Shri Sakhi Chand Buchasia, Burdwan V. The ITO Wd-3(1), Asansol, Asansol

ITA 148/KOL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3150 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2014
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU
• Assessee Lawyers: V N PUROHIT
• Keywords: Non-deduction of tax

Judgement Text

ITA NO.148/KOL/2014- SHRI SAKHI CHAND BUCHASIA A. Y.2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BE NCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM ] I.T.A NO. 148/KOL/201 4 ASSESSMENT YEAR : 2005-0 6 SHRI SAKHI CHAND BUCHASIA -VS.- I.T.O., WARD-3(1), BURDWAN ASANSOL (PAN:ADDPB1446M) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI V.N.PUROHIT, CA FOR THE RESPONDENT : DAVID Z. CHAWNGTHU, ADDL.CIT DATE OF HEARING : 14.01.2016. DATE OF PRONOUNCEMENT : 3.2.2016. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE 10.12 .2013 OF CIT(A)- ASANSOL, RELATING TO AY 2005-06. 2. GR.NO.1 TO 3 RAISED BY THE ASSESSEE CAN BE CONV ENIENTLY DECIDED TOGETHER. THESE GROUNDS READ AS FOLLOWS: 1) THAT THE C.I.T.(A) HAS ERRED IN SUSTAINING THE ADHOC DISALLOWANCE OF RS. 2,70,000.00 AS MADE BY THE LD. AO OUT OF THE CARRIAGE CHARGES ( RS. 28,65,432.00), LOADER & DUMPER CHARGES (RS. 18,44,230.00) AND SITE EXPENSES (RS. 6,90,344.00); 2) THAT THE C.I.T.(A) IS NOT JUSTIFIED IN PART-SUST AINING THE ADHOC DISALLOWANCE UPTO 12.5% OF THE CAR EXPENSES (RS. 93,600.00) AND (TELE PHONE EXPENSES RS. 22,408.00); 3) THAT THE C.I.T.(A) IS NOT CORRECT IN PART-SUSTAI NING THE ADHOC DISALLOWANCE UPTO 7:5% OF THE TRAVELLING EXPENSES (RS. 190,220.00) AND GEN ERAL EXPENSES RS. 63,268.00) 3. THE ASSESSEE IS AN INDIVIDUAL. HE CARRIES OUT CONTRACT WORK FOR INDIAN RAILWAYS BESIDES SUPPLYING STONE BALLAST TO THE INDIAN RAILW AYS. HE ALSO HAS INCOME FROM THE BUSINESS OF EXECUTING TRANSPORT CONTRACTS WITH M/S. AMRIT COAL CARRIERS. WHILE CONCLUDING THE ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (ACT), THE AO DISALLOWED 5% OF THE FOLLOWING EXPENSES INCURRED B Y THE ASSESSEE, WHICH WAS CLAIMED AS DEDUCTION WHILE COMPUTING INCOME FROM BU SINESS, VIZ., ITA NO.148/KOL/2014- SHRI SAKHI CHAND BUCHASIA A. Y.2005-06 2 CARRIAGE CHARGES RS.28,65,432 PAY LOADER & DUMPER HIRE CHARGES RS.18,44,230 SITE EXPENSES RS. 6,90,344 THE AO CALLED UPON THE ASSESSEE TO FURNISH THE NAME AND ADDRESS OF THE PARTIES, TRUCK NOS., DUMPER/PAY LOADER NOS., NAME AND ADDRES S OF THE OWNERS ETC. THE ASSESSEE SUBMITTED ONLY THE LEDGER COPIES OF THESE EXPENSES AND CLAIMED THAT PAYMENTS FOR THE AFORESAID EXPENSES WERE MADE IN CA SH SUPPORTED BY SELF MADE VOUCHERS. THE AO DISALLOWED 5% OF THE AFORESAID EX PENSES VIZ., RS.2,70,000 FOR THE REASON THAT IN ABSENCE OF DETAILS PROPER VERIFICATI ON COULD NOT BE MADE. 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE CIT(A) WANTED TO EXAMINE AS TO WHETHER THE ENTIRE E XPENSES COULD BE DISALLOWED U/S.40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX A T SOURCE ON THE AFORESAID PAYMENTS, IN EXERCISE OF HIS POWERS OF ENHANCEMENT. HE HOWEV ER DID NOT ENHANCE INCOME OF THE ASSESSEE, AFTER SATISFYING HIMSELF THAT THERE WAS N O TDS OBLIGATION IN RESPECT OF THE PAYMENTS/EXPENDITURE DISALLOWED BY THE AO. AS FAR AS DISALLOWANCE OF 5% OF THE AFORESAID EXPENSES ARE CONCERNED, THE CIT(A) DID NO T GIVE ANY REASON FOR CONFIRMING THE ORDER OF THE AO. 5. AS FAR AS TRAVELLING EXPENSES OF RS.1,90,220, T ELEPHONE EXPENSES OF RS.22,408 AND CAR HIRE CHARGES OF RS.93,400 AND GENERAL EXPE NSES OF RS.63,268 ARE CONCERNED, FOR IDENTICAL REASONS GIVEN FOR DISALLOWING CARRIAG E CHARGES, PAYLOADER & DUMPER HIRE CHARGES AND SITE EXPENSES, THE AO DISALLOWED 20% OF THE AFORESAID EXPENSES VIZ., A SUM OF RS.3,69,496/-. 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESS EE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS RAISED GROUND NO.1 TO 3 BEFORE THE TRIBUNAL . A CHART OF THE TURNOVER AND EXPENDITURE UNDER VARIOUS HEADS REFERRED TO IN GRO UND NO.1 TO 3 HAS BEEN FILED BY THE ASSESSEE. THE SAME IS AS FOLLOWS: ITA NO.148/KOL/2014- SHRI SAKHI CHAND BUCHASIA A. Y.2005-06 3 7. IT CAN BE SEEN FROM THE AFORESAID CHART THAT TH E PERCENTAGE OF EXPENSES TO TURNOVER CLAIMED AND ALLOWED IN SCRUTINY ASSESSMENT PROCEEDI NGS FOR SUBSEQUENT ASSESSMENT YEAR I.E., AY 2006-07 IS HIGHER THAN THE PRESENT AY 2005-06. THE SUBMISSION OF THE ASSESSEE IS THAT IT TRANSPORTS STONE BALLAST BY TRU CKS AND TRUCK CHARGES KEEP INCREASING EVERY YEAR. IN RESPECT OF TRAVELLING EXPENSES, TEL EPHONE EXPENSES, CAR HIRE EXPENSES AND GENERAL EXPENSES IT WAS SUBMITTED THAT THE SAME COMPARES FAVOURABLY WITH THE PAST AND FUTURE PERCENTAGE TO TURNOVER. THE LEARNE D DR RELIED ON THE ORDER OF THE AO. 8. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSION AND AM OF THE VIEW THAT THE DISALLOWANCE HAS BEEN MADE ON ESTIMATES FOR WAN T OF SUPPORTING DOCUMENTS TO VERIFY THE ACTUAL INCURRING OF THE EXPENDITURE. IT IS TRUE THAT THE EXPENDITURE IN QUESTION ARE SUPPORTED ONLY BY SELF MADE VOUCHERS. ONE HAS TO THEREFORE KEEP IN MIND THE NATURE OF BUSINESS OF THE ASSESSEE, WHERE IT IS NOT POSSIBLE TO GET PUCCA VOUCHERS OR MAKE PAYMENTS BY CHEQUES AND ALSO THE PAST HISTO RY OF PERCENTAGE OF EXPENDITURE IN THE PAST AND FUTURE COMPARES FAVOURABLY WITH THE PR ESENT EXPENSES. KEEPING THESE PARAMETERS IN MIND, I AM OF THE VIEW THAT ENDS OF J USTICE WOULD BE MET, IF THE DISALLOWANCE UNDER THE HEAD CARRIAGE EXPENSES, PAY LOADER & DUMPER HIRE CHARGES AND SITE EXPENSES ARE SUSTAINED AT 2.5% OF THE EXPENSES AND THE TRAVELLING EXPENSES, TELEPHONE EXPENSES, CAR HIRE CHARGES AND GENERAL EX PENSES ARE SUSTAINED AT 10% OF THE EXPENSES. I ORDER ACCORDINGLY AND PARTLY ALLOW GR. NO.1 TO 3. 9. GR.NO.4 RAISED BY THE ASSESSEE READS THUS: 4) THAT THE ID. CIT (A) IS UNJUSTIFIED IN SUSTAINI NG THE ADDITION OF RS. 16,000.00 UNDER THE HEAD 'LOW DRAWINGS'. ITA NO.148/KOL/2014- SHRI SAKHI CHAND BUCHASIA A. Y.2005-06 4 10. THE AO FOUND THAT THE ASSESSEE HAD SHOWN DRAWI NGS OF ONLY RS.54,000 WHICH IN HIS OPINION WAS LOW AND HE THEREFORE HELD THAT A SU M OF RS.16,000 HAD TO BE ADDED AS EXPENDITURE MET ON LIVING EXPENSES OF THE ASSESSEE FROM UNDISCLOSED SOURCES AND ADDED THE SAID SUM TO THE TOTAL INCOME OF THE ASSES SEE. THE CIT(A) CONFIRMED THE ORDER OF THE AO. 11. AFTER HEARING THE RIVAL SUBMISSIONS OF THE PAR TIES, I AM OF THE VIEW THAT THE ADDITION DESERVES TO BE DELETED. THE FAMILY OF THE ASSESSEE CONSISTS OF ASSESSEE AND HIS WIFE ONLY. THE WIFE OF THE ASSESSEE IS ALSO AN INCOME TAX ASSESSEE AND HAS SHOWN SUBSTANTIAL DRAWINGS. KEEPING IN MIND THESE FACTORS, I DIRECT DELETION OF THE ADDITION SUSTAINED BY THE CIT(A). 12. AS FAR AS 5 IS CONCERNED, THE SAME CHALLENGES THE DISALLOWANCE OF RS.28,400 BY THE CIT(A) IN EXERCISE OF HIS POWERS OF ENHANCEMENT . THE ASSESSEE PAYS CHARGES FOR TESTING THE QUALITY OF STONE BALLAST SUPPLIED TO RA ILWAYS THROUGH A GOVERNMENT APPROVED QUALITY TESTER. THE CIT(A) WAS OF THE VIE W THAT THE AFORESAID PAYMENT WAS IN THE NATURE OF FEES FOR TECHNICAL SERVICES AND THEREFORE THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE U/S.194J OF THE ACT. SINCE TAX WAS NOT SO DEDUCTED THE CIT(A) INVOKING THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT DISALLOWED A SUM OF RS.28,400/-. 13. I HAVE HEARD THE RIVAL SUBMISSIONS. SEC.194-J OF THE ACT CASTS AN OBLIGATION ON A PERSON WHO PAYS FEES FOR TECHNICAL SERVICES IN EXCE SS OF RS.20,000 TO DEDUCT TAX AT SOURCE AT THE TIME OF MAKING SUCH PAYMENT. EXPLANATION [ 2 ] TO SEC.9(1)(VII) OF THE ACT DEFINES FOR THE PURPOSE OF SEC.194J OF THE ACT AS 'FEES FOR TECHNICAL SERVICES' MEANS ANY CONSIDERATION (INCLUDING ANY LUMP SUM CON SIDERATION) FOR THE RENDERING OF ANY MANAGERIAL, TECHNICAL OR CONSULTANCY SERVICES ( INCLUDING THE PROVISION OF SERVICES OF TECHNICAL OR OTHER PERSONNEL) BUT DOES NOT INCLU DE CONSIDERATION FOR ANY CONSTRUCTION, ASSEMBLY, MINING OR LIKE PROJECT UNDE RTAKEN BY THE RECIPIENT OR CONSIDERATION WHICH WOULD BE INCOME OF THE RECIPIEN T CHARGEABLE UNDER THE HEAD 'SALARIES'. THE ORDER OF CIT(A) IS SILENT AS TO HO W THE TESTING FEES RECEIVED BY THE ITA NO.148/KOL/2014- SHRI SAKHI CHAND BUCHASIA A. Y.2005-06 5 ASSESSEE WOULD BE IN THE NATURE OF FEES FOR TECHNI CAL SERVICES. I AM OF THE VIEW THAT IN THE ABSENCE OF ANY REASON GIVEN BY THE CIT( A), THE ADDITION SHOULD BE DELETED. EVEN OTHERWISE, I AM OF THE VIEW THAT THESE CHARGES ARE ROUTINE TESTING CHARGES FOR TESTING THE SIZE OF THE STONE BALLASTS, WHICH CANNO T BE SAID TO BE OF TECHNICAL NATURE. THE ADDITION IS THEREFORE DIRECTED TO BE DELETED. 14. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 03.02.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBER DATED : 03.02.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.SHRI SAKHI CHAND BUCHASIA, C/O LALIT KUMAR AGRAWA LLA, CHARTERED ACCOUNTANTS, SISHU BAGAN MORE, P.O.RANIGANJ 713347, DIST. BURDWAN (WB) . 2. ITO, WARD-3(1), ASANSOL. 3. CIT(A)-ASANSOL. 4. CIT-ASANSOL. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES