K Rma Krishna, Koraput V. ITO, Koraput

ITA 428/CTK/2012

• Counselvise Citation: 42822114 RSA 2012
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-06-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: D K SETH
• Section: 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 428/CTK/2012 / ASSESSMENT YEAR 2007 - 08 SRI K.RAMA KRISHNA, PROP. M/S.SOWBHAGYAM ENTERPRISES, AT/P.O.JEYPORE, DIST. KORAPUT PAN: AAFHK 9833 E - - - VERSUS - INCOME - TAX OFFIC ER , WARD 2, JEYPORE. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI D.K.SETH, AR / FOR THE RESPONDENT: / SHRI S.C.MOHANTY, DR / DATE OF HEARING: 13.09.2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE RAISES THE GROUNDS RELATING TO DISALLOWANCE AND ADDITIONS MADE BY THE ASSESSING OFFICER WHICH HAVE BEE N PARTLY CONFIRMED BY THE LEARNED CIT(A). 2. THE BRIEF FACTS, AS HAVE BEEN BROUGHT ON RECORD, ARE THAT THE ASSESSEE IS IN THE BUSINESS OF RETAIL SALE OF ELECTRONIC AND FURNITURE ITEMS. IT FILED ITS RETURN OF INCOME AT 1,88,870 FOR THE IMPUGNED ASSESSMENT YEAR IN THE STATUS OF HUF. THE ASSESSING OFFICER WHILE SCRUTINIZING THE RETURN UNDER THE PROVISIONS OF SECTION 143(3)/147 OBSERVED THAT THERE WAS DIFFERENCE OF 10,000 IN THE DEBTORS AS PER THE LIST VIS - - VIS AS PER THE BALANCE NOTED I N THE BALANCE SHEET. SIMILARLY HE WAS OF THE BELIEF THAT CLAIM OF DONATION OF 13,000 ESCAPED ASSESSMENT WAS PERTINENT FOR VALIDATING THE INVOKING OF THE PROVISIONS OF SECTIONS 147/148. AFTER ISSUING NOTICES U/S.143(2) AND SECTION 142(1), IT WAS OBSERVED BY THE ASSESSING OFFIC ER ON VERIFICATION OF BILLS AND I.T.A.NO. 428/CTK/2012 2 VOUCHERS THAT TRANSPORTATION CHARGES HAD BEEN CLAIMED AT 1,02,395 WHICH OUGHT NOT TO HAVE BEEN BORNE BY THE ASSESSEE. HE DISALLOWED 10% THEREOF ALONG WITH THE CHARITY AND DONATION OF 13,000 DISALLOWABLE. HE ALSO DISALLOWED A SUM OF 89,878 BEING THE BALANCES CONFIRMED BY THE SUNDRY CREDITORS WHICH WERE INSCRIBED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE OUTSTANDING AT A LESSER FIGURE RESULTING IN DIFFEREN CE OF 89,878. 3. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPEL LATE AUTHORITY WHO CONFIRMED THE DISALLOWANCE OF 10% OF TRANSPORTATION CHARGES AND ALSO THE ADDITION U/S.68 AMOUNTING TO 89,878 RELYING ON THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF VISP (P) LTD., V. CIT [(2004) 265 ITR 202 (MP)]. 4. THE LEARNED COUNSEL FOR THE ASSESSEE BEGAN HIS ARGUMENTS BY SUBMITTING THAT THERE WAS NO BASIS FOR THE ASSESSING OFFICER TO DISALLOW ARBITRARILY 10% OF THE TRANSPORTATION CHARGES THE ASSESSEE BEING A DEALER IN ELECTRONICS AND FURNITURE WHICH ARE NECESSARY TO BE TRANSPORTED BY HIRING OUT TRANSPORTATION WHEN HAVING VERIFIED THE BILLS AND VOUCHERS, HE OUGHT TO HAVE RELATED THE DISALLOWANCE ON A SPECIFIC FINDING AND NOT ARBITRARILY DISALLOWING 10% THEREOF. THE LEARNED CIT(A) CONFIRMED THE SAME BY MERELY OPININ G THAT THIS DISALLOWANCE IS NOT EXCESSIVE. HE SUBMITTED THAT BULK ELECTRONIC ITEMS AND FURNITURE HAVE TO BE NECESSARILY TRANSPORTED BY HIRING OUT WHEN THE GOODS ARE SOLD ON FOR BASIS. ON A TURNOVER OF ABOUT 99 LAKHS THE EXPENDITURE WAS LESS THAN 1%, THERE FORE, COULD NOT BE DISALLOWED ARBITRARILY AT 10%. HE PRAYED THAT THIS AMOUNT BE FULLY ALLOWED. 4.1. THE LEARNED AR OF THE ASSESSEE, HOWEVER, DID NOT PRESS THE GROUND RELATING TO DISALLOWANCE OF CHARITY AND DONATION DISALLOWED BY THE ASSESSING OFFICER AS C ONFIRMED BY THE LEARNED CIT(A). I.T.A.NO. 428/CTK/2012 3 4.2. ON THE BALANCES CONFIRMED BY THE ASSESSING OFFICER WHICH BALANCES WERE NOT INCORPORATED BY THE ASSESSEE AS SUNDRY CREDITORS, THE LEARNED AR OF THE ASSESSEE CONTENDED THAT THE SAME CANNOT BE DISALLOWED ON MERE CONFIRMATI ON BY THE THIRD PARTIES. THE PURCHASES HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER OUGHT TO HAVE GIVEN A FINDING EXCEPT THAT SUCH SUNDRY CREDITORS REQUIRE RECONCILIATION. WHEN THE PARTIES HAVE CONFIRMED THE BALANCES BY RAISING BILLS ON THE ASSESSEE, IT WAS NOBODYS CASE THAT THE BILLS RAISED BY THEM WERE NOT TO BE PAID FOR BY THE ASSESSEE. THE ASSESSEE HAS PAID THESE AMOUNTS INSOFAR AS THE BALANCES GOT CONFIRMED AFTER THE AUDIT OF THE BALANCE SHEET CLEARLY INDICATE THAT THE AMOUNT STOOD RECONCILED BY THE AS SESSING OFFICER HIMSELF. HE POINTED OUT THAT THE LEARNED CIT(A) ERRED IN FOLLOWING THE DECISION OF HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF VISP (P) LTD (SUPRA) WHICH WAS ON THE SUSTENANCE OF ADDITION OF BOGUS SUNDRY CREDITORS. HE POINTED OUT THAT AS ON 31.3.2007 THE AMOUNT HAD BEEN PAID WHICH WAS RECEIVED BY THE ASSESSEE AFTER THE DATES WHEN THEY HAD CONFIRMED IT IN THE IMMEDIATELY SUCCEEDING MONTH, THEREFORE, CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE AS THE SUNDRY CREDITORS CANNOT BE HELD AS BO GUS WHICH HAVE BEEN PAID FOR ON THE BASIS OF PURCHASE ACCEPTED BY THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A). THE FACTS OF THE CASE LAW RELIED UPON BY THE LEARNED CIT(A) THEREFORE IS NOT APPLICABLE INSOFAR AS HE HAS FURNISHED THE COPIES OF THE THR EE PARTIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHEN THE PURCHASES HAVE BEEN ACCEPTED AND HAVE BEEN PAID FOR BY THE ASSESSEE BUT ACCOUNTED FOR BY THE RECIPIENTS IN THE SUBSEQUENT YEAR. HE, THEREFORE, PRAYED FOR DELETION OF THE ADDITION OF 89,878 MADE O N THIS SCORE. 5. THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW FOR HIS PART OF SUBMISSIONS. I.T.A.NO. 428/CTK/2012 4 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERATIO N OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE INCLINED TO HOLD THAT THE DISALLO WANCE OF 10% OF THE EXPENDITURE ON TRANSPORT HAS BEEN MADE ARBITRARILY INSPITE OF THE ASSESSING OFFICER HAVING ISSUED NOTICES U/S S . 143(2) AND 142(1) WHEN THE PURCHASES A ND SALES HAVE BEEN VERIFIED INDICATING THAT THE TRANSPORTATION BECOMES PART AND PARCEL OF THE SALES OF MORE THAN 99 LAKHS WERE TO BE TRANSPORTED TO THE CUSTOMERS PREMISES ON FOR BASIS. THEREFORE, DISALLOWANCE OF 10% BECOMES PURELY ARBITRARY AND UNJUSTIFIED WHICH THE LEARNED CIT(A) HAS CONSIDERED AS NOT EXCESSIVE. A BUSINESSMAN NEVER IS INTERESTED IN INCURRING EXPE NDITURE WHICH LATER COULD BECOME HIS INCOME ASSESSED BY THE ASSESSING OFFICER. WE ARE INCLINED TO FOLLOW THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE SIMPLE REASON THAT NO SPECIFIC DEFECT IN CLAIMING THE EXPENSES WAS POINTED OUT INSOFAR AS THE ASSES SING OFFICER VERIFIED THE BILLS AND VOUCHERS WHEN THE TRANSPORTATION CHARGES ARE BORNE BY THE ASSESSEE BUT NOT CLAIMED AGAINST THE SALES. IN HIS WISDOM THE ASSESSEE HAS CLAIMED IT AFTER THE GROSS MARGIN CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE FOR DISA LLOWANCE AS THE DISALLOWANCE OF A PART TRANSPORTATION COST WILL BE DETRIMENTAL TO THE BUSINESS OF THE ASSESSEE WHICH ARE NECESSARILY INCURRED FOR THE PURPOSE OF TRANSPORTING THE GOODS SOLD ON WHICH PROFIT HAS ALREADY BEEN RENDERED TO TAX AS GROSS MARGIN TH E ASSESSEE BEING A DEALER I N ELECTRONIC AND FURNITURE ITEMS. THE DISALLOWANCE OF 10,200 OUT OF TRANSPORT EXPENSES IS THEREFORE DIRECTED TO BE DELETED. 6.1. AS REGARDS THE CONFIRMATION OF ADDITION OF 89,878 U/S.68, WE FIND THAT THE ASSESSING AUTHORITIES MISDIRECTED THEMSELVES TO HOLD THAT THEY ARE BOGUS CREDITS WHEN THEY HAVE VERIFIED THE PURCHASES HAVE RESULTED IN SALES INSOFAR I.T.A.NO. 428/CTK/2012 5 AS MORE THAN 40% OF THE PURCHASES HAVE BEEN HELD BY THE ASSESSEE AS CLOSING STOCK. THIS INDICATES THAT THE SUNDRY CREDITORS ARE NOT BOGUS WHICH SUNDRY CREDITORS AMOUNTING TO 16,30,310 ARE AVAILABLE AS AT 31.3.2007. THE THIRD PARTIES CONFIRMATION FOR THE CHEQUES IN MAIL HAVE BEEN SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AS A MATTER OF RECONCILIATION BUT THE FACT REMAINS TH AT THE THIRD PARTIES HAVE ISSUED THE PURCHASE BILLS THOROUGHLY ACCOUNTED FOR BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT ALONG WITH THE PURCHASES THROUGHOUT THE YEAR THEREFORE BY NO STRETCH OF IMAGINATION COULD THEY BE HELD AS BOGUS INSOFAR AS IT WAS NOT THE C ASE OF THE ASSESSING OFFICER TO FORCE THE ASSESSEE TO MAKE PAYMENTS I N ACCORDANCE WITH THE BALANCE INDICATED BY THE SUNDRY CREDITORS. HAVING MADE THE PAYMENTS, THE ASSESSEE HAD RIGHT TO SQUARE OFF THE CREDITORS BY SHOWING LOWER BALANCE IN BANK WHICH HE DID NOT. THE MAIN CONTENTION OF THE ASSESSING OFFICER IS LACK OF RECONCILIATION WHICH HAS BEEN EXPLAINED IN ORDER TO RECONCILE THE BANK AND NOT THE SUNDRY CREDITORS. THEREFORE, THE LEARNED CIT( A) WRONGLY APPLIED THE CASE LAW CITED WHICH WAS ONLY ON PURELY BOG US SUNDRY CREDITORS TO BE TAXED U/S.68. IN THIS VIEW OF THE MATTER, THE ADDITION OF 89,878 MADE BY THE ASSESSING OFFICER U/S.68 AND SUSTAINED BY THE LEARNED CIT(A) IS NOT JUSTIFIED AND AS SUCH, THE SAID ADDITION OF 89,878 IS DELETED. 7. IN THE RESULT, TH E APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 428/CTK/2012 6 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : SRI K.RAMA KRISHNA, PROP. M/S.SOWBHAGYAM ENTERPRISES, AT/P.O.JEYPORE , DIST. KORAPUT 2 / THE RESPONDENT: INCOME - TAX OFFICER, WARD 2, JEYPORE. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY , / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 27.09.2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28.09.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHI CH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..