ITO, Ward - 3(3), Kolkata, Kolkata V. M/s. Transmeridian Trucking Pvt. Ltd., Kolkata

ITA 734/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48145 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K BEHARA
• Assessee Lawyers: S BANDYOPADHYAY
• Keywords: Corroborative evidences

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . .. . , , ! ! ! ! , , ,, , ] [BEFORE HONBLE SHRI S.V. MEHROTRA, AM & HONBLE SHRI MAHAVIR SINGH, JM] !' !' !' !' / I.T.A NO. 734/KOL/2010 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEARS : 2005-06 INCOME TAX OFFICER/WARD-3(3) -VS.- M/S. TRANSMERIDIAN TRUCKING PVT. LTD. KOLKATA KOLKATA. [ PAN : AAACT99 99E] [ () /APPELLANT ] [ +,()/ RESPONDENT ] () / FOR THE APPELLANT : - /SHRI A. K. BEHARA, CIT +,() / FOR THE RESPONDENT : - / SHRI S. BANDYOPADHYAY . /ORDER [ . . . . . .. . , ] PER S.V. MEHROTRA, A. M. THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT Y EAR 2005-06 AGAINST ORDER OF CIT(A)-I, KOLKATA DATED 13.01.2010. 2. THE ASSESSEE-COMPANY IN THE RELEVANT ASSESSMENT YEAR CARRIED ON THE BUSINESS OF TRANSPORTATION. IT HAD FILED ITS RETURN OF INCOME D ECLARING TOTAL INCOME OF RS.1,51,480/-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.1, 05,77,400/- AFTER MAKING AN ADDITION OF RS.1,04,25,922/- ON ACCOUNT OF UNPROVED LIABILITY F OR SUNDRY CREDITORS. THE LD. CIT(A) DELETED THE ADDITION. 3. BEING AGGRIEVED, THE DEPARTMENT IS IN APPEAL BEF ORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- (1) THE LD. CIT(A) ERRED ON THE FACTS AND IN THE CI RCUMSTANCES IN DELETING THE ADDITION OF RS.1,04,25,922/- MADE BY THE A.O. O N ACCOUNT OF [ ITA NO. 734/KOL/2010] 2 UNPROVED SUNDRY CREDITORS WITHOUT APPRECIATING THE FACTS/EVIDENCES BROUGHT ON RECORD IN COURSE OF ASSESSMENT PROCEEDIN GS. (2) THE LD. CIT(A) WAS ALSO NOT JUSTIFIED ON THE FA CTS AND IN THE CIRCUMSTANCES, IN ACCEPTING THE ASSESSEES EXPLANAT IONS WITHOUT MATERIAL EVIDENCE AGAINST THE ABNORMALITIES BROUGHT ON RECOR D AND ESTABLISHED BY THE AO IN COURSE OF ASSESSMENT PROCEEDINGS. (3) THE CIT(A) HAS ERRED IN DELETING THE SAID ADDIT ION WITHOUT OBTAINING FROM THE ASSESSEE ANY MATERIALS FROM WHICH IT COULD BE UNDERSTOOD THAT PAYMENTS TO ALL THE SUNDRY CREDITORS WERE GENUINE A ND VERIFIABLE. 4. IN ALL THE THREE GROUNDS, THE MAIN ISSUE IS REGA RDING ADDITION OF RS.1,04,25,922/-. 5. BRIEF FACTS OF THE ISSUE ARE THAT FROM THE EXAMI NATION OF BALANCE SHEET, IT WAS REVEALED THAT THERE WAS A LIABILITY OF RS.1,04,25,922/- FOR SUNDRY CREDITORS. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PRODUCE DETAILS OF SUNDRY CREDITORS WITH SUPPORTING EVIDENCES. THE ASSESSEE FILED LEDGER COPY OF SUNDRY CREDITORS. THE ASSESSING OFFICER HAS OBSERVED THAT FROM THE LEDGER COPY OF SUNDRY CREDITORS, THE ADDRESSES OF THE PARTIES TO WHOM FREIGHT AMOUNT WAS TO BE PAID COULD NOT BE ASCERTAINED, ONLY NAMES OF THE SUNDRY CREDITORS AND TRUCK NUMBERS WERE GIVEN IN THE COPY OF THE LEDGER, BUT IN MOST OF THE CASES, TRUCK NUMBERS, NAMES AND ADDRESSES OF THE SUNDRY CREDITORS WERE NOT GIVEN. THEREFORE, THE TRANSACTIONS WERE NOT VERIFIABLE. HE FURTHER OBSERVED THAT TRUCK NUMBERS AVAILABLE WERE OF DIFFERENT STATES OF INDIA. THE ASSESSEE HAD ALSO FILED LEDGER COPY OF REPAYMENT OF SUNDRY C REDITORS FOR THE FINANCIAL YEAR 2005-06, FROM WHICH ALSO, ADDRESSES OF THE SUNDRY CREDITORS COULD NOT BE TRACED OUT. HE FURTHER OBSERVED THAT MOST OF THE TRUCK NUMBERS WERE ALSO NOT FOUND. IN THE ABSENCE OF ADDRESSES OF SUNDRY CREDITORS AND ALSO THE DETAILS RELATING THERETO, AS SESSING OFFICER HELD THAT ASSESSEE FAILED TO PROVE THE TRANSACTION IS REAL AND NOT FICTITIOUS. H E POINTED OUT THAT IN THE ABSENCE OF IDENTIFICATION OF CREDITORS, MERE FILING OF LIST OF SUNDRY CREDITORS WITH NAMES, AMOUNTS AND SOME TRUCK NUMBER DOES NOT HAVE ANY CORROBORATIVE V ALUE. HE, THEREFORE, ADDED SUM OF RS.1,04,25,922/- ON ACCOUNT OF UNVERIFIABLE SUNDRY CREDITORS. THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- FACTUALLY THERE IS HARDLY ANY BUSINESS ACTIVITY WH ERE NO OUTSTANDING CREDIT BALANCE FOR EXPENSES, EXISTS. AS THE ASSESSEE MAINT AINS ITS ACCOUNTS ON A MERCANTILE BASIS, THE EXPENSES ACTUALLY INCURRED BU T NOT PAID DURING THE YEAR, ARE TO BE ALLOWED AS A DEDUCTION. THE RECORDS OF TH E ASSESSEE SHOW THAT NO SIMILAR DISALLOWANCE WAS MADE IN THE PAST WHEN THE A.O. WHO PASSED THE ORDER UNDER APPEAL WAS SUBJECTED TO THE LEST OF SCRUTINY ASSESSMENT PROCEEDINGS. THE [ ITA NO. 734/KOL/2010] 3 ASSESSEE, PERHAPS IN A REASONABLE PERIOD OF TIME, C OULD HAVE FURNISHED THE FULL LIST OF SUNDRY CREDITORS RUNNING INTO LARGE NUMBERS WITH THE TRUCK NUMBERS IN MOST OF THE CASES. THE ASSESSEE ALSO PROVED WITH EV IDENCES THE ACTUAL PAYMENTS OF THE OUTSTANDING AMOUNTS IN THE NEXT YEAR. THE AS SESSEE ALSO EXPLAINED THE REASONS WHY THE ADDRESSES OF THE TRUCK OWNERS/DRIVE RS WERE NOT RECORDED IN THIS LINE OF BUSINESS END ALSO HOW SUCH ADDRESSES ARE NO T ACTUALLY REQUIRED AS HIRING OF THE TRUCKS IS USUALLY DONE THROUGH BROKERS. THE A.0. HAD ADDED BACK THE ENTIRE AMOUNT OF OUTSTA NDING SUNDRY CREDITORS BALANCES MEANING THEREBY THAT ALL THE PAYMENTS SHOU LD HAVE BEEN MADE BY THE END OF THE CURRENT ACCOUNTING YEAR. HOWEVER, THERE IS NO SUCH REQUIREMENT EITHER IN LAW OR ACCORDING TO COMMERCIAL PRACTICE. IT WAS ALSO BEEN POINTED OUT BY LD. A/R THAT THE ACTION OF THE A.O. IN ADDING BA CK THE ENTIRE SUNDRY CREDITORS BALANCES, HAS GIVEN RISE TO AN ABSURD SIT UATION IN THAT THE MARGIN OF PROFIT MOVES UP TO 18.27% OF THE FREIGHT REALIZATIO N. IT IS IN EVERY BODYS KNOWLEDGE THAT THE TRANSPORT BUSINESS INVOLVES A LA RGE TURNOVER AND A LOW MARGIN RATE. I HAVE ALSO GONE THROUGH THE TWO JUDGMENTS AS CITED ON BEHALF OF THE APPELLANT. IN THESE JUDGMENTS AND SPECIFICALLY THE ONE OF THE HONBLE ITAT, HYDERABAD BENCH, IT WAS CLEARLY OPINED THAT NO BUSINESS IS GE NERALLY FEASIBLE WITHOUT KEEPING SOME OUTSTANDING BALANCES AND THAT IN TRANS PORT BUSINESS, SUCH OUTSTANDING AMOUNTS MAY EVEN BE SUBSTANTIAL AND IT IS IMPRACTICAL TO FURNISH THE IDENTITIES OF THE PAYEES TO WHOM PAYMENT HAS BEEN M ADE SUBSEQUENTLY, DIRECTLY IMPINGES ON THE APPELLANTS CASE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ASSESSMENT ORDER AND POINTED OUT THAT SINCE ASSESSEE DID NOT FURNISH THE COMPLETE DE TAILS RELATING TO SUNDRY CREDITORS, THE ADDITION WAS RIGHTLY MADE. 7. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND HIRE TRUCKS THRO UGH BROKER. HE SUBMITTED THAT IT IS THE NORMAL TRADE PRACTICE IN THIS LINE OF BUSINESS. THE BROKER S CAN KEEP TRACK WITH THE TRUCK DRIVERS AND THEREFORE, FOR SAFETY PURPOSES ANY MISCHIEF BY THE TRUCK DRIVERS, TRANSPORTERS CAN BE HELD OFF THROUGH BROKERS. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE ALSO REFERRED TO PAGE 2 OF THE ASSESSMENT ORDER AND POINTED OUT THAT THE ASSESSING OFFICER HAS MADE CONTRADICTORY STATEMENT, IN AS MUCH AS, IN THE SAME BREATH, HE OBSERVED AS U NDER :- ONLY NAMES OF THE SUNDRY CREDITORS & TRUCKS NUMBER WERE GIVEN IN THE COPY OF THE LEDGER, BUT MOST OF THE CASES TRUCK NO. AND NAMES AND ADDRESSES OF THE SUNDRY CREDITORS WERE NOT GIVEN. LD. COUNSEL APPEARING ON BEHALF OF THE ASSESSEE FUR THER SUBMITTED THAT THIS ISSUE IS SQUARELY [ ITA NO. 734/KOL/2010] 4 COVERED BY THE DECISION OF I.T.A.T., KOLKATA VIDE O RDER DATED 21.05.2010 IN THE CASE OF ITO VS. APEX CARGO MOVERS & SERVICES IN ITA NO. 528/KOL/201 0 FOR THE ASSESSMENT YEAR 2005-06. HE FURTHER RELIED ON THE DECISION OF I.T.A.T., HYDERAB AD BENCH IN THE CASE OF PIONEER ROAD CARRIERS VS. ITO IN ITA NO.1054/HYD./2008, ORDER DA TED 26.02.2009 FOR THE ASSESSMENT YEAR 2003-04. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. AT PAGE 24 OF THE PAPER BOOK, ASSESSEE HA S GIVEN DETAILS OF SUNDRY CREDITORS FROM FINANCIAL YEAR 2001-02 TO 2004-05. IN ALL THESE YEA RS NO SUCH ADDITIONS HAVE BEEN MADE. THAT APART, IN ORDER TO APPRECIATE THE CORRECTNESS OF AD DITIONS MADE BY THE ASSESSING OFFICER, IT IS NECESSARY TO FIRST EXAMINE THE MODUS OPERANDI OF ASSESSEES BUSINESS BECAUSE TRADE PRACTICES PLAY AN IMPORTANT ROLE IN DECIDING SUCH ISSUES. BEF ORE THE LD. CIT(A), IT WAS POINTED OUT THAT THE ASSESSEE HAD NO TRUCKS OF ITS OWN AND IT HIRED TRUCKS FROM THE MARKET THROUGH A BROKER. AS AN WHEN CLIENT NEEDED, TRUCKS WERE HIRED FROM THE L OCAL MARKET AND PLACED AT THE CLIENTS DESIRED PLACE FOR LOADING OF GOODS AND TRANSPORT. W E FURTHER NOTE FROM THE ORDER OF I.T.A.T. IN THE CASE OF PIONEER ROAD CARRIERS (SUPRA) THAT WHEN THE ASSESSEE HIRES A LORRY, IT PREPARES A CHALLAN WHICH HAS DISTINCT NUMBER, DATE, LORRY NUMB ER, CHASSIS NUMBER, ENGINE NUMBER AND OTHER DETAILS OF GOODS TO BE TRANSPORTED. IT ALSO C ONTAINS THE TOTAL HIRE CHARGES, HIRE CHARGES ACTUALLY PAID AT THE TIME OF HIRE AND THE BALANCE P AYABLE. WHATEVER IS ACTUALLY PAID AT THE TIME OF HIRE, IS DEBITED TO LORRY HIRE ACCOUNT. AT THE E ND OF THE YEAR, ALL THE PAYMENTS THAT REMAIN OUTSTANDING ARE ASCERTAINED FROM THE CHALLANS AND J OURNAL ENTRY IS PASSED DEBITING LORRY HIRE ACCOUNT AND CREDITING LORRY HIRE PAYABLE ACCOUNT (I N THE PRESENT CASE SUNDRY CREDITORS). THOUGH IN THE ORDERS OF THE AUTHORITIES BELOW, THESE ASPEC TS HAVE NOT SPECIFICALLY BEEN MENTIONED BUT SINCE IT IS THE NORMAL TRADE PRACTICE IN VOGUE, WE TAKE INTO CONSIDERATION THESE ASPECTS. THE ONLY OBJECTION OF THE ASSESSING OFFICER IS THAT ADD RESSES OF THE SUNDRY CREDITORS WERE NOT AVAILABLE. HOWEVER, WHEN THE TRUCK NUMBERS HAD BEEN GIVEN, ASSESSING OFFICER COULD NOT BRUSH ASIDE THE ENTIRE DETAILS SOLELY ON THIS GROUN D. THE ASSESSEE WAS ALSO FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE, WHATEVER OUTSTA NDING LIABILITY REMAINED AT THE END OF THE YEAR, RELATING TO TRUCK HIRE CHARGES, THE SAME HAD TO BE ACCOUNTED FOR BY DEBITING TRUCK HIRE CHARGES AND CREDITING RESPECTIVE SUNDRY CREDITORS A CCOUNT. SINCE ASSESSEE HAD FURNISHED THE TRUCK NUMBERS, THE SAME COULD BE LINKED WITH THE RE SPECTIVE CHALLAN TO FIND OUT THE GENUINENESS [ ITA NO. 734/KOL/2010] 5 OF THE ASSESSEES CLAIM. THE ASSESSING OFFICER HAS NOT RAISED ANY SUCH OBJECTION. THE ASSESSEE HAD ALSO MADE THE PAYMENTS IN SUBSEQUENT YEARS AND THE DETAILS OF THE SAME WERE ALSO FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESSE E HAD EVEN OFFERED FOR TEST CHECK CERTAIN ITEMS, KEEPING IN VIEW OF THE LARGE NUMBER OF SUNDR Y CREDITORS UNDER CONSIDERATION. UNDER SUCH CIRCUMSTANCES, KEEPING IN VIEW THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PARTICULARLY, TRADE PRACTICE IN VOGUE, WE ARE OF TH E OPINION THAT LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. WE ACCORDINGLY, CONFIRM THE ORDER OF LD. CIT(A). 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. . . . . / / / / 0 /# 1 2 0 /# 1 2 0 /# 1 2 0 /# 1 2 ORDER PRONOUNCED IN THE OPEN C OURT ON 31. 05. 2011. SD/- SD/- [ ! , ] [ . ., ] [ MAHAVIR SINGH ] [S.V. M EHROTRA , ] JUDICIAL MEMBER ACCOUNTANT M EMBER (4) DATED : 31ST MAY, 2011. . 6 + 7 87%/ COPY OF THE ORDER FORWARDED TO: 1. () /APPELLANT- INCOME TAX OFFICER/WARD-3(3), 8/2, ES PLANADE EAST, DWARLI HOUSE, GROUND FL OOR, KOLKATA-700 069. 2 +,() / RESPONDENT : M/S. TRANSMERIDIAN TRUCKING PVT. LTD ., 22, RABINDRA SARANI, FN-1, 1 ST FLOOR, KOLKATA-700 073. 3. .#/ THE CIT, 4. .# ()/ THE CIT(A), KOLKATA. 5. 1 + #/ DR, KOLKATA BENCHES, KOLKATA [,7 + / TRUE COPY] .#// BY ORDER, !? /DEPUTY/ASSTT REGISTRAR [ KKC @A #B? C /SR.PS]