M/s. SATISH CARRIER, MUMBAI V. ACIT - 14(3), MUMBAI

ITA 2998/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1569 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 24-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 18-04-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: U C BOTHRA
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI R.S.PADVEKAR, JM ITA NO.6887/MUM/2006 : ASST.YEAR 2003-2004 ITA NO.3703/MUM/2007 : ASST.YEAR 2004-2005 ITA NO.2900/MUM/2009 : ASST.YEAR 2004-2005 THE ASSTT./DY.COMMISSIONER OF INCOME-TAX CIRCLE 14(3) MUMBAI. VS. M/S.SATISH CARRIERS 32/33, DEVKARAN MANSION MANGALDAS ROAD, MUMBAI 400 002. PA NO.AAAFS7344D. (APPELLANT) (RESPONDENT) ITA NO.6960/MUM/2006 : ASST.YEAR 2003-2004 ITA NO.2998/MUM/2007 : ASST.YEAR 2004-2005 M/S.SATISH CARRIERS 32/33, DEVKARAN MANSION MANGALDAS ROAD, MUMBAI 400 002. VS. THE ASSTT. COMMISSIONER OF INCOME-TAX CIRCLE 14(3) MUMBAI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUMIT KUMAR ASSESSEE BY : SHRI U.C.BOTHRA O R D E R PER R.S.SYAL, AM : THIS BATCH OF FIVE APPEALS COMPRISING OF TWO BY TH E ASSESSEE AND THREE BY THE REVENUE RELATE TO THE ASSESSMENT YEARS 2003-200 4 AND 2004-2005. SINCE COMMON ISSUES HAVE BEEN RAISED IN THESE APPEALS, WE ARE, THEREFORE, DISPOSING THEM BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. ASSESSMENT YEAR 2003-2004 2. FIRST GROUND OF THE ASSESSEES APPEAL AND THE ON LY GROUND OF THE REVENUES APPEAL ARE AGAINST THE DELETION/SUSTENANCE OF ADDIT ION ON ACCOUNT OF EXPENSES ON LOADING, UNLOADING AND TRANSPORT COMMISSION. BRIE FLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS O F TRANSPORTATION AT THE MATERIAL TIME. IN ORDER TO VERIFY THE GENUINENESS OF EXPENSE S INCURRED BY THE ASSESSEE ON LOADING AND UNLOADING AND ALSO COMMISSION ON TRAN SPORTATION CHARGES, THE ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 2 ASSESSING OFFICER ISSUED NOTICES U/S.133(6) TO THE FOLLOWING THREE PARTIES, TO WHOM THE ASSESSEE HAD MADE THE PAYMENTS ON THIS SCORE :- S. NO. NAME OF THE PARTY HEAD OF EXPENDITURE AMOUNT CLAIMED 1. SHRI RAJENDRA PRASAD SEKHAWAT LOADING AND UNLOAD ING 28,55,113 2. SHRI GOPAL SINGH RATHOD LOADING AND UNLOADING 28 ,27,328 3. M/S.SHIVSAGAR STEEL ROLLING MILLS TRANSPORT COMMISSION 14,42,005 TOTAL 71,24,446 NOTICES U/S.133(6) WERE RETURNED BY THE POSTAL AU THORITIES WITH THE REMARKS LEFT / INCOMPLETE ADDRESS EXCEPT IN THE CASE OF S HRI GOPAL SINGH RATHOD, TO WHOM THE NOTICE WAS SERVED ON 28.11.2005 BUT NO REP LY WAS RECEIVED. THE ASSESSEE WAS REQUIRED TO PROVIDE COPY OF ACCOUNT OF THOSE PA RTIES DULY SIGNED BY THEM ALONG WITH THEIR PERMANENT ACCOUNT NUMBERS AND COPY OF BI LLS ETC. IN THE ABSENCE OF ASSESSEE FURNISHING SUCH DETAILS, THE ASSESSING OFF ICER MADE ADDITION FOR RS.71,24,446. THE LEARNED CIT(A) CALLED FOR REMAND REPORT FROM THE A.O. VIDE REPORT DATED 19.9.2006, THE ASSESSING OFFICER PUT FORTH THAT THE PARTIES DID NOT TURN UP DESPITE NOTICES SERVED ON THEM. THEREAFTER INSPE CTOR WAS SENT AT THE ADDRESS GIVEN OF THE TWO PARTIES VIZ. SHRI RAJENDRA PRASAD SEKHAWAT AND SHRI GOPAL SINGH RATHOD, WHO LEARNT THAT THESE TWO PARTIES FILED RET URNS FOR ASSESSMENT YEAR 2004- 2005 ON 31.3.2006. THE A.O. NOTICED THAT THE ENTIRE PAYMENT OF TRANSPORTATION CHARGES MADE TO THESE TWO PARTIES WERE KEPT AT BEL OW RS.20,000 EACH IN CASH SO AS TO CIRCUMVENT THE MISCHIEF OF SECTION 40A(3). HE OP INED THAT THE PROVISIONS OF SECTION 40A(3) WERE APPLICABLE AND DISALLOWANCE AT THE RATE OF 20% NEEDED TO BE MADE. HE ALSO NOTED THAT THE RATE FOR LOADING AND U NLOADING CHARGES REMAINED UNIFORM AT RS.60 PER METRIC TONE, WHICH WHEN COMPA RED WITH THAT PAID BY SOME OTHER PARTY, WAS ON HIGHER SIDE. ACCORDINGLY THE A.O., IN REMAND PROCEEDINGS, ADOPTED THE RATE OF RS.20 PER MT. TO BE ALLOWABLE. THUS HE RESTRICTED THE DISALLOWANCE TO RS.37,88,294 IN THE REMAND REPORT A S AGAINST THE ORIGINAL DISALLOWANCE AT RS.56,82,441. ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 3 3. THE LEARNED CIT(A), ON APPRECIATION OF THE ENTIRE MATERIAL BEFORE HIM, INCLUDING THE REMAND REPORT, CAME TO THE CONCLUSIO N THAT THE PROVISIONS OF SECTION 40A(3) WERE NOT APPLICABLE, WHICH PART OF THE CITS ORDER HAS NOT ASSAILED BY THE REVENUE IN THEIR APPEAL BEFORE THE TRIBUNAL. THE L EARNED CIT(A) FURTHER OBSERVED THAT THE ENTIRE PAYMENT OF LOADING AND UNLOADING CH ARGES WAS MADE TO SHRI RAJENDRA PRASAD SEKHAWAT AND SHRI GOPAL SINGH RATHO D, WHO HAPPENED TO BE LABOUR CONTRACTORS. HE HELD THAT THE ASSESSEE HAD I NFLATED THE EXPENSES. CONSIDERING THESE FACTS THE LEARNED CIT(A) HELD THA T THE RATE OF RS.40 PMT BE ADOPTED AS LOADING AND UNLOADING CHARGES AND THE AD DITION BE SUSTAINED AT THE RATE OF RS.20 PMT. THIS RESULTED INTO SUSTENANCE OF ADDI TION TO THE TUNE OF RS.18,94,147 AGAINST WHICH THE ASSESSEE IS IN APPEAL AND THE DEL ETION OF ADDITION OF RS.37,88,294, AGAINST WHICH THE REVENUE IS IN APPEAL. AS REGARDS THE THIRD ADDITION MADE BY THE A.O. AMOUNTING TO RS.14,42,005, BEING PART OF THE COMPOSITE ADDITION OF RS.71.24 LAKHS, THE ASSESSING OFFICER IN REMAND REPORT SUBMI TTED THAT THERE WAS NO DISCREPANCY IN RESPECT OF TRANSPORTATION COMMISSION . AS A RESULT OF THAT THE LEARNED CIT(A) DELETED THE ADDITION AND THE REVENUE IS IN N OT IN APPEAL AGAINST THE SAID ADDITION. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE WAS ENGAGED IN THE TRANSPORTATION BUSINESS AND HAD PAID LOADING AND UNLOADING CHARGES TO SHRI RAJ ENDRA PRASAD SEKHAWAT AND SHRI GOPAL SINGH RATHOD AT THE RATE OF RS.60 PMT. T HE ASSESSING OFFICER MADE ADDITION FOR THE ENTIRE SUM ON THE GROUND THAT THE ASSESSEE HAD NOT FILED CONFIRMATIONS FROM THESE PARTIES IN THE SHAPE OF CE RTIFICATION OF THEIR ACCOUNTS IN THE BOOKS OF THE ASSESSEE. HOWEVER THE LEARNED CIT( A) REDUCED THE ADDITION TO RS.18.94 LAKHS ON THE PREMISE THAT THE RATE PAID AT RS.60 PMT. WAS EXCESSIVE AND IT WAS REASONABLE TO ALLOW DEDUCTION AT THE RATE OF RS .40 PMT. THERE IS NO DISPUTE ON THE FACT, WHICH TRANSPIRED DURING THE REMAND PROCE EDINGS, THAT BOTH SHRI RAJENDRA ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 4 PRASAD SEKHAWAT AND SHRI GOPAL SINGH RATHOD HAD REC ORDED THE PAYMENTS MADE BY THE ASSESSEE AT THE SAME LEVEL IN THEIR BOOKS OF AC COUNT, AT WHICH THESE WAS DISCLOSED BY THE ASSESSEE. IT IS FURTHER NOTED BOTH THE PARTIES HAD FILED THEIR RESPECTIVE RETURNS OF INCOME. IT IS NOT THE CASE OF THE REVENUE THAT THESE PARTIES WERE COVERED U/S.40A(2)(B) OF THE ACT. FROM HERE IT BECOMES CLEAR THAT THE ASSESSEE MADE THE PAYMENT AT THE RATE OF RS.60 PMT. TO THESE TWO PARTIES TOWARDS LOADING AND UNLOADING CHARGES WHICH AMOUNT WAS FAITHFULLY R ECORDED BY THEM IN THEIR BOOKS OF ACCOUNT. IN SUCH A SITUATION THERE CANNOT BE ANY QUESTION OF REDUCING THE DEDUCTION BY CONSIDERING THAT THE PAYMENTS MADE WER E EXCESSIVE, MORE SPECIFICALLY WHEN THESE WERE MADE TO NON-RELATED PARTIES. AS SU CH WE ARE UNABLE TO SUSTAIN THE VIEW POINT OF THE LEARNED CIT(A) THAT THE DEDUCTION BE ALLOWED AT THE RATE OF RS.40 PMT. AS AGAINST THE ACTUAL PAYMENT MADE AT THE RATE OF RS.60 PMT. THE REVENUE AUTHORITIES CANNOT STEP INTO THE SHOES OF THE ASSES SEE FOR DETERMINING AS TO WHAT AMOUNT OF PAYMENT SHOULD BE MADE IN RESPECT OF SERV ICES RECEIVED IN THE COURSE OF BUSINESS. ONCE THE GENUINENESS OF THE PAYMENT IS ES TABLISHED AND IT IS INCURRED IN THE COURSE OF BUSINESS AND MADE TO THE PARTIES WHO ARE NOT RELATIVES WITHIN THE MEANING OF SECTION 40A(2)(B), THERE CANNOT BE ANY Q UESTION OF NOT ALLOWING DEDUCTION FOR THE ENTIRE AMOUNT PAID. WE, THEREFORE , ORDER FOR THE DELETION OF ADDITION SUSTAINED BY THE LEARNED CIT(A) AT RS.18,9 4,147. CONSEQUENTLY THE GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THAT BY THE R EVENUE IS DISMISSED. 5. THE ONLY OTHER GROUND IN THE ASSESSEES APPEAL I S AGAINST THE CONFIRMATION OF DISALLOWANCE OF CONVEYANCE AND STAFF WELFARE EXPENS ES TO THE TUNE OF RS.30,000 EACH. THE ASSESSEE DEBITED A SUM OF RS.3,28,492 UND ER THE HEAD `CONVEYANCE EXPENSES IN ITS PROFIT AND LOSS ACCOUNT. THE A.O . FOUND THAT THE VOUCHERS WERE SELF-MADE AND FEW WERE NOT SUPPORTED BY ANY BILLS. HE, THEREFORE, MADE AD HOC ADDITION OF RS.30,000. AS REGARDS THE STAFF WELFARE EXPENSES CLAIMED BY THE ASSESSEE AT RS.6,20,160, THE ASSESSING OFFICER NOTE D THAT PROPER EVIDENCE IN RESPECT ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 5 OF SUCH EXPENSES WERE NOT AVAILABLE. THUS HE MADE AN ADDITION OF RS.30,000. THE LEARNED CIT(A) SUSTAINED BOTH THE ADDITIONS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS FOUND AS AN ADMITTED FACT THAT THESE TWO ADDITIONS WERE MADE FOR THE REASON THAT THE ASSESSEE DID NOT HAVE COMPLETE EVID ENCE IN SUPPORT OF THE CLAIM FOR EXPENSES. IN SUCH A SITUATION, WE DO NOT FIND ANY R ATIONALE FOR ALLOWING THE DEDUCTION FOR THE ENTIRE AMOUNT CLAIMED. HOWEVER C ONSIDERING THE ENTIRETY OF THE FACTS PREVAILING IN THIS CASE, WE ARE OF THE CONSID ERED OPINION THAT IT WILL BE FAIR IF THE DISALLOWANCE ON ACCOUNT OF CONVEYANCE EXPENSES IS REDUCED TO RS.15,000. HOWEVER AS REGARDS THE STAFF WELFARE EXPENSES, WE F IND THE EXTENT OF DISALLOWANCE TO BE REASONABLE, WHICH IS HEREBY SUSTAINED. THIS GROUND IS PARTLY ALLOWED. ASSESSMENT YEAR 2004-2005 7. THE ASSESSEE AS WELL AS REVENUE FILED THE APPEAL S. THE GROUNDS RAISED IN THE REVENUES APPEAL WERE NOT PROPER. THEREAFTER INSTEA D OF REVISING THE GROUNDS, THE REVENUE HAS FILED ANOTHER APPEAL ON 6.5.2009. SINCE ITA NO.2900/MUM/2009 IS REPETITION OF THE REVENUES APPEAL IN ITA NO.3703/M UM/ 2007 BUT WITH THE REVISED GROUNDS, WE, THEREFORE, DISMISS THE SAME. HOWEVER THE REVISED GROUNDS FILED ALONG WITH ITA NO.2900/MUM/2009 ARE CONSIDERED FOR THE PU RPOSE OF DISPOSAL OF DEPARTMENTAL APPEAL IN ITA NO.3703/MUM/2007. 8. NOW THE ONLY EFFECTIVE WISE GROUND RA ISED BY THE REVENUE IS AGAINST THE REDUCTION IN DISALLOWANCE OF LOADING AND UNLOADING EXPENSES TO THE TUNE OF RS.32,22,118. THE FIRST GROUND OF THE ASSESSEES AP PEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.32,22,118, BEING THE LOADING AND UNLOADING CHARGES PAID TO SHRI RAJENDRA PRASAD SEKHAWAT AND SHRI GOPAL SINGH RATHO D. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES OF THESE GROUNDS IN THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR ASSESSMENT YEAR 2003-2004. IT IS SEEN FROM ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 6 THE ASSESSMENT ORDER FOR THIS YEAR THAT THE ASSESSI NG OFFICER, WHILE MAKING SIMILAR ADDITION, HAS REFERRED TO HIS ORDER FOR ASSESSMENT YEAR 2003-2004. CONSIDERING THE VIEW TAKEN BY US IN ASSESSMENT YEAR 2003-2004, WE A LLOW THE ASSESSEES GROUND AND DISMISS THAT OF THE REVENUE. 9. GROUND NO.2 OF THE ASSESSEES APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF CONVEYANCE EXPENSES AT RS.40,000. H ERE AGAIN WE FIND THAT OUT OF THE TOTAL EXPENDITURE DEBITED AT RS.4,37,295 THE A. O. DISALLOWED A SUM OF RS.40,000 ON THE GROUND THAT THE VOUCHERS WERE SELF -MADE AND FEW VOUCHERS WERE NOT SUPPORTED BY BILLS. FOLLOWING THE VIEW TAKEN BY US IN EARLIER YEAR ON THIS ISSUE, WE ORDER TO REDUCE THIS DISALLOWANCE TO RS.20,000. THIS GROUND IS PARTLY ALLOWED. 10. GROUND NO. 3 IS AGAINST THE CONFIRMATION THE DI SALLOWANCE OUT OF STAFF WELFARE EXPENSES AT RS.43,000 OUT OF TOTAL EXPENDIT URE OF RS.8,59,453 FOR WANT OF PROPER PROOF OF EXPENDITURE. HERE AGAIN WE FIND THA T THE FACTS ARE ALMOST SIMILAR TO THOSE OF THE PRECEDING YEAR AND THE PERCENTAGE OF D ISALLOWANCE TO THE TOTAL EXPENDITURE IS ALMOST IN THE SAME RANGE. FOLLOWING THE VIEW TAKEN BY US IN EARLIER YEAR WE DISMISS THIS GROUND OF APPEAL. 11. GROUND NO.4 IS AGAINST THE CONFIRMATION OF DISA LLOWANCE OF TELEPHONE EXPENSES AMOUNTING TO RS.70,000. THE A.O. DISALLOWE D THE SAID AMOUNT OUT OF TOTAL EXPENDITURE OF RS.7,27,096 INCURRED IN RESPECT OF T ELEPHONES INSTALLED AT THE RESIDENCE OF THE PARTNERS AND THEIR MOBILES. THE LE ARNED CIT(A) RESTRICTED THE DISALLOWANCE TO RS.40,000. IT IS, THEREFORE, SEEN T HAT THERE IS A MISTAKE IN THE GROUND RAISED BY THE ASSESSEE BY WHICH THE ADDITION HAS BE EN CHALLENGED AT RS.70,000 WHEREAS IN FACT THE LEARNED CIT(A) REDUCED THE DISA LLOWANCE TO RS.40,000. CONSIDERING THE TOTAL AMOUNT OF EXPENDITURE INCURRE D IN RESPECT OF TELEPHONES INSTALLED AT THE RESIDENCE AND MOBILE PHONE BILLS V IS--VIS THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT(A), WE ARE OF THE CONS IDERED OPINION THAT NO FURTHER ITA NO.6887/MUM/2006 & ORS. M/S.SATISH CARRIERS. 7 INTERFERENCE IS WARRANTED IN THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. 12. THE LAST GROUND IS AGAINST THE CONFIRMATION OF MOTOR CAR EXPENSES TO THE TUNE OF RS.31,570. THE ASSESSING OFFICER DISALLOWED 1/10 TH OF THE CAR EXPENSES TOWARDS PERSONAL USE. THE LEARNED CIT(A) SUSTAINED THE DISA LLOWANCE AT THAT LEVEL. CONSIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTA NCES IN THIS CASE WE FIND THE ADDITION AT A REASONABLE LEVEL. THIS GROUND IS NOT ALLOWED. 13. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED AND THOSE OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF JUNE, 2010. SD/- SD/- ( R.S.PADVEKAR ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 4 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XV, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.