Bhagyodaya Transport Co., Pune V. Deputy Commissioner of Income-tax,

ITA 1961/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9364 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Keywords: Commercial expediency
• Section: 143(3); 37(1)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1961/PUN/2014 / ASSESSMENT YEAR : 2010-11 BHAGYODAYA TRANSPORT CO., NEAR ELLORA PALACE, BALAJI NAGAR, DHANKAWADI, PUNE 411037. PAN : AADFB4592K . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 4, PUNE. . / RESPONDENT / APPELLANT BY : SMT. DEEPA KHARE / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF T HE ORDER OF COMMISSIONER OF INCOME TAX (A) - II, PUNE, DT.31 .07.2014 FOR THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- 2.1 ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED AS TRANSPORT CONTRACTORS AND COMMISSION AGENTS. ASSESSEE FILED ITS / DATE OF HEARING : 30.05.2017 / DATE OF PRONOUNCEMENT: 07.06.2017 2 RETURN OF INCOME FOR A.Y. 2010-11 ON 17.09.2010 DECLARING TO TAL INCOME AT RS.1,95,80,660/-. THE CASE WAS SELECTED FOR SCRU TINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S 143(3) OF THE A CT VIDE ORDER DT.15.03.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.2,49,29,000/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE C ARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.31.07.2014 GR ANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER O F LD.CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING GROUNDS. 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE OF RS.24,74,173/- ON ACCOUNT OF TRUCK RUNNING EXPENSES TO THE EXTENT OF 25% OF THE TOTAL EXPENDIT URE. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE INSPITE OF HAVING ACCEPTED THE GENUINENESS OF EXPENDITURE, AND ALSO ACCEPTING THE FACT THAT DUE TO THE NATURE OF BUSIN ESS OF THE APPELLANT, THE VOUCHERS OR BILLS CANNOT BE MAINTAIN ED . 3. BEFORE US, AT THE OUTSET, LD.A.R. SUBMITTED THAT THOUGH THE ASSESSEE HAS RAISED TWO GROUNDS BUT THE SOLE CONTROVE RSY IS WITH RESPECT TO DISALLOWING 25% OF THE TRUCK RUNNING EXPENSES. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON PERU SING THE DETAILS FURNISHED BY THE ASSESSEE, AO NOTICED THAT FO R UNDERTAKING TRIPS, ASSESSEE PAID ADVANCE TO DRIVERS OF TH E TRUCKS WHO IN TURN INCURRED VARIOUS EXPENSES DURING THE TRANSI T FROM SOURCE TO DESTINATION. HE ALSO NOTICED THAT ASSESSEE SE PARATELY DEBITS EXPENSES ON ACCOUNT OF TRUCK REPAIRS AND MAINTEN ANCE AND OTHER RELATED EXPENSES. HE ALSO NOTICED THAT TRUCK RUN NING EXPENSES DEBITED WERE THE AMOUNT ADVANCED TO DRIVER S. THE ASSESSEE WAS THEREFORE ASKED TO EXPLAIN THE NATURE O F EXPENSES WITH NECESSARY SUPPORTING AND PROOF OF PAYMENTS. AO NO TED THAT 3 ASSESSEE DID NOT SATISFACTORILY ANSWERED THE QUESTIONS R AISED AND THAT THE REPLIES GIVEN BY THE ASSESSEE WERE GENERAL IN N ATURE. HE THEREFORE, AFTER CONSIDERING THE NATURE OF EXPENSES, THE E XPENSES BEING INCURRED IN CASH AND MAJORITY OF THE EXPENSES BEING SUPPORTED BY THIRD PARTY BILLS AND SUPPORTING DOCUMENTS CONCLUDED THAT 50% OF TRUCK RUNNING EXPENSES TO BE UNS UPPORTED AND ACCORDINGLY DISALLOWED A SUM OF RS.53,48,345/- (BEING 50 % OF TRUCK EXPENSES DEBITED BY ASSESSEE). AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO GRANTED PARTIAL RELIEF TO ASSESSEE BY HOLDING AS UNDER : 3.4 I HAVE CONSIDERED THE SUBMISS I ON MADE BY THE APPELLANT AND PERUSED MATERIAL ON R E COR D . THE ONLY I S SUE CONTESTED RELATES TO THE DISALLOWANCE OF RS . 53 , 48 , 345/- BEI NG 50 % O F TRUCK R UNN IN G BUSINESS, THE AO DURING THE ASSESSMENT PROCEEDINGS FOUN D THE APPE LL ANT TO HAV E CLAIMED EXPENSES OF RS. 1 , 06 , 96 , 69 1/ - ON ACCOUNT O F TRU C K RUNNI N G EX PENS ES WH ICH WERE NOT SUPPORTED BY TH I RD PARTY BILLS AND TH E EXPL A NATION FU RN I S HED BY THE APPELLANT AND , THEREFORE, DISALLOWED EXPENDITURE T O TH E E X T E NT O F 50 % OF THE TOTAL EXPENDITURE. THE APPELLANT FIRM IS SEEN TO BE E NGAGED IN T H E BUSINESS OF TRANSPORTATION OF GOODS AND MAINLY TRAN SPORTATION - OF OV ER D IM E NSIONAL CONSIGNMENTS (ODC) I . E . MAINLY INTO TRANSPORTATION OF PRODUCTS MANUFACTURED BY PLANT & MACHINERY MANUFACTURERS SUCH AS THERM A X G RO UP , WALCHANDNAGAR INDUSTRIES ETC. THE APPELLANT HAS CLAIMED THE EXPENSES OF RS . 1,06,96,691/ ON ACCOUNT OF TRUCK RUNNING EXPENSES WHICH ARE RELATING TO RUNNING AND MAINTENANCE OF THE 35 OWNED TRUCKS FROM WHICH THE APPELLANT HAS RE FLECTED RECEIPT OF RS. 1,88,31,745/- . THE EXPLANATION FURNISHED BY THE APPELLANT EXPLAINED THE NATURE OF EXPENDITURE INCURRED AND IN SUPPO R T THE APPELLANT HAS MAINTAINED TRIP SHEETS IN RESPECT OF THE DIFFERENT TRUCKS OWNED FOR WHICH THE PURCHASE RECEIPTS AND EX PENSES HAVE BEEN MAINTAINED. THUS THE NATURE OF BUSINESS CARR I ED OUT BY THE APPELLANT CERTAINLY REQUIRES TO BE TAKEN INTO CONSI DERATION WHILE DECIDING THE ISSUE AT HAND. THE TRUCKS OWNED BY THE APPELLANT DO TRANSPORT SUPER ODC CONSIGNMENTS FOR WHICH THE APPE LLANT HAS TO PAY AMOUNTS TO THEIR DRIVERS WHICH IS IN ADDITION T O THE SALARY AND TOUR ALLOWANCES , AS THE DR I VERS HAVE TO SPEND FOR ADDITIONAL EXPENSES FOR CARRYING THE CONSIGNMENT PROPERLY, SAF ELY AND IN TIME TO THE DESTINATION . THE NATURE OF EXPENSES ARE VAST AND R A NGES FROM REPAIR , MAINTENANCE , SEEKING PERMISSIONS TO BE OBTAINED FROM VA R IOUS AUTHORITIES SUCH AS PWD, NHAI , MSRDC ETC FOR PASSING THROUGH TRACKS AND A REA THROUGH WHICH IT PASSES. THE DRIVERS ALSO HAVE T O MEET THE POLICE, RTO , TOLL NAKA AND PASS THROUGH THEM WHICH ALSO BECOMES A NECESSITY SO AS TO R EACH T HE CONSIGNMENT IN TIME MORE SO IF THEY ARE MEANT TO BE EXPORTED . 4 3 .4.1 THE APPELLANT IN ITS SUBMISSION HAS ELABORATELY EXP LAINED THE VARIOUS CIRCUMSTANCES INCLUDING THE UNFORESEEN ONES WHICH THE DRIVERS HAVE TO OVERCOME SO AS TO REACH ITS DES TINAT I ON AT THE EARLIEST SAFELY . THE DRIVER WHO IS IN RECEIPT OF THE ADVANCES UTILIZES THE SAME TOWARDS THE EXPENSES AND FOR THE SAME THE SUPPOR T ING BILLS/VOUCHERS ARE NOT COLLECTED. THE APPELLANT THUS PREPARES TRIP SHEETS SIGNED BY THE DR I VERS, WHICH INCLUDE THE SALARY/WAGES OF THE DRIVERS AS WELL AS THE DIESEL E XPENSES APART FROM THE OTHER INCIDENTAL EXPENSES MENTIONED ABOVE ARE ALSO SUBMITTED BY THE APPELLANT . THUS THE OBSERVATION OF THE AO THAT THE DIESEL EXPENDITURE IS SEPARATELY CLAIMED BY THE APPELLANT IS FACTUALLY NOT CORRECT . AS A RESULT THE RUNNING EXPENSES INCLUDE THE SAME TO HAVE BEEN INCURRED ON DIESEL AND SALARY / W AGES OF THE DRIVERS. THE APPELLANT HAS SHOWN SUBSTANTIAL RECEI PTS FROM THE TRANSPORTATION BUSINESS THOUGH ITS OWNED TRUCKS AND OVERALL HAS SHOWN AND DISCLOSED GROSS PROFIT OF MORE THAN 30% THOUGH THE AO HAS DISA L LOWED THE EXPENSES ON ESTIMATED BASIS WHICH IS 50 % O F THE TOTAL OF SUCH EXPENSES. THE NATURE OF BUSINE S S I F CONSIDERED, THE EXP E NSE S INCURRED - CANNOT BE DOUBTED AS PRIMA FAC I E THE APPELLANT IN THE GIVEN SET OF F A CTS HAS MAINTAINED A RECORD THOUGH NOT DETA I LED ONE BUT CONTAINS DETAILS OF EACH AND EVERY EXPENSES INCURRED BY THE DRIVERS TR I P-W I SE, HOWEVER, HAS NOT KEPT RECORD OF THE VOUCHERS , BIL L S ETC. THOUGH THE MAJOR PA R T OF SUCH EXPENSES I NCUR R ED INCLUDES, EXPENSES ON SALARY TO DRIVERS AND ON DIESE L . SECTION 37(1) P R OV I DES FO R DEDUCTION OF ALL EXPENDITURES LAID OUT OR EXPENDED W H O LL Y AND EXC L US I VELY F OR T HE PURPOSE OF BUSINESS OR PROFESSION , HOWEV E R , I N OR DER TO CLAI M THAT AN EXPENDITURE FALLS U/S 37(1) THE BURDEN OF PROVING T HE NECESSA R Y FACT IN THA T CONNECTION IS ON THE APPELLANT . THE BOOKS OF ACCOUNT OF THE APPEL L A N T IS SUBJECTED TO AUDIT U/S 44AB. HOWEVER , THERE ARE CERTA I N EXPENSES I NCURRED WH I CH DO NOT APPEAR TO BE LEGA L LY ALLOWABLE OR WHICH IS PROHIBITED BY LAW SHA LL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS AND DEDUCTION I N RESPECT OF THE SAME IS NOT ALLOWABLE THOUGH FOR SOME EXPENDI T URE IN O R DER TO DETERMINE THE QUESTION OF REASONAB L ENESS OF THE EXPENDITURE THE TES T O F COMMERCIAL EXPEDIENCY HAS TO BE ACKNOWLEDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN BASED ON THE EXISTING FACT . 3.4.1 THE MAD R AS HIGH COURT IN THE CASE OF CIT VS COIMBATORE SALEM TRANSPORT (P) LTD, (1966) 61 ITR 480 (MAD) , HELD THAT PAYMENT OF TIPS WHICH ARE I NEVITABLE IN THE COURSE OF BUSINESS I F ASSESSEE HAS TO CARRY ON B U S I NESS IS DEDUCTIBLE . THE CASE LAW RELIED UPON BY THE APPELLANT , HOWEVER , DO NOT STRI C TLY APPLY TO THE FACTS OF THE CASE AS IN THAT CASE THE ISSUE OF NON-PRODUCTIO N OF THE SUPPO R TING IN THE FORM OF VOUCHERS AND BILLS DID NOT ARIS E AS IS EVIDENT FROM THE FACT IN THE PRESENT CASE. HOWEVER , THE APPELLANT HAS SPENT SUBSTANTIA L AMOUNT ON THE EXPENSES WH I CH RELATES TO THE SALA R Y/WAGES OF DRIVERS & ON DIESEL AND T H US THE D I SA L LOWANCES MADE BY THE AO APPEA R TO BE ON A H I GHER SIDE . THOUG H F OR CERTAIN EXPENSES VOUCHERS AND BILLS CANNOT BE AVAILABLE AND THE APPEL L ANT HAS TO RELY ON THE EXPENSES CERTIFIED BY THE DRIVER S . HOWEV ER, A T THE S AME TI M E T HE ONUS CERTAINLY LIES ON THE APPELLANT TO P R OVE THE CO RR ECTNESS O F T HE EXPENSES AIMED AND IS ITS BOUNDED DUTY TO SAT I SFY THE ASSESS I NG OFFICER THAT EXPENSES CLAIMED WERE INCURRED WHOLLY AND EXCLUS I VE L Y F OR THE BUSINESS O F THE APPE L LANT . THEREFORE , 5 TAKING INTO ACCOUNT THE ENTIRE FACTS AND CIRCUMSTAN CES OF THE CASE IT WILL BE FAIR AND REASONABLE IF THE DISALLOWANCE IS RESTRICTED TO 25% OF THE TOTAL EXPENSES INCURRED ON R UNNING EXPENSES BY THE APPE L LANT IT WILL MEET THE END OF JUSTICE AND, THEREFORE, OUT OF THE DISALLOWANCE OF RS. 53 , 48,345/- THE SAME IS UPHELD TO T HE EXTENT OF 50 % I.E . RS . 24 , 74,173/- AND THE REMAINING AMOUNT I S LIABLE TO BE DELETED . 3.5 IN VIEW OF THE ABOVE, GROUND OF APPEAL NO.1 RAI SED BY THE APPELLANT IS PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APP EAL BEFORE US. 5. BEFORE US, LD.A.R. REITERATED THE SUBMISSIONS MADE BEFORE AO AND LD.CIT(A) AND FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE AUDITED AND NO ADVERSE COMMENTS WERE MADE BY THE AUDITORS. SHE FURTHER SUBMITTED THAT EVEN IN EAR LIER YEARS AND IN SUBSEQUENT YEARS, NO DISALLOWANCE OF EXPENSES HAVE BEEN MADE. SHE THEREFORE SUBMITTED THAT THE ADDITION BE DELE TED. LD.D.R. ON THE OTHER HAND, SUPPORTED THE ORDER OF LD.CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPEC T TO DISALLOWANCE OF TRUCK EXPENSES. AO CONSIDERING THE FACT TH AT THE EXPENSES HAVE BEEN INCURRED IN CASH AND NOT BEING SUPP ORTED BY THIRD PARTY EXPENSES, HAD DISALLOWED 50% OF THE EXPENSES. WHEN THE MATTER WAS CARRIED BEFORE LD.CIT(A), LD.CIT(A) HAS GIVEN A FINDING THAT CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE , THE EXPENSES CANNOT BE DOUBTED BUT HOWEVER ASSESSEE HAS MAINTAINED RECORD OF EXPENSES THOUGH NOT DETAILED ONE. HE HAS ALSO GIVEN A FINDING THAT THE DISALLOWANCE MADE BY THE AO APPEARS TO B E ON A HIGHER SIDE. THE AFORESAID FINDINGS OF LD.CIT(A) HAS NOT BEEN 6 CONTROVERTED BY EITHER PARTIES. HOWEVER BEFORE US, LD.A.R . HAS SUBMITTED THAT NO SUCH DISALLOWANCE OF EXPENSES HAVE BEE N MADE BY REVENUE IN THE SCRUTINY PROCEEDINGS EITHER IN EARLIER Y EAR OR IN SUBSEQUENT YEAR. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE ENDS OF J USTICE SHALL BE MET IF THE ADDITION IS RESTRICTED TO RS.10 LACS. WE THUS D IRECT SO. IN THE RESULT, THE GROUNDS OF ASSESSEE ARE PARTLY A LLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 7 TH DAY OF JUNE, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 7 TH JUNE, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-II, PUNE. CIT-2, PUNE. #$% &&'(,* '(, / DR, ITAT, A PUNE; %+,-/ GUARD FILE. / BY ORDER, // TRUE COPY // // // . /012 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.