ITO, New Delhi V. M/s. Satya Priya Roadlines Pvt. Ltd., New Delhi

ITA 452/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4099 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 10-05-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIKHIL CHAUDHARY
• Assessee Lawyers: R K SHARMA
• Keywords: Business expenditure; Principle of natural justice; Additional evidence; Wrong claim
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI A.D. JAIN AND SHRI A.K. GARODIA ITA NO. 452(DEL)2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, M/S. SATYA P RIYA ROADLINES PVT.LTD., WARD 7(4), NEW DELHI. V. F-11, VISHWAKARM A COLONY, MB ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI NIKHIL CHAUDHARY, SR. DR RESPONDENT BY: SHRI R.K . SHARMA, ADVOCATE ORDER PER A.D. JAIN, J.M . THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2006-07, TAKING THE FOLLOWING GROUNDS:- 1. LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, IN DEL ETING THE ADDITION OF ` 35,28,641/- MADE BY THE AO ON ACCOUNT OF FREIGHT C HARGES. 2. LD. CIT(A) ERRED, IN LAW AND ON THE FACTS AND C IRCUMSTANCES OF THE CASE, IN REDUCING THE ADDITIONS OF ` 10,71,235/- MADE BY THE AO ON ACCOUNT OF WAY EXPENSES TO ` 9,71,235/-. 3. LD. CIT(A) ERRED, IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE, BY ACCEPTING ADDITIONAL EVIDENCES WITHOUT AFF ORDING OPPORTUNITY TO THE AO U/S 46A OF THE I.T. RULES. ITA 452(DEL)10 2 2. GROUND NO.1 CHALLENGES THE ACTION OF THE LD. CIT (A) IN DELETING THE ADDITION OF ` 35,28,641/- MADE BY THE AO ON ACCOUNT OF FREIGHT C HARGES. 3. WITH REGARD TO THE CLAIM OF FREIGHT CHARGES, DUR ING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED DETAILS WITH REGARD TO FREIGHT EXPENSES. THESE DETAILS INCLUDED NAMES AND ADDRESSES OF THE PARTIES TO WHOM THE CHARGES WERE STATED TO HAVE BEEN PAID, ALONGWITH COPIES OF A FEW INVOICES. THE AO ISSUED NOTICES U/S 133(6) OF THE I.T. ACT TO ALL TH E PARTIES. OUT OF THE TOTAL FREIGHT CHARGES OF ` 54,61,273/-, NOTICES SENT TO THE FOLLOWING PARTIES WERE EITHER RECEIVED BACK OR NO REPLY WAS RECEIVED. TH E TRANSACTIONS INVOLVED PAYMENT OF ` 35,28,641:- ` 1. HIMANSHU ROAD LINES 5,06,190/- 2. ODC CARRIERS 2,07,780/- 3. ODS ROADWAYS 9,12,071/- 4. SANDEEP GAGODIA TRANSPORT 8,89,100/- 5. SATISH GAGODIA TRANSPORT 10,13,500/- 4. ON THIS, OBSERVING THAT NO EVIDENCE HAD BEEN REC EIVED CONCERNING THE AFORESAID 5 PARTIES, THE AO MADE A DISALLOWANCE OF ` . 35,28,641/-. 5. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION. 6. CHALLENGING THE IMPUGNED ORDER IN THIS REGARD, T HE LD. DR HAS ARGUED THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION CORRECTLY MADE BY THE AO, DESPITE THE FACT THAT UNDISPUTEDLY, NO EVIDENCE WAS PRODUCED BEFORE THE ITA 452(DEL)10 3 AO CONCERNING THE 5 PARTIES, I.E., HIMANSHU ROAD LI NES, ODC CARRIERS, ODS ROADWAYS, SANDEEP GAGODIA TRANSPORT AND SATISH GAGODIA TRANSPORT, CONCERNING TRANSACTIONS AMOUNTING TO ` 35,28,641/-. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN SUBMITTED THAT THE LD. CIT(A) CORRECTLY DELETED THE DISALLOWANCE; THAT THE ASSESSEE HAD FILED ALL THE NECESSARY DETAILS; THAT THE AO DID NOT DISPUTE THE FACTUM OF THE FREIGHT EXPENSES INCURRED BY THE ASSESSEE BEING NORMAL BUSI NESS EXPENSES; AND THAT AS SUCH, THE GRIEVANCE OF THE DEPARTMENT IN THIS RE GARD, HAVING NO MERIT, BE REJECTED. 8. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL ON RECORD. SO AS TO SUSTAIN THE DISALLOWANCE PROPOSED, IT WAS NECESSARY FOR THE AO TO ARRIVE AT A FINDING THAT THE EXPENSES INCURRED BY T HE ASSESSEE BY WAY OF PAYMENT OF FREIGHT CHARGES DID NOT HAVE ANY NEXUS W ITH THE ASSESSEES BUSINESS. NO SUCH FINDING FINDS PLACE IN THE ASSES SMENT ORDER. THE AO, AS SUCH, ACCEPTED THAT THE EXPENSES WERE THE EXPENSES INCURRED BY THE ASSESSEE FOR ITS BUSINESS PURPOSES. JUST BECAUSE THE PARTI ES DID NOT RESPOND TO THE NOTICES ISSUED, WOULD NOT LEAD TO AUTOMATIC DISALLO WANCE BEING MADE, AS RIGHTLY OBSERVED BY THE LD. CIT(A). AS FOR THE ASS ESSEE, IT UNDOUBTEDLY, FILED ALL THE NECESSARY REQUISITE DETAILS BEFORE THE AO. THESE DETAILS INCLUDED THE ITA 452(DEL)10 4 NAMES AND ADDRESSES OF THE PARTIES TO WHOM THE FREI GHT CHARGES WERE STATED TO HAVE BEEN PAID. THERE WAS NOTHING AVAILABLE WI TH THE AO, TO MAKE THE DISALLOWANCE. MOREOVER, AS CONSIDERED BY THE LD. C IT(A), THE FREIGHT CHARGES INCURRED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD COME DOWN AS COMPARED TO THOSE INCURRED FOR THE ASSESSME NT YEAR 2004-05. IN THE ASSTT.YEAR 2004-05, THE ASSESSEE INCURRED FREIGHT C HARGES EXPENSES OF ` 78.14 LAKHS, WHEREAS FOR THE YEAR UNDER CONSIDERATION, SU CH CHARGES INCURRED WERE OF ` 54.61 LAKHS. THE TURNOVER OF THE ASSESSEE FOR TH E YEAR UNDER CONSIDERATION WAS OF ` 2.40 CRORES. IT WAS OF ` 2.19 CRORES FOR THE ASSESSMENT YEAR 2004-05. FOR ASSESSMENT YEAR 2005 -06, THE FREIGHT CHARGES WERE OF ` 51.44 LAKHS. THUS, THE FREIGHT CHARGES OF ` 54.61 LAKHS INCURRED FOR THE YEAR UNDER CONSIDERATION COMPARED FAVOURABL Y WITH THOSE INCURRED FOR THE ASSESSMENT YEAR 2005-06. THE TURNOVER, ME ANWHILE SHOWED A CONSISTENT INCREASE, BEING ` 2.36 CRORES FOR THE ASSESSMENT YEAR 2005-06 AND OF ` 2.40 CRORES FOR THE YEAR UNDER CONSIDERATION. 9. THE AO ALSO DID NOT MAKE OUT A CASE THAT THE CL AIM OF FREIGHT CHARGES WAS A BOGUS CLAIM. THEREFORE, IN THE ABSENCE OF A NY PALPABLE REASON ADOPTED BY THE AO FOR MAKING THE DISALLOWANCE IN QU ESTION, IN OUR CONSIDERED OPINION, THE LD. CIT(A) CANNOT BE FAULTE D FOR HAVING DELETED THE SAME. ITA 452(DEL)10 5 10. ACCORDINGLY, GROUND NO.1 IS REJECTED. 11. GROUND NO.2 STATES THAT THE LD. CIT(A) ERRED IN REDUCING THE ADDITION OF ` 10,71,235/- MADE ON ACCOUNT OF WAY EXPENSES TO ` . 9,71,235/-. 12. AS PER GROUND NO.3, THE LD. CIT(A) ERRED IN ACC EPTING THE ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE WITHOUT AFFORDIN G OPPORTUNITY TO THE AO UNDER RULE 46A OF THE I.T. RULES. 13. THE AO DISALLOWED THE ASSESSEES CLAIM OF WAY E XPENSES OF ` 10,71,235/- FOR THE REASON THAT THE ASSESSEE HAD NO T SUPPORTED THIS CLAIM BY ANY DOCUMENTARY EVIDENCE LIKE BILLS, VOUCHERS, DRIV ERS DETAILS TO WHOM THE AMOUNT HAD BEEN PAID, THE DESTINATION, ETC. 14. THE LD. CIT(A) HAVING DELETED THE DISALLOWANCE, GROUND NOS. 2&3 HAVE BEEN RAISED BY THE DEPARTMENT. 15. THE LD. DR HAS CONTENDED THAT THE ADDITIONAL EV IDENCE FURNISHED WITH REGARD TO THIS ISSUE BY THE ASSESSEE BEFORE THE LD. CIT(A) HAS WRONGLY BEEN ADMITTED AT THE BACK OF THE AO. 16. THIS CONTENTION OF THE LD. DR IS FOUND TO BE CO RRECT. THE OBSERVATIONS OF THE LD. CIT(A) IN THIS REGARD (RELE VANT PORTION) ARE AT PAGES 17 TO 18 OF THE IMPUGNED ORDER:- ITA 452(DEL)10 6 BRIEF FACTS AS STATED BY THE APPELLANT ASSESSEE AR E THAT THEY CLAIMED WAY EXPENSES AS THEIR BUSINESS EXPENDITURE TO THE T UNE OF ` 1,07,12,357/-, OUT OF WHICH THE AO DISALLOWED 10% O F WAY EXPENSES AMOUNTING TO ` 10,71,235/-. IT IS SEEN THAT THE REASON FOR DISALLOWANCE AS GIVEN BY THE AO ARE THAT THE ASSESS EE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE SUCH AS BILLS, V OUCHERS, DRIVER DETAILS ETC. WHEREAS ON THE OTHER HAND, THE ASSESSE E CLAIMS TO HAVE FILED COMPLETE DETAILS OF WAY EXPENSES ALONGWITH A CHART NARRATING THE EXPENSES INCURRED ON EACH CONTAINER/TRAILER FOR PLY ING. ALL THE LETTERS AND DETAILS FILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS HAVE BEEN PERUSED. IT IS SEEN THAT IN RESPONSE TO THE Q UERY WITH REGARD TO ABOVE EXPENDITURE RAISED BY ME, THE ASSESSEE FILED COPIES OF CERTAIN VOUCHERS PERTAINING TO THE WAY EXPENSES. ACCORDIN G TO THE APPELLANT, THE WAY EXPENSES INCLUDES EXPENDITURE ON DIESEL, O ILS AND LUBRICANTS, OCTROI, TOLL-TAX, NIGHT CHARGES, FOOD EXPENSES, SMA LL REPAIR OF VEHICLES, CLEANER(HELPER) EXPENSES, LIFTING EXPENSES, LOADING AND UNLOADING ETC. DRIVERS ARE STATEDLY PAID APPROXIMATELY 50 TO 60% O F THE HIRE CHARGES (RECEIPTS), DEPENDING ON DIFFERENT AREA, ROUTES AND DISTANCE OF DESTINATIONS POINT, HEAVY REPAIRS AND TYRE EXPENSES ARE BORNE BY THE COMPANY. 17 . A PERUSAL OF THE ABOVE EXTRACTED PORTION OF THE LD. CIT(A)S ORDER SHOWS THAT INDEED, THE ADDITIONAL EVIDENCE IN THE F ORM OF VOUCHERS PERTAINING TO WAY EXPENSES WERE FILED BY THE ASSESS EE BEFORE THE LD. CIT(A). THIS EVIDENCE WAS CONSIDERED BY THE LD. CIT(A) AND THE DISALLOWANCE WAS DELETED. HOWEVER, BEFORE SO DECIDING THE ISSUE, TH E ADDITIONAL EVIDENCE IS NOT SHOWN TO HAVE BEEN PUT TO THE AO. 18. WE ARE ALIVE TO THE FACT THAT THE ADDITIONAL EV IDENCE WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) IN RESPONSE TO THE Q UERY RAISED BY THE LD. CIT(A) ONLY AS IS EVIDENT FROM THE ABOVE PRODUCED E XTRACT OF THE CIT(A)S ITA 452(DEL)10 7 ORDER. STILL, IN OUR CONSIDERED OPINION, IT WAS I NCUMBENT UPON THE LD. CIT(A) TO HAVE PUT SUCH EVIDENCE TO THE AO FOR REBU TTAL TO THE PROVISIONS WHEREFOR IS CONTAINED IN RULE 46A(3) OF THE I.T. RU LES 1962. RULE 46A(4) STATES THAT :- NOTHING CONTAINED IN THIS RULE, SHALL AFFECT THE P OWER OF THE COMMISSIONER(A) ..TO DIRECT PRODUCTION OF ANY DO CUMENTS,.. TO ENABLE HIM TO DISPOSE OF THE APPEAL 19. THIS RULE, HOWEVER, IS ALSO IN CONFORMITY WITH RULE 46A(3) WHICH, IN TURN, IS INCONFORMITY WITH THE NATURAL JUSTICE PRI NCIPLE OF AUDI ALTEREM PARTEM. RULE 46A(4) DOES NOT OVERRIDE RULE 46A(3 ) AND ANY ADDITIONAL EVIDENCE FILED BEFORE THE LD. CIT(A), BE IT FILED BY THE ASSESSEE SUO MOTO OR AT THE INSTANCE OR ASKING OF THE LD. CIT(A) NEEDS M UST BE INVARIABLY PUT TO THE AO FOR REBUTTAL. 20. AS SUCH, WE REMIT THIS ISSUE TO THE FILE OF THE AO TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW ON CONSIDERING THE AFORESAID ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A). THE ASSESSEE SHALL BE AT LIBERTY TO SUPPORT ITS CASE ON THE ISSUE. THE ASSESSEE, N O DOUBT, SHALL CO-OPERATE WITH THE AO. ITA 452(DEL)10 8 21. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED, AS INDICATED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.05.2010. SD/- SD/- (A.K. GARODIA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.05.2010 *RM COPY FORWARDED TO: 1. INCOME TAX OFFICER, WARD 7(4), NEW DELHI. 2. M/S. SATYA PRIYA ROADLINES PVT.LTD., F-11, VISHWAKARMA COLONY, MB ROAD, NEW DELHI. 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR