Mayur Transport Corporation, Bharuch v. The Income tax Officer,Ward-1,, Bharuch

ITA 4489/AHD/2007 | 2004-2005
Pronouncement Date: 13-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 448920514 RSA 2007
Assessee PAN AAIFM9811H
Bench Ahmedabad
Appeal Number ITA 4489/AHD/2007
Duration Of Justice 3 year(s) 23 day(s)
Appellant Mayur Transport Corporation, Bharuch
Respondent The Income tax Officer,Ward-1,, Bharuch
Appeal Type Income Tax Appeal
Pronouncement Date 13-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 13-01-2011
Date Of Final Hearing 04-01-2011
Next Hearing Date 04-01-2011
Assessment Year 2004-2005
Appeal Filed On 20-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI MAHAVIR SINGH JUDICIAL MEMBER AND SHRI D. C. AGRAWAL ACCOUNTANT MEMBER ITA NO.4489/AHD/2007 & ITA NO.180/AHD/2008 ASSESSMENT YEAR :2004-05 DATE OF HEARING:4.1.11 DRAFTED:7.1.11 M/S. MAYUR TRANSPORT CORPORATION 7-8 GIDC SHOPPING CENTRE NR. MIPCO GIDC BHARUCH PAN NO.AAIFM9811H INCOME TAX OFFICER WARD-1 BANK OF BARODA BUILDING STATION ROAD BHARUCH V/S . V/S . INCOME TAX OFFICER WARD-1 BHARUCH M/S. MAYUR TRANSPORT CORPORATION 7/8 GIDC SHOPPING CENTRE NR. MIPCO GIDC BHARUCH (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI SUNIL H TALATI AR REVENUE BY:- SMT. SUMIT KAUAR DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE AR ISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-VI BA RODA IN APPEAL NO.CAB/VI-368/06-07 DATED 26-10-2007. THE ASSESSMEN T WAS FRAMED BY ITO WARD-1 BHARUCH U/S143(3) OF THE INCOME-TAX ACT 19 61 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28-12-2006 FO R ASSESSMENT YEAR 2004-05. 2. THE FIRST INTER-CONNECTED ISSUE IN THESE CROSS-A PPEALS OF ASSESSEE AND REVENUE IS AS REGARDS TO ESTIMATION OF GROSS PROFIT DELETED BY CIT(A) AND ITA NO.4489/AHD/2007 & 180/AHD/2008 A.Y.2004-05 M/S. MAYUR TRANSPORT CORPN. V. ITO WD-1 BHARUCH PAGE 2 DISALLOWANCE OF PAYMENT TO TRUCK DRIVERS AND LABOUR CHARGES CONFIRMED. FOR THIS REVENUE HAS RAISED THE FOLLOWING TWO EFFECTIVE GROUNDS :- ITA NO.180/AHD/2008 BY REVENUE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LEARNED CIT(A) ERRED IN DELETING THE ADD MADE BY THE AO ON ACCOUNT OF ESTIMATION OF NET PROFIT AT 5%. 2. THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE NET PROFIT AT 5% WAS ESTIMATED BY THE AO AFTER ESTABLIS HING THE DISCREPANCY IN THE BOOKS OF ACCOUNT. AND ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.2 :- ITA NO.4489/AHD/2007 BY ASSESSEE. 2. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE ADDITION OF (1) RS.2 19 375 BEING PAYMENTS MADE TO TRUCK DRIVER S/OWNERS. (2) RS.1 21 916 BEING PAYMENT OF LABOUR CHARGES ON ADHOC BASIS. YOUR APPELLANT SUBMITS THAT THE ADDITIONS CONFIRMED BY CIT(A) ARE UNJUST AND UNCALLED FOR AND BE DELETED NOW. 3. THE BRIEF FACTS LEADING TO THE ABOVE INTER-CONNE CTED ISSUE ARE THAT ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS NOTICED FROM THE INCOME AND EXPENDITURE ACCOUNT THAT IT HAD DEBI TED AN AMOUNT OF RS.1 82 93 338/- UNDER THE HEAD FREIGHT CHARGES WH ICH IS 80.77% OF THE CONTRACT RECEIPTS. THE ASSESSEE HAS ALSO DEBITED LA BOUR CHARGES AT RS.24 38 191/- WHICH IS 10.77% OF THE CONTRACT RECE IPTS. THE AO ISSUED SHOW CAUSE NOTICE AND POINTED OUT CERTAIN DISCREPANCIES THAT SOME OF THE MEMOS BEING SECOND COPY UNSIGNED BY THE DRIVERS OF THE TR UCKS TO WHOM TRANSPORTATION WORKS WAS ASSIGNED AND FREIGHT CHARG ES WAS FIXED. IN SOME OF MEMOS ADVANCES HAVE BEEN GIVEN AND PAYMENT HAS BEEN MADE ON THE FIRST COPY OF THE FREIGHT MEMO. AS REGARDS TO FREIGHT AND LABOUR CHARGES THE ADVANCE PAYMENT OUTSTANDING FOR THE YEAR WAS NOTED BY ASSESSING OFFICER AND IN VIEW OF THESE DISCREPANCIES HE ESTIMATED NE T PROFIT AT 5% OF THE TOTAL TURNOVER WHICH COMES TO RS.11 32 404/- AS AGAINST T HE DISCLOSED NET PROFIT AT RS.2 61 555/-. ACCORDINGLY HE MADE ADDITION OF RS. 8 70 849/-. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE CIT(A). THE CIT(A) DELETED THE ADDITION OF ITA NO.4489/AHD/2007 & 180/AHD/2008 A.Y.2004-05 M/S. MAYUR TRANSPORT CORPN. V. ITO WD-1 BHARUCH PAGE 3 NET PROFIT ESTIMATED BY AO AT 5% BUT SUSTAINED THE ADDITION OF AD HOC DISALLOWANCE OF LABOUR EXPENSES AT 5% AT RS.3 41 48 5/-. AGGRIEVED AGAINST THE ACCEPTING BOOK RESULTS REVENUE AND AGAINST ESTI MATION OF DISALLOWANCE OF LABOUR EXPENSES ASSESSEE CAME IN APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. AFTER GOING THROUGH THE CASE RECORDS WE FIND THAT CIT(A) HAS ACCEPTED THE BOOK RESULTS ON THE BASIS T HAT THERE IS NO REASON THAT REJECTING THE BOOK RESULTS AS THERE IS NO DEFECT PO INTED OUT BY ASSESSING OFFICER IN THE BOOKS OF ACCOUNT AND HE NOTED THAT A REASONABLE DISALLOWANCE OF LABOUR EXPENSES AT 5% WILL MEET THE ENDS OF JUST ICE AND ACCORDINGLY HE DELETED A SUM OF RS.3 41 285/-. WE FIND FROM THE OR DERS OF LOWER AUTHORITIES AND NOW THE GROUNDS OF APPEAL RAISED BY BOTH THE SI DES THAT ASSESSEE HAS NOT CHALLENGED THE REJECTION OF BOOK RESULTS NOR THE RE VENUE HAS CHALLENGED THE ACCEPTANCE OF BOOK RESULTS. LD. COUNSEL FOR THE ASS ESSEE SHRI SUNIL H TALATI BEFORE US FAIRLY STATED THAT A REASONABLE DISALLOWA NCE OF EXPENSES I.E. ON LABOUR EXPENSES WILL MEET THE ENDS OF JUSTICE. WE F IND THAT THE CIT(A) HAS NOT GIVEN ANY REASONING FOR MAKING DISALLOWANCE OF 5% O F LABOUR EXPENSES AND ACCORDINGLY AD HOC DISALLOWANCE OF RS.2 LAKH WILL M EET THE ENDS OF JUSTICE. ACCORDINGLY THE INTER-CONNECTED ISSUES IN THE CROS S-APPEALS OF ASSESSEE AS WELL AS REVENUE ARE ALLOWED IN TERMS OF ABOVE. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A) IN CONFIRMING THE ADDITION OF UNEXPLAINED CASH CRED IT U/S 68 OF THE ACT. FOR THIS ASSESSEE HAS RAISED THE FOLLOWING GROUND NO.3 & 4 :- 3. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING ADDITION OF RS.2 00 000 TREATING LOAN AS UNEXPLAINED CASH CREDIT INVOKING PROVISIONS OF SECTION 68 OF THE ACT . IT IS SUBMITTED THAT IDENTITY GENUINENESS AND CREDITWORTHINESS OF THE D EPOSIT HAS BEEN PROVED AND HENCE ADDITION MADE IS UNCALLED AND UNWA RRANTED AND SAME BE DELETED NOW. 4. THE HONBLE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN NOT ALLOWING BENEFIT OF TELESCOPING. YOUR APPELLANT S UBMITS THAT ONCE PROFIT ITA NO.4489/AHD/2007 & 180/AHD/2008 A.Y.2004-05 M/S. MAYUR TRANSPORT CORPN. V. ITO WD-1 BHARUCH PAGE 4 IS ESTIMATED APPLYING NET PROFIT RATE NO FURTHER ADDITION/DISALLOWANCES WOULD BE JUSTIFIED. IT BE HELD SO NOW. 6. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE T HAT ASSESSING OFFICER HAS MADE ADDITION OF UNSECURED LOAN U/S.68 OF THE ACT A ND CIT(A) HAS CONFIRMED THE SAME. WE FIND THAT CIT(A) HAS CATEGORICALLY HEL D THAT THE TRANSACTION OF CASH CREDIT IN ASSESSEES BOOK IS NOT AT ALL GENUIN E AND IT IS PROVED BEYOND DOUBT THAT THIS AMOUNT HAS BEEN INTRODUCED IN COLLU SION WITH SMT. VARSAHABEN WHICH WAS FOUND THROUGH A SYSTEMATIC EX AMINATION BY ASSESSING OFFICER IN HIS ASSESSMENT ORDER AT PARA-5 WHEREIN NO SOURCE OF THIS AMOUNT OF RS.2 LAKH WAS PROVED BY ASSESSEE. THE CIT(A) FINALL Y IN PARA-5.3.3 OF HIS APPELLATE ORDER CONFIRMED THE ADDITION AS UNDER:- 5.3.3 IN THE INSTANT CASE THE ASSESSING OFFICER HA D DEEPLY SCRUTINIZED THE REAL TRANSACTION AND HAD SECURED THE INFORMATIO N NOT ONLY FOR THE BANK REGARDING THE CHEQUES BUT ALSO TRACED THE REAL RECIPIENTS AND EVEN FOUND OUT THE PURPOSE FOR WHICH THESE CHEQUES WERE ISSUED. IN OTHER WORDS HE REAL DESIGN AND THE MODUS-OPERANDI OF APPE LLANT FIRM AND ITS COLLUSION WITH SMT. VARSHABEN AND HER HUSBAND WAS U NRAVELED THROUGH SYSTEMATIC EXAMINATION BY ASSESSING OFFICER. IT HAS BEEN PROVED BEYOND DOUBT THAT THE TRANSACTION OF CASH CREDIT IN THE APPELLANTS BOOKS IS NOT GENUINE. THE ADDITION OF RS.2 LACS IS THUS C ONFIRMED. WE ARE IN FULL AGREEMENT WITH THE FINDINGS OF CIT(A ) AND EVEN NOW BEFORE US ASSESSEE COULD NOT ADDUCE ANYTHING NEW WHICH SUBSTA NTIATE THAT ASSESSEE HAS SOURCE OF THIS TRANSACTION. RATHER THE LD. COUN SEL FOR THE ASSESSEE STATED THAT ONLY TELESCOPING OF THIS AMOUNT CAN ALLOW AGAI NST THE DISALLOWANCE OF EXPENSES. WE FIND THAT WE HAVE ALREADY CONFIRMED TH E ESTIMATION OF NET PROFIT AND UPHELD THE DISALLOWANCE OF EXPENSES AT RS.2 LAK H BUT ASSESSEE IS UNABLE TO CO-RELATED THE NEXUS OF THIS UN-VOUCHED EXPENSES CONFIRMED BY US WITH THE TRANSACTION OF LOAN. ACCORDINGLY WE ARE IN AGREEME NT WITH THE FINDINGS OF CIT(A) IN PARA-6.1 OF HIS APPELLATE ORDER AS UNDER:- 6.1 I HAVE CAREFULLY CONSIDERED THE ALTERNATE PLEA OF THE APPELLANT. AS DECIDED IN THIS ORDER IN REGARD TO GROUND NO.1 THE ESTIMATION OF THE GROSS PROFIT AT 5% HAS NOT BEEN UPHELD AND ONLY THE INCOMPLETE UNVOUCHED AND UNSIGNED PAYMENTS WERE DISALLOWED. MO REOVER THE ASSESSEE HAS FAILED TO DIRECTLY ESTABLISH THE CONNE CTION BETWEEN THE ITA NO.4489/AHD/2007 & 180/AHD/2008 A.Y.2004-05 M/S. MAYUR TRANSPORT CORPN. V. ITO WD-1 BHARUCH PAGE 5 CASH CREDIT AND THE INCOME WITHHELD FROM THE BOOKS OF ACCOUNTS. THEREFORE THE CLAIM THAT THE TELESCOPING SHOULD BE AUTOMATICALLY PROVIDED FOR WHENEVER TWO ADDITIONS ARE PROPOSED IS NOT ACCEPTABLE. IT IS FOR THE APPELLANT TO PROVE THAT THAT IF THE CASH CREDIT REPRESENTS INCOME IT IS FROM THE SOURCE WHICH HAS ALREADY BEEN TAXED. THE PLEA IS THUS REJECTED. ACCORDINGLY THIS ISSUE OF ASSESSEES APPEAL IS DIS MISSED. 7. THE NEXT ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) IN DELETING THE ADDITION OF PENALTY MADE BY ASSESSI NG OFFICER. FOR THIS REVENUE HAS RAISED THE FOLLOWING GROUND NO.3 & 4 :- ITA NO.180/AHD/2008 BY REVENUE. 3. THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANCES O F THE CASE ERRED IN DELETING THE ADDITION OF RS.225023/- ON ACCOUNT OF DISALLOWANCE OF PENALTY. 4. THE LD. CIT(A) HAS ERRED NOT APPRECIATING THE FA CT THAT THE AMOUNT OF RS.225023/- WAS PAID FOR NON-COMPLETION OF CONTRACT WITHIN THE STIPULATED TIME AND THE AO HAD TREATED THIS AMOUNT AS PENALTY WHICH WAS RIGHTLY DISALLOWED. 8. AFTER HEARING THE RIVAL CONTENTIONS AND GOING TH ROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE WE FIND THAT THE AMOUNT DEBITED TO PROFIT AND LOSS ACCOUNT WAS ONLY ON ACCOUNT OF AMOUNT DEDUCTED/FORF EITED BY THE CLIENTS FOR NON-COMPLETION OF TERMS OF CONTRACT WITHIN THE STIP ULATED TIME AND THAT DEDUCTION IS NOT FOR ANY UNLAWFUL ACT OR FOR ANY VI OLATION OF LAW IN INDIA AND THUS SUCH EXPENDITURE IS FULLY ALLOWABLE U/S 37(1) OF THE ACT. IT IS FURTHER ARGUED THAT THE AMOUNT WAS DEDUCTED AS THE MATERIAL WAS NO T SUPPLIED ON TIME AS PER THE CONDITIONS OF THE CONTRACT AND CIT(A) DELETED A DDITION BY GIVING FOLLOWING FINDINGS IN PARA-7.3 OF HIS APPELLATE ORDER:- 7.3 I HAVE CAREFULLY CONSIDERED THE RIVAL ARGUMENT S. THE AMOUNT OF RS.2 25 023/- REFLECTS THE AMOUNT FORFEITED/DEDUCTE D FROM CONTRACT AMOUNT BY THE CLIENTS FOR NON FULFILLMENT OF THE CO NTRACT CONDITIONS AND IT IS NOT FOR INFRACTION OR VIOLATION OF ANY LAW. THE SAID BUSINESS LOSS IS AN ALLOWABLE EXPENDITURE UNDER SECTION 37 AS IT IS NOT AN EXPENDITURE FOR UNLAWFUL PURPOSES. BREACH OF CONTRACT AND THE RELAT ED CONSEQUENCES ARE VERY MUCH WITHIN THE REALM OF BUSINESS EXPEDIEN CY AND EXPENSES ITA NO.4489/AHD/2007 & 180/AHD/2008 A.Y.2004-05 M/S. MAYUR TRANSPORT CORPN. V. ITO WD-1 BHARUCH PAGE 6 THEREON IS AN ALLOWABLE BUSINESS EXPENDITURE. THE A SSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF RS.2 25 023/-. T HE GROUND NO.3 IS ALLOWED. WE FIND NO INFIRMITY N THE ORDER OF CIT(A) IN VIEW OF THE ABOVE FACTS AND ACCORDINGLY WE CONFIRM THE SANE AND THIS ISSUE OF R EVENUES APPEAL IS DISMISSED. 9. IN THE RESULT APPEAL OF ASSESSEE AND THAT OF REVEN UE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13/01/2011 SD/- SD/- (D.C.AGRAWAL) (MAHAVIR SIN GH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD DATED : 13/01/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-VI BARODA 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD