Mohit Lal Ghosh, Hooghly V. ACIT, CIR-I, HOOGHLY, Hooghly

ITA 868/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1823 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND KUMAR SINGH J
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 868 / KOL / 2014 ASSESSMENT YEAR :2009-10 MOHIT LAL GHOSH C/O SHRI SOMNATH GHOSH, ADVOCATE, SEVEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST.HOOGHLY, PIN 712 105 [ PAN NO.ADIPG1520 E ] V/S . ACIT, CIRCLE-1, AAYAKAR BHAWAN, G.T. ROAD, KHADINA MORE, P.O. CHINSURAH, P.S.CHINSURAH, DIST. HOOGHLY, PIN 712 101 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SOMNATH GHOSH, ADVOCATE /BY RESPONDENT SHRI ANAND KUMAR SINGH, JCIT-DR /DATE OF HEARING 13-02-2017 /DATE OF PRONOUNCEMENT 03-04-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 19.03.2014. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-1, KOLKATA U/ S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 29.12.2011 FOR ASSESSMENT YEAR 2009-10. SHRI SOMNATH GHOSH, LD. ADVOCATE APPEARED ON BEHALF OF ASSESSEE AND SHRI ANAND KUMAR SINGH, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. ITA NO.868/KOL/2014 A.Y. 2009-10 MOHIT LAL GHOSH VS. ACIT, CIR-1 HG PAGE 2 2. SOLITARY ISSUE RAISED IN THIS APPEAL OF ASSESSEE IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY SUS TAINING THE DISALLOWANCE OF 2,76,518/- INCURRED TOWARDS EARTH CUTTING EXPENSE O N THE AD-HOC BASIS. 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF BRICK FIELD, HIRE CHARGE S OF LORRY ETC., THE ASSESSEE IS A PROPRIETOR OF TWO CONCERNS NAMELY SUNDRY BRICK FIELDS AND MAA MANGALCHANDI BRICK FIELD. THE ASSESSEE HAS CLAIMED EARTH CUTTING EXPENSE FOR 19,42,960/- AND 8,22,220/- IN ITS TWO BOTH PROPRIETOR CONCERNS. THE ASSESSEE IN SUPPORT OF ITS EXPENSE HAS PRODUCED THE DEBIT VOUCHERS WHEREIN IN MANY CASES THE NAME OF RECIPIENT AND ADDRESS WER E NOT RECORDED. ACCORDINGLY, AO OPINED THAT INDEPENDENT VERIFICATIO N TO ESTABLISH THE AUTHENTICITY OF THE EXPENSE CANNOT BE MADE. THEREFO RE, AO IN THE ABSENCE OF CORROBORATIVE EVIDENCE HAS DISALLOWED THE 10% OF TH E EXPENSE TO THE TUNE OF 2,76,518/- AND ADDED TO THE TOTAL INCOME OF ASSESSE E. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT ASSESSEE IS ENGAGED IN MANUFACTURING ACTIVITIES OF BRICK MAKING WHICH IS L ABOUR INTENSIVE INDUSTRIES. THE AO IN ASSESSMENT ORDER HAS NOT DENIED THE FACT THAT THESE EXPENSES WERE NOT INCURRED EXCLUSIVELY FOR THE PURPOSE OF AS SESSEES BUSINESS. THUS, THE AFORESAID EXPENSES WERE INCURRED FOR THE RUNNIN G OF ASSESSEES BUSINESS. THE AO HAS QUESTIONED ABOUT THE MANNER IN WHICH THE DOCUMENTS IN SUPPORT OF EARTH CUTTING EXPENSES WERE MAINTAINED AND ACCOR DINGLY MADE THE DISALLOWANCE ON ESTIMATED BASIS. IT WAS ALSO SUBMIT TED THAT THE LABOUR REGISTER WAS MAINTAINED AND NO DEFECT IN SUCH REGISTER WAS P OINTED OUT. BUT THE AO HAS DISALLOWED THE EXPENSE ON HIS OWN PREMISE AND C ONJECTURE. HOWEVER THE LD. CIT(A) HAS DISREGARDED THE SUBMISSION OF ASSESS EE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER:- 4.3 APPELLANTS SUBMISSION AND FACT AVAILABLE ON RE CORD IS CAREFULLY CONSIDERED. AS IS EVIDENT FROM ASSESSING OFFICER'S ORDER APPELLANT HAS CLAIMED SUBSTANTIAL EXPENDITURE ON EARTH CUTTING EX PENSE. HOWEVER, NO VERIFIABLE EVIDENCE COULD BE PRODUCED BEFORE THE AO , TO ENABLE HIM TO CROSS VERIFY THE EXTENT OF EXPENSE CLAIMED. AS THE AO HAD CLAIMED THE EXPENSE, THE ONUS WAS CAST UPON HIM TO PRODUCE NECESSARY EVIDENC E WHICH WOULD ENABLE ITA NO.868/KOL/2014 A.Y. 2009-10 MOHIT LAL GHOSH VS. ACIT, CIR-1 HG PAGE 3 HIM TO CROSS CHECK THE EXTENT OF EXPENSE CLAIMED. E VIDENCES SUCH AS MUSTER ROLL REGISTER CONTAINING THE NAME AND ADDRESS OF TH E LABOUR EMPLOYED LABOUR RETURN FILED WITH LABOUR DEPARTMENT, STATUTORY DEPO SITS SUCH AS PF, ESI ETC DONE, NEEDS TO BE MAINTAINED IN SUPPORT OF EXPENSE, CONSIDERING THE VOLUME OF EXPENSE CLAIMED. IN ABSENCE OF THE SAME, AO HAD CORRECTLY DISALLOWED A PART OF IT. IN VIEW OF THE ABOVE, APPELLANTS APPEA L ON THIS GROUND IS DISMISSED. BEING AGGRIEVED BY THIS, ASSESSEE CAME IN SECOND AP PEAL BEFORE US. 5. BEFORE US LD. AR FILED PAPER BOOK WHICH IS RUNNI NG PAGES FROM 1 TO 86 AND HE REITERATED THE ARGUMENTS THAT WERE MADE BEFO RE THE LD. CIT(A). ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE DISALLOWANCES MADE BY THE LOWER AUTHORITIES. THERE IS NO DISPUTE ABOUT THE FACTS OF THE CASE WHICH HAVE BEEN ELABORATED IN THE FOREGOING PARAGRA PHS. THEREFORE THE SAME ARE NOT REPEATED HERE FOR THE SAKE OF BREVITY. NOW THE ISSUE BEFORE US ARISES FOR OUR ADJUDICATION IS WHETHER THE LOWER AUTHORITI ES ARE JUSTIFIED IN MAKING THE AFORESAID DISALLOWANCES ON AD-HOC BASIS IN THE AFOR ESAID FACTS AND CIRCUMSTANCES. THE CASE OF THE AO IS THAT MANY VOUC HERS PRODUCED BEFORE THE AO IN SUPPORT OF EARTH CUTTING EXPENSES WERE NO T CONTAINING THE NAME AND ADDRESSES OF THE RECIPIENT. THUS THE AO HAS DISALLO WED EXPENSES ON AD-HOC BASIS. INDEED IT IS THE DUTY OF THE ASSESSEE TO PRO DUCE NECESSARY SUPPORTING EVIDENCE AS DESIRED BY THE AO IN SUPPORT OF EXPENSE S CLAIMED. IN CASE ASSESSEE FAILS THE DISALLOWANCES ARE WARRANTED. HOW EVER AT THE SAME TIME THE AO HAS TO MAKE THE DISALLOWANCES IN SCIENTIFIC MANNER I.E. AFTER CONSIDERING VARIOUS ASPECTS AS DETAILED UNDER:- 1. NATURE OF THE BUSINESS OF THE ASSESSEE 2. NATURE OF THE EXPENSES 3. PAST HISTORY OF THE ASSESSEE IN RELATION TO SUCH EXPENSES 4. MAINTENANCE OF THE BOOKS OF ACCOUNTS INTEREST BA CK TO SUCH EXPENSES ITA NO.868/KOL/2014 A.Y. 2009-10 MOHIT LAL GHOSH VS. ACIT, CIR-1 HG PAGE 4 5. PREVAILING PRACTICE FOR THE INCORRECT OF SUCH EX PENSES IN THE RELEVANT INDUSTRY ETC. THESE ARE SOME FACTORS WHICH THE ASSESSING OFFICER NEEDS TO CONSIDER BEFORE MAKING THE DISALLOWANCES FOR ANY EXPENSES IN THE AB SENCE OF ANY SUPPORTING DOCUMENTARY EVIDENCE. 6.1 IN THE INSTANT CASE BEFORE US WE FIND THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BRICK FIELDS WHICH IS LABOUR INTENS IVE INDUSTRY. THE ASSESSEE HAS TO DEPLOY LABOURERS FOR VARIOUS PURPOSES. THE A O HAS MADE THE DISALLOWANCES ON THE GROUND THAT THE NAME AND THE A DDRESSES OF THE RECIPIENTS WERE NOT REFLECTING IN THE VOUCHERS PROD UCED BEFORE HIM. FROM THE ABOVE OBSERVATION OF THE AO IT IS CLEAR THAT THE SA ID EXPENSES ARE NOT UNREASONABLE OR EXCESSIVE. THUS THESE EXPENSES ARE COMMENSURATE TO THE BUSINESS OF THE ASSESSEE. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE AO CHOSE TO DISALLOW ONLY THOSE VOUCHERS OF THE EXP ENSES WHICH ARE NOT SUPPORTED WITH THE NAME AND ADDRESS OF THE RECIPIEN T. IN THE CASE BEFORE US THE AO HAS TAKEN A BASE TO DISALLOW THOSE EXPENSES IN RESPECT OF THOSE VOUCHERS NOT SUPPORTED WITH THE NAME AND ADDRESS OF THE RECIPIENT. HOWEVER THE AO AT THE TIME OF DISALLOWANCES HAS QUANTIFIED THE DISALLOWANCES ON AD- HOC AND ESTIMATED BASIS. THE AO HAS CHOSEN TO MAKE THE DISALLOWANCE WITHOUT FINDING THE SPECIFIC DEFECT IN THE RELATED VOUCHERS. IN OUR VIEW IT IS THE DUTY OF THE AO TO POINT OUT SPECIFIC VOUCHERS FOR T HE DISALLOWANCES WHERE THE NAME AND ADDRESS OF THE RECIPIENT ARE NOT REFLECTIN G. THUS IN VIEW OF ABOVE WE ARE OF THE OPINION THAT THE DISALLOWANCES MADE BY T HE AO AND SUBSEQUENTLY CONFIRMED BY THE LD CIT(A) ARE NOT SUSTAINABLE IN T HE EYES OF LAW. MOREOVER, THE LOWER AUTHORITIES BEFORE MAKING THE D ISALLOWANCES SHOULD HAVE CROSS VERIFIED THE HISTORY OF THE ASSESSEE, THE NAT URE OF THE EXPENSES CLAIMED AND THE BOOKS OF ACCOUNTS MAINTAINED IN THE COURSE OF THE BUSINESS. IN THE AFORESAID FACTS AND CIRCUMSTANCES IT WAS THE DUTY O F THE AO TO VERIFY WHETHER SUCH EXPENSES ARE COMMENSURATE TO THE BUSINESS OF T HE ASSESSEE ON BASIS OF PAST & SUBSEQUENT HISTORY BUT THERE IS NO SUCH FIND ING GIVEN BY THE AO ON THIS ASPECT. WE FIND THAT THE AO HAS MADE THE DISALLOWAN CES IN MECHANICAL ITA NO.868/KOL/2014 A.Y. 2009-10 MOHIT LAL GHOSH VS. ACIT, CIR-1 HG PAGE 5 MANNER WHICH IS NOT ARE CORRECT METHOD. IN THESE CI RCUMSTANCES, WE ARE OF VIEW THAT THE ESTIMATED DISALLOWANCE IS NOT SUSTAIN ABLE IN THE EYES OF LAW. IN THIS CONNECTION, WE ALSO RELY IN THE ORDER OF CO-OR DINATE BENCH OF ITAT KOLKATA IN THE CASE OF ANIMESH SADHU VS. ACIT IN ITA 11/KOL/2013 DATED 12.11.2014. THE RELEVANT EXTRACT IS REPRODUCED BELO W.:- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS DISALLOW ED 20% OF THE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT NO INDEPENDENT VERIFICATION TO BE MADE TO FIND OUT THE AUTHENTICITY OF THE EXPENSES. LD. C IT(APPEALS) HAS REDUCED THE SAME ON THE SAME GROUND. HOWEVER, WE ARE OF THE VIE W THAT NO ESTIMATED DISALLOWANCE CAN BE MADE FOR INABILITY TO MAKE INDE PENDENT VERIFICATION. IF ANY SPECIFIC EXPENDITURE IS UNVERIFIABLE OR IS UN-VOUCH ED, THEN SUCH SPECIFIC EXPENDITURE IS DISALLOWABLE. HERE NO SUCH SPECIFIC IDENTIFICATION HAS BEEN DONE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW TH AT THE ESTIMATED DISALLOWANCE AS CONFIRMED BY THE LD. CIT(APPEALS) I S UNSUSTAINABLE. CONSEQUENTLY THE SAME STANDS DELETED. IN THE RESULT , GROUNDS NO. 2 & 3 OF THE ASSESSEES APPEAL STAND ALLOWED. RESPECTFULLY, FOLLOWING THE ORDER OF THE CO-ORDINAT E BENCH (SUPRA), WE DELETE THE ADDITION MADE BY THE LOWER AUTHORITIES. WE ALSO FIND THAT THE AO HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS AND THE SAME WERE NOT REJECTED. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED . 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 03 /05/2017 SD/- SD/- ( !') (!') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 03 / 05 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-MOHIT LAL GHOSH, C/O SH. SOMNATH GHOSH, ADVOCATE, SEVEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST.HOOGHLY 2. /RESPONDENT-ACIT, CIRCLE-1, AAYAKAR BHAWAN, G.T. RO AD, KHADINA MORE, P.O. CHINSURAH, P.S. CHINSURAH, DIST. HOOGHLY, PIN-712 101 3.%.%/01 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5.567 /0, 1 /0 , / DR, ITAT, KOLKATA 6.7:;<= / GUARD FILE. BY ORDER/ 1!, /TRUE COPY/ / % 1 /0 ,