Surendra Kumar Agrawal, Nuapada V. ITO, Bhawanipatna Ward, Bhawanipatna

ITA 55/CTK/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3861 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 22-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P K MISHRA
• Keywords: Unexplained investment; Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND KULDIP SINGH JUDICIAL MEMBER ITA NO.55 /CTK/2016 ASSESSMENT YEAR : 2011 - 12 SRI SURENDRA KUMAR AGARWAL, AT - SIRTO, NEAR FOREST CHECKGATE, DIST: NUAPADA VS. ITO, BHAWANIPATANA PAN/GIR NO. ABPPA 2487 H (APPELLANT ) .. ( RESPONDENT ) ITA NO.59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 ITO, BHAWANIPATANA VS. SRI SURENDRA KUMAR AGARWAL, AT - SIRTO, NEAR FOREST CHECKGATE, DIST: NUAPADA PAN/GIR NO. ABPPA 2487 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI D.K.PRADHAN , DR DATE OF HEARING : 17 /04/ 2017 DATE OF PRONOUNCEMENT : 21 /04/ 2017 O R D E R PER N.S.SAINI, AM: THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF CIT(A) - CUTTACK, DATED 30.11.2015 , FOR THE ASSESSMENT YEAR 2011 - 12 . 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. FOR THAT, THE IMPUGNED ORDERS PASSED BY THE FORUMS BELOW ARE NOT JUST AND PROPER UNDER T HE FACTS AND IN THE CIRCUMSTANCES 2 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 OF THE CASE, AS SUCH THE ADDITIONS MADE THEREIN ARE LIABLE TO BE DELETED IN THE INTEREST OF JUSTICE, 2. FOR THAT, THE LEARNED C.I.T(A) SHOULD NOT HAVE DIRECTED THE LEARNED A.O. TO DISALLOW 10% OF THE EXPENDITURE CLAIMED UNDER CARRIAGE OUTWARD EXPENSES TO THE TUNE OF RS.9,67,000.00 AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE . 3. FOR THAT, THE LEARNED A.O. AS WELL AS THE LEARNED C.I.T(A) SHOULD NOT HAVE TREATED THE AMOUNT OF RS.12,64,611.00 AS EXCESS PU RCHASES AS UNEXPLAINED, IGNORING THE RECONCILIATION AND SALES TAX RECORD PRODUCED BY THE ASSESSEE. 4. FOR THAT, THE LEARNED A.O. AS WELL AS THE LEARNED C.I.T(A) SHOULD NOT HAVE TREATED THE DISCOUNT AMOUNT OF RS.6,91,738.00 AS UNDISCLOSED INCOME OF THE ASSESSEE, WHEN, IT IS AN UNDISPUTED FACT THAT THE SAID INCOME HAS ALREADY BEEN DISCLOSED AND TAXED IN THE SUBSEQUENT YEARS AND ACCEPTED BY THE LEARNED A.O. 5. FOR THAT, THE LEARNED A.O AS WELL AS THE LEARNED C.I.T(A) SHOULD NOT HAVE DISALLOWED RS.4,91,69 9 TREATING THE SAME AS UNEXPLAINED INVESTMENT OF THE ASSESSEE, WHEN THE SAID INVESTMENT HAS ALREADY BEEN SATISFACTORILY EXPLAINED. 6. FOR THAT, SINCE THE IMPUGNED ADDITIONS ARE ILLEGAL AND NOT SUSTAINABLE IN THE EYE OF LAW, HENCE IS LIABLE TO BE DELET ED IN THE INTEREST OF JUSTICE. 7. FOR THAT, THE APPELLANT CRAVES LEAVE OF THIS HON'BLE TRIBUNAL TO URGE OTHER GROUNDS OF APPEAL, IF ANY, AT THE TIME OF HEARING . 3. THE REVENUE IN ITS APPEAL HAS TAKEN THE FOLLOWING GROUNDS: 1. WHETHER ON THE FADS AN D IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT [A] IS JUSTIFIED IN DELET ING THE ADDITION MADE BY THE AO TOWARDS 'UND ISCLOSED RECEIPT' TO THE TUNE OF RS. 17,78,488/ - FOR THE A.Y.201 I - 12. , 2, WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT (A) IS JUSTIFIED IN DIRECTING THE AO TO ADD EXPENSES OF RS.9,67,000/ - TOWARDS 'CARRI AGE OUTWARD' BY GIVING RELIEF OF RS.75,37,764/ - ON THIS ACCOUNT FOR THE A.Y. 2011 - 22. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD, CIT (A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE 3 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 AO TOWARDS ' DIRECT EXPENSES' TO THE TUNE OF RS.7, 61 440/ - ON THIS ACCOUNT FOR THE A.Y, 2011 - 12. 4. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT [ A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO TOWARDS UNEXPLAINED TRANSACTION IN CASH BOOK TO THE TUNE OF RS.64,44,354/ - ON THIS ACCOUNT FOR THE A.Y. 2011 - 12 BASED ON THE ADDITIONAL SUBMISSION/EXPLANATION PRODUCED BY THE ASSESSEE IN VIOLATION OF RULE 46A. 5. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO TOWARDS INTEREST ON FDR TO THE TUNE OF RS.2, 34,310/ - ON THIS ACCOUNT FOR A.Y. 2011 - 22. 4 . GROUND NOS.1,6 & 7 OF THE APPEAL OF THE ASSESSEE ARE GENERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. 5 . AT THE TIME OF HEARING, LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITT ED THAT HE IS NOT PRESSING GROUND NOS.4 & 5 OF APPEAL AND HENCE, THEY ARE DISMISSED FOR WANT OF PROSECUTION. 6. IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN REST RICTING THE DISALLOWANCE UNDER THE HEAD CARRIAGE O UTWARD EXPENSES' TO 10 % CLAIMED BY THE ASSESSEE. 7. IN GROUND NO.2 OF THE APPEAL OF THE REVENUE, THE GR IEVANCE IS THAT THE CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO ADD EXPENSES OF RS.9,67,000/ - ONLY TOWARDS CARRIAGE OUTWARD EXPENSES BY GIVING REL IEF OF RS.75,37,764/ - ON THIS ACCOUNT TO THE ASSESSEE. 8 . AS THE ISSUE AND FACTS INVOLVED IN GROUND OF APPEAL OF THE ASSESSEE AND REVENUE ARE COMMON, THEY ARE BEING DISPOSED OF TOGETHER AS UNDER: 4 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 9 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.96,71,825/ - TO HIS PROFIT AND LOSS ACCOUNT TOWARDS CARRIAGE OUTWARDS EXPENSES. HE FURTHER FOUND T HAT I N THE LEDGER ACCOUNT, THE ASSESSEE HAD DEBITED SUCH EXPENSES OF RS.1,14,14,602/ - AND C REDITED RS.1 7,42,777/ - THEREBY MAKING A NET CLAIM OF RS.96,71,825/ - . THE ASSESSING OFFICER CONSIDERING THE NATURE OF BUSINESS OF THE ASSESSEE PROPOSED TO THE ASSESSE E TO APPLY THE RATE OF RS.75/ - PER QUINTAL BEING PROBABLE EXPENSE S INCURRED FOR OUTWARDS TRANSPORTATION AND DELIVERY OF DAL AT THE FEEDING POINTS/CEN TERS. T HE ASSESSEE REPLIED THAT HE HAS BEEN APPOINTED AS TRANSPORTING AGENT OF PDS ITEM AND ALSO IS IN CHAR GE OF TRANSPORTING AND DELIVERING DAL AT DIFFERENT PLACES AS PER THE AGREEMENT WITH THE GOVERNMENT OF ODISHA. THE ASSESSEE FURTHER SUBMITTED THAT HE HAS MAINTAINED LEDGER COPY OF DEBIT VOUCHERS, LETTER OF CONFIRMATION WITH AFFIDAVIT BY THE TRANSPORTER TOWA RDS EXPENSES CLAIMED AND INCURRED WITH DUE PAYMENT RECEIPT AND THEREFORE, THE RA TE FORMULA AS PROPOSED BY THE ASSESSING OFFICER FOR TRANSPORTATION AND LOADING AND UNLOADING IS HYPOTHETICAL AND AS SUCH NOT ACCEPTABLE. THE ASSESSING OFFICER DID NOT ACCEPT TH E SUPPORTING DETAILS AND LEDGER COPIES ETC. SUBMITTED BY THE ASSESSEE AND FELT THAT 'THE ADDITIONAL EXPENDITURE IF ANY INCURRED BY THE ASSESSEE TOWARDS CARRIAGE OUTWARDS AGAINST DELIV ERY OF DAL SOLD TO THE DSWO CAN NOT IN NO 5 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 CIRCUMSTANCES WILL EXCEED THE RA TE OF RS.75/ - PER QUINTAL, THE RATE AT WHICH THE ASSESSEE STORED AND TRANSPORTED FOODSTUFF TO THE SAME FEEDING CEN TER AND DERIVED PROFIT.' THE ASSESSING OFFICER THEN IN T HE ASSESSMENT ORDER MENTIONING THE NAME AND ADDRESS OF THE TRANSPORTER ALONGWITH THE AMOUNT PAID TO THEM FOUND THAT ALL THE CARRIAGE OUTWARD EXPENSES HAVE BEEN INCURRED BY CASH. THE ASSESSING OFFICER FURTHER FOUND THAT THE ASSESSEE HAD UTILIZED TWO TRANSPORTERS TO TRANSPORT THE PDS FROM CSO, NUAPADA TO THE FEEDING CENTRE OF THE DISTRICT @ RS.75/ - PER QUINTAL. THEREFORE, HE OBSERVED THAT UNDER THE AGREEMENT FROM DSWO, NUAPADA, TRANSPORTATION OF DAL TO DIFFERENT SCHOOL, ETC OF NUAPADA SHOULD BE CHARGED AT RS.75/ - PER QUINTAL. THE ASSESSING OFFICER ALSO FOUND THAT THE DEBIT VOUCHERS PRODUCE D BY THE ASSESSEE IN SUPPORT OF ALL PAYMENT OF CARRIAGE OUTWARDS HAS NO EVIDENTIARY VALUE AS THE DETAILS OF TRANSPORTATION CHARGES SUCH AS DATE, QUANTITY OF DAL TRANSPORTED , RATE PER QUINTAL, NAME OF THE FEEDING CENTRE, RECEIPT OF DAL BY THE PERSONS IN CHA RGE OF THE SCHOOL/AWC, COPY OF BILLS RAISED BY THE TRANSPORTERS HAVE NOT BEEN PRODUCED FOR VERIFICATION. CONSIDERING THE ABOVE, THE ASSESSING OFFICER ESTIMATED THE CARRIAGE OUTWARDS EXPENSES OF DAL SOLD TO THE DSWO, NUAPADA @ RS.75/ - PER QUINTAL WHICH WAS RS.11,67,061.00 IN TOTAL AND THUS, COMPUTED EXCESS EXPENDITURE OF RS.85,04,764/ - AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 10 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT COMPARISON OF THE TRANSPORTATION CHARGES OF PDS MATERIALS WITH THAT OF TRANSPORTATION 6 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 OF DAL IS NOT CORRECT. HE SUBMITTED THAT FOR TRANSPORTING THE PDS MATERIALS FROM FCI GODOWN SITUATED AT KHARIAR ROAD TO FIVE NUMBERS OF BLOCK HEADQUARTERS, TRANSPORTAT ION CHARGES WERE PAID ON QUINTAL BASIS IRRESPECTIVE OF THE FACT THAT WHAT MUCH OF QUANTITY ARE TRANSPORTED IN ONE VEHICLE. IT WAS IN THIS BACKDROP THAT THE ASSESSEE AGREED TO PAY @ RS.75/ - PER QUINTAL FOR TRANSPORTATION CHARGES AS IN ONE TRUCK 9 TO 10 TON S OF PDS MATERIALS ARE TRANSPORTED. HOWEVER, IN CASE OF TRANSPORTATION OF DAL FOR DELIVERY AT SCHOOL POINT, THE TRANSPORTATIONS ARE MADE FROM NUAPADA TO ALL 16562 SCHOOLS OF THE FIVE BLOCK AND TWO NACS. IT WAS SUBMITTED THAT IT IS NOT POSSIBLE TO SUPPLY THE DAL IN ONE TRUCK TO ALL THE SCHOOLS. THEREFORE, THE ASSESSEE ENGAGED OTHER VEHICLES SUCH AS THREE WHEELERS AS ROAD FACILITIES ARE NOT GOOD TO ENTER THE HEAVY VEHICLES. IT WAS ALSO SUBMITTED THAT THE LOCAL AREAS TO WHICH THE ASSESSEE WAS SUPPLYING DAL ARE NOT SUPPORTED BY BANKING FACILITIES AND, THEREFORE, THE TRUCK DRIVERS DEMAND CASH PAYMENT ONLY. IT WAS SUBMITTED THAT IF THE ASSESSING OFFICER WAS DOUBTED THE PAYMENT MADE TO TRANSPORTERS, HE COULD HAVE CALLED THESE TRANSPORTERS FOR CONFIRMATION TO AS CERTAIN THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE AS ALL THE NECESSARY DOCUMENTS AND INFORMATION WERE SUPPLIED TO THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT AND HAS NOT SPECIFIED THE DEFECTS FOR WHICH THE ACTUAL EXPENDITURE OR PROFIT COULD NOT BE ASCERTAINED. 7 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 11 . THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT THE ASSESSEE WAS ENGAGED IN TWO TYPES OF BUSINESS . HE WORKED AS A PROCURER OF DAL, STORAGE AGENT FOR THE MATERIAL AND TRANSPORTED THE DAL TO DIFFERENT SCHOOLS OF FIVE BLOCKS OF NUAPADA DISTRICT. HE ALSO IN ADDITION WORKED AS A TRANSPORTER OF PDS ITEMS FOR THE CIVIL SUPPLY OFFICER, NUAPADA, BOTH THE WORKS ARE DISTINGUI SHED FROM EACH OTHER BECAUSE IN TH E FIRST CONTRACT, THE ASSESSEE PURCHASED DAL FROM OUTSIDE AN D INSIDE THE STATE AND BROUG HT IT TO HIS BUSINESS PREMISES. THEREAFTER, HE CARRIED T HE SAME FOR STORAGE AND THEN TRANSPORTED IT IN DIFFERENT QUANTITIES TO DIFFER ENT SCHOOLS OF NUAPADA DISTRICT. WHEREAS AS TRANSPO RTER OF PDF ITEMS, THE ASSESSEE HAS TRANSPORTED THE PDF ITEMS FROM THE GODOWN OF CSO TO THE CIVIL SUPPLY GODOWNS OF FIVE BLOCKS OF NUAPADA DISTRICT FOR WHICH HE ONLY RECEI VED TRANSPORTATION CHARGES. THE C IT(A) OBSERVED THAT THE ASSESSEE HAS ENTERED INTO AGREEMENT WITH GOVERNMENT, FROM WHICH, IT IS UNDERSTOOD THAT THE ST ORAGE OF DAL AND TRANSPORTAT ION OF THE SAME BY THE ASSESSEE TO DIFFERENT SCHOOLS IN THE FIVE BLOCKS OF NUA PADA DISTRICT WHERE DIFFERENT QUANTIT IES ARE INVOLVED AND LENGTH OF DISTANCE S TO BE COVERED BY THE ASSESSEE IS DIFFERENT FROM TRANSPORTING THE PDS ITEMS FROM THE DISTRICT GODOWN OF CIVIL SUPPLY OFFICE TO THE FIVE BLOCK OFFICE DESTINATIONS. THEREFORE, THE TRANSPORTATION CHARGES CLAIMED AT RS.75/ - PER QUINTAL FOR TRANSPORTATION OF PDS ITEMS FROM THE DISTRICT GODOWN TO THE FIVE BLOCK OFFICES WOULD NOT BE COMPARABLE WITH TRANSPORTING DIFFERENT QUANTITIES OF DAL TO AROUND 300 8 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 SCHOOLS SITUATED IN THE FIVE BLOCK OF NUAPADA WITH SOME OF THOSE B EING AT REMOTE PLACES. 12. WITH REGARD TO EXPENSES INCURRED IN CASH, THE CIT(A) OBSERVED THAT THE DEBIT VOUCHERS IN TOKEN OF RECEIPT OF CASH HAVE NOT BEEN SUPPORTED WITH REVENUE STAMP EVEN THOUGH THE AMOUNT OF CASH PAYMENTS EXCEEDED RS.5000/ - AND MANY VOUC HERS SUBMITTED BY THE ASSESSEE ARE NOT COMPLETELY FILLED IN TO POSSESS EVIDENTIARY VALUE. HE OBSERVED THAT THE CONTENTION OF THE ASSESSEE IS THAT THE TRUCK DRIVERS INSISTED CASH PAYMENT AS THE DESTINATIONS ARE NOT SUPPORTED BY BANKING FACILITIES. CONSIDE RING THE ABOVE, THE CIT(A) OBSERVED THAT AN ELEMENT OF DISCREPANCY CANNOT BE RULED OUT IN MAINTAINING THE CORRECT ACCOUNT OF TRANSPORTATION EXPENSES AS CLAIMED BY THE ASSESSEE. THEREFORE, HE DIRECTED TO DISALLOW 10% OF THE EXPENDITURE CLAIMED UNDER CARRIA GE OUTWARD BEING RS.9,67,000/ - AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 13. BEING AGGRIEVED, BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 14 . LD AUTHORISED REPRESENTATIVE OF THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT GIVEN ANY BASIS IN ESTIMATION OF TRANSPORTATION CHARGES OF DAL FROM NUAPADA TO DIFFERENT SCHOOLS. HE FURTHER OBSERVED THAT THE ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT S OF THE ASSESSEE 9 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 AND NEITHER POINTED OUT ANY DEFECTS THEREON. THEREFORE, HE WAS NOT JUSTIFIED IN ESTIMATING THE TRANSPORTATION EXPENSES. IT WAS ARGUED THAT THE CIT(A) HAS ASSUMED THAT SINCE THE PAYMENT OF TRANSPORTATION CHARGES TO THE TRUCK DRIVERS WAS M ADE IN CASH WHO INSISTED CASH PAYMENT, THEREFORE, BILLS AND VOUCHERS COULD NOT HAVE BEEN MAINTAINED PROPERLY BY THE ASSESSEE TO GIVE TRUE AND CORRECT PICTURE OF TRANSPORTATION CHARGES PAID AND THE ADDITION WAS MADE BASED ON ASSUMPTION AND SURMISE OF THE CI T(A). HENCE, IT WAS HIS PRAYER THAT THE ADDITION MADE SHOULD BE DELETED. 15 . IN THE ALTERNATIVE, THE ARGUMENT OF LD A.R. OF THE ASSESSEE WAS THAT THE DISALLOWANCE SUSTAINED AT 10% OF THE CARRIAGE OUTWARD EXPENSES WAS ON HIGHER SIDE AND, THEREFORE, SAME S HOULD BE APPROPRIATELY REDUCED. 16 . LD DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND ARGUED THAT THE CIT( A) WAS NOT JUSTIFIED IN GIVING RELIEF OF RS.75,37,764/ - . 17 . WE FIND THAT THE UNDISPUTED FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE HAS CLAIMED TO HAVE PAID CARRIAGE OUTWARD EXPENSES OF RS.96,71,825/ - . HOWEVER, IN THE LEDGER ACCOUNT, THE ASSESSEE HAD DEBITED SUCH EXPENSES OF RS.1,14,14,602/ - AND CREDITED RS.17,42,777/ - THEREBY MAKING A NET CLAIM OF RS.96,71,825/ - . WE FIND THAT THE ASSESSEE WAS ENGAGED IN TWO TYPES OF BUSINESS I.E. PROCUREMENT, STORAGE AND SUPPLY OF SAME TO DIFFERENT SCHOOLS OF FIVE BLOCKS OF NUAPADA 10 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 DISTRICT AND TRANSPORTATION OF PDS MATERIALS FOR THE CIVIL SUPPLY OFFICER, NUAPADA. BOTH THE WORKS A RE DISTINGUISHED FROM EACH OTHER. IN CASE OF TRANSPORTATION OF DAL, THE ASSESSEE PURCHASED THE SAME FROM OUTSIDE AND INSIDE THE STATE AND STORED THE SAME IN HIS BUSINESS PREMISES AND THEREAFTER SUPPLIED TO DIFFERENT SCHOOLS OF NUAPADA DISTRICT. IN CASE O F PDS MATERIALS, THE ASSESSEE HAS TRANSPORTED THE ITEMS FROM THE GODOWN OF CSO TO FIVE BLOCKS OF NUAPADA DISTRICT FOR WHICH HE RECEIVED ONLY TRANSPORTATION CHARGES. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT BOTH THE TRANSPORTATIONS ARE NOT COMPARABLE TO EACH OTHER. WITH REGARD TO PAYMENT MADE IN CASH TO TRUCK DRIVERS, WE ARE OF THE CONSIDERED THAT WHEN BANKING FACILITIES ARE NOT AVAILABLE IN REMOTE AREAS AND ON THE SPOT THE TRUCK DRIVERS INSISTED CASH PAYMENT, THE ASSESSEE HAS TO SUCCUMB TO THE DEMAND OF THE TRANSPORTERS AND PAID THE CASH. FURTHER, WE FIND THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED BY THE ASSESSING OFFICER AND WITHOUT DOING THE SAME, HE IS NOT EMPOWERED IN LAW TO MAKE ESTIMATED DISALLOWANCE OUT OF THE LEGITIMATE AND GENUINE BUSINESS EXPENDITURE OF THE ASSESSEE. STILL FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENSES IN ORDER TO REDUCE IT S INCOME. FURTHER, NO DETAILS HAVE BEEN PROVIDED EITHER BY THE ASSESSING OFFICER OR BY THE CIT(A) AS TO WHICH OF THE TRANSPORTATION EXPENSES IS NOT VERIFIABLE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT NO ESTIMATED DISALLOWANCE OUT OF TOTAL TRANSPORT ATION INWAR D EXPENSES OF RS.96,71,825/ - CAN BE MADE BY THEA ASSESSING OFFICER IN LAW. HENCE, WE SET ASIDE THE ORDERS OF LOWER 11 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 AUTHORITIES A ND DELETE THE ADDITION OF RS.9,67,000 / - SUSTAINED BY THE CIT(A) AND ALLOW THIS GROUND NO.2 OF APPEAL OF THE ASSESSEE AND REJECT THE GROUND NO. 2 OF APPEAL OF THE REVENUE. 18. IN GROUND NO.3 OF THE APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE CIT(A) ERRED IN TREATING THE AMOUNT OF RS.12,64,611/ - AS EXCESS PURCHASES UNEXPLAINED IGNORING THE RECONCILIATION AND SALE T AX RECORD PRODUCED BY THE ASSESSEE. 19. THE ASSESSING OFFICER FOUND THAT PURCHASES FURNISHED THROUGH LEDGER ACCOUNT BY THE ASSESSEE AND AS REQUISITIONED U/S.133(6) OF THE ACT, THERE HAVE BEEN DISCREPANCY IN THE ACCOUNTS OF FIVE PARTIES. THE ASSESSING OFFICER HAS PRODUCED THE PARTIES WITH DETAILS OF PURCHASES MADE AS PER ASSESSEE AND SALE AS PER PARTY. THUS, THE ASSESSING OFFICER FOUND THAT THERE HAVE BEEN EXCESS PURCHASE OF RS.12,64,611/ - AS SHOWN BY THE ASSESSEE. SINCE THE ASSESSEE CO ULD NOT RECONCILE THE PURCHASES MADE FROM THE ABOVE FIVE PARTIES, THE ASSESSING OFFICER TREATED THE EXCESS PURCHASE OF RS.12,64,611/ - AS UNEXPLAINED AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 20. ON APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED THAT T HE ASSESSEE HAS NOT INFLATED THE PURCHASES TO REDUCE PROFIT AS ALL THE PURCHASERS ARE DULY EXAMINED AND STAMPED AT THE CHECK GATE AND DULY RECORDED IN THE BOOKS 12 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 OF ACCOUNT. THE BOOKS OF ACCOUNT WERE DULY CHECKED AND VERIFIED BY THE SALES TAX AUTHORITIES. 21. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT DURING THE APPEAL PROCEEDINGS, THE ASSESSEE COULD NOT PRODUCE ANY RECONCILIATION OF THE PURCHASES AS CLAIMED AND ON THE OTHER HAND, THE ASSESSING OFFICER COLLECTED INFORMATION U/S.133(6) OF THE ACT BUT THE ASSESSEE FAILED TO RECONCILE THE SAME. 22. BEFORE US, LD A.R. OF THE ASSESSEE HAS FILED COPY OF THE RECONCILIATION STATEMENT OF DIFFERENCE IN PURCHASES ORDER PLACED AT PAGES 55 TO 61 OF THE PAPER BOOK AND SUBMITTED THAT THER E WAS NO DIFFERENCE AS ALLEGED BY THE ASSESSING OFFICER. THEREFORE, HE SUBMITTED THAT THE ADDITION SHOULD BE DELETED. 23. LD D.R. RELIED ON THE ORDERS OF LOWER AUTHORITIES. 24. WE FIND THAT THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE PLACED AT PAPE R BOOK AT PAGES 55 TO 61 OF DIFFERENCE IN PURCHASE WAS NOT FILED BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A). IN OUR CONSIDERED VIEW, THE SAME REQUIRES VERIFICATION BY THE ASSESSING OFFICER. THEREFORE, IN THE INTEREST OF JUSTICE, WE RESTORE BACK TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFTER VERIFYING THE RECONCILIATION STATEMENT OF 13 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 DIFFERENCE IN PURCHASES OF RS.12,64,611/ - . HENCE, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 25 . GROUND NO.3 OF THE APPEAL OF THE REVENUE RELATES TO DELETION OF ADDITION TOWARDS DIRECT EXPENSES TO THE TUNE OF RS.7,61,440/ - . 26 . THE UNDISPUTED FACTS OF THE CASE ARE THAT T HE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.76,14,100/ - AS DIRECT EXPENSES TO THE TRADING ACCOUNT COMPRISING OF CARRIAGE INWARD, HEMALI AND WAGES, PACKAGING MATERIALS AND TWINE AND STITCHING EXPENSES. THE A SSESSING OFFICER FURTHER NOTED THAT THE A SSESSEE PRODUCED ONLY DEBIT VOUCHERS IN SUPPORT OF EXPENSES CLAIMED UNDER THE ABOVE HEADS. DAL HAVE BEEN TRANSPORTED FROM NAGPUR TO NUAPADA THROUGH TWO TRANSPORT CARRIERS. BUT THE ASSESSEE HAS NOT PRODUCED A SINGLE WAYBILL COPY OR MONEY RECEIPT OF THE TRAN SPORTERS TOWARDS RECEIPT OF FREIGHT. ALL TIRE - PAYMENTS A RE STATED TO BE MADE BY CASH ON DAY TO DAY BASIS. THE ASSESSING OFFICER FOUND THE EXPENSES CLAIMED UNDER HEMALI AND WAGES, PACKAGING MATERIALS AND TWINE AND STITCHING EXPENSES HIGHLY EXCESSIVE CONSIDE RING THAT THE GOODS TRADED BY THE ASSESSEE WAS MEANT FOR HUMAN CONSUMP TION AND THEY ARE SOLD IN GOOD PACKETS/B AGS. ON ESTIMATION BASIS, THE ASSESSING OFFICER DISALLOWED 10% OF THE ABOVE EXPENSES AND ADDED AN AMOUNT OF RS.7,61,440/ - TO THE TOTAL INCOME OF THE ASSESSEE. 14 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 27 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS DISALLOWED 10% OF THE DIRECT EXPENSES ON SURMISE AND CONJECTURES ALTHOUGH THE BILLS AND VOUCHERS WERE PRODUCED BEFORE HIM. THE BOOKS OF ACCOUNTS WERE DULY VERIFIED AND ACCEPTED BY THE ASSESSING OFFICER AND HE COULD NOT POINT OUT ANY SPECIFIC DEFECT REGARDING TH E BILLS AND VOUCHERS . THE DISALLOWANCE OF 10% OF EXPENDITURE ON ESTIMATION BASIS, IS CONTRARY TO THE INTEREST OF JUSTICE. BEFORE THE CIT(A), T HE ASSESSEE FILED LEDGER ACCOUNT COPY OF CARRIAG E INWARD, HEMALI AND WAGES AND OTHER EXPENSES. 28 . THE CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT THE ASSESSING OFFICER HAS HIMSELF STATED IN THE ASSESSMENT ORDER THAT AN AMOUNT OF R S.52,23,200/ - HAVE BEEN CLAIMED AS CARRIAGE INWARD BY THE ASSESSEE AND PAID TO TWO ROAD TRANSPORT CARRIERS FOR GETTING DAL FROM NAGPUR TO N UAPADA. NOTHING PREVENTED THE ASSESSING OFFICER TO ASK THE TWO TRANSPORT CARRIERS TO PRODUCE THE EVIDENCE OF RE CEIPTS, INCOME - TAX RETURNS ETC. WITHOUT SUCH EXERCISE AND WITHOUT BRINGING INTO RECORD ANY EVIDENCE REGARDING ANY SPECIFIC ANOMALY IN THE CLAIM OF EXPENSES, IT IS NOT TENABLE TO DISALLOW 10% OF SUCH EXPENSES CLAIMED. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO DELETE THE SAME. 2 9 . LD DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 15 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 30. AFTER CONSIDERING THE RIVAL SUBMISSION AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE. IN THIS CASE, THE ASSESSING OFFICER HIMSELF HAS STATED THAT THE PAYMENT OF RS.52,23,200/ - HAS BEEN PAID TO TWO TRANSPORT CARRIERS FOR GETTING DAL FROM NAGPUR TO NUYAPADA. HOWEVER, TH E ASSESSING OFFICER WITHOUT VERIFYING THE FACT FROM THE TRANSPORTERS, AN D WITHOUT BRINGING ON RECORD ANY POSITIVE MATERIAL, DISALLOWED 10% OF EXPENSES ON ADHOC BASIS. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ACCOUNT AND REJECT THE GROUND OF APPEAL OF THE REVENUE. 31. GROUND NO.1 OF THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE DELETION OF RS.17,78,488/ - TOWARDS UNDISCLOSED RECEIPT. 32. THE UNDISPUTED FACTS OF THE CASE ARE THAT DURING THE SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE DID NOT DISCLOSE RECEIPT OF RS.17,42,777.17 FROM THE DSWO, NUAPADA, SHOWN AS OTHER CHARGES IN THE INCOME TAX RETURN FILED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER AFTER VERIFYING THE LEDGER ACCOUNT OF THE ASSESSEE AND DETAILS OF PAYMENT FROM DSWO, NUAPADA, TREAT THE AMOUNT OF RS.17,78,488/ - AS UND ISCLOSED RECEIPT OF THE ASSESSEE FROM DSWO, NUAPADA AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 16 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 33. ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT THE GROSS TURNOVER FROM DSWO, NUAPADA AS SHOWN IN THE PROFIT & LOSS ACCOUNT AT RS.11,0 4,88,473.85 WAS CORRECT AND AFTER RECONCILIATION OF THE GROSS RECEIPT OF RS.11,96,55,785.12 FROM DSWO WAS FOUND BY THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT TRANSPORTATION CHARGES OF RS.30,05,127/ - IS SHOWN BY THE ASSESSEE AS INCOME FROM TRANS PORTATION CHARGES SEPARATELY WHICH ALSO FORMS PART OF THE PROFIT AND LOSS ACCOUNT AS WELL AS AUDIT REPORT. THE INCIDENTAL CHARGES OF RS.17,42,777.16 RECEIVED FROM DSWO WAS ADJUSTED AGAINST THE CARRIAGE OUTWARDS EXPENSES SHOWN BY THE ASSESSEE. 34. THE CIT (A) AFTER VERIFYING THE RECONCILIATION OF GROSS RECEIPT AND LEDGER COPIES OF CARRIED OUTWARDS ALONGWITH THE AUDIT REPORT DIRECTED THE ASSESSING TO DELETE THE ADDITION. 35. BEFORE US, LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICE. 36. LD A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 37. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE ORDER OF THE LOWER AUTHORITIES, WE DO NOT FIND ERROR IN THE ORDER OF THE CIT(A) TO INTERFERE, WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 17 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 38. GROUND NO.4 OF THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) DELETING THE ADDITION OF RS.64,44,354/ - TOWARDS UNEXPLAINED TRANSACTION IN CASH BOOK IN VIOLATION OF RULE 46A. 39. THE ASSESSING OFFICER FOUND THE DISCREPANCIES OF RS.64,44,354/ - IN CASH BOOK OF THE ASSESSEE ON FOUR DATES. HE REQUIRED THE ASSESSEE TO EXPLAIN THE DISCREPANCIES. SINCE THE ASSESSEE COULD NOT EXPLAIN THE NON CASH TRANSACTION MADE IN THE CASH BOOK THE ASSESSING OFFICER TREATED THE S AME AS UNEXPLAINED TRANSACTION MADE IN THE CASE BOOK AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 40. ON APPEAL BEFORE THE CIT(A), IT WAS SUBMITTED THAT AS PER NORMAL ACCOUNTING STANDARD WHEN THE ASSESSEE PAID SOMEONE THROUGH BANKING CHANNEL, A CONTRARY ENTRY WAS PASSED IN THE CASH BOOK SO THAT THE TRUE STATE OF ACCOUNTING IS MAINTAINED. IT WAS SUBMITTED THAT ALTHOUGH THIS WAS EXPLAINED BEFORE THE ASSESSING OFFICER, BUT HE OVERLOOKED THE EXPLANATION OF THE ASSESSEE. THE ASSESSEE SUBMITTED THE EXPLANATION REGARDING THE CONTRA ENTRIES IN THE CASH BOOK AS UNDER: I) 7,60,000.00 HAS BEEN WRONGLY TRANSFERRED ON 3.4.2010 FROM CURRENT NO.11276760986 OF THE ASSESSEE TO THE ACCOUNT OF SRI SURESH KUMAR AGARWAL VIDE ACCOUNT NO.0030259243934. AFTER ADJUSTMENT OF RENT RECEIVABLE BY HIM HE RETURNED BACK THE DIFFERENT IA L AMOUNT OF RS.7,49,191.00 IN CASH. II) RS.4,35,163.00 HAS BEEN DEPOSITED ON 3.4.2010 BEING THE TRANSPO - RTATION CHARGES REVERSED BY SRI B ALAJI SUPPLIERS, NUAPADA AND ACCOUNTED IN THE CASH BOOK. 18 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 III) RS.7,49,191.00 RETURNED BACK BY SRI SURESH KUMAR AGARWAL AFTER DEDUCTING THE RENT RECEIVABLE BY HIM. (IV). RS.45,00,000.00 DATED 03.04.2010 THE SAID TRANSACTION IS NOTHING BUT JUST A INTER - BANK TRANSACTIONS FROM ASSESSEE'S CURRENT ACCOUNT TO THE CASH CREDIT ACCOUNT. TO MAINTAIN THE BALANCE IN THE CASH CREDIT ACCOUNT AND TO AVOID THE INCREASE OF INTEREST IN THE CASH CREDIT ACCOUNT, YOUR ASSESSEE HAS ISSUED A CHEQUE DATED 31.03.2010 FRO M HIS CURRENT ACCOUNT. SINCE THE CHEQUE COULDE NOT BE DEPOSITED IN THE CASH CREDIT ACCOUNT, YOUR ASESSEE HAD NO OTHER OPTION THAN TO MAKE A CONTRA ENTRY IN THE CASH BOOK. SUBSEQUENTLY THE CHEQUE WAS DEPOSITED ON 03.04.2010 IN THE CASH CREDIT ACCOUNT. THE F INDING OF THE LEARNED A.O. THAT THE TRANSACTIONS IS NOT A VALID TRANSACTIONS IS WRONG AND ILLEGAL. AS THERE IS NO CASH, YOUR ASSSESSEE HAS KEPT THE CHEQUE WITH HIM, HE POSTED IT IN THE CASH BOOK WITH A NARRATION OF CHEQUE IN HAND. THE LEARNED A.O. SHOULD N OT HAVE IGNORED THIS FACT. IF AT LEAST HE WOULD HAVE MADE A COMPARISON BETWEEN TWO BANK STATEMENTS, CERTAINLY HE WOULD NOT HAVE GIVEN SUCH A WRONG FINDINGS. THIS FACT CLEARLY SHOWS THAT, NON APPLICATION OF MIND BY THE LEARNED A.O. 41. THE CIT( A) OBSERVED THAT THE ABOVE EXPLANATION OF THE ASSESSEE IS SUFFICIENT TO REMOVE THE AMBIGUITY REGARDING TRANSACTION MADE IN THE CASH BOOK. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.64,44,354/ - . 42. BEFORE US, LD DEPARTMENTA L RELIED ON THE ORDER OF THE ASSESSING OFFICER. 43. LD A.R. SUPPORTED THE ORDER OF THE CIT(A). 44. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF LOWER AUTHORITIES, NO DISCREPANCY COULD BE POINTED OUT BY LD D.R. IN THE FINDINGS 19 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 OF THE CIT(A ). AS REGARDS VIOLATION OF RULE 46A, WE FIND THAT THE MATERIALS WHICH HAVE BEEN CONSIDERED BY THE CIT(A) WERE SUBMITTED BEFORE THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. HENCE, IT CANNOT BE VIEWED THAT THE CIT(A) HAS ACCEPTED FRESH MATERIALS IN CONTRAVENTION OF RULE 46A. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 45. APROPOS GROUND NO.5 OF THE APPEAL OF THE REVENUE, THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND THAT THE ACTUAL RECEIPT OF INTEREST ON FDRS/STDRS WAS RS.2,34,310/ - AS AGAINST RS.1,79,448/ - DISCLOSED BY THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER TREATED THE DIFFERENTIAL AMOUNT OF RS.54,852/ - AS UNDISCLOSED INTEREST INCOME. 46. ON APPEAL THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER BY MISTAKE HAS MADE AN ADDITION OF RS.2,34,310/ - AS UNDISCLOSED INTEREST INCOME. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO MAKE AN ADDITION OF RS.54,852/ - . 47. AFTER HEARING THE RIVAL SUBMISSIONS, WE FIND NO ERRO R IN THE FINDINGS OF THE CIT(A). HENCE, WE CONFIRM THE SAME AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 20 ITA NO.55 /CTK/2016 ITA NO. 59 /CTK/2016 ASSESSMENT YEAR :2011 - 12 48 . IN THE RESULT, THE APPEAL F ILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NO UNCED IN THE OPEN COURT ON 21 /04/2017 . SD/ - SD/ - (KULDIP SINGH) ( N.S SAINI) JUDICIAL MEMBER A CCOUNTANT MEMBER CUTTACK; DATED 21 /04/2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE ASSESSEE: SRI SURENDRA KUMAR AGARWAL, AT - SIRTO, NEAR FOREST CHECKGATE, DIST: NUAPADA 2. THE REVENUE: ITO, BHAWANIPATANA, FS 3. CIT(A) CUTTACK 4. PR.CIT , SAMBALPUR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//