THE ACIT RG 9(1), MUMBAI V. M/S. EDICON MINING EQUIPMENT LTD, MUMBAI

ITA 4231/MUM/2008

• Counselvise Citation: 423119914 RSA 2008
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 10-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: BRIJMOHAN POORANMAL AGA RWAL
• Keywords: Unexplained expenditure; Additional evidence
• Section: 69C; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI J.SUDHAKAR R EDDY (A.M) ITA NO.4231/M/08(A.Y. 2004-05) THE ACIT, RG. 9(1), ROOM NO.223, AAYKAR BHAVAN, MK ROAD, MUMBAI 20. (APPELLANT) VS. M/S. EDICON MINING EQUIPMENT LTD., 11/12, GURUGOVIND SINGH INDUSTRIAL ESTATE, W.E. HIGHWAY, GOREGAON (E), MUMBAI 400 066. PAN: AAACE 12338C (RESPONDENT) APPELLANT BY : SHRI S.K.SINGH RESPONDENT BY : SHRI BRIJMOHAN POORANMAL AGA RWAL ORDER PER N.V.VASUDEVAN, J.M, THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 3/3/2008 OF THE CIT(A) IX, MUMBAI RELATING TO ASSESSMENT YEAR 2 004-05. THE FIRST GROUND OF APPEAL OF THE REVENUE READS AS FOLLOWS: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,41,2 30/- OUT OF TRAVELLING & CONVEYANCE EXPENSES AS THEREOF ARE NON-INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING OF PNEUMATIC TOOLS, ACCESSORIES AND ALLIED PRODUCTS . THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED TRAVELLING AND CONVEYANCE EXPENSES OF RS. 14,12,309/- IN THE P&L ACCOUNT FOR THE PREVIOUS YEA R, WHEREAS IN THE EARLIER YEAR THE EXPENDITURE UNDER THIS HEAD WAS ONLY RS. 9 ,66,199/-. THE AO CALLED FOR THE SUPPORTING BILLS, VOUCHERS AND DETAI LS OF THE PERSONS INCURRING THE EXPENSES. THE ASSESSEE FURNISHED THE DETAILS G IVING THE NAMES OF THE PERSONS IN RESPECT OF WHOM THE EXPENSES HAD BEEN IN CURRED. ADMITTEDLY ITA NO.4231/M/08(A.Y. 2004-05) 2 THESE PERSONS WERE EMPLOYEES AND DIRECTORS OF THE A SSESSEE. THE AO HOWEVER HELD THAT THE DETAILED NARRATION OF THE PUR POSES OF THE TRAVELLING WAS NOT AVAILABLE AND, THEREFORE, IT COULD NOT BE RELAT ED TO THE BUSINESS NECESSITY OF THE ASSESSEE. THE AO, THEREFORE, DISALLOWED 10% OF THE TRAVELLING AND CONVEYANCE EXPENSES. 3. ON APPEAL BY THE ASSESSEE THE CIT(A) DELETED THE ADDITION MADE BY THE AO HOLDING THAT THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO SHOW THAT THE EXPENSES INCURRED WERE NOT FOR THE PURPOSE OF B USINESS. 4. BEFORE US LD. D.R SUBMITTED THAT THE ONUS ESTABL ISHING THAT AN EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS ON THE ASSESSEE AND, THEREFORE, THE ORDER OF THE CI T(A) IS INCORRECT. 5. WE HAVE CONSIDERED HIS SUBMISSIONS AND ARE OF TH E VIEW THAT IN THE LIGHT OF THE FACT THAT THE DETAILS OF THE EXPENSES HAVE BEEN FURNISHED AND THE FACT THAT THE PERSONS UNDERTAKING THE TRAVEL WERE E MPLOYEES AND DIRECTS OF THE ASSESSEE, THE ASSESSEE HAS PRIMA FACIE DISCHARG ED THE BURDEN OF SHOWING THAT THE EXPENSES WERE INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE BASIS ON WHICH THE AO MADE THE DISALLOWANCE WAS THE ABSENCE OF PROPER NARRATION OF THE PURPOSE OF THE TRAVEL IN THE DETAI LS OF THE TRAVELLING EXPENSES. IN OUR OPINION THIS CANNOT BE THE PROPER BASIS TO MAKE THE DISALLOWANCE. IN OUR VIEW THE CIT(A) RIGHTLY DELET ED THE DISALLOWANCE MADE BY THE AO. CONSEQUENTLY, GROUND NO.1 OF THE REVENU E IS DISMISSED. 6. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDER :- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCES OF R S. 11,12,741/- U/S. 69C OF THE I.T. ACT OUT OF TRANSPORTATION CHARGES W ITHOUT APPRECIATING THE FINDINGS OF THE REMAND REPORT OF THE A.O. DATED 4/12/2008 ITA NO.4231/M/08(A.Y. 2004-05) 3 7. THE APPELLANT COMPANY HAD INCURRED AN EXPENSE O F RS. 30,06,104/- FOR TRANSPORTATION OF MINING EQUIPMENT AND THE RELE VANT RAW MATERIAL. THE DETAILS OF TRANSPORTATION EXPENSES WERE ALSO FILED BEFORE THE AO, HOWEVER, THE AO ASKED FOR CONFIRMATION OF TRANSPORTATION CHARGES FROM THE FOLLOWING THREE PARTIES: 1. M/S. APL LOGISTICS INDIA. : RS. 5,32,514/- 2. M/S. RAHUL TRANSPORT : RS. 3,85,899/- 3. M/S. RAMJI BHANJI THAKUR : RS. 1,94,328/- ACCORDING TO THE AO, THE ASSESSEE DID NOT FURNISH C ONFIRMATION OF THE AFORESAID PARTIES BUT FILED ONLY DETAILS OF TRANSPO RTATION CHARGES PAID TO THESE PARTIES ALONG WITH THEIR NAMES AND ADDRESSES WERE. THE AO THEREFORE DISALLOWED THE AFORESAID TRANSPORTATION EXPENSES ON THE GROUND THAT THE CONFIRMATIONS WERE NOT FURNISHED BY THESE PARTIES A ND TREATED AN AMOUNT OF RS. 11,12,741/- AS UNEXPLAINED EXPENDITURE U/S. 69C OF THE I.T. ACT, 1961. 8. BEFORE CIT(A), THE ASSESSEE FILED CONFIRMATION OF THE ABOVE PARTIES. THE CIT(A) VIDE HIS OFFICE LETTER DATED 11/7/2007, FORW ARDED THE CONFIRMATION TO THE AO BECAUSE THE SAME WAS ADDITIONAL EVIDENCE AN D FURTHER ASKED THE AO TO CARRY OUT FURTHER VERIFICATION ON THE BASIS OF T HE CONFIRMATION. THE AO IN HIS LETTER DATED 12/2/2008 SUBMITTED AS UNDER:- (I) M/S. APL LOGISTIC SERVICES LTD.: THE ASSESSEE HAS FILED A COPY OF LEDGER FOR THE FY 2003-04 IN THE BOOKS OF THE ASSESSEE AND THE SAME WAS CONFIRMED BY M/S. LOGISTICS SERVICES LTD. (II) M/S. RAHUL TRANSPORT: THE DETAILS FILED BY THE ASSESSEE ARE THE COPY OF L EDGER A/C FOR THE FY 2003-04, AS TPER THE BOOKS OF THE ASSESSEE COMPANY AND THE LETTER FILED BY THE PARTY ADDRESSED TO THE ACCOUNTS DEPART MENT, EDICON MINING EQUIPMENT PVT. LTD. FOR THE PERIOD OF 1/4/20 03 TO 31/3/2004, SIGNED BY THE PARTY M/S. RAHUL TRANSPORTS. ITA NO.4231/M/08(A.Y. 2004-05) 4 (III) M/S. RAMJI BHANJI THAKUR:- THE DETAILS FILED BY THE ASSESSEE ARE A COPY OF LED GER A/C IN THE BOOKS OF THE ASSESSEE AND THE COPY OF THE LEDGER A/C. FOR T THE PERIOD FROM 1/4/2003 TO 31/3/2004 IN THE BOOKS OF THE PARTY AND SIGNED BY THE PARTY M/S. RAMJI BHANJI THAKUR. THE AMOUNT OF TRANSACTION SHOWN IN THE COPY OF THE LEDER ACCOUNT OF THE PARTIES ARE THE SAME OF THE CLAIM MADE BY THE A SSESSEE IN THE PROFIT & LOSS ACCOUNT. 9. ON CONSIDERING THE REMAND REPORT THE CIT(A) WAS OF THE VIEW THAT THE CONFIRMATION OF THE PARTIES HAD BEEN FILED AND THE AO HAD VERIFIED THE SAME AND NO ADVERSE INFERENCE HAS BEEN DRAWN BY THE AO. THE CIT(A), THEREFORE, DELETED THE ADDITION MADE BY THE AO. 10. WE HAVE PERUSED THE REMAND REPORT OF THE AO FIE LD BEFORE THE CIT(A) DATED 12/2/2008. IN THE REMAND REPORT THE AO HAS C ONSIDERED THE CONFIRMATION FILED BY THE PARTIES AND HAS NOT DRAWN ANY ADVERSE INFERENCE. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE A DDITION WAS RIGHTLY DELETED BY THE CIT(A). CONSEQUENTLY GROUND NO.2 RA ISED BY THE REVENUE IS ALSO DISMISSED. 11. GROUND NO.3 RAISED BY THE REVENUE READS AS FOL LOWS: 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE OF PUR CHASES TO RS. 68,200/- AS AGAINST RS.20,35,537/- MADE BY THE AO W ITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS FAILED TO PROVIDE THE PARTIES ALONGWITH BOOKS OF ACCOUNTS AND ALSO FAILED TO DISC HARGE THE PRIMARY ONUS OF FURNISHING RECONCILIATION STATEMENT FROM TH E SAID PARTIES. 12. THE 3 RD GROUND RELATES TO DISALLOWANCE OF PURCHASES AMOUNT ING TO RS.20,35,537/- U/S. 69C OF THE I.T.ACT,1961 AS UNEX PLAINED EXPENDITURE: THE ADDITION WAS MADE BY THE AO U/S. 69C OF THE IT ACT, AS THE PARTIES HAVE FAILED TO RESPOND TO THE NOTICES ISSUED U/S. 133(6) AND THE ASSESSEE HAD ALSO FAILED TO SUBSTANTIATE THE CLAIM BY PRODUCING THE P ARTIES FOR EXAMINATION. ITA NO.4231/M/08(A.Y. 2004-05) 5 13. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE APPELLATE PROCEEDINGS. IN THE REMAND REPORT DATED 12/2/2008, THE AO SUBMITTED AS UNDER: 3. THE ADDITION OF RS. 20,35,537/- WAS MADE IN TH E ORDER DATED 6/12/2006 U/S. 69C OF THE I.T. ACT AS THE PARTIES HAVE FAILED TO R ESPOND TO THE NOTICES ISSUED U/S. 133(6) AND THE ASSESSEE HAD ALSO FAILED TO SUBSTANT IATE THE CLAIM BY PRODUCING THE PARTIES FOR EXAMINATION AND THE DETAILS OF WHICH A RE AS UNDER:- S.NO. NAME OF THE PARTY AMOUNT (RS.) 1. M/S. A.G.ENGINEERING 7,89,060 2. M/S. VIPUL TOOL CENTRE 1,67,842 3. M/S. JUDE INDUSTRIES 1,50,373 4. M/S. ASTIVINAYAK MACHINE TOOLS LTD. 85,480 5. M/S. METAL TREAT 6,93,594 6. M/S. ANURUP PACKAGING 1,49,188 20,35,537 (I) M/S. A.G.ENGINEERING: THE DETAILS FILED BY THE ASSESSEE ARE THE COPIES OF CONFIRMATION OF THE PARTY FOR THE PERIOD FROM 1/4/2003 TO 31/3/2004 AND THE COPY OF L EDGER ACCOUNT OF THE ASSESSEE FOR THE SAID PERIOD. THE TOTAL TRANSACTIONS AS PER CONFIRMATIONS FILED BY THE PARTY IS RS. 7,68,075/- AND THE COPY OF THE ASSESSEES LEDGE R ACCOUNT HAS ALSO SHOWN THE SAME. THE DETAILS FILED BY THE ASSESSEE AT THE TIM E OF ASSESSMENT PROCEEDINGS HAS SHOWN THE VARIOUS FIGURES, WHICH ARE AS UNDER: (A) AS PER PARTY WISE LABOUR CHARGES FOR THE YEAR E NDING 31/3/04. RS. 7,58,335/- (B) AS PER DETAILS OF TRADE CREDITORS AS ON 31/3/04 , I.E. ADDITION DURING THE YEAR RS. 7,89,060/- (C) AS PER DETILS OF PURCHASES ABOVE RS. 2 LAKHS RS. 7,68,075/- THE ADDITION HAS BEEN MADE BY TAKING THE FIGURE SHO WN IN TRADE CREDITORS OF RS.7,89,060/-. (II) METAL TREAT: THE DETAILS FILED BY THE ASSESSEE ARE COPY OF LEDGE R ACCOUNT OF THE ASSESSEE AS WELL AS THE PARTY FOR THE PERIOD 1/4/03 TO 31/3/2004. THE TOTAL TRANSACTIONS RECORDED IN THE LEDGER ACCOUNTS ARE OF RS. 6,81,462/-. THE DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS SHOWN VARIOUS FIGURES AND ARE AS UNDER:- (A) AS PER PARTY WISE LABOUR CHARGES FOR THE YEAR E NDING 31/3/04. RS. 6,93,594/- (B) AS PER DETAILS OF TRADE CREDITORS AS ON 31/3/04 , I.E. ADDITION DURING THE YEAR RS. 6,93,594/- (C) AS PER DETILS OF PURCHASES ABOVE RS. 2 LAKHS RS. 6,81,462/- THE ADDITION HAS BEEN MADE BY TAKING THE FIGURE SHO WN IN TRADE CREDITORS OF RS.6,93,594/-. ITA NO.4231/M/08(A.Y. 2004-05) 6 (III) VIPUL TOOL CENTRE: THE DETAILS FILED BY THE ASSESSEE ARE COPY OF LEDGE R ACCOUNT OF THE ASSESSEE AS WELL AS THE PARTY FOR THE PERIOD 1/4/03 TO 31/3/2004. THE TOTAL TRANSACTIONS RECORDED IN THE LEDGER ACCOUNTS ARE OF RS. 1,67,842/- AND IN TH E LEDGER A/C. OF THE PARTY AT RS.1,63,368/-. THE ADDITION HAS BEEN MADE BY TAKING THE ADDITION S HOWN DURING THE YEAR IN THE DETAILS OF TRADE CREDITORS OF RS. 1,67,842/-. (IV) JUDE INDUSTRIES:- THE DETAILS FILED BY THE ASSESSEE ARE COPY OF LEDG ER ACCOUNT OF THE ASSESSEE AS WELL AS THE PARTY FOR THE PERIOD 1/4/03 TO 31/3/2004. THE TOTAL TRANSACTIONS RECORDED IN THE LEDGER ACCOUNTS ARE OF RS. 1,65,350/-. THE DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS BEEN SHOWN VARIOUS FIGURES AND ARE AS UNDER:- (A) AS PER PARTY WISE LABOUR CHARGES FOR THE YEAR E NDING 31/3/04. RS. 1,67,133/- (B) AS PER DETAILS OF TRADE CREDITORS AS ON 31/3/04 , I.E. ADDITION DURING THE YEAR RS. 1,50,377 THE ADDITION HAS BEEN MADE BY TAKING THE FIGURES S HOWN IN TRADE CREDITORS OF RS. 1,50,373/-. (V) ANURUP PACKAGING: THE DETAILS FILED BY THE ASSESSEE ARE COPY OF LEDGE R ACCOUNT OF THE ASSESSEE AS WELL AS THE PARTY FOR THE PERIOD 1/4/03 TO 31/3/2004. THE TOTAL TRANSACTIONS RECORDED IN THE LEDGER ACCOUNTS ARE OF RS. 1,45,079/- THE DETAILS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS BEEN SHOWN VARIOUS FIGURES AND ARE AS UNDER:- (A) AS PER PARTY WISE LABOUR CHARGES FOR THE YEAR E NDING 31/3/04. RS. 1,45,079/- (B) AS PER DETAILS OF TRADE CREDITORS AS ON 31/3/04 , I.E. ADDITION DURING THE YEAR RS. 1,49,188/- THE ADDITION HAS BEEN MADE BY TAKING THE FIGURE SHO WN IN TRADE CREDITORS OF RS.1,49,188/- (VI) M/S. ASTIVINAYAK MACHINE TOOLS LTD.: IN THE CASE OF ASHTVINAYAK MACHINE TOOLS LTD., NO D ETAILS ENCLOSED ALONGWITH THE SUBMISSION OF THE ASSESSEE ON 14/09/2007. 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFO RE CIT(A) THAT THE PARTYS NAMES, ADDRESSES AND THE CONFIRMATIONS WERE FILED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE AO ALSO ISSUED NOTICES U/S. 133(6) TO ITA NO.4231/M/08(A.Y. 2004-05) 7 THE ABOVE PARTIES, WHICH REMAINED UNATTENDED. THE ASSESSEE COMPANY HAD ALSO FILED THE DETAILS OF PURCHASES MADE FROM THE A BOVE PARTIES BY WAY OF FURNISHING DETAILS SUCH AS COPIES OF BILLS, THEIR C OMPLETE NAMES, PRESENT ADDRESSES AND ALSO THE CONFIRMATIONS SIGNED BY THES E PARTIES. IT WAS CONTENDED THAT THE FACT THAT THE ABOVE PARTIES DID NOT COMPLY WITH THE NOTICE ISSUED U/S. 133(6) BY ITSELF DOES NOT MEAN THAT THE EXPENDITURE DISALLOWABLE AS THE PRIMARY ONUS HAS BEEN COMPLIED WITH, BY THE ASSESSEE. 15. ON CONSIDERATION OF THE REMAND REPORT THE CIT(A ) WAS OF THE VIEW THAT THE ASSESSEE HAD FIELD CONFIRMATION, LIST GIVING N AME, ADDRESS AND PAN NUMBERS OF THE PARTIES AND, THEREFORE, THE ONUS HAS BEEN DISCHARGED BY THE ASSESSEE. THE CIT(A) HOWEVER, CONFIRMED THE ADDITI ON TO THE EXTENT OF RS. 68,200/- FOR THE FOLLOWING REASONS: 4.5 IT IS TRUE THAT THE PARTIES HAVE BEEN IDENTIF IED, BUT, SOME DISCREPANCIES BETWEEN THE APPELLANTS LEDGER AND PA RTIES LEDGER HAVE NOT BEEN EXPLAINED SATISFACTORILY. THEREFORE, IN T HE ABSENCE OF SATISFACTORY EXPLANATION, THE SAME IS REQUIRED TO B E ADDED TO THE TOTAL INCOME, WHICH ARE GIVEN AS UNDER:- AG ENGINEERING : R S. 30,725/- JUDE INDUSTRIES : RS. 16,760/- METAL TREAT : RS. 12,132/- VIPUL TOOLS : RS. 4,471/- ANURUP PACKAGING : RS. 4,109/- THUS, THE ADDITION OF RS. 20,35,537/- MADE BY THE A O U/S. 69C OF THE I.T. ACT, IS RESTRICTED TO RS. 68,200/- ONLY. 16. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENU E HAS RAISED GROUND NO.3 BEFORE THE TRIBUNAL. 17. WE HAVE HEARD THE SUBMISSIONS OF THE LD. D.R, W HO RELIED ON THE ORDER OF THE AO. WE HAVE PERUSED THE REMAND REPORT OF TH E AO FIELD BEFORE THE CIT(A) AND FIND THAT THE AO HAS NOT DRAWN ANY ADVER SE INFERENCE AGAINST THE ITA NO.4231/M/08(A.Y. 2004-05) 8 PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES. HE HAS ONLY POINTED OUT THE DISCREPANCY IN THE FIGURES AS APPEARING IN THE BOOKS OF THE ASSESSEE AND THE BOOKS OF THE OTHER PARTIES. SUCH DIFFERENCE HA S BEEN DISALLOWED AND ADDED BY THE CIT(A) IN THE IMPUGNED ORDER. IN SUC H CIRCUMSTANCES WE ARE OF THE VIEW THAT THE REVENUE CANNOT HAVE ANY GRIEVA NCE WHATSOEVER. WE, THEREFORE, CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS GROUND NO.3 RAISED BY THE REVENUE. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF MAY, 2011. SD/- SD/- (J.SUDHAKAR REDDY ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED. 18 TH MAY.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RJ BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.4231/M/08(A.Y. 2004-05) 9 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 10/5/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 11/5/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER