M/s Niraj Cargo Movers Pvt. Ltd., Ahmedabad V. The ACIT, , Circle -5, Ahmedabad

ITA 480/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7775 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-06-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 02-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P M SHUKLA
• Assessee Lawyers: SAKAR SHARMAAR
• Section: 274

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, - BENCH, AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI N.S.SAINI, ACCOU NTANT MEMBER. ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545/AHD/2007(A.Y. 2003 - 04) ITA NO. 480/ AHD/2007(A.Y. 2003 - 04) ACIT, CIRCLE 5, AHMEDABAD. .. APPELLANT - VERSUS - NIRAJ CARGO MOVERS PVT. LTD., 38 HIRABHAI MARKET, DIWAN BALUBHAI ROAD, AHMEDABAD. .. RESPONDENT NIRAJ CARGO MOVERS PVT. LTD., 38 HIRABHA I MARKET, DIWAN BALUBHAI ROAD, AHMEDABAD. .. APPELLANT - VERSUS - ACIT, CIRCLE 5, AHMEDABAD. .. RESPONDENT FOR THE ASSESSEE : SHRI SAKAR SHARMA,AR FOR THE REVENUE : SHRI P.M.SHUKLA, DR ORDER SHRI T.K.SHARMA, JUDICIAL MEMBER : ALL THESE APPEALS WERE HEARD ON THE SAME DATE, ARGUED BY COMMON REPRESENTATIVES AND THEREFORE, THESE ARE NOW DECIDED BY THIS COMMON OR DER FOR THE SAKE OF CONVENIENCE AS UNDER. ITA NO.544/AHD/200 7(A.Y. 2000 - 01) ITA NO.545/AHD/2007(A.Y. 2003 - 04) (BOTH APPEALS BY REVENUE) 2. THE ONLY GROUND RAISED, WHICH IS COMMON IN BOTH THE APPEALS FILED BY THE REVENUE, IS AGAINST DELETION OF THE ADDITION OF RS.55,46,165 IN A.Y. 2000 - 01 AND RS.7,04,511 IN A.Y. 2003 - 04 MADE ON ACCOUNT OF SUPPRESSED FREIGHT INCOME. 3. FACTS IN BOTH THE ASSESSMENT YEAR UNDER CONSIDERATION IS UNDISPUTEDLY IDENTICAL EXCEPT THE DISPUTED AMOUNT. THE FACTS, REFERRING TO THE ASSESSMENT YEAR 2000 - 01, ARE THAT THE ASSESSEE - COMPANY IS ENGA GED IN TRANSPORT BUSINESS. IT IS BOOKING GOODS OF PARTIES AND HIRING/ENGAGING THE TRUCKS FROM OPEN MARKET FOR THE DESTINATION AS PER GOODS AVAILABLE FOR TRANSPORTATION. THE DIFFERENCE ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 2 BETWEEN FREIGHT CHARGES RECEIVED FROM CUSTOMER AND FREIGHT PAID ON TRUCK S IS ITS INCOME WHICH IS REFLECTED IN P&L ACCOUNT. IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2000 - 01, THE ASSESSING OFFICER STATED THAT THE ASSESSEE HAS RECEIVED TOTAL FREIGHT CHARGES OF R S.1,50,80,754 AND HAS CLAIMED TO HAVE PAID FREIGHT AMOUNTING TO RS.1,10,92,330. IN ABSENCE OF ANY DOCUMENTARY SUPPORT WITH REGARD TO THE TOTAL FREIGHT PAID AND CONSIDERING THE FACT THAT THERE HAS TO BE SOME EXPENDITURE BY THE ASSESSEE FOR EARNING THE FREIGHT INCOME, THE ASSESSING OFFICER RESTRICTED THE EXPENDITURE TO 50% OF RS.1,10,92,330 AND MADE THE IMPUGNED ADDITION OF RS.55,46,165 IN THE ASSESSMENT YEAR 2000 - 01. ON THE SAME REASONING SIMILAR ADDITION OF RS.7,04,511 WAS ALSO MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2003 - 04. MATTER WAS CARRIED TO THE CIT(A) AND THE LEARNED CIT(A) CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO THE SUBMISSION OF THE ASSESSEE, DELETED THE IMPUGNED ADDITION MADE IN BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. 4. THE LEARNED DR CONTENDED BEFORE US THAT BEFO RE THE ASSESSING OFFICER THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY SUPPORT IN REGARD TO THE TOTAL FREIGHT PAID, THEREFORE, THE ASSESSING OFFICER LEGALLY AND FACTUALLY CORRECT IN RESTRICTING THE FREIGHT EXPENDITURE TO 50% OF TOTAL FREIGHT EXPENDITURE C LAIMED BY THE ASSESSEE. 5. ON THE OTHER HAND, THE LEARNED AR OF THE ASSESSEE SUPPORTED THE IMPUGNED ORDERS OF THE LEARNED CIT(A) IN DELETING THE IMPUGNED ADDITION ON ACCOUNT DISALLOWANCE OF FREIGHT EXPENDITURE. HE POINTED OUT THAT THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2001 - 02 HAS DELETED SIMILAR ADDITION. HE FURTHER POINTED OUT THAT NO DISCREPANCY HAS BEEN NOTICED BY THE ASSESSING OFFICER IN THE BOOKS OF ACCOUNT. FURTHER HE SUBMITTED THAT THE ASSESSEE DOES NOT OWN ANY VEHICLE AND THE REFORE NEED TO DEPEND ON THE OTHER TRANSPORT OWNERS/OPERATOR AND THEREFORE, HAVE TO PAY THEM SUBSTANTIAL PART OF THE FREIGHT RECEIVED BECAUSE THEY ARE THE PERSONS WHO ACTUALLY INCUR ACTUAL EXPENDITURE FOR TRANSPORTATION, FUEL, LABOUR, DRIVERS, COOLEE, TEAR AND WEAR OF VEHICLES, REPAIRS AND MAINTENANCE ETC. THE ASSESSEE RETAINS ONLY A MEAGER AMOUNT OF THE FREIGHT RECEIVED AS ITS MARGIN FOR ARRANGING TRANSPORTATION OF GODS FOR THESE TRANSPORTERS. THE MARGIN OF INCOME EARNED BY THE ASSESSEE IS ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 3 FAIR AND REASON ABLE LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND, THEREFORE, THE LEARNED CIT(A) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE IMPUGNED ADDITION MADE ON THIS ACCOUNT IN BOTH THE AYS. 6. HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO THE NOTE HERE THAT THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL EVIDENCE OR POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OUT OF THE TOTAL FREIGHT EXPENDITURE. HE HAS FAILED TO CONSIDER THE FACT THAT THE ASSESSEE DOES NOT OWN ANY VEHICLE AND THEREFORE NEED TO DEPEND ON THE OTHER TRANSPORT OWNERS/OPERATOR AND THEREFORE, HAVE TO PAY THEM SUBSTANTIAL PART OF THE FREIGHT RECEIVED BECAU SE THEY ARE THE PERSONS WHO ACTUALLY INCUR ACTUAL EXPENDITURE FOR TRANSPORTATION, FUEL, LABOUR, DRIVERS, COOLEE, TEAR AND WEAR OF VEHICLES, REPAIRS AND MAINTENANCE ETC. IN THIS BUSINESS, ONLY A MARGIN OF FREIGHT RECEIPTS AFTER MEETING THE FREIGHT EXPENDITU RE HAS BEEN RECEIVED BY THE ASSESSEE. THERE IS NO MATERIAL ON RECORD CONTRARY TO THE ABOVE FACTS. SINCE THE ASSESSEE RUNS THE TRANSPORT BUSINESS ON HIRING VEHICLE FROM OTHERS IT IS NOT IMPROBABLE A MAJOR CHUNK OF FREIGHT RECEIPTS MUST HAVE BEEN PAID BY THE ASSESSEE. IT IS ALSO PERTINENT TO NOTE HERE THAT SIMILAR ADDITION WAS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2001 - 02 AND CONFIRMED BY THE CIT(A). THE ITAT, AHMEDABAD BENCH HAS DELETED THE SAME. THE RELEVANT PORTION OF THE SAID ORDER OF THE T RIBUNAL , AS QUOTED IN PARAGRAPH 3.2.1 OF THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR 2000 - 01 , IS REPRODUCED AS UNDER : 3.2.1. . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOING THROUGH THE MATERIAL ON RECORD, WE ARE NOT IN AGREEMENT WITH THE FI NDINGS OF CIT(A) BECAUSE THE ASSESS EE HAS GIVEN COMPLETE DETAILS BE FORE THE AUTHOR ITIES BELOW, WHICH WERE RELEVANT DOCUMENTS AND SUBJECT TO VERIFICATION OF THE AD. THE ASSESSEE HAS GIVEN MONTH - WISE RECEIPTS AS WELL AS MONTHLY DETAILS OF THE RECEIPTS AND E XPENDITURE ON FREIGHT ACC OUNTS. THE ASSESSEE HAS ALSO SHOWN BY PERCENTAGE THAT NET INCOME IN T HE YEAR UNDER CONSIDERATION HAS SUBSTANTIALLY INCREASED AND THE REVENUE HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS EXCEPT IN THE NOTE ATTACHED TO THE STATEMENT OF ACCOUNT AS MENTIO NED ABOVE. IN TH E FACTS AND CIRCUMSTANCES OF THE CASE, IT SIMPLY SEEMS THAT IT IS A CLERICA L TYPING MISTAKE WHICH HAS BEEN CATEGORICALLY ADMITTED BY THE ASSESSEE. THE REVENUE HAS ALSO NOT BEEN ABLE TO SUBSTANTIATE ITS STAND B Y PLACING A NY EVIDENCE ON RECORD. WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD NOT SU FFER FOR ANY INADVERTENT MISTAKE OF ITS C. A. OR ITS STAFF IN ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 4 THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ADDITION IS NOT JUSTIFIED. THE SAME IS DI RECTED TO BE DELETED. IN VIEW OF THE ABOVE AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, IN OUR CONSIDERED VIEW, THE LEARNED CIT(A) IS PERFECTLY JUSTIFIED IN DELETING THE IMPUGNED ADDITIONS MADE ON ACCOUNT OF DISALLOWANCE OF FREIGHT EXPENDITUR E IN BOTH THE AYS UNDER CONSIDERATION. WE UPHOLD THE SAME AND DISMISS BOTH THE APPEALS OF THE REVENUE. 7. IN THE RESULT, ITA NO.544/AHD/2007(A.Y.2000 - 01) AND ITA NO.545/AHD/2007(A.Y. 2003 - 04), FILED BY THE REVENUE ARE DISMISSED . ITA NO.480/AHD/2007(A.Y. 2003 - 04) (FILED BY ASSESSEE): 8. IN THIS APPEAL, THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINST CONFIRMATION OF THE DISALLOWANCE OF INTEREST OF RS.3,90,179. 9. THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF RS.3,90,179 FOR THE REASONS GIVEN IN PARAGR APH 5 ON PAGE 2 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE COMPANY HAS OBTAINED LOAN OF RS.13,00,000 ON 2.4.2002 AND RS.5,00,000 ON 12.3.2003 AND REPAID THE LOAN OF RS.13,00,000 ON 27.3.2003 AND RS.3,00,000 ON 29.3.2003. THU S THE FUNDS AMOUNTING TO RS.5,00,000 WERE AVAILABLE TO THE ASSESSEE FOR 17 DAYS AND RS.2,00,000 FOR TWO DAYS N THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER DISALLOWED INTEREST OF RS.3,60,172 @18% ON AN ADVANCE OF RS.20,00,953 GIVEN TO PROGRESSIVE C ARS P. LTD., AND ALSO RS.30,007 @6% IN RELATION TO M/S. NIRAJ CARGO MOVERS ASSUMING ADVANCING OF FUNDS TO THE SAID CONCERN ON A INTEREST @12% AGAINST FUNDS BORROWED @18%. ON APPEAL, BEFORE THE LEARNED CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT THE ADVANC E OF RS.20,00,953 TO PROGRESSIVE CARS P LTD WAS NOT GIVEN DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, QUESTION OF DIVERTING INTEREST BEARING FUNDS FOR GIVING INTEREST FREE ADVANCE DOES NOT ARISE. IT WAS FURTHER CONTENDED THAT INTEREST PAID DURING TH E YEAR IS ONLY RS.5,29,648 AGAINST RS.5,90,393 IN THE IMMEDIATE PRECEDING YEAR. THE INTEREST DISALLOWED AMOUNTING TO RS.3,60,172 IN RESPECT OF PROGRESSIVE CARS P. LTD., IS THEREFORE, NOT JUSTIFIED. AS REGARDS DISALLOWANCE OF INTEREST OF RS.30,007 IN RELAT ION TO THE TRANSACTIONS WITH NIRAJ CARGO MOVERS, THE ASSESSEE SUBMITTED THAT INFERENCE OF ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 5 THE ASSESSING OFFICER THAT THE ASSESSEE HAD ADVANCED FUNDS TO NIRAJ CARGO MOVERS IN THE YEAR UNDER CONSIDERATION ON INTEREST IS NOT CORRECT AS CAN BE SEEN FROM ANNEXU RE - 1 OF THE AUDITED ACCOUNTS ATTACHED WITH THE RETURN OF INCOME. THE ASSESSEE HAD OPENING CREDIT BALANCE OF RS.8,98,839 WITH NIRAJ CARGO MOVERS WHICH HAS BEEN INCREASED TO RS.13,55,712 ON ACCOUNT OF FURTHER BORROWINGS MADE DURING THE YEAR. T HUS, THERE WAS NO ADV ANCE TO THE SAID CONCERN. THE ASSESSEE FURTHER SUBMITTED THAT MERELY BECAUSE ASSESSEE HAS PAID INTEREST @12% AGAINST 18% PAID ON OTHER ACCOUNTS, INTEREST CANNOT BE DISALLOWED BECAUSE ASSESSEE HAS EFFECTIVELY REDUCED ITS INTEREST LIABILITY IN THE YE AR UNDER APPEAL AS COMPARED TO THE INTEREST PAID LAST YEAR. AFTER CONSIDERING THE AFORESAID SUBMISSIONS, IN THE IMPUGNED ORDER, THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE IS ONLY AN AGENT WHO ARRANGES TRANSPORTATION OF GOODS AND COLLECT COMMISSION THERE ON. THE ASSESSEE DOES NOT NEED HEAVY INVESTMENTS. DESPITE OF THIS, THE ASSESSEE HAS BORROWED LOANS FROM THE DIRECTORS AND THEIR RELATIVES AND PAYS INTEREST ON SAID BORROWED AMOUNTS AND FUNDS TO OTHER SISTER CONCERNS WITHOUT CHARGING ANY INTEREST. HE ACCOR DINGLY UPHELD BOTH THE DISALLOWANCE OBSERVING THAT NECESSARY EVIDENCES ARE NOT FORTHCOMING IN SUPPORT OF THE ASSESSEES CONTENTION. 10. AGGRIEVED WITH THE ORDER OF THE LEARNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. HEARD BOTH THE PARTI ES AND PERUSED THE RECORD. THE LEARNED AR OF THE ASSESSEE REITERATED THE SUBMISSION S AS WERE MADE BEFORE THE AUTHORITIES BELOW. FROM THE COPY OF ACC OU NT OF PROGRESSIVE CARS PVT. LTD., FOR THE YEAR ENDED 31.3.2003 (PAGE 6 OF PB) IT IS SEEN THAT THERE WAS AN OPENING BALANCE OF RS.2 0 ,00,953 , WHICH INDICATES THAT THE AMOUNT WAS NOT ADVANCED DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LEARNED AR OF THE ASSESSEE CONTENDED THAT OUT OF THE ABOVE OPENING BALANCE RS.12,00,000 WERE ADVANCED IN A.Y. 2002 - 03 AND THE BALANCE WAS ADVANCED IN A.Y. 2001 - 02 OR EARLIER YEARS. THE LEARNED AR OF THE ASSESSEE FURTHER CONTENDED THAT NO DISALLOWANCE OF INTEREST WAS MADE I N EARLIER ASSESSMENTS. HE ALSO CONTENDED THAT THE AUTHORITIES BELOW HAVE NOT ESTABLISHED THAT THE SAID ADVANCE WAS GIVEN OUT OF BORROWED FUNDS ON WHICH THE ASSESSEE PAID INTEREST. NONE OF THESE SUBMISSIONS ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 6 OF THE LEARNED AR OF THE ASSESSEE COULD BE CONTROVERTED BY THE LEARNED DR. IN THE DECISION OF IN THE CASE OF CIT V. SRIDEV ENTERPRISES [192 ITR 165 (K AR) , CIT V. RADICO KHAITAN LTD [ 274 ITR 354 (ALL)] AND ESCORTS LTD., V. ACIT [104 ITR 427 (DEL - G BENCH)] , RELIED ON BY THE LEARNED AR OF THE ASSESSEE, IT IS HELD THAT NO DISALLOWANCE OF INTEREST COULD BE MADE WHEN THERE IS NO ADVANCE OF FUNDS DURING THE YEAR AND AMOUNT SO ADVANCED REPRESENTS ONLY OPENING BALANCE. IN THE INSTANT CASE ON HAND SINCE THE AMOUNT IN QUESTION WAS THE OPENING BALANCE, BY FOLLOWING THE AFORESAID DECISIONS, WE HOLD THAT NO DISALLOWANCE OF INTEREST COULD BE MADE SINCE THERE IS NO ADVANC E OF FUNDS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. 12. AS REGARDS DISALLOWANCE OF INTEREST OF RS.30,007 IN RESPECT OF NIRAJ CARGO MOVER S, WE FIND THAT BOTH THE AUTHORITIES BELOW HAVE TRAVELLED ON THE FOOTING THAT AMOUNTING OUTSTANDING TO THE ACCO UNT OF THE SAID PARTY REPRESENTS AMOUNT ADVANCED BY THE ASSESSEE. THE LEARNED AR OF THE ASSESSEE PRODUCED THE COPY OF ACCOUNT OF NIRAJ CARGO MOVERS FOR THE YEAR ENDED 31.3.2003 INDICATING CREDIT OUTSTANDING BALANCE BOTH AT THE BEGINNING AND END OF THE YEA R AND PAYMENT OF INTEREST OF RS.60,014 AND CONTENDED THAT THE ASSESSEE BORROWED FUNDS FROM THE SAID PARTY AND PAID INTEREST OF RS.60,014 @12%, WHICH IS LESSER THAN THE MARKET RATE OF 18% AND THEREFORE, THERE IS NO EXCESSIVE PAYMENT OF INTEREST WHICH COULD BE DISALLOWED. THE LEARNED DR COULD NOT CONTROVERT THE ABOVE FACTS. THEREFORE, IN OUR CONSIDERED VIEW THE INTEREST IN RESPECT OF NIRAJ CARGO MOVERS HAS BEEN DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON WRONG FOOTING AND WRONG ASSUMPTION FACTS. THEREFORE, WE DELETE SUCH DISALLOWANCE AND ALLOW THE GROUND OF THE ASSESSEE RAISED IN THIS REGARD. 13. IN THE RESULT, ITA NO.480/AHD/2007 FOR THE A.Y. 2003 - 04 FILED BY THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT . 24.07.09 SD/ - SD/ - ( N.S.SAINI) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIAL MEMBER DATE: 24.07.09 (H.K.PADHEE) SENIOR PRIVATE SECRETARY. ITA NO.544/AHD/2007(A.Y. 2000 - 01) ITA NO.545 /AHD/2007(A.Y. 2003 - 04) ITA NO.545/AHD/2007(A.Y. 2003 - 04) 7 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.