HINDUSTAN CARGO LTD., MUMBAI V. D.C.I.T. 1(1), MUMBAI

ITA 7752/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0935 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 09-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: B V JHAVERI
• Keywords: Revenue expenditure
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUM BAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI SANJAY ARO RA, AM ./I.T.A. NO. 7752/MUM/2012 ( / ASSESSMENT YEAR: 2008-09) M/S HINDUSTAN CARGO LTD., 402-403, A-WING, POLARIS BUILDING, OFF MAKWANA ROAD, MAROL, ANDHERI (E), MUMBAI-400059 / VS. DCIT- (1)(1), PIRAMAL CHAMBERS, LALBAUG, MUMBAI-12 ./ ./PAN/GIR NO. AAACH1471R ( ! /APPELLANT ) : ( '#! / RESPONDENT ) $%&' ( ) / ASSESSEE BY : SHRI B.V.JHAVERI + ) / REVENUE BY : SHRI JITENDRA KUMAR $+ ) ( . / DATE OF HEARING : 11.03.2015 ) ( . / DATE OF PRONOUNCEMENT : 09.06.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, MUMBAI (CI T(A) FOR SHORT) DATED 15.10.2012, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S.143(3) R/W S. 147 OF THE INCOME TAX ACT, 1961 (THE ACT HEREI NAFTER) FOR ASSESSMENT YEAR (A.Y.) 2008-09. ITA NO.7752/M/2012 M/S HINDUSTAN CARGO LTD. 2 2. THE APPEAL RAISES TWO ISSUES, CATEGORIZED BROADL Y AS GROUND I AND II, WHICH WE SHALL TAKE UP IN SERIATIM: ISSUE #1 3. THIS RELATES TO A DISALLOWANCE OF RS. 77,86,145/ -, BEING THE REVENUE EXPENDITURE INCURRED, EFFECTED ON THE GROUND OF HAV ING BEEN CLAIMED BY THE ASSESSEE TWICE, I.E., ONCE BY WAY OF DEDUCTION FROM THE REVENUE EXPENDITURE RECOVERED (FROM CLIENT/S) ACCOUNT AND, SECONDLY, BY INCLUDING THE SAME UNDER THE REVENUE EXPENDITURE ACCOUNT. AN EXPENDITURE CAN NOT SURELY BE CLAIMED TWICE. THE ASSESSEES CLAIM, ON THE OTHER HAND, IS THAT IT IS IN FACT NOT SO, AND WHICH IT SOUGHT TO ILLUSTRATE WITH REFERENCE TO THE JOURNAL ENTRIES (AS WELL AS THE BANK/CASH ENTRIES) STATED TO BE PASSED IN ITS BOOKS OF ACCOUNTS FOR THE PURPOSE, TAKING A HYPOTHETICAL EXAMPLE, AND WHICH STAND DULY (AND FAIRLY) REPRODUCED BY THE LD. CIT(A) IN HIS ORDER (REFER PARAGRAPH 4/PAGE S 3 - 5). SO, HOWEVER, IN HIS VIEW, THE ASSESSEE HAD NOT CLA RIFIED THE SAME WITH REFERENCE TO THE ACTUAL ENTRIES PASSED IN ITS BOOKS OF ACCOUNT. NO ACCOUNTING SYSTEM WOULD ADMIT OF A DOUBLE ENTRY FOR THE SAME S UM OF EXPENDITURE. THE SAME WOULD, UPON INCURRING, GET REFLECTED AS A DEBI T SUM, WITH A CORRESPONDING CREDIT TO THE BANK/CASH ACCOUNT. ITS CLAIM, WHICH COULD BE AT A HIGHER (OR EVEN THE LOWER) SUM (AS EXPLAINED BY THE ASSESSEE, THE E XPENSES ARE, TO AVOID CONFUSION AND RELATED PROBLEMS, BILLED TO THE CLIEN TS IN ADVANCE ON ESTIMATED BASIS), WOULD SIMILARLY RESULT IN DEBIT TO THE BANK /CASH ACCOUNT, WITH A CORRESPONDING CREDIT TO THE INCOME (I.E., EXPENDITU RE RECOVERED) ACCOUNT. WHILE THE EXPENDITURE WOULD, GET REFLECTED ON THE DEBIT S IDE OF THE P&L A/C, ITS RECOVERY, WOULD LIKEWISE, ON ITS CREDIT SIDE, WITH THE SAME DIFFERENCE BEING REFLECTED IN THE BANK ACCOUNT (ASSUMING BOTH ARE PA ID AND RECEIVED), OR IN THE DEBTORS (OR CREDITORS ACCOUNTS.) THERE WAS, UNDER THE CIRCUMSTANCES, NO SCOPE OF DUPLICATION, I.E., FOR RECORDING/ACCOUNTING THE SAME TRANSACTION TWICE. THE STAND OF THE AO WAS, ACCORDINGLY, UPHELD BY HIM. ITA NO.7752/M/2012 M/S HINDUSTAN CARGO LTD. 3 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. WE ARE UNABLE TO UNDERSTAND THE REVENUES STAND. TH E ASSESSEE, A CUSTOM HOUSE AGENT (CHA), INCURS EXPENDITURE ON VAR IOUS ACTIVITIES INVOLVED IN THE CLEARING AND FORWARDING OF THE IMPORT AND/OR EXPORT OF GOODS, VIZ. LOADING, UNLOADING, STRAPPING, CUSTOM DUTY, TRANSPO RT CHARGES, CFS CHARGES, ETC. SOME OF THEM ARE DULY SUPPORTED BY BILLS, OR D ULY RECEIPTED, OR EVEN SUBJECT TO TAX DEDUCTION AT SOURCE, WHILE OTHERS AR E PER SELF-GENERATED (OR, INTERNAL) VOUCHERS. THE SAME STAND TO BE BILLED TO THE CUSTOMERS ON ESTIMATED BASIS TO MAINTAIN TRANSPARENCY AND AVOID CONFUSION, I.E., FOR CLARITY, AND ARE THUS INCURRED EITHER AT A LESSER OR (AT TIMES EVEN A) HIGHER SUM THAN THAT BILLED TO THEM. DURING THE RELEVANT YEAR, THE ASSESSEE INCURR ED A TOTAL EXPENDITURE OF RS. 50,73,60,802/-, WHILE RECOVERED A SUM OF RS. 3,43,0 5,663/-. THE INCURRING OF THE EXPENDITURE IS ACCOMPANIED BY A CORRESPONDING C REDIT, AND ITS RECOVERY, LIKEWISE, BY A DEBIT TO THE ACCOUNT OF THE CREDITOR (OR DEBTOR) ACCOUNT, GETTING NEUTRALIZED ON PAYMENT AND RECEIPT, AS THE CASE MAY BE, THROUGH THE BANK/CASH ACCOUNT. THE ASSESSEE STATES TO HAVE PASSED, IN ADD ITION, AN ENTRY REFLECTING THE CASH COMPONENT OF THE REVENUE EXPENDITURE INCURRED ( FOR AND ON BEHALF OF THE CLIENT), AS: REVENUE EXPENDITURE RECOVERED A/C. (DR.) RS. 2080 (SAY). TO REVENUE EXPENDITURE RECOVERED ACCOUNT (CR.) RS . 2080 THIS, IT IS FURTHER STATED, ENABLES IDENTIFICATION OF THE CASH EXPENDITURE INCURRED ON THE CLEARING OF THE GOODS, I.E., QUA A PARTICULAR CONSIGNMENT, EVEN AS THE SAID EXPENDITURE IS ALREADY INCLUDED IN THE TOTAL EXPENDITURE, ACCOUNTED FOR ON BEING INCURRED. BOTH THE DEBIT AND CREDIT BA LANCES, UPON PASSING THE JOURNAL ENTRIES AFORESAID, GET TRANSFERRED TO THE P &L A/C, WITHOUT THUS IMPACTING THE PROFIT (OR LOSS) IN ANY MANNER. HOW COULD SUCH AN ENTRY LEAD TO A DOUBLE CLAIM FOR DEDUCTION OF EXPENDITURE OR GENERA TION OF REVENUE ? THAT SUCH ITA NO.7752/M/2012 M/S HINDUSTAN CARGO LTD. 4 AN ENTRY IS ACTUALLY PASSED IS BORNE OUT BY THE FAC T OF A DEBIT ENTRY IN THE EXPENDITURE RECOVERED ACCOUNT. AGAIN, ASSUMING THAT NO SUCH ENTRIES HAVE BEEN EXHIBITED TO BE PASSED IN ITS BOOKS OF ACCOUNT BY T HE ASSESSEE, AS STATED BY THE LD. CIT(A), THE ONLY ENTRIES WOULD BE IN RELATION T O INCURRING OF EXPENDITURE, AND ITS CLAIM THROUGH THE RECOVERY ACCOUNT, BOTH GE TTING CHANNELIZED THROUGH THE BANK (CASH) ACCOUNT. THE DOUBLE ENTRY SYSTEM, I T NEEDS TO BE APPRECIATED, BEING SELF-BALANCING, CANNOT LEAD TO A DOUBLE CLAIM , WHICH COULD ONLY BE IN CASE OF UNMATCHED BALANCES IN THE BALANCE-SHEET, I. E., AS WHERE AN ENTRY FOR EXPENDITURE (OR INCOME) IS PASSED TWICE (OR MORE TH AN ONCE). THE SAME WOULD GET REFLECTED AS LIABILITY (OR ASSET), WITHOUT THE SAME EXISTING IN REALITY, AND WHICH IS NOT THE CASE IN THE INSTANT CASE. WE, ACCORDINGLY, FIND NO MERIT IN THE REVENUES STA ND OF A DOUBLE CLAIM BY THE ASSESSEE. WE, THEREFORE, DIRECT FOR A DELETI ON OF THE AMOUNT OF DISALLOWANCE OR, AS THE CASE MAY BE, ADDITION, AND THE ASSESSEE SUCCEEDS ON ITS GROUND I. 5. THE SECOND ISSUE CONCERNS A PART DISALLOWANCE OF THE CASH EXPENDITURE INCURRED BY THE ASSESSEE. THE SAME, THOUGH STANDS C LAIMED FROM THE CLIENT/S, WERE FOUND UNVERIFIABLE BY THE REVENUE, RESULTING I N ITS DISALLOWANCE AT 20% OF THE TOTAL CLAIM FOR SUCH EXPENDITURE (AT RS . 77.86 LACS),I.E., AT RS. 15,57,229/-, FOLLOWING THE ORDER BY THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR AY 2003-04. THE ASSESSEES CLAIM BEFORE US WAS TWO FOLD:- (A) THAT THE DISALLOWANCE BE RESTRICTED TO THE COMPONE NT OF THE TOTAL EXPENDITURE WHICH IS NOT UNVERIFIABLE, I.E., BEING INCURRED PER SELF- MADE VOUCHERS, CLAIMING THE SAID AMOUNT TO BE AT RS . 29.58 LACS FOR THE CURRENT YEAR; AND (B) THAT THE RATIO OF THE DISALLOWANCE BE CURTAILED FU RTHER TO 15%, I.E., INSTEAD OF AT 20% BY THE REVENUE. ITA NO.7752/M/2012 M/S HINDUSTAN CARGO LTD. 5 WE FIRSTLY OBSERVE THIS TO BE, AGAIN, A SUBSISTING ISSUE, WITH THE MATTER HAVING TRAVELLED TO THE TRIBUNAL FOR A SUBSEQUENT O RDER (AY 2007-08) AS WELL (PB PAGES 37-40). ON MERITS, WE FIND NO MERIT IN TH E ASSESSEES SECOND PLEA (B); THE RATE OF 20% HAVING BEEN CONFIRMED BY THE T RIBUNAL FOR AY 2003-04 AS WELL AS FOR AY 2007-08. WE, HOWEVER, FIND CONSIDERA BLE MERIT IN THE ASSESSEES FIRST CLAIM, SO THAT THE EXPENDITURE PROPERLY SUPPO RTED BY BILLS/RECEIPTS ISSUED BY THIRD PARTIES/PAYEES, OUGHT NOT TO BE SUBJECT TO DISALLOWANCE ON ACCOUNT OF UNVERIFIABILITY, WHICH IS A BASIS OF THE DISALLOWAN CE BY THE AO. THE DEDUCTION OF TDS, HOWEVER, IN OUR VIEW WOULD NOT, WITHOUT ANY THING MORE, RESULT IN ESTABLISHING THE CLAIM AS GENUINE. THE ONUS TO PROV E THE SAME WOULD BE ON THE ASSESSEE, WITH THE DEDUCTION OF TDS, SO THAT THE PA YEE IS IDENTIFIABLE AND HAVING PRESUMABLY DISCLOSED THE SAME RECEIPT AS HIS INCOME, WOULD DEFINITELY LEND CREDENCE OR A PRESUMPTION AS TO ITS GENUINENES S. THE REVENUE HAVING ONLY FOLLOWED THE ORDER OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR AY 2003-04, WE CONSIDERED IT PROPER THAT THE MATTER QUA THE VERIFICATION OF THE EXPENDITURE WHICH IS SUBJECT TO TDS BE RESTORED BACK TO THE FIL E OF THE AO FOR FRESH ADJUDICATION, WHO SHALL DECIDE THE SAME IN ACCORDAN CE WITH LAW, ALLOWING THE ASSESSEE A FAIR OPPORTUNITY TO PRESENT ITS CASE. TH E EXPENDITURE FOR WHICH ONLY INTERNAL VOUCHERS ARE AVAILABLE, WOULD, NEEDLESS TO ADD, IS CONFIRMED FOR DISALLOWANCE AT 20% OF TOTAL SUCH EXPENDITURE. WE D ECIDE ACCORDINGLY. 6. THE ASSESSEES APPEAL IS PARTLY ALLOWED AND PART LY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 09, 2015 SD/- SD/- (JOGINDER SINGH) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; 4$ DATED : 09.06.2015 $ . ./SHARWAN . PS ITA NO.7752/M/2012 M/S HINDUSTAN CARGO LTD. 6 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. 5( ( ) / THE CIT(A) 4. 5( / CIT - CONCERNED 5. 6+7 '($% , . % , / DR, ITAT, MUMBAI 6. & / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI