Globe Transport Company Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 3277/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6465 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P JANGID SRDR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI D.K.TYAGI, HONBLE JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, HONBLE ACCOUNTANT MEMBER ITA NO.3277/AHD/2009 ASSESSMENT YEAR:2006-07 DATE OF HEARING26051.11 DRAFTED:27.5.11 GLOBE TRANSPORT COMPANY PVT. LTD., 61, NEW YORK TOWER-A, THALTEJ CIRCLE, S.G. HIGHWAY, AHMEDABAD PAN NO.AAACG3938J V/S . ACIT, CIRCLE-4, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI VINIT MOONDRA, AR RESPONDENT BY:- SHRI J.P. JANGID, SR-DR O R D E R PER D.K.TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME(APPEALS)-VIII, AHMEDABAD IN APPEAL NO. CI T(A)-VIII/AC- 4/237/08-09 FOR THE ASSESSMENT YEAR 2002-03. 2. ASSESSEE HAS TAKEN FOLLOWING EFFECTIVE GROUND:- 1. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDI TIONS OF RS.1485680/- ON THE BASIS OF NON AVAILABIALITY OF P ROPER VOUCHERS. NATURE OF BUSINESS OF APPELLANT BEING TRANSPORTATIO N, EXPENSES INCURRED ON WAY BY DRIVERS, 100% VOUCHERS ARE NOT P OSSIBLE AND HENCE ADDITIONS ARE NOT JUSTIFIED AND DESERVE TO BE DELETED. ITA NO.3277/AHD/2009 A.Y. 2006-07 GLOBE TANSPORT CO.P. LTD. V. ACIT CIRL-4 ABD PAGE 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRANSPORTATION, AUTO PARTS AND WIND MILL. THE ASSESSEE FILED ITS RETURN DECLARING TOTAL INCOME AT RS.91,82,640/-. DURING THE ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE VOUCHERS OF TRANSPORTATION BUSINESS. ON VERIFICATION OF THE VOUCHERS OF TEN RA NDOMLY SELECTED TRIPS AO FOUND THAT SUBSTANTIAL AMOUNT CLAIMED UNDER THE HEAD OPERATIONAL EXPENSES WAS NOT SUPPORTED BY VOUCHERS EVIDENCE. H E ACCORDINGLY ASKED THE ASSESSEE TO JUSTIFY THE CLAIM FOR SUCH EX PENSES. THE ASSESSEE PRODUCED THE INFORMATION OF OPERATIONAL EXPENSES IN TABULAR FORM AND EXPLAINED THAT THESE EXPENSES ARE INCURRED BY THE D RIVERS WHO WERE ILLITERATE PERSONS AND THEY DO NOT KEEP ALL THE SUP PORTING VOUCHERS FOR THE EXPENSES INCURRED BY THEM. THEY CLAIM THE TOTAL ACT UAL EXPENSES IRRESPECTIVE OF SUPPORTING VOUCHERS AND ON THE BASI S OF THEIR CLAIM PAYMENT IS REQUIRED TO BE MADE AS PER GENERAL PRACT ICE IN THE TRANSPORT BUSINESS. IT WAS ALSO EXPLAINED THAT IF THE ASSESSE E DEMANDS FULL SUPPORTING VOUCHERS FOR CLAIM THEN THE DRIVER WOULD NOT WORK FOR IT. IT WAS POINTED OUT THAT ASSESSEE WAS HAVING STANDARDS OF A LL EXPENSES WHICH ARE REQUIRED TO BE INCURRED ON ALL ROUTES AND THE P AYMENTS ARE MADE TO THE DRIVERS ON THE BASIS OF SUCH STANDARDS ONLY. TH IS EXPLANATION OF THE ASSESSEE WAS NOT FOUND SATISFACTORY BY THE AO. HE O BSERVED THAT REASONS GIVE BY THE ASSESSEE FOR NOT MAINTAINING AL L THE VOUCHERS WERE GENERAL IN NATURE. THE SAMPLE WAS SELECTED RANDOMLY BY THE ASSESSEE HIMSELF CONSIDERING THE NUMBER OF VEHICLES AND THE TRIPS UNDERTAKEN BY IT. THE AO ON THE BASIS OF THAT SAMPLE CONCLUDED TH AT 21.97% OF THE EXPENSES WERE NOT SUPPORTED BY THE VOUCHERS. HE ACC ORDINGLY APPLYING THE SAMPLE RATE ON THE TOTAL EXPENSES UNDER THIS HE AD OPERATIONAL EXPENSES CLAIMED AT RS.1,23,80,666/- DISALLOWED AN AMOUNT OF RS.27,20,32,000/- AND ADDED IN THE INCOME OF THE AS SESSEE. ITA NO.3277/AHD/2009 A.Y. 2006-07 GLOBE TANSPORT CO.P. LTD. V. ACIT CIRL-4 ABD PAGE 3 4. BEFORE LD. CIT(APPEALS) ASSESSEE CHALLENGED THIS DISALLOWANCE AND MADE FOLLOWING SUBMISSION:- THE DISALLOWANCE HAS BEEN MADE ON ACCOUNT OF OPERA TIONAL EXPENSES FOR WHICH EXPENSES VOUCHERS WERE NOT AVAIL ABLE ON RECORD ON A SAMPLE DATA. THE OPERATIONAL EXPENSES I NCLUDE WAY EXPENSES INCURRED IN THE ASSESSEES TRANSPORTATION BUSINESS. SUCH EXPENSES ARE INCURRED BY TRUCK DRIVERS, WHO AR E MOSTLY ILLITERATE AND DO NOT HAVE THE KNOWLEDGE OR WILLING NESS TO PRESERVE EACH AND EVERY VOUCHER FOR ALL EXPENSES DONE ON A T RIP. HOWEVER, THEY KEEP A RECORD OF ALL EXPENSES DONE BY THEM ON ACCOUNT OF TRIP AND CLAIM THE ENTIRE AMOUNT FROM THE ASSESSEE IRRESPECTIVE OR WHETHER THE VOUCHERS ARE AVAILABLE OR NOT. IN A BUS INESS LIKE TRANSPORTATION SER4VICES,S THE ASSESSEE CANNOT DENY THE PAYMENT TO THE DRIVERS ON GROUNDS OF NON-AVAILABILITY OF TH E VOUCHERS, AS IT DOS SO, NO DRIVER SHALL WORK FOR THE COMPANY. MOREO VER, THE ASSESSEE COMPANY IS FULLY AWARE OF THE VARIOUS EXPE NSES TO BE INCURRED ON A TRIP, WHICH INCLUDES FOOD, LODGING BO ARDING, TOLL TAX, DIESEL, REPAIRS & MAINTENANCE, ETC. OUT OF THEIR EX PERIENCES. THEY ALSO CHECK THE GENUINITY OF THE DRIVERS CLAIM BY CR OSS CHECKING WITH ROUTE SURVEY, OTHER DRIVERS AND OTHER TRANSPORTERS. IN FACT THIS METHOD HAS BEEN PRACTICALLY ADOPTED ACROSS THE TRAN SPORTATION SERVICES INDUSTRY. THE ASSESSEE COMPANY IS A LARGE COMPANY AND IT CANN OT BE BEFOOLED BY TRUCK DRIVERS. BEFORE MAKING THE REIMBU RSEMENT OF EXPENSES TO THE DRIVERS, THE GENUINITY OF THE CLAIM IS PROPERLY CHECKED WITH LIST OF TOLL TAX BOOTHS, STANDARDS OF EXPENSES ON EACH ROUTE AND OTHER SUPPORTING DATA. NO EXCESS PAYMENTS ARE MADE TO DRIVERS AND ALL AMOUNT PAID ARE ACTUAL BUSINESS EXP ENSES. FURTHER, WE WOULD ALSO LIKE TO BRING TO YOUR KIND N OTICE THAT THE SAMPLE DATA ON THE BASIS OF WHICH THE LD. AO MADE T HE ADDITION WAS OF OLD TRUCKS HAVING 9 TONNE CAPACITY AND RUNNI NG ON FIXED ROUTES FOR WHICH THE EXPENDITURE LEVELS WAS WELL SE TTLED. HENCE, THE ASSESSEE HAS MADE THE PAYMENT AS PER STANDARD W ITHOUT BOTHERING MUCH FOR THE SUPPORTING VOUCHERS. THESE T YPE OF TRUCKS ARE ONLY 10% OF THE ASSESSEES TOTAL FLEET. IN OTHE R WORDS, THIS SAMPLE WAS SELECTED IN A HASTE DUE TO SHORTAGE OF T IME AND A BETTER SAMPLE WAS ALSO PRODUCED BEFORE THE LD. AO, BUT HE DID NOT ACCEPT THE SAME, DUE TO SHORTAGE OF TIME. ITA NO.3277/AHD/2009 A.Y. 2006-07 GLOBE TANSPORT CO.P. LTD. V. ACIT CIRL-4 ABD PAGE 4 IN FACT, THE VOUCHERS WERE CALLED FOR BY THE LD. AO ON THE LAST DATE OF THE YEAR I.E. 31-12-08, ON WHICH THE ORDER SHOUL D HAVE BEEN DONE, AND AT SUCH SHORT NOTICE, ALL VOUCHERS COULD NOT BE GATHERED. WE OFFERED HIM TO PRODUCE OTHER VOUCHERS, BUT THE R EQUEST WAS DENIED, WHICH IS VERY CLEARLY MENTIONED IN ASSESSME NT ORDER ITSELF. EVEN IN THE SAMPLE VOUCHERS SUBMITTED, OUT OF THE M ISSING VOUCHERS, MOST OF THEM COULD HAVE BEEN COLLECTED, H AD THE TIME PERMITTED US. FURTHER, ON PAGE NO.2 OF HIS ORDER DATED 31-12-2008 THE LD. AO HAS REPRODUCED OUR ABOVE SUBMISSIONS MADE, REGARDIN G THE SAMPLE BEING NOT A PROPER REPRESENTATIVE SAMPLE, BU T HE HAS NOT CONSIDERED OUR REQUEST TO PRODUCE A SAMPLE WHICH IS ACTUALLY REPRESENTATIVE [VOUCHERS OF TRUCK NO.GJ-I-AU-4224, GJ-I-AU- 3058, GJ-I-AU-3048 PRODUCED BEFORE HIM AND CAPTURED ON PAGE 3 OF HIS ORDER] ON PAGE NO 4 AND 5 OF HIS ORDER, HE HAS REPRODUCED THE DETAILS OF THE NON-REPRESENTATIVE SAMPLE, BUT HE HAS NOWHERE R EPRODUCED THE DETAILS OF THE BETTER SAMPLE PRODUCED BY US OF THE ABOVE TRUCKS. IT WAS ALSO ARGUED BEFORE LD. CIT(APPEALS) THAT ASS ESSEE DISCLOSED HIGHER GROSS PROFIT I.E. 13.56% DURING THE YEAR AS AGAINST 10.30% IN THE IMMEDIATELY PRECEDING YEAR. HE ACCORDINGLY CONTENDE D THAT WHEN THE ASSESSEE HAD DISCLOSED HIGHER GP OVER THE PRECEDING YEAR ITS BOOKS OF ACCOUNT CANNOT BE REJECTED. HE ALSO CONTENDED THAT WHERE IT IS IMPRACTICABLE TO OBTAIN VOUCHERS FOR EACH AND EVERY EXPENSES DISALLOWANCE WAS NOT CALLED FOR IN THIS REGARD. HE PLACED RELIANCE ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF PHILCO ENGINEERS PVT. LTD. V. ACIT REPORTED IN 28 DTDC 188 (DEL). 5. TAKING INTO CONSIDERATION THE FACT THAT ASSESSEE HAS DISCLOSED HIGHER GP DURING THE RELEVANT PERIOD IN COMPARISON TO THE PRECEDING YEAR THE DISALLOWANCE MADE AT 21.97% OF THE EXPENSE S BY THE ASSESSING OFFICER WAS HELD TO BE EXCESSIVE BY LD. C IT(A). HE RESTRICTED ITA NO.3277/AHD/2009 A.Y. 2006-07 GLOBE TANSPORT CO.P. LTD. V. ACIT CIRL-4 ABD PAGE 5 THIS DISALLOWANCE TO 12% OF THE EXPENSES CLAIMED BY ASSESSEE UNDER THE HEAD OPERATIONAL EXPENSES. 6. FURTHER AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEF ORE US. 7. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE REITERATED THE SAME SUBMISSION AS MADE BEFORE LD. CIT(APPEALS) WHI CH WE HAVE ALREADY REPRODUCED IN PARA-4 OF THIS ORDER AND PRAYED THAT THIS IS A FIT CASE IN WHICH NO DISALLOWANCE IS CALLED FOR AS IN E ARLIER AS WELL AS IN SUBSEQUENT YEAR NO DISALLOWANCE UNDER THIS HEAD HAS BEEN MADE BY THE ASSESSING OFFICER. 8. LD. DR ON THE OTHER HAND RELIED ON THE ORDER OF LD. CIT(A) AND SUBMITTED THAT LD. CIT(A) HAS BEEN VERY REASONABLE IN RESTRICTING THIS DISALLOWANCE TO 12% OF THE TOTAL EXPENSES INCURRED BY THE ASSESSEE UNDER THE HEAD OPERATIONAL EXPENSES AND NO FURTHE R RELIEF IS CALLED FOR. 9. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. W E FIND THAT THERE IS NO DISPUTE ABOUT THE FACT THAT ASSESSEE HAS NOT MAINTAINED COMPLETE VOUCHERS FOR THE EXPENSES CLAIMED BY HIM UNDER THE HEAD OPERATIONAL EXPENSES. THE ASSESSEE HAS ACCEPTED THAT EXPENSES UNDER THIS HEAD ARE NOT ALWAYS SUPPORTED BY COMPLETE VOUCHERS AND H E HAS TO DEPEND UPON THE DRIVERS IN THIS REGARD WHO MAKE EXPENSES I N DAY-TO-DAY OPERATIONS OF TRUCKS. IN THE ABSENCE OF SUPPORTING VOUCHERS THE ALLOWABILITY OF EXPENSES CLAIMED UNDER THIS HEAD O PERATIONAL EXPENSES HAS REMAINED UNVERIFIABLE. HOWEVER, KEEPING THE TOT ALITY OF THE CIRCUMSTANCES IN VIEW LIKE GP RATE SHOWN BY ASSESSE E BEING MORE THAN IN EARLIER YEAR AND THE FACT THAT NO SUCH DISALLOWA NCE WAS MADE IN EARLIER YEARS ON THIS ACCOUNT WE ARE INCLINED TAKE A LENIEN T VIEW IN THE MATTER ITA NO.3277/AHD/2009 A.Y. 2006-07 GLOBE TANSPORT CO.P. LTD. V. ACIT CIRL-4 ABD PAGE 6 AND FEEL THAT THIS DISALLOWANCE BE RESTRICTED TO 10 % OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE UNDER THE HEAD OPERATIONAL EXPENSES. WE HOLD ACCORDINGLY. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED . ORDER PRONOUNCED IN OPEN COURT ON 31/05 /2011 SD/- SD/- (D.C.AGRAWAL) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 31/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VIII, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD