The DCITBharuch Circle, Bharuch V. M/s. Shakti Roadways, Bharuch

ITA 2769/AHD/2010

• Counselvise Citation: 276920514 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 29-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK MISHR A
• Assessee Lawyers: S K SADHWANI
• Keywords: Unexplained expenditure; Additional evidence
• Section: 69C; 143(3)

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.2769/AHD/2010 [ASSTT.YEAR : 2006-2007] DCIT, BHARUCH CIRCLE BHARUCH. PAN : AAPFS 3850 D /VS. M/S.SHAKTI ROADWAYS ANKLESHWAR DIST. BHARUCH. ( (( ('( '( '( '( / APPELLANT) ( (( ()* )* )* )*'( '('( '( / RESPONDENT) + , - / REVENUE BY : SHRI D.K. MISHRA, /$ , - / ASSESSEE BY : SHRI S.K. SADHWANI '0 , $1/ DATE OF HEARING : 25 TH OCTOBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 31-10-2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A )-VI, BARODA DATED 4.5.2010. 2. THE FIRST ISSUE INVOLVED IN THIS APPEAL IS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING ADDITION OF ` 8,00,000/- ON ACCOUNT ITA NO.2769/AHD/2010 -2- OF DIFFERENCE IN THE AMOUNT OF UNSECURED LOANS RECE IVED FROM P.D. SHROFF. 3. BRIEF FACTS OF THE CASE ARE THAT THE AO HAS FOUN D THAT THE ASSESSEE-FIRM IN ITS BOOKS OF ACCOUNTS HAS CREDITED ` 36,32,665/- IN THE NAME OF P.D. SHROFF, WHEREAS THE IN ACCOUNT OF P.D. SHROFF, THE SAID AMOUNT IS DEBITED AT ` 32,32,665/- AND THEREFORE DIFFERENCE OF ` 4,00,000/-. THE AO FURTHER NOTED DEBIT AND CREDIT ENTRY OF ` 4,00,000/- EACH ON 13.7.2005, ARE NOT REFLECTED IN THE ACCOUNT SUBMITTED BY P.D.SHORFF, THEREFORE, THE AO MADE ADDITION OF ` 8,00,000/- HOLDING THAT THE ASSESSEE-FIRM HAD IN F ACT WITHDRAWN THE AMOUNT FROM ITS BANK. 4. BEFORE THE LEARNED CIT(A), THE ASSESSEE EXPLAINE D THAT THERE WAS A MISTAKE IN PASSING THE ENTRIES IN THE A CCOUNTS. THE PAYMENT OF ` 4,00,000/- WAS MADE TO ONE SHRI NIRANJAN VIDE CHEQUE NO.886517 DATED 13.7.2005 DRAWN ON OBC BANK AND BY MISTAKE THE SAME WAS DEBITED IN THE ACCOUNT OF P.D. SHROFF. THIS ERROR WAS RECTIFIED ON THE SAME DATE BY PASSING A J OURNAL ENTRY WHEREBY THE ENTRY OF ` 4,00,000/- WAS REVERSED FROM THE ACCOUNT OF P.D. SHAH, NULLIFYING THE EFFECT. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS OF THE ASSESSEE HELD THAT THE COPY OF THE ACCOUNT ENCL OSED WITH THE PAPER BOOK SHOWED THAT CREDIT ENTRY ON 13.7.2005 OF ` 4,00,000/- IS A JOURNAL ENTRY AND NO MONIES HAVE ACTUALLY BEEN CREDITED IN THE BOOKS OF THE ASSESSEE-FIRM. REGARDING THE ITA NO.2769/AHD/2010 -3- WITHDRAWAL/PAYMENT MADE ON 13.7.2005 OF ` 4,00,000/-, WHICH WAS ALSO ADDED TO THE TOTAL INCOME, THE SAME DOES N OT FALL WITHIN THE PURVIEW OF SECTION 69C, AS THE AO HAS USED THE TERM UNEXPLAINED EXPENDITURE. ON THESE FACTS, THE ADD ITION OF ` 8,00,000/- WAS HELD TO BE UNJUSTIFIED AND DELETED T O BY THE LEARNED CIT(A). 6. THE LEARNED DR RELIED ON THE ORDER OF THE AO AND SUBMITTED THAT THE ASSESSEE HAS FILED COPY OF LEDGE R ACCOUNTS OF SHRI NIRANJAN BEFORE THE LEARNED CIT(A), WHICH WAS NOT FILED BEFORE THE AO, WHICH IS AN ADDITIONAL EVIDENCE, AND THEREFORE, THERE IS A VIOLATION OF RULE 46A. ON THE OTHER HAN D, THE LEARNED AR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE ASSESSEE MADE PAYMENT OF ` 4,00,000/- TO ONE SHRI NIRANJAN ON 13.7.2005, VIDE CHEQUE NO.886517 D RAWN ON OBC BANK, WHICH WAS BY MISTAKE DEBITED IN THE ACCOU NT OF SHRI P.D. SHROFF INSTEAD OF THE ACCOUNT OF SHRI NIRANJAN . THE ASSESSEE RECTIFIED THIS MISTAKE BY PASSING A JOURNAL ENTRY O N 13.7.2005 THEREBY CREDITING THE ACCOUNT OF SHRI P.D. SHROFF A ND DEBITING ACCOUNT OF SHRI NIRANJAN. THE AO HELD THAT DEBITIN G AND CREDITING OF ` 4,00,000/- EACH ON 13.7.2005 ARE NOT REFLECTED IN THE ACCOUNT SUBMITTED BY SHRI P.D. SHROFF, AND THER EFORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ITA NO.2769/AHD/2010 -4- 8. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE BY OBSERVING THAT ON VERIFICATION OF THE COPY OF THE A CCOUNT FILED IN THE COMPILATION IN THE PAPER BOOK, IT IS SEEN THAT IT IS A JOURNAL ENTRY AND NO MONEY HAS ACTUALLY BEEN RECEIVED IN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE, AND ALSO DOES NOT FALL WI THIN THE PURVIEW OF THE SECTION 69C OF THE ACT, AS THE AO HA S USED THE TERM UNEXPLAINED EXPENDITURE. WE FIND THAT THE A O HAS MISUNDERSTOOD THE JOURNAL ENTRY OF ` 4,00,000/- PASSED IN THE BOOKS OF ACCOUNTS BY THE ASSESSEE FOR RECTIFYING TH E WRONG DEBIT IN THE ACCOUNT OF SHRI P.D. SHROFF INSTEAD OF IN AC COUNT OF SHRI NIRANJAN. THIS REVERSAL ENTRY PASSED BY THE ASSESS EE RECTIFYING THE MISTAKE COMMITTED ON 13.7.2005 DOES NOT HAVE AN Y FINANCIAL EFFECT ON THE PROFIT OF THE ASSESSEE, THEREFORE, TH E LEARNED CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE, H ENCE, WE DO NOT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) WH ICH IS CONFIRMED AND THE GROUND OF THE APPEAL OF REVENUE I S DISMISSED. 9. THE GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINS T THE ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE OF ` 7,81,351/- ON ACCOUNT OF TYRE EXPENSES AND ` 1,37,760/- ON ACCOUNT OF SPARE PARTS EXPENSES. 10. BRIEF FACTS ARE THAT THE AO OBSERVED THAT THE A SSESSEE HAS CLAIMED TYRE EXPENSES FOR ` 16,51,771/-AS AGAINST ` 5,62,736/- AND SPARE EXPENSES OF ` 3,06,135/- AS AGAINST NIL EXPENSES IN THE IMMEDIATELY PRECEDING YEAR. HE ALSO OBSERVED THAT THE INCREASE IN TURNOVER DURING THE YEAR WAS ` 54,36,409/-WHICH WAS ABOUT ITA NO.2769/AHD/2010 -5- 40% MORE THAN THE PREVIOUS YEAR. HE ALSO OBSERVED THAT THERE WAS INCREASE OF 293% IN THESE EXPENSES AND 100% IN SPARE PARTS EXPENSES. IN VIEW OF THE ABOVE, HE ALLOWED AN INCR EASE OF 10% IN THE EXPENSES OF TYRE AS COMPARED TO PREVIOUS YEAR, AND THEREBY ALLOWED EXPENSES OF ` 7,87,830/- AND DISALLOWED THE BALANCE AMOUNT OF ` 8,63,941/-. LIKEWISE FOR SPARE PARTS EXPENSES, HE MADE DISALLOWANCE AT 5% OF THE EXPENSES AMOUNTING T O ` 1,53,067/-. 11. ON APPEAL, THE LEARNED CIT(A) RESTRICTED THE DI SALLOWANCE TO 5% OF THE TYRE EXPENSES AND SPARE PARTS BY OBSER VING THAT NET PROFIT PERCENTAGE OF THE ASSESSEE WAS SHOWN AT 2.81 % AND IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR, THE NET PROFIT WAS DISCLOSED AT 2.93% WHICH WAS ACCEPTED BY THE AO IN THE ASSESS MENT MADE UNDER SECTION 143(3) OF THE ACT. HE OBSERVED THAT THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE PURCHASES FROM ASSOCIAT ED CONCERN IN FULL. IT IS NOT KNOWN WHETHER THE RATES OF PURCHAS ES WERE COMMENSURATE WITH THE MARKET RATES FOR THE TYPE OF PURCHASES MADE. 12. THE LEARNED DR HAS SUPPORTED THE ORDER OF THE A O, WHEREAS, THE LEARNED AR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 13. AFTER CONSIDERING RIVAL SUBMISSIONS AND PERUSAL OF THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE A O HAS DISALLOWED EXPENSES OF ` 8,63,941/- OUT OF THE TOTAL TYRE EXPENSES ITA NO.2769/AHD/2010 -6- OF ` 16,51,771/- CLAIMED BY THE ASSESSEE, BY CONSIDERIN G THE SAME TO BE UNREASONABLE, AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. SIMILARLY, THE AO ALSO DISALLOWED 5% FROM TH E SPARE PARTS EXPENSES OF ` 3,06,135/- CLAIMED BY THE ASSESSEE, AS EXCESSIVE. ON APPEAL, THE LEARNED CIT(A) ESTIMATED THE DISALLO WANCE AT 5% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE AND DELE TED THE DISALLOWANCE OF ` 7,81,351/- FROM OUT OF TYRE EXPENSES AND ` 1,37,760/- FROM OUT SPARE PARTS EXPENSES, THEREBY R ESTRICTING THE DISALLOWANCE AT 5% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE UNDER RESPECTIVE HEAD. NO SPECIFIC DEFECT IN THE IMPUGNED ORDER OF THE LEARNED CIT(A) COULD BE POINT ED OUT BY THE REVENUE. WE FIND THAT THE LEARNED CIT(A) HAS J USTIFIED THE DISALLOWANCE AT 5% OF THE EXPENSES CLAIMED ON ACCOU NT OF TYRE EXPENSES AND SPARE PARTS BY COMPARING THE NET PROFI T SHOWN BY THE ASSESSEE IN THE CURRENT YEAR, WHICH WAS 2.81% A S COMPARED TO THE IMMEDIATELY PRECEDING YEAR OF 2.93%, WHICH WAS ACCEPTED BY THE AO IN THE ASSESSMENT FRAMED UNDER SECTION 143(3 ) OF THE ACT. WE, THEREFORE, DO NOT FIND ANY GOOD REASON TO INTER FERE WITH THE ORDER OF THE LEARNED CIT(A) ON THIS ISSUE, AND THE GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 14. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER