KRISHNA DADU PATIL, THANE V. ACIT CIR 1, THANE

ITA 6957/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5910 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2014-2015
• Appeal Filed On: 08-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: IN PERSON
• Keywords: Fair market value; Corroborative evidences
• Section: 143(3)

Judgement Text

, ,, , IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER & SHRI RAM LAL NEGI, JUDICIAL MEMBER ./ ITA NO.6957/MUM/2017 ( / ASSESSMENT YEAR :2014-2015) KRISHNA DADU PATIL, PROP.M/S SHARDA DUDH CENTRE, BEHIND JARIMARI TEMPLE GOKUL NAGAR, OLD AGRA ROAD, THANE(W), THANE-400601 VS. ACIT CIR-1, THANE ./PAN NO. : ABUPP 9848 C ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : ASSESSEE-IN-PERSON /REVENUE BY : SHRI MANOJ KUMAR SINGH, DR / DATE OF HEARING : 02/01/2019 /DATE OF PRONOUNCEMENT 15/01/2019 / O R D E R PER SHRI RAJESH KUMAR, AM : THIS APPEAL BY ASSESSEE ARISES OUT OF THE ORDER OF THE CIT(A) 3, MUMBAI, DATED 26.09.2017, WHICH IN TURN HAS ARISEN OUT OF THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) RELATING TO A.Y. 2014-2015. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE PRE SENT APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.62,16,00 0/- BY THE CIT(A) AS UPHOLDING THE ORDER OF AO THEREBY CONFIRMING THE DI SALLOWANCE OF EXPENDITURE INCURRED ON FREIGHT AND DELIVERY CHARGE S. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PACKAGED MILK AND DURING THE YEAR THE ASSESSEE HAS FILED RETURN OF INCOME ON 04.03.2015 SHOWING TOTAL INCOME AT RS.34, 93,670/- WHICH WAS PROCESSED U/S.143(1) OF THE ACT. THEREAFTER CASE OF THE ASSESSEE WAS ITA NO.6957/17 2 SELECTED FOR SCRUTINY UNDER CASS AND STATUTORY NOTI CES WERE DULY ISSUED AND SERVED ON THE ASSESSEE. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE AO NOTICED FROM THE AUDIT REPORT T HAT THE ASSESSEE HAS MADE PAYMENT TO RELATED PERSONS U/S.40A(2)(B) OF TH E ACT TO THE TUNE OF RS.62,16,000/- COMPRISING OF RS.31,10,000/- TO SHAR DA TRANSPORT (PROP:SHRI DADU PATIL, FATHER) AND RS.31,06,000/- T O SACHIN TRANSPORT (PROP:SMT. SHARDA D PATIL, MOTHER). THE SAID RECIPI ENTS HAVE NOT FILED ANY RETURN OF INCOME ON THE GROUND THAT INCOMES WERE BE LOW THE TAXABLE LIMIT, THEREFORE, THE AO ADDED AND DISALLOWED THE SAID PAY MENTS OF FREIGHT ON THE GROUND THAT BOTH THESE RECIPIENTS WERE RELATED TO THE ASSESSEE AS FATHER AND MOTHER AND THEY WERE NOT FILING RETURN O F INCOME REGULARLY. MOREOVER, THE ASSESSEE COULD NOT FURNISH THE NECESS ARY DETAILS OF OWNERSHIP OF VEHICLES BY THESE PERSONS, BILLS AND VOUCHERS FOR HIRING THE VEHICLES AND DETAILS AND NUMBER OF DRIVERS EMPLOYED BY THE RELATED PERSONS AND SUPPORTING EVIDENCES OF PAYMENTS MADE T O THEM. FINALLY, THE AO ADDED THE ENTIRE AMOUNT OF RS.62,16,000/- TO THE INCOME OF THE ASSESSEE BY FRAMING THE ASSESSMENT U/S.143(3) OF TH E ACT, VIDE ORDER DATED 16.12.2016. 4. IN APPEAL, LD. CIT(A) UPHELD THE ORDER OF AO BY OBSERVING AND HOLDING AS UNDER :- 5.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE ASSESSEE. AS PER SECTION 40A(2)(B), IF THE AO O F THE OPINION THAT EXPENDITURE IN RESPECT OF WHICH PAYMENT IS MAD E TO A PERSON WHO IS RELATED TO THE ASSESSEE IS EXCESSIVE OR UNRE ASONABLE, HAVING REGARD TO FAIR MARKET VALUE OF GOODS, SERVIC ES OR FACILITIES, OR THE LEGITIMATE NEEDS OF THE BUSINESS OR THE BENEFIT DERIVED, THAN THE' ITA NO.6957/17 3 SAME SHALL NOT BE ALLOWED AS A DEDUCTION. THE ONUS WAS ON THE ASSESSEE TO PROVE THAT THE PAYMENTS MADE TO THE PAR ENTS OF THE ASSESSEE ARE GENUINE. HOWEVER HE COULD NOT SUBSTANT IATE ANY DOCUMENTARY OR CORROBORATIVE EVIDENCE TO SHOW THAT THE RELATED PERSONS HAVE PROVIDED ANY SERVICES TO THE ASSESSEE, DURING ASSESSMENT OR APPELLATE PROCEEDINGS. THE PLEA OF TH E ASSESSEE THAT DELIVERY EXPENSES ARE ONLY 1.32% OF TOTAL SALE S IS NOT RELEVANT. KEEPING IN MIND THE AGE OF THE PARENTS, IT WAS NOT POSSIBLE FOR THEM TO ACTIVELY ENGAGE THEMSELVES IN TRANSPORTATION BUS INESS. THE DETAILS OF THE TRUCKS ARE NOT AVAILABLE. THERE IS N O EVIDENCE TO SHOW THAT ANY TRANSPORTATION ACTIVITY WAS CARRIED OUT BY THE RELATED PERSONS. THE PLEA OF THE ASSESSEE THAT THE RETURN W AS NOT FILED AS IT WAS BELOW TAXABLE AS PER PROVISIONS OF 44AE IS NOT RELEVANT AS THE QUESTION OF TAXABILITY WILL ARISE IN THE CASE OF TH E PERSON WHO IS DOING TRANSPORTATION BUSINESS, IF THE PURPOSE IS GE NUINE. THE ASSESSEE CANNOT TAKE SHELTER U/S 44AE WHILE EXPLAIN ING THE PAYMENTS MADE TO THE RELATED PERSONS. THE VOUCHERS MAINTAINED BY THE ASSESSEE ARE 'JOURNAL VOUCHERS' SHOWING THAT THERE IS TRANSFER OF CASH IN THE ACCOUNTS OF RELATED PERSONS . UNDER SUCH CIRCUMSTANCES, I FIND THAT THE VIEW TAKEN BY THE AS SESSEE IN DISALLOWING THE PAYMENTS TO THE RELATED PERSONS IS ABSOLUTELY CORRECT. THE PAYMENTS MADE BY THE ASSESSEE TO THE R ELATED PERSONS ARE ONLY FOR REDUCING THE PROFITS BY INFLAT ING THE EXPENSES. THE ADDITION MADE BY THE AO IS CONFIRMED. 5. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL ON RECORD INCLUDING THE IMPUGNED ORDER, WE OBSERVE THAT THE A CTIVITY CARRIED ON BY THE ASSESSEE IS OF DISTRIBUTION OF PACKAGED MILK. D URING THE YEAR THE TURNOVER OF THE ASSESSEE WAS RS.70.02 CRORES AND TH E TOTAL FREIGHT AND DELIVERY EXPENSES INCURRED AT RS.92.56 LAKHS, WHICH COMES TO APPROXIMATELY 1.32% OF THE TOTAL TURNOVER, WHEREAS THE FREIGHT AND DELIVERY EXPENSES WERE TO THE TUNE OF 1.35% APPROXI MATELY IN THE EARLIER ITA NO.6957/17 4 YEARS. ANOTHER UNDISPUTED FACT IS THAT BOTH RECIPIE NTS HAD ONLY ONE TRUCK EACH AND SMT. SHARDA PATIL DIED IN 2015 AND DADU P ATIL IS 68 YEARS OLD. AS REGARDS NON-FILING OF RETURN OF INCOME, THE ASSE SSEE SUBMITTED BEFORE THE AUTHORITIES BELOW THAT INCOME WAS NOT TAXABLE A S INCOME WOULD BE COMPUTED AT RS.7,500/- PER TRUCK PER MONTH ON DEEME D BASIS AND, THEREFORE, NOT TAXABLE. THE ASSESSEE HAS ALSO CHALL ENGED THAT IT IS NOT THE CASE OF THE ASSESSEE THAT PAYMENT IS EXCESSIVE AND UNREASONABLE AND DISALLOWANCE U/S.40A(2)(B) OF THE ACT CAN ONLY BE M ADE ON THE BASIS OF FINDING OF THE AO THAT THE PAYMENT IS EXCESSIVE AND UNREASONABLE, WHEREAS IN THE PRESENT CASE NOTHING OF SORT HAS BEE N FOUND BY THE AO. LD.CIT(A), ON THE OTHER HAND, REJECTED THE PLEA OF THE ASSESSEE THAT EXCESSIVE AND UNREASONABLE IS NOT THE CASE IN THE P RESENT CASE OF THE ASSESSEE BUT PAYMENT MADE TO THE RELATIVES IS NOT G ENUINE. NOW, UNDER THE PRESENT SCENARIO, IF WE CONSIDER THE FACTS AND CIRCUMSTANCES AND THE FACTUAL MATRIX OF THE CASE, WE ARE OF THE VIEW THAT THE HUNDRED PERCENT (100%) DISALLOWANCE TO THE TUNE OF RS.62,16,000/- C OULD NOT BE SUSTAINED AS THE ASSESSEE MIGHT HAVE INCURRED THE REASONABLE EXPENSES TO CARRY ON THE BUSINESS. IT IS APPARENT FROM THE FACT THAT IN THE EARLIER YEARS THE FREIGHT AND DELIVERY EXPENSES WERE 1.35% WHEREAS IN THE CURRENT YEAR IT IS 1.32%. MOREOVER THE AO HAS NOT BROUGHT ON RECORDS T HAT THE ANY EVIDENCE THAT PAYMENTS WERE NON GENUINE. UNDER THE INCOME TAX ACT, IT IS THE ONLY INCOME OF THE ASSESSEE WHICH COULD BE T AXED EVEN THOUGH THE ASSESSEE IS NOT HAVING PROOF OF EXPENSES, WHERE AS SUCH EXPENSES WERE REASONABLY INCURRED IN THE ORDINARY COURSE OF BUSINESS. UNDER THESE ITA NO.6957/17 5 CIRCUMSTANCES, WE ARE NOT AGREED WITH THE FINDINGS OF THE CIT(A) THAT THE ENTIRE EXPENSES ARE NOT GENUINE WHICH IS WITHOUT AN Y CORROBORATION. AT THE MOST, A PART OF THE EXPENSES COULD BE DISALLOWED T O PLUG THE POSSIBILITY LEAKAGES AND OVERSTATEMENT OF EXPENSES. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT WOULD BE JUST AND REASONABL E, IF 10% OF THE SAID EXPENSES BE DISALLOWED. ACCORDINGLY, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 10% OF THE EXPENSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/01/2019. SD/- ( RAM LAL NEGI ) SD/- (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/01/2019 . . /PRAKASH KUMAR MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI 1. / THE APPELLANT- 2. / THE RESPONDENT- 3. ( ) / THE CIT(A), MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//