Smt. Vandana Arun Sarawgi, Pune V. Joint Commissioner of Income-tax,

ITA 214/PUN/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9166 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-04-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 214/PUN/2015 / ASSESSMENT YEAR : 2009-10 SMT. VANDANA ARUN SARAWGI, VINAYAN TUBES, 32/505, OFFICE NO.309B, CITY TOWER, 17 BOAT CLUB ROAD, PUNE 411001 PAN : ADXPS3272L . / APPELLANT V/S JT. COMMISSIONER OF INCOME - TAX, RANGE-5, PUNE . / RESPONDENT ASSESSEE BY : SHRI M.K. KULKARNI REVENUE BY : SHRI MUKESH JHA, JCIT / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-4, PUNE DATED 28-01-2015 FOR THE ASSESSMENT YEAR 2009-10. 2. ASSESSEE RAISED 6 GROUNDS IN THE APPEAL. REFERR ING TO GROUND NOS. 1,2, 4 , 5 & 6, LR. COUNSEL FOR THE ASSESSEE MENTIONED T HAT THEY ARE NOT EITHER PRESSED (GROUND NOS. 1,2 AND 4) AND SHOULD BE TREAT ED AS GENERAL /CONSEQUENTIAL (GROUND NOS. 5 AND 6). ACCORDINGLY, THEY ARE DISMISSED AS SUCH. / DATE OF HEARING :25.07.2017 / DATE OF PRONOUNCEMENT: 26.07.2017 2 ITA NO.214/PUN/2015 3. REFERRING TO GROUND NO.3, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE SAID GROUND DEALS WITH THE CORE ISSUE WHICH REQ UIRES ADJUDICATION. THEREFORE, THE SAME IS EXTRACTED AS UNDER : 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE MA DE BY THE A.O. OF RS.9,71,440/- OUT OF FREIGHT OUTWARDS OUT OF RS.53, 47,533/- MADE BY THE A.O. WHO RESTRICTED THE AVERAGE OF 0.9% SIMPLY ON ILLUSO RY BASIS IGNORING THE REALITIES OF THE BUSINESS. THE DISALLOWANCE IS NOT SUSTAINABLE AND IT BE DELETED. 4. NARRATING THE BACKGROUND FACTS OF THE CASE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A DEALER IN IRON, ST EEL PIPES AND PIPE FITTINGS. ASSESSEE FILED THE RETURN OF INCOME ON 29-10-2009 D ECLARING INCOME OF RS.2,46,87,280/-. IN THE SCRUTINY ASSESSMENT U/S.1 43(3) OF THE ACT, THE ASSESSMENT WAS COMPLETED DETERMINING THE ASSESSED I NCOME AT RS.2,85,10,862/-. SO FAR AS THE ADDITION ON ACCOUN T OF FREIGHT OUTWARD EXPENDITURE IS CONCERNED, IN THE ASSESSMENT, AO STU DIED THIS ACCOUNT THOROUGHLY AND DRAWN SOME CORRELATION OF THE MONTH- WISE EXPENDITURE TO THE MONTH-WISE SALES. AO NOTICED THAT THERE IS NO CORR ELATION SO FAR AS THE EXPENDITURE ON THIS FREIGHT ACCOUNT TO SALES ACCOUN T FOR THE MONTHS OF OCTOBER AND JANUARY TO MARCH (4 MONTHS). HE NOTICED THE AV ERAGE RATIO OF FREIGHT OUTWARDS ACCOUNT TO SALES ACCOUNT WORKS OUT TO 0.90 %; WHEREAS IN THE SAID 4 MONTHS THE RATIOS VARIED FROM 1.17%, 1.38%, 1.21% A ND 1.88% RESPECTIVELY. EVENTUALLY, THE AO RESTRICTED THE CLAIM FOR THESE 4 MONTHS TO THE AVERAGE RATIO OF 0.90% (SUPRA). IN TERMS OF RUPEES, THE EQUIVALE NT OF WORKS OUT TO RS.9,71,440/-. THE SAID ADDITION WAS CONFIRMED BY THE CIT(A). 5. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE DEMO NSTRATED THAT THE ANALYSIS MADE BY THE AO MAY BE CORRECT STATISTICALL Y, BUT THAT IS NOT THE WAY THE ASSESSMENTS CAN BE MADE FOR MAKING THE ADDITIONS IN THE ASSESSMENTS. THE FACT OF NOT PROCURING ANY INCRIMINATING MATERIAL IN SUPPORT OF ANY INFLATION OF EXPENDITURE ON ACCOUNT OF FREIGHT OUTWARD IS UNDISP UTED. WHEN THE 3 ITA NO.214/PUN/2015 EXPENDITURE IS GENUINE, THE DISALLOWANCE MADE ON AD HOC BASIS AND ON SURMISES IS NOT SUSTAINABLE IN LAW. HOWEVER, LD. COUNSEL ME NTIONED THAT THE ADDITION SHOULD BE ENTIRELY DELETED. ALTERNATIVELY, LD. AUT HORISED REPRESENTATIVE SUBMITTED THAT THE TRIBUNAL MAY TAKE A DECISION, IF IT DEEMS FIT TO CONFIRM PART OF THE ADDITION. 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE HEAVILY RELIED ON THE ORDERS OF THE AO AND THE CIT( A). LD. DEPARTMENTAL REPRESENTATIVE ARGUED STATING THAT THE ONUS IS ON T HE ASSESSEE TO EXPLAIN THE DISPROPORTIONATE CLAIM OF EXPENSES AND FAILED TO DI SCHARGE THE SAME. 7. WE HEARD BOTH THE PARTIES ON THE SAID LIMITED IS SUE RELATING TO THE DISALLOWANCE MADE ON ACCOUNT OF FREIGHT OUTWARD. T HERE IS NO DISPUTE ON THE FACT THAT ASSESSEE MADE A CLAIM OF RS.53,47,533/- I N THE PROFIT AND LOSS ACCOUNT. AO AND THE CIT(A) CONFIRMED THE ADDITION TO RS.9,71,440/- MADE BY THE AO. IT IS ALSO AN UNDISPUTED FACT THAT THE AO HAS NOT BROUGHT ANY INCRIMINATING EVIDENCE QUESTIONING THE GENUINE NATU RE OF THE EXPENDITURE OR INFLATION OF THE EXPENDITURE, IF ANY, ON THIS ACCOU NT. SO FAR AS THE DISCREPANCIES IN THE RATIO, I.E. THE FREIGHT OUTWARDS EXPENDITURE TO SALES DURING THE SAID 4 MONTHS, I.E. OCTOBER AND JANUARY TO MARCH, THE EXPL ANATION OF THE ASSESSEE IS THAT MORE SALES ARE MADE OUTSIDE THE STATE BOUNDARI ES WHICH ACCOUNTS FOR HIGHER CLAIM OF EXPENDITURE IN THOSE MONTHS. ON HE ARING THE PARTIES AND CONSIDERING THE ABOVE ARGUMENTS WE ARE OF THE VIEW THAT, IN PRINCIPLE, IT IS A CASE OF ADHOC ADDITION BASED ON THE SURMISES AND UN SUPPORTED BY ANY TANGIBLE EVIDENCE. THEREFORE, WE ARE OF THE OPINION THAT TH E ADDITION MADE BY THE AO IS NOT SUSTAINABLE ON THAT BASIS. WE ARE ALSO OF THE VIEW THAT THE CONCLUSION OF THE AO THAT THE EXPENDITURE OVER AND ABOVE 0.90% CO NSTITUTES EXCESSIVE, IS NOT SUSTAINABLE. HOWEVER, IT IS A FACT THAT THERE IS F AILURE ON PART OF THE ASSESSEE TO EXPLAIN THE INCREASE OF FREIGHT OUTWARDS EXPENDITUR E IN THE SAID 4 MONTHS. 4 ITA NO.214/PUN/2015 CONSIDERING THE INCREASE IN THE FREIGHT OUTWARD EXP ENDITURE IN THE SAID 4 MONTHS IS MORE THAN 200%, WE FIND THE EXPLANATION G IVEN BY THE LD. COUNSEL FOR THE ASSESSEE IS NOT COMMENSURATE WITH THE SAID STEEP HIKE IN THE EXPENDITURE ACCOUNT. AS A PART OF DETERRENCE, WE A RE OF THE VIEW THAT THE ALTERNATE ARGUMENT PUT FORWARD BY THE LD. COUNSEL F OR THE ASSESSEE SHOULD BE CONSIDERED FAVOURABLY. AS A PART OF THIS, WE PROPO SE TO CONFIRM THE ROUND- SUM FIGURE OF RS.2 LAKHS AS INDICATED BY THE LD. COUNSE L FOR THE ASSESSEE IN THE OPEN COURT. ACCORDINGLY, AO IS DIRECTED TO RESTRIC T THE DISALLOWANCE TO RS.2 LAKHS. THEREFORE, GROUND NO.3 RAISED BY THE ASSESS EE IS PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JULY, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 26 TH JULY, 2017. / COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - 4 , PUNE 4. CIT - 4 , PUNE 5. % , , A BENCH PUNE; 6. / GUARD FILE.