M/s. M.R. Corporation, Anand V. The Income tax Officer,Ward-1, Anand

ITA 3401/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2079 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-05-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 24-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: Y P VERMA
• Keywords: Rejection of books of accounts
• Section: 143(3)

Judgement Text

ITA NO.3401/AHD/2010 ASSESSMENT YEAR:2006-2007 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM : SHRI PRAMOD KUMAR A.M. AND SHRI KUL BHARAT J.M.] ITA NO. 3401/AHD / 2010 ASSESSMENT YEAR: 2006-07 M R CORPORATION ..APPELLANT C 10, MUNICIPAL SHOPPING CENTRE OPP SARDAR BAUG, ANAND 388 001 [PAN : AAHFM2751R] VS. INCOME TAX OFFICER WARD 2, ANAND ..RESPONDENT APPEARANCES: B J THAKKAR, FOR THE APPELLANT Y P VERMA, FOR THE RESPONDENT DATE OF HEARING : MAY 01, 2013 DATE OF PRONOUNCEMENT : MAY 10, 2013 O R D E R PER PRAMOD KUMAR : 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF ORDER DATED 19 TH OCTOBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS), IN THE MATTER OF ASSESSMEN T UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEA R 2006-07. GRIEVANCE OF THE ASSESSEE IS AGAINST REJECTION OF THE BOOKS OF A CCOUNTS AND YET MAKING DISALLOWANCES FROM LABOUR EXPENSES AND CARTAGE EXPE NSES SHOWN IN THE ITA NO.3401/AHD/2010 ASSESSMENT YEAR:2006-2007 PAGE 2 OF 4 BOOKS OF ACCOUNTS. 2. TO ADJUDICATE ON THIS APPEAL, A FEW MATERIAL FAC TS NEED TO BE TAKEN NOTE OF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SUPPLY OF LABOUR AT AMULS KANJARI PLANT WHICH MANUFACTURES CATTLE FEED FROM RAW MATERIAL LIKE MAIZE, KISHKI AND DRB ETC. THE MAIN WORK OF THE ASS ESSEE IS UNLOADING OF RAW MATERIAL, SHIFTING OF MATERIAL AND LOADING OF F INISHED GOODS. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT CARTING EXPENSES HAVE SUBSTANTIALLY GONE UP DU RING THIS YEAR. THE ASSESSING OFFICER SCRUTINIZED BILLS AND VOUCHERS FO R THE MONTH OF FEBRUARY AND INFERRED, ON THE BASIS OF DETAILS THEREIN, THAT ONE WORKER CAN LOAD, UNLOAD OR SHIFT 236 BAGS PER DAY. TAKING THIS AN YA RDSTICK, HE COMPUTED THE NUMBER OF WORKERS REQUIRED TO DO THE JOB FOR WHICH ASSESSEE HAS BILLED AMUL. AS THERE WAS A VARIANCE IN THE NUMBER OF PERS ONS SO WORKED OUT VIS- -VIS THE NUMBER OF PERSONS ACTUALLY EMPLOYED BY TH E ASSESSEE, HE WAS OF THE VIEW THAT BOOKS OF ACCOUNTS ARE NOT RELIABLE AND DO NOT SHOW THE CORRECT PICTURE OF AFFAIRS. AS FOR CARTING EXPENSES, THE AS SESSING OFFICER WAS OF THE VIEW THAT VOUCHERS DONOT APPEAR TO BE GENUINE. HE A LSO NOTED, AS HE CLAIMED TO FOUND ON MAKING LOCAL ENQUIRIES, THAT THERE IS NOT MUCH SCOPE OF MOVEMENT OF TRACTORS FOR INTERNAL TRANSPORTATION. HE WAS OF THE VIEW THAT THE VOUCHERS ARE FALSE AND ARE USED TO SIPHON OFF P ROFITS OF THE FIRM. IN THIS BACKDROP, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND DISALLOW RS 21,12,019 OUT OF LABOUR EXPENSES AND CARTAGE EXP ENSES, ON THE BASIS OF HIS CALCULATIONS OF EXCESS LABOUR EXPENSES AND ADOPTING THE ACTUAL WORK BY A WORKER AT 236 BAGS PER DAY AND AN ALLOWANCE FOR DEV IATIONS FROM THE SAME. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE CIT(A) BUT WITHOUT MUCH SUCCESS. THE APPELLANT MADE ELABORATE SUBMISSIONS, PRODUCED CONFIRMATIONS BY AMUL TO THE EFFECT THAT TRACTORS W ERE INDEED USED FOR INTERNAL MOVEMENT OF MATERIAL AND PRAYED FOR DELETI NG OF DISALLOWANCE. LEARNED CIT(A) UPHELD THE REJECTION OF BOOKS OF ACC OUNTS IN PRINCIPLE, BUT ITA NO.3401/AHD/2010 ASSESSMENT YEAR:2006-2007 PAGE 3 OF 4 DELETED THE DISALLOWANCE TO THE EXTENT OF RS 1,68,8 30 OUT OF LABOUR CHARGES, AND TO THE EXTENT OF RS 6,61,633 OUT OF CARTAGE EXP ENSES. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN LIGHT OF T HE APPLICABLE LEGAL POSITION. 4. WE HAVE NOTED THAT THE ASSESSING OFFICER HAS REJ ECTED THE BOOKS OF ACCOUNTS BECAUSE, AS PER HIS EXTRAPOLATIONS OF DATA FOR ONE MONTH, THE ACTUAL LABOUR REQUIREMENTS OF THE ASSESSEE SHOULD HAVE BEE N MUCH LESS THAN WHAT HE HAS BOOKED IN THE BOOKS OF ACCOUNTS. THIS APPROA CH, HOWEVER, IS NOT ONLY LEGALLY UNSUSTAINABLE BUT ALSO OVERLOOKS THE GROUND REALITIES OF BUSINESS WHICH DONOT ALLOW SUCH CONSISTENCY OF OUTPUT AND ST ATIC SITUATIONS. WHAT A PERSON DOES IN A PARTICULAR MONTH NEED NOT FOLLOW I N ALL OTHER MONTHS AS WELL. THESE SWEEPING GENERALIZATIONS, AS ADOPTED BY THE ASSESSING OFFICER, CAN NOT MEET ANY JUDICIAL APPROVAL. AS FOR THE REJE CTION OF THE CARTAGE EXPENSES ON THE BASIS OF LOCAL ENQUIRIES, IT IS A N ADMITTED POSITION THAT THESE SEEMINGLY VAGUE LOCAL ENQUIRIES, EVEN IF THES E INQUIRIES ACTUALLY TOOK PLACE, WERE NEITHER PLACE ON RECORD OR CONFRONTED T O THE ASSESSEE. IN ANY CASE, THERE IS A DIRECT CONFIRMATION FROM AMUL WHIC H IS ON RECORD AND THIS CONFIRMATION IS CONTRARY TO THE SAID LOCAL ENQUIRIE S. THERE MAY NOT HAVE BEEN ANY CARTAGE EXPENSES IN THE LAST YEAR BECAUSE THERE MAY NOT HAVE BEEN ANY SUCH WORK IN THE LAST YEAR, BUT THAT FACT ALONE CAN NOT LEAD TO THE CONCLUSION THAT ALL CARTAGE BILL ARE FAKE OR HIGHLY INFLATED. THE VERY APPROACH OF THE AUTHORITIES BELOW HAS BEEN OF SWEEPING GENERALIZATI ONS AND PROCEEDINGS ON THE BASIS OF SURMISES AND CONJECTURES. IT IS ALSO U NREASONABLE TO ACCEPT THE ASSESSEE TO PRODUCE FOR VERIFICATION THE PERSONS WH O DID ALL THIS WORK FOR HIM. ONCE THE BOOKS ARE REJECTED, THE ASSESSING OFF ICER MAY AS WELL HAVE EXAMINED THE REASONABLENESS OF PROFITS OF THE ASSES SEE AND POINTED OUT HOW ITA NO.3401/AHD/2010 ASSESSMENT YEAR:2006-2007 PAGE 4 OF 4 THE PROFITS OF THE ASSESSEE ARE LESSER THAN THE NOR MAL PROFITS IN THAT LINE OF BUSINESS BUT THAT EXERCISE HAS ALSO NOT BEEN CARRIE D OUT. ON ONE HAND, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT S, AND ON THE OTHER HAND, THE ASSESSING OFFICER HAS ADOPTED THE SAME BOOK RES ULTS AND DISALLOWED THE EXPENSES ON ESTIMATE BASIS FROM THE BOOK RESULTS. I N VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF TH E CASE, WE DEEM IT FIT AND PROPER TO DELETE THE IMPUGNED DISALLOWANCE, WHICH A RE MADE BY IMPROPERLY REJECTING THE BOOKS OF ACCOUNTS AND ADOPTING SOME H YPOTHETICAL COMPUTATIONS ABOUT LABOUR WORK AND PROCEEDINGS ON T HE BASIS OF SURMISES AND CONJECTURES, AND DIRECT THE ASSESSING OFFICER T O GIVE RELIEF ACCORDINGLY. 5. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERM S INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON 10 TH DAY OF MAY, 2013. SD/- SD/- (KUL BHARAT ) (PRAMOD KUMAR) JUDICIAL MEMBER ACCOU NTANT MEMBER AHMEDABAD: 10 TH DAY OF MAY 2013. TRUE COPY COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER , AHMEDABAD 4. DEPARTMENTAL REPRESENTATIVE, BENCH, AHMEDABA D 5. GUARD FILE BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD