J.Kanagarajan, Tiruvarur V. ACIT, Thanjavur

ITA 1527/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96283 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 08-10-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: G BASKAR

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 15 27 /MDS/2015 / ASSESSMENT YEAR :2006 - 07 SHRI J. KANAGARAJAN, PROP. SRI VENKATESWARA TRADERS, NO. 7, JUBLEE MARKET, TIRUVARUR 610001. [PAN: A A KPK5645D ] VS. THE ASSISTANT COMMISSION E R OF INCOME TAX , CIRCLE I, THANJAVUR. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI G. BASKAR , ADVOCATE / RESPONDENT BY : SHRI A.B KOLI , J CIT / DATE OF HEARING : 08 . 1 0 .201 5 / DATE OF P RONOUNCEMENT : 29 . 1 0 .201 5 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : TH IS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) , TIRUCHIRAPALLI , DATED 15 . 0 4 .20 1 5 FOR THE ASSESSMENT YEAR 2006 - 07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADING IN PADDY AND HIRING OF LORRIES, DEALER IN PETROL & DIESEL, TRANSPORT CONTRACT, ETC. A ND FILED HIS RETURN ADMI TTING TOTAL INCOME OF .9,15,442/ - ALONG WITH AGRICULTURAL INCOME OF . 25,000/ - . THE RETURN WAS I.T.A. NO . 1527 /M/ 15 2 PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] AND SELECTED FOR SCRUTINY. IN RESPONSE TO NOTICE ISSUED, AR OF THE ASSESSEE HAS PRODUCED THE SEPARATE BOO KS OF ACCOUNTS MAINTAINED FOR ALL UNITS FOR VERIFICATION. AFTER VERIFICATION OF BOOKS OF ACCOUNTS AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE ASSESSING OFFICER HAS MADE VARIOUS ADDITIONS AGAINST WHICH THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE LD. CIT(A). THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING THE MATERIALS AVAILABLE ON RECORD, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING VARIOUS GR OUNDS. 3. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO ADDITION OF .9,80,850/ - TOWARDS TRADE CREDITORS. ON VERIFICATION OF THE BALANCE SHEET, THE ASSESSING OFFICER HAS FOUND THAT THERE IS A LIABILITY OF .49,09,487/ - SHOWN UN DER MIRASUDAR ACCOUNT REPRESENTING THE CREDITORS FOR PURCHASE OF PADDY. AS PER THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, A SUM OF .28,67,927/ - IS OUTSTANDING FOR MORE THAN A YEAR AND THEREFORE, THE ASSESSEE WAS ASKED TO FURNISHED CONFIRMATION LETTERS IN RESPECT OF THE OUTSTANDING AMOUNTS. OUT OF 59 PERSONS AGAINST WHOM THE ABOVE AMOUNT S ARE SHOWN AS OUTSTANDING, THE ASSESSEE HAS FILED CONFIRMATION LETTERS FROM 35 CREDITORS. HOWEVER, THE ASSESSEE COULD NOT FILE CONFIRMATION LETTERS FROM 24 CREDITORS. ACCORDINGLY, SINCE THE OUTSTANDING I.T.A. NO . 1527 /M/ 15 3 LIABILITY TO THE EXTENT OF .9,80,850/ - WAS NOT PROVED BY FILING CONFIRMATION LETTER, THE ASSESSING OFFICER ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS MATERIALS ON RECORD, CONFIRME D THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SINCE THE ASSESSEE WAS NOT ABLE TO FILE CONFIRMATION LETTERS FROM THE 24 TRADE CREDITORS EVEN BEFORE THE LD. CIT(A). 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IT IS A TRADE PRACTIC E OF PAYING THE SALE PROCEEDS TO BIG LAND LORDS (MIRASUDARS) AND THEY TAKE MORE TIME TO SETTLE THE OUTSTANDING PAYMENTS. THEREFORE, HE PRAYED THAT THE ADDITION MAY BE DELETED. 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELO W. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE HAS ENGAGED IN PADDY AND LORRY BUSINESS AND IN THE BALANCE SHEET, THE ASSESSEE HAS SHOWN LIABILITY OF .49,09,487/ - , OUT OF WHI CH AN AMOUNT OF .28,67,927/ - WAS OUTSTANDING FOR MORE THAN A YEAR. THE ASSESSEE WAS ASKED TO FURNISHED CONFIRMATION LETTERS IN RESPECT OF THE OUTSTANDING AMOUNTS. OUT OF 59 PERSONS AGAINST WHOM THE ABOVE AMOUNT IS SHOWN AS OUTSTANDING, THE ASSESSEE HAS FI LED CONFIRMATION LETTERS FROM 35 CREDITORS. HOWEVER, THE ASSESSEE COULD NOT I.T.A. NO . 1527 /M/ 15 4 FILE CONFIRMATION LETTERS FROM 24 CREDITORS. SINCE THE OUTSTANDING LIABILITY TO THE EXTENT OF .9,80,850/ - WAS NOT PROVED BY FILING CONFIRMATION LETTER S , THE ASSESSING OFFICER DISA LLOWED THE SAME. ON APPEAL, EVEN BEFORE THE LD. CIT(A), THE ASSESSEE COULD NOT FILE CONFIRMATION LETTERS FROM 24 TRADE CREDITORS. THEREFORE, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE ASSESSEE HAS NOT ABLE TO FILE CONFIRMATION LETTERS FROM THE 24 TRADE CREDITORS. SINCE THE TRADE LIABILITY WAS NOT PROVED BY FILING THE CONFIRMATION LETTERS FROM THE TRADE CREDITORS, WE FIND THAT THE ASSESSING OFFICER HAS JUDICIOUSLY DISALLOWED THE ABOVE A MOUNT AND THE LD. CIT(A) HAS RIGHTLY CONFIRMED THE ABOVE DISALLOWANCE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE I S DISMISSED. 8. THE NEXT ISSUE RAISED IN THE GROU NDS OF APPEAL OF THE ASSESSEE IS WITH REGARD TO CONFIRMATION OF OUTSTANDING CREDITS IN THE NAME OF SHRI C. SUBRAMANIAN OF .56,000/ - [IN GROUND NO. 3.1] AND IN THE NAME OF SHRI A. SELVAM OF .26,000/ - [IN GROUND NO. 3.2]. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT GROUND NOS. 3.1 AND 3.2 ARE NOT PRESSED. SINCE THE LD. COUNSEL FOR THE ASSESSEE HAS MADE ENDORSEMENT OF NOT PRESSING GROUND NOS. 3.1 AND 3.2, THE SAME ARE DISMISSED AS NOT PRESSED. I.T.A. NO . 1527 /M/ 15 5 9. THE NEXT ISSUE RAISED IN THE GROUNDS OF APPEAL OF THE ASSESSEE IS RELATING TO CONFIRMATION OF DISALLOWANCE OF .2 LAKHS TOWARDS EXPENDITURE INCURRED I N RESPECT OF PADDY AND LORRY HIRING BUSINESS. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS CLAIMED NET LOSS OF .8,46,680/ - FROM LORRY BUSINESS. THE ASSESSEE HAS DEBITED LORRY MAINTENANCE EXPENSES OF .7,79,841/ - , CAR EXPENSES OF .1,07,787/ - AND FINANCI AL CHARGES PAID TO SFL OF .1,50,002/ - . THE ASSESSEE HAS CREDITED HIRE INCOME OF .15,43,700/ - . THE ASSESSING OFFICER HAS OBSERVED THAT MOST OF THE EXPENDITURES CLAIMED BY THE ASSESSEE ARE BASED ON THE PAYMENT SLIPS GIVEN BY THE DRIVERS EXCEPT FOR THE BILL S OF DIESEL PURCHASES, ALL OTHER EXPENSES CLAIMED ARE THROUGH SELF MADE VOUCHERS ONLY. THE ASSESSING OFFICER, KEEPING IN VIEW OF THE PERSONAL ELEMENT OF USE OF CAR AS WELL AS TO KEEP A CONTROL ON THE EXPENSES CLAIMED, DISALLOWED A SUM OF . 2,00,000/ - . 1 0. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON ESTIMATED BASIS . SINCE THE ASSESSEE HAS INCURRE D HEAVY LOSS IN HIS BUSINESS, HE PRAYED FOR DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 12. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO . 1527 /M/ 15 6 13. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD. THE ASSESS ING OFFICER HAS OBSERVED THAT MOST OF THE EXPENDITURES CLAIMED BY THE ASSESSEE ARE BASED ON THE PAYMENT SLIPS GIVEN BY THE DRIVERS EXCEPT FOR THE BILLS OF DIESEL PURCHASES, ALL OTHER EXPENSES CLAIMED ARE THROUGH SELF MADE VOUCHERS ONLY. SINCE THE ASSESSEE HAS PRODUCED SELF MADE VOUCHERS AND ELEMENT OF PERSONAL US AGE OF CAR, THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER. WE FIND THAT THOUGH THE ASSESSEE HAS PRODUCED SELF MADE VO UCHERS FOR THE EXPENDITURE INCURRED IN THE LORRY HIRE BUSINESS, THE ASSESSING OFFICER HAS NOT DOUBTED THE EXPENDITURE INCURRED IN THE LORRY HIRE BUSINESS. SINCE THE ASSESSEE HAS PRODUCED SELF MADE VOUCHERS , THE ASSESSING OFFICER MADE DISALLOWANCE OF .2,00 ,000/ - ON ESTIMATED BASIS. WE FIND THAT THE BASIS FOR ESTIMATING THE DISALLOWANCE WAS NOT MENTIONED IN THE ASSESSMENT ORDER. FURTHER, IT IS NOT DISPUTED THAT SUCH EXPENSES ARE NOT AT ALL INCURRED BY THE ASSESSEE. INCURRING EXPENSES IN RUNNING THE LORRIES SUCH AS SUNDRY REPAIRS AND OTHER RECURRING EXPENSES ARE VERY COMMON. SINCE THE ASSESSING OFFICER HAS PARTIALLY ACCEPTED THE EXPENSES INCURRED BY THE ASSESSEE AND MADE DISALLOWANCE, C ONSIDERING THE NATURE OF THE BUSINESS, WE ARE OF THE FIRM VIEW THAT THE AS SESSING OFFICER WAS NOT JUSTIFIED IN MAKING DISALLOWANCE ON ESTIMATED BASIS IN THE PRESENT CASE. ACCORDINGLY, THE DISALLOWANCE OF .2,00,000/ - MADE BY THE ASSESSING OFFICER IS DELETE D. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. I.T.A. NO . 1527 /M/ 15 7 14. THE LAST ISSU E RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF .1,06,316/ - TOWARDS ADVERTISEMENT AND PAYMENT FOR FESTIVALS, ETC. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENSES WHICH INCLUDE EXPENSES FOR CONDUCTING MEET ING AND PAID FOR FESTIVALS, ETC. OF .5,31,578/ - TOWARDS ADVERTISEMENT CHANGES AND SALES PROMOTION EXPENSES AND ARE NOT FULLY SUPPORTED BY BILLS AND VOUCHERS. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED 20% OF THE EXPENSES. ON APPEAL, THE LD. CIT(A) CO NFIRMED THE ORDER OF THE ASSESSING OFFICER. 15. WE FIND THAT IN THE ABSENCE OF ORIGINAL CASH BILLS AND THE ASSESSEE HAS PRODUCED SELF MADE VOUCHERS, AFTER CONSIDERING NATURE OF THE CLAIM, THE ASSESSING OFFICER HAS FAIRLY ESTIMATED AND DISALLOWED ONLY 20 % OF THE TOTAL CLAIM OF .5,31,578/ - . THUS, WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A) ON THIS ISSUE AND ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 29 TH OCTOBER, 2015 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 29 .1 0 .201 5 VM/ - I.T.A. NO . 1527 /M/ 15 8 / COPY TO: 1. / APPELLANT , 2. / R ESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.