M/s. Ess Ess Engineering, Surat V. The Dy.CIT.,Circle-3, Surat

ITA 2761/AHD/2011

• Counselvise Citation: 276120514 RSA 2011
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Third party statement

Judgement Text

-1- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI D K TYAGI - JM AND SHRI A MOHAN ALANKAMONY - AM ITA NO.2761/AHD/2011 (ASSESSMENT YEAR:-2008-09) M/S ESS ESS ENGINEERING 90, SEEMANAGAR SOCIETY-II PALANPUR PATIA, RANDER ROAD, SURA V/S THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3, SURAT PAN: AABFE 6746 Q [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI HARDIK VORA, AR REVENUE BY:- SHRI VINOD TANWANI, SR. DR DATE OF HEARING:- 09-01-2012 DATE OF PRONOUNCEMENT:- 25-01-2012 O R D E R PER D K TYAGI (JM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 23-08-2011 PASSED BY THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS)-II, SURAT FOR ASSESSMENT YEAR 2008-09. THE FOLLOWING TWO EFFECTIVE GROUNDS H AVE BEEN RAISED BY THE ASSESSEE IN THIS APPEAL:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN PAR TLY CONFIRMING THE ACTION OF THE AO BY SUSTAINING DISAL LOWANCE OF RS.18,19,678/- AS AGAINST RS.20,59,480/- MADE BY AO ON ACCOUNT OF TRANSPORTATION EXPENSES. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CON FIRMING THE 2 ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.14,31 6/- ON ACCOUNT OF TELEPHONE EXPENSES. 2 AS REGARDS GROUND NO.1, THE FACTS OF THE CASE ARE THAT E- RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY THE ASSESSEE ON 30-09-2008 DECLARING TOTAL INCOME A T RS.41,21,340/-. ON PERUSAL OF P&L ACCOUNT, THE AO F OUND THAT THE ASSESSEE HAD DEBITED TRANSPORTATION EXPENSES OF RS.20,60,250/-, AND ON VERIFICATION OF DETAILS FURN ISHED BY THE ASSESSEE, THE AO NOTED THAT THE TRANSPORTATION CHAR GES WERE PAID BY THE ASSESSEE TO THE FOLLOWING PERSONS:- 1. M/S S T DESAI TRAVELLERS 2,05,600/- 2. M/S SHRI GANESH TRAVELLERS 11,72,630/- 3. M/S YASH TRAVELLERS 4,41,448/- 4. M/S SHREE RAM TRANSPORTATION 2,39,802/- -------------- TOTAL 20,59,480/- LIKE IN EARLIER ASSESSMENT YEAR, THE INSPECTOR WAS DEPUTED BY THE ASSESSING OFFICER TO MAKE ENQUIRIES ABOUT THE GENUI NENESS AND SERVICES RENDERED BY THE ABOVE PARTIES TO THE ASSES SEE. THE RANGE INSPECTOR SHRI AJIT GOKHE, VIDE REPORT DATED 6-12-2 010 STATED THAT THE PARTIES NAMELY, M/S. S.T. DESAI TRAVELLERS , M/S. SHRI GANESH TRAVELLERS AND M/S. YASH TRAVELLERS WERE NOT TRACEABLE AT THE GIVEN ADDRESSES. IN VIEW OF THESE, THE AO, VIDE ORDER SHEET NOTING DATED 13-12-2010 REQUIRED THE ASSESSEE TO SU BMIT AS TO WHY TRANSPORTATION EXPENSES PAID TO ABOVE PARTIES S HOULD NOT BE DISALLOWED. THE ASSESSEE OBJECTED TO THE ABOVE DISA LLOWANCE ON THE GROUND THAT IT IS ENGAGED IN THE SUPPLY OF MANP OWER, BOTH TECHNICAL AND NON TECHNICAL TO VARIOUS COMPANIES AT THEIR SITES 3 AND USUALLY SUCH LARGE COMPANIES DO NOT PROVIDE TRA NSPORTATION FACILITIES THEMSELVES, BUT PAY EXTRA AMOUNT OVER AN D ABOVE THE SERVICE CHARGES FOR TRANSPORTATION OF EMPLOYEES, WH ICH IS SELF EXPLANATORY FROM THE COPY OF WORK ORDER AND BILLS, WHICH IT SUBMITTED BEFORE THE ASSESSING OFFICER AND ALSO STA TED THAT IT HAS SUBMITTED DETAILS OF TRANSPORTERS LIKE CONTRA CONFI RMATION ALONG WITH COPY OF ITR OF THE ABOVE SAID PERSONS, COPY OF BILLS, TDS CERTIFICATE AND AFFIDAVIT OF M/S. YASH TRAVELS AND M/S. GANESH TRAVELS, AND IT WAS READY TO PRODUCE ALL THE TRANSP ORTERS AND PROVE GENUINENESS OF TRANSACTION. THE ASSESSING OFF ICER DID NOT ACCEPT THE ARGUMENT OF THE ASSESSEE FOR THE REASON THAT TRANSPORTERS, AS STATED ABOVE, ARE NOT TRACEABLE AT THE GIVEN ADDRESSES, THEREFORE, IDENTITY OF THESE TRANSPORTER S AND SERVICES RENDERED BY THEM ARE NOT KNOWN, AND FACTS AND CIRCU MSTANCES OF THE CASE AND ARGUMENT RELIED UPON BY THE ASSESSEE W ERE THE SAME, AS IN EARLIER ASSESSMENT YEAR, WHEREIN THE ID. CIT( A) HAS ALREADY CONFIRMED THE ADDITIONS MADE ON ACCOUNT OF PAYMENT TO ABOVE PARTIES AND RELYING ON THE FINDINGS GIVEN IN THE AS SESSMENT ORDER OF A.Y. 2007-08 AND EARLIER YEAR AND ALSO THE ORDER OF THE CIT(A), THE AMOUNT OF RS.20,59,480/- WAS DISALLOWED BY HIM AS NON-BUSINESS EXPENDITURE. 3 AGGRIEVED BY THIS ORDER, THE ASSESSEE FILED AN AP PEAL BEFORE THE FIRST APPELLATE AUTHORITY. BEFORE THE LEARNED C IT(A), THE ASSESSEE SUBMITTED AS UNDER:- DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS CLAIMED TRANSPORTATION EXPENSES OF RS.20,60,250/-, ASSESSIN G OFFICER NOTICED THAT RS.2,05,600/- PAID TO S. T. DESAI TRAVEL CON TRACTOR, RS.11,72,630/- TO SHRI GANESH TRAVELS, RS.4/41/44 8/- TO M/S. YASH TRAVELS AND RS.2,39,802/- TO M/S. SHREE RAM TRANSPO RTATION. 4 ASSESSING OFFICER ASKED TO SHOW CAUSE AS TO WHY TRA NSPORTATION EXPENSES TO THE TUNE OF RS.20,59,480/- SHOULD NOT B E DISALLOWED. IN RESPONSE ASSESSEE HAS SUBMIT CONTRA ACCOUNT CONFIRM ATION ALONG WITH AFFIDAVIT FROM THE TRANSPORTER AND DETAILS OF INCOM E IN THE SUPPORT OF TRANSPORTATION INCOME RECEIVED FROM CUSTOMER FOR TR ANSPORTATION OF EMPLOYEES AGAINST WHICH TRANSPORTATION EXPENSES CLA IMED SUBMITTED WITH SUBMISSION DATED 15/12/2010. IN THE SAID SUBMI SSION ASSESSEE IS ALSO READY TO PRODUCE A/I THE TRANSPORTER FOR VERIF ICATION OF THE ASSESSING OFFICER AND HAS ALSO REQUEST TO GIVE CONV ENIENT TIME TO PRODUCE A/1 THE TRANSPORTERS FOR VERIFICATION BUT A SSESSING OFFICER DIDN'T GIVE OPPORTUNITY TO PRODUCE TRANSPORTERS. ASSESSING OFFICER REJECTED THE REPLY OF ASSESSEE AS WELL AS EVIDENCES AND REQU EST OF THE ASSESSEE FOR VERIFICATION OF TRANSPORTERS ONLY ON THE BASIS OF INSPECTORIAL REPORTS. IT IS ESTABLISHED FACTS THAT THE PERSON WHO OWNS PA N THAN IDENTITY OR EXISTENCE OF SAID PERSON CANNOT BE DENIED. AND WHEN CONTRA CONFIRMATION AND AFFIDAVITS SUBMITTED BY THIRD PERS ON TO THE CASE THAN GENUINENESS OF TRANSACTION IS ALSO ESTABLISHED. HOW EVER JUST WITH PREDETERMINED MIND THE LD. DC/7 HAS SIMPLY REJECTED REPLY OF THE ASSESSEE AS PER HIS FINDINGS GIVEN AT PAGE NO 3 & 4 OF THE ASSESSMENT ORDER AND SAID THAT RS.20,59,480/- TRANSPORTATION E XPENSES DISALLOWED. AFFIDAVITS OF TRANSPORTERS ARE VERY CLEARLY CONTAIN S NEW ADDRESSES OF TRANSPORTERS, BUT THE LEARNED AO DID NOT TAKE PAIN TO MAKE INQUIRY ON NEW ADDRESS OF TRANSPORTERS AND ALSO NOT GIVEN OPPO RTUNITY TO PRODUCE ALL THE TRANSPORTER FOR VERIFICATION AND SATISFACTI ON OF THE ASSESSING OFFICER. HOWEVER IN THE PARA 4.4 ON PAGE NO. 4 OF T HE ASSESSMENT ORDER ASSESSING OFFICER HAS CONFIRMED THAT ONE OF THE TRA NSPORTER M/S. SHREE RAM TRANSPORTATION WAS AVAILABLE AND CONFIRMED ABOU T SERVICE GIVEN TO ASSESSEE AND ACCORDINGLY PAYMENT MADE TO THEM OF RS.2,39,802/- IS ALLOWED AS TRANSPORTATION EXPENDITURE, BUT UNFORTUN ATELY THE EFFECT OF THE SAME NOT GIVEN IN THE COMPUTATION OF INCOME IN PARA 8 ON PAGE NO 6 OF THE ASSESSMENT ORDER. WE HEREBY ATTACH COPY OF CONTRA CONFIRMATION AND AF FIDAVIT OF TRANSPORTERS FOR YOUR READY REFERENCE AND PERUSAL. IN THE LIGHT OF ABOVE FACTS AND CIRCUMSTANCES WE HE REBY REQUEST YOUR HONOR THAT MATTER MAY BE REMANDED TO THE FILE OF TH E ASSESSING OFFICER FOR VERIFICATION OF TRANSPORTER WHICH HAS NOT BEEN DONE AT THE TIME OF ASSESSMENT PROCEEDING IN SPITE OF REQUEST OF THE AS SESSEE OR ALLOWED TRANSPORTATION EXPENSES IN FULL AND DELETE THE ADDI TION MADE BY ASSESSING OFFICER.' 5 4 TAKING INTO CONSIDERATION THE ABOVE SUBMISSIONS O F THE ASSESSEE, THE LEARNED CIT(A) PARTLY ALLOWED THE APP EAL FILED BY THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS:- 1.4 DECISION: 1.4.1 IN VIEW THAT THE FIRST FOUR GROUNDS OF APPEAL ARE AGAINST THE ADDITION OF RS.20,59,480/- BY WAY OF DISALLOWANCE F ROM TRANSPORTATION EXPENSES, AND THE WRITTEN SUBMISSION FILED BY THE A PPELLANT ON ALL THE ABOVE GROUNDS OF APPEAL IS COMMON, I TAKE UP THESE GROUNDS OF APPEAL TOGETHER FOR DISCUSSION AND DISPOSAL. 1.4.2 I HAVE DULY CONSIDERED THE DISCUSSION MADE IN THE ASSESSMENT ORDER AND FIND THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE FACTS AND CIRCUMSTANCES ARE SAME, AS IN THE A.Y. 2007-08, APPEAL IN WHICH YEAR AGAINST THE SAID DISA LLOWANCE HAS BEEN DISMISSED BY THE CIT(A). SIMILAR DISALLOWANCE WAS M ADE IN THE A.Y. 2005-06 IN WHICH YEAR ALSO THE APPEAL OF THE APPELL ANT WAS DISMISSED BY THE CIT(A). I ALSO FIND THAT THREE OUT OF FOUR T RANSPORTERS, VIZ. M/S S.T. DESAI TRAVELLERS (RS.2,05,600/-), M/S SHRI GAN ESH TRAVELLERS (RS.11,72,630/-) AND M/S YASH TRAVELLERS( RS.4,41,4 48), WERE ALSO THERE IN THE FINANCIAL YEAR RELEVANT TO A.Y. 2007-0 8 AND TRANSPORTATION EXPENSES CLAIMED TO HAVE BEEN PAID .TO THEM WERE DI SALLOWED FOR THE REASON THAT THE ABOVE PARTIES DID NOT EXIST AT THE ADDRESSES PROVIDED BY THE APPELLANT. THE ADDITION WAS CONFIRMED BY THE CI T(A) VIDE APPELLATE ORDER DATED 26-10-2010 IN APPEAL NO. CAS- 11/320/09-10. IN VIEW THAT THE VERY REASON FOR WHICH DISALLOWANCE WAS MADE IN THE A.Y. 2007-08, OF TRANSPORTATION EXPENSES CLAIMED IN THE NAME OF THE ABOVE PARTIES, IS ALSO APPLICABLE IN THE YEAR UNDER CONSIDERATION, I FOLLOWING THE DECISION GIVEN IN THE ABOVE APPELLATE ORDER, CONFIRM THE DISALLOWANCE OF TRANSPORTATION EXPENSES CLAIMED TO HAVE BEEN MADE TO THE ABOVE THREE PARTIES BY THE APPELLANT. 1.4.3 IN RESPECT OF THE DISALLOWANCE OF TRANSPORTAT ION EXPENSES OF RS.2,39,502/- CLAIMED IN THE NAME OF M/S SHREE RAM TRANSPORTATION, I FIND THAT THE ASSESSING OFFICER HAS HIMSELF GIVEN A FINDING THAT MR. GOHKE, PROP, OF M/S SHREE RAM TRANSPORTATION WAS AV AILABLE AND HE CONFIRMED TO HAVE RENDERED SERVICES TO THE APPELLAN T. THE ASSESSING OFFICER HAS ALSO ALLOWED THE CLAIM OF ABOVE EXPENSE S, BUT BY MISTAKE IN THE COMPUTATION OF INCOME ADDED THE ABOVE AMOUNT . I, THEREFORE, DELETE THE ADDITION OF RS.2,39,802 MADE ON THE ABOV E ACCOUNT. 6 1.4.4 IN VIEW OF THE ABOVE, THE APPELLANT GETS RELI EF OF RS.2,39,802/-. THE FIRST FOUR GROUNDS OF APPEAL ARE PARTLY ALLOWED . 5 AGGRIEVED BY THIS ORDER OF THE LEARNED CIT(A), TH E ASSESSEE HAS COME IN APPEAL BEFORE US. BOTH THE PARTIES AGRE ED THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT IN ASS ESSEES OWN CASE FOR AY 2005-06 IN ITA NO.3736/AHD/2008 AND OTH ERS, ORDER DATED 26-08-2011. 6 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE FA CTS OF THE CASE. WE HAVE ALSO GONE THROUGH THE ORDER OF THE IT AT IN ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.3736/A HD/2008, ORDER DATED 26-08-2011, WHEREIN ON IDENTICAL FACTS, THE TRIBUNAL, VIDE PARAS 5 OF ITS ORDER, HAS RESTORED THE ISSUE T O THE LEARNED CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, IN THE LIGHT OF OBSERVATIONS CONTAINED TH EREIN. FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL, WE R ESTORE THE ISSUE TO THE FILE OF THE LEARNED CIT(A) WITH THE SA ME DIRECTION. THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STA TISTICAL PURPOSE. 7 AS REGARDS GROUND NO.2 OF THE ASSESSEES APPEAL, THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED TELEPHONE EXPENSES OF RS.71,578/-. THE AO NOTICED THAT FOR THE ABOVE TELE PHONE EXPENSES SOME OF THE PAYMENTS ARE MADE IN CASH AND FOR WHICH BILLS / VOUCHERS ARE NOT AVAILABLE AND THEREFORE HE DISALLOWED THE SUM OF RS.14,316/- BEING 20% OUT OF TELEPHONE EXPEN SES. 8 THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE MAD E BY THE AO. 7 9 BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A). THE LEA RNED DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE AO. 10 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE FIND THAT THE LEARNED CIT(A) HAS UPHELD THE DISALLO WANCE OF 20% OF TELEPHONE EXPENSES MADE BY AO ON THE GROUND THAT THE PAYMENT WAS MADE IN CASH FOR WHICH BILLS / VOUCHERS WERE NOT AVAILABLE WITH THE ASSESSEE. WE, HOWEVER, FEEL THAT THE DISALLOWANCE IS ON HIGHER SIDE AND THEREFORE, WE RE STRICT THIS DISALLOWANCE TO 10% OF THE EXPENSES INCURRED BY THE ASSESSEE. WE HOLD ACCORDINGLY. THUS, THIS GROUND IS PARTLY AL LOWED. 11 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT TODAY ON 25-01-2012 SD/- SD/- (A MOHAN ALANKAMONY) ACCOUNTANT MEMBER (D K TYAGI) JUDICIAL MEMBER DATE : 25-01-2012 COPY OF THE ORDER FORWARDED TO: 1. M/S ESS ESS ENGINEERING 90, SEEMANAGAR SOCIETY-I I PALANPUR PATIA, RANDER ROAD, SURA 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-3, SURAT 3. CIT CONCERNED 8 4. CIT(A)-II, SURAT 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD