Chandrakant Sonigra (HUF), Solapur V. Assistant Commissioner of Income tax, Solapur

ITA 1292/PUN/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9869 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M K VERMA
• Assessee Lawyers: V L JAIN
• Keywords: Additional evidence; Fair market value; Corroborative evidences; TDS

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, P UNE BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI PARTHA SARATHI CHAUDHURY, JM / ITA NO.1292/PUN/2017 / ASSESSMENT YEAR : 2011-12 SHRI CHANDRAKANT G. SONIGRA (HUF), 3875, SOLAPUR ROAD, BARSHI, SOLAPUR-413 409. PAN : AABHC6460K ....... / APPELLANT ! / V/S. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, SOLAPUR. / RESPONDENT ASSESSEE BY : SHRI V.L. JAIN REVENUE BY : SHRI M.K. VERMA / DATE OF HEARING : 02.04.2019 / DATE OF PRONOUNCEMENT : 03.04.2019 ' / ORDER PER PARTHA SARATHI CHAUDHURY, JM : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE LD. CIT(APPEALS)-7, PUNE DATED 02.02.2017 FOR THE ASSESSME NT YEAR 2011-12 AS PER FOLLOWING GROUNDS OF APPEAL ON RECORD: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONF IRMING THE DISALLOWANCE OF THE FOLLOWING EXPENSES: - RS.13,41,788/- BEING LABOUR CHARGES - RS.50,000/- BEING TRANSPORT CHARGES 2 ITA NO. 1292/PUN/2017 A.Y.2011-12 2. THE APPELLANT CRAVES LEAVE TO ALTER, AMEND OR DEL ETE ANY OF THE GROUNDS OF APPEAL OR ADD TO THE SAME, IF DEEMED NEC ESSARY. 2. THE BRIEF FACTS IN THIS CASE ARE THAT THE ASSESSEE IS AN HUF RUNNING A PROPRIETARY BUSINESS IN THE NAME OF ABHIJIT TRADING CO. EN GAGED IN MANUFACTURING OF PAPPU/POWDER FROM TAMARIND SEEDS. THE AS SESSEE HAS FILED RETURN OF INCOME ON 28.09.2011 DECLARING TOTAL INCOME OF RS.20,43,292/- WHICH WAS ASSESSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) BY THE ASSESSING OFFICER AT RS .48,68,060/- BY MAKING VARIOUS ADDITIONS/DISALLOWANCES AS APPEARING IN THE ASSESSMENT ORD ER. 3. THE GRIEVANCE OF THE ASSESSEE BEFORE US IS WITH REGAR D TO THE DISALLOWANCE OF LABOUR CHARGES OF RS.13,41,788/- AND DISALLOWAN CE OF TRANSPORT CHARGES OF RS.50,000/-. 4. AT THE TIME OF HEARING THE LD. AR OF THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE SUB-ORDINATE AUTHORITIES. WIT H REGARD TO THE DISALLOWANCE OF LABOUR CHARGES, THE LD. AR OF THE ASSESSEE CONTENDED THAT AS PER SECTION 40A(2)(B) OF THE ACT, IT IS FOR THE ASSESSING OFFIC ER TO BRING IN THE COMPARISONS AND HE HAS TO JUSTIFY THE APPLICABILITY OF THE SAID PROVISION. IT IS NOT THE BURDEN OF THE ASSESSEE U/S.40A(2)(B) OF THE ACT T O SUBSTANTIATE THE EXPENSES INCURRED. 4.1 WITH REGARD TO THE DISALLOWANCE OF TRANSPORT EXPENSE S, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THESE ARE AD-HOC DISALLOWANCES AND THAT THE ASSESSING OFFICER HAS NOT SPECIFICALLY POINTED OUT WHICH VOUC HERS ARE DEFECTIVE AND SUMMARILY SUCH DISALLOWANCE WAS NOT PERMITTE D AND HENCE, SHOULD BE DELETED. 3 ITA NO. 1292/PUN/2017 A.Y.2011-12 5. PER CONTRA, THE LD. DR PLACED STRONG RELIANCE ON THE ORDERS OF THE SUB- ORDINATE AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HA S NEITHER PRODUCED ANY DOCUMENTARY EVIDENCE NOR ANY RELEVANT MATERIAL BROU GHT ON RECORD TO SUBSTANTIATE THE SAID EXPENSES. THERE WAS NO EXPLANATIO N BY THE ASSESSEE REGARDING FALLING GP WITH SUPPORTING EVIDENCES CORROBORATIN G EXCESSIVE AND UNREASONABLE PAYMENTS TO SISTER CONCERNS I.E. ADITYA TRAD ERS AND OM ENTERPRISES. 5.1 WITH REGARD TO THE DISALLOWANCE ON TRANSPORT EXPENSE S, THE LD. DR SUBMITTED THAT THE ENTIRE EXTENT OF TRANSPORT EXPENSE S AS DISALLOWED BY THE ASSESSING OFFICER SHOULD BE UPHELD IN THE CASE OF THE ASSESSEE. 6. WE HAVE PERUSED THE CASE RECORDS AND ANALYZED TH E FACTS AND CIRCUMSTANCES AND HAVE HEARD THE RIVAL CONTENTIONS. THA T WITH REGARD TO THE DISALLOWANCE OF LABOUR CHARGES FACTS ON RECORD DEMONSTRAT ES THAT THE ASSESSEE HAS DEBITED RS.79,80,179/- TOWARDS LABOUR CHARG ES WHICH ARE PAID TO THE FOLLOWING SISTER CONCERNS: 1. ATUL FEEDS BARSHI RS.19,38,440/- 2. OM ENTERPRISES BARSHI RS.18,89,580/- 3. ANITA INDUSTRIES BARSHI RS.19,24,060/- 4. ATUL TRADING COMPANY BARSHI RS.12,42,890/- 5. ADITYA TRADERS BARSHI RS.12,04,840/- THE ASSESSEE WAS REQUESTED TO PRODUCE THE BILLS AND C ONTRACT AGREEMENT ENTERED WITH THE SISTER CONCERN REGARDING RA TES CHARGED FOR GRINDING WORK OF TAMARIND SEEDS. IN RESPONSE THE ASSESSE E COULD NOT PRODUCE ANY AGREEMENT AND SUBMITTED THAT THE AGREEMENT IS ORA L. BUT THE ASSESSING 4 ITA NO. 1292/PUN/2017 A.Y.2011-12 OFFICER OBSERVED THAT THE BILLS PRODUCED BY THE ASSESSEE ARE WITHOUT ANY TAXES PAID. FURTHER THE ASSESSEE SUBMITTED THAT SISTER CONCER NS ARE DOING MAJURI AT THEIR PLACE OF WORK AND RECORDS REGARDING MUSTER ROLL/ A TTENDANCE SHEET ARE KEPT BY THEM ONLY AND ARE IN THEIR CUSTODY. THE ASSES SEE HAS ALSO STATED THAT TDS IS DEDUCTED ON THESE PAYMENTS MADE TO THE SISTER CONCERNS. THE INVOICES ARE NOT IN PROPER FORMAT AND THESE ARE WRITTEN ONLY ON THE LETTER HEAD THAT GRINDING WORK IS DONE AND AMOUNT CHARGEABLE IS MENTIONED BUT NOWHERE TAXES CHARGED AS APPLICABLE ARE MENTIONED. FURTHER, EVE N SISTER CONCERNS COULD NOT PROVIDE ANY PROOF OF DEPOSIT OF TAXES BY THEM O N THE GRINDING WORK CARRIED OUT BY THEM. IN THIS REGARD, THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO PRODUCE DAILY STORK REGISTER AND STOCK MOVEMENT REGIST ER SUPPORTED BY TRANSPORT RECEIPTS TO PROVE THAT IN FACT GRINDING WORK W AS CARRIED OUT AS MENTIONED IN THE BILLS AND THERE IS NO DIVERSION OF PROFITS TO THE SISTER CONCERNS. HOWEVER, THE ASSESSEE FAILED TO PRODUCE STOCK REGISTER OF FINISHED AND RAW MATERIAL WHICH COULD HAVE PROVEN THE AUTHENTICITY OF TRANSACTION. FURTHER, THE ASSESSEE FAILED TO PROVIDE DATE WISE TRANSPO RT RECEIPTS OF THE QUANTITY AS CLAIMED IN THE EACH BILL ISSUED BY THE SISTER C ONCERNS. THEREFORE, IT CANNOT BE SAID ON ANALYSING THE FACTUAL PARAMETERS TH AT TRANSACTIONS ARE GENUINE IN THE CASE OF THE ASSESSEE. 6.1 THAT EVEN BEFORE THE LD. CIT(APPEALS), THE ASSESSEE HA S NOT SUBMITTED ANY APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RU LE 46A. THAT EVEN BEFORE THE LD. CIT(APPEALS), THE ASSESSEE IS UNABLE TO EXPLAIN WITH FACTUAL EVIDENCES THE GENUINENESS OF THE TRANSACTIONS AND WHY SUCH EXCESS AMOUNT WAS PAID TO THE SISTER CONCERNS. THEREFORE, THE L D. CIT(APPEALS) HAS CONFIRMED THE DISALLOWANCE OF RS.13,41,788/- MADE BY THE ASS ESSING OFFICER ON LABOUR CHARGES. 5 ITA NO. 1292/PUN/2017 A.Y.2011-12 7. NOW COMING TO THE ARGUMENTS OF THE LD. AR THAT SECT ION 40A(2)(B) OF THE ACT IMPOSES OBLIGATION ON THE ASSESSING OFFICER TO BRING IN THE COMPARISONS AND TO JUSTIFY THE APPLICATION OF THE SAID PRO VISION. ON PLAIN READING OF THE PROVISIONS OF SECTION 40A(2)(A) & 40A(2)(B) OF THE ACT WHICH PROVIDES THAT ASSESSING OFFICER IS OF THE OPINION THAT SUCH EXPEN DITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OF THE ASSESSEE.. THEREFORE, THE ASSESSING OFFICER HAS TO FORM AN OPINION AND THAT OPINION CAN ONLY BE FORMED BY THE ASSESSING OFFICER WHETHE R THE EXPENDITURES ARE EXCESSIVE OR UNREASONABLE, IT HAS TO BE BASED ON T HE DOCUMENTARY EVIDENCES PROVIDED BY THE ASSESSEE. IT IS THE ASSESSEE WHO IS DOING THE BUSINESS AND IS CLAIMING DEDUCTION IN EXPENDITURES, ENTIRE DETAILS AND EVIDENCES HAS TO BE SUBMITTED TO THE ASSESSING OFFICER BY THE ASSESSEE AND WITHOUT THE DETAILS AND EVIDENCES THE ASSESSING OFFICER CAN NOT FORM AN OPINION. THEREFORE, PRIMA FACIE RESPONSIBILITY IS NOT ON THE AS SESSING OFFICER BUT IT IS ON THE ASSESSEE U/S. 40A(2)(A) & 40A(2)(B) OF THE AC T TO FURNISH RELEVANT EVIDENCES. 8. REVERTING TO THE FACTS OF THE PRESENT CASE, NEITHER B EFORE THE ASSESSING OFFICER NOR BEFORE THE LD. CIT(APPEALS), THE ASSESSEE WAS AB LE TO SUBSTANTIATE GENUINENESS OF THE TRANSACTIONS AND PAYMENTS MADE TO THE SISTER CONCERNS THAT TO IN AN EXCESSIVE AND UNREASONABLE MANNER AND T HERE IS ABSENCE OF BASIC DOCUMENTS LIKE CONTRACT AND TDS AGREEMENTS ETC. T HEREFORE, GENUINENESS OF THESE PAYMENTS ARE NOT ESTABLISHED IN THIS CASE BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF T HE LD. 6 ITA NO. 1292/PUN/2017 A.Y.2011-12 CIT(APPEALS) AND THEREFORE, THE SAME IS UPHELD. THUS, GROUND OF APPEAL IN RESPECT OF LABOUR CHARGES BY THE ASSESSEE IS DISMIS SED . 9. NOW COMING TO THE DISALLOWANCE MADE FOR TRANSPORT EXP ENSES, IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED RS.13,75,470/- TOWARDS TRANSPORT BILLS. MANY OF THESE BILLS WE RE SELF MADE VOUCHERS AND NOT VERIFIABLE IN NATURE. THE ASSESSING OFFICER DISALLOWED 20% OF THE EXPENSES I.E. RS.2,75,094/- AND ADDED THE SAME TO T HE TOTAL INCOME OF THE ASSESSEE. 10. DURING THE FIRST APPELLATE PROCEEDINGS, THE LD. CIT(APP EALS) HAS OBSERVED THAT IT IS INDEED CORRECT THAT OUT OF THE TOT AL PAYMENTS SOME OF THE VOUCHERS WERE SELF MADE AND THESE PAYMENTS HAVE BEEN MADE TO TEMPO OPERATORS. THE LD. CIT(APPEALS) HAS RESTRICTED THE SAID D ISALLOWANCE TO RS.50,000/-. 11. WE HAVE PERUSED THE CASE RECORDS AND HEARD THE RIVAL CONTENTIONS. WE OBSERVE THAT THESE ARE NOT AD-HOC DISALLOWANCES. IT IS A DISALLOWANCE IN ORDER TO CHECK LEAKAGE OF REVENUE SO THAT THE GOVERNMENT IS NOT DEPRIVED OF THE CORRECT QUANTUM OF REVENUE WHICH IT SHOULD RECEIVE FROM A PARTICULAR ASSESSEE. SINCE, IN THIS CASE IT IS ADMITTED FACT THAT THERE WERE VOUCHERS WHICH WERE SELF MADE AND MOREOVER THE TRANSPORT RECEIP TS IN RESPECT OF GRINDING WORK MADE BY SISTER CONCERN WERE NOT VERIFIABLE AS STOCK REGISTER WAS NOT PRODUCED BEFORE THE REVENUE AUTHORITIES AND PAYMEN TS MADE IN CASH, IN SUCH CIRCUMSTANCES, THERE IS EVERY POSSIBILITY OF REVENUE LEAKAGE. HENCE, WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APP EALS) AND THE SAME IS THEREFORE, UPHELD. THUS, GROUND OF APPEAL ON TRANSPORT CHARGES BY THE ASSESSEE IS DISMISSED . 7 ITA NO. 1292/PUN/2017 A.Y.2011-12 12. GROUND NO.2 RAISED IN APPEAL BY THE ASSESSEE IS GENE RAL IN NATURE AND HENCE, REQUIRES NO ADJUDICATION. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 03 RD DAY OF APRIL, 2019. SD/- SD/- ANIL CHATURVEDI PA RTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER / PUNE; / DATED : 03 RD APRIL, 2019. SB '#$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-7, PUNE. 4. THE CIT-6, PUNE. 5. '#$ %%&' , ( &' , - )*+ , / DR, ITAT, SMC BENCH, PUNE. 6. $,- ./ / GUARD FILE. // TRUE COPY // (0 / BY ORDER, %1 &+ / PRIVATE SECRETARY ( &' , / ITAT, PUNE. 8 ITA NO. 1292/PUN/2017 A.Y.2011-12 DATE 1 DRAFT DICTATED ON 02 .0 4 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 02 .0 4 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER