Sri Kanakadurga Road Lines, Kadapa v. ITO Ward-2, Tirupathi

ITA 1073/HYD/2011 | 2006-2007
Pronouncement Date: 03-02-2012 | Result: Allowed

Appeal Details

RSA Number 107322514 RSA 2011
Assessee PAN AAPFS6806D
Bench Hyderabad
Appeal Number ITA 1073/HYD/2011
Duration Of Justice 8 month(s) 1 day(s)
Appellant Sri Kanakadurga Road Lines, Kadapa
Respondent ITO Ward-2, Tirupathi
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 03-02-2012
Assessment Year 2006-2007
Appeal Filed On 02-06-2011
Judgment Text
ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH HYDERABAD BEFORE CHANDRA POOJARI ACCOUNTANT MEMBER & SMT. ASHA VIJAYARAGHAVAN JUDICIAL MEMBER ITA NO. 1073/HYD/2011 ASSESSMENT YEAR 2006-07 SHRI KANAKA DURGA ROAD LINES KADAPA DISTRICT (PAN AAPFS6806D) VS THE ITO WARD 2 THIRUPATHI APPELLANT RESPONDENT APPELLANT BY : SHRI A.V. RAGHURAM RESPONDENT BY : SMT. K. MYTHILI RANI DATE OF HEARING : 24.1.2012 DATE OF PRONOUNCEMENT : 3.2.2012 ORDER PER ASHA VIJAYARAGHAVAN JM . THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER PASSED BY THE CIT(A)-THIRUPATHI DATED 30.3.2 011 AND PERTAINS TO THE ASSESSMENT YEAR 2006-07. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRANSPORT CONTRACTOR AND HAS INCURRED AN AMOUNT OF RS.1 20 78 535/- ON ACCOUNT OF FREIGHT CHARGES AND MEALS TO DRIVERS AND ALL THE VEHICLES WERE HIRED BY THE ASSESSEE FIRM. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEE DINGS THE ASSESSEE SUBMITTED THAT FREIGHT PAYMENT IN RESPECT OF ANY ONE SINGLE LORRY HAS NOT EXCEEDED RS.20 000/- NOR THE AGGREGAT E OF SUCH ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 2 PAYMENTS TO SINGLE LORRY IS MORE THAN RS.50 000/- A ND HENCE THE PROVISIONS OF SEC.40A(3) AND PROVISION OF SECTION 4 0(A)(IA) R.W.S. 194C ARE NOT ATTRACTED. 4. THE ASSESSING OFFICER HAS COMPLETED THE ASSESSM ENT U/S.143(3) DETERMINING THE TOTAL INCOME AT RS.222050/-. SUBSE QUENTLY THE CIT IN HIS ORDER UNDER SECTION 263 HELD AS UNDER:- IT IS THE CONTENTION OF THE ASSESSEE THAT ALL PAYM ENTS OR THE AGGREGATE PAYMENTS WERE LESS THAN THRS.20 000/- OR RS.50 000/- RESPECTIVELY. THIS HAS BEEN MERELY STAT ED BY THE ASSESSEE VIDE HIS LETTER DATED 17.11.2008 BUT NOT SUPPORTED WITH ANY MATERIAL EVIDENCE PLACED ON THE RECORD SUC H AS ACCOUNT COPY OF THE LORRY FREIGHT PAID TO RESPECTIVE LORRY OWNERS. THUS THERE IS A DEFICIENCY IN THE DISPOSAL OF THE ASSESS MENT ORDER IN NOT VERIFYING THE BOOKS OF ACCOUNTS NOR OBTAINING A COPY OF SUCH ACCOUNT AND PLACING THE SAME ON RECORD. IT IS THE STATUTORY MANDATE OF THE ASSESSING OFFICER TO VERIFY SUCH EXP ENDITURE AND DETAILS THEREOF IN A DEMONSTRATIVE MANNER BY ELICIT ING REQUIRED INFORMATION AND PLACING IT ON THE RECORD. HOWEVER NO SUCH EXERCISE HAS BEEN CARRIED OUT IN THIS CASE. 5. IN HIS WRITTEN SUBMISSIONS THE ASSESSEE HAS AL SO REFERRED TO CASE LAWS CIT VS DEEPAK MITTAL (2010) 324 ITR 411 (P&H) ET AL AND REMINDED THE LIMITATIONS OF THE POWERS OF THE CIT V ESTED U/S.263 IT WOULD BE PERTINENT TO STATE THAT I AM WELL AWARE OF SUCH LIMITATIONS AS LAID DOWN BY THE STATUTE AS WELL AS RELEVANT JUDICI AL AUTHORITIES U/S.263. THE MOOT POINT HERE IS NOT REAPPRAISING TH E EVIDENCE AVAILABLE ON RECORD U/S.263 OF THE ACT BUT TO EXAM INE WHETHER THE AO HAS GATHERED ADEQUATE MATERIAL AND CAUSED NECESSARY ENQUIRIES WITH ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 3 REFERENCE TO THE NATURE OF EXPENDITURE UNDER EXAMIN ATION. AS PER THE EXPENDITURE CLAIMED IN THIS CASE IT IS INCUMBENT U PON THE A.O TO HAVE CALLED FOR LORRY WISE PAYMENTS AND PLACE IT ON THE RECORD TO JUSTIFY THE EXPENDITURE. A MERE STATEMENT BY THE A SSESSEE THAT NO PAYMENT HAVE EXCEEDED RS.20 000/- OR AGGREGATE RS.5 0 000/- AS THE CASE MAY BE WOULD NOT AN CANNOT SUBSTITUTE SUCH EN QUIRY HENCE THE ACTION OF THE A.O WAS PERFUNCTORY AND PREJUDICIAL. 6. THE SAME PREFACE OF THE ORDER HAS CLEARLY EXPLA INED WHY THE ASSESSEES CASE HAS BEEN CONVERTED INTO SCRUTINY WH EN THE ASSESSING OFFICER HAS STATED THAT SINCE THE GROSS CONTRACTUAL RECEIPTS OF THE ASSESSEE EXCEED RS.1 CRORE AND THE INCOME DECLARED IS LESS THAN 5% OF THE GROSS RECEIPTS AS PER PARA 2(O) OF THE CBDT GU IDELINES FOR THE ASSESSMENT YEAR 2006-07. HOWEVER THIS ASPECT HAS N EVER BEEN EXAMINED BY THE ASSESSING OFFICER DURING THE COURS E OF SCRUTINY PROCEEDINGS. HENCE FOR THESE TWO REASONS IT IS H ELD THAT THE ASSESSMENT IS DEFECTIVE AND INCOMPLETE RESULTING IN AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE 7. THE ASSESSEE IS IN APPEAL BEFORE US BY RAISING THE FOLLOWING GROUND OF APPEAL:- (1) THE ORDER DT 30.03.2011 OF THE COMMISSIONER OF INCOME TAX TIRUPATHI RANGE TIRUPATHI PASSED U/S. 263 OF THE ACT IS MUCH AGAINST THE LAW FACTS AND PROBABILITIES OF THE CASE. (2) THE DIRECTIONS OF THE CIT U/S.263 OF THE ACT TO THE ASSESSING OFFICER TO RE-DO THE ASSESSMENT IS CONTRA RY TO THE PROVISIONS OF SECTIONS 143(2) 143(3) AND ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 4 SEC.153(1)(III). HIS DIRECTION WOULD RESULT IN AUTHORIZING THE AO TO ISSUE NOTICE U/S.143920 AFTER THE TIME LIMIT FOR MAKING THE ASSESSMENT HAS EXPIRE D AND WOULD ALSO AUTHORIZE THE AO TO COMPLETE THE ASSESSMENT AFTER THE PERIOD OF LIMITATION. SUCH A RESULT CANNOT BE COUNTENANCED - V.NARAYANAN VS CIT (2010) 127 ITD 133 (CHEN C TRIB). (3) THE COMMISSIONER OF INCOME TAX SHOULD HAVE CONSIDERED THE AUDIT PARTY OPINION IN ENUNCIATING T HE ELUCIDATING A POINT OF LAW AND FACTS AND CANNOT BE REGARDED AS INFORMATION FOR SETTING ASIDE THE ASSESSMENT PRONOUNCED U/S.143(3) OF THE ACT. THE SUPREME COURT IN INDIA AND EASTERN NEWS PAPER SOCIETY VS CIT 91979) 12 CTR (SC); (1979) : 119 ITR 996 (SC). (4) THE COMMISSIONER OF INCOME TAX SHOULD HAVE ACCEPTED THE RECOMMENDATION OF THE ASSESSING OFFICER FOR DROPPING AUDIT PARTY OBJECTION AND NOT PASSED ORDER APPEALED. (5) THE ASSESSING OFFICER IN HIS ORDER DATED 21.11.2008 DELIVERED U/S.143(3) STATED THE ASSESSEE HAS PRODUCED THE VOUCHERS TOWARDS FREIGHT CHARGES CLAIMED THE CIT SHOULD HAVE ACCEPTED THE FACTS AND OUGHT NOT TO HAVE PASSED THE ORDER U/S.263 OF THE A CT. (6) THE CIT OUGHT TO HAVE GIVEN SUFFICIENT TIME TO ASSE SSEE TO PRESENT HIMSELF BEFORE CIT TO PRESENT HIS VIEWS. THE ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 5 CIT HAS GIVEN 3 DAYS NOTICE TO ASSESSEE TO PRESENT BEFORE HIM AT THE END OF LIMITATION PERIOD WHICH S UFFER NATURE JUSTICE. (7) ANY OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING. 8. THE LEARNED COUNSEL A.V.RAGHURAM TOOK US THROUG H THE ASSESSMENT ORDER UNDER SECTION 143(3) DT 21.11.2008 WHEREIN THE AO HAS DISCUSSED AS FOLLOWS:- THE ASSESSEE HAS PRODUCED THE VOUCHERS TOWARDS FRE IGHT CHARGES CLAIMED. ON VERIFICATION IT IS NOTICED TH AT THE ASSESSEE COULD NOT PRODUCE THE VOUCHERS TO THE TUNE OF RS.51 340/- AND EXPRESSED HIS INABILITY TO PRODUCE THEM. THEREFORE UNVOUCHED AMOUNT OF RS.51 340/- IS DISALLOWED AND ADDED TO TH E INCOME FOR WHICH THE ASSESSEES A.R. AGREED 9. THE COUNSEL FOR THE ASSESSEE HAS ALSO SUBMITTED THAT REPLY TO THE QUESTIONNAIRE IN WHICH AT COLUMN 17 PURSUING T O SECTION 40(A)(IA) DETAILS OF AMOUNTS WERE NOT DEDUCTED HAS BEEN SHOW N AS NIL. 10. HENCE THE LEARNED COUNSEL SUBMITTED THAT ISSUE IN QUESTION IE. AGGREGATE EXPENSES OF MORE THAN RS.80 000/- OR SING LE PAYMENT EXCEEDING RS.20000/- ARE WIDELY DISCUSSED WITH THE ASSESSING OFFICER AT TIME OF HEARING AND THE ASSESSEE HAS PRODUCED AL L THE DETAILS BEFORE HIM AND THE AFTER BEING SATISFIED THE AO HAS PASSED THE ASSESSMENT ORDER. ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 6 11. ATTENTION WAS ALSO DRAWN BY THE COUNSEL TO PAR A 1 OF THE ORDER. THE RELEVANT PARA IS BEING EXTRACTED BELOW: IN RESPONSE TO THE NOTICES ISSUED U/S.143(2) THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SHRI P.MUSALAIAH CA APPEARED FROM TIME TO TIME AND PRODUCED THE BOOKS OF ACCOUNT AND FURNISHED BILLS / VOUCHERS THE EXPENSES CLAIMED. C ASE HEARD 12. THE ASSESSEE COUNSEL ALSO ARGUED THAT PROVISIO NS OF SECTION 40A(IA) IS NOT APPLICABLE AS THERE WAS NO AMOUNT OU TSTANDING NOR THE ASSESSEE HAS ENTERED INTO CONTRACT OR SUB-CONTRACT WITH ANY OF THE LORRY OWNERS AND HENCE THE PROVISIONS OF SECTION 19 4C READ WITH SECTION 40(A)(IA) CANNOT BE INVOKED. 13. WE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. IT IS CLEAR FROM THE ORDER OF ASSESSMEN T U/S 143(3) THE AO HAD EXAMINE ALL THE BOOKS AS WELL AS VOUCHERS IN CO NNECTION WITH CLAIM OF FREIGHT CHARGES. THE ASSESSEE ALSO SUBMITT ED THAT IN THEIR REPLY FILED ON 14.11 2007 TO A QUESTIONNAIRE OF TH E AO THEY HAD MENTIONED CLEARLY THAT THERE WAS NO PAYMENT TO CONT RACTORS IN EXCESS OF RS. 50 000 TO ANY CONTRACTOR AND HAS ALSO MENTIO NED THAT THERE WAS NO AMOUNT THAT CAN BE DISALLOWED U/S 40(A)(IA). THE AO HE HAS MENTIONED THAT HE HAD CALLED FOR DETAILS FROM A FEW CLIENTS TO VERIFY THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE H EAD `LORRY FREIGHT TO THE EXTENT OF RS. 1 20 78 535/- AND HAS ALSO DISALLOWED CERTAIN AMOUNTS OF FREIGHT CHARGES. THEAO HAS EXAM INED THE CLIENTS EXAMINED THE VOUCHERS AND VERIFIED LORRY PARTICULAR S WITH AP ROAD TRANSPORT AUTHORITIES. HENCE THE HAS APPLIED HIS M IND IN ALL ASPECTS. WHEN THE AO HAS AFTER APPRECIATING THE FACTS AND VE RIFICATION OF ITA NO.1073/HYD/2011 M/S KANAKA DURGA ROD LINES THIRUPATHI 7 DOCUMENTS AND INDIVIDUAL VOUCHERS HAS COME TO A CON CLUSION THAT NO PART OF FREIGHT PAYMENT IS DISALLOWABLE THE CIT CA NNOT SUBSTITUTE HIS CONCLUSION AND DIRECT THE AO FOR A FRESH EXAMINATIO N OF THE SAME FACTS. IN THE CASE OF VIKAS POLYMERS 236 CTR 476 DEL- IT IS HELD THAT THERE IS A DISTINCTION BETWEEN OF LACK OF ENQU IRY AND INADEQUATE INQUIRY. IT IS ONLY IN CASES OF LACK OF ENQUIRY T HE CIT CAB EXERCISE HIS REVISIONARY JURISDICTION. THE RATIO OF THE DECISIO N IN THE CASE OF CIT V GABRIEL INDIA LTD 203 ITR 108 (MUM) AND MALABAR INDUSTRIAL CO LTD V CIT 243 ITR 83 ALSO SUPPORT THE CASE OF THE A SSESSEE. APPLYING THE RATIO OF THE DECISION CITED SUPRA WE ALLOW THE ASSESSEES APPEAL. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3.2.2 012 SD/- SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER DATED THE 3 RD FEBRUARY 2012 COPY FORWARDED TO: 1. SRI KANAKADURGA ROAD LINES YERRAGUNTLA 2/29 KADA PA ROAD YERRAGUNTALA KADAPA DISTRICT 2. THE ITO WARD 2 THIRUPATHI 3. THE CIT(A)- THIRUPATHI 4. THE CIT HYDERABAD 5. THE DR ITAT HYDERABAD NP/