DCIT, CHENNAI V. M/s. Free World Exports Prime Pvt. Ltd., CHENNAI

ITA 192/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7136 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: V SRINIVASAN ITP
• Keywords: Unexplained cash credit
• Section: 68; 6

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHE NNAI . . . , . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ #% #% #% #% & && & BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER # ./ I.T.A.NO.192/MDS/2014 ' ! '! / ASSESSMENT YEAR :2008-09 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(1), CHENNAI 600 034. VS. M/S. FREE WORLD EXPORTS PRIME PVT. LTD., NO.45, ODDYSY BUILDING, GANDHI NAGAR FIRST MAIN ROAD, ADYAR, CHENNAI 600 020. [PAN : AAACF7972M] ( () () () () /APPELLANT ) ( *+() *+() *+() *+() / RESPONDENT ) () , # / APPELLANT BY : SHRI GURU BHASHYAM, JCIT *+() , # / RESPONDENT BY : SHRI V. SRINIVASAN, ITP # , -. / DATE OF HEARING : 22.07.2014 /0' , -. /DATE OF PRONOUNCEMENT : 20.08.2014 1 1 1 1 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) II, CH ENNAI, DATED 19.09.2013 RELEVANT TO THE ASSESSMENT YEAR 2008-09. 2. THE EFFECTIVE GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDER: 2. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF .20,00,000/-, MADE BY THE AO ON ACCOUNT OF UNEXPLAI NED LOANS, TREATING THE SAME AS UNEXPLAINED CASH CREDITS U/S 6 8 OF THE ACT. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 2 3. THE LD. CIT(A) HAS ERRED IN DELETING THE DISALL OWANCE OF .39,48,740/- AT 10% ON LORRY HIRE CHARGES MADE BY T HE AO. 3. THE FIRST GROUND OF APPEAL RELATING TO ADDITION IN RESPECT OF .20,00,000/- UNDER SECTION 68 OF THE ACT. IN THE AS SESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT ON VERIFICATION OF THE LEDGER COPIES OF THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE HAS AVAILED LOAN OF .20,00,000/- FROM M/S. ANBU TRANSPORTS. HOWEVER, ON VERIFICATION OF LEDGER COPIES, AS FILED BY THE ASSESSEE, THE LOAN W AS ACTUALLY RECEIVED FROM FIVE INDIVIDUALS BY CHEQUES THROUGH M/S. ANBU TRANSPORTS. HOWEVER, THE ASSESSEE COULD NOT FURNISH CONFIRMATIO N FROM M/S. ANBU TRANSPORT. THE ASSESSEE HAS FILED DETAILS OF THE CR EDITORS FROM WHOM IT HAD RECEIVED LOANS AND CONFIRMATION ALSO. HOWEVER, THE ASSESSING OFFICER MADE ADDITION BY INVOKING SECTION 68 OF THE ACT. 4. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE ADD ITION ON THE GROUND THAT THE ASSESSEE HAS FILED DETAILS ABOUT TH E CREDITORS AND ALSO CONFIRMATION. 5. ON APPEAL BEFORE US, THE LD. DR HAS SUPPORTED T HE ORDER PASSED BY THE ASSESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 3 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(APPEALS). 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN TH IS CASE, THE ASSESSEE IS ENGAGED IN TRADING ROUGH GRANITE BUSINE SS. AS PER THE LEDGER ACCOUNT OF THE ASSESSEE, A LOAN OF .20,00,000/- HAS BEEN BORROWED FROM M/S. ANBU TRANSPORTS. ON VERIFICATION OF THE LEDGER COPY, IT WAS NOTICED THAT THE AMOUNTS WERE RECEIVED FROM FIVE INDIVIDUALS THROUGH CHEQUES. THE ASSESSEE WAS NOT A BLE TO GIVE EXPLANATION AS TO WHY IT HAS MENTIONED IN THE NAME OF M/S. ANBU TRANSPORTS. BEFORE US, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT M/S. ANBU TRANSPORTS WAS SUPPLYING VEHICLES TO THE ASSESSEE AND THROUGH M/S. ANBU TRANSPORTS, THE ASSESSEE HAS AVAI LED LOANS FROM FIVE PERSONS. NAME AND ADDRESS OF FIVE PERSONS AND THEIR DETAILS OF PAN WERE FURNISHED BEFORE THE ASSESSING OFFICER AND CONFIRMATION LETTERS WERE ALSO FILED. THERE ARE TWO REASONS MENT IONED BY THE ASSESSING OFFICER TO INVOKE SECTION 68 OF THE ACT T HAT THE ASSESSEE HAS NOT FILED THE CONFIRMATION FROM M/S. ANBU TRANSPORT S AND THE PARTIES WERE NOT PRODUCED BEFORE THE ASSESSING OFFICER. IN FACT, THE ASSESSEE HAS RECEIVED LOAN PAYMENTS THROUGH ACCOUNT PAYEE CH EQUES AND ALL I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 4 CONFIRMATIONS AND DETAILS OF PAN WERE ALSO FURNISHE D. IT IS NOT CLEAR THAT IF THE ASSESSEE HAS OBTAINED LOAN FROM FIVE IN DIVIDUALS WHY ASSESSEE HAS RECORDED ANBU TRANSPORTS NAME IN ITS BOOKS AS THE LOAN CREDITOR. FURTHER, THE ASSESSEE WAS NOT ABLE TO PRO DUCE M/S. ANBU TRANSPORTS AND NO PROPER EXPLANATION WAS GIVEN BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER IN THIS REGARD. IT IS CLEAR FROM THE ASSESSMENT ORDER THAT TO COMPLETE THE ASSESSMENT, T HE ASSESSING OFFICER HAS GIVEN VERY SHORT TIME TO THE ASSESSEE F OR PROVING THE CASE BY PRODUCING THE PERSONS FROM WHOM THE ALLEGED LOAN WAS RECEIVED, SINCE THE CASE IS GETTING BARRED BY TIME. IF THE AS SESSEE HAS TAKEN LOANS FROM FIVE PERSONS, IN THE ABSENCE OF ANY CONF IRMATION FROM M/S. ANBU TRANSPORTS HAVING ARRANGED LOAN FROM FIVE PERS ONS FOR THE ASSESSEE, THE OBSERVATION OF THE LD. CIT(APPEALS) I S INCORRECT THAT M/S. ANBU TRANSPORTS HAVE ARRANGED THE LOAN FOR THE ASSE SSEE AND THE ASSESSEE MIGHT HAVE RECORDED M/S. ANBU TRANSPORTS NAME IN THE BOOKS AS THE LOAN CREDITOR. WE ALSO FIND THAT THE A SSESSING OFFICER HAS NOT RESORTED TO BY ISSUING NOTICE UNDER SECTION 133 (6) OF THE ACT TO ALL THE CREDITORS AS WELL AS M/S. ANBU TRANSPORTS TO EX AMINE THE ISSUE. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND REMIT THE MATTER BACK TO THE ASSES SING OFFICER TO I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 5 CONSIDER THE ISSUE AFRESH AFTER EXAMINING THE ISSUE IN DETAIL BY AFFORDING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. ACCORDINGLY, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 8. THE SECOND GROUND OF APPEAL OF THE REVENUE RELA TING TO LORRY HIRING EXPENSES OF .39,48,740/-. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE BILLS AND VOUCHERS WITH REGARD TO THE LORRY HIRING EXPENSES. THEREFORE, HE HAS DISALLOWED 10% OF THE EXPENSES. 9. ON APPEAL, THE LD. CIT(APPEALS), AFTER CONSIDER ING THE DETAILED SUBMISSIONS MADE BY THE ASSESSEE, OBSERVED AS UNDER : I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS CAREF ULLY. THE ONLY REASON FOR THE ASSESSING OFFICER FOR DISALLOWI NG 10% OF THE ABOVE EXPENSES IS THE ASSESSEE'S INABILITY TO PRODUCE ALL THE EVIDENCES AT THE TIME OF ASSESSMENT. AS COULD BE SEEN FROM THE DETAI LS, THE ASSESSEE HAS SITES ALL OVER THE COUNTRY AND MAJORITY OF THE BILL S / VOUCHERS IN RESPECT OF THE ABOVE EXPENSES ARE MAINTAINED IN THE RESPECT IVE PREMISES / SITES. HENCE, THE ASSESSEE WAS UNABLE TO FURNISH ALL THE B ILLS / VOUCHERS DUE TO ITS VOLUME AND PAUCITY OF TIME. AS MENTIONED ABOVE, THE ASSESSEE'S ACTIVITY IS EXCA VATION, PROCESSING AND EXPORT OF GRANITE. AFTER EXTRACTING THE GRANITE BLOCKS FROM THE QUARRIES, THEY HAVE TO BE PROCESSED AND TR ANSPORTED TO THE SEA PORTS FOR EXPORT. THE QUARRIES / PROCESSING PLANTS ARE LOCATED AT VARIOUS PLACES IN THE COUNTRY AND ARE FAR AWAY FROM THE SEA PORTS. HENCE, THE ASSESSEE HAS TO INCUR HUGE EXPENDITURE IN TRANSPORT ING THE GRANITE FROM THE QUARRIES TO THE SEA PORTS BEFORE EXPORT. FURTHE R, SINCE THE GRANITE IS HEAVY AND BULKY, THE TRANSPORT EXPENSES WILL BE SUB STANTIAL. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 6 FURTHER, AS SUBMITTED BY THE ASSESSEE, ALL THE LORR Y HIRE CHARGES ARE SUBJECTED TO TDS, AS PER THE PROVISIONS, AND AR E PAID BY CHEQUES ONLY. UNDER THESE CIRCUMSTANCES INCURRING OF EXPENS ES, ON ACCOUNT OF 'LORRY HIRE CHARGES', CANNOT BE CONSIDERED AS NON-G ENUINE EITHER IN FULL OR IN PART. THEREFORE, I AM OF THE OPINION THAT THE ASSESSING OFFICER'S ACTION OF DISALLOWING 10% OF THE LORRY HIRE CHARGES IS NOT ONLY ARBITRARY, BUT ALSO UNWARRANTED. HENCE, THE DISALLO WANCE OF RS.39,48,403/-, BEING 10% OF LORRY HIRE CHARGES CLA IMED, IS DELETED. HOWEVER, THE ASSESSEE STATED THAT SOME OF THE EXPEN SES UNDER LABOUR CHARGES AND INCENTIVES ARE PAID BY CASH ALSO , AS THEY WERE LESS THAN RS.20,000/- EACH. CONSIDERING THE NATURE OF TH ESE EXPENSES AND THEIR PAYMENTS, I AM OF THE OPINION THAT A REASONAB LE PORTION OF THESE EXPENSES NEEDS TO BE DISALLOWED. CONSIDERING THE NA TURE AND VOLUME OF BUSINESS AND THE EXPENSES CLAIMED BY WAY OF LABOUR CHARGES AND INCENTIVE EXPENSES, I AM OF THE OPINION THAT DISALL OWANCE OF THESE EXPENSES @ 5% IS MORE REASONABLE, COMPARED TO THE 1 0% DISALLOWED BY THE ASSESSING OFFICER. HENCE, THE ASSESSING OFFI CER IS DIRECTED TO RESTRICT THE DISALLOWANCE OF EXPENSES TO 5% OF THE LABOUR CHARGES AND INCENTIVES, AS AGAINST THE DISALLOWANCE OF EXPENSES MADE @ 10% BY HIM. 10. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FI ND THAT THE LD. CIT(APPEALS), AFTER CONSIDERING THE DETAILED EXPLAN ATION GIVEN BY THE ASSESSEE AND ALSO BY TAKING INTO CONSIDERATION THE NATURE OF BUSINESS AND TURNOVER OF THE ASSESSEE AND NATURE OF THE EXPE NSES INCURRED, THE DISALLOWANCE OF THE EXPENSES WAS RESTRICTED TO 5%. WE FIND JUST AND FAIR AND REASONABLE. THEREFORE, THIS GROUND OF APPE AL RAISED BY THE REVENUE IS DISMISSED. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.192 192192 192/M/ /M/ /M/ /M/14 1414 14 7 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON WEDNESDAY, THE 20 TH OF AUGUST, 2014 AT CHENNAI. SD/- SD/- ( . . . ) (DR. O.K. NARAYANAN) / VICE-PRESIDENT ( . ! ! ! ! ) (V. DURGA RAO) ' ' ' ' #$ #$ #$ #$ / JUDICIAL MEMBER CHENNAI, DATED, THE 20.08.2014 VM/- 1 , *'-23 43'- /COPY TO: 1. () / APPELLANT, 2. *+() / RESPONDENT, 3. 5 ( ) /CIT(A), 4. 5 /CIT, 5. 36 *'-' /DR & 6. ! 7 /GF.