A.Rm.Ramanathan, CHENNAI V. ITO, CHENNAI

ITA 1370/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7366 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-03-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 18-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M.MURUGABOOPATHY
• Keywords: Onus to prove
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 191

Judgement Text

, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A/SMC, CHENNAI , ! BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.1370/MDS/2016 ' # $%# / ASSESSMENT YEAR : 2007-08 A.RM.RAMANATHAN, 17, 1 ST FLOOR, WUTHUCATTEN STREET, PERIAMET, CHENNAI 600 003. [PAN: AAIPR 6628P] VS. INCOME TAX OFFICER, NON CORPORATE WARD-6(1), CHENNAI. ( /APPELLANT ) ( / RESPONDENT ) &' ( ) / APPELLANT BY : SHRI T.VASUDEVAN, ADVOCATE *+&' ( ) / RESPONDENT BY : SHRI M.MURUGABOOPATHY, ADDL. CIT , $ ( - / DATE OF HEARING : 08.03.2017 .% ( - / DATE OF PRONOUNCEMENT : 31.03.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-5, CHENNAI (C IT(A) FOR SHORT) DATED 15.03.2016, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) DATED 03.12.2009 FOR ASSESSMENT YEAR (AY) 2007-08. 2. THE ASSESSEE IS A DEALER OF FINISHED LEATHER, MA NUFACTURING IT BY PROCESSING GOAT SKINS. VERIFYING THE ASSESSEES CLOSING STOCK AS AT THE YEAR-END DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THE 2 ITA NO.1370 /MDS/2016 (AY 2007-08) R.RM.RAMANATHAN V. ITO SAME, REPORTED AT 28620 PIECES (VALUED AT .70 PER PIECE)AND ANOTHER 850 PIECES (@ . 16), BEING PRESUMABLY DAMAGED/REJECTED SKINS. THE YEAR-END PURCHASES WERE FOUND TO BE AS UNDER: (AMOUNT IN .) S NO. NAME OF THE PARTY PCS. DATE RATE VALUE 1. SEJWAR TRADERS 14161 01.03.2007 123 17,41,803 2. NIZAM & SONS 15518 27.03.2007 105 16,36,219 THE ASSESSEE WAS QUESTIONED IN RESPECT OF THE APPA RENT UNDER-VALUATION OF HIS CLOSING STOCK. THE ASSESSEES EXPLANATION OF HA VING SOLD THE SAID GOODS, PURCHASED IN MARCH, 2007, WAS FOUND NOT WHOLLY ACCE PTABLE AS THE PROCESSING OF THE RAW LEATHER INTO SEMI-FINISHED LEATHER WOULD TA KE TIME (ABOUT 20 DAYS), AND ONLY WHERE-UPON COULD IT BE SOLD. THE PURCHASES FR OM NIZAM & SONS (15518 PIECES) WERE ACCORDINGLY VALUED AT COST PRICE, MAKI NG AN ADDITION FOR . 5,43,130/-, I.E., TOWARD THE DIFFERENCE IN RATE ( .35 PER PIECE). IN APPEAL, THE ASSESSEE SOUGHT TO EXPLAIN THE DIFFERENCE ON THE BA SIS OF DELIVERY CHALLANS. THE GOODS PURCHASED FROM NIZAM & SONS NOT RAW SKIN BUT WET BLUE GOAT SKINS, WHICH COULD BE PROCESSED IN 6 TO 7 DAYS. THE GOODS BOUGHT FROM THE SAID PARTY WERE ACTUALLY DELIVERED ON 03.03.2007 (VIDE DELIVER Y NOTE NO.145, AT 17347 PIECES). AFTER THE RAW MATERIAL WAS PROCESSED AND T HE QUANTUM OF REJECTS FINALIZED, THE ASSESSEE DELIVERED BACK REJECTED PIE CES (1829), AND THEREUPON ONLY THE VENDOR ISSUED THE FINAL BILL FOR THE GOODS PURC HASED (15518 PCS.). THE SAME HOWEVER DID NOT FIND FAVOUR WITH THE LD. CIT(A) AS THE DELIVERY NOTE DATED 03.03.2007 (SUPRA) WAS FOR TWO QUALITIES OF SKINS, WHILE THE GOAT WET BLUE SKINS RETURNED BY THE ASSESSEE (VIDE DELIVERY CHALLAN NO. 98 DATED 24.03.2007) DID NOT SPECIFY THEIR QUALITY, SO THAT IT COULD SIGNIFY ONE QUALITY ONLY. WHILE THEREFORE ONLY ONE QUALITY STOOD REJECTED, THE SUBS EQUENT SALE BILL BY THE PARTY DATED 27.03.2007 CARRIED REDUCTION IN BOTH THE QUAL ITIES OF SKIN SUPPLIED INITIALLY, SO THAT BOTH HAD BEEN RETURNED, EVEN AS ONLY ONE WAS RETURNED BY THE ASSESSEE (IN-AS-MUCH AS NO QUALITY WAS SPECIFIED WH ILE RETURNING THE GOODS). 3 ITA NO.1370 /MDS/2016 (AY 2007-08) R.RM.RAMANATHAN V. ITO THEN, AGAIN, THE ASSESSEE HAD NOT PROVED FOLLOWING THE SAME MODUS OPERANDI , I.E., OF PURCHASING GOAT SKINS ON APPROVAL BASIS, R ETURNING THE REJECTS SUBSEQUENTLY, FOR OTHER PURCHASES FROM NIZAM & SONS . THE ASSESSEES CASE, BASED ON DELIVERY CHALLANS, WAS ACCORDINGLY REJECTE D BY HIM. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL. 3. THE PARTIES HAVE BEEN HEARD, AND THE MATERIA L ON RECORD PERUSED. THE ASSESSEES CASE IS WHOLLY UNPROVED. THERE IS, T O BEGIN WITH, NO CERTIFICATION BY THE ASSESSEE OR HIS COUNSEL TO THE EFFECT THAT THE DOCUMENTS FURNISHED BEFORE ME ARE A PART OF THE RECORD OF THE REVENUE AUTHORITIES NOR ATTESTED AS TRUE COPY, SO AS TO FORM PART OF THE TR IBUNALS RECORD. THE MATTER, HOWEVER, IS PROCEEDED WITH IN VIEW OF THE REFERENCE TO THE SALE INVOICE AND/OR DELIVERY CHALLANS IN THE IMPUGNED ORDER. ON MERITS , THERE IS, FIRSTLY, NO STOCK REGISTER IN-AS-MUCH AS NONE STANDS PRODUCED AT ANY STAGE, AND WHICH ONLY COULD ESTABLISH THE ASSESSEES CLAIMS OF GOODS BEING RECE IVED AND RETURNED ON THE BASIS OF DELIVERY CHALLANS, WITH THE INVOICES FOLLOWING L ATER, WHICH IN EFFECT IS THE ASSESSEES CASE IN SUBSTANCE. THE DELIVERY NOTES/CH ALLANS ARE OF RELEVANCE ONLY WHERE THEY FIND REFLECTION IN THE ASSESSEES REGULA R BOOKS OF ACCOUNT, WHICH HAS NOT BEEN SHOWN, AND NOT OTHERWISE. THIS IS AS ONLY IN THAT CASE THAT THE SAME COULD BE REGARDED AS PART OF THE ASSESSEES BOOKS O F ACCOUNT AND RECORDS. FURTHER, WHERE THE GOODS DELIVERED ARE ON APPROVAL BASIS, THE DELIVERY CHALLAN WOULD CLEARLY BEAR MENTION THERETO, WHICH I S ABSENT. AGAIN, HOW, ONE MAY ASK, ARE THE GOODS IDENTIFIED, AS IT IS ONLY TH E SKINS DELIVERED BY A PARTICULAR PARTY THAT COULD BE RETURNED THERETO? THERE IS, IN FACT, NO REFERENCE TO THE DELIVERY NOTE DATED 03.303.2007 EITHER IN THE SALE INVOICE RAISED SUBSEQUENTLY BY THE PARTY OR THE DELIVERY CHALLAN ISSUED BY THE ASSESSEE, EVEN AS BOTH ARE CLAIMED TO BE IN RESPECT OF THE GOODS SUPPLIED VIDE THE SAID DELIVERY NOTE #145. THE REFERENCE IS NECESSARY TO RAISE A VALID CLAIM A S WELL AS IDENTIFY THE GOODS. FURTHER, THE ASSESSEE STATING THE PROCESSING TO TAK E 6 TO 7 DAYS, THE RETURN, 4 ITA NO.1370 /MDS/2016 (AY 2007-08) R.RM.RAMANATHAN V. ITO ADMITTEDLY ON 24.03.2007, I.E., AFTER TWENTY DAYS, IS INEXPLICABLE, AGAIN DISPROVING THE ASSESSEES EXPLANATION. THE TWO OBJE CTIONS STATED BY THE LD. CIT(A) ARE EQUALLY PERTINENT AND VALID, AND NOT ADD RESSED OR MET IN ANY MANNER, INCLUDING BEFORE ME. THE ASSESSEES CASE IS THUS WI THOUT MERIT. IN FACT, THE CARRYING OF REJECTS IN THE CLOSING STOCK (VALUED AT . 16) FURTHER DISCREDITS THE ASSESSEES EXPLANATION. I, ACCORDINGLY, FIND NO REA SON FOR INTERFERENCE, AND THE RELEVANT GROUNDS ARE DISMISSED. 4. THE NEXT ISSUE ARISING IN THIS APPEAL IS THE DIS ALLOWANCE OF EXPENDITURE ON TELEPHONE, TRAVELLING AND CONVEYANCE, AND CAR HIRE CHARGES, MADE AT 1/4 TH THE AMOUNT CLAIMED, I.E., AT . 12,915/-, . 15,885/- AND . 10,438/-, FOR THE THREE EXPENSES RESPECTIVELY. THE SAME ARE DISALLOWED, AND CONFIRMED FOR THE SAME, DUE TO THE ASSESSEE FAILING TO FURNISH ANY SUPPORTI NG EVIDENCES. THE ASSESSEES CASE IS THAT THERE IS NO MATERIAL WITH THE REVENUE TO EXHIBIT ITS CLAIM AS EXCESSIVE SO AS TO WARRANT A DISALLOWANCE. BOTH THE AUTHORITIES BELOW HAVE ISSUED A CATEGORICAL FINDING OF ASSESSEES CLAIM BE ING NOT SUPPORTED BY ANY EVIDENCE. THE ONUS TO PROVE ITS RETURN OF INCOME, A ND THE CLAIMS PREFERRED THEREBY, IS ONLY ON THE ASSESSEE ( CIT V. CALCUTTA AGENCY LTD . [1951] 19 ITR 191 (SC); CIT V. R. VENAKATASWAMY NAIDU [1956] 29 ITR 529 (SC)). IT CANNOT BE COUNTENANCED THAT THE TELEPHONE EXPENSES ARE UN-EVI DENCED INASMUCH AS THE SAME WOULD BE PAID ONLY TO AN AUTHORIZED TELECOM SE RVICE OPERATOR/PROVIDER. WHERE INDEED NOT SO, OR THE AO ENTERTAINED A GENUIN E DOUBT IN ITS RESPECT, IT WAS INCUMBENT ON HIM TO MENTION AS TO WHOM, AS PER THE ACCOUNTS, THE PAYMENT HAS BEEN MADE, AND PROCEED ACCORDINGLY, DISALLOWING ALL SUCH EXPENDITURE. THOUGH THE MATTER COULD BE RESTORED BACK FOR VERIFICATION, I DO NOT THINK IT NECESSARY IN VIEW OF THE NOMINALITY OF THE AMOUNT INVOLVED. NO O THER REASON HAS BEEN STATED BY THE REVENUE. ACCORDINGLY, THE DISALLOWANCE QUA TELEPHONE EXPENDITURE IS DELETED. FOR THE OTHER TWO, THE ASSESSEE HAS ALSO NOT BACKED HIS CLAIM OF THE DISALLOWANCE BEING EXCESSIVE WITH ANY MATERIAL OR E XPLANATION, SO THAT IT 5 ITA NO.1370 /MDS/2016 (AY 2007-08) R.RM.RAMANATHAN V. ITO REMAINS A BALD CLAIM. IN FACT, THE AO ALSO OUGHT TO HAVE STATED THE BASIS FOR ARRIVING AT THE RATIO OF 1/4. UNDER THE CIRCUMSTANC ES, I, IN THE IN THE INTEREST OF JUSTICE, CONSIDER IT PROPER TO RESTRICT THE DISALLO WANCE TO 15% OF THE SUM CLAIMED. I DECIDE ACCORDINGLY, PARTLY ALLOWING ASSE SSEES RELEVANT GROUND. 5. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED ON MARCH 31, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) /ACCOUNTANT MEMBER /CHENNAI, / /DATED, MARCH 31, 2017. EDN 0 ( *'-12 32%- /COPY TO: 1. &' /APPELLANT 2. *+&' /RESPONDENT 3. , 4- ( )/CIT(A) 4. , 4- /CIT 5. 2$56 *'-' /DR 6. 67# 8 /GF