Sri Narayana Moorthy Travels, CHENNAI V. ITO, CHENNAI

ITA 206/CHNY/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86302 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: M C HARI KRISHNAN
• Section: 143(3); 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 206/MDS/2011 ( / ASSESSMENT YEAR: 2007-08) SRI NARAYANA MOORTHY TRAVELS, 11/7, HOTEL IMPALA CONTINENTAL COMPLEX, KENNET LANE, EGMORE, CHENNAI-600 008. VS THE INCOME TAX OFFICER, WARD-VII(1), CHENNAI-34. PAN: AABFS9535K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. M.C.HARI KRISHNAN /RESPONDENT BY : MR. S. DAS GUPTA, JCIT /DATE OF HEARING : 5 TH FEBRUARY, 2015 /DATE OF PRONOUNCEMENT : 20 TH FEBRUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IX, CHE NNAI DATED 25.11.2010 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN ITS APPEAL:- 1. THE ORDER OF THE CIT(A) IS SO FAR AS IT I S AGAINST THE ASSESSEE, IS CONTRARY TO L AW, ERRONEOUS AND UNSUSTAINABLE ON THE FACTS OF THE CASE. 2. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE ` 2,00,000/ - OUT OF ESTIMATED ` 10,00,000/- MADE BY THE ASSESSING OFFICER UNDER THE HEAD 'BUS RUNNING CHARGES'. 2 ITA NO.206/MDS/2011 3. THE CIT(A) FAILED TO APPRECIATE THAT OUT OF TH E TOTAL CLAIMS IN THE PROFIT AND LOSS ACCOUNT ` 52, 11,411/ - , THE ASSESSING OF FICER DISALLOWED ` 10,00,000/- ON AN ESTIMATED BASIS UNDER THE HEAD 'BUS RUNNING CHARGES ' , ` 9,84,766/- AGAIN UNDER THE HEAD 'BUS R UNNING CHARGES' AND ` 17,52,799/ - U/S 40(A)(IA) UNDER THE SAME HEAD, THUS TOTALLING TO ` 37,37,565/- , I.E. 72% OF THE TOTAL CLAIMS AND HENCE THERE WAS NO JUSTIFICATION FOR CONFIRMING THE ASSESSING OFFICER'S ACTI O N. 4. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT ONCE DISALLOWANCE WAS RESORTED TO ON AN ESTIMATED BASIS, NO FURTHER DISA LLO WANCE WAS WARRANTED ESPECIALLY DISALLOWANCE OF ` 9,84,7661- UNDER THE HEAD 'BUS RUNNING CHARGES' AND HENCE CONFIRMING THE ASSESSING OFFICER'S DISALLOWANCE WAS UNCALLED FOR. 5. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE UNDER THE HEAD 'BUS RUNNING CHARGES' ` 9, 84,766/ -. 6. THE CIT(A) FURTHER FAILED TO APPRECIATE THAT, HAVING REGARD TO THE NATURE OF BUSINESS, THE ASSESSEE HAD DISCHARGED HIS ONUS OF PROVING THE EXPENDITURE, AND HENCE THE CONFIRMING THE DISALLOWANCE WAS UNJUSTIFIABLE, SINCE THERE WAS NO MATERIAL OR BASIS. 7) THE CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAS DISCHARGED HIS ONUS AND NEITHER WAS THERE ANY MATERIAL OR BASIS, FOR MAKING / CONFIRMING SUCH DISALLOWANCE. 8) THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/ S 40(A)(IA) IN AN AMOUNT OF ` 17 , 52 , 799/- . 9) THE C I T(A) FAILED TO APPRECIATE THAT THE ASSESSEE MERELY DETAINED TEMPORARY POSSESSION OF THE BUS WHICH FALLS OUTSIDE THE PURVIEW OF SECTION 194C AND HENCE CONFIRMING THE DISALLOWANCE WAS UNSUSTAINABLE BOTH IN LAW AS WELL AS ON FACTS. 10) THE CIT(A), HAVING DUE REGARD TO THE NATURE OF THE BUSINESS AND THE GROSS PROFIT RATES OF THE EARLIER YEARS, OUGHT TO HAVE ACCEPTED THE 3 ITA NO.206/MDS/2011 CONTENTION OF THE ASSESSEE AND HELD THAT NO DISALLOWANCE WAS CALLED FOR . 11) IN ANY EVENT, THE DISALLOWANCE CONFIRMED , ESPECIALLY WHERE THE TOTAL DISALLOWANCE REPRESENTS 72% OF THE TOTAL CLAIMS, IS ARBITRARY, WITHOUT ANY BASIC AND HIGHLY EXCESSIVE. 3. THOUGH SEVERAL GROUNDS WERE RAISED BY THE ASSESS EE, IT COULD BE SEEN THAT MAIN ISSUES ARE ONLY THREE I .E. I) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF ` 2,00,000/- OUT OF ESTIMATED DISALLOWANCE OF ` 10,00,000/- UNDER THE HEAD BUS RUNNING CHARGES. II) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF ` 9,84,766/- BEING BUS HIRE CHARGES; & III) COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING DISALLOWANCE UNDER SECTION 40(A)(IA) FOR AN AMOUNT OF ` 17,52,799/-. 4. THE ASSESSEE FIRM IS REPRESENTED BY ONE OF THE PARTNERS MR. M.C.HARI KRISHNAN. HE SUBMITS THAT THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN MAKING VARIOUS DIS ALLOWANCES. HE SUBMITS THAT ASSESSING OFFICER DISALLOWED EXPEND ITURE OF 4 ITA NO.206/MDS/2011 ` 37,37,565/- , OUT OF ` 52,11,411/- DEBITED TO PROFIT AND LOSS ACCOUNT, AND THIS AMOUNT IS 72% OF THE TOTAL EXPE NDITURE. THEREFORE, HE SUBMITS THAT DISALLOWANCES ARE NOT AT ALL JUSTIFIED AND HE COMPLETELY PLACES RELIANCE ON THE GROUNDS OF APPEAL. 5. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF LOWER AUTHORITIES. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT UNDER SECTION 143(3) ON 30.12.2009 DISALLOWED ` 10,00,000/- OUT OF BUS MAINTENANCE AND BUS SPARES AND CONSUMAB LES STATING THAT ASSESSEE HAS NOT PRODUCED VOUCHERS AND BILLS. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED AD-HOC DISALLOWANCE TO ` 2,00,000/- AS AGAINST ` 10,00,000/- MADE BY THE ASSESSING OFFICER ON THE GR OUND THAT BUS MAINTENANCE AND BUS SPARES AND CONSUMABLES DISALLOWED BY THE ASSESSING OFFICER IS SLIGHTLY ON HIGHER SIDE, IN VIEW OF THE FACT THAT ASSESSEES RECEIPTS ARE ON LY ` 57,05,083/-. WE DO NOT FIND ANY REASON TO SUSTAIN T HE AD- HOC DISALLOWANCE MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS). THUS, WE DELETE THE ADDITION OF ` 2,00,000/- MADE 5 ITA NO.206/MDS/2011 UNDER THE HEAD BUS MAINTENANCE, BUS SPARES AND CONSUMABLES. 7. THE SECOND ISSUE IN THE APPEAL OF THE ASSESSEE I S THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT DISALLOWED BUS HIRE CHARGES OF ` 9,84,766/- PAID BY THE ASSESSEE TO VARIOUS PERSONS STATING THAT THE PERSO NS TO WHOM THE PAYMENTS SAID TO HAVE BEEN MADE HAVE NOT CONFIRMED SUCH PAYMENTS. ON APPEAL, THE COMMISSION ER OF INCOME TAX (APPEALS) SUSTAINED THE DISALLOWANCE. T HE COMMISSIONER OF INCOME TAX (APPEALS) IN THE COURSE OF APPELLATE PROCEEDINGS CALLED FOR COMMENTS OF THE AS SESSING OFFICER. THE ASSESSING OFFICER SUBMITTED TO THE COM MISSIONER OF INCOME TAX (APPEALS) THAT SOME OF THE PARTIES HA VE NOT REPLIED TO THE NOTICES SENT BY THE ASSESSING OFFICE R AND THE ASSESSEE COULD NOT GIVE ADDRESSES IN SOME CASES AN D ONE PARTY DENIED OF HAVING ANY AMOUNT RECEIVED FOR THE ASSESSMENT YEAR 2007-08. IN THE CIRCUMSTANCES, THE COMMISSIONER OF INCOME TAX (APPEALS) SUSTAINED THE ADDITION. 6 ITA NO.206/MDS/2011 8. ON GOING THROUGH THE ORDERS OF THE LOWER AUTHORI TIES AND SUBMISSIONS OF THE ASSESSEE BEFORE THE LOWER AU THORITIES, WE FIND THAT THE TRAVEL AGENTS, WHO SUPPLIED BUSES TO THE ASSESSEE FIRM WHICH IN TURN GIVEN ON HIRE FOR TRANS PORTATION OF STUDENTS, HAVE NOT RESPONDED TO THE LETTERS ISSUED BY THE ASSESSING OFFICER. IT WAS THE SUBMISSION OF THE AS SESSEE THAT IN VIEW OF THE STRAINED BUSINESS RELATIONSHIP, THE PARTIES MIGHT NOT HAVE RESPONDED TO THE LETTERS ISSUED BY T HE ASSESSING OFFICER. HE SUBMITS THAT THE FACT THAT A SSESSEE FIRM HIRED VEHICLES FROM VARIOUS PARTIES IS NOT DIS PUTED BY THE LOWER AUTHORITIES. THE ONLY REASON FOR DISALLOWING THE AMOUNTS IS THAT THE ASSESSEE COULD NOT PRODUCE THEI R CONFIRMATIONS AND THE PARTIES HAVE NOT RESPONDED TO THE LETTERS ISSUED BY THE ASSESSING OFFICER. WE FIND TH AT IT IS NOT DISPUTED THAT ASSESSEE HIRED VEHICLES FROM VARIOUS PARTIES AND THOSE VEHICLES WERE IN TURN USED FOR TRANSPORTI NG STUDENTS OF SRI VENKETESHWARA ENGINEERING COLLEGE, SRIPERUMB UDUR. IN SUCH CIRCUMSTANCES, IT CANNOT BE RULED OUT THAT ASS ESSEE HAS MADE PAYMENTS TO THOSE PARTIES FOR HIRING BUSES. TH E ASSESSEE HAS RETURNED RECEIPTS FROM THE BUSINESS OF TRANSPORTATION OF STUDENTS AT ` 57,05,083/-. THE PARTIES MIGHT NOT HAVE RESPONDED TO THE LETTERS ISSUED BY THE ASS ESSING 7 ITA NO.206/MDS/2011 OFFICER IN VIEW OF STRAINED RELATIONSHIP WITH THE A SSESSEE. ON THIS GROUND ALONE, THE PAYMENTS MADE TO THOSE PARTI ES FOR HIRING BUSES BY THE ASSESSEE CANNOT BE DOUBTED. IN THESE CIRCUMSTANCES, WE DELETE THE DISALLOWANCE OF ` 9,84,766/- AND ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THI S ISSUE. 9. THE LAST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE DISALLOWANCE UNDER SECTION 40()A)(IA) OF THE A CT IN RESPECT OF PAYMENTS OF ` 17,52,799/-. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT DISALLOWED ` 17,52,799/- STATING THAT ASSESSEE HAS NOT DEDUCTED TDS FOR THE CONTRACT AMOUNTS PAID. THE DISALLOWANCE WAS SUSTAINED BY THE COMMISSIONER OF INCOME TAX (APPEALS) STATING THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER IS FOUND TO BE IN ORDER. 10. ON HEARING BOTH THE PARTIES, WE FIND THAT THIS BENCH IS CONSISTENTLY HOLDING THAT PROVISIONS OF SECTION 40( A)(IA) HAVE NO APPLICATION, IN CASE PAYMENTS WERE ALREADY MADE BEFORE THE END OF ACCOUNTING YEAR. THE CO-ORDINATE BENCH O F THIS 8 ITA NO.206/MDS/2011 TRIBUNAL IN THE CASE OF ITO VS. THEEKATHIR PRESS IN ITA NO.2076/MDS/2012 DATED 18.09.2013 HELD AS UNDER:- 2. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF CERTAIN EXPENDITURE MADE BY THE ASSESSEE UNDER SECTION 40(A)(IA) ON THE GROUND THAT TAX HAS NOT BEEN DEDUCTED AT SOURCE AND PAID TO THE CREDIT OF GOVERNMENT OF INDIA. BUT, THE COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE DISALLOWANCE STATING THAT THE AMOUNT PAYABLE ALONE WOULD ATTRACT THE DISALLOWANCE UNDE R SECTION 40(A)(IA) AND THE AMOUNT ALREADY PAID WOULD NOT ATTRACT THE ABOVE PROVISION. THE REVENUE IS AGGRIEV ED AND, THEREFORE, THIS SECOND APPEAL BEFORE US. 3. THE INCOME-TAX APPELLATE TRIBUNAL, VISAKHAPAT NAM- SPECIAL BENCH, HAD HELD IN THE CASE OF MERILYN SHIP PING AND TRANSPORTS VS. ADDL. CIT, 16 ITR (TRIB) 1, THAT THE PROVISIONS OF SECTION 40(A)(IA) DO APPLY ONLY TO TH OSE AMOUNTS REMAINED PAYABLE BY THE END OF THE PREVIOUS YEAR AND THE SAID PROVISIONS DO NOT APPLY TO THE AMOUNTS ALREADY PAID BY THE ASSESSEE BEFORE THE CLOSE OF THE RELEVA NT PREVIOUS YEAR. IN THAT WAY, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN THE PRESENT CASE IS CONDUCIVE TO T HE DECISION OF THE SPECIAL BENCH. THE VERY SAME VIEW HAS BEEN U PHELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. M/S. VECTORSHIPPING SERVICES(P) LTD. THE HONBLE ALLAHABAD HIGH COURT, THROUGH THEIR JUDGMENT DATED 9-7- 2013 IN ITA NO.122 OF 2013, HAS HELD THAT THE DECIS ION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING AND TRANSPORTS VS. ADDL. CIT IS GOOD LAW. IN THAT WAY, THE PRESENT APPEAL FILED BY THE REVENUE IS LIA BLE TO BE DISMISSED. 4. BUT, AT THE SAME TIME, THE LEARNED JOINT C OMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE HAS RELIED ON THREE OTHER JUDGMENTS RENDERED BY THE HONBLE CALCUTTA HI GH COURT AND GUJARAT HIGH COURT, IN WHICH THEIR LORDSH IPS HAVE HELD THAT THE LAW STATED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPOR TS VS. ADDL.CIT WAS NOT ACCEPTABLE. THE HONBLE CALCUTTA H IGH COURT, THROUGH THEIR JUDGMENT DELIVERED ON 3 RD APRIL, 2013 IN ITA NO.20 OF 2013 IN THE CASE OF CIT VS. CRESCENT E XPORT SYNDICATES, HAS HELD THAT THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRAN SPORTS 9 ITA NO.206/MDS/2011 VS. ADDL.CIT IS NOT ACCEPTABLE. THE SAME VIEW HAS A GAIN BEEN REPEATED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. MD. JAKIR HOSSAIN MONDAL, THROUGH T HEIR JUDGMENT DELIVERED ON 4 TH APRIL, 2013 IN ITA NO.31 OF 2013. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V S. SIKANDARKHAN N.TUNVAR, 33 TAXMAN.COM.133, HAS ALSO HELD THAT THE DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT DISTINGUISH BETWEEN AMOUNTS PAID AND PAYABLE. I N VIEW OF THE ABOVE JUDGMENTS OF TWO HIGH COURTS, THE LEAR NED OFFICER CONTENDED THAT THE APPEAL OF THE REVENUE NE EDS TO BE ALLOWED. 5. WE FIND THAT THE JUDGMENT OF THE HONBLE ALLA HABAD HIGH COURT IS IN FAVOUR OF THE ASSESSEE. AT THE SAM E TIME, WE FIND THAT THE ORDERS OF THE CALCUTTA HIGH COURT AND THE GUJARAT HIGH COURT ARE AGAINST THE ASSESSEE. IN SUC H CIRCUMSTANCES, THE RULE OF JUDICIAL PRECEDENCE DEMA NDS THAT THE VIEW FAVOURABLE TO THE ASSESSEE MUST BE ADOPTED , AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LTD., 88 ITR 192. FOLLOWING THE ABOVE FUNDAMENTAL RULE DECLARED BY THE HONBLE SUPREME CO URT, WE HAVE TO FOLLOW THE JUDGMENT OF THE HONBLE ALLAH ABAD HIGH COURT, WHICH IS IN FAVOUR OF THE ASSESSEE. ACC ORDINGLY, WE HOLD THAT THE DISALLOWANCE UNDER SECTION 40(A)(I A) APPLIES ONLY TO THOSE AMOUNTS PAYABLE AND NOT TO THOSE AMOUNTS PAID. ACCORDINGLY, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) IN THE PRESENT CASE. THE APPEAL FILED BY THE REVENUE IS LIABLE TO BE DIS MISSED. 11. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HO LD THAT PROVISIONS OF SECTION 40(A)(IA) HAVE NO APPLICATION IN CASE THE PAYMENTS WERE MADE WITHIN THE ACCOUNTING YEAR. SINCE THE ASSESSEE HAS MADE THE PAYMENTS WITHIN THE ACCOU NTING YEAR, THE PROVISIONS OF SECTION 40(A)(IA) HAVE NO A PPLICATION. 10 ITA NO.206/MDS/2011 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DAY OF FEBRUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 20 TH FEBRUARY, 2015 SOMU 12 32 / COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .