH EXPENSES FROM WHICH HE (I.E. THE A.O.) COULD J USTIFY THAT PARTICULAR PAYMENT WAS EITHER BOGUS OR EXCESS' AS A RELEVANT FACT TO THE I SSUE WHEREAS IT IS AN ADMITTED FACT THAT HIS APPLICANT HAD FAILED TO PRODUCE THE SUPPORTING BILLS/VOUCHERS AS NOTED BY HIM ALSO AS A FACT 'AND CONSEQUENTLY RESTRICTING THE ADDITIO N OF RS.38,89,499 BEING 20% OF THE EXPENDITURE ON ACCOUNT OF LORRY OPERATIONAL EXPENSE S MADE IN THE ASSESSMENT TO A NOMINAL AMOUNT OF RS. 2,50,000/- WITHOUT ANY BASIS. 2. WHEREAS IT IS AN ADMITTED FACT THAT HIS APPLICAN T HAD FAILED TO PRODUCE THE SUPPORTING ITA NO.1278/KOL/2013 M/S. INDIAN LEASING & TRADING PVT. LTD. A.Y.2007-08 2 BILLS/VOUCHERS AND WHEREAS LD. CIT(A) IS ALSO SATIS FIED THAT THE A.O. WAS NOT LEFT WITH ANY OPTION BUT TO ESTIMATE THE DISALLOWANCE, LD. CI T(A) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO A NOMINAL AMOUNT OF RS. 2,50,000/- AS AGAINST THE DISALLOWANCE OF AS MUCH AS OF RS. 38,89,499/-. 3. LD. CIT(A) IN RESPECT OF THE APPLICANT'S CLAIM O F EXPENDITURE ON ACCOUNT OF LORRY OPERATING EXPENSES IS NOT JUSTIFIED IN CONSIDERING THE ONUS OF PROOF LYING WITH THE A.O. MERELY ON THE FACT THAT THE CLAIM WAS CONSISTENT WI TH THE CLAIM OF EARLIER YEARS AND THAT THE ACCOUNT WERE DULY AUDITED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING A MEAGRE AMOUNT OF RS. 2,50,000/-, DELET ING THE ADDITION TO THE EXTENT OF RS. 36,39,499/- MADE ON ACCOUNT OF LORRY OPERATING EXPE NSES. 4. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSE SSEE IS DERIVING INCOME FROM LORRIES AND INCOME FROM FINANCING. THE LEARNED AO DURING TH E COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAD SHOWN LO RRY INCOME OF RS.2,39,31,585/- AND LORRY OPERATING EXPENSES OF RS.1,94,37,495/-. H E OBSERVED THAT LORRY OPERATING EXPENSES WERE HUGE IN COMPARISON TO EXPENSES INCURR ED BY SIMILAR INDUSTRIES AND THE SAID EXPENSES WERE SUPPORTED ONLY WITH SELF MADE V OUCHERS WHICH WERE NOT VERIFIABLE. ACCORDINGLY HE PROCEEDED TO DISALLOW 20 % OF LORRY EXPENSES AMOUNTING TO RS.38,87,499/- (20% OF RS.1,94,37,495/-) AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. ON FIRST APPEAL THE ASSESSEE PLEADED THAT THE L EARNED AO HAD NOT POINTED OUT ANY PARTICULAR VOUCHER IN RESPECT OF SUCH EXPENSES FROM WHICH HE COULD JUSTIFY THAT PARTICULAR PAYMENT WAS EITHER BOGUS OR EXCESSIVE. I T WAS ARGUED THAT THE LEARNED AO HAD OVERLOOKED THE FACT THAT THE BOOKS OF ACCOUNTS OF THE APPELLANT WERE DULY AUDITED BY A QUALIFIED CHARTERED ACCOUNTANT BOTH UNDER THE COMPANIES ACT, 1956 AND ALSO AS PER THE PROVISIONS OF SECTION 44AB OF THE INCOME TA X ACT. IT WAS ARGUED THAT IN ANY CASE THERE WAS NO SCOPE FOR MAKING ADHOC DISALLOWAN CE. THE LEARNED CIT(A) OBSERVED THAT FROM THE PERUSAL OF THE BALANCE SHEET OF THE A SSESSEE FROM A.YRS. 2006-07, 2007- 08 AND 2008-09 THE TOTAL LORRY EXPENSES WAS 80%, 81 % AND 83% RESPECTIVELY OF LORRY INCOME. THE LEARNED CIT(A) ALSO OBSERVED THAT THE A O HAD NOT BROUGHT ANY COMPARABLE CASES IN THE SAME LINE OF BUSINESS TO JU STIFY HIS ESTIMATED DISALLOWANCE OF 20%. HOWEVER, THE LEARNED CIT(A) FOUND THAT IN THE ABSENCE OF EVIDENCE PRODUCED IN AND IN THE ABSENCE OF SUPPORTING BILLS AND VOUCHERS PRODUCED BY THE ASSESSEE BEFORE ITA NO.1278/KOL/2013 M/S. INDIAN LEASING & TRADING PVT. LTD. A.Y.2007-08 3 THE LEARNED AO, THE LEARNED AO HAD NO OPTION BUT TO RESORT TO SOME ESTIMATION AND HENCE GOING BY THE PAST HISTORY OF THE ASSESSEE HE FOUND THAT THE DISALLOWANCE OF RS.2,50,000/- WOULD MEET THE ENDS OF JUSTICE AND AC CORDINGLY GRANTED RELIEF FOR THE BALANCE SUM OF RS.36,39,499/-. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE HAVE HEARD THE LEARNED DR AND WE FIND THAT THE LEARNED DR WAS NOT ABLE TO CONTROV ERT ANY OF THE FINDINGS RECORDED BY THE LEARNED CIT(A) AND VEHEMENTLY RELIED ON THE ORD ER OF THE LEARNED AO. HENCE WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNE D CIT(A) ON THIS GROUND. ACCORDINGLY GROUND NOS. 1 TO 4 RAISED BY THE REVENU E ARE DISMISSED. 7. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT WOULD BE INVOKED IN RESPECT OF FINANCE CHARGES PAID TO TATA FINANCE LIMITED. 8. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE PAID FINANCE CHARGES TO TATA FINANCE LIMITED IN THE SUM OF RS.1,60,563/- UNDER H IRE PURCHASE CONTRACT. THE ASSESSEE RELIED ON THE CBDT INSTRUCTION NO.1425 F.N O.275/9/80 IT(B) DATED 16-11- 81. IN SUPPORT OF THIS CONTENTION THAT FINANCE CHAR GES PAID UNDER HIRE PURCHASE CONTRACT WOULD NOT TAKE THE CHARACTER OF THE INTEREST IN TER MS OF SECTION 194A AND ACCORDINGLY THE APPLICABILITY OF TDS PROVISION WOULD NOT COME I NTO FORCE. THE LEARNED AO HOWEVER STRANGELY OBSERVED THAT THE SAID PAYMENT IS IN THE NATURE OF COMMISSION OR BROKERAGE AND HENCE RESORTED TO MAKE DISALLOWANCE U /S 40(A)(IA) OF THE ACT FOR VIOLATION OF THE PROVISIONS OF SECTION 194H OF THE ACT. BEFORE THE LEARNED CIT(A) THE ASSESSEE CONTENDED THAT THE PAYMENT OF FINANCE CHAR GES UNDER HIRE PURCHASE CONTRACT TO TATA FINANCE LIMITED DOES NOT COME WITHIN THE AM BIT OF COMMISSION OR BROKERAGE AND HE REITERATED HIS RELIANCE PLACED ON THE INSTRU CTION NO.1425 OF CBDT (SUPRA) AND STATED THAT THERE IS NO VIOLATION OF ANY TDS PROVIS ION AND HENCE PRAYED FOR DELETION OF THE DISALLOWANCE. THE CONTENTIONS OF THE ASSESSEE W ERE DULY APPRECIATED BY THE ITA NO.1278/KOL/2013 M/S. INDIAN LEASING & TRADING PVT. LTD. A.Y.2007-08 4 LEARNED CIT(A), WHO DELETED THE DISALLOWANCE. AGGRI EVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN CONSIDERING THE MATTER OF PAYMENT OF FINANCE CHARGES TO TATA FINANC E AS A CASE PERTAINING TO THE PAYMENT OF HIRE PURCHASE INSTALMENT AND OBSERVING T HAT THE CASE IS COVERED BY THE CBDT'S INSTRUCTION NO. 1425 DATE - 16.11.81 OF THE CBDT AND IS NOT JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT FINANCE CHARGES OF 1,6 0,563 BY THE A.O . 6. LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ROL E OF TATA FINANCE, WITH REFERENCE TO THE. AMOUNT PROVIDED BY IT ON ACCOUNT OF PURCHASE M ADE BY HIS APPLICANT, WAS IN FACT THAT OF A FINANCIER AND AS SUCH THE AMOUNT OF INSTA LMENT INCLUDES INTER ALIA INTEREST ON MONEY BORROWED, APART FROM THE PRINCIPAL AMOUNTS AN D HIRE CHARGES, IF ANY, AND AS SUCH THE CASE WAS NOT COVERED BY THE CBDT'S INSTRUC TION O. 1425 DATE- 16.11.1981 AS RELIED UPON BY HIM. 7. LD. CIT(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 1,60, 563/- MADE ON ACCOUNT OF FINANCE CHARGES. 9. WE HAVE HEARD THE LEARNED DR. AT THE OUTSET, WE FIND THAT THE PAYMENTS OF HIRE CHARGES TO TATA FINANCE LIMITED UNDER THE HIRE PURC HASE DOES NOT COME WITHIN THE AMBIT OF COMMISSION OR BROKERAGE. HENCE WE HOLD THA T THE PROVISION OF SECTION 194H WOULD NOT BE APPLICABLE. WITH REGARD TO THE APPLICA BILITY OF THE PROVISIONS OF SECTION 194A OF THE ACT THE RELIANCE PLACED BY THE ASSESSEE ON THE CBDT INSTRUCTION NO.1425 F.NO.275/9/80 IT (B) DATED 16-11-81 IS WELL FOUNDED WHICH IS REPRODUCED HEREIN BELOW FOR THE SAKE OF CONVENIENCE :- 'T.D.S. SECTION 194A OF THE INCOME-TAX ACT-HIRE PUR CHASE TRANSACTIONS APPLICABILITY OF-CLARIFICATION REGARDING. INSTRUCTION NO. 1425 F. NO. 275/9/80 IT(B) DATED 16-11-81 FROM CBDT. VOL. XXVII NO. 3 PAGE 403) IN A HIRE-PURCHASE CONTRACT THE OWNER DELIVERS GOOD S TO ANOTHER PERSON UPON TERMS ON WHICH THE HIRER IS TO HIRE THEM AT A FIXED PERIODIC AL RENTAL. THE HIRER HAS ALSO THE OPTION OF PURCHASING THE GOODS BY PAYING THE TOTAL AMOUNT OF AGREED HIRE AT ANY TIME OR OF RETURNING THE SAME BEFORE THE TOTAL AMOUNT IS PAID. IT MAY BE POINTED OUT THAT PART OF THE AMOUNT OF THE HIRE PURCHASE PRICE IS TOWARDS THE HI RE AND PART TOWARDS THE PAYMENT OF PRICE. THE AGREED AMOUNT PAYABLE BY THE HIRER IN PE RIODICAL INSTALMENTS CANNOT, THEREFORE, BE CHARACTERISED AS INTEREST PAYABLE IN ANY MANNER WITHIN THE MEANING OF SECTION 2 (28A) OF THE INCOME-TAX ACT, AS IT IS NOT IN RESPECT OF ANY MONEY BORROWED OR DEBT INCURRED IN THIS VIEW OF THE MATTER IT IS CLAR IFIED THAT THE PROVISIONS OF SECTION 194A OF THE INCOME-TAX ACT ARE NOT ATTRACTED IN SUCH TRA NSACTIONS 10. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN TH E ORDER OF LEARNED CIT(A) AND ACCORDINGLY GROUND NOS. 5 TO 7 RAISED BY THE REVENU E ARE DISMISSED. ITA NO.1278/KOL/2013 M/S. INDIAN LEASING & TRADING PVT. LTD. A.Y.2007-08 5 11. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 04.05.2016. SD/- SD/- [MAHAVIR SINGH] [M.BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBE R DATE: 04.05.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . M/S. INDIAN LEASING & TRADING PVT. LTD., 134/1, M.G .ROAD, KOLKATA- 700007. 2 THE I.T.O., WARD-9(3), KOLKATA. 3 . CIT(A)-VIII, KOLKATA 4. CIT-III, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO.1278/KOL/2013 M/S. INDIAN LEASING & TRADING PVT. LTD. A.Y.2007-08 6