Utkal Motors (P) Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 159/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4417 (ITAT-CUTTACK)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 28-03-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: ASHOK MOHANTY
• Section: 147

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL,CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 159 AND 160/CTK/2011 (ASSESSMENT YEAR S 2003 - 04 AND 2004 - 05) UTKAL MOTORS (P) LTD.,246 LEWIS ROAD, BHUBANESWAR PAN: AAACU 3986 A VERSUS ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI ASHOK MOHANTY, AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K.GUPTA, A CCOUNTANT MEMBER : THESE TWO APPEALS FOR THE AYS 2003 - 04 AND 2004 - 05 ARE BEFORE US ON THE ASSESSEE APPELLANTS AGITATING THAT THE AD HOC DISALLOWANCE OF EXPENSES COMPUTED BY THE ASSESSING OFFICER IN HIS ORDER U/S.143(3 ) /147 WERE HELD TO BE FI T FOR CONFIRM ATION BY THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAVING RESORTED TO ESTIMATE THE RATE OF GROSS MARGIN ON THE GROSS RECEIPTS FOR TAXATION IN THE IMPUGNED ASSESSMENT YEARS . 2. COMMON ISSUES HAVE BEEN RAISED BY THE ASSESSEE FOR BOTH THE AYS ARE BEIN G THEREFORE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER AFTER ISSUING INTIMATION U/S.143( 1 ) AND HAVING ACCEPTED THE RETURN FILED EARLIER, ISSUED U/S. 147/148 AND OBSERVING THE VOLUME OF TRANSACTIONS FOR EARNING THE INCOME BEING A DEALER IN AUTOMOBILES AND SPARES, LUBRICANTS, INVERTERS AND BATTERIES, THE ASSESSING OFFICER WITHOUT GIVING ANY FINDING AS TO THE DEFICIENCY IN THE AUDITED FINANCIAL STATEMENT ARBITRARILY DISALLOWED 10% OF THE EXPENSES WHICH EXPENSES, AS THE NAME SUGGESTS, HAVE BEEN INCURRED FOR THE BUSINESS ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE THEREFORE VEHEMENTLY ARGUED THAT IT WAS NOT THE CASE OF THE ASSESSING OFFICER HAVING PAUCITY OF TIME WHEN THE ASSESSEE COULD NOT PRODUCE THE EVIDENCES TO THE ASSESSING OFFICER BUT ONLY AS THE TRANSACTION S WERE VOLUMINOUS REQUIRED CONSIDERATION FOR PURSUING THE SAME WAS CONSIDERED AS DEFICIENCY WHICH MAY OR MAY NOT HAVE BEEN AGREED UPON BY THE LEARNE D AR OF THE ASSESSEE PRESENT BEFORE HIM HAS BEEN CONFIRMED BY THE LEARNED CIT(A) BY RESTRICTING THE DISALLOWANCE FROM 10% TO 8%. THE LEARNED COUNSEL 2 ITA NO. 159 AND 160/CTK/2011 FOR THE ASSESSEE SUBMITTED THAT AT NO POINT OF TIME COULD IT BE SAID THAT A PORTION OF EXPENSE WHICH IS NEC ESSARILY INCURRED FOR THE BUSINESS OF THE ASSESSEE COULD BE DISALLOWED FOR WANT OF CORROBORATING EVIDENCE OR EXPLANATION IS A TEDIOUS TASK TO ESTABLISH AS TO HOW ONLY 10% COULD BE DISALLOWED WHEN THE NATURE OF EXPENSES AS WORKSHOP EXPENSES , TRAVELLING AND CONVEYANCE, SALES PROMOTION AND MISC. EXPENSES ARE PART AND PARCEL OF INCURRING THE SAME FOR EARNING INCOME OF THE ASSESSEE AS AN AUTOMOBILE DEALER. MERE PRESUMPTION AND ASSUMPTION HAS BEEN ADOPTED BY BOTH THE AUTHORITIES BELOW WHICH IS HIGHLY UNJUSTIFIED AND WITHOUT ANY BASIS. HE PRAYED THAT AN OPPORTUNITY BE GRANTED TO THE ASSESSEE TO EXPLAIN ALL THE 100 % EXPENSES BY SUPPORTING VOUCHERS AND EVIDENCES ETC., WHICH MAY BE REQUIRED AND FOR THE PURPOSE HE UNDERTAKES TO APPEAR BEFORE THE AUTHORITIES ON THE FI RST INTIMATION , NOTIFIED . 4. THE LEARNED DR SUBMITTED THAT THE ASSESSEE IS A HABITUAL DEFAULTER AND DOES NOT COOPERATE THEREFORE THE ESTIMATED DISALLOWANCE MAY KINDLY BE CONSIDERED AS ACCEPTABLE TO THE ASSESSEE AS HAS BEEN NOTED BY THE ASSESSING OFFICER IN HIS ORDER THAT DEFICIENCY IN MAINTAINING THE VOUCHERS IS NOT RULED OUT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE FACTS, WE ARE UNABLE TO JUSTIFY TO THE PROPOSITION THAT THE AS SESSING OFFICER PROCEED ED TO DISALLOW 10% WITHOUT ANY BASIS , THE EXPENSES CLAIMED WHICH OTHERWISE 90% ARE HELD TO HAVE BEEN INCURRED FOR THE ASSESSEES BUSINESS. THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND AUDITED UNDER THE PROVISIONS OF SECTION 44AB ALO NG WITH THE STATUTORY AUDIT CONDUCTED UNDER THE COMPANIES ACTR,1956 WHICH AUDIT REPORT CERTIFY THAT NO EXPENSES ON ACCOUNT OF PERSONAL NATURE HAVE BEEN CLAIMED IN THE PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER, THEREFORE, DID NOT HAVE ANY BASIS TO DISALL OW A PART THEREOF SPECIFICALLY UNDER THE PROVISIONS OF SECTION 147 WHEN HE OBSERVED THAT THE MAGNITUDE OF THE TRANSACTIONS ARE VOLUMINOUS AND COULD LAY HIS HANDS ON ASSUMPTION OF 10% PARTLY REDUCED TO 8% FOR DISALLOWANCE WITHOUT ASSIGNING ANY REASON WHATSO EVER EVEN IF ASSUMING BUT NOT ACCEPTING THAT THE ASSESSEE HAD AGREED TO THE PROPOSITION THAT THERE MAY BE SOME DEFICIENCY IN MAINTENANCE OF VOUCHERS. NO PRUDENT BUSINESSMAN WOULD INCUR ANY EXPENDITURE WITHOUT ANY BASIS. THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US HAS AGREED TO THE PROPOSITION THAT HE WILL LEAVE NO STONE UNTURNED TO SATISFY THE ASSESSING 3 ITA NO. 159 AND 160/CTK/2011 OFFICER FOR HAVING INCURRED THE 100% EXPENSES CLAIMED FOR THE BUSINESS ONLY , IF AN OPPORTUNITY IS GRANTED. 6. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORD ER OF THE LEARNED CIT(A) AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE EXPENSES IN ITS ENTIRETY AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO ASSIST HIM IN OVERCOMING THE DEFICIENCY , IF ANY, AS OTHERWISE NOTED B Y HIM AT THE TIME OF PASSING THE ORDER OF ASSESSMENT U/S.147. 7. IN THE RESULT, THE APPEAL S FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON DT. 20 TH MAY, 2011 SD/ - SD/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 20 TH MAY, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: UTKAL MOTORS (P) LTD.,246 LEWIS ROAD, BHUBANESWAR 2. THE RESPONDENT: ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.