ACIT, Bhubaneswar V. Girija Sankar Pani, Dhenkanal

ITA 181/CTK/2012

• Counselvise Citation: 18122114 RSA 2012
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2012
• Court: TRIBUNAL
• Department Lawyers: A BHATTACHARJEE

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , HONB LE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 181/CTK/2012 ( / ASSESSMENT YEAR 2008 - 09 ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. - - - VERSUS - SHRI GIRIJA SANKAR PANI, PROP.HANSINI DISTRIBUTORS, KUN JAKANTA, PANI COLONY, DHENKANAL 759 001 PAN: AGSPP 7256 R ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.BHATTACHARJEE, DR / FOR THE RESPONDENT: NONE / DATE OF HEAR ING: 13.07.2012 / DATE OF PRONOUNCEMENT: 20.07.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER . THIS APPEAL BY THE REVENUE IS ON THE SOLITARY GROUND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW AS WELL AS ON FACT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.12,87,705 ON ACCOUNT OF DISALLOWANCE OF EXCESS CLAIM OF TRANSPORTATION, LOADING AND UNLOADING EXPENSES WHEN THE ASSESSEE COUL D NOT SUBSTANTIATE THE CLAIM. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE RESPONDENT INSPITE OF NOTICE FIXING THE CASE FOR HEARING DULY SERVED. WE PROCEED TO DISPOSE OF THIS APPEAL AFTER HEARING THE LEARNED DR. 3. THE BRIEF FACTS AS HAVE BEEN BROUGHT ON REC ORD ARE THAT THE ASSESSEE IS INVOL VED IN TRADING OF IRON ORE AND M INES. IT FILED ITS RETURN OF INCOME AT 6,71,340. IN THE ASSESSMENT MADE U/S.143(3), THE ASSESSING OFFICER I.T.A.NO. 181/CTK/2012 2 DETERMINED THE INCOME AT 45,91,590 BY MAKING ADDITIONS INTER ALIA OF 12,87,805 UNDER THE HEADS TRANSPORTATION EXPENSES BY OBSERVING IN HIS ORDER AS UNDER : COMPUTATION OF TRANSPORTATION EXPENSES . IT IS NOTED THAT THE NET PROFIT ACCRUING TO ASSESSEE IS RS. 7.71 LAKH. WHEREAS THE ALLEGED PAYMENTS TO SRI SK RATH IS RS. 2,18,78,162/ - . A TRANSPORT CONTRACTOR MAKES AN AVERAGE NET PROFIT OF 5% OF TURNOVER * . THIS MEANS THAT DOING BUSINESS WITH HANSINI DISTRIBUTORS S K RATH MAKES A NET PROFIT OF 5% OF RS. 2,18,78,162 I.E. RS. 10,93,908/ - . THIS IMPLIES THAT THE ASSESSEE MAKES A PROFIT OF R S. 7.71 LAKH FROM HIS BUSINESS WHEREAS SK RATH MAKES A PROFIT OF RS. 11 LAKH FROM ASSESSEES BUSINESS. IN A GENUINE TRADING BUSINESS THIS IS NEVER THE CASE. THE TRADER ALWAYS MAKES MORE THAN DOUBLE THE MONEY MADE BY PARTIES TO WHOM HE MAKES PAYMENTS FOR SU BSIDIARY PAYMENTS. ONLY IN THE CASE OF A PERSON USED AS BENAMI BY ANOTHER TO RUN BUSINESS THE PROFIT TO THE OTHER PERSON IS MORE FROM BUSINESS THAN THE PERSON IN WHOSE NAME BUSINESS IS RUN. HENCE ON ESTIMATE A SUM OF RS. X IS DEDUCTED FROM TRANSPORTATION C HARGES AS BOGUS. THE NET PROFIT OF ASSESSEE BECOMES RS. (771340 + X) AND AMOUNT PAID TO SK RATH FOR TRANSPORTATION EXPENSES IS RS. (21878162 X). SINCE PROFIT TO ASSESSEE FROM HIS TRADING BUSINESS HAS TO BE MORE THAN DOUBLE OF PROFIT TO ANY OTHER PARTY, ( 771340+X)2TIMES5%OF(21878162 X) =100X(771340+X) 10X(21878162 X) = 110X141647620 =X1287705 HENCE ON CALCULATION BY ESTIMATE 12,87,705 IS DISALLOWED FROM TRANSPORTATION EXPENSES. * THE NET PROFIT LOWERS DOWN TO 3 - 4% FOR LONG DISTAN CE TRANSPORTATION AND RISES TO 6 - 7% FOR SHORT DISTANCE TRANSPORTATION. HENCE NET PROFIT TO SK RATH IS ON THE UPPER SIDE OF 5%. RELIANCE IS ALSO TAKEN ON THE NET PROFIT TO I.T.A.NO. 181/CTK/2012 3 TURNOVER RATIO IN THE CASE OF SRI MANOJ AGARWALLA, PAN NO. AAXPA3699J, AY 2008 - 09 WHO FILES RETURN IN THIS CIRCLE. FOR A TURNOVER OF RS. 7,92,21,950/ - ASSESSEES NET PROFIT AS PER BOOKS IS RS. 23,14,077/ - . AFTER EXCLUDING EXPENSES OF PRIOR ACCOUNTING YEAR OF RS. 31,70,889/ - , NET PROFIT IS RS. 5484896/ - I.E. 6.9%. SRI MANOJ AGARWALLA IS ALS O INVOLVED IN TRANSPORTATION OF IRON ORE IN KENOJHAR. GIVEN SIMILAR SITUATIONS, BY ALL HUMAN PROBABILITY SK RATHS NET PROFIT IS MORE THAN 5%. 4. AGGRIEVED, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY, WHO CONSIDERING THE CASE OF THE ASSE SSEE APPELLANT , OBSERVED IN PARAGRAPH 4.3.1 OF HIS ORDER, AFTER HEARING THE ASSESSEE APPELLANT AS FOLLOWS : 4.3.1 AS IS CLEAR FROM THE REASONS GIVEN BY THE A.O. IN HIS ASSESSMENT ORDER AS EXTRACTED ABOVE, THE DISALLOWANCE HAS BEEN MADE BY THE A.O. PURELY ON A HYPOTHETICAL CALCULATION AND WITHOUT BRINGING ANY MATERIAL ON RECORD. THE A.O. STARTS TO DOUBT THE RATE PAID ON THE GROUND THAT IN ANOTHER ASSESSEE ASSESSED WITH HIM THE RATE IS RS.180/ - PER MT OVER LONG DISTANCES. HOWEVER, HE HAS NOT ELABORATED HOW L ONG IS THAT LONG DISTANCE IS. SIMILARLY, WHILE AS PER CALCULATION MADE BY HIM THE TRANSPORTERS PROFIT MARGIN IS AROUND 30%, WHICH LED THE A.O. TO DISBELIEVE THE TRANSPORTATION CHARGES PAID, IT IS NOT CLEAR AS TO WHETHER THE A.O. HAS CONSIDERED THE DEPRECI ATION AND FINANCING CHARGES IN THE EXPENSES COMPUTED BY HIM. IN ANY CASE, THE SAME COMPUTATION IS PURELY HYPOTHETICAL AND WITHOUT ANY BASIS. FURTHER, THE A.O. ASSUMES A PROFIT RATE OF 5% FOR THE TRANSPORT CONTRACTOR AND DOUBLE THAT RATE FOR THE ASSESSEE ON THE GROUND PROFIT TO THE ASSESSEE FROM HIS TRADING BUSINESS HAS TO BE MORE THAN DOUBLE OF PROFIT TO ANY OTHER PARTY. THIS AGAIN IS AN ASSUMPTION WITHOUT ANY CORROBORATING FACTS OR EVIDENCES FROM ANY REAL LIFE CASE. IN FACT, IF A.O. S REASONING IS TO BE ACCEPTED, THEN PROFIT MARGINS IN ALL RETAIL BUSINESS WHICH INVOLVES TRANSPORTATION HAS TO BE TAKEN AT 10%, WHICH IS NOT AN ACCEPTABLE PROPOSITION. THE A.O. ALSO STATES IN HIS ORDER THAT THE DEDUCTEE IS NOT ASSESSED HERE, THE DETAILS OF HIS STATUS CANNOT BE OBTAINED. THIS CAN BE NO GROUND FOR ANY ADDITION OR DISALLOWANCE BECAUSE ALL THE PARTIES WITH WHOM THE ASSESSEE IS I.T.A.NO. 181/CTK/2012 4 HAVING TRANSACTION CANNOT BE POSSIBLY BE ASSESSED BY THE SAME A.O. OR FOR THAT MATTER IN THE SAME PLACE. PERUSAL OF THE RECORDS INDICATE THAT THE ASSESSEE DURING THE SCRUTINY PROCEEDING HAS FURNISHED PHOTOCOPY OF TDS CERTIFICATE IN RESPECT OF SHRI S.K. RATH WHEREIN HIS PAN NO. HAS BEEN CLEARLY MENTIONED. FROM THE PAN THE A.O. COULD EASILY HAVE GOT ANY VERIFICATION DONE FROM THE CONCERNED A. O. ON THE OTHER HAND, AS ARGUED BY THE ASSESSEE, THE ENTIRE PAYMENT OF TRANSPORTATION CHARGES HAS BEEN MADE BY CHEQUE. TDS HAS BEEN DEDUCTED ON THE SAME, WHICH HAS ALSO BEEN ADMITTED BY THE A.O. THE ONLY DEFAULT ON THE PART OF THE ASSESSEE IS NON PRODUCTIO N OF CHALLANS, WHICH AS STATED BY THE ASSESSEE BEFORE THE A.O. WERE STOLEN. THE A.O.S SUSPICION THAT THERE WAS NO THEFT IS ONLY A SUSPICION. FURTHER, NON PRODUCTION OF CHALLANS WILL NOT IN ITSELF LEAD TO A CONCLUSION THAT THE TRANSPORTATION EXPENSES ARE I NFLATED UNLESS SOME OTHER CORROBORATING EVIDENCE ARE BROUGHT OUT OR UNLESS THE ASSESSEE FAILS TO PRODUCE EVEN THE BASIC BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS. IT IS NOT THE CASE OF THE A.O. THAT THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS IN SUPPORT OF EXPENSES WERE NOT PRODUCED BEFORE HIM. ON THE OTHER HAND AS ARGUED BY THE LD. A.R. BEFORE ME, THE EXPENDITURE IS DULY SUPPORTED BY BILLS AND VOUCHERS AND BOOKS OF ACCOUNTS, THE PAYMENTS HAVE BEEN MADE BY CHEQUE AND TDS HAS BEEN DEDUCTED THERE FROM. IN VIE W OF THE SAME AND CONSIDERING THE FACTS, I AM UNABLE TO SUSTAIN THE ADDITION OF RS. 12,87,705/ - MADE BY THE A.O. THE SAME IS ACCORDINGLY DELETED AND GROUND NUMBER 1 IS THUS DECIDED IN FAVOUR OF THE APPELLANT. 5. THE REVENUE IS IN APPEAL BEFORE US AS PER T HE GROUND MENTIONED ABOVE. 6. THE LEARNED DR SHRI A.BHATTACHARJEE RELIED ON THE ORDER OF THE ASSESSING OFFICER FOR HIS PART OF SUBMISSIONS. ON A SPECIFIC QUERY FROM THE BENCH WHETHER THE ASSUMED COMPUTATION OF EXPENDITURE CAN BE ALLOWED ONLY I.T.A.NO. 181/CTK/2012 5 WHEN THE ACTUA L EXPENSES AS HAVE BEEN INCURRED IS ACCEPTABLE . THE ASSESSING OFFICER HAS TRIED TO CONSIDER DISALLOWANCE OF EXPENDITURE WHEN ALL THE VOUCHERS WERE AVAILABLE FOR THE PURPOSE OF CLAIMING THE DEDUCTION STOOD BEEN VERIFIED BY HIM. THE LEARNED DR ANSWERED IN TH E AFFIRMATIVE AFTER PERUSING THE ORDER OF THE LEARNED CIT(A) (SUPRA) . 7. WE HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER AND HAVE CONSIDERED THE CONTENTION OF THE LEARNED CIT(A) IN HIS ORDER. WE DO NOT FIND INFIRMITY THEREIN. THE LEARNED CIT(A) STATED T HAT THE TDS WERE DEDUCTED ON THE ENTIRE TRANSPORTATION CHARGES BY CHEQUES AND IT WAS NOT THE CASE OF THE ASSESSING OFFICER TO DISALLOW THAT THE EXPENDITURE CLAIMED AS TRANSPORT CHARGES WERE BOGUS OR SHARED . IN FACT, WE APPRECIATE TO NOTE HIS OBSERVATION TH AT A GENUINE TRADING BUSINESS THIS IS NEVER THE CA S E. THE ASSESSING OFFICER NOTED THAT A TRADER ALWAYS MAKES MORE THAN DOUBLE THE MONEY MADE BY THE PARTIES TO WHOM HE MAKES PAYMENT FOR SUBSIDIARY PAYMENTS. ONLY IN THE CASE OF A PERSON USED AS BENAMI BY ANO THER TO RUN BUSINESS THE PROFIT TO THE OTHER PERSON IS MORE FROM BUSINESS THAN THE PERSON IN WHOSE NAME THE BUSINESS IS RUN. ON THIS PROPOSITION HE PROCEEDED TO ESTIMATE SUCH INCOME IN THE HANDS OF THE RECIPIENT TO DISALLOW THE CLAIM IN THE HANDS OF THE AS SESSEE AS TRANSPORTATION CHARGES. WE ARE UNABLE TO ACCEPT THE BASIS AND THE ANALOGY OF THE ASSESSING OFFICER ON THIS ISSUE WHICH HAS BEEN RIGHTLY DEALT WITH BY THE LEARNED CIT(A). NO CONTROVERTING MATERIAL HAS BEEN BROUGHT OUT BY THE REVENUE AS OF NOW ON T HE BASIS OF THE FINDING OF THE LEARNED CIT(A) THEREFORE LEAVES NO ROOM TO DOUBT THAT THE DISALLOWANCE OF EXPENDITURE BY THE ASSESSING OFFICER WAS MADE PURELY ON ASSUMPTIONS, PRESUMPTIONS, BIAS AND ERROR OF JUDGEMENT. THE INCOME IN OTHERS HAND CANNOT BE DIS ALLOWED AS EXPENDITURE ON THE PAYEES HANDS FOR CLAIMING EXPENSES. IN VIEW OF THE I.T.A.NO. 181/CTK/2012 6 ABOVE, WE HAVE NO HESITATION TO UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN THIS REGARD AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT, THE APPEAL OF THE REVEN UE IS DISMISSED. SD/ SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 20.07.2012 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 2 / THE RESPONDENT: SHRI GIRIJA SANKAR PANI, PROP.HANSINI DISTRIBUT ORS, KUNJAKANTA, PANI COLONY, DHENKANAL 759 001 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 16 .7.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17.7.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20.07.2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.