Sekhon Roadways & Trading Co., Baroda V. The Income tax Officer,Ward-2(5), Baroda

ITA 3882/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6593 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 27-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Keywords: Opportunity of being heard; Additional evidence; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL, VICE-PRESIDENT(A Z) & HONBLE SHRI T.K. SHARMA, J.M.) I.T.A. NO. 3882/AHD./2008 ASSESSMENT YEAR : 2005-2006 SEKHON ROADWAYS & TRADING CO., BARODA -VS.- INC OME TAX OFFICER, WARD-2(5), BARODA (PAN : AAFFS 2741 F) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BHAVIN MARFAT IA RESPONDENT BY : SHRI C.K. MISHRA, SR . D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 09.09.2008 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-II, BARODA FOR THE ASSESSMENT YEAR 2005-06. 2. GROUND NO. 1 RAISED BY THE ASSESSEE READS AS UND ER :- THE LD. CIT.(A) ERRED IN FACT AND IN LAW IN CONFIR MING THE ACTION OF ITO, WARD-2(5) IN MAKING ADDITION OF OUTSTANDING CR EDITORS OF RS.16,29,934/- ON ACCOUNT OF CEASED LIABILITY U/S. 41(1) OF THE INCOME TAX ACT, 1961. 3. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE S HRI BHAVIN MARFATIA APPEARED AND CONTENDED THAT BEFORE THE LEARNED COMMISSIONER OF I NCOME TAX(APPEALS), THE ASSESSEE FILED AFFIDAVITS FROM THE CREDITORS CONFIRMING THAT THE A MOUNT IS OUTSTANDING AS IN JULY, AUGUST, 2008. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REFUSED TO THESE ADDITIONAL EVIDENCES ON THE GROUND THAT THESE WERE NOT FILED AT THE TIME OF ASSESSMENT PROCEEDINGS AND ALSO THAT THESE ADDITIONAL EVIDENCE S ARE NOT VERY RELEVANT. NO REASONS WHATSOEVER WERE GIVEN BY THE LEARNED COMMISSIONER O F INCOME TAX(APPEALS) FOR NOT ADMITTING THE ADDITIONAL EVIDENCES OR HOLDING THAT THESE ARE NOT VERY RELEVANT. THE LD. COUNSEL OF THE ASSESSEE ACCORDINGLY CONTENDED THAT IN THE INTEREST OF JUSTICE, THE DISALLOWANCE OF RS.16,29,934/- MADE BY THE A.O. ON ACCOUNT OF CEASED LIABILITY UND ER SECTION 41(1) OF THE INCOME TAX ACT BE 2 ITA NO. 3882/AHD/200 8 RESTORED TO THE FILE OF A.O. WITH THE DIRECTION TH AT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) MAY ADMIT THE ADDITIONAL EVIDENCES, MA Y CROSS VERIFICATION, IF REQUIRES, AND RE- ADJUDICATE THIS ADDITION AFRESH IN ACCORDANCE WITH LAW. 4. ON THE OTHER HAND, SHRI C.K. MISHRA, SR. D.R. AP PEARING ON BEHALF OF REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LEARNED COMMISSIO NER OF INCOME TAX (APPEALS). 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUT HORITIES BELOW. IT IS TRUE THAT THE ADDITIONAL EVIDENCES WERE FILED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). LOOKING TO THE NATURE OF EVIDENCES, WE ARE OF THE V IEW THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE ADMITTED THE EVIDENCES A ND THEREAFTER CALLED THE REMAND REPORT FROM THE A.O. SINCE THIS WAS NOT DONE, WE SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ON THIS ISSUE AND RESTORE THIS ADDITIO N TO THE FILE OF A.O. WITH THE DIRECTION THAT THE ASSESSEE SHOULD FURNISH WHATEVER EVIDENCES WERE FUR NISHED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), A.O. WILL EXAMINE THE SAME, MA Y MAKE NECESSARY ENQUIRY AND RE- ADJUDICATE THE ADDITION OF RS.16,29,934/- AFRESH AF TER PROVIDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. 6. THE ONLY OTHER GROUND RAISED BY THE ASSESSEE IS AS UNDER :- THE LEARNED C.I.T(A) ERRED IN FACT AND IN LAW IN C ONFIRMING THE ACTION OF A.O. IN MAKING ADDITION OF RS.3,48,904/- INVOKIN G PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME TAX ACT, 1961. 7. BRIEF FACTS RELATING TO DISALLOWANCE OF RS.3,48, 904/- MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40A(2) IS THAT IN THE ASSESSM ENT ORDER THE A.O. OBSERVED THAT THE ASSESSEE HAS MADE PAYMENT OF CARTAGE CHARGES TO THE PARTNERS AND RELATIVES. HE ACCORDINGLY TOOK THE AVERAGE OF EXCESS PAYMENT AT 4% AND WORKED OUT INFL ATED CARTAGE PAYMENT OF RS.3,48,904/-. ON APPEAL, BEFORE THE LEARNED COMMISSIONER OF INCOME T AX(APPEALS) IT WAS CONTENDED THAT TRANSPORTATION BUSINESS IS VERY RISKY BECAUSE OF HI GH VALUE OF GOODS INVOLVED. FIRM CANNOT AFFORD TO TAKE RISKS, THEREFORE, THE TRANSPORT WORK WAS MO STLY GIVEN TO THE RELATIVES. THE PAYMENTS MADE TO THE RELATIVES WERE AT PREVALENT MARKET RATE ONLY KEEPING IN VIEW THE HANDLING FOR TRANSPORTATION OF MANUFACTURING GOODS LIKE RECOVERY OF DAMAGES, EA SY AVAILABILITY OF VEHICLES, LOWER RISK OF 3 ITA NO. 3882/AHD/200 8 UNEXPECTED LOSSES SUCH AS THOUGH, SHORTAGE, ETC. TH E LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE DISALLOWANCE FOR THE DET AILED REASONS GIVEN IN PARA 3.3., WHICH READS AS UNDER :- 3.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE COUN SEL AND FACTS OF THE CASE. IT IS NOT IN DISPUTE THAT THE CARTAGE CHARGES PAID TO SPECIFIED PERSONS WERE AT HIGHER RATES AS COMPARED TO OUTSIDE PARTIES. THE REASONS FOR GIVING HIGHER RATES ARE NOT SUPPORTED B Y ANY EVIDENCE. THE REASONS ARE GENERAL IN NATURE AND CANNOT JUSTIFY TH E HIGHER MARKET VALUE. CONSIDERING THIS, THE ADDITION MADE BY THE A SSESSING OFFICER IS JUSTIFIED. ONUS IS ON THE APPELLANT TO PROVE THAT T HE EXPENSES CLAIMED AGAINST SPECIFIED PERSONS ARE NOT EXCESSIVE OR UNRE ASONABLE, HOWEVER, ASSESSING OFFICER HAS PROVED ON RECORD THAT THE CAR TAGE CHARGES PAID TO THE RELATIVES ARE HIGHER THAN MARKET RATE. CONSIDER ING THIS, THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 8. AT THE TIME OF HEARING, SHRI BHAVIN MARFATIA, LD . COUNSEL OF THE ASSESSEE APPEARED AND CONTENDED THAT THE RELATIVES COVERED BY SECTION 40A (2) ARE PAID AT A HIGHER RATE BECAUSE WHEREVER MORE RISK IS INVOLVED, TRANSPORT WORK IS GIVEN TO T HE RELATIVES. BOTH THE DEPARTMENTAL AUTHORITIES BELOW REJECTED THE EXPLANATION OF THE ASSESSEE ON D OUBTS AND SUSPICION, THEREFORE, THE DISALLOWANCE OF RS.3,48,904/- MADE BY THE A.O. BY I NVOKING THE PROVISIONS OF SECTION 40A(2) OF THE INCOME TAX ACT, 1961 BE DELETED. 9. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. HE POINTED OUT THAT NO DOCUME NTARY EVIDENCE IN SUPPORT OF THE CLAIM THAT TRANSPORT WORK GIVEN TO THE RELATIVES INVOLVED MORE RISK. THEREFORE, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) BE UPH ELD. 10. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. ADMITTEDLY, THE EXCESS PAYMENT AS WORKED OUT BY THE A.O. IS MERELY 2.5%. BEFORE THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS), IT WAS CONTENDED THAT WHEREVER HIGH VALUE OF GOODS INVOLVED, TRANSPORT WORK IS GIVEN TO RELATIVE S. THIS EXPLANATION OF THE ASSESSEE HAS BEEN REJECTED BY BOTH THE DEPARTMENTAL AUTHORITIES BELOW ON DOUBTS AND SUSPICION. LOOKING TO THE SMALLNESS OF THE AMOUNT INVOLVED AND DIFFERENCE IN PRICES, WE ARE OF THE VIEW THAT BOTH THE DEPARTMENTAL AUTHORITIES BELOW SHOULD HAVE ACCEPTED THE EXPLANATION OF THE ASSESSEE. PAYMENT TO SPECIFIED PERSONS IS MARGINALLY HIGHER BECAUSE OF M ANY FACTORS LIKE RECOVERY OF DAMAGES, EASY 4 ITA NO. 3882/AHD/200 8 AVAILABILITY OF VEHICLES, LOWER RISK OF UNEXPECTED LOSSES SUCH AS THOUGH, SHORTAGE, ETC. IN THIS VIEW OF THE MATTER, DISALLOWANCE OF RS.3,48,904/- M ADE BY THE A.O. AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS DELE TED. RESULTANTLY, THIS GROUND OF APPEAL IS ALLOWED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AS INDICATED ABOVE. THE ORDER WAS PRONOUNCED IN THE COURT ON 09.04.2010 . SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 09 / 04 /2010 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER D EPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.