M/S HARI KISHAN TEJMAL & CO., BUNDI V. ADDITIONAL COMMISSIONER OF INCOME TAX, KOTA

ITA 370/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7202 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH JCIT DHK
• Assessee Lawyers: SHRAVAN GUPTA
• Keywords: Depreciation; Corroborative evidences
• Section: 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA -@ ITA NO. 370/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 M/S HARI KISHAN TEJMAL & CO. C/O- RAJESH RICE MILL, CHITTORE ROAD, BUNDI. C UKE VS. ADDITIONAL CIT, RANGE-I, KOTA. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: AAEFH 4782 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY: SHRI SHRAVAN GUPTA (ADV) JKTLO DH VKSJ LS @ REVENUE BY : SMT. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/09/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/10/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10/01/2018 OF LD. CIT(A), KOTA FOR THE A.Y. 2011-12. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. A.O. GROSSLY ERRED ON LAW AND FACTS IN MAKING THE DISALLOWANCE ON AD HOC BASIS OUT TRANSPORTATION EXPENSES @10% AND OUT OF THIS THE LD. CIT(A) ALLOWED RS. 181560/- AND ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 100,000/- ON LUMP SUM BASIS. 2. THAT THE LD. A.O. GROSSLY ERRED ON LAW AND FACTS IN MAKING THE DISALLOWANCE OUT OF SOYABEAN EXPENSES @ 20% ON AD HOC BASIS. ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 2 THE LD. C.I.T.(A) ALLOWED IN PART AND ERRED IN SUSTAINING THE DISALLOWANCE OUT OF SOYABEAN EXPENSES RS. 27976.00. 3. THAT THE LD. A.O. GROSSLY ERRED ON LAW AND FACTS IN MAKING THE DISALLOWANCE OUT OF WHEAT EXPENSES @ 20% ON AD HOC BASIS. THE LD. C.I.T.(A) ALLOWED IN PART AND ERRED IN SUSTAINING THE DISALLOWANCE OUT OF WHEAT EXPENSES RS. 23481.00. 4. THAT THE LD. A.O. GROSSLY ERRED ON LAW AND FACTS IN MAKING THE DISALLOWANCE OUT OF VARIOUS ADMINISTRATIVE EXPENSES @ 20% ON AD HOC BASIS. THE LD. C.I.T. (A) ALLOWED IN PART AND ERRED IN SUSTAINING THE DISALLOWANCE OUT OF VARIOUS EXPENSES RS. 31917.00. 5. ANY OTHER GROUND AT THE TIME OF HEARING. 2. GROUND NO.1 OF THE APPEAL IS REGARDING DISALLOWANCE OF TRANSPORTATION EXPENSES @ 10% BY THE A.O. AND AN AD HOC DISALLOWANCE WAS SUSTAINED BY THE LD. CIT(A) TO THE EXTENT OF RS. 1.00 LAC ON LUMP SUM BASIS. THE ASSESSEE IS IN THE BUSINESS OF KACHA AADHAT AND TRADING OF FOOD GRAINS. THE A.O. NOTED THAT THE ASSESSEE HAD DEBITED AMOUNT OF RS. 28,15,609/- UNDER THE HEAD TRANSPORTATION EXPENSES. ON EXAMINATION OF THE DETAILS OF THE EXPENDITURE, THE A.O. OBSERVED THAT SOME OF THE EXPENSES BELOW RS. 20,000/- ARE PAID IN CASH AND NO SUPPORTING EVIDENCE IS AVAILABLE WITH THE ASSESSEE EXCEPT OF SELF-PREPARED VOUCHERS. THUS, THE A.O. HELD THAT IN ABSENCE OF COMPLETE PARTICULARS OF THE RECIPIENT, SELF-PREPARED VOUCHERS ARE ONLY A DEVICE TO SUIT THE ASSESSEE AND CONSEQUENTLY DISALLOWED 10% OF THESE TOTAL EXPENSES AMOUNTING TO RS. 2,81,560/-. ON APPEAL, THE LD. CIT(A) ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 3 HAS RESTRICTED THE DISALLOWANCE FOR A LUMP SUM AMOUNT OF RS. 1.00 LAC AS AGAINST RS. 2,81,560/- MADE BY THE A.O. 3. BEFORE THE TRIBUNAL, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS INCURRED TRANSPORTATION EXPENSES AND PAYMENT HAS BEEN MADE MOSTLY BY CHEQUE OR IN CASH. ALL THE PAYMENTS ARE SUPPORTED BY THE VOUCHERS EXCEPT THE LOCAL TRANSPORT OF UPCOUNTRY/DIRECT/FREIGHT HAS BEEN PAID ON THE BASIS OF G.R. PRODUCED BY THE TRANSPORTER AND THIS IS THE REGULAR FEATURE AND PRACTICE IN THIS TRADE SINCE LONG. HE HAS FURTHER CONTENDED THAT THE A.O. WAS NOT GIVEN A SINGLE EXAMPLE OF SELF-PREPARED VOUCHER NOT VERIFIABLE BUT THE DISALLOWANCE OF 10% IS BASED ON SURMISES AND CONJECTURE. THE ASSESSEE HAS PRODUCED ALL THE DETAILS OF EACH AND EVERY EXPENDITURE INCURRED ON TRANSPORT GIVING THE DETAILS OF COMMODITY TRANSPORTED AND THE DESTINATION. THE PAYMENT IS MADE AS PER THE RATES APPLICABLE AS PRESCRIBED BY THE TRANSPORT UNIONS IN THE CITY. THUS, THE DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS NOT JUSTIFIED. 4. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS SUPPORTED ITS EXPENDITURE BY SELF-MADE VOUCHERS IN RESPECT OF PAYMENT OF LESS THAN RS. 20,000/- IN EACH CASE, THEREFORE, THE ASSESSEE HAS DELIBERATELY SHOWN THE PAYMENT IN CASH OF LESS THAN RS. 20,000/- ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 4 AND SUPPORTED BY SELF-MADE VOUCHERS. SHE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD. CIT(A) HAS ALREADY GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH, THE A.O. FOUND CERTAIN IRREGULARITIES IN THE SUPPORTING EVIDENCE PRODUCED BY THE ASSESSEE IN RESPECT OF TRANSPORT EXPENSES AND PARTICULARLY IN RESPECT OF THE PAYMENT OF LESS THAN RS. 20,000/-. HOWEVER, WHILE MAKING THE DISALLOWANCE, THE A.O. HAS MADE DISALLOWANCE OF 10% OF THE ENTIRE EXPENDITURE WITHOUT EVEN GIVING DETAILS WHAT IS THE PERCENTAGE OF PAYMENT MADE IN CASH, WHICH IS SUPPORTED BY SELF-MADE VOUCHERS. THUS, THE DISALLOWANCE IS MADE WITHOUT CONSIDERING THE RELEVANT FACTS. FURTHER, WHEN THE TRANSPORTATION AND FREIGHT EXPENSES IS INEVITABLE IN THE ASSESSEES LINE OF BUSINESS THEN WITHOUT CONDUCTING ANY ENQUIRY OR GIVING A FINDING, THE PAYMENT MADE BY THE ASSESSEE IS EITHER BOGUS OR EXCESSIVE/INFLATED THEN AN AD HOC DISALLOWANCE MADE BY THE A.O. OF THE ENTIRE CLAIM OF TRANSPORT EXPENSES WHERE THE MAJORITY OF THE PAYMENT HAS BEEN MADE THROUGH CHEQUES IS NOT JUSTIFIED. THE LD. CIT(A) HAS ALSO CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS. 1.00 LACS WHICH IS AN AD HOC DISALLOWANCE WITHOUT CONSIDERING THE RELEVANT FACTS ON THE ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 5 ISSUE, ACCORDINGLY, THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS DELETED. 6. GROUND NO. 2 OF THE APPEAL IS REGARDING DISALLOWANCE OF SOYABEAN EXPENSES @ 20%. THE ASSESSEE HAS DEBITED AMOUNT OF RS.2,79,762/- UNDER THE HEAD SOYABEAN EXPENSES. ON EXAMINATION OF THE DETAILS OF THE EXPENDITURE, THE A.O. OBSERVED THAT THE ASSESSEE HAS PAID SOME OF THE EXPENSES IN CASH WHICH ARE BELOW RS. 20,000/- FOR WHICH NO SUPPORTING EVIDENCE IS AVAILABLE WITH THE ASSESSEE EXCEPT SELF-MADE VOUCHERS. THUS, THE A.O. ON THE SIMILAR GROUND AS DISALLOWANCE MADE ON ACCOUNT OF TRANSPORT EXPENSES, HAS MADE DISALLOWANCE OF 20% OF THE EXPENSES. ON APPEAL, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 10% OF THE EXPENSES. 7. BEFORE THE TRIBUNAL, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THERE ARE VOUCHERS FOR EVERY PAYMENT. THE A.O. HAS NOT JUSTIFIED THE SELF-PREPARED VOUCHER AS THESE SELF-PREPARED VOUCHERS ARE DOCUMENTARY PROOF BECAUSE IN UN-ORGANIZED SECTOR NO ONE WANTS TO ISSUE BILL FROM THE WORK LIKE LABOUR ETC. AND, THEREFORE, EVERY PAYMENT IS MADE BY SELF-PREPARED VOUCHER. THE A.O. HAS NOT CITED EVEN A SINGLE EXAMPLE OF ANY SELF- PREPARED VOUCHER AND BASED ON PROBABILITY, SURMISES & ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 6 CONJECTURES HE HAS DISALLOWED 20% ON LUMP SUM BASIS. HE HAS ALSO SUBMITTED THAT THERE IS NO RULE TO DISALLOW THE EXPENSES AT A CERTAIN PERCENTAGE WHEN THERE IS NO CONCRETE FINDING OF THE A.O. ABOUT ANY DEFICIENCY IN THE EXPENDITURE INCURRED BY THE ASSESSEE. HE HAS ALSO SUBMITTED THAT THE LD. CIT(A) ALLOWED PART OF THE EXPENSES THAT TOO ON ASSUMPTION, WHICH IS WRONG & THUS SUBMIT TO ALLOW THE TOTAL EXPENSES INCURRED BY THE ASSESSEE. 8. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS CLAIMED PAYMENT OF THE ENTIRE EXPENDITURE IN CASH WHICH HAS BEEN SUPPORTED BY SELF-MADE VOUCHERS WHICH IS NOT VERIFIABLE AS NO PARTICULARS ARE GIVEN TO WHOM THE PAYMENT WAS MADE. SHE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. FROM THE DETAILS OF THE EXPENDITURE INCURRED ON ACCOUNT OF SOYABEAN EXPENSES, IT IS FOUND THAT THE SAID EXPENDITURE IS INCURRED ON ACCOUNT OF PALA AND BHARAI WHICH MEANS PAYMENT IS MADE FOR LOADING AND UNLOADING OF THE GOODS. THOUGH, THE PAYMENT IN SUCH NATURE OF EXPENDITURE IS MADE IN CASH TO THE LABOURERS, HOWEVER, THE LABOURERS IN A PARTICULAR MANDI ARE REGULAR LABOURERS WORKING AND NOT ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 7 THE STRANGE PERSONS TO THE TRADERS IN A PARTICULAR MANDI. THEREFORE, ONCE THE LABOURERS ARE KNOWN AND WORKING ALMOST REGULARLY WITH THE ASSESSEE AND OTHER TRADERS THEN THE DETAILS AND PARTICULARS OF THE RECIPIENTS SHOULD BE MENTIONED IN THE VOUCHERS. EVEN WHEN THESE ARE REGULAR WORKERS WORKING IN THE MANDI THEN VOUCHERS MUST HAVE BEEN GOT SIGNED FROM THE RECIPIENTS. SINCE THE ENTIRE PAYMENT IS MADE IN CASH, THEREFORE, THE DISALLOWANCE RESTRICTED BY THE LD. CIT(A) TO 10% IS PROPER AND REASONABLE. HENCE, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE. 10. GROUND NO. 3 OF THE APPEAL IS REGARDING DISALLOWANCE OF WHEAT EXPENSES, WHICH WAS RESTRICTED BY THE LD. CIT(A) TO 10% FROM 20%. 11. I HAVE HEARD THE LD AR AS WELL AS THE LD.DR AND PERUSED THE MATERIAL ON RECORD. THIS ISSUE IS IDENTICAL TO THE ISSUE OF DISALLOWANCE OF SOYABEAN EXPENSES BEING ON ACCOUNT OF PALA AND BHARAI I.E. LOADING AND UNLOADING OF THE GOODS, THEREFORE, IN VIEW OF MY FINDING ON ACCOUNT OF SOYABEAN EXPENSES, 10% DISALLOWANCE RESTRICTED BY THE LD. CIT(A) IS PROPER AND JUSTIFIED. 12. GROUND NO. 4 OF THE APPEAL IS REGARDING DISALLOWANCE OF ADMINISTRATIVE EXPENSES. THE A.O. NOTED THAT THE ASSESSEE HAS DEBITED OFFICE EXPENSES, TELEPHONE EXPENSES, VEHICLE RUNNING AND MAINTENANCE ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 8 EXPENSES AND DEPRECIATION ON CAR IN THE P&L ACCOUNT. MOST OF THE EXPENSES WERE PAID IN CASH AND SUPPORTED BY SELF-MADE VOUCHERS, WHICH WERE BELOW RS. 20,000/-. THE A.O. ACCORDINGLY DISALLOWED 20% OF THESE EXPENSES FOR WANT OF VERIFIABLE OF THE SUPPORTING EVIDENCE. ON APPEAL, THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 10% OF ALL THESE FOUR ITEMS. 13. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE A.O. HAS DISALLOWED 20% OF THE FOLLOWING EXPENSES: 1. OFFICE EXPENSES RS. 99,038/- 2. TELEPHONE EXPENSES RS. 83,738/- 3. VEHICLE RUNNING & MAINT. EXPENSES RS. 73,281/- 4. DEPRECIATION ON CAR RS. 63,109/- TOTAL RS. 3,19,166/- AS IT IS CLEAR FROM THE NATURE OF EXPENSES, THE DEPRECIATION ON CAR CANNOT BE DISALLOWED ON THE GROUND OF NON-FURNISHING OF VOUCHERS OR NON-VERIFIABLE OF THE EXPENDITURE. THE DEPRECIATION IS A STATUTORY ALLOWANCE PROVIDED U/S 32 OF THE ACT, THEREFORE, THE DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF DEPRECIATION ON CAR IS DELETED. SIMILARLY, TELEPHONE EXPENSES ARE ALSO NOT REQUIRED TO BE PROVED BY ANY VOUCHER WHEN THE TELEPHONE BILL ITSELF IS A PROOF. EVEN ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 9 OTHERWISE, THIS EXPENDITURE CAN BE VERIFIED FROM AN INDEPENDENT SOURCE. IN ABSENCE OF ANY VERIFICATION CONDUCTED BY THE A.O. REGARDING THE GENUINENESS OF THE EXPENDITURE, THE DISALLOWANCE MADE AND SUSTAINED BY THE LD. CIT(A) IS NOT JUSTIFIED, THE SAME IS DELETED. AS REGARDS THE OFFICE EXPENSES, AFTER GOING THROUGH THE DETAILS OF THE EXPENDITURE, IT IS NOTED THAT THE MAJORITY OF THE EXPENDITURE HAS BEEN INCURRED THROUGH CHEQUES EXCEPT ONLY ONE ITEM OF EXPENDITURE WHICH IS LABOUR CHARGES OF RS. 2,150/- FOR COLOUR IN OFFICE. ALL OTHER EXPENSES ARE DULY SUPPORTED BY THE BILLS OF THE VENDOR. IT APPEARS, WITHOUT VERIFYING THE DETAILS OF THE EXPENDITURE, THE A.O. HAS MADE AD HOC DISALLOWANCE IN A ROUTINE MANNER. ACCORDINGLY, THE DISALLOWANCE MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) IS DELETED. WITH REGARD TO VEHICLE RUNNING AND MAINTENANCE EXPENSES, FROM PERUSAL OF THE DETAILS OF THE EXPENDITURE, IT IS NOTED THAT THE ENTIRE PAYMENT IS MADE IN CASH AND SOME OF THE PAYMENTS ARE MADE FOR PETROL AND FOR OTHERS. NO DESCRIPTION IS GIVEN IN THE DETAILS OF THE EXPENDITURE EXCEPT SOME BILL NUMBER IS GIVEN. THEREFORE, WHEN THE ENTIRE EXPENDITURE IS INCURRED IN CASH THEN THE DISALLOWANCE OF 10% MADE BY THE LD. CIT(A) IS ON ACCOUNT OF VEHICLE RUNNING AND ITA 370/JP/2018 M/S HARI KISHAN TEJMAL & CO. VS ADDL.CIT 10 MAINTENANCE EXPENSES IS PROPER AND JUSTICE. HENCE, I DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE LD. CIT(A) QUA THIS ISSUE. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH OCTOBER, 2019. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH OCTOBER, 2019 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S HARI KISHAN TEJMAL & CO., BUNDI. 2. IZR;FKHZ @ THE RESPONDENT- THE ADDITIONAL CIT, RANGE-I, KOTA. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 370/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR