ACIT CIR 13(1), MUMBAI V. YUSUF MEHBOOB KHAN, MUMBAI

ITA 1363/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7283 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 27-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAKASH JOTHWANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI. BEFORE SHRI N.V. VASUDEVAN,J.M. AND SHRI J. SUDHAK AR REDDY, A.M. I.T.A. NO. 1 363/MUM/2009. ASSESSMENT YEAR : 2005-06. ASSTT. COMMISSIONER OF S HRI YUSUF MAHBOOB KHAN, INCOME TAX, CIR.13(1), VS. STAR PETROL STATION, MUMBAI. 26, MOHD. ALI ROAD, MUMBAI 400 003. PAN :AJFPK9137Q APPELLANT RESPONDENT APPELLANT BY : SHRI MOHD. USMAN. RESPONDENT BY : SHRI PRAKASH JOTHWANI. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS)-XIII, MUMBAI DATED 17-12-2008. 2. THE ASSESSEE IN THIS CASE IS IN THE BUSINESS OF LORRY HIRING FOR REMOVAL OF REFUSES. HE FILED A RETURN OF INCOME ON 30-10-2005 DECLARING TAXABLE INCOME OF RS.20,59,583/-. THE ISSUES THAT A RISE BEFORE US ARE REFLECTED IN THE GROUNDS OF APPEAL NO. (I) AND (II) OF THE REVENUE WHICH ARE EXTRACTED BELOW : (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCES OUT O F LORRY HIRING CHARGES FROM 20% TO 5% WITHOUT GIVING ANY REASONS A ND EVEN AFTER FINDING THAT THE PAYMENT WERE NOT VERIFIABLE. 2 (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) ERRED IN DELETING DISALLOWANCES OF 15% OUT O F ALARY EVEN THOUGH THE RENDERING OF SERVICE WAS NOT PROVED BY P RODUCING THE SALARY REGISTER. 3. WE HAVE HEARD MR. MOHD. USMAN, LEARNED DR ON BE HALF OF THE REVENUE AND MR. PRAKASH JOTHWANI, LEARNED COUNS EL FOR THE ASSESSEE. 4. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIR CUMSTANCES OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD, WE HOLD AS FOLLOWS. 5. THE FIRST ISSUE IS AGAINST THE ACTION OF THE CI T(APPEALS) RESTRICTING THE DISALLOWANCE OUT OF LORRY HIRE CHAR GES FROM 20% TO 5%. THE AO DISALLOWED THE CLAIM ON THE GROUND THAT BILL S WERE NOT PRODUCED AND IN THE EARLIER ASSESSMENT YEAR THE AO HAD MADE 25% DISALLOWANCE. A COMPARISON WAS MADE WITH THE EXPENSES OF THE PRECED ING YEARS. HE FURTHER OBSERVED THAT THOUGH DURING THE YEAR THE LO RRY TRANSPORT CHARGES GOT REDUCED BY ABOUT RS.43 LAKHS, THE EXPENSES HAD GONE UP ON ACCOUNT OF OWN VEHICLES AVAILABLE. IN VIEW OF THESE FACTORS HE DEEMED IT FIT TO DISALLOW 20% OF THE CLAIM. THE ASSESSEE CONTENDED B EFORE THE CIT(APPEALS) THAT THE LORRY HIRE CHARGES PAID DURIN G THIS YEAR WAS ONLY RS.56.46 LAKHS AS COMPARED TO RS.94.84 LAKHS PAID I N THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. ALL PAYMENTS WERE MADE B Y CHEQUES AND LEDGER COPIES AND BILLS FOR TRANSPORTATION WERE ALS O FILED. IN THE EARLIER YEAR, THE ASSESSEE POINTED OUT THAT AN EXPARTE ORDE R WAS PASSED AND EVEN THERE THE CIT(APPEALS) REDUCED THE DISALLOWANCE TO 15%. THE ASSESSEE CLAIMED THAT THE FACTS DURING THE YEAR WERE VERY MU CH DIFFERENT. IT WAS POINTED OUT THAT THE AREAS IN WHICH THE ACTIVITY OF THE ASSESSEE HAD CARRIED OUT WERE SMALL LANES AND THE COMPACTORS OF THE ASSE SSEE WERE LARGE AND COULD NOT ENTER IN SELECTIVE LANES FOR LOADING. IT WAS SUBMITTED THAT HIRING 3 OF LORRY AND DUMPERS WAS FOR THOSE VEHICLES WHICH C OULD TRAVEL INTO SMALL BY-LANES FROM WHICH LOADING WAS DONE AND UNLOADING ON THE COMPACTORS. HENCE IT WAS CONTENDED THAT THE AOS INFERENCE THAT LESS NUMBER OF VEHICLES WERE REQUIRED, WAS CORRECT, AS COMPACTORS WERE NOT REQUIRED, BUT AT THE SAME TIME THE EXPENDITURE CLAIMED WAS NOT HI RE CHARGES INCURRED ON COMPACTORS BUT ON LORRIES AND DUMPERS WHICH WERE SM ALLER IN SIZE AND WERE REQUIRED FOR THE PURPOSE OF BUSINESS. IT WAS A LSO SUBMITTED THAT THE GROSS PROFIT RATE WAS HIGHER THIS YEAR AS COMPARED TO PRECEDING YEAR. ON THESE FACTS, THE FIRST APPELLATE AUTHORITY AT PARA 2.3 HAS OBSERVED AS FOLLOWS : I HAVE CONSIDERED THE FACTS OF THE CASE. THE A.O. MADE ADDITION ON ADHOC BASIS AT THE RATE OF 20% OF TOTAL CLAIM OF EXPENSES, ON THE GROUND THAT THE ENTIRE EXPENSES WE RE PAID TO THE THREE CONCERNS, TWO OF WHICH WERE IN SOME RELATION WITH THE APPELLANT, BILLS WERE NOT PRODUCED AND IN THE YEAR UNDER CONSIDERATION THE TEN COMPACTORS WERE AVAILABLE FOR ENTIRE YEAR IN COMPARISON TO PARTLY AVAILABLE IN THE IMMEDIATELY P RECEDING YEAR. THE A.O. ALSO COMPARED THE OTHER EXPENSES AND LOOKI NG INTO THE ADDITION MADE IN THE IMMEDIATELY PRECEDING YEAR THE A.O. DISALLOWED 20% OF THE EXPENSES. DURING APPELLATE PR OCEEDINGS, THE APPELLANT HAS GIVEN EXPLANATION ON ALL THE QUERIES, DOUBTS AND OTHER QUESTIONS ON THE BASIS OF WHICH A.O. DISALLOWED THE EXPENSES. THE FACTS OF THIS YEAR WERE DIFFERENT FROM THE EARLIER YEAR. IN EARLIER YEAR, THE ENTIRE PAYMENT WAS MADE IN CASH WHEREAS T HIS YEAR, ENTIRE PAYMENT WAS MADE BY CHEQUE AND THE COPY OF LEDGER A CCOUNTS WERE ALSO SUBMITTED SHOWING THE CHEQUE PAYMENTS. CO PIES OF BILLS WERE ALSO SUBMITTED DURING APPELLATE PROCEEDINGS. I N THE IMMEDIATELY PRECEDING YEAR ALL TEN COMPACTORS WERE NOT AVAILABLE FOR THE ENTIRE YEAR. CONSEQUENTLY, THE FUEL EXPENSE S AND REPAIRS & MAINTENANCE WERE AT LOWER SIDE IN COMPARISON TO THE YEAR UNDER CONSIDERATION. ON ACCOUNT OF AVAILABILITY OF COMPAC TORS FOR THE ENTIRE YEAR, THE TYRE EXPENSES WERE ALSO CLAIMED AT RS. 10.81 LAKHS WHEREAS NO SUCH EXPENSES WERE CLAIMED IN EARLIER YE AR. FOR THE REASON OF AVAILABILITY AND NON AVAILABILITY OF COMP ACTORS, THE LORRY HIRE CHARGES WERE MORE IN THE IMMEDIATELY PRECEDING YEAR IN COMPARISON TO THIS YEAR. THEREFORE, THE APPELLANT H AS JUSTIFIABLY 4 EXPLAINED THE REASON FOR INCREASE AND DECREASE IN V ARIOUS EXPENSES ON THE BASIS OF WHICH THE A.O. MADE ADDITION IN THE ASSESSMENT ORDER. IN THE IMMEDIATELY PRECEDING YEAR, SINCE THE ENTIRE EXPENSES WERE MADE IN CASH, THE DISALLOWANCE WAS MADE BY A.O . AT 25% OF TOTAL CLAIM WHICH WAS REDUCED BY CIT(A) TO 15% OF C LAIM. KEEPING IN VIEW THE ENTIRETY OF FACTS AND CIRCUMSTA NCES, THE APPELLANT HAS EXPLAINED THE REASONABLENESS AND JUST IFICATION OF LORRY TRANSPORTATION CHARGES CLAIMED IN THE RETURN OF INCOME. HOWEVER, SINCE THE BILLS WERE NOT PRODUCED BEFORE T HE A.O. AND ALSO THE EXACT RELATIONSHIP BETWEEN THE APPELLANT A ND THE PARTIES TO WHOM PAYMENTS WERE MADE WAS NOT EXPLAINED AND FURTH ER THE FACT ALSO REMAINED UNVERIFIED AS TO WHETHER THE PAYMENTS WERE MADE AT PREVAILING MARKET RATE OR OTHERWISE, THE CLAIM OF A PPELLANT IN ITS ENTIRETY CANNOT BE ACCEPTED. LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE DISALLOWANCE MADE BY A.O. IS RESTRICTED TO 5% OF THE CLAIM AT RS.2,57,300/-. THE BALANCE ADDITION OF RS.7,71,900/- IS DELETED. 6. THESE FACTUAL FINDINGS DO NOT CALL FOR OUR INT ERFERENCE. WE UPHOLD THE SAME AND DISMISS GROUND NO. 1 OF THE REV ENUE. 7. COMING TO GROUND NO. 2, THE AO DISALLOWED 15% O F THE TOTAL SALARY EXPENSES. THE CIT(APPEALS) FOUND THAT A SIMI LAR DISALLOWANCE WAS MADE IN THE EARLIER YEAR AND THUS HE DELETED THE DI SALLOWANCE ON THE GROUND THAT THE EXPENDITURE IS REASONABLE. AT PARA 3.3, THE FIRST APPELLATE AUTHORITY OBSERVED AS FOLLOWS : I HAVE CONSIDERED THE FACTS OF THE CASE. THE ISSU E IN CONSIDERATION IS COVERED BY APPELLATE ORDER OF MY P REDECESSOR WHERE THE DISALLOWANCE WAS FULLY DELETED. IN THE YE AR UNDER CONSIDERATION THE APPELLANT HAS JUSTIFIED THE INCRE ASE OF EXPENSES IN COMPARISON TO EARLIER YEAR. THEREFORE, LOOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE ORDER O F MY PREDECESSOR, THE DISALLOWANCE MADE BY A.O. IS DELET ED. 8. THESE FINDINGS HAD NOT BEEN CONTRADICTED BY THE LEARNED DR. THUS WE UPHOLD THESE FINDINGS AND DISMISS THIS GROU ND OF THE REVENUE. 5 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 29 TH DAY OF MARCH, 2010. SD/- SD/- (N.V.VASUDEVAN) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 29 TH MARCH, 2010. COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, G-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, WAKODE I TAT, MUMBAI BENCHES, MUMBAI.