South Eastern Carriers Pvt. Ltd, Kolkata V. DCIT, Circle-8(2), Kolkata, Kolkata

ITA 2244/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1714 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 28-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHERJEE
• Assessee Lawyers: V N PUROHIT
• Section: 143(3)

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.2244/KOL/2016 ASSESSMENT YEAR:2009-10 SOUTH EASTERN CARRIERS PVT. LTD. 10, PHEARS LANE, 2 ND FLOOR, KOLKATA-12 [ PAN NO. AAECS 9360 E ] / V/S . DCIT, CIRCLE-8(2), AYAKAR BHAWAN, KOLKATA-700 069 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI V.N. PUROHIT, FCA /BY RESPONDENT SHRI ARINDAM BHATTACHERJEE, ADDL. CIT-DR /DATE OF HEARING 01-02-2018 /DATE OF PRONOUNCEMENT 07-02-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-11, KOLKATA DATED 30.09.2016. ASSESSMENT WAS FRAMED BY JCIT(OSD), CIRCLE-10, KOLKATA U/S 143(3) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 08.1 2.2011 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL A RE AS UNDER:- 1) THAT THE LEARNED CIT(APPEAL) HAS ERRED BOTH IN LAW AND UNDER THE CIRCUMSTANCES IN SUSTAINING THE DISALLOWANCE OF RS. 16,55,829/- MADE BY AO. 2) THAT THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND OR WITHDRAW ALL OR ANY OF THE GROUND OR GROUNDS OF APPEAL AT THE TIME OR BEFO RE THE HEARING OF THE APPEAL. ITA NO.2244/KOL/2016 A.Y 2009-10 SOUTH EASTERN CARRIERS PVT. LTD. VS. DCIT, CIR-8(2) KOL. PAGE 2 SHRI V.N.PUROHIT, LD. AUTHORIZED REPRESENTATIVE APP EARED ON BEHALF OF ASSESSEE AND SHRI AARINDAM BHATTACHERJEE, LD. DEPARTMENTAL REPRE SENTATIVE APPEARED ON BEHALF OF REVENUE. 2. IN THIS APPEAL TWO GROUNDS HAVE BEEN RAISED OUT OF WHICH GROUND NO.2 IS OF GENERAL IN NATURE AND DOES NOT REQUIRE ANY ADJUDICA TION. 3. SOLE ISSUE RAISED BY ASSESSEE IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 16,55,829/- MADE BY THE ASSESSING OFFICER. 4. BRIEFLY STATED FACTS OF THE ISSUE ARE THAT THE A SSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN BUSINESS OF TRANSPORTATION O F GOODS SERVICES. DURING THE YEAR, THE ASSESSEE HAS CLAIMED THE LORRY HIRE CHARG ES OF RS.165,58,29425/- ONLY. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T MOST OF THE EXPENSES OF LORRY HIRE CHARGES ARE PAID IN CASH WHICH WERE SUPPORTED ON THE BASIS OF SELF-MADE VOUCHERS. THEREFORE THE AO CONCLUDED THAT ASSESSEE HAS NOT PROVED THE GENUINENESS AND NEXUS OF THE EXPENDITURE WITH THE BUSINESS OPER ATION. ACCORDINGLY THE AO DISALLOWED 0.1% OF THE LORRY HIRE CHARGES AMOUNTING TO RS.16,55,829/- AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE C IT(A) AGAINST THE DISALLOWANCE MADE BY THE AO. DURING THE APPEAL PROC EEDINGS, THE ASSESSEE SUBMITTED THAT SIMILAR EXPENSES WERE CLAIMED IN THE EARLIER Y EARS I.E. AYS 2005-06 TO 2008-09 BUT NO DISALLOWANCE WAS MADE EXCEPT IN THE AY 2008- 09 FOR RS.2.50 LAKH ON AD HOC BASIS. HOWEVER, THE SAME ADDITION OF THE EXPENDITUR E MADE IN THE A.Y. 2008-09 OF RS. 2.50 LAKH APPROX. 0.67% OF THE TOTAL EXPENDITURE BY THE A.O WAS DELETED BY THE LD. CIT(A). HOWEVER, THE LD. CIT(A) DISREGARDED THE CON TENTION OF THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE BY THE AO BY OBSERVING AS UNDER:- 4.3 THE SUBMISSION MADE BY THE ASSESSEE IN THE PRES ENT PROCEEDINGS NEED TO BE CAREFULLY ANALYSED. THE FACT THAT THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION HAS SHOWN 8.95% MARGIN IN FREIGHT RECEIVED OVER THE EXP ENSES MADE FOR TRANSPORTATION WHICH IS SIGNIFICANTLY LOWER THAT THE SAME RATIO IN THE PREVIOUS YEAR AT 10.15% AND ALSO LOWER THAN THE SAME RATIO IN YEAR PROCEEDING T O THAT. THE ADDITION MADE BY THE ASSESSING OFFICER THOUGH ON ESTIMATED FIGURE IS BAS ED UPON UNCONTROVERED FACT OF THE DECLINING RATIO OF FRIEND RECEIVED A COMPARED TO FR EIGHT AND OTHER TRANSPORTATION CHARGES PAID BY THE ASSESSEE. 4.4 THE ADDITION MADE HERE, BY THE ASSESSING OFFICE R, THOUGH I ON THE BASIS OF CERTAIN ESTIMATES, IT EMANATES FROM UNCONTROVERTED FACTS AP PARENT FROM THE SUBMISSION OF THE ASSESSEE HIMSELF. THOUGH THE ASSESSING OFFICER HAS AGREED THAT PAYMENT IN CASH IS ITA NO.2244/KOL/2016 A.Y 2009-10 SOUTH EASTERN CARRIERS PVT. LTD. VS. DCIT, CIR-8(2) KOL. PAGE 3 BUSINESS EXIGENCY, THE AVERMENT ON WHICH THE ASSESS EE AS RELIED IN HIS DEFENCE. THE ASSESSEE DOES NOT HAVE LIBERTY TO SELECTIVELY IGNOR E THE OTHER AVERMENT MADE BY THE ASSESSING OFFICER THAT IN RESPECT OF SUCH EXPENDITU RE THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND THE NEXUS WITH ITS BUSINESS OPERATI ONS. IT IS SETTLED LAW THAT ASSESSEE CANNOT PROBATE AND REPROBATE AT THE SAME TIME. 4.5 THE OTHER ARGUMENT TAKEN BY THE ASSESSEE AND CI TED AT PARAGRAPH NO 4.2.2 IS GENERAL NATURE THESE ARGUMENTS IF THEY ARE APPLICAB LE TO BUSINESS OF THE ASSESSEE IN THE PRESENT YEAR HAS ALSO NOT BEEN ESTABLISHED BY T HE ASSESSEE. THE THEORETICAL ARGUMENTS MADE BY THE ASSESSEE WITHOUT SUBSTANTIATI NG THE SAME WITH FACTS OF THE WORKING OF THE PRESENT YEAR IS NOT BEING ANALYSED H ERE. 4.6 CAREFUL APPRECIATION OF THE SUBMISSIONS MADE BY THE ASSESSEE AS CITED IN PARA 4.2 ABOVE CLEARLY INDICATES THAT IN ORDER TO EXPLAIN TH E LOW OPERATING MARGIN IN THE PRESENT YEAR THE ASSESSEE HAS GIVEN HIS MAIN ARGUME NT IN PARA 4.2.3 WHEREIN THE ASSESSEE HAS ATTRIBUTED THE FALL IN THE MARGIN TO THE BAD ECONOMIC CONDITION PREVAILING IN 2009-2010. HOWEVER A BAD ECONOMIC CON DITION OF FALLING MANUFACTURING AND FALLING EXPORT SHOULD FIRST IMPACT THE TURNOVER OF THE ASSESSEE. A PERUSAL OF CHART PREPARED BY THE ASSESSEE AND CITE IN PARA 4.2.1 ABO VE CLEARLY INDICATES THAT THE TURNOVER OF THE ASSESSEE HAS RATHER GONE UP DURING THE YEAR. SIMILARLY THE BAD ECONOMIC CONDITION IF AT ALL HAD IMPACTED THE BUSIN ESS OF THE ASSESSEE IT MUST HAVE IMPACTED BOTH THE BUSINESS ACTIVITIES WHICH RESULTS INTO RECEIPTS AND THE BUSINESS ACTIVITIES WHICH RESULTS INTO EXPENDITURE, PARTICUL ARLY IN THE CASE OF THE ASSESSEE, WHERE THE PROCURED BUSINESS AS WELL AS EXPENDITURE ARE IDENTICAL I.E. TRANSPORTATION. 4.7 IN VIEW OF THE ARGUMENTS IN PARA 4.3 TO 4.6 I A M OF THE OPINION THAT THE ARGUMENT OF THE ASSESSEE ARE GENERAL, A FLIMSY, THEORETICAL AND UNSUBSTANTIATED BY THE FACTS OF THE CASE. IT IS TRITE LAW THAT REVENUE AUTHORITY CA NNOT ACT ON PURE CONJECTURES SURMISES AND NOTIONS THE CONVERSE OF THE SAME IS ALSO TRUE T HAT ONCE THE ASSESSING OFFICER HAS ACTED ON THE BASIS OF CERTAIN RATION AND FIGURES FR OM THE FINANCIAL ACCOUNT OF THE ASSESSEE IT CANNOT BE CONTROVERTED BY PURE SURMISE CONJECTURES AND THEORETICAL ARGUMENTS. ACCORDINGLY THE ARGUMENTS OF THE ASSESSE E AS QUOTED IN PARA 4.2.1 TO 4.2.3 IS REJECTED. 4.8 THE ONLY REMAINING ARGUMENT CITED IN PARAGRAPH NO 4.2.4 DOES NOT HOLD GOOD, AS IT IS TRITE LAW THAT THE PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE ON THE PROCEEDINGS OF INCOME TAX ACT. AGGRIEVED BY THIS, THE ASSESSEE HAS COME UP IN APPE AL BEFORE US. 6. THE LD. AR BEFORE US REITERATED THE SUBMISSION M ADE BEFORE THE LD. CIT(A) AND ALSO FILED A CHART SHOWING THE EXPENSES CLAIM IN TH E EARLIER YEARS AND SUBSEQUENT YEAR. THE RELEVANT EXTRACT OF THE CHART IS REPRODUCED BEL OW:- FINANCIAL YEAR ASST. YEAR TURNOVER FREIGHT LORRY HIRE % ON LORRY HIRE ON FREIGHT % ON LORRY HIRE ON TURNOVER 2004-05 2005-06 813609244 812803457 758482464 93.32 % 93.22% 2005-06 2006-07 1008018433 1001401684 928821760 92.75% 92.14% 2006-07 2007-08 1270016538 1267798251 1147615983 90.52% 90.36% 2007-08 2008-09 1653149372 1650754966 1483135576 89.85% 89.72% ITA NO.2244/KOL/2016 A.Y 2009-10 SOUTH EASTERN CARRIERS PVT. LTD. VS. DCIT, CIR-8(2) KOL. PAGE 4 2008-09 2009-10 1828070661 1825218260 1661806133 91.05% 90.90% 2009-10 2010-11 2216026001 2214456883 2032930909 91.80% 91.74% TOTAL 8788890249 8772433501 8012792825 91.34% 91.17% THE LD. AR ALSO SUBMITTED THAT THE EXPENSES CANNOT BE DISALLOWED ON ESTIMATED BASIS. HE IN SUPPORT OF ASSESSEES CLAIM RELIED ON THE ORD ER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF LOGISYS INDIA LTD. VS. DCIT IN ITA NO. 843/KOL/2006 ORDER DATED 11.1.2017. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD AND PERUSED THE SUBMISSIONS MADE B Y THE LD.AR AND LD. DR AS WELL AS THE MATERIALS AVAILABLE ON RECORDS. IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED THE EXPENSES UNDER THE HEAD LORRY HIRE CHARGES WH ICH WERE BASED ON SELF MADE VOUCHERS. THE PAYMENTS OF THESE EXPENSES WERE MADE IN CASH. THUS, THE AO DOUBTED ON THE GENUINENESS OF THE EXPENSES AND HELD THAT TH E BUSINESS NEXUSES CANNOT BE ESTABLISHED. THE VIEW OF THE AO WAS SUBSEQUENTLY CO NFIRMED BY THE LD. CIT(A). THE UNDISPUTED FACT IS THAT THE LORRY HIRE CHARGES WAS DISALLOWED BY THE AO ON ESTIMATED BASIS AND WITHOUT FINDING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. ALL THE SUPPORTING DOCUMENTS AND BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO DURING ASSESSMENT PROCEEDINGS. IN OUR VIEW T HE AD HOC DISALLOWANCE OF THE EXPENSES IS NOT PERMITTED UNDER THE PROVISIONS OF L AW. THE AO SHOULD HAVE MADE THE DISALLOWANCE AFTER MAKING SPECIFIC REFERENCE TO THE VOUCHERS/DOCUMENTS WHICH WAS NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. IN THIS CONNECTION, WE ALSO RELY ON THE ORDER OF CO-ORDINATE BENCH OF ITAT KOLKATA IN THE C ASE OF ANIMESH SADHU VS. ACIT IN ITA 11/KOL/2013 DATED 12.11.2014. THE RELEVANT EXTRACT IS REPRODUC ED BELOW :- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS DISALLOWED 20% OF THE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT NO INDEPENDENT VERIFICATIO N TO BE MADE TO FIND OUT THE AUTHENTICITY OF THE EXPENSES. LD. CIT(APPEALS) HAS REDUCED THE SAME ON THE SAME GROUND. HOWEVER, WE ARE OF THE VIEW THAT NO ESTIMAT ED DISALLOWANCE SCAN BE MADE FOR INABILITY TO MAKE INDEPENDENT VERIFICATION. IF ANY SPECIFIC EXPENDITURE IS UNVERIFIABLE OR IS UN-VOUCHED, THEN SUCH SPECIFIC EXPENDITURE IS DISALLOWABLE. HERE NO SUCH SPECIFIC IDENTIFICATION HAS BEEN DONE. IN THESE CIR CUMSTANCES, WE ARE OF THE VIEW THAT THE ESTIMATED DISALLOWANCE AS CONFIRMED BY THE LD. CIT(APPEALS) IS UNSUSTAINABLE. CONSEQUENTLY THE SAME STANDS DELETED. IN THE RESULT , GROUNDS NO. 2 & 3 OF THE ASSESSEES APPEAL STAND ALLOWED. ITA NO.2244/KOL/2016 A.Y 2009-10 SOUTH EASTERN CARRIERS PVT. LTD. VS. DCIT, CIR-8(2) KOL. PAGE 5 SIMILARLY, WE NOTE THAT THE LD. CIT(A) HAS OBSERVED THAT THE MARGIN OF THE ASSESSEE HAS BEEN REDUCED IN COMPARISON TO THE EARLIER YEARS. IT IS AGAIN UNCONTROVERTED FACT AND CANNOT BE DISPUTED BUT THE SAME CANNOT BE ATTRIBUTE D DUE TO THE LORRY HIRE CHARGES. THERE CAN BE MULTIPLE REASONS FOR THE REDUCTION OF THE MARGIN OF THE ASSESSEE SUCH AS INCREASE IN THE FUEL OR REDUCTION IN THE PRICE CHAR GED BY THE ASSESSEE FROM THE PARTIES DUE TO COMPETITION. BUT NO SUCH FACT HAS BEEN BROUG HT ON THE RECORD BY THE LD. CIT(A). THUS, IN OUR CONSIDERED VIEW THE REASONS CITED BY T HE LD. CIT(A) FOR CONFIRMING THE ADDITION IS NOT TENABLE. 7.1 IT IS ALSO IMPORTANT TO NOTE THAT THE AO ACCEPT ED IN THE ASSESSMENT ORDER THAT AS PER THE NATURE OF BUSINESS CASH EXPENSES CANNOT BE AVOIDED IN TOTALITY. THE VIEW EXPRESSED BY THE AO REFLECTS THE ACCEPTANCE FOR TH E NATURE OF EXPENSES CLAIMED BY THE ASSESSEE ON SELF MADE VOUCHERS. RESPECTFULLY, FOLLO WING THE ORDER OF THE CO-ORDINATE BENCH (SUPRA) AND CONSIDERING THE OTHER FACTORS AS DISCUSSED ABOVE, WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. HENCE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 07/02/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 07/02/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SOUTH EASTERN CARRIERSPVT. LTD., 10, PHEA RS LANE, 2 ND FL, KOL-12 2. /RESPONDENT-DCIT, CIRCLE-8(2), AYAKAR BHAWAN, KOLKATA-6 9 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY HEAD OF OFFICE/DDO ,,