The ACIT, Circle-9, Surat V. M/s. Airwide Express Cargo, Surat

ITA 4084/AHD/2008

• Counselvise Citation: 408420514 RSA 2008
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWAMI
• Assessee Lawyers: RASESH B SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI D. K. TYAGI, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.3721 / AHD/2008 (ASSESSMENT YEAR 2005-06) M/S. AIRWIDE EXPRESS CARGO, A-104, ABHISHEK APARTMENT, VARACHHA ROAD, SURAT VS. ITO, WARD 7(1), SURAT I.T.A. NO.4084 / AHD/2008 (ASSESSMENT YEAR 2005-06) ITO, WARD 7(1),SURAT VS. M/S. AIRWIDE EXPRESS CARGO, A-104, ABHISHEK APARTMENT, VARACHHA ROAD, SURAT PAN/GIR NO. : AABFC6664K (APPELLANT) .. (RESPONDENT) ASSESSEE BY : SHRI RASESH B SHAH, AR REVENUE BY: SHRI VINOD TANWAMI, SR. DR DATE OF HEARING: 18.10.2011 DATE OF PRONOUNCEMENT: 21.10.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AND THESE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) IV, SU RAT DATE 6.10.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL A ND THE ONLY GROUND RAISED BY THE REVENUE ARE INTERCONNECTED WHICH READ AS UNDER: 1. THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITIO N OF RS. 13,72,590/-. I.T.A.NO. 3721 & 4084 /AHD/2008 2 2. THAT THE CTT(A) ERRED IN COMPARING THE RESULTS O F THE YEAR UNDER APPEAL WITH THAT OF IMMEDIATELY PRECEDING YEAR. EAC H YEAR IS A SEPARATE YEAR. '. 3. THE GROUND RAISED BY THE REVENUE READS AS UDDE R: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), HAS ERRED IN DELETING THE ADDITION ON ACCOU NT OF LOADING, UNLOADING AND TEMPO EXPENSES OF RS.6,00,000/- MADE BY THE A.O., WITHOUT APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSEE FAILED TO PRODUCE COMPLETE BOOKS OF ACCOUNTS, VOUCHERS, DETAI LS OF THE PARTIES, ETC. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT( A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE BRIEF FACTS OF THIS ISSUE ARE NOTED BY THE L D. CIT(A) ON PAGES 1 & 2 OF HIS ORDER WHICH ARE REPRODUCED BELOW: THE NEXT THREE GROUND OR APPEAL ARE RELATED AND AR E REGARDING DISALLOWANCE OF EXPENSE OF RS.19,72,590/-. THE AO OBSERVED THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS OF CARGO & TRANSPORT SERVIC ES THROUGH RAILWAY AND AS PER THE BALANCE SHEET, THE LOADING EXPENSES PAYA BLE WE'RE RS.5,65,040/-, TEMPO EXPENSES PAYABLE WERE RS.15,00,070/- AND UNLO ADING EXPENSES PAYABLE WERE RS.5,65.015/-. THE AO REQUIRED THE APP ELLANT TO GIVE DETAILS OF DATE OF PAYMENTS, NAME & ADDRESS AND CONFIRMATION O F THE PARTIES TO WHOM THE PAYMENTS WERE MADE IN THE SUBSEQUENT YEARS. HOW EVER, HO DETAILS REGARDING NAME & ADDRESS OF THE PERSONS WERE FILED. THE AO FURTHER OBSERVED THAT THE APPELLANT HAD DEBITED A SUM OF RS .87,15,806/- UNDER THESE THREE HEADS IN THE P&L ACCOUNT AND THE OUTSTANDING AMOUNT WAS ABOUT 30% OF THE TOTAL CLAIM WHICH WAS ALMOST EQUAL TO FO UR MONTHS EXPENSES. HE WAS OF THE VIEW THAT THE APPELLANT HAD TAKEN MORE T HAN FOUR MONTHS TO CLEAR THE OUTSTANDING PAYMENTS TO THE LABORERS WHICH WAS NOT LIKELY SINCE LABORERS WERE POOR PERSONS AND WERE DEPENDENT ON DAY TO DAY EARNINGS. THE AO THEREFORE CONCLUDED THAT THE OUTSTANDING PAYMENTS O N THESE ACCOUNTS WERE NOT GENUINE AND ALLOWED ONLY OUTSTANDING OF ONE MON TH DISALLOWING THE BALANCE AMOUNT. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). IT IS NOTED BY THE LD. CIT(A) THAT THE SAM E ISSUE AROSE IN ASSESSMENT YEAR I.T.A.NO. 3721 & 4084 /AHD/2008 3 2004-05 ALSO AND IN THAT YEAR, THE ENTIRE ADDITION WAS CONFIRMED BY HIS ORDER DATED 14.08.2007 AGAINST WHICH THE ASSESSEE FILED 2 ND APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL ALLOWED PART RELIEF TO THE ASSESSEE IN I.T .A.NO. 3924/AHD/2007 DATED 01.09.2008. LD. CIT(A) HAS NOTED ON PAGE 3 OF THIS ORDER THAT THE FACTS ARE THE SAME IN THE PRESENT YEAR AS COMPARED TO THE FACTS I N THE ASSESSMENT YEAR 2004-05. HE FURTHER NOTED THAT THE TRIBUNAL HAS ALLOWED RELI EF TO THE ASSESSEE OF RS.3 LACS AND IN THE LIGHT OF THIS DECISION OF THE TRIBUNAL, THE LD. CIT(A) ALLOWED RELIEF OF RS.6 LACS IN THE PRESENT YEAR AND CONFIRMED THE BAL ANCE DISALLOWANCE OFRS.13,72,590/-. NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US FOR THE PART DISALLOWANCE CONFIRMED BY THE LD. CIT(A) WHEREAS, THE REVENUE IS IN APPEAL BEFORE US FOR THE RELIEF OF RS.6 LACS ALLOWED BY TH E LD. CIT(A). 6. LD. D.R. FOR THE REVENUE SUPPORTED THE ASSESSMEN T ORDER WHEREAS IT WAS SUBMITTED BY THE LD. A.R. FOR THE ASSESSEE THAT IN THE PRESENT YEAR, ALTHOUGH THERE IS SLIGHT FALL IN THE GP TO 18.70% AS AGAINST GP OF 19.90% IN THE PRECEDING YEAR, NP IN THE PRESENT YEAR IS THE SAME AS IN THE PRECED ING YEAR I.E. 2.33% AS NOTED BY THE A.O. IN PARA 3 OF THE ASSESSMENT ORDER. IT IS FURTHER SUBMITTED BY HIM THAT THE GP CHART OF THE PRESENT YEAR AND EARLIER TWO YEARS ARE AVAILABLE ON PAGE 1 OF THE PAPER BOOK AS PER WHICH, GP DECLARED BY THE ASSESSE E IN THE PRESENT YEAR IS 18.71% AS AGAINST 19.91% IN THE PRECEDING YEAR AND 17.12% IN THE ASSESSMENT YEAR 2003-04. IT WAS HIS SUBMISSION THAT AVERAGE GP OF THE LAST TWO YEARS I.E. ASSESSMENT YEAR 2004-05 AND 2003-04 MAY BE ADOPTED IN THE PRESENT YEAR. AT THIS JUNCTURE, THE BENCH WANTED TO KNOW THE GP IN THE PR ECEDING YEAR AFTER INCLUDING THE ADDITION CONFIRMED BY THE TRIBUNAL IN THE GP OF THE ASSESSEE OF THE PRECEDING YEAR. IN REPLY, A REVISED GP CHART FOR THE ASSESSM ENT YEARS 2004-05 WAS SUBMITTED BY THE LD. A.R. IN WHICH THE GP HAD BEEN WORKED OUT AT 25.22% AFTER INCLUDING THE ADDITION CONFIRMED BY THE TRIBUNAL IN THE GP OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05. IT WAS ALSO SUBMITTED THAT IN ASSESS MENT YEAR 2004-05, IT IS OBSERVED BY THE TRIBUNAL IN PAR 6 & 8 THAT IF ENTIR E DISALLOWANCE IS CONFIRMED, THE I.T.A.NO. 3721 & 4084 /AHD/2008 4 RESULTANT GP WILL BE 27.35%, WHICH IS NOT POSSIBLE IN THIS LINE OF BUSINESS. IT IS SUBMITTED THAT STILL, THE TRIBUNAL CONFIRMED THE DI SALLOWANCE OF RS.7,51,186/- IN THAT YEAR WHICH IS RESULTING IN GP OF 25.22% IN THA T YEAR, WHICH IS ALSO NOT ACHIEVABLE IN THIS LINE OF BUSINESS. HE SUBMITTED THAT AFTER REDUCING THE DISALLOWANCE CONFIRMED BY THE TRIBUNAL IN ASSESSMEN T YEAR 2004-05, PERCENTAGE OF THESE FOUR EXPENSES IN THAT YEAR TO GROSS RECEIP T IS WORKED OUT AND WHEN THE SAME IS COMPARED WITH PERCENTAGE OF THESE EXPENSES TO GROSS RECEIPT IN THE PRESENT YEAR, IT IS SEEN THAT EXCEPT TEMPO CHARGES, ALL OTH ER THREE EXPENSES ARE LOWER IN THE PRESENT YEAR IN PERCENTAGE TERMS. FOR TEMPO CHARGE S ALSO, IF SAME PERCENTAGE IS MAINTAINED, THEN DISALLOWANCE OF ONLY RS.4,46,976/- IS CALLED FOR. HE SUBMITTED THAT DISALLOWANCE TO THIS EXTENT MAY BE CONFIRMED I N THE PRESENT YEAR OR GP MAY BE ADOPTED AT AVERAGE G.P. OF PRESENT YEAR AND EARL IER TWO YEARS. 7. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . THAT THE GP RATE IN THE PRECEDING YEAR AFTER INCLUDING THE ADDITION CONFIRM ED BY THE TRIBUNAL IN THAT YEAR SHOULD BE ADOPTED IN THE PRESENT YEAR EVEN IF IT IS FELT THAT THE ENTIRE ADDITION MADE BY THE A.O. IS NOT JUSTIFIED. HE ALSO SUBMITTED TH AT WHEN BOOKS ARE REJECTED, G.P. RATE SHOULD BE APPLIED AS IN LAST YEAR AFTER TRIBUN AL ORDER AND THERE IS NO BASIS FOR CONSIDERATION OF ALLOWABILITY OF HEAD WISE EXPENSES . 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BEL OW AND THE TRIBUNAL DECISION IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 200 4-05. IN THAT YEAR, DISALLOWANCE WAS MADE BY THE A.O. OF RS.3,30,746/- OUT OF LOADING EXPENSES, RS.3.35 LACS WAS DISALLOWED OUT OF UNLOADING EXPENS ES AND RS.3,85,440/- WAS DISALLOWED OUT OF TEMPO CHARGES TOTALING RS.10,51,1 86/-. THE ENTIRE DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A) IN THAT YEAR BUT IT WAS HELD BY THE TRIBUNAL IN THAT YEAR THAT IF THIS ENTIRE ADDITION IS CONFIRMED THEN THE GP WOULD RISE TO AN UNREALISTIC AND NEVER ACHIEVABLE FIGURE OF 27.35% W HICH IS NEVER POSSIBLE IN THIS LINE OF BUSINESS IN WHICH THE ASSESSEE IS ENGAGED. IT IS ALSO NOTED BY THE TRIBUNAL IN I.T.A.NO. 3721 & 4084 /AHD/2008 5 THAT YEAR THAT GP OF THE ASSESSEE IN THAT YEAR INC REASED FROM 17.12% TO 19.19%. THE TRIBUNAL HAS ALLOWED RELIEF TO THE ASSESSEE OF RS.3 LACS AND CONFIRMED THE BALANCE ADDITION OF RS.7,51,186/- IN THAT YEAR. HE NCE, WE FEEL THAT THIS REQUEST OF THE ASSESSEE THAT THE AVERAGE GP OF THE EARLIER TWO YEARS SHOULD BE ADOPTED IN THE PRESENT YEAR, IS NOT ACCEPTABLE BECAUSE IN THE PREC EDING YEAR, THE INCREASE IN GP FROM 17.12% TO 19.19% WAS FACTORED IN BY THE TRIBUN AL WHILE ALLOWING PART RELIEF TO THE ASSESSEE OF RS.3 LACS IN THAT YEAR. WE ALSO FIND THAT ALTHOUGH IT IS NOTED BY LD. CIT(A) IN THE PRESENT YEAR THAT FACTS ARE IDENT ICAL IN THE PRESENT YEAR AS COMPARED TO ASSESSMENT YEAR 2004-05, BUT ONE DIFFER ENCE IN FACTS IS VERY IMPORTANT. THIS DIFFERENCE IS THAT EVEN WHEN WE CO NSIDER THE PERCENTAGE OF NET EXPENSES IN ASSESSMENT YEAR 2004-05 TO GROSS RECEIP T AFTER REDUCING THE DISALLOWANCE CONFIRMED BY THE TRIBUNAL AND COMPARE THE SAME WITH PERCENTAGE OF EXPENSES TO GROSS RECEIPT IN THE PRESENT YEAR, THE SAME IS LOWER IN PERCENTAGE TERMS IN THE PRESENT YEAR EXCEPT FOR TEMPO CHARGES, WHICH IS HIGHER BY 1.88%. DIFFERENCE EQUAL TO 1.88% WORKS OUT TO RS.4,46,976/ - ONLY. WE ALSO FIND THAT WHEN THE TRIBUNAL SAYS THAT GP RATE OF 27.35% IS NO T POSSIBLE IN THIS LINE OF BUSINESS, CONFIRMING OF DISALLOWANCE OF RS.7,51,186 /- IN THAT YEAR, WHICH IS RESULTING INTO GP OF 25.22% IN THAT YEAR IS PROBABL Y WITHOUT NOTICING THIS ASPECT. WE FIND THAT THIS IS THE FACT OF THE PRESENT CASE T HAT G.P. RATE WAS NOT ADOPTED BY THE A.O. IN THE PRESENT YEAR AND IN THE LAST YEAR. IN THE TRIBUNAL ORDER FOR THE PRECEDING YEAR ALSO, ALTHOUGH A COMMENT IS MADE THA T IF ENTIRE DISALLOWANCE IS CONFIRMED, THE RESULTANT G.P. RATE WILL BE 27.35%, WHICH IS NO ACHIEVABLE IN THIS LINE OF BUSINESS BUT ULTIMATELY, THE ISSUE WAS NOT DECIDED BY ADOPTING A G.P. RATE AND RELIEF WAS ALLOWED FOR RS.1 LAC UNDER EACH HEAD , TOTAL RS.3 LACS. IT WAS A CONTENTION OF THE LD. D.R. OF THE REVENUE THAT RELI EF OF RS.3 LACS WAS ALLOWED BY THE TRIBUNAL IN THE PRECEDING YEAR ONLY TO BRING TH E RESULTANT G.P. RATE TO REASONABLE LEVEL & HENCE, THE RESULTANT G.P. RATE OF THE LAST YEAR SHOULD BE ADOPTED IN THE PRESENT YEAR, WHICH IS 25.22%. BUT WE DO NOT FIND ANY FORCE IN THIS CONTENTION I.T.A.NO. 3721 & 4084 /AHD/2008 6 BECAUSE WE FIND THAT THE TRIBUNAL IN THE PRECEDING YEAR DID NOT ALLOW A LUMP SUM RELIEF OF RS.3 LACS BUT IN FACT, THE TRIBUNAL ALLOW ED RELIEF OF RS.1 LAC FOR EACH HEAD, TOTAL RS.3 LACS. THIS IN OUR OPINION MEANS THAT HE AD-WISE DISALLOWANCE OF EXPENSES WAS CONFIRMED BY THE TRIBUNAL IN THE PRECE DING YEAR AND THE TRIBUNAL DID NOT HOLD THAT 25.22% G.P. RATE IS TO BE ADOPTED BEI NG REASONABLE IN THIS BUSINESS. HENCE, IN OUR CONSIDERED OPINION, THE PERCENTAGE OF THESE EXPENSES TO GROSS RECEIPT IN THE PRECEDING YEAR SHOULD BE ADOPTED AS REASONABLE IN THE PRESENT YEAR. WHEN WE DO SO, WE FIND THAT PERCENTAGE OF EXPENSES UNDER TWO HEADS IS BELOW THAT OF THE PRECEDING YEAR. FOR TEMPO CHARGES, THE PERCENTAGE IN THE PRESENT YEAR IS HIGHER BY 1.88% AND IF THE SAME PERCENTAGE IS MA INTAINED, IT WILL RESULT INTO A DISALLOWANCE OF RS.4,46,976/- OUT OF TEMPO CHARGES. IT WILL RESULT INTO G.P. RATE OF 20.59%, WHICH IS HIGHER THAN G.P. DECLARED BY THE A SSESSEE IN THE ASSESSMENT YEAR 2003-04 OF 17.22% AND IN ASSESSMENT YEAR 2004-05 OF 19.91% BUT WE FIND THAT IN THE WRITTEN SUBMISSIONS OF THE LEARNED AR OF THE AS SESSEE, IT IS REQUESTED THAT G. P. RATE MAY BE ADOPTED AT 21%. WE ACCEPT THIS REQUEST AND HOLD THAT IN THE PRESENT CASE. G. P. RATE OF 21% BE ADOPTED AS AGAINST 18.70 % DECLARED BY THE ASSESSEE. IT WILL RESULT INTO AN ADDITION OF 2.3% OF GROSS RECEI PT OF RS. 237,75,331/-. HENCE, NET ADDITION WILL BE OF RS. 546,833/- AS AGAINST RS . 19,72,590/- MADE BY THE A.O. SINCE, RELIEF ALLOWED BY THE LD. CIT(A) IS LOWER, T HE APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED WHEREAS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST OCT., 2011. SD./- SD./- (D.K. TYAGI) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 21 ST OCT., 2011 SP I.T.A.NO. 3721 & 4084 /AHD/2008 7 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION.19/10 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20/10.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.20/10 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21/10 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.21/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21/10/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..