Shri Kulwansingh Randhwa, Baroda V. The Dy.CIT.,Circle-2(1), Baroda

ITA 844/AHD/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80250 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-07-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Business expenditure
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SRI KUL B HARAT, JUDICIAL MEMBER SHRI KULWANTSINGH RANDHAWA PROP. RADIANT TANKER SERVICES, B-112, RANOLI COMMERCIAL COMPLEX, AT & POST RANOLI, DIST. BARODA PAN: ADGPR 3309 E VS DCIT, CIRCLE 2 (1), BARODA (RESPONDENT) ASSESSEE BY: SRI URVASHI SODHAN, A.R . REVENUE BY: SRI DINESH SINGH, SR. D.R. DATE OF HEARING : 25-07-2014 DATE OF PRONOUNCEMENT : 08-08-20 14 / ORDER PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:- THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF LD. CIT(A)- II, BARODA DATED 26-11-2010 FOR A.Y. 2006-07. ITA NO. 844/AHD/2011 ASSESSMENT YEAR 2006-07 I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 2 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF 'RAD IANT TANKER SERVICE' AND IS STATED TO BE ENGAGED IN THE BUSINESS OF TRAN SPORTATION OF LIQUID MATERIAL. ASSESSEE FILED HIS RETURN OF INCOME FOR A Y 06-07 ON 30.12.2006 DECLARING TOTAL INCOME OF RS 9,86,280/-. THE CASE W AS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) VI DE ORDER DATED 31.12.2008 AND THE TOTAL INCOME WAS DETERMINED AT R S. 17,92,500/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CLT(A) VIDE ORDER DATED 26.11.2010 GRAN TED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASS ESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFEC TIVE GROUNDS: 1. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING ADHOC DISALLOWANCE MADE BY AO OF RS. 50,000/- OUT OF TOTA L TRIP EXPENSES HOLDING THE SAME TO BE NON BUSINESS EXPENSES. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE EXPENSES INCURRED FOR THE PURPOSE OF CONDUCTING TANKER BUSINESS WERE FULLY VO UCHED FOR AND PARTICULARS SUBMITTED. UNDER THE FACTS AND THE CIRC UMSTANCES OF THE CASE, LD. CIT (A) OUGHT TO HAVE ALLOWED THE TRIP EX PENSE IN FULL AS 'BUSINESS EXPENDITURE'. 2. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CO NFIRMING DISALLOWANCE OF RS. 4,00,863/- MADE BY AO AS INCOME NOTIONALLY EARNED ON ACCOUNT OF RATE DIFFERENCE. THE ORDER OF ID. CIT(A) IS WITHOUT PROPERLY APPRECIATING THE FACTS AND FURTHER ERRED IN IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT THAT OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. 3. LD. CTT (A) HAS ERRED IN LAW AND ON FACTS IN C ONFIRMING AD HOC ADDITION OF RS. 50,000/- OUT OF TOTAL ADDITION OF R S. 3,01,709/- MADE BY AO U/S 69C OF THE ACT. LD CIT (A) ERRED IN APPRE CIATING THE CONTENTION THAT PROVISIONS OF SECTION 69C, WHEN PRO PER EXPLANATION FOR THE EXPENSES INCURRED IS SUBMITTED ARE NOT APPL ICABLE FOR I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 3 ESTIMATED EXPENSES NEVER INCURRED. LD. CIT (A) OUGH T NOT TO HAVE CONFIRMED ADDITION OF RS. 50,000/-. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFI RMING ADHOC DISALLOWANCE OF 10% OUT OF 20% MADE BY AO OUT OF TE LEPHONE AND VEHICLE EXPENSES. 1 ST GROUND IS WITH RESPECT TO DISALLOWANCE OF ADHOC DISALLOWANCE OF TRIP EXPENSES OF RS. 50,000/- 4. AO NOTICED THAT ASSESSEE HAD DEBITED RS 2,06,378 /- AS TRIP EXPENSES IN THE PROFIT AND LOSS ACCOUNT. ON VERIFIC ATION OF THE VOUCHERS, HE NOTICED THAT MOST OF THE EXPENSES WERE INCURRED IN CASH AND THE EXPENSES WERE NOT FULLY VERIFIABLE AND THEREFORE WH ETHER THE EXPENSES WERE INCURRED WHOLLY FOR THE PURPOSE OF BUSINESS WA S NOT PROVED. HE ACCORDINGLY DISALLOWED RS 50,000/- OF THE TOTAL EXP ENSES. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) UPHELD THE ORDER OF AO. AGGRIEVED BY THE ORD ER OF CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 5. BEFORE US, LD AR REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A). SHE FURTHER SUBMITTED THAT EXPENSES HAVE BE EN INCURRED BY THE CLEANERS AND DRIVERS DURING THEIR TRIP AND HAVE NEC ESSARILY TO BE INCURRED IN CASH. SHE FURTHER SUBMITTED THAT NO SUCH DISALLOWAN CE WAS MADE IN THE EARLIER YEAR. SHE THUS URGED THAT THE ADDITION BE D ELETED. LD DR ON THE OTHER HAND SUPPORTED THE ORDERS OF AO AND LD. CIT(A ). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABOUT THE DISALLOWANCE OF TRIP EXPENSES WHICH HAVE BEEN INCURRED IN CASH. AO CONSI DERING THAT THE I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 4 EXPENSES HAVE BEEN INCURRED IN CASH AND THE EXPENSE S BEING NOT FULLY VERIFIABLE DISALLOWED RS. 50000/-. BEFORE US, LD. AR HAS ALSO NOT SUBMITTED THE NATURE OF EXPENSES NOR HAS PLACED ON RECORD THE ASSESSMENT ORDERS OF EARLIER YEARS IN SUPPORT OF TH E CONTENTION THAT SIMILAR EXPENSES INCURRED BY THE ASSESSEE HAVE BEEN ACCEPTE D BY REVENUE IN PAST. FURTHER CONSIDERING THE NATURE OF BUSINESS IN WHICH THE ASSESSEE IS ENGAGED IN AND CONSIDERING THAT THE TOTAL RECEIPTS OF THE ASSESSEE FROM THE BUSINESS AT RS 3.51 CRORES, WE ARE OF THE VIEW THAT IN SUCH CIRCUMSTANCES THE DISALLOWANCE OF RS 50000/- WHICH WORKS OUT TO O NLY 0.14% OF THE RECEIPTS, IS REASONABLE IN THE PRESENT CIRCUMSTANCE S AND THEREFORE NO INTERFERENCE IS CALLED FOR. IN THE RESULT THIS GROU ND IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO CONFIRMING DISALLOWANCE OF RS 4,00,863/-. 7. AO NOTICED THAT ASSESSEE HAD APART FROM USING TH E OWN TRUCKS HAD ALSO USED TRUCKS HIRED FROM ASSOCIATE CONCERNS AND ALSO FROM OTHERS. HE ALSO NOTICED THAT ASSESSEE HAD RECEIVED INCOME FROM CONTRACTING (RATE DIFFERENCE] FROM TWO ASSOCIATES AT 8.82 % AND 8.10% WHEREAS FROM THE OTHER TWO CONCERNS DID NOT RECEIVE ANY INCOME. AO W AS OF THE VIEW THAT ASSESSEE SHOULD HAVE EARNED INCOME FROM THE OTHER T WO CONCERNS ALSO. HE ACCORDINGLY WORKED OUT THE INCOME ON THE BASIS O F PERCENTAGE OF FREIGHT CHARGES AND MADE AN ADDITION OF RS 4,08,863/-. AGGR IEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE NATTER BEFORE LD. CIT(A). LD. CIT(A) CONFIRMED THE ACTION OF AO BY HOLDING AS UNDER: 4.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE LEAR NED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASSESSING OFFIC ER. THE APPELLANT HAS PLIED 4 VEHICLES OF HIS RELATIVE DURING THE YEA R. FROM TWO OF THEM HE HAS SHOWN REMUNERATION WHILE IN CASE OF OTHER TW O HE HAS NOT SHOWN ANY REMUNERATION. NO REASON HAS BEEN GIVEN FO R THIS I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 5 APPARENT DISCREPANCY EXCEPT STATING THAT IT HAS NOT CHARGED ANY REMUNERATION FROM THESE TWO AS HE HAS DONE IN THE C ASE OF OTHER TWO. THE EXPLANATION IS NOT CONVINCING. IT IS NOT E XPLAINED WHY TRANSACTION WITH THE OTHER TWO RELATIVES IS NOT AT ARM'S LENGTH. WHEN APPELLANT IS RUNNING OTHERS' VEHICLE FOR REMUNERATI ON THEN IS NO CONVINCING REASON WHY HE IS NOT SHOWING SIMILAR ARM 'S LENGTH TRANSACTION FROM THESE TWO. ON THE FACTS OF THE CAS E, THE ASSESSING OFFICER IS JUSTIFIED IN ESTIMATING INCOME AT THE SA ME RATE AS IS RECEIVED FROM OTHER TWO CONTRACTEE. THIS GROUND IS REJECTED. 8. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. 9. BEFORE US LD AR REITERATED THE SUBMISSIONS MADE BEFORE LD CIT(A) AND FURTHER SUBMITTED THAT AO HAS FAILED TO ESTABLI SH THAT ASSESSEE HAS IN FACT RECEIVED THE INCOME AND HAS TAXED NOTIONAL INC OME. SHE FURTHER SUBMITTED THAT ONLY REAL INCOME CAN BE TAXED AND NO T NOTIONAL INCOME AND THEREFORE THE ADDITION MADE BY THE AO NEEDS TO BE D ELETED. LD DR ON THE OTHER HAND SUPPORTED THE ORDERS OF AO AND LD. CIT(A ). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE IT IS SEEN THAT AO HAS WORKED OUT THE INCOME THAT THE ASSESSEE OUGHT TO HAVE RECEIVED FROM TWO A SSOCIATE CONCERNS. WE FURTHER FIND THAT AO HAS NOT BROUGHT ANY MATERIA L ON RECORD TO DEMONSTRATE THAT THE ASSESSEE HAS IN FACT RECEIVED THE INCOME BUT HAD PROCEEDED TO WORK OUT THE INCOME ON THE BASIS OF PE RCENTAGE OF INCOME RECEIVED BY ASSESSEE FROM TWO OTHER ASSOCIATE CONCE RNS. IT IS A SETTLED LAW THAT ONLY REAL INCOME CAN BE TAXED. IN SUCH CIRCUM STANCES, WE ARE OF THE VIEW THAT NO ADDITION IS CALLED FOR MORE SO WHEN TH E ADDITION IS MADE ON I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 6 THE BASIS OF ASSUMPTION. WE THUS DIRECT ITS DELETIO N. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 3 RD GROUND IS WITH RESPECT TO ADDITION OF RS 50000/- U /S 69C. 11. AO NOTICED THAT ASSESSEE HAD PURCHASED 5 TANKER S DURING THE YEAR AND HAD INCURRED EXPENSES FOR THE BODY WORK OF THE TANKERS. ON PERUSING THE DETAILS OF EXPENSES OF BODY BUILDING SUBMITTED BY THE ASSESSEE, HE WAS OF THE VIEW THAT IN RESPECT OF STEEL PURCHASE T HERE WAS HUGE VARIATION IN EXPENSES IN THE CASE OF EACH TANKER. HE THEREAFT ER WORKED OUT THE DIFFERENCE ON THE BASIS OF THE EXPENSES SHOWN BY TH E ASSESSEE AND EXPENSES OF TANKER AT RS 2,06,000/- AND WORKED OUT THE DIFFERENCE AT RS 3,01,709/- (WORKING AT PAGE 6 OF THE ORDER) AND MAD E ADDITION U/S 69C OF THE ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CAR RIED THE MATTER BEFORE LD. CIT(A). LD. CIT(A) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE GRANTED SUBSTANTIAL RELIEF BY HOLDING AS UNDER: 5.3. I HAVE CONSIDERED THE SUBMISSIONS O F THE LEARNED AUTHORIZED REPRESENTATIVE AND THE ORDER OF THE ASS ESSING OFFICER. THE ASSESSING OFFICER HAS MADE ADDITION AS TANKER WISE MANUFACTURING EXPENSES SHOWED DISCREPANCY AS NOTED AT PAGE-5 OF A SSESSMENT ORDER. THE APPELLANT ON THE OTHER HAND HAS ARGUED THAT ALL THE TANKERS WERE MANUFACTURED WITHIN 15 DAYS AND THEREFORE EXPENDIT URE SHOULD BE LOOKED INTO TOTALITY. IT IS APPARENT FROM THE DETAILS F ILED BEFORE THE ASSESSING OFFICER THAT THE APPELLANT'S ACCOUNTING WAS F AULTY. IN SOME CASES PURCHASE OF STEEL HAS BEEN SHOWN AT VERY HIGH QUANT ITY WHILE IN OTHER CASES IT HAS BEEN SHOWN AT A VERY SMALL QUANTITY. S IMILARLY IN ONE CASE LABOUR CHARGES HAVE BEEN SHOWN AT A VERY SUBSTANTIA L AMOUNT, WHILE IN OTHER CASES NO LABOUR EXPENSES AT ALL HAS BEEN SHOW N, A SUPERFICIAL ANALYSIS WOULD SHOW THAT WHILE IN SOME CASES EXPENS ES HAVE BEEN EXAGGERATED, IN OTHER CASE EXPENSES HAVE BEEN SUPPRESSED. FROM TH E POINT OF VIEW OF A TAX-PAYER BOTH WILL CONCEAL EACH OTHER AS BOT H ARE MUTUALLY OFFSETTING. APPARENTLY, SUCH SUPERFICIAL ANALYSIS W OULD NOT HELP IN THIS CASE. IT IS OBVIOUS THAT SINCE ALL THE TANKERS WERE BUILT WITHIN 15 DAYS OF I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 7 EACH OTHER ACCOUNTING HAVE BEEN MIXED UP. IT IS ALS O SEEN THAT IN TOTAL SIX TANKERS WERE BUILT BUT THE ASSESSING OFFICER HAS CO NSIDERED ONLY 5 TANKERS. ACCORDING TO THE APPELLANT, THE ASSESSING OFFICER HAS NOT CONSIDERED TRUCK NO. GJ6Z 6646. IT IS MOST LIKELY T HAT MATERIAL PURCHASED INITIALLY WERE ALSO UTILIZED FOR SUBSEQUENT BODY BU ILDING. SIMILARLY THERE IS NO POSSIBILITY OF NO LABOUR EXPENSES BEING INCURRED AS IS SEEN IN SOME CASES. IT ALSO MAKES NO SENSE THAT WHILE IN CASE OF ONE TANKER LABOUR EXPENSES ARE EXAGGERATED AND IN CASE OF ANOTHER TAN KER THE EXPENSES IS SHOWN AS NIL. THE APPELLANT HAS FILED CERTIFICATE FROM M/S. RELAX TECHNO FAB REGARDING REQUISITE MATERIAL REQUIRED FOR FABRI CATION OF M.S. TANKER, ACCORDING TO WHICH FOR SIX TANKERS 2005 KGS OF STEE L AND 700 KG OF ANGLES WOULD BE REQUIRED AS AGAINST WHICH THE APPELLANT HA S PURCHASED 2002 KGS OF STEEL AND 701 KGS OF ANGLES. THUS, THERE SEEM TO BE LOGIC IN THE CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT ACCOUNTING HAVE BEEN MIXED UP. YET CONSIDERING THE FACT THAT EXPENS ES ARE NOT FULLY RECONCILABLE AN AMOUNT OF RS.50,000/- IS DISALLOWED . THE APPELLANT GETS PARTIAL RELIEF ON THIS ISSUE. 12. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS N OW IN APPEAL BEFORE US. 13. BEFORE US, LD AR REITERATED THE SUBMISSIONS MAD E BEFORE LD. CIT(A) AND FURTHER SUBMITTED THAT WHEN THE ENTIRE EXPLANAT ION OF THE ASSESSEE HAS BEEN ACCEPTED THERE WAS NO REASON TO MAKE ADHOC DIS ALLOWANCE OF RS 50,000/- WITHOUT ANY BASIS. SHE THEREFORE SUBMITTE D THAT THE DISALLOWANCE UPHELD BY LD. CIT(A) BE DELETED. LD DR ON THE OTHER HAND SUPPORTED THE ORDER OF AO. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) AFTER CONSIDERING T HE SUBMISSIONS AND ON THE BASIS OF THE CERTIFICATE OF THE FABRICATOR WHO HAD DONE THE WORK OF BODY BUILDING HAS ACCEPTED THAT PURCHASE OF STEEL AND AN GLES TO BE MATCHING WITH THE PURCHASES OF STEEL AND ANGLES MADE BY ASSE SSEE. HE HAS FURTHER GIVEN A FINDING THAT A SUPERFICIAL ANALYSIS SHOW TH AT IN SOME CASES THE I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 8 EXPENSES HAVE BEEN EXAGGERATED AND IN THE OTHER CAS ES IT HAS BEEN SUPPRESSED AND BOTH, MUTUALLY OFFSET EACH OTHER. I N VIEW OF THE AFORESAID FINDINGS OF LD CIT(A), WE ARE OF THE VIEW THAT NO D ISALLOWANCE IS CALLED FOR IN THE PRESENT CASE. WE THUS DIRECT ITS DELETION. IN THE RESULT THIS GROUND OF ASSESSEE IS ALLOWED. 4TH GROUND IS WITH RESPECT TO DISALLOWANCE OF TELEP HONE AND VEHICLE EXPENSES. 15. AO NOTICED THAT ASSESSEE HAS CLAIMED TELEPHONE EXPENSES AND VEHICLE MAINTENANCE EXPENSES AGGREGATING TO RS. 2,3 6,221/-. AO WAS OF THE VIEW THAT THE PERSONAL USE OF TELEPHONE AND CAR CANNOT BE RULED OUT AND ACCORDINGLY DISALLOWED RS. 47,324/- (BEING 20% OF THE EXPENSES). AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD CIT(A). LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 1 0% AS AGAINST 20% MADE BY THE AO. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US. BEFORE US FOR LD AR REITERATED TH E SUBMISSIONS MADE BEFORE LD. CIT(A) AND ON THE OTHER HAND, LD DR RELI ED ON THE ORDER OF AO. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS ARID PERUSE D THE MATERIAL ON RECORD. IN THE PRESENT CASE, AO HAD CONSIDERED 20% OF THE TELEPHONE AND VEHICLE EXPENSES TO BE FOR NON BUSINESS PURPOSES AN D ON ACCOUNT OF PERSONAL USE AND MADE THE DISALLOWANCE. THE DISALLO WANCE WAS SCALED DOWN TO 10% OF THE EXPENSES BY LD. CIT(A). WE ARE O F THE VIEW THAT LD. CIT(A) WAS QUITE REASONABLE IN RESTRICTING THE DISA LLOWANCE AND THEREFORE NO INTERFERENCE IS CALLED FOR. THUS THIS GROUND OF ASSESSEE IS DISMISSED. I.T.A NO. 844/AHD/2011 A.Y. 2006-07 PAGE NO KULWANTSINGH RANDHAWA VS. DCIT 9 17. IN THE RESULT THE APPEAL OF ASSESSEE IS PARTLY ALLOWED ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE SD/- SD/- (KUL BHARAT) ( ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 08/08/2014 AK / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,