M/s Maruthi Traders, Chitradurga V. ITO, Chitradurga

ITA 1359/BANG/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5359 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-02-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C R NULVI CA SHRI M K BIJU J
• Assessee Lawyers: CIRCUMSTANCES OF CASE
• Keywords: Business income; Principle of natural justice

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C :BANGALORE BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO.1359/BANG/2012 (ASSESSMENT YEAR: 2008-09) M/S.MARUTHI TRADERS, MAIN ROAD, BELAGUR, HOSADURGA TALUK, CHITRADURGA DISTRICT. APPELLANT PAN: AAEFM4207H VS. INCOME - TAX OFFICER, WARD - 1, CHITRADURGA. RESPONDENT DATE OF HEARING : 25 - 02 - 2014 . DATE OF PRONOUNCEMENT : 07 - 0 3 - 2014. O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE OF THE CIT(A), HUBLI, DATED 17-9-2012 FOR TH E ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: 1. THE ORDER OF THE AUTHORITIES BELOW IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE AND AGAINST THE EVIDENCE PRODUCED BEFORE THEM. APPELLANT BY : SHRI C.R.NULVI, CA RESPONDENT BY : SHRI M.K.BIJU, JCIT(DR) . ITA NO.1359/BANG/2012 PAGE 2 OF 8 2. THE AUTHORITIES BELOW ERRED IN ADDING AND SUSTAINING THE ADDITION OF 50% OF HAMALI CHARGES AND LOCAL LOADING CHARGERS WHICH IS AGAINST THE FAC T THAT FOR PAYMENT OF SUCH EXPENSES, THE REGISTER WERE MAINTAINED WHICH ARE IMPOUNDED BY THE AO DURING THE COURSE OF SURVEY. 3. THE HONBLE CIT(A), HUBLI HAS SUSTAIN ED THE ADDITION SOF RS.268,752/- BY STATING THAT THE STATEMENT OF PARTNER OF APPELLANT RECONCILED WITH THE BOOKS OF ACCOUNT BY AO BUT AO HAS NOT MADE ANY SUCH CLAIMS IN HIS REMAND REPORT. 4. THE HONBLE CIT(A), HUBLI HAS ERRED IN SUSTAININ G THE ADDITIONS OF RS.11,523/- ON ACCOUNT OF DIFFERENCE IN SUNDRY CREDITS WHEREIN RECIPROCAL MISTAKE HAS BEEN HAPPENED AND PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN FOLLOWED IN MAKING THE ADDITION. 5. THE HONBLE CIT(A), HUBLI HAS ERRED IN MAKING ADDITION OF RS.1,810,562/-, THOUGH THE AO IN HIS REMAND REPORT HAS NOT REQUESTED FOR UPHOLDING THE ADDITIONS BASED ON THE DOCUMENTARY EVIDENCE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM DOING THE BUSINESS OF TRADING IN C OCONUT AND COPRA. FOR THE RELEVANT ASSESSMENT YEAR, THE ASSES SEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.9,930 /-. INITIALLY THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-T AX ACT,1961 [HEREINAFTER REFERRED TO AS THE ACT] ACCEPTING T HE RETURNED INCOME RESULTING IN A REFUND OF RS.41,176/-. SUBSE QUENTLY THE RETURN WAS SELECTED FOR SCRUTINY. THE ASSESSING OF FICER (AO) CALLED FOR THE BOOKS OF ACCOUNT AND OTHER DETAILS R ELATING TO COMPUTATION OF INCOME OF THE ASSESSEE. THE ASSESSE E FILED THE NECESSARY DETAILS AS WELL AS ITS BOOKS OF ACCOUNT. ON PERUSAL OF THE SAID DOCUMENTS, THE AO FOUND CERTAIN DISCREPANC IES RELATING TO (I) PAYMENT OF HAMALI CHARGES AND LOCAL LABOUR C HARGES (II) ITA NO.1359/BANG/2012 PAGE 3 OF 8 COMMISSION ON LOCAL SALES (III) DIFFERENCE IN SUNDR Y CREDITORS, AND (IV) DIFFERENCE IN CLOSING STOCK OF GUNNY BAGS. HE ACCORDINGLY MADE THE DISALLOWANCE AND CONSEQUENTIAL ADDITIONS T O THE RETURNED INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ALONG WITH NECESSARY DETAILS. THE CIT(A) CA LLED FOR A REMAND REPORT FROM THE AO ON THE DETAILS SUBMITTED BY THE ASSESSEE AND AFTER TAKING NOTE OF THE REMAND REPORT SUBMITTED BY THE AO, THE CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN SECOND APPEAL BEFORE US. 6. AS REGARDS GROUND NO.2 RELATING TO DISALLOW ANCE OF 50% OF HAMALI CHARGES AND LOCAL LOADING CHARGES ARE CONCER NED, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE ASS ESSEE, BEING IN THE TRADING OF COCONUT AND COPRA, HAS TO NECESSA RILY ENGAGE LABOUR FOR LOADING AND UNLOADING OF THE GOODS. HE SUBMITTED THAT THE ASSESSEE HAS MAINTAINED VOUCHERS FOR PAYMENTS M ADE TOWARDS HAMALI CHARGES AND LOADING CHARGES AND HAS ALSO MAINTAINED ACQUITTANCE REGISTER IN SUPPORT OF ENGAG ING THE LABOUR. HE SUBMITTED THAT THE ASSESSEE HAS FILED C OPIES OF ALL THE VOUCHERS BEFORE THE AO BUT THE AO HAS REFUSED TO CO NSIDER THE SAME HOLDING THEM TO BE SELF-MADE VOUCHERS. HE SUB MITTED THAT ITA NO.1359/BANG/2012 PAGE 4 OF 8 HE HAS MADE A SUBMISSION BEFORE THE AO THAT ACQUITT ANCE REGISTER HAS BEEN FOUND AND IMPOUNDED DURING THE CO URSE OF SURVEY AND WAS IN POSSESSION OF THE ASSESSING AUTHO RITY AND THEREFORE THE SAME MAY ALSO BE CONSIDERED TO VERIFY THE VERACITY OF THE CLAIM OF HAMALI CHARGES AND LOADING CHARGES. HE SUBMITTED THAT NEITHER THE AO NOR THE CIT(A) HAS LO OKED INTO THE CLAIM OF THE ASSESSEE WITH REGARD TO THE ACQUITTANC E REGISTER BUT HAS SIMPLY MADE AN AD HOC DISALLOWANCE OF 50% OF TH E CLAIM OF HAMALI CHARGES AND LOCAL LOADING CHARGES, WHICH IS NOT JUSTIFIED. 6.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE IS SUPPOSED TO MAINTAIN BILLS AND VOUCHERS FOR ALL THE EXPENDITURE CLAIMED BY HIM AND SINCE THE ASSESSEE HAS FAILED TO AVAIL THE OPPORTUNITY OF PRO DUCING THE RELEVANT DOCUMENTS BEFORE THE AUTHORITIES BELOW, TH E DISALLOWANCE MADE IS REASONABLE AND JUSTIFIED. 6.2. HAVING HEARD BOTH THE PARTIES AND HAVING CO NSIDERED THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEES BUSI NESS DEFINITELY CALLS FOR ENGAGEMENT OF LABOUR AND HAMALI. THEREFO RE, THE ASSESSEE IS NOT ONLY REQUIRED TO MAKE PAYMENT FOR H AMALI AND LABOUR BUT THE ASSESSEE IS ALSO SUPPOSED TO MAINTAI N NECESSARY EVIDENCE IN SUPPORT OF ITS CLAIM OF INCURRING EXPEN DITURE. THE ASSESSEE HAS MAINTAINED SELF-MADE VOUCHERS WHICH BY ITA NO.1359/BANG/2012 PAGE 5 OF 8 THEMSELVES MAY NOT OFFER ANY CREDIBILITY BUT IF THE SAME IS VERIFIED WITH THE ACQUITTANCE REGISTER, IT MIGHT PR OVE THE VERACITY OF THE ASSESSEES CLAIM. IN VIEW OF THE SAME, WE SET ASIDE THE ADDITION MADE BY THE AO AND REMAND THE ISSUE BACK T O THE FILE OF THE AO WITH A DIRECTION TO RE-CONSIDER THE EVIDENCE SUCH AS ACQUITTANCE REGISTER, WHICH IS IN POSSESSION OF THE REVENUE AUTHORITIES, TO VERIFY THE CLAIM OF THE ASSESSEE TH AT HAMALI AND OTHER LABOURERS HAVE BEEN ENGAGED BY IT AND THAT TH E CHARGES CLAIMED TO HAVE BEEN PAID BY IT ARE COMMENSURATE WI TH THE NO. OF LABOURERS ENGAGED BY IT. THIS ISSUE IS ACCORDIN GLY SET ASIDE TO THE FILE OF THE AO FOR DE NOVO CONSIDERATION. 7. WITH REGARD TO GROUND NO.3 RELATING TO ALLEG ED COMMISSION FROM LOCAL SALES, WE FIND THAT THE AO HAS RELIED UP ON THE STATEMENT OF A PARTNER DURING THE COURSE OF SURVEY THAT THE ASSESSEE IS ALSO COLLECTING COMMISSION FROM LOCAL S ALES. EXCEPT FOR THE STATEMENT OF THE PARTNER, NEITHER THE AO NO R THE CIT(A) HAVE BEEN ABLE TO BRING ON RECORD ANY EVIDENCE IN S UPPORT OF SUCH ADDITION. IT IS NOW A SETTLED POSITION THAT T HE STATEMENT OF A PARTNER ALONE CANNOT FORM THE BASIS FOR ANY ADDITIO N, BUT CORROBORATIVE EVIDENCE HAS TO BE FOUND TO MAKE AND SUSTAIN AN ADDITION. IN THE ABSENCE OF ANY CORROBORATIVE EVID ENCE, WE HOLD THAT THE STATEMENT OF A PARTNER ALONE CANNOT FORM T HE BASIS FOR MAKING THE ADDITION. THIS ADDITION IS ACCORDINGLY DELETED. ITA NO.1359/BANG/2012 PAGE 6 OF 8 8. AS REGARDS GROUND NO.4 RELATING TO DIFFERENCE IN SUNDRY CREDITORS, THE LEARNED COUNSEL FOR ASSESSEE SUBMITT ED THAT IT IS ON ACCOUNT OF RECIPROCAL MISTAKE IN THE BOOKS OF ACCOU NT AND THE AUTHORITIES BELOW HAVE FAILED TO CONSIDER THE CONTE NTIONS OF THE ASSESSEE AND MADE THE ADDITION WHICH AMOUNTS TO DOU BLE ADDITION. AFTER HEARING BOTH THE PARTIES, WE ARE OF THE OPIN ION THAT THIS ISSUE ALSO SHOULD BE REMANDED TO THE FILE OF T HE AO FOR VERIFICATION OF THE ASSESSEES CONTENTIONS AND IF I T IS FOUND THAT IT IS A DOUBLE ADDITION AND IS ON ACCOUNT OF A MISTAKE OCCURRING IN THE BOOKS OF ACCOUNT, THEN THE AO IS DIRECTED TO DE LETE THE ADDITION. THIS GROUND IS ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 9. AS REGARDS GROUND NO.5, THE LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT THE AO HAS MADE THE ADDITION ON ACCO UNT OF DIFFERENCE IN THE CLOSING STOCK OF EMPTY GUNNY BAGS . HE SUBMITTED THAT IN THE REMAND REPORT, THE AO HAS CLE ARLY STATED THAT THE SALE BILLS/FORWARDING NOTES HAVE BEEN VERI FIED AND IT HAS BEEN NOTICED THAT ALL COCONUTS SOLD ARE NOT PACKED IN GUNNY BAGS BUT SOME ARE ALSO SOLD LOOSE AND, THEREFORE, THE NU MBER OF GUNNY BAGS SOLD HAS BEEN ADOPTED ON THE TOTAL SALES WITHOUT CONSIDERING WHETHER THE COCONUTS ARE SOLD LOOSE OR PACKED IN GUNNY BAGS AND HENCE ADDITION IS NOT PROPER AND THA T THE ASSESSEES CLAIM REQUIRES TO BE CONSIDERED ON MERIT S. HE ITA NO.1359/BANG/2012 PAGE 7 OF 8 SUBMITTED THAT THE CIT(A), WITHOUT CONSIDERING THE REMAND REPORT OF THE AO, HAS CONFIRMED THE ADDITION WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 9.1 THE LEARNED DEPARTMENTAL REPRESENTATIVE PLA CED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. HOWEVER, H E CONCEDED THAT THE AO, IN HIS REMAND REPORT, HAS STATED THAT THE ADDITION MADE ON ACCOUNT OF CLOSING STOCK OF GUNNY BAGS WAS MADE ON THE BASIS OF TOTAL SALES WITHOUT CONSIDERING THE FA CT THAT SOME COCONUTS ARE SOLD LOOSE ALSO. 9.2 AFTER HEARING BOTH THE PARTIES AND AFTER PERU SAL OF THE MATERIAL ON RECORD, WE ARE OF THE OPINION THAT THIS ISSUE ALSO SHOULD BE REMANDED TO THE FILE OF THE AO FOR RE-CON SIDERATION OF THE ISSUE IN ACCORDANCE WITH LAW AND AFTER TAKING I NTO ACCOUNT THE REMAND REPORT OF THE AO ON THIS ISSUE. THIS GROUND IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE ASSESSEES APPEAL IS PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2014. SD/- SD/- ( JASON P.BO AZ ) ( SMT. P.MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU ITA NO.1359/BANG/2012 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY IN COME-TAX APPELLATE TRIBUNAL BANGALORE