SHREEJI TRANSPORT SERVICES P. LTD, NAVI MUMBAI v. ADDL CIT 10(2), MUMBAI

ITA 2126/MUM/2010 | 2004-2005
Pronouncement Date: 09-03-2011 | Result: Allowed

Appeal Details

RSA Number 212619914 RSA 2010
Assessee PAN AAECS3602B
Bench Mumbai
Appeal Number ITA 2126/MUM/2010
Duration Of Justice 11 month(s) 23 day(s)
Appellant SHREEJI TRANSPORT SERVICES P. LTD, NAVI MUMBAI
Respondent ADDL CIT 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 09-03-2011
Assessment Year 2004-2005
Appeal Filed On 17-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI R.V. EASWAR PRESIDENT AND SHRI P.M. JAGTAP ACCOUNTANT MEMBER I.T.A.NO. 2126/MUM/2010 ASSESSMENT YEAR : 2004-05 M/S. SHREEJI TRANSPORT SERVICES P.LTD. PLOT NO.107 SHREEJI KRUPA SECTOR-19C PHASE-II VASHI NAVI MUMBAI 400 705 PAN: AAECS 3602 B VS. THE ADDL. COMMISSIONER OF INCOME- TAX RANGE 10(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY C. SHAH RESPONDENT BY : SHRI SUMEET KUMAR O R D E R PER P.M. JAGTAP AM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-22 MUMBAI DA TED 06.01.2010. 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS.4 03 579/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LEARNED CIT(A) OUT OF CLAIM EXPENSES. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY W HICH IS ENGAGED IN THE BUSINESS OF PROVIDING TRANSPORT SERVICES. THE RETUR N OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.4.2010 DECLARIN G TOTAL INCOME OF RS. 53 36 490/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO GIVE DETAILS OF I NSURANCE CLAIM RECEIVED AND TRANSPORT CHARGES RECEIVED FROM THE PARTIES TO WHOM THE SAID CLAIM WERE PAID. THE ASSESSEE WAS ALSO ASKED BY THE ASSESSING OFFICER TO SUBMIT CONFIRMATION OF PARTIES TO WHOM THE CLAIM OF MORE THAN RS. 10 000/-WAS PAID . IN REPLY THE FOLLOWING SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE BEFOR E THE ASSESSING OFFICER: THE SAID CLAIM EXPENSES ARE PAID BY THE ASSESSEE O N ACCOUNT OF DAMAGES/SHORTAGE/THEFT OF THE GOODS TRANSPORTED BY ASSESSEE COMPANY. THE SAID CLAIM IS IN RESPECT OF GOODS WHICH ARE UN INSURED AND THIS ITA NO. 2126/M/2010 M/S.SHREEJI TRANSPORT SERVICES P.LTD. 2 QUESTION OF RECEIVING INSURANCE CLAIM DOES NOT ARIS E. FURTHER THE CLAIM PAID IS NET OF TRANSPORTATION CHARGES DUE TO ASSESSEE CO MPANY AND THUS TRANSPORTATION CHARGES ARE NOT SEPARATELY COLLECTED . AS REGARDS CONFIRMATION OF THE PARTIES TO WHOM CLAIMS ARE PAID IT IS SUBMITTED THAT ASSESSEE HAS ASKED FOR THE SAID CONFIRMATION FROM RESPECTIVE PARTIES AND THE SAME SHALL BE FURNISHED AS AND WHEN RECEIVED. S UCH CLAIMS ARE EITHER PAID BY CHEQUE OR THEY ARE DEDUCTED FROM THE AMOUNT DUE TO THE ASSESSEE AGAINST ITS OWN BILLS. AMOUNT PAID IN CASH IS VERY NEGLIGIBLE AMOUNT. THE ASSESSEE ALSO FURNISHED THE DETAILS OF CLAIM EX PENSE CALLED FOR BY THE ASSESSING OFFICER. FROM THE SAID DETAILS THE ASSESS ING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN ONLY THE NAMES OF THE PARTIES AN D NOT THE ADDRESSES. ACCORDING TO THE ASSESSING OFFICER REASONS FOR PAY MENT OF CLAIM WERE ALSO NOT GIVEN BY THE ASSESSEE AGAINST EACH PARTY. IN THE A BSENCE OF ALL THESE DETAIL THE ASSESSING OFFICER HELD THAT THE DEDUCTION CLAIMED B Y THE ASSESSEE ON ACCOUNT OF CLAIM EXPENSES WAS NOT VERIFIABLE AND THE SAID DEDU CTION WAS DISALLOWED BY HIM. 3. BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED ON B EHALF OF THE ASSESSEE THAT WHATEVER DETAILS CALLED FOR BY THE ASSESSING O FFICER WERE DULY FURNISHED BY IT AND THE REASONS FOR PAYMENT OF CLAIM TO THE CONCERN ED PARTIES WERE NEVER ASKED BY THE ASSESSING OFFICER. THE NATURE OF CLAIM PAID BY THE ASSESSEE TO THE VARIOUS PARTIES WAS ALSO EXPLAINED BY THE ASSESSEE BEFORE T HE LEANED CIT(A) IN SUPPORT OF ITS CASE FOR DEDUCTION THEREOF AND IN ORDER TO EXPL AIN ITS INABILITY TO OBTAIN CONFIRMATIONS FROM THE SAID PARTIES. THE LEARNED C IT(A) WAS NOT CONVINCED BY THIS SUBMISSION MADE ON BEHALF OF THE ASSESSEE. HE HELD THAT IN THE ABSENCE OF CONFIRMATIONS OF THE CONCERNED PARTIES AS WELL AS T HE RELEVANT DETAILS FURNISHED BY THE ASSESSEE IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO VERIFY ITS CLAIM FOR DEDUCTION ON ACCOUNT OF CLAIMS PAID TO THE SAID PAR TIES. HE THEREFORE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON T HIS ISSUE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OU TSET INVITED OUR ATTENTION TO THE DETAILS OF CLAIM EXPENSES FURNISHED BY THE A SSESSEE PLACED AT PAGE NOS. 32 TO 38 OF HIS PAPER BOOK TO POINT OUT THAT NAMES AND FULL ADDRESSES OF THE CONCERNED PARTIES TO WHOM CLAIMS WERE PAID WERE DU LY FURNISHED. HE ALSO INVITED ITA NO. 2126/M/2010 M/S.SHREEJI TRANSPORT SERVICES P.LTD. 3 OUR ATTENTION TO THE RELEVANT PORTION OF THE QUESTI ONNAIRE ISSUED BY THE ASSESSING OFFICER TO POINT OUT THAT THE REASONS FOR PAYMENT O F CLAIM WERE NOT REQUIRED TO BE FURNISHED BY THE LATER. HE FURTHER INVITED OUR ATT ENTION TO THE LETTER DATED 27.11.2006 FILED BEFORE THE ASSESSING OFFICER PLACE D AT PAGE NOS. 50 AND 51 OF HIS PAPER BOOK TO POINT OUT THAT THE REASON FOR THE INA BILITY OF THE ASSESSEE TO FURNISH THE RELEVANT DETAILS WAS EXPLAINED AS ITS RECORDS G ETTING DESTROYED IN THE UNPRECEDENTED FLOOD WHICH TOOK PLACE ON 26 TH JULY 2005. HE CONTENDED THAT HAVING REGARD TO ALL THESE FACTS OF THE CASE THE G ENUINENESS OF THE CLAIM EXPENSES INCURRED BY THE ASSESSEE SHOULD NOT HAVE BEEN DOUBT ED BY THE ASSESSING OFFICER ESPECIALLY WHEN SIMILAR EXPENSES CLAIMED IN THE EAR LIER YEARS WERE DULY ALLOWED BY HIM. IN THIS REGARD HE INVITED OUR ATTENTION TO T HE COMPARATIVE FIGURES OF CLAIM EXPENSES INCURRED IN THE EARLIER YEARS GIVEN AT PAG E 78 OF HIS PAPER BOOK TO POINT OUT THAT CLAIM EXPENSES INCURRED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WERE ONLY 0.24 PER CENT OF ITS TURNOVER AS AGAINST 0.33 PER CENT AND 0.29 PER CENT INCURRED IN ASSESSMENT YEARS 2002-03 AND 2003-04 R ESPECTIVELY. HE ALSO POINTED OUT FROM THE RELEVANT FIGURES GIVEN AT PAGE 51 OF H IS PAPER BOOK THAT GROSS PROFIT SHOWN BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATI ON WAS 21.42 PER CENT AS AGAINST 18.23 AND 21.45 PER CENT SHOWN IN THE ASSES SMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW IN SU PPORT OF REVENUES CASE ON THIS ISSUE. HE CONTENDED THAT IN THE ABSENCE OF RELEVANT DETAILS AND CONFIRMATIONS OF THE CONCERNED PARTIES FURNISHED BY THE ASSESSEE IT S CLAIM FOR DEDUCTION ON ACCOUNT OF CLAIM EXPENSES WAS NOT VERIFIABLE AS RIG HTLY HELD BY THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE DISALLO WANCE ON ACCOUNT OF CLAIM ITA NO. 2126/M/2010 M/S.SHREEJI TRANSPORT SERVICES P.LTD. 4 EXPENSES WAS MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LEARNED CIT(A) ON THE GROUND THAT THE SAME WERE NOT VERIFIABLE IN THE ABSENCE OF RELEVANT DETAILS FURNISHED BY THE ASSESSEE. AS POINTED OUT BY THE LE ARNED COUNSEL FOR THE ASSESSEE THE RELEVANT DETAILS SUCH AS NAMES AND COMPLETE ADD RESSES OF THE CONCERNED PARTIES TO WHOM CLAIMS WERE PAID WERE DULY FURNISHE D BY THE ASSESSEE AND THE SAME WERE SUFFICIENT FOR THE ASSESSING OFFICER TO V ERIFY IF REQUIRED THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENSES. AS FURTHER SHOWN B Y THE LEARNED COUNSEL FOR THE ASSESSEE FROM THE QUESTIONNAIRE ISSUED BY THE ASSES SING OFFICER THE DETAILS OF REASONS FOR MAKING THE SAID PAYMENTS TO THE CONCERN ED PARTIES WERE NOT SPECIFICALLY CALLED FOR BY THE ASSESSING OFFICER. B E THAT AS IT MAY SUCH CLAIM EXPENSES WERE INCURRED BY THE ASSESSEE REGULARLY IN THE EARLIER YEARS AS WELL AS IN THE SUBSEQUENT YEARS AND AS IS CLEARLY EVIDENT FROM THE RELEVANT DETAILS GIVEN ON PAGE NO.78 OF THE ASSESSEES PAPER BOOK THE CLAIM EXPENSES INCURRED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AT 0.25 PE R CENT OF THE TOTAL TURNOVER WERE LOWER THAN 0.33% AND 0.29% CLAIMED AND ALLOWED IN THE ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. MORE OVER THE G ROSS PROFIT SHOWN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION AT 21.42% WAS WELL COMPARABLE WITH THE GROSS PROFIT RATE OF 18.23% AND 21.45% SHOWN IN THE ASSESSMENT YEARS 2002-03 AND 2003-04 RESPECTIVELY. HAVING REGARD TO ALL THE SE FACTS OF THE CASE WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFIABLE REASON FOR T HE ASSESSING OFFICER AS WELL AS FOR THE LEARNED CIT(A) TO DOUBT THE REASONABILITY O F THE CLAIM EXPENSES INCURRED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. ON TH E OTHER HAND THE SAID EXPENSES CLAIMED BY THE ASSESSEE WERE QUITE FAIR A ND REASONABLE AND THERE WAS NO REASON TO DISALLOW THE SAME. WE THEREFORE DELE TE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON THIS ISSUE AND ALLOW GROUND NO.1 OF THE ASSESSEES APPEAL. ITA NO. 2126/M/2010 M/S.SHREEJI TRANSPORT SERVICES P.LTD. 5 7. THE ISSUE RAISED IN GROUND NO.2 RELATES TO THE D ISALLOWANCE OF RS.93 960/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) OUT OF INTEREST EXPENSES. 8. FROM THE PERUSAL OF THE BALANCE SHEET FILED BY T HE ASSESSEE ALONG WITH THE RETURN OF INCOME THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN A LOAN OF RS. 10 44 000/- TO ITS SISTER CONCERN M/S. SHREEJI TRANSPORT FREE OF INTEREST. HE THEREFORE REQUIRED THE ASSESSEE TO EXPLAIN WHY INTEREST EXPENDITURE TO THE EXTENT ATTRIBUTABLE TO THE SAID LOAN ACCOUNT SHOULD NOT BE DISALLOWED. IN REPLY IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT SUFFIC IENT OWN FUNDS WERE AVAILABLE TO ADVANCE THE SAID LOAN AMOUNT TO THE SISTER CONCE RN. THE ASSESSING OFFICER ACCEPTED THIS POSITION THAT THE ASSESSEE HAD RESERV ES OF RS. 1.44 CRORES IN ADDITION TO SHARE CAPITAL OF RS.19.92 LAKHS. HE HOWEVER F OUND THAT EVEN THE DIRECTORS OF THE ASSESSEE COMPANY WHO HAD ADVANCED THE LOANS TO IT WERE PAID INTEREST AT THE RATE OF 18% PER ANNUM. ACCORDING TO THE ASSESSING OFFICER IN THESE FACTS AND CIRCUMSTANCES THERE WAS NO REASON FOR THE ASSESSEE TO FORGO INTEREST ON THE LOAN OF RS. 10 44 000/- ADVANCED TO ITS SISTER CONCERN. ACCORDINGLY INTEREST TO THE EXTENT ATTRIBUTABLE TO THE SAID ADVANCE CALCULATED AT RS.93 960/- WAS DISALLOWED BY THE ASSESSING OFFICER. 9. ON APPEAL THE LEARNED CIT(A) CONFIRMED THE SAID DISALLOWANCE ON THE GROUND THAT THE ASSESSEE COULD NOT ESTABLISH THAT T HE ADVANCE TO ITS SISTER CONCERN WAS GIVEN OUT OF ITS OWN FUNDS AVAILABLE AT THE REL EVANT TIME. HE ALSO OBSERVED THAT IF INTEREST FREE FUNDS WERE AVAILABLE TO THE A SSESSEE COMPANY WHAT WAS THE NEED FOR IT TO BORROW INTEREST BEARING FUNDS. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS IS CLEARLY EVIDEN T FROM THE BALANCE SHEET OF THE ASSESSEE COMPANY AS ON 31.03.2004 (COPY PLACED AT P AGE 39 OF THE PAPER BOOK) SUFFICIENT OWN FUNDS TO THE EXTENT OF RS.1.65 CROR ES WERE AVAILABLE WITH THE ITA NO. 2126/M/2010 M/S.SHREEJI TRANSPORT SERVICES P.LTD. 6 ASSESSEE IN THE YEAR UNDER CONSIDERATION IN THE FOR M OF SHARE CAPITAL AND RESERVES AND SURPLUS AND THIS POSITION HAS NOT BEEN DISPUTED EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(A) IN THEIR RESPECTIVE ORDERS . THE DISALLOWANCE OF INTEREST HOWEVER WAS STILL MADE BY THEM ON THE GROUND THAT DESPITE HAVING ITS OWN FUNDS THE ASSESSEE HAD BORROWED INTEREST BEARING FUNDS. IN OUR OPINION THE BASIS GIVEN BY THE AUTHORITIES BELOW TO MAKE A DISALLOWANCE OUT OF INTEREST IS NOT TENABLE AND THE DISALLOWANCE SO MADE BY THEM IS NOT SUSTAINABLE . WHEN THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO GIVE THE ADVANCE OF RS. 10. 45 LAKHS TO ITS SISTER CONCERN THERE WAS NO REASON TO MAKE A DISALLOWANCE OUT OF I NTEREST MERELY BECAUSE IT HAD BORROWED INTEREST BEARING FUNDS IN SO FAR AS THE FU NDS SO BORROWED ON INTEREST WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF IT S BUSINESS. IN OUR OPINION IT WAS NOT A CASE OF UTILIZATION OR DIVERSION OF BORRO WED FUNDS FOR GIVING INTEREST FREE LOAN TO THE SISTER CONCERN AND THIS BEING SO THE D ISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT( A) ON THIS ISSUE WAS NOT SUSTAINABLE. WE THEREFORE DELETE THE SAME AND AL LOW GROUND NO.2 OF THE ASSESSEE. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF MARCH 2011. SD. SD. (R.V. EASWAR) (P.M. JAGTAP) PRESIDENT ACCOUNTANT MEMBER MUMBAI DATED THE 9 TH MARCH 2011. KN COPY TO: 1. THE ASSESSEE 2. THE ADDL.CIT RANGE 10(2) MUMBAI 3. THE CIT-10 MUMBAI 4. THE CIT(A)-22 MUMBAI 5. THE DR F BENCH MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR ITAT MUMBAI