M/s Jayalakshmi Fertilisers, Tanuku V. THE ADDL. CIT, Rajahmundry

ITA 332/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2027 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Corroborative evidences; Capital expenditure
• Section: 142(1)

Judgement Text

ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.332/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) M/S. JAYALAKSHMI FERTILISERS TANUKU VS. ADDL. CIT , RAJAHMUNDRY [PAN: AAAFJ 9533B ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C. SUBRAHMANYAM, AR / RESPONDENT BY : SHRI M.N. MURTHY NAIK, DR / DATE OF HEARING : 23.02.2016 / DATE OF PRONOUNCEMENT : 18.03.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-11, MUMBAI, CAMP: VISAKHAPATNAM DATED 15.3.2 013 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009-10. ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF TRADING I N FERTILIZERS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 25.9.2009 DECLARING TOTAL INCOME OF ` 96,20,226/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CAL LED AS 'THE ACT'). THE CASE WAS SELECTED FOR SCRUTINY AS PER CBDT INST RUCTIONS FOR MANUAL SELECTION OF CASES AND ACCORDINGLY, NOTICES U/S 143 (2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO THE NOTICES, THE AU THORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED BOOKS OF ACCOUNTS AND OTHER INFORMATION C ALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF ` 42,30,354/- TOWARDS FREIGHT AND CARRIAGE OUTWARDS. ON VERIFICATION OF T HE VOUCHERS FURNISHED IN SUPPORT OF THE CLAIM, IT WAS NOTICED THAT ALL TH E VOUCHERS ARE SELF- MADE AND DO NOT CONTAIN ANY SUPPORTING EVIDENCES AN D ALSO ADDRESSES OF THE PAYEES. THEREFORE, THE ASSESSING OFFICER ASK ED ASSESSEE TO FILE OBJECTIONS, IF ANY FOR THE PROPOSED DISALLOWANCE OF 10% OF ABOVE EXPENDITURE. IN RESPONSE, THE ASSESSEE PRODUCED SOM E WAY BILLS IN SUPPORT OF LORRY NUMBERS, HOWEVER, HAS NEITHER PROD UCED ANY EVIDENCE IN SUPPORT OF QUANTUM OF EXPENDITURE CLAIMED NOR AD DRESSES OF ANY OF THE PAYEES. THEREFORE, IN THE ABSENCE OF CLEAR DETA ILS OF THE PERSONS TO ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 3 WHOM PAYMENTS ARE MADE, THE ASSESSING OFFICER DISAL LOWED 10% OF EXPENDITURE I.E. ` 4,23,035/- AND ADDED BACK TO THE TOTAL INCOME. SIMILARLY, DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSEE HAS BEEN ASKED TO PRODUCE BILLS IN SUPPORT OF ADDIT IONS TO THE FIXED ASSETS. IN RESPONSE TO NOTICE, THE ASSESSEE HAS FU RNISHED BILLS AND INVOICES FOR ADDITIONS MADE TO ALL THE FIXED ASSETS , EXCEPT IN RESPECT OF TWO MOTOR CYCLES VALUED AT ` 86,000/-. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED DEPRECIATION OF ` 6,450/- CLAIMED ON SUCH ASSET IN THE ABSENCE OF BILLS AND VOUCHERS. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER. THE ASSESSEE FURTHER SUBMITTED THAT REGARDING CARRIAGE INWARD EX PENDITURE IT HAS PRODUCED BILLS & VOUCHERS IN SUPPORT OF THE EXPENDI TURE CLAIMED. THE ASSESSEE FURTHER SUBMITTED THAT THE FIRM HAS HIRED THE VEHICLES TO TRANSPORT GOODS TO VARIOUS DESTINATIONS AND PAID LO RRY HIRE CHARGES. IT HAS PRODUCED WAY BILLS, BILLS & VOUCHERS DULY RECON CILING THE LORRY NUMBERS, DESTINATION, QUANTITY TRANSPORTED TO PROVE THE GENUINENESS OF THE PAYMENTS AND ALSO EXPLAINED THE FACTS AND CIRCU MSTANCES UNDER WHICH SUCH PAYMENTS ARE MADE. THE ASSESSING OFFICER WITHOUT ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 4 APPRECIATING THE PROPER FACTS MADE ADHOC DISALLOWAN CE, WHICH IS NOT CORRECT. SIMILARLY, AS REGARDS THE DEPRECIATION ON MOTOR CYCLES, THE ASSESSEE SUBMITTED THAT IT HAS BILLS FOR PURCHASE O F MOTOR CYCLES. HOWEVER, WHILE SUBMITTING THE SAID INFORMATION, THE ASSESSEE COULD NOT PRODUCE THE INVOICES FOR TWO MOTOR CYCLES, WHICH HA PPENED BY OVERSIGHT WHILE PREPARING THE SAID INFORMATION. THE SAID INVO ICES ARE VERY MUCH AVAILABLE WITH THE ASSESSEE, IF PROPER OPPORTUNITY IS GIVEN THE SAME SHALL BE GIVEN TO THE ASSESSING OFFICER FOR HIS VERIFICAT ION. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, C ONFIRMED THE DISALLOWANCE OF CARRIAGE INWARD EXPENSES. THE CIT(A ) HELD THAT THE ASSESSEE COULD NOT PRODUCE PROPER DETAILS WITH REGA RD TO THE EXPENDITURE CLAIMED UNDER CARRIAGE INWARDS, SUCH AS WAY BILLS AND ALSO NAMES AND ADDRESS OF THE PAYEES. IN ABSENCE OF SUCH DETAILS, THE GENUINENESS OF THE EXPENDITURE AND PAYMENT IS IN DO UBTFUL. THEREFORE, CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFIC ER. AS REGARDS THE DISALLOWANCE ON DEPRECIATION, THE CIT(A) HELD THAT THE ASSESSEE ADMITTED THAT HE COULD NOT PRODUCE EVIDENCES BEFORE THE ASSESSING OFFICER FOR HIS VERIFICATION. THE POSITION REMAINS SAME. EVEN, DURING THE APPELLATE PROCEEDINGS, THESE INVOICES ARE NOT PRODU CED. HENCE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS UPHEL D. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 5 4. THE FIRST ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF CARRIAGE INWARD EXPENDITURE. THE LD. A.R. OF THE AS SESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE 10% ADHOC DISALLOWA NCE OF EXPENDITURE TOWARDS CARRIAGE INWARDS WITHOUT CONSIDERING THE SU PPORTING EVIDENCES FILED DURING THE COURSE OF ASSESSMENT. THE AUTHORIS ED REPRESENTATIVE FURTHER SUBMITTED THAT THE ASSESSEE IS INTO THE BUS INESS OF TRADING IN FERTILIZERS, WHICH REQUIRES HUGE NUMBER OF VEHICLES FOR TRANSPORTATION OF GOODS. THE ASSESSEE HAS HIRED LORRIES FOR TRANSPOR TATION OF GOODS FROM ONE PLACE TO ANOTHER PLACE AND PAID THE HIRE CHARGE S AND FURNISHED SUPPORTING EVIDENCES IN THE FORM OF WAY BILLS AND O THER DETAILS. THE ASSESSEE HAS PROVED THE EXPENDITURE BY PRODUCTION O F WAY BILLS, QUANTITY OF GOODS TRANSPORTED, CORRESPONDING SALE TO DEALERS , ETC. UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT CORREC T IN MAKING ADHOC DISALLOWANCE. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THAT ADHOC DISALLOWANCE OF EXPENDITURE, ON ESTIMATION BA SIS BY HOLDING THAT EXPENDITURE IS SUPPORTED BY SELF MADE VOUCHERS IS N OT CORRECT, UNLESS PROVED OTHERWISE AS WAS HELD IN THE CASE OF ITO VS. BAJRANG TRADING COMPANY AND 3F INDUSTRIES VS. JCIT REPORTED IN (201 4) 63 SOT 314. THE AUTHORISED REPRESENTATIVE FURTHER SUBMITTED THA T 10% ADHOC DISALLOWANCE MADE BY THE ASSESSING OFFICER IS QUITE HIGH, THEREFORE, REQUESTED TO SCALE DOWN THE DISALLOWANCE TO 5%. ON THE OTHER HAND, THE ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 6 LD. D.R. STRONGLY SUPPORTING THE ORDER OF CIT(A), A GREED FOR 5% DISALLOWANCE OF EXPENDITURE. 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. HAS DISALLOWED 10% CARRIAGE INWARD EXPENDITURE . THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE HAS NO T SUBSTANTIATED THE CLAIM OF EXPENDITURE BY PRODUCING SUPPORTING BILLS & VOUCHERS. IT WAS THE CONTENTION OF THE ASSESSEE THAT IT HAS SUBMITTE D SUPPORTING DOCUMENTS SUCH AS WAY BILLS, QUANTITY OF GOODS TRAN SPORTED AND ALSO NAMES AND ADDRESSES OF THE PAYEES. THEREFORE, THE ASSESSING OFFICER WAS NOT CORRECT IN DISALLOWING 10% OF SUCH EXPENDIT URE. WE HAVE GONE THROUGH THE SUBMISSIONS OF THE ASSESSEE AND ORDERS OF THE AUTHORITIES BELOW. THE ASSESSING OFFICER DISALLOWED THE EXPEND ITURE ON ADHOC BASIS WITHOUT POINTING OUT ANY SPECIFIC INSTANCES, WHERE SUPPORTING BILLS ARE NOT AVAILABLE. ON PERUSAL OF FINANCIAL STATEMENT FI LED BY THE ASSESSEE, WE FIND THAT THE EXPENDITURE CLAIMED IS VERY LESS WHEN COMPARED TO RELATED TURNOVER. THE ASSESSEE IS INTO THE BUSINESS OF TRAD ING IN FERTILIZERS WHICH REQUIRES LOT OF CARRIAGE INWARD EXPENDITURE, AS THE GOODS ARE BULKY AND WHICH NEEDS TO BE TRANSPORTED TO VARIOUS PLACES. CO NSIDERING THE NATURE AND SIZE OF BUSINESS, WE ARE OF THE OPINION THAT TH E DISALLOWANCE MADE ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 7 BY THE ASSESSING OFFICER IS AT HIGHER SIDE. DURING THE COURSE OF HEARING, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE REQUE STED FOR SCALE DOWN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. TH E LD. D.R. ON THE OTHER HAND DID NOT OBJECT FOR THE PROPOSAL. THEREFO RE, TO MEET THE ENDS OF JUSTICE, WE DIRECT THE ASSESSING OFFICER TO DISA LLOW 5% OF CARRIAGE INWARD EXPENDITURE. ACCORDINGLY, WE DIRECT THE ASSE SSING OFFICER TO DISALLOW 5% OF EXPENDITURE UNDER THE HEAD CARRIAGE INWARDS. 6. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF DEPRECIATION ON MOTOR CYCLES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE BILLS I N SUPPORT OF THE CAPITAL EXPENDITURE. THE ASSESSEES CONTENTION IS T HAT IT HAS BILLS IN SUPPORT OF THE FIXED ASSETS, HOWEVER COULD NOT PROD UCE BEFORE THE ASSESSING OFFICER BY OVERSIGHT. THE CIT(A) HELD THA T EVEN DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE COULD NOT FURNISH BILLS IN SUPPORT OF THE EXPENDITURE. EVEN BEFORE US, THE FAC TS REMAINED SAME. THE ASSESSEE COULD NOT FURNISH ANY BILLS IN SUPPORT OF THE EXPENDITURE CLAIMED. THEREFORE, WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITIONS MADE BY THE ASSESSING OFFIC ER. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER PASSED BY TH E CIT(A). ACCORDINGLY, WE UPHOLD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ITA NO.332/VIZAG/2013 M/S. JAYALAKSHMI FERTILISERS, TANUKU 8 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 TH MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 18.03.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. JAYALAKSHMI FERTILISERS, VE NKATARAYAPURAM, TANUKU-534 215. 2. / THE RESPONDENT ADDL. CIT, RAJAHMUNDRY RANGE, R AJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM