Asst.C.I.T., Bangalore V. M/s Balaji Agencies, Bangalore

ITA 495/BANG/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8479 (ITAT-BANGALORE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S. RAMASUBRAMANIAM
• Keywords: TDS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 194C; 250

Judgement Text

ITA.495/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI. S. JAYARAMAN, ACCOUNTANT MEMBER I.T.A NO.495/BANG/2016 (ASSESSMENT YEAR : 2011-12) ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 6(2)(1), BENGALURU .. APPELLANT V. M/S. BALAJI AGENCIES, NO.11, 3 RD CROSS, RAGHAVENDRA LAYOUT, TUMKUR ROAD, YESHWANTHPURA, BENGALURU 560 052 .. RESPONDENT PAN : AAEFS0050L ASSESSEE BY : SHRI. S. RAMASUBRAMANIAM, CA REVENUE BY : SHRI. M. K. BIJU, JCIT HEARD ON : 06.03.2017 PRONOUNCED ON : 08.03.2017 O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT (A), BENGALURU-2, BENGALURU, DT.21.01.2014, FOR THE ASSESSMENT YEAR 2011- 12. 02. M/S. BALAJI AGENCIES, THE ASSESSEE , IS A PART NERSHIP FIRM. IT IS CARRYING ON THE BUSINESS OF ACTING AS DISTRIBUTORS OF TEA FOR HINDUSTAN UNILEVER LTD. IT SELLS TEA TO NEARLY 2300 - 2500 RETAIL SHOPS IN NORTH BENGALURU, HIRES VANS FOR DELIVERY OF TEA WHICH TAK ES PLACE PRACTICALLY ITA.495/BANG/2016 PAGE - 2 EVERY DAY OF THE YEAR. IT FILED ITS RETURN FOR THE A Y 2011-12 ON 23.11.2012 DECLARING A TOTAL INCOME OF RS.23,98,570 /-. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 9, THE ASSESSING OFFICER (A O), WHILE COMPLETING THE ASSESSMENT U/S 143(3) MADE THE FOLLOWING ADDITIONS A) DISALLOWANCE OF INTEREST RS. 8,65,837/- & B) DIS ALLOWANCE OF VAN HIRE CHARGES - RS 24,62,400/- 03. AGGRIEVED , THE ASSESSEE FILED AN APPEAL BEF ORE THE CIT (A) AND THE CIT (A) ALLOWED THE APPEAL . AGAINST THE CIT (A) OR DER, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS : ITA.495/BANG/2016 PAGE - 3 04. THE BRIEF FACTS IN RESPECT OF THE ABOVE ADDITIONS AS SUBMITTED BY THE ASSESSEE BEFORE THE CIT (A) AND THE CIT( A) DECISION ON SUCH ISSUES ARE AS EXTRACTED UNDER : 05. ON INTEREST DISALLOWANCE : OUT OF THE TOTAL BO RROWING OF RS. 45,25,000/- MADE FROM FRIENDS AND RELATIVES, RS. 1 0 LAKHS ONLY WAS BORROWED DURING THE AY 2011-12 AND THE BALANCE AMO UNT WAS BORROWED IN THE EARLIER FINANCIAL YEARS. THE ASSESSEE HAD T AKEN 64.90 LAKHS SECURED LOANS FROM TWO BANKS DURING THE AY 2011-1 2 AND THE BALANCE AMOUNTS WERE BORROWED IN THE EARLIER FINANC IAL YEARS. BOTH THE SECURED LOANS AND UNSECURED LOANS WERE USED FOR WOR KING CAPITAL PURPOSES. THE ASSESSEE WAS INCURRING EXPENDITURE T OWARDS UNLOADING CHARGES, VAN HIRE CHARGES, SALARY ETC . THESE AMOUN TS WERE PAID TO VARIOUS PERSONS, GROUPED UNDER THE RESPECTIVE HEAD AND DEBITED TO PROFIT AND LOSS ACCOUNT UNDER APPROPRIATE HEADS. FO R INSTANCE, THE PAYMENTS MADE TO VARIOUS PERSONS TOWARDS UNLOADING CHARGES WERE SHOWN IN THE INDIVIDUAL NAME IN THE LEDGER BUT GROU PED TOGETHER UNDER THE HEAD 'UNLOADING CHARGES' AND DEBITED TO PROFIT AND LOSS ACCOUNT. SIMILAR PROCEDURE WAS FOLLOWED IN RESPECT OF OTHER EXPENSES . THE ASSESSING OFFICER MISUNDERSTOOD THE ABOVE DETAILS SHOWN IN THE NAME OF INDIVIDUAL PARTIES IN THE LEDGER AS ADVANCES PAID TO THEM AND HAS WRONGLY SURMISED THAT THESE ADVANCES WERE INCLUDED IN SUNDRY DEBTORS OF RS. 1,40,57,125/-. THEREFORE, THE AO CAME TO A C ONCLUSION THAT THE SUNDRY DEBTOR OF RS. 1,40,57,125/- IS NOTHING BUT C ASH WITHDRAWN BY ITA.495/BANG/2016 PAGE - 4 THE APPELLANT UNDER VARIOUS NAMES. HE HELD THAT THE APPELLANT HAD NOT UTILIZED THE BORROWED SUMS FOR THE PURPOSE OF BUSIN ESS AND DISALLOWED THE ENTIRE INTEREST OF RS.8,65,8371-. THE ASSESSEE ENCLOSED A STATEMENT OF SUCH EXPENSES. 06. THE RELEVANT PORTION OF THE CIT (A) ORDER, ON T HIS ISSUE IS EXTRACTED AS UNDER : 4.5 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S CONTENTIONS AND SUBMISSIONS AND PERUSED THE ASSESSM ENT ORDER. THE ASSESSING OFFICER'S JUSTIFICATION FOR DI SALLOWING THE INTEREST OF RS.8,65,837/- IS THAT THE APPELLANT HAD MORE 'TH AN ENOUGH FUNDS AT ITS DISPOSAL SINCE THE CLAIM OF SUNDRY DEBTORS I S ONLY A CAMOUFLAGE IN THE FORM OF AMOUNTS DUE FROM CUSTOMERS TO WHOM T HE APPELLANT CLAIMS TO HAVE SUPPLIED TEA, ETC., AND SO THERE WAS NO NEED TO BORROW FUNDS AND PAY INTEREST. THE EXPLANATION OF T HE APPELLANT BEFORE THE ASSESSING OFFICER WAS THAT 'NA TURE OF BUSINESS OF THE ASSESSEE IS DISTRIBUTING OF HINDUST AN LEVER PRODUCTS (TEA POWDER) DAILY 4 TO 5 VANS WILL GO TO DIFFERENT AREAS AND INDIVIDUAL VAN IN-CHARGE HAS TO GIVE A LI ST OF SALES EFFECTED DURING THE DAY ALONG WITH CASH RECEI VED. AS IT IS INNUMERABLE PARTIES, MAINTAINING INDIVIDUAL LEDGER IS CUMBERSOME HENCE THE ASSESSEE HAS MAINTAINED A SING LE ACCOUNT UNDER THE NAME SUNDRY DEBTORS, ALL SALES EV ERY DAY AND COLLECTIONS EVERY DAY ARE ENTERED DAILY. BUT THEY H AVE CONTROL TO SHOW WHICH ARE THE BILLS OUTSTANDING AT A PARTICULA R POINT OF TIME. HENCE THIS IS PURELY SALES AND CASH LENT.' T HE SAME IS REITERATED BEFORE ME. THE APPELLANT HAS ALSO EXPLAI NED THAT 'THESE PAYMENTS ARE SHOWN IN THE CASH BOOK AS HAVIN G BEEN PAID TO THE INDIVIDUAL PERSONS AND THEY ARE COLLATED AND THEN POSTED TO THE RESPECTIVE EXPENSE ACCOUNT' WHICH HAVE NOT B EEN APPRECIATED BY THE ASSESSING OFFICER. IT IS ON REC ORD THAT THE ITA.495/BANG/2016 PAGE - 5 APPELLANT HAS HAD A TURNOVER OF RS. 50,68,55,878/- DURING THE YEAR. FROM THE SAID EXPLANATION, IT CANNOT BE SAID THAT T HE AMOUNTS HAVE BEEN ADVANCED TOWARDS A NON-BUSINESS PURPOSE. FROM THE DETAILS FILED BEFORE ME AT THE TIME OF APP EAL HEARING, IT IS SEEN THAT, DURING THE YEAR ENDED 31/ 3/2011 RELEVANT TO THE ASSESSMENT YEAR 2011-12, IT HAD BOR ROWED ONLY A SUM OF RS 10,00,000/- FROM FRIENDS AND RELATIVES WHEREAS THE LOAN OF RS.32.45 LAKHS WAS TAKEN IN THE EARLIER YEARS FROM FRIENDS AND RELATIVES AND LOAN TO THAT EXTENT IS SH OWN IN THE OPENING BALANCE. 4.6 I AGREE WITH THE APPELLANT THAT IT IS NOT FOR T HE ASSESSING OFFICER, TO PUT HIMSELF IN THE PLACE OF A BUSINESSMAN TO DECIDE WHETHER A PARTICULAR EXPENDIT URE IS REASONABLE IF IT IS FOUND THAT IT WAS INCURRED FOR THE PURPOSE OF BUSINESS AS HELD BY THE HON'BLE SUPREME COURT IN S. A.BUILDERS LTD. V. CIT (SUPRA). IT IS SIGNIFICANT TO NOTE THAT THE ASS ESSING OFFICER HAS NOT QUESTIONED THE GENUINENESS OF THE APPELLANT'S CLAIM OF HAVING TAKEN LOANS FROM THE 12 INDIVIDUALS AND 2 FINANCIAL INSTITUTIONS, SUBSTANTIAL PART OF W HICH WAS TAKEN IN THE EARLIER YEARS. MOREOVER., NOTHING HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT THE BORROWED FUNDS HAVE BEEN USED FOR NON- BUSINESS PURPOSE OR FOR A PURPOSE WHICH YIELDS NON- TAXABLE INCOME UNDER SUCH FACTS, I HOLD THAT THERE WAS NO J USTIFICATION FOR THE ASSESSING OFFICER TO DISALLOW THE INTEREST AND LOAN PROCESSING CHARGES OF RS.8,65,837/- CLAIMED BY IT I N THIS REGARD AND HEREBY DELETE THE DISALLOWANCE. WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH RE LEVANT MATERIAL. WE FIND THAT THE ORDER OF THE CIT (A) DOES NOT RE QUIRE ANY INTERFERENCE AND HENCE DISMISS THE REVENUES APPEAL ON THIS ISSUE. ITA.495/BANG/2016 PAGE - 6 07. THE NEXT ISSUE IS DISALLOWANCE ON VAN HIRE CHAR GES: THE ASSESSEE IS ENGAGING VANS BELONGING TO VA RI OUS PARTIES FOR DELIVERY OF TEA TO RETAIL SHOPS WHICH HAPPENS ALMOST EVERY DAY. THE T OTAL AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT WAS RS 40,24,900 /-. IN RESPECT OF FIVE PERSONS WHOSE VANS WERE REGULARLY ENGAGED BY I T , THE ASSESSEE PAID RS 30 LAKHS TO THEM AND DEDUCTED TAX AT SOURC E ON IT. IN RESPECT OF THE OTHER PERSONS, THE AMOUNT PAID TO EACH OF TH EM WAS LESS THAN THE SPECIFIED LIMIT U / S 194C OF THE ACT AND HENCE, THE ASSESSEE DID NOT DEDUCT TAX AT SOURCE. IT MAINTAINED TWO LEDGER ACC OUNTS, ONE FOR VAN HUE CHARGES WITH T DS AND THE OTHER WITHOUT TDS . THE ASSESSING OFFICER WRONGLY HELD THAT THE LEDGER ACCOUNTS PRODU CED SHOWED ONLY RS 30 LAKH WHEREAS THE AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS RS 40,24,900/-. BASED ON THIS WRONG SU RMISE, HE HELD THAT THE VAN HIRE CHARGES DEBITED BY THE ASSESSEE ARE CIRCUMSPECT AND HENCE ESTIMATED VAN HIRE CHARGES AT RS.15,62,5 00/- AND DISALLOWED THE BALANCE RS. 24,62,400/-. IT IS MAINTAINING RE GULAR BOOKS OF ACCOUNTS , WHICH ARE AUDITED BY A CHARTERED ACCOUNT ANT AS REQUIRED U/S.44AB . TO PROVE THAT THE IT HAS DEBITED THE AM OUNTS PAID TO INDIVIDUAL PARTIES UNDER VARIOUS EXPENSE HEADINGS, IT ENCLOSED A COPY OF THE LEDGER ACCOUNT, SUNDRY DEBTORS ACCOUNT AND C ASH BOOK FOR THE MONTH OF MARCH 2011 TO PROVE THAT THE AMOUNTS NOTED BY THE ASSESSING OFFICER IN PARA 3 (PAGES 2 TO 13) OF THE ASSESSMENT ORDER HAVE NOTHING TO DO WITH THE SUNDRY DEBTORS. ITA.495/BANG/2016 PAGE - 7 08. THE RELEVANT PORTION OF THE CIT (A) ORDER, ON T HIS ISSUE IS EXTRACTED AS UNDER : 5.1 THE ASSESSING OFFICER NOTED THAT THE APPELLANT HAS SHOWN EXPENDITURE RELATING TO HIRING OF VANS FOR MAKING D ELIVERY OF THE COMMODITIES CLAIMED AT RS.40,24,900/- BUT, ACCORDIN G TO HIM, THE CLAIM IS EXCESSIVE BY RS 24,62,400/- AS THE REASONA BLE EXPENDITURE INCURRED COULD HAVE BEEN ONLY RS.15,62,500/-. 5.2 THE RELEVANT GROUNDS OF APPEAL ARE AS FOLLOWS: 7. THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN HOLDING THAT THE APPELLANT HAD NOT INCURRED TO VAN HIRE CHARGES OF RS.40,24,900/- AND ERRED IN DISALLOWING A SUM OF RS .24,62,400/-. 8 THAT THE LEARNED ASSESSING OFFICER ERRED IN LAW A ND ON FACTS IN ESTIMATING THE VAN HIRE CHARGES OF RS.15,62,500/AND SUCH AN ESTIMATE IS LIABLE TO BE QUASHED AS BEING ARBITRARY AND MERELY BASED ON SURMISES AND CONJECTURES 9. THAT THE FINDING OF THE LEARNED ASSESSING OFFICE R THAT THE APPELLANT REQUIRES ONLY FIVE VANS PER DAY AND SUCH VANS WERE USED ONLY FOR 250 DAYS IN A YEAR IS ARBITRARY AND LIABLE TO BE QUASHED AS QUASHED AS BEING A MERE CONJECTURE AND SURMISE.' 5.3 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS AND PERUSED THE ASSESSMENT ORDER. THE A PPELLANT HAS POINTED OUT THAT IT IS CATERING TO DISTRIBUTION OF HINDUSTAN LEVER PRODUCTS (TEA POWDER) TO AS MANY AS 2300- 2500 OUTL ETS IN KARNATAKA IN THE AREA ASSIGNED TO IT THE APPELLANT HAS SUBMITTED THAT IT ENGAGES VANS HIRED FROM SEVERAL PARTIES AND SUPPLIES ARE MA DE ALMOST EVERY DAY IN THE YEAR. THE NUMBER OF VANS REQUIRED TO BE HIRED BY THE APPELLANT IS AN ISSUE TO BE DECIDED BY IT AS IT WOULD DEPEND ON THE DEMAND FROM ITS CUSTOMERS. HERE AGAIN, AS OBSERVED BY THE HON'BLE SUPREME COURT IN THE SA BUILDER'S CASE (SUP RA), THE ASSESSING OFFICER CANNOT PUT HIMSELF IN THE PLACE O F THE ITA.495/BANG/2016 PAGE - 8 BUSINESSMAN TO ASSUME AS TO HOW MANY VANS WERE REQU IRED BY THE APPLICANT AND THAT TOO FOR HOW MANY DAYS IN A YEAR FOR DELIVERY OF THE COMMODITIES WITHOUT CONSIDERING THAT IT SUPPLIES TO 2300-2500 SHOPS FALLING IN THE TERRITORY TO WHICH HE CATERS THE CON CLUSION OF THE ASSESSING OFFICER THAT A CERTAIN NUMBER OF TRIP S FOR CERTAIN DAYS ONLY AT A CERTAIN RATE ONLY . IS APPROPRIATE EXPENDITURE WITHOUT BRINGING ON RECORD ANYTHING TO SUGGEST THAT THE ACTUAL CLAIM OF THE APPELLANT DOES NOT CORRESPOND TO THE SALES IS NOT SCIENTIFIC AND C ANNOT BE SUSTAINED BESIDES, THE APPELLANT HAS DISPUTED THE VERACITY OF THE ASSESSING OFFICER'S OBSERVATION REGARDING DEDUCTION . ..OF TAX AT SOURCE FROM PAYMENTS MADE TO CUSTOMERS AS IT HAS SUBMITTED THAT IT HAS BEEN MAINTAINING TWO LEDGERS TO SEPARATELY INDICATE PAYM ENTS WHERE TAX HAS BEEN DEDUCTED AT SOURCE AND WHERE TAX HAS N OT BEEN DEDUCTED AT SOURCE DEPENDING ON THE REQUIREMENT AS PER LAW. I HAVE CALLED FOR AND TEST-CHECKED THE BILLS/VOUCHERS MAINTAINED FOR VAN HIRE CHARGES. BY AND LARGE, THE APPELLANT IS MAINTAINING BILLS/VOUCHERS WITH VAN/LORRY NOS. MOREOVER, I HAVE CALLED FOR AN D COMPARED THE SAID EXPENSES WITH THAT CLAIMED IN THE IMMEDIATELY PRECE DING YEAR (I E ASSESSMENT YEAR 2010-11). I FIND THAT THESE WHEN CO MPARED ARE AS UNDER A. Y VAN HIRE CHARGES TURNOVER % OF VAN HIRE CHARGES/ TURNOVER 2010-11 47,40,000 47,85,98,004 @0.99% 2011-12 40,24,900 50,68,55,878 @0.8% AS IS APPARENT, THE VAN HIRE CHARGES AT RS.40,24,90 0/- AGAINST TURNOVER OF RS.50,68,55,878/- DURING ASSESSMENT YEAR 2011-12 IS COMPARABLE TO THAT OF RS.47,40,000/- FOR ASSESSMENT YEAR 2010-11 AGAINST A TURNOVER OF RS.47,85,98,004/- FOR THAT YEAR. THE SAID VAN HIRE CHARGES AT 0.8% OF TURNOVER ALSO DO NOT APPEAR TO BE VERY HIGH. UNDER SUCH FACTS, AND IN A CASE WHERE NO SPECIFIC DISCREPANCY HAS BEEN POINTED OUT BY THE AO AS BROUGHT OUT ABOVE, THE ADDITION OF RS.24,62,400/- DESERVES TO BE DELETED. ACCORDINGLY, I DELETE THE ADDITION OF RS.24,62,400/ -. ITA.495/BANG/2016 PAGE - 9 WE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH RE LEVANT MATERIAL. WE FIND THAT THE ORDER OF THE CIT (A) DOES NOT REQU IRE ANY INTERFERENCE AND HENCE DISMISS THE REVENUES APPEAL ON THIS ISSUE. 09. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF MARCH, 2017. SD/- SD/- (GEORGE GEORGE K) (S. JAYARAMAN) JUDICIAL MEMBER AC COUNTANT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME TAX 4. THE COMMISSIONER OF INCOME TAX (A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR