Avinash Carriers Pvt. Ltd., Pune V. Assistant Commissioner of Income-tax,

ITA 1774/PUN/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7729 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Business income; Depreciation; Corroborative evidences

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1774/PUN/2016 / ASSESSMENT YEAR : 2010-11 AVINASH CARRIERS PVT. LTD., SHOP NO.2, S.NO.25, MIDC, COMMERCIAL COMPLEX, CHINCHWAD, PUNE 411 019 PAN : AAECA6883E . /APPELLANT VS. ACIT, CIRCLE-8, PUNE . / RESPONDENT ASSESSEE BY : NONE REVENUE BY : DR. VIVEK AGGARWAL / DATE OF HEARING : 19.06.2018 / DATE OF PRONOUNCEMENT: 27.06.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-6, PUNE, DATED 22-04-2016 FOR THE ASSESSMENT YEAR 2010-11. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THAT THE ASSES SEE IS A COMPANY AND IS ENGAGED IN THE TRANSPORTATION BUSINESS. ASSESSEE HAS TRUCKS AND OTHER VEHICLES ON HIRING. ASSESSEE PURCHASED CERTAIN VEHICLES AND ASSIGNED THEM TO SOME TRUCK DRIVERS GIVING AUTHORITY TO RUN THE SAID VEHICLES AND APPROPRIATE THE INCOME FOR THEIR USE. ASSESSEE DOES N OT SHOW ANY BUSINESS INCOME FROM SUCH VEHICLES GIVEN TO THE SAID T RUCK DRIVERS. HOWEVER, THE ASSESSEE CLAIMED DEPRECIATION ON THE SAID TR UCKS AGAINST THE OTHER TRANSPORTATION INCOME EARNED BY THE ASSESSEE TH ROUGH DIRECT OPERATION OF THE TRUCKS. FURTHER, THE ASSESSEE CLAIMED CERTAIN EXP ENDITURE 2 AMOUNTING TO RS.5,81,081/- ON ACCOUNT OF TRUCK MANAGEME NT CHARGES AND DEBITED TO THE PROFIT AND LOSS ACCOUNT. THEREFORE, IT IS THE CASE OF THE AO THAT CLAIMING OF EXPENSES AND NOT SHOWING RELATED INCO ME OUT OF SUCH TRUCK GIVEN TO THE SAID TRUCK DRIVERS, IS NOT PROPER. AO DISALLOWED THE SAME HOLDING THAT THE CONCEPT OF HANDING OVER THE TRUCKS TO RELIABLE T RUCK DRIVERS TO OPERATE THE BUSINESS OF THE COMPANY AND T HE PROFIT EARNED ON THESE TRUCKS WERE GIVEN TO TRUCK DRIVERS AS INCENTIV ES, DOES NOT APPEAR TO BE BELIEVABLE. AO MADE ADDITION OF THE SAID AMOUNT OF RS.5,81,081/-. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO AS PER THE DIS CUSSION GIVEN IN PARA NO.4.2 OF HIS ORDER. 3. AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE FILED THE PRESENT APPEAL WITH THE FOLLOWING GROUNDS : ON FACTS AND IN LAW : 1. THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION O F RS.5,81,081/- MADE BY THE AO BY DENYING THE EXPENSES CLAIMED AS TRUCK MANAGEMENT CHARGES ON THE GROUND THAT THE PROFITS EARNED FROM HIRING O F TRUCKS WHICH WAS INCOME OF THE APPELLANT COMPANY WAS NOT OFFERED TO TAX WITHOUT APPRECIATING THE FACTS AND SUBMISSIONS GIVEN BY THE ASSESSEE COMPANY. 2. THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITIONS WITHOUT APPRECIATING THE FACTS THAT THE APPELLANT HAS PAID THESE CHARGES TO COVER UP THE VARIOUS PROBLEMS REGARDING PAYMENT OF DRIVERS SALARY, AND OTHER ADMINISTRATION EXPENSES ETC. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 4. DURING THE PROCEEDINGS BEFORE US, THERE IS NONE TO RE PRESENT THE ASSESSEE DESPITE SERVICE OF NOTICE. CONSIDERING THE SMALLNE SS OF THE ISSUE AND AVAILABILITY OF THE ASSISTANCE OF LD. DR FOR THE REVENUE , WE PROCEED TO ADJUDICATE THIS APPEAL IN THE ABSENCE OF ASSESSEE OR HIS REPRESENT ATIVE. 5. AFTER HEARING THE LD. DR FOR THE REVENUE AND ON ASSIMILA TION OF FACTS, WE ARE OF THE OPINION THAT CONTENTS OF PARA NOS. 6 TO 8 OF THE ASSESSMENT ORDER AND CONTENTS PARA NO.4.2 OF THE ORDER OF CIT(A) ARE 3 RELEVANT. THESE PARAGRAPHS GIVE THE FACTS OF THE ISSUE A ND ALSO THE RATIONALE FOR MAKING DISALLOWANCE AND CONFIRMING THE SAID DISALLO WANCE BY THE CIT(A). CONSIDERING THE SIGNIFICANCE OF THE SAID PARAGRA PHS, WE PROCEED TO EXTRACT THE SAME HERE AS UNDER : PARA NOS. 6 TO 8 OF THE ASSESSMENT ORDER : 6. ON GOING THROUGH PROFIT & LOSS A/C SUBMITTED B Y THE ASSESSEE COMPANY, IT WAS NOTICED THAT THE ASSESSEE HAS CLAIM ED TRUCK MANAGEMENT CHARGES OF RS.5,81,081/- UNDER THE HEAD OF ADMINIS TRATIVE OVERHEADS. DURING THE COURSE OF HEARING DATED 4-09-2012, THE A SSESSEE COMPANY WAS ASKED TO PROVIDE THE DETAILS OF TRUCK MANAGEMENT CH ARGES. IN RESPONSE, THE ASSESSEE COMPANY CLARIFIED THAT SOME TRUCKS WER E HANDED OVER TO SOME RELIABLE TRUCK DRIVERS TO OPERATE FOR THE BUSINESS OF COMPANY AND THE PROFIT EARNED THROUGH THESE TRUCKS WERE GIVEN TO THOSE TRU CK DRIVERS AS AN INCENTIVE. THE DETAILS OF TRUCK MANAGEMENT CHARGES ARE FILED AS UNDER : . . . . . . . . . . . . . . . . 7. ON GOING THROUGH ABOVE CHART, IT CAN BE NOTICED THAT THE ASSESSEE COMPANY HAS RECEIVED LORRY HIRE INCOME OF RS.49,69, 584/-, OUT OF SAID INCOME TOTAL EXPENSES WERE INCURRED BY TRUCK DRIVER S OF RS.43,81,503/-. THE DIFFERENTIAL INCOME OF RS.5,88,081/- WAS NOT OF FERED FOR TAX BY THE ASSESSEE COMPANY. ON THE CONTRARY, THE SAID INCOME WAS CLAIMED AS EXPENDITURE UNDER THE HEAD OF TRUCK MANAGEMENT CHA RGES AND ALSO CLAIMED TO HAVE BEEN GIVEN AS INCENTIVE TO TRUCK DR IVERS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AR OF THE ASSESSEE W AS ASKED AS TO WHY THE SAID INCOME SHOULD NOT BE TAXED? IN RESPONSE, NO FURTHER DETAILS AND EVIDENCES FOR JUSTIFICATION OF THIS CLAIM WAS FURNI SHED, HOWEVER, REITERATED THAT THE INCOME WAS GIVEN TO THOSE RELIABLE TRUCK D RIVERS AS AN INCENTIVE. THE ARGUMENT WITHOUT SUPPORTING EVIDENCES IS NOT FO UND SATISFACTORY AND CONVINCING. FIRST OF ALL, THE INCOME WAS EARNED BY THE COMPANY THROUGH ITS OWN TRUCK OPERATIONS AFTER CLAIMING ALL EXPENSES; SH OULD HAVE BEEN OFFERED FOR TAX. THE PROFIT OF THOSE TRUCKS CAN ONLY BE AL LOCATED TO THOSE TRUCK DRIVERS AFTER PAYING TAX THEREON. 8. IN VIEW OF ABOVE, THE CLAIM OF THE ASSESSEE COMP ANY IS NOT ACCEPTED. ACCORDINGLY, THE CLAIM OF TRUCK MANAGEMENT CHARGES AMOUNTING TO RS.5,88,081/- ARE DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. SINCE THE ASSESSEE HAS FURNISHED INACCURAT E PARTICULARS OF INCOME, THE PENALTY UNDER SECTION 271(1)(C) R.W. EX PLANATION 1 THERETO, IS INITIATED. PARA NO.4.2 OF THE ORDER OF CIT(A) : 4.2. AS REGARDS GROUND NO.2, THE AO IN THE ASSESSME NT ORDER DISALLOWED TRUCK MANAGEMENT CHARGES OF RS.5,81,081/- CLAIMED U NDER THE HEAD 'ADMINISTRATIVE OVERHEADS'. IT IS THE CLAIM OF THE APPELLANT THAT CERTAIN TRUCKS ARE BEEN HANDED OVER TO SOME RELIABLE TRUCK DRIVERS TO OPERATE FOR THE PURPOSE OF BUSINESS AND THE PROFIT EARNED THROUGH T HESE TRUCKS WERE GIVEN TO THOSE TRUCK DRIVERS AS AN INCENTIVE. THE AO HAD WORKED OUT A NET PROFIT OF RS.5,88,081/- ON THESE TRUCKS AND HOLDING THAT THIS AMOUNT HAS NOT BEEN OFFERED TO TAX BUT HAS BEEN CLAIMED AS A TRUCK MANA GEMENT CHARGES HAD ADDED TO THE APPELLANT'S INCOME. THE AO DID NOT BUY THE ARGUMENT OF THE ASSESSEE AND THE PROFIT EARNED ON THESE TRUCKS CANN OT BE ALLOCATED TO THE TRUCK DRIVERS WITHOUT PAYING TAX. HOWEVER, IN THE R EWORKING SUBMITTED BY 4 THE APPELLANT DURING THE APPEAL PROCEEDINGS, HE CLA IMED TO HAVE EARNED A PROFIT OF RS.12,64,410/- AND OUT OF WHICH TRUCK MAN AGEMENT CHARGES OF RS.5,88,081/- HAS BEEN PAID TO THE RELIABLE TRUCK D RIVERS. THE DIFFERENCE BETWEEN THE AO'S CALCULATION AND THE APPELLANT'S CA LCULATION IS AN ACCOUNT OF THE WAY THE INSTALLMENTS PAYMENTS HAVE BEEN TREATED . THE AO HAS TAKEN THE WHOLE INSTALLMENT PAYMENT AS EXPENSE WHILE THE APPELLANT CLAIMED ONLY THE INTEREST IN THE INSTALLMENT TO BE AN EXPENSE. T HE TRUCKS ARE OWNED BY THE COMPANY AND THE INSTALLMENTS ARE BEING PAID BY THE COMPANY. THE COMPANY IS ALSO CLAIMING DEPRECIATION ON THESE ASSE TS. THE CONCEPT OF HANDING OVER THE TRUCKS TO RELIABLE TRUCK DRIVERS T O OPERATE THE BUSINESS OF THE COMPANY AND THE PROFIT EARNED ON THESE TRUCKS W ERE GIVEN TO THE TRUCK DRIVERS AS INCENTIVE DOES NOT APPEAR TO BE BELIEVA BLE. AS PER THE WORKING ADOPTED BY THE AO THERE IS NO BENEFIT TO THE COMPAN Y EXCEPT FOR CLAIMING DEPRECIATION IF ALL THE PROFITS ARE GIVEN AS INCENT IVE TO THE TRUCK DRIVERS. LOOKING AT THE FACTS AS BROUGHT OUT IN THE ASSESSME NT ORDER, THERE APPEARS TO BE A MECHANISM ADOPTED BY THE APPELLANT TO TAKE A DVANTAGE OF DEPRECIATION ON TRUCKS BY AN ARRANGEMENT TO GIVE TH E VEHICLES TO SUPPOSEDLY RELIABLE TRUCK DRIVERS AND ALLOWING THEM TO KEEP AL L THE PROFITS EARNED FROM THE HIRING OUT OF SUCH TRUCKS. IN THE LIGHT OF THES E FACTS, I AM OF THE OPINION THAT THE AO TREATMENT OF THE PROFITS AS INCOME OF T HE APPELLANT COMPANY AND DENYING THE EXPENSES CLAIMED AS A TRUCK MANAGEMENT CHARGES IS APPROPRIATE AND HENCE SUSTAINED. THE GROUND IS DIS MISSED. IN OUR VIEW, IT IS A CASE WHERE THERE IS NO DISPUTE ABOUT THE NON- RECOGNISING THE INCOME FROM THE TRUCKS GIVEN TO THE SAID RELIABLE TRUCK DRIVERS (RTDS) AND THE INCOME IS APPROPRIATED BY THE SAID DRIVERS ON LY. NO INCOME FROM SUCH TRUCKS IS OFFERED TO TAX. HOWEVER, IT IS A LSO UNDISPUTED FACT THAT THE EXPENDITURE CLAIMED ON ACCOUNT OF TRUCK MA NAGEMENT CHARGES AMOUNTING TO RS.5,81,081/- IS NOT DENIED BELONGING TO THE SAID TRUCKS GIVEN TO THE SAID RELIABLE TRUCK DRIVERS. AS SUCH, THE ASSESSEE FAILED TO DEMONSTRATE THE SAID EXPENDITURE IS NOT RELATABLE TO THE SAID TRUCKS. ON THESE FACTS, WE ARE OF THE OPINION THAT THE DECISIONS R ENDERED BY THE AO AND THE CIT(A) ARE FAIR AND REASONABLE. ACCORDINGLY, T HE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 27 TH JUNE, 2018 5 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-6, PUNE 4. THE PR.CIT-5, PUNE 5. , , B BENCH PUNE; 6. / GUARD FILE.