Thirumala Enterprises, Erode V. ITO, Salem

ITA 2214/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7188 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 09-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: S SRIDHAR
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , ' $ % , & ' BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2214/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) M/S.THIRUMALA ENTERPRISES 320, 7 TH CROSS BRINDAVAN ROAD, SALEM-636 004. VS INCOME TAX OFFICER, WARD-I(4), SALEM. PAN: AAEFT1999B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR .N.MADHAVAN, JCIT / DATE OF HEARING : 9 TH DECEMBER, 2014 /DATE OF PRONOUNCEMENT : DECEMBER, 2014 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM DATED 30.06.2014 FOR THE ASSESSMENT YEAR 2007-08. THE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTA INING THE DISALLOWANCE OF EXPENDITURE OF ` 9,34,334/- INCURRED TOWARDS DIESEL, PETROL AND OIL. 2. BRIEF FACTS ARE THAT ASSESSEE IS A FIRM AND ENGA GED IN EXCAVATION OF ORE FROM THE MINES. DURING THE ASSESS MENT 2 ITA NO.2214/MDS/2014 YEAR ASSESSEE WAS GIVEN CONTRACT TO EXCAVATE ORE FR OM THE MINES OF MADRAS ALUMINIUM LTD. AND OTHERS. THE ASS ESSEE FIRM FILED RETURN DECLARING INCOME OF ` 70,270/-. ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED ON 14.12.2009 DETERMINING THE INCOME AT ` 10,04,604/-. WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFI CER DISALLOWED ` 9,34,334/- REPRESENTING EXPENSES OF ` 7,54,334/- INCURRED BY THE ASSESSEE ON DIESEL AND P ETROL ON THE VEHICLE OF ONE OF THE PARTNERS MR. V.SARAVANAN USED BY THE ASSESSEE IN ITS BUSINESS. SIMILARLY, ` 1,80,000/- BEING EXPENDITURE ON DIESEL, PETROL AND OIL WAS DISALLOWE D ON THE GROUND THAT VEHICLES BELONGING TO SISTER CONCERNS W ERE USED BY THE ASSESSEE. ASSESSING OFFICER WAS OF THE VIEW THAT THE EXPENDITURE IN RESPECT OF DIESEL, PETROL & OIL TO THE EXTENT OF ` 9,34,334/- WAS BOOKED BY THE ASSESSEE IN ITS BUSINESS AS WELL AS IN THE BUSINESSES OF PARTNERS I N THEIR PROPRIETARY CONCERNS AND THEREFORE, ASSESSING OFFI CER PROPOSED TO DISALLOW THE SAID EXPENSES. WITH REGARD TO EXPENDITURE IN RESPECT OF DIESEL AND PETROL OF ` 7,34,334/- ASSESSEE SUBMITTED THAT ONE OF THE PARTNERS OF THE ASSESSEE FIRM MR. V.SARAVANAN WAS THE PROPRIETOR O F M/S. 3 ITA NO.2214/MDS/2014 VSS ENGINEERING & CONSTRUCTION COMPANY FUNCTIONING AT SALEM AND IS IN THE BUSINESS OF EXCAVATION OF ORE F ROM MINES. ASSESSEE SUBMITTED THAT THIS UNIT WAS SHIFTE D LATER TO BANGALORE BY MR. V.SARAVANAN AND THERE IS NO BUSINE SS ACTIVITY IN SALEM AFTER 2005. SUBSEQUENTLY, PARTNER SHIP FIRM WAS STARTED IN THE NAME OF M/S. THIRUMALA ENTERPRIS ES ON 1.9.2005 BY MR. V.SARAVANAN AND MR. SHAKTI KUMAR. I T WAS THE SUBMISSION THAT IN THE LOCAL MARKET, MR. V.SAR AVANAN AND HIS PROPRIETARY BUSINESS M/S. VSS ENGINEERING & CONSTRUCTION COMPANY IS KNOWN TO ITS CUSTOMERS AS VSS. THEREFORE, THE PETROL BUNKS ISSUED BILLS TO THE ASS ESSEE FIRM IN THE NAME OF VSS FOR EASY IDENTIFICATION. THEREFO RE, ASSESSEE OBJECTED FOR DISALLOWANCE OF DIESEL, PETRO L & OIL EXPENSES PROPOSED BY THE ASSESSING OFFICER. IN RES PECT OF ADDITION OF ` 1,80,000/- ASSESSEE SUBMITTED THAT OUT OF THREE VEHICLES ONE VEHICLE BELONGS TO MR. V.SAKTHI KUMAR, ONE OF THE PARTNERS IN ITS PROPRIETARY BUSINESS CON CERN NAMELY M/S. TULIP ENTERPRISES AND THE OTHER TWO VE HICLES BELONG TO OTHER PARTNER MR. M.SARAVANAN. THE ASSESS EE SUBMITTED THAT WHENEVER VEHICLES ARE USED FOR SITE WORK OF THIRUMALA ENTERPRISES PETROL & DIESEL ARE FILLED IN PETROL 4 ITA NO.2214/MDS/2014 BUNKS SITUATED IN SALEM ONLY BECAUSE SITE WORK OF THIRUMALA ENTERPRISES IS ONLY AT YERCAUD AND KOLLI HILLS. THE ASSESSING OFFICER REJECTING THE SUBMISSIONS OF THE ASSESSEE MADE DISALLOWANCE OF EXPENDITURE OF ` 9,34,334/- ON OIL, PETROL & DIESEL. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED DISALLOWANCE OBSERVING THAT ASSESSING OFFICER HAS M ADE CAREFUL ANALYSIS OF BILLS AND VOUCHERS BEFORE MAKI NG A PROPOSAL FOR DISALLOWANCE, THEREFORE HE AGREED WITH THE VIEW OF THE ASSESSING OFFICER. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT EXPENDITUR E INCURRED BY THE ASSESSEE FIRM IN RESPECT OF DIESEL, PETROL & OIL IS DISALLOWED BY THE ASSESSING OFFICER FOR THE REA SON THAT BILLS WERE IN THE NAME OF VSS REPRESENTING M/S. VSS ENGINEERING & CONSTRUCTION COMPANY WHICH IS A PROPR IETARY CONCERN OF ONE OF THE PARTNERS AND THEREFORE THIS E XPENDITURE WAS BOOKED BY THE ASSESSEE DISBELIEVING THE VERSION OF THE ASSESSEE THAT BILLS ISSUED IN THE NAME OF VSS WERE IN FACT BELONG TO ASSESSEE M/S. THIRUMALA ENTERPRISES AND T HE DEALERS OF PETROL BUNK FOR EASY IDENTIFICATION ISSU ED BILLS IN THE NAME OF VSS WHICH IS A PROPRIETARY CONCERN OF ONE O F THE 5 ITA NO.2214/MDS/2014 PARTNERS. IN RESPECT OF DISALLOWANCE OF ` 1,80,000/- MADE BY THE ASSESSING OFFICER, COUNSEL SUBMITS THAT WHEN EVER VEHICLES BELONG TO PARTNERS ARE IDLE THEY WERE USE D BY THE ASSESSEE AND THE PETROL EXPENDITURE INCURRED IN SUC H SITUATION ON SUCH USE WERE DEBITED IN THE BOOKS OF THE ASSESSEE. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASS ESSEE DID NOT DEBIT ANY EXPENDITURE WHICH IS RELATING TO THE PROPRIETARY CONCERNS OF THE PARTNERS. COUNSEL SUBMI TS THAT EXPENDITURE DEBITED BY THE PROPRIETARY CONCERNS OF THE PARTNERS AND THE ASSESSEE FIRM ARE NOT THE SAME EXPENDITURE BUT DIFFERENT. HE SUBMITS THAT WHENEVER EXPENDITURE INCURRED BY THE ASSESSEE IN RESPECT OF ITS WORK THAT ALONE WAS DEBITED IN THE BOOKS OF THE ASSESSEE FIRM. THEREFORE, HE SUBMITS THAT DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDER OF THE LOWER AUTHORITIES IN DISALLOWING EXPEN SES IN RESPECT OF DIESEL, PETROL & OIL BY THE LOWER AUTHO RITIES. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER DISALLOWED EXPENSES ON DIESEL , PETROL 6 ITA NO.2214/MDS/2014 & OIL TO THE EXTENT OF ` 9,34,334/- FOR TWO REASONS. THE EXPENDITURE OF ` 7,54,334/- WAS DISALLOWED FOR THE REASON THAT ASSESSEE BOOKED THE EXPENDITURE BASED ON THE B ILLS ISSUED IN THE NAME OF VSS WHICH IS A PROPRIETARY C ONCERN OF ONE OF THE PARTNERS WHICH IS ALSO ENGAGED INTO EXCA VATION OF IRON ORE DISBELIEVING THE SUBMISSION THAT FOR BETTE R IDENTIFICATION THE BILLS WERE ISSUED IN THE NAME OF ERSTWHILE PROPRIETARY CONCERN (VSS) OF THE ONE OF THE PARTNER S. THE EXPENDITURE OF ` 1,80,000/- WAS DISALLOWED FOR THE REASON THAT ASSESSEE USED VEHICLES BELONGING TO THE PROPRIETARY CONCERN OF THE PARTNERS AND INCURRED DIESEL, PETROL & OIL EXPENSES FOR USING THOSE VEHICLES IN ASSESSEES BUSINESS. THE SU BMISSION OF THE COUNSEL FOR THE ASSESSEE WAS THAT BOTH EXPEN SES DEBITED IN THE BOOKS OF THE ASSESSEE AS WELL AS BOO KS OF PROPRIETARY CONCERNS OF THE PARTNERS ARE NOT THE SA ME EXPENDITURE AND NONE OF THE EXPENDITURE BELONGING T O THE PROPRIETARY CONCERNS IS DEBITED IN THE BOOKS OF THE ASSESSEE. ON GOING THROUGH THE ORDERS OF AUTHORITIES BELOW, W E FIND THAT ASSESSEE COULD NOT PRODUCE SUFFICIENT EVIDENCE FOR THE SUBMISSIONS MADE BY IT AND AT THE SAME TIME, WE ALS O FIND LITTLE FORCE IN THE SUBMISSION OF THE ASSESSEE THAT PETROL BUNK 7 ITA NO.2214/MDS/2014 DEALERS MIGHT HAVE ISSUED BILLS IN THE NAME OF VSS FOR EASY IDENTIFICATION OF THE ONE OF THE PARTNERS MR. M.SAR AVANAN WHO IS ALSO A PARTNER OF THE ASSESSEE FIRM. THERE IS N O PROHIBITION IN LAW FOR USING VEHICLES OF PROPRIETARY CONCERNS OF THE PARTNERS IN THE PARTNERSHIP FIRM. THE ASSESSEE HAS NOT LED SUFFICIENT EVIDENCE TO SHOW THAT EXPENDITURE INCURR ED IN RESPECT OF DIESEL, PETROL & OIL FOR THE VEHICLES O F SISTER CONCERNS HAVE NOT BEEN DEBITED IN THE BOOKS OF THE ASSESSEE. TAKING THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE INTO CONSIDERATION TO MEET THE ENDS OF JUSTICE, WE RESTRICT THE DISALLOWANCE TO FIFTY PERCENT OF OIL, PETROL & DIESEL EXPENDITURE OF ` 9,34,334/-. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE SAID DISALLOWANCE ACCORDI NGLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 1 9 TH DAY OF DECEMBER, 2014 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED, 19 TH DECEMBER, 2014 SOMU 8 ITA NO.2214/MDS/2014 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .