M/s Cosmopol Travel Pvt. Ltd., Bangalore V. DCIT, Bangalore

ITA 147/BANG/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5647 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 07-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SHEETAL BORKER

Judgement Text

ITA.147/BANG/2011 P AGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. N. BHARATHVAJA SANKAR, VICE PRESIDENT AND SHRI. GEORGE GEORGE K. JUDICIAL MEMBER I.T.A NO.147/BANG/2011 (ASSESSMENT YEAR : 2006-07) M/S. COSMOPOL TRAVELS P. LTD., A-301, QUEEN'S CORNER, NO.3, QUEEN'S ROAD, BANGALORE .. APPELLANT PAN : AAACC5932E V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11(2), BANGALORE .. RESPONDENT APPELLANT BY : SMT. SHEETAL BORKER, ADVOCATE RESPONDENT BY : SHRI. G. V. GOPALA RAO, COMMISSION ER OF INCOME-TAX-I O R D E R PER N. BHARATHVAJA SANKAR, VICE PRESIDENT : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE M/S. C OSMOPAL TRAVEL P. LTD., BANGALORE, FOR THE ASSESSMENT YEAR 2006-07, AGAINST THE APPELLATE ORDER DATED.11.01.2011 OF THE COMMISSIONE R OF INCOME- TAX(A)-I, BANGALORE. THE ASSESSEE HAS BROUGHT BEFO RE US THREE ISSUES FOR ADJUDICATION. ITA.147/BANG/2011 P AGE - 2 02. LET US FIRST TAKE UP THE FIRST ISSUE RELATING T O DISALLOWANCE OF 10% OF OPERATIONAL EXPENSES. THE RELEVANT GROUND O F APPEAL READS AS UNDER: 'ON THE FACTS, THE LEARNED COMMISSIONER OF INCOME-T AX(A) ERRED IN DISALLOWING 10% OF OPERATIONAL EXPENSES WI THOUT APPRECIATING THE FACT THAT ALL THE EXPENDITURE INCU RRED WERE VERIFIABLE AND WERE INCURRED IN THE COURSE OF BUSIN ESS AND FOR THE PURPOSE OF BUSINESS AND THUS NO PART OF THE SAM E WAS LIABLE TO BE DISALLOWED.' THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RUNNING TRAVEL AND TOUR HANDLING. IT FILED THE RETURN OF INCOME FOR THE RE LEVANT ASSESSMENT YEAR DECLARING A TOTAL INCOME OF ` .16,62,507/-. IN THE PROCEEDINGS U/S.143(3), THE ASSESSING OFFICER NOTICED THAT UNDE R THE HEAD 'OPERATIONAL EXPENSES', THE ASSESSEE HAS DEBITED TH E FOLLOWING EXPENSES : 1. TICKETING AND TOUR CHARGES 23,51,471 2. TOUR GUIDE CHARGES 2,13,58,031 3. TAXI OPERATING EXPENSES 8,19,983 TOTAL 2,45,29,485 ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HA S NOT PRODUCED ANY VOUCHERS, BILLS OR ANY EVIDENCES IN RESPECT OF OPER ATIONAL EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT. ON EXAMINA TION OF THE STATEMENT OF ACCOUNT, HE NOTICED THAT THE MAIN SOUR CES OF THE ASSESSEE'S BUSINESS WAS FROM TICKETING AND TOUR CHARGES DERIVE D FROM THE ITA.147/BANG/2011 P AGE - 3 BRANCHES SITUATED AT CHENNAI, KOCHI AND TRIVANDRUM AND BANGALORE OFFICE. THE BRANCH WISE SPLIT UP INFORMATION IN RE SPECT OF THE INCOME OR EXPENDITURE WERE NOT MADE AVAILABLE DESPITE REPE ATED REQUESTS. THE NET PROFIT DECLARED BY THE ASSESSEE AS DETERMINED I N RELATION TO THE TOTAL INCOME OF THE ASSESSEE WORKED OUT TO JUST 3%. IN V IEW OF THE FACT THAT THE ASSESSEE HAD NOT SUBSTANTIATED THE EXPENDITURE OF ` .2,45,29,485/- WITH DETAILS OF THE VOUCHERS, BILLS AND PARTICULARS OF PAYMENT TOWARDS GUIDE CHARGES IN RESPECT OF ALL ITS FOUR BRANCHES, THE CLAIM OF THE ASSESSEE THAT IT HAD SPENT ` .2,45,29,485/- WAS NOT ACCEPTABLE TO THE ASSESSING OFFICER. MOST OF THE PAYMENTS MADE TO TH E GUIDES WERE BY CASH, BY DRAWING SELF-VOUCHERS. SINCE THE AUTHENTI CATION OF THE EXPENDITURE INCURRED WAS DOUBTFUL TO THE EXTENT OF CLAIM MADE IN VIEW OF INSUFFICIENT DOCUMENTARY PROOF, THE ASSESSING OF FICER WAS OF THE VIEW THAT THERE WAS POSSIBILITY OF INFLATING THE EX PENDITURE BY INTRODUCING THE SAME UNDER THREE SUB-HEADS FOR WHIC H THERE HAD BEEN NO EXPLANATION WHATSOEVER WITH DOCUMENTARY EVIDENCE . AFTER TAKING INTO CONSIDERATION THE NATURE OF THE BUSINESS OF TH E ASSESSEE DURING THE ASSESSMENT YEAR AND IN VIEW OF THE FACT THAT THE AS SESSEE WAS NOT ABLE TO SUBSTANTIATE THIS EXPENDITURE BY PRODUCING THE R EQUIRED EVIDENCE, THE ASSESSING OFFICER DISALLOWED 20% OF THE TOTAL E XPENDITURE WHICH WORKED OUT TO ` .49,05,897/-. AGGRIEVED BY THIS ORDER OF THE ASSESSING OFFICER, THE ASSESSEE MOVED IN APPEAL BEF ORE THE FIRST APPELLATE AUTHORITY. ITA.147/BANG/2011 P AGE - 4 03. BEFORE THE FIRST APPELLATE AUTHORITY, THE COUNS EL FOR THE ASSESSEE SUBMITTED THAT FOR AN EARLIER ASSESSMENT YEAR 2005- 06, THE ASSESSEE'S CASE WAS SELECTED FOR SCRUTINY AND THE SAME WAS COM PLETED ACCEPTING THE RETURN OF INCOME U/S.143(3). THE FINANCIAL POS ITION OF THE ASSESSEE FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 ARE AS UNDER : FOR THE YEAR ENDED A.Y.2006-07 A. Y. 2005-06 REVENUE FROM TICKETING AND TOUR HANDLING ` .30,866,375 ` .28,844,064 DIRECT OPERATION EXPENSES AS PER P & L ACCOUNT `. 24,529,485 ` .23,162,966 (A) (B) ` . 6,336,890 ` . 5,681,098 IT CAN BE DEDUCED FROM THE ABOVE THAT THERE HAS BEE N AN INCREASE OF 7.01% AND 5.90% IN THE REVENUE FROM TICKETING AND T OUR HANDLING AND DIRECT OPERATIONAL COST RESPECTIVELY, FOR THE ASSES SMENT YEAR 2006-07 AS COMPARED TO THE CORRESPONDING REVENUE FOR THE AS SESSMENT YEAR 2005-06. PARTICULARS OF THE DIRECT OPERATIONAL EXPENSES OF ` .2,45,29,485/- INCURRED BY THE OFFICES/BRANCHES OF THE COMPANY DUR ING THE ASSESSMENT YEAR 2006-07, IS FURNISHED BEFORE THE ASSESSING OFF ICER, WHICH IS REPRODUCED BY THE COMMISSIONER OF INCOME-TAX(A) IN HIS ORDER IS EXTRACTED BELOW : ITA.147/BANG/2011 P AGE - 5 TICKETING CHARGES BANGALORE COCHIN CHENNAI TOTAL TOURS TICKETING (1) (2) (3) (4) (5) ` ` ` ` ` TICKETING CHARGES 164800.00 2164714.00 21957.00 - 2351471.00 TOUR CHARGES HALTING CHARGES 2821360.35 129559.00 3577167.50 145284.40 6673371.25 TOUR HANDLING CHARGES 4430423.94 18665.00 7430496.91 1438907.69 13318493.54 GUIDE CHARGES 481174,00 674723.00 210270.00 1366167.00 TAXI OPERATING EXPENSES : QUALIS 247007.00 247007.00 TEMPO TRAVELLER 87940.00 87940.00 AMBASSADOR 74700.00 74700.00 QUALIS,SCORPIO ETC 410336.00 410336.00 TOTAL 24529485.79 ON THE BASIS OF THE ABOVE PARTICULARS ALONG WITH TH E LEDGER EXTRACTS, COPIES OF THE MAJOR EXPENSES BILLS, WHICH WERE ENCL OSED AS ANNEXURES, THE ASSESSEE SUBMITS THAT THE WHOLE OF THE OPERATIO NAL EXPENSES HAS TO BE ALLOWED. 04. THE COMMISSIONER OF INCOME-TAX(A) SENT TO THE A SSESSING OFFICER THE DETAILS FURNISHED BY THE ASSESSEE, BUT NO COMMENT HAD BEEN OFFERED BY THE ASSESSING OFFICER. HOWEVER, AFTER E XAMINING THE DETAILS FILED, THE COMMISSIONER OF INCOME-TAX(A) FO UND THAT THE ITA.147/BANG/2011 P AGE - 6 ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE THE ENTI RE CLAIM OF ` .2,45,29,485/- AND THE DISALLOWANCE WAS ESTIMATED @ 10% ( ` .24,52,949/-) BY THE FIRST APPELLATE AUTHORITY. AG GRIEVED BY THE ABOVE ORDER OF THE COMMISSIONER OF INCOME-TAX(A), T HE ASSESSEE IS IN SECOND APPEAL WITH THIS ISSUE WITH THE GROUND OF AP PEAL EXTRACTED ELSEWHERE IN THIS ORDER. 05. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE PLACED ON RECORD A COMPILATION CONSISTING OF 233 PA GES COMPRISING THEREIN THE FOLLOWING MATERIALS : I) COPY OF WRITTEN SUBMISSION BEFORE THE COMMISSION ER OF INCOME-TAX(A) ; II) LEDGER ACCOUNT ALONG WITH BILL OF TICKETING CHA RGED ; III) COPY OF BREAK-UP OF UNEXPLAINED SUNDRY CREDITO R OF `. 7,72,111/- ALONG WITH A COPY OF SUMMARY OF ACCOUNTS ; IV) COPY OF ASSESSMENT ORDER FOR ASST.YEAR 2005-06 ; AND V) BREAK-UP OF DIRECT OPERATING CHARGES AS PER P & L ACCOUNT FOR FINANCIAL YEARS 2003-04 AND 2004-05. BY PLACING THE ABOVE MATERIALS ON RECORD, THE LEAR NED COUNSEL REITERATED THE SAME ARGUMENTS TENDERED BEFORE THE F IRST APPELLATE AUTHORITY. SHE ALSO PLACED ON RECORD A COPY OF THE DECISION OF THIS TRIBUNAL IN M/S. SHIVSHANKAR TRADING CO., IN ITA 15 03/BANG1992, DATED.31.03.1994 AND PLEADED THAT ACCORDING TO THIS DECISION, THE NON- AVAILABILITY OF FULL PARTICULARS CANNOT BE THE REAS ON FOR REJECTION OF THE CLAIM OF THE ASSESSEE. ITA.147/BANG/2011 P AGE - 7 06. ON THE OTHER HAND, THE LEARNED DR REITERATED TH E CONTENTS OF THE ASSESSMENT ORDER AS HIS ARGUMENTS. HE ALSO SUBMITT ED THAT THE COMMISSIONER OF INCOME-TAX(A) HAD BEEN VERY GENEROU S IN REDUCING THE DISALLOWANCE BY 10% AND THERE CANNOT BE ANY GRI EVANCE TO THE ASSESSEE IN VIEW OF THE FACT THAT THE ASSESSEE COUL D NOT PRODUCE ANY EVIDENCE EVEN BEFORE THIS TRIBUNAL. 07. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THE FACTS AND MATERIALS ON RECORD. WE FIND THAT THE LEARNED COMMISSIONER OF INCOME-TAX(A) HAD BEEN FAIR ENOUGH TO RESTRICT THE DISALLOWANCE TO 10% FOR THE REASON THAT THE ENTIRE CLAIM OF ` .2,45,29,485/- WAS NOT SUBSTANTIATED BY THE ASSESSEE. IN OUR OPINION, THI S IS A PURE CASE OF ESTIMATED DISALLOWANCE. THE ASSESSING OFFICER HAD DISALLOWED 20% AND THE FIRST APPELLATE AUTHORITY HAS RESTRICTED IT TO 10%. TO MEET THE ENDS OF JUSTICE, WE DIRECT THE ASSESSING OFFICER TO DISALLOW ONLY 5% OF THE OPERATIONAL EXPENDITURE, AS AGAINST 20% DISALLO WED BY HIM. THIS GROUND OF APPEAL IS PARTLY ALLOWED. 08. LET US NOW TURN TO THE NEXT ISSUE RELATING TO D ISALLOWANCE OF SUNDRY CREDITORS TO THE EXTENT OF ` .7,72,111/-. THE RELEVANT GROUND OF APPEAL READS AS UNDER : ITA.147/BANG/2011 P AGE - 8 'THE LEARNED COMMISSIONER OF INCOME-TAX(A) ERRED IN DISALLOWING SUNDRY CREDITORS TO THE EXTENT OF ` .7,72,111/- WITHOUT APPRECIATING THAT ALL THE SUNDRY CREDITORS WERE GEN UINE AND THE BALANCES ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT AND EVIDENCE WAS ALSO FURNISHED IN THIS REGARD AND HENCE NO PART OF THE SAME WAS LIABLE TO BE ADDED BACK AS UNEXPLAINED INCOME O F THE APPELLANT.' 09. THE BRIEF FACTS ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER SOUGHT LEDGER EXTRACT OF MAJOR CR EDITORS OF THE ASSESSEE AND CONSEQUENTLY LEDGER EXTRACTS OF SEVEN PARTIES AMOUNTING TO ` .46,93,836/- AS ON 31.03.2006 WAS PRODUCED. THE AS SESSING OFFICER SOUGHT BALANCE CONFIRMATIONS FROM ALL OTHER PARTIES WHICH COULD NOT BE PRODUCED IMMEDIATELY AS THE TOUR AND T RAVEL INDUSTRY'S PEAK BUSINESS WAS AROUND CHRISTMAS, NEW YEAR EVE AN D THE BEGINNING OF THE NEW YEAR AND THE SAME WAS EXPLAINED TO THE A SSESSING OFFICER. HOWEVER, THE ASSESSING OFFICER DISALLOWED ` .50,50,933/- UNDER THE HEAD 'CASH CREDITS'. AGGRIEVED THE ASSESSEE MOVED THE MATTER BEFORE THE FIRST APPELLATE AUTHORITY WITH THIS ISSUE. 10. THE FIRST APPELLATE AUTHORITY CALLED FOR A REMA ND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT, IT WAS OB SERVED THAT FROM THE DETAILS FILED BY THE ASSESSEE COMPANY, THE ASSESSEE COULD PRODUCE THE CONFIRMATION LETTERS WITH COMPLETE DETAILS SUCH AS NAME, ADDRESS, ITA.147/BANG/2011 P AGE - 9 PAN, TO THE EXTENT OF ` .42,78,822/- AND IN RESPECT OF THE REMAINING CREDITORS, THOUGH THE ASSESSEE HAD GIVEN THE DETAIL S, CONFIRMATION LETTERS, PAN NUMBERS HAD NOT BEEN FURNISHED TO THE TUNE OF ` .7,72,111/-. THE COMMISSIONER OF INCOME-TAX(A) FOU ND MERIT AND STRENGTH IN THE REMAND REPORT AND HENCE RESTRICTED THE ADDITION OF ` .7,72,111/-. THUS THE ASSESSEE GOT A RELIEF OF `. 42,78,822/-. NOT BEING SATISFIED BY THIS ORDER OF THE COMMISSIONER O F INCOME-TAX(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE US WITH THI S ISSUE, WITH THE GROUNDS OF APPEAL EXTRACTED ELSEWHERE IN THIS ORDER . 11. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SUBSEQUENTLY THESE BALANCES HAD BEEN DISCHARGED BY PAYMENT THROUGH CHEQUES AND THESE WERE NOT CASH PAY MENTS. SHE ALSO PLEADED THAT THESE WERE TRADE CREDITORS. SHE RELIE D ON THE DECISION OF THE ITAT, ALLAHABAD BENCH IN THE CASE OF JCIT V. MA THURA DAS ASHOK KUMAR IN (2006) 101 TTJ 810. PER CONTRA, THE LEARN ED DR STRONGLY SUPPORTED THE ORDER OF THE COMMISSIONER OF INCOME-T AX(A). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THE FACTS AND MATERIALS ON RECORD INCLUDING THE CASE LAW CITE D BY THE LEARNED COUNSEL FOR THE ASSESSEE. WE FIND THAT THE ASSESSE E COULD NOT FILE CONFIRMATION LETTERS AND PAN NUMBERS IN RESPECT OF THE CREDITORS TO THE TUNE OF ` .7,72,111/-. THE ASSESSEE COULD NOT PRODUCE THE SA ME ITA.147/BANG/2011 P AGE - 10 MATERIALS NEITHER BEFORE THE COMMISSIONER OF INCOME -TAX(A) NOR BEFORE THIS TRIBUNAL. WE FIND THAT THE FACTS OF TH E CASE REPORTED IN 101 TTJ 810 (ALL), ARE DIFFERENT FROM THE FACTS OF THE ASSESSEE'S CASE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE FEEL THAT NO INTERFERENCE IS WARRANTED FROM OUR SID E TO THIS ADDITION CONFIRMED BY THE COMMISSIONER OF INCOME-TAX(A). TH US THIS GROUND OF APPEAL OF THE ASSESSEE FAILS. 13. NOW LET US TURN TO THE FINAL ISSUE RELATING TO CHARGING OF INTEREST U/S.234B AND 234C. IN OUR OPINION SINCE THIS IS A CONSEQUENTIAL ISSUE, WE DIRECT THE ASSESSING OFFICER TO GIVE CONSEQUENTI AL EFFECT WHILE GIVING EFFECT TO OUR ORDER IN THIS APPEAL. 14. IN THE RESULT, THE ASSESSEE'S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 29.04.2011, AT BANGALORE. SD/- SD/- (GEORGE GEORGE K) (N. BARATHVAJA SANKAR) JUDICIAL MEMBER VICE PRESIDENT