M/S. NEW EMPIRE TEXTILES PROCESSORS PVT. LTD, MUMBAI v. THE ACIT 4(3), MUMBAI

ITA 7235/MUM/2007 | 2003-2004
Pronouncement Date: 30-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 723519914 RSA 2007
Assessee PAN AAACN7363A
Bench Mumbai
Appeal Number ITA 7235/MUM/2007
Duration Of Justice 2 year(s) 3 month(s) 25 day(s)
Appellant M/S. NEW EMPIRE TEXTILES PROCESSORS PVT. LTD, MUMBAI
Respondent THE ACIT 4(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 30-03-2010
Date Of Final Hearing 12-03-2010
Next Hearing Date 12-03-2010
Assessment Year 2003-2004
Appeal Filed On 05-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F: MUMBAI BEFORE SHRI N V VASUDEVAN JUDICIAL MEMBER AND SHRI RAJENRA SINGH ACCOUNTANT MEMBER ITA NO.7235/MUM/2007 ASSESSMENT YEARS 2003-04 NEW EMPIRE TEXTILES PROCESSORS PVT LTD 51/53 TEL GALI GROUND FLOOR VITHALWAID KALBADVI ROAD MUMBAI -400 002 PAN AAACN 7363 A VS ACIT -4(3) AAYAKAR BHAVAN MUMBAI (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI N M PORWAL FOR RESPONDENT : S/SHRI S M SEKHAWAT & S S RAND ORDER PER RAJENDRA SINGH AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.09.2007 OF CIT (A) FOR THE ASSESSMENT YEAR 2003-04. THE ASSESSEE IN THIS APPEAL HAS RAISED DISPUTE ON TWO D IFFERENT GROUNDS. 2. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OF RS 36 83 044/- OUT OF LABOUR CHARGES PAID BY THE ASSES SEE. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WAS DOING THE WORK OF T EXTILE PROCESSING ON JOB WORK BASIS. FOR THE RELEVANT YEAR THE ASSESSE E HAD DECLARED GROSS JOB CHARGES OF RS 9 63 50 304/- AS AGAINST PAYMENT OF RS 10 09 07 571/- IN THE IMMEDIATELY PRECEDING YEAR. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE DURING THE YEAR HA D CLAIMED LABOUR NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 2 CHARGES OF RS 78 39 874/- WHICH INCLUDED A SUM OF RS 16 80 029/- ON ACCOUNT OF M/S K S GIRI (PROF MRS KARUNAVATI SHRI SHANKAR GIRI) AND RS 23 35 620/- ON ACCOUNT OF GIRI & CO (PROPRIETOR SHRI SHIVSHANKAR GIRI). THE ASSESSING OFFICER WITH A VIEW TO VERIFY THE GENUINENESS OF LABOUR CHARGES PAID TO THESE 2 PARTIES ISSUED VERIF ICATION LETTERS IN RESPONSE TO WHICH BOTH THE PARTIES STATED THAT THEY HAD SUPPLIED LABOUR TO THE ASSESSEE PRIOR TO THE YEAR 2000 AND D URING THE PERIOD 1.4.2002 TO 31.3.2003 THEY HAD NOT DONE ANY BUSINES S NOR RECEIVED ANY PAYMENTS FROM THE ASSESSEE. ON BEING CONFRONTE D THE ASSESSEE STATED THAT IT HAD GIVEN CONTRACT TO M/S K S GIRI F OR CARRYING OUT WORK OF STENTERING AND DECODIZING FINISHED WORK AND CONT RACT TO M/S GIRI & CO HAD BEEN GIVEN TO OPERATE JIGGERS / JETS IN THE PROCESSING UNITS. BOTH THE PARTIES WERE REGISTERED AS LABOUR CONTRACT ORS WITH THE ASSESSEE-COMPANY AND BOTH THE CONCERNS HAD DEPUTED SHRI SHANKARLAL YADAV AS THEIR MEN REPRESENTATIVE TO LOOK AFTER THE CONTRACT ON THEIR BEHALF. THE ASSESSEE HAD MADE THE PAYMENTS TO THE TWO PARTIES THROUGH SHRI SHANKARLAL YADAV. THE ASSESSEE HAD DE DUCTED TAX AT SOURCE AS WELL AS ESIC PF AND PT ON THE PAYMENTS M ADE TO THE PARTIES. THE ASSESSEE ALSO FURNISHED COPY OF THE B ILLS RAISED ON TWO PARTIES ON ACCOUNT OF WORK DONE ALONG WITH THE COPY OF MUSTER ROLL TO JUSTIFY THE GENUINENESS OF PAYMENT. THE ASSESEE AL SO POINTED OUT THAT WITHOUT LABOUR PAYMENTS THE ASSESSEE COULD NOT HAV E DONE THE STENTERING AND DECODIZING AS WELL AS OPERATE JIGGER S / JETS. THE ASSESSEE ALSO REQUESTED TO CROSS EXAINE SHRI S S GI RI WHICH WAS ALLOWED. THE RESULTS OF CROSS-EXAMINATION HAVE BEE N SUMMARIZED BY THE ASSESSING OFFICER AS UNDER: 1) SHRI S S GIRI WAS UNDERTAKING CONTRACTS OF THE ASSESSEE COMPANY PRIOR TO 2000 AND AGAIN FROM JANUARY 2002 TO APRIL 2002. THEREAFTER HE DID NOT TAKE ANY CONTRACT OF THE ASSESSEE. SAME IS THE CASE OF M/S K S GIRI & CO NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 3 2) SHRI SHANKARLAL YADAV WAS EMPLOYEE OF SHRI GIRI TILL THE TIME SHRI GIRI WAS DOING WORK OF THE ASSESSEE COMPA NY. THEREAFTER SHRI YADAV WAS NO MORE IN THE SERVICE OF SHRI GILL. 3) FROM THE I T RECORDS OF SHRI S.S. GIRI & MRS K S GIRI IT IS SEEN THAT DURING THE ACCOUNTING PERIOD 1.4.2001 TO 31.3.2002 RELEVANT TO AY 2002-03 BOTH OF THEM HAD OFFERED TH E CONTRACT AMOUNT FOR THE MONTHS OF JANUARY 2002 TO MARCH 20 02 AND CLAIMED CREDIT FOR TDS AMOUNT FOR THE SAME MONTHS. 4) FOR AY 2003-04 (ACCOUNTING PERIOD 1.4.2002 TO 31 .3.2003) BOTH OF THEM HAD OFFERED ONLY ONE MONTHS CONTRACT I NCOME FROM THE ASSESSEE I.E. FOR APRIL 2002 AND CLAIMED CREDI T FOR TDS IN RESPECT OF THE SAID BILL ONLY. 5) SHRI JATINDER SHARANDAS MEHTA IN HIS CROSS EXAMI NATION ASKED QUESTIOS WHICH WERE NOT RELEVANT AND COULD NO T ESTABLISH THAT SHRI GIRI AND MRS K S GIRI HAD CONTINUED TO TA KE CONTRACTS FOR THE BALANCE MONTHS I.E. MAY 2002 TO MARCH 200 3. 6) THE ASSESSEE COMPANY HAD MADE ADVANCES TOWARDS L ABOUR CHARGES ON THE PRETEXT THAT IT WAS THE NECESSITY OF THE BUSINESS. HOWEVER THE COMPANY WAS REQUIRED TO MAKE PAYMENT TO THE LABOUR CONTRACTORS AND NOT TO THE LABOURERS DIRECTL Y. IT WAS THE RESPONSIBILITY OF LABOUR CONTRACTOR TO DISTRIBUTE W AGES/SALARIES TO THE LABOURERS EMPLOYED BY THEM. 7) SHRI SHANKARLAL YADAV HAD TAKEN THE CONTRACT OF THE ASSESSEE COMPANY INDEPENDENTLY FORM AUGUST 2005. 8) SHRI YADAV ADMITTED THAT MR GIRI HAD LEFT THE CO NTRCT SAY ABOUT TWO YEARS BEFORE. HOWEVER HE COULD NOT GIVE ANY SPECIFIC DATE/MONTH OR YEAR OF MR GIRIS LEAVING THE CONTRAC T WORK OF THE ASSESSEE COMPANY. 9) SHRI YADAV CONTINUED TO WORK WITH THE NEW CONTRA CTORS WHO HAD TAKEN THE CONTRACT OF THE ASSESSEE COMPANY EVEN AFTER MR GIRI LEFT THE CONTRACT. SHIR YADAV CONTINUED TO WORK WITH AND FOR THE ASSESSEE EVEN AFTER THE NEW CONTRACTORS ALS O LEFT THE CONTRACT. THUS HIS INTEGRITY IS TOWARDS THE ASSES SEE AND HIS STATEMENT THAT MR GIRI WAS THE CONTRACTOR DURING TH E PERIOD 1.4.2002 TO 31.3.2003 IS NOT TRUSTWORTHY. 10) SHRI YADAV HAS NO BANK ACCOUNT HAS NOT FILED A NY RETURN OF INCOME NOR DISCLOSED CONTRACT RECEIPTS TO THE DE PARTMENT. NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 4 11) AS STATED BY SHRI YADAV HE USED TO PASS ON INF ORMATION TO MR GIRI ON THE BASIS OF WHICH THE BILLS WERE PREPAR ED BY SHRI GIRI AND HANDED OVER TO HIM FOR GIVING IT TO THE COMPANY . IF THE BILLS WERE PARED BY SHRI GIRI THEN WHY THESE WERE SIGNAT URES OF MR YADAV ON THE BILLS. 12) THE ASSESSEES SUBMISSION THAT THE ESIC / PF ET C. RECORD SUPPOSED TO BE THAT OF MR GIRI CAN NOT BE CONSIDER ED AS A VALID EVIDENCE THAT SHRI GIRI WAS THE CONTRACTOR DURING T HE SAID PERIOD. 13) THERE WAS NO WRITTEN CONTRACT AGREEMENT BETWEEN THE ASSESSEE COMPANY AND M/S GIRI & CO AND M/S K S GIRI . 14) SHRI GIRI CATEGORICALLY DENIED HAVING DONE ANY WORK CONTRACT WITH THE ASSESSEE FROM MAY 2002 TO 31 MAR CH 2003 TO THE SPECIFIC QUESTION ASKED BY SHRI MEHTA. 3. BASED ON THE CROSS-EXAMINATION THE ASSESSING O FFICER CONCLUDED THAT BOTH THE PARTIES HAD DONE WORK ONLY FOR 1 ST MONTH IN APRIL 2002 WHICH HAD BEEN OFFERED BY THEM IN INCOME -TAX RETURNS. THE ASSESSING OFFICER THEREFORE ALLOWED THE CLAIM ONL Y FOR THE APRIL 2002 AND THE BALANCE CLAIM ON ACCOUNT OF BOTH THE PARTIE S TOTALLING TO RS 36 83 044/- WAS DISALLOWED. IN APPEAL CIT (A) OBSE RVED THAT BOTH THE CONTRACTORS HAD DENIED HAVING DONE ANY WORK DURING THE YEAR EXCEPT FOR THE MONTH OF APRIL 2002. SHRI S L YADAV WHO WA S WORKING ON BEHALF OF THE PARTIES WAS NO MORE IN EMPLOYMENT OF PARTIES AFTER THE CONTRACT WAS STOPPED. BOTH THE PARTIES HAD DECLARE D LABOUR INCOME ONLY FOR ONE MONTH IN THEIR INCOME-TAX RECORDS. EV EN THOUGH SHRI SHANKARLAL YADAV CONTINUED TO SUPPLY LABOUR THERE WAS NO DEFINITE EVIDENCE TO CORROBORATE THIS. CIT (A) ALSO OBSERVE D THE ONUS WAS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS WHICH HAD NOT BEEN DISCHARGED. CIT (A) THEREFORE CONFIRMED THE DISA LLOWANCE. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS BEF ORE THE TRIBUNAL. NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 5 3.1 BEFORE US THE LEARNED AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE ARGUED THAT SERVICES OF CONTRACTORS WERE N ECESSARY FOR DOING THE WORK OF STENTERING AND DECODIZING AND FOR OPERA TION OF JIGGERS / JETS. IT WAS NOT POSSIBLE WITHOUT ENGAGEMENT OF LA BOUR CONTRACTS. IN THE EARLIER YEARS ALSO THE ASSESSEE HAD CLAIMED EXP ENDITURE ON THESE ACCOUNTS WHICH HAD BEEN ALLOWED. THE COMPARATIVE POSITION OF EXPENDITURE CLAIMED IN THE EARLIER YEARS WAS PLACED AT PAGE 176 OF THE PAPER BOOK. IT WAS ARGUED THAT THE CONTRACTORS WER E REPRESENTED BY SHRI SHANKARLAL YADAV THROUGH WHOM THE ASSESSEE HAD BEEN MAKING PAYMENT FOR WORK DONE AND BILLS WERE ALSO RAISED. AS THE EXPENDITURE WAS NECESSARY AND PAYMENT HAD BEEN MADE THE CLAIM HAD TO BE ALLOWED. IT WAS ALSO POINTED OUT THAT EARLIER BOTH THE PARTIES HAD DENIED ANY PAYMENT BUT SUBSEQUENTLY AGREED THAT PAY MENTS HAD BEEN RECEIVED FOR ONE MONTH AND THEREFORE THERE STATEM ENTS COULD NOT BE RELIED UPON. IT WAS FURTHER POINTED OUT THAT SHRI SHANKARLAL YADAV HAD CONTINUED TO WORK WITH AND FOR THE ASSESSEE EVEN A FTER MR GIRI HAD LEFT THE CONTRACT. HE CONTINUED TO WORK WITH NEW C ONTRACTORS WHO HAD TAKEN THE CONTRACT. THIS POSITION HAD EMERGED FROM THE CROSS EXAMINATIONS WHICH HAS BEEN REPRODUCED IN THE ORDE R OF THE ASSESSING OFFICER ITSELF. THEREFORE THE CLAIM OF THE ASSESSEE CANNOT BE DISALLOWED. THE LEARNED DEPARTMENTAL REPRESENTATIV E ON THE OTHER HAND SUBMITTED THAT THE CLAIM WAS NOT ESTABLISHED BY ANY EVIDENCE OR RECORD. HE SUPPORTED THE FINDING GIVEN BY THE AUTH ORITIES BELOW AND ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE HIG H COURT OF DELHI IN CASE OF LA MEDICA (250 ITR 575). 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. THE DISPUTE IS REGARDING AL LOWABILITY OF EXPENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF P AYMENTS TO CONTRACTOR M/S K S GIRI AND M/S GIRI & CO. THE CLA IM OF THE ASSESSEE IS NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 6 THAT IT HAD GIVEN THE WORK OF STENTERING AND DECODI ZING TO M/S K S GIRI AND OPERATION OF JIGGERS / JETS TO M/S GIRI & CO ON CONTRACT BASIS. THE ASSESSEE HAD BEEN GETTING THESE ACTIVITIES ON CONTR ACT SINCE THE EARLIER YEARS IN RESPECT OF WHICH THE EXPENDITURE HAS BEEN ALLOWED. THE ASSESSEE HAS GIVEN COMPARATIVE FIGURES OF CLAIM IN RESPECT OF SUCH ACTIVITIES ON CONTRACT BASIS FROM ASSESSMENT YEAR 1 999-2000 TO ASSESSMENT YEAR 2003-04 PLACED AT PAGE 176 OF THE P APER BOOK. THE CHART SHOWS THAT THE ASSESSEE HAD CLAIMED THE EXPEN DITURE OF RS 16 80 029 IN THE CURRENT ASSESSMENT YEAR COMPARED T O EXPENDITURE OF RS 15 09 678/- IN ASSESSMENT YEAR 2002-03 FOR STENT ERING AND DECODIZING WORK. SIMILARLY EXPENDITURE CLAIMED TH IS YEAR IS RS 23 35 620/- IN RESPECT OF JET DYING AND JIGGERS DYI NG COMPARED TO RS 20 20 771/- IN ASSESSMENT YEAR 2002-03. THE ASSESS EE HAS CLAIMED THAT IT HAS BEEN MAKING PAYMENT AND RAISING BILLS O N THE PARTIES THROUGH SHRI SHANKARLAL YADAV WHO WAS THEIR REPRESE NTATIVE. THE WORK HAD ACTUALLY BEEN GOT DONE AND PAYMENTS HAD AC TUALLY BEEN MADE AND THEREFORE THE CLAIM CANNOT BE DISALLOWED. THE CASE OF THE REVENUE IS THAT BOTH THE PARTIES HAD DENIED HAVING DONE ANYTHING AND RECEIVED ANY SUM EXCEPT FOR ONE MONTH I.E. FOR APRI L 2002 AND CLAIM THEREFORE HAS TO BE DISALLOWED. IN OUR VIEW CLAIM CANNOT BE DISALLOWED ONLY ON THE GROUND THAT PARTIES HAVE DEN IED THE PAYMENT WHEN THE ASSESSEE WAS GETTING THE WORK DONE THROUGH THEIR REPRESENTATIVE SHRI SHANKARLAL YADAV WHO HAS ADMITT ED THE CLAIM. IT HAS EMERGED FROM THE CROSS EXAMINATION THAT SHRI YA DAV HAD CONTINUED THE WORK ON BEHALF OF SOME OTHER CONTRACT ORS. IT IS THEREFORE POSSIBLE THAT FOR REMAINING 11 MONTHS HE HAD GOT THE WORK DONE FOR THE ASSESSEE THROUGH OTHER CONTRACTORS. T HE ASSESSEE HAS BEEN CLAIMING SIMILAR EXPENDITURE FOR THESE ACTIVIT IES IN EARLIER YEARS WHICH HAS BEEN ALLOWED. THEREFORE CLAIM CANNOT BE DISALLOWED UNLESS IT IS ESTABLISHED THAT THESE ACTIVITIES HAVE BEEN G OT DONE BY THE ASSESSEE DURING THE YEAR IN HOUSE. IT IS THEREFORE REQUIRED TO BE NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 7 EXAMINED WHETHER THERE WAS ANY ADDITION TO THE ESTA BLISHMENT OF THE ASSESSEE DURING THE YEAR COMPARED TO EARLIER YEAR F OR GETTING WORK DONE. IN CASE THE ESTABLISHMENT OF THE ASSESSEE RE MAINED THE SAME AS IN EARLIER YEARS AND JOB WORK IS A BUSINESS REQ UIREMENT THE EXPENDITURE CAN BE DISALLOWED IN FULL AND IT HAS TO BE ESTIMATED CONSIDERING TO THE PAST RECORD. THE MATTER IN OUR VIEW REQUIRES FRESH EXAMINATION AND THE SAME HAS TO BE DECIDED AFRESH A FTER CONSIDERING THE ENTIRE CIRCUMSTANTIAL EVIDENCE I.E. REQUIREMENT OF THE ACTIVITIES FOR THE PURPOSE OF THE BUSINESS ESTABLISHMENT AVAILABL E FOR GETTING SUCH WORK DONE IN HOUSE ALLOWANCE OF CLAIM IN THE EARLI ER YEARS COMPARATIVE POSITION AND ALL OTHER RELEVANT FACTORS . 3.3 THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS PLA CED RELIANCE ON THE JUDGMENT OF HONBLE HIGH COURT OF DELHI IN CASE OF LAW MEDICA (SUPRA) WHICH IN OUR VIEW IS DISTINGUISHABLE AND N OT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE THE ASSESS EE HAD SHOWN PURCHASES FROM K WHO ON ENQUIRY WAS FOUND TO BE N ON-EXISTENT. IT WAS ALSO FOUND THAT THE BANK ACCOUNT HAD BEEN OPENE D BY ANOTHER PERSON GIVING FICTITIOUS ADDRESS. THE ASSESSING OFF ICER THEREFORE TREATED THE SAID AMOUNT AS INCOME FROM UNDISCLOSED SOURCES. THE TRIBUNAL HELD THAT THERE WAS NO DISPUTE ABOUT THE P URCHASES AND THEREFORE CLAIM COULD NOT BE DISALLOWED ONLY BECAU SE OF INVOLVEMENT OF SOME OTHER PERSONS WHO HAD GIVEN FICTITIOUS ADDR ESSES. IN FURTHER APPEAL THE HONBLE HIGH COURT OBSERVED THAT THE DE CISION OF THE TRIBUNAL WAS NOT BASED ON RELEVANT MATERIAL BECAUSE ONCE IT WAS ACCEPTED THAT SUPPLIES WAS NOT MADE BY K TO WHOM PAYMENT HAD BEEN PAID THE QUESTION WHETHER PURCHASES WERE MADE BY SOME OTHER PERSON WAS NOT RELEVANT. THE PRESENT CASE IS DIFFE RENT. IN THIS CASE THE ASSESSEE HAD GOT WORK DONE THROUGH SHRI SHANKAR LAL YADAV WHO WAS REPRESENTATIVE OF THE CONCERNED PARTIES AND WHO ADMITTED THAT THE WORK DONE HAD BEEN DONE. SIMILAR EXPENDITURE FOR S IMILAR WORK DONE NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 8 HAD BEEN ALLOWED IN THE EARLIER YEAR. THEREFORE M ERELY ON THE GROUND THAT THE CONTRACTORS WERE NOT AVAILABLE OR DENIED T HAT THEY HAD WORKED IT IS NOT ESTABLISH THAT NO WORK HAD BEEN D ONE OR NO EXPENDITURE HAD BEEN INCURRED. AT THE MOST IT COU LD BE SAID THAT EXPENDITURE IS NOT SUPPORTED BY PROPER EVIDENCE AND IN THAT CASE THE EXPENDITURE HAS TO BE ESTIMATED AFTER CONSIDERING T HE ENTIRE CIRCUMSTANTIAL EVIDENCE INCLUDING THE PAST RECORD A S HELD BY US EARLIER. WE THEREFORE SET ASIDE THE ORDERS OF THE CIT (A) AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR PAS SING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF THE OBS ERVATIONS MADE IN THIS ORDER AND AFTER ALLOWING OF OPPORTUNITY OF HEA RING TO THE ASSESSEE. 4. THE SECOND DISPUTE IS REGARDING DISALLOWANCE OF TRANSPORTATION CHARGES. THE ASSESSING OFFICER TOO K-UP THE CLAIM OF TRANSPORTATION CHARGES OF RS 45 87 215/- FOR VERIFI CATION. IT WAS NOTED BY HIM THAT THE ASSESSEE HAD MADE PAYMENT OF RS 20 21 231 TO M/S KARAN TRANSPORT. HE ISSUED LETTER U/S 133(6) BUT T HE SAME WAS RETURNED UN-SERVED BY THE POSTAL AUTHORITIES WITH R EMARK INCOMPLETE ADDRESS. ON BEING CONFRONTED THE ASSESSEE DEPUTED ITS ACCOUNTANT SHRI BHIWA CHAVAN TO TAKE THE WARD INSPECTOR TO TH E OFFICE OF KARAN TRANSPORT BUT DESPITE BEST EFFORTS THE TRANSPORTER COULD NOT LOCATED AS PER THE REPORT OF THE INSPECTOR. THE ASSESSING OFF ICER THEREAFTER MADE VERIFICATION WITH THE BANK REGARDING THE PAYMENT MA DE BY CHEQUE AND IT WAS NOTED BY HIM THAT CHEQUES HAD BEEN DEPOSITED IN THREE DIFFERENT BANK ACCOUNTS WITH CANARA BANK MULUND UNION BANK OF INDIA THANE AND PARSIK JANTA SAHKARI BANK LTD BHIWANDI. IT WAS ALSO NOTED BY HIM THAT THE PROPRIETARY CONCERN IN WHOSE NAME THE CHEQ UES WERE DEPOSITED WERE MR PARTAP LALCHAND AGNANI IN CASE OF CANARA BANK AND UNION BANK OF INDIA AND SHRI DHARMENDRA B DUBEY IN RESPECT OF PARSIK JANTA SAHAKARI BANK LTD. ASSESSING OFFICER THEREF ORE ASKED THE ASSESSEE TO PRODUCE THE PROPRIETOR OF M/S KARAN TRA NSPORT FOR NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 9 VERIFICATION. THE ASSESSEE EXPLAINED THAT IT HAD A VAILED SERVICES OF KARAN TRANSPORT FOR TRANSPORT OF GOODS FROM THE CUS TOMERS PREMISES OR GODOWN OF KARAN TRANSPORT AT BHIWANDI TO THE CLI ENTS FACTORY PREMISES AT KALYAN. THE GREY FABRICS WERE PROCESSE D BY THE CLIENTS IN THEIR FACTORY AND TRANSPORTED BACK BY KARAN TRANSPO RTER EITHER TO THEIR GODOWN AT BHIWANDI OR MUMBAI OR OTHER LOCATIONS AS PER THE CUSTOMERS INSTRUCTIONS. THE ASSESSEE REITERATED T HAT M/S KARAN TRANSPORT WAS IN EXISTENCE EVEN TODAY AND THE ASSES SEE WAS HIRING SERVICES OF THE TRANSPORTER. THE ASSESSEE ALSO SUB MITTED THAT THEY HAD GIVEN CHEQUE TO M/S KARAN TRANSPORTER OF WHICH SHRI PRATAP LALCHAND AGANANI WAS THE PROPRIETOR AND THEY WERE NOT AWARE DHARMENDRA B DUBEY IN WHOSE NAME THE CHEQUES HAD BEEN DEPOSITED IN PARSIK JANTA SAHAKAR BANK LTD AT BHIWANDI. THE ASSESSING OFFICE R WAS HOWEVER NOT SATISFIED BY EXPLANATION GIVEN BY HIM AND IT WA S OBSERVED BY HIM THAT THE TRANSACTIONS OF THE ASSESSEE WITH M/S KARA N TRANSPORT WERE SHADY GENUINENESS OF WHICH WAS NOT PROVED. THE ON US TO PROVE THE GENUINENESS OF THE TRANSACTION WAS ON THE ASSESSEE WHICH HAD NOT BEEN DISCHARGED. THE ASSESSING OFFICER THEREFORE DISALLOWED THE CLAIM OF TRANSPORT CHARGES AMOUNTING TO RS 20 21 23 1/-. 4.1 IN APPEAL THE LEARNED CIT (A) OBSERVED THAT IT WAS CLEAR FROM THE STATEMENT OF MR PARTAP LALCHAND AGNANI AND MR M EHTA THAT M/S KARAN TRANSPORT HAD RENDERED TRANSPORT SERVICES TO THE APPELLANT. BUT SINCE NO ACCOUNTS HAD BEEN MAINTAINED BY MR AGNANI AND FULL DETAILS OF TRANSPORT WORK DONE ARE NOT INDICATED IN THE BILLS THE EXTENT OF TRANSPORT SERVICES RENDERED AND CORRECTNESS OF PAYM ENT IS NOT VARIABLE. IT WAS NOT CLEAR AS TO HOW THE PAYMENT M ADE TO M/S KARAN TRANSPORT WAS CREDITED IN THE ACCOUNT OF MR DHARMEN DRA B DUBEY WHOSE IDENTITY COULD NOT BE ESTABLISHED. THEREFORE EVEN IF THE PAYMENT WAS MADE BY THE CHEQUE THE AMOUNT CREDITED IN THE ACCOUNT OF MR DHARMENDRA B DUBEY OF RS 3 54 925/- COULD NOT BE CONSIDERED NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 10 AS HAVING BEEN INCURRED FOR GENUINE BUSINESS OF TRA NSPORT SERVICES. CIT (A) THEREFORE CONFIRMED THE DISALLOWANCE TO T HE EXTENT OF RS 3 45 925/- AND ALLOWED RELIEF TO THE TUNE OF RS 17 75 306/-. AGGRIEVED BY THE SAID DECISION THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 4.2 BEFORE US THE LEARNED AUTHORISED REPRESENTATIV E FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT (A). IT WAS ARGUED THAT THE ASSESSEE HAD MADE THE PAYMENT BY CH EQUE AS PER THE BILL RAISED AND ASSESSEE WAS NOT CONCERNED AS TO HO W THE PAYMENT MADE WAS UTILIZED BY THE PAYEE. THE LEARNED DEPART MENTAL REPRESENTATIVE ON THE OTHER HAND PLACED RELIANCE ON THE FINDINGS GIVEN IN THE APPELLATE ORDER. 4.3 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ALLOWABILITY O F EXPENDITURE ON ACCOUNT OF TRANSPORT SERVICES. THERE IS NO DISPUTE THAT M/S KARAN TRANSPORT HAD RENDERED THE SERVICES. DISPUTE IS ON LY WHETHER PART DISALLOWANCE COULD BE MADE ON THE GROUND THAT CHEQU ES ISSUED BY THE ASSESSEE HAD BEEN DEPOSITED IN THE ACCOUNT OF M/S K ARAN TRANSPORT OF WHOSE PROPRIETOR WAS MR DHARMENDRA B DUBEY AND NOT MR AGNANI TO WHOM THE ASSESSEE HAD MADE THE PAYMENT. THE ASSESS EE ADMITTEDLY HAD GOT THE TRANSPORT WORK DONE BY M/S KARAN TRANSPORT WHOSE PROPRIETOR WAS MR AGNANI. THE ASSESSEE HAS A LSO CLAIMED THAT IT HAD MADE THE PAYMENT TO MR AGNANI. THEREFORE I T IS NOT EXPLAINED AS TO HOW THE SOME OF THE CHEQUES GOT CREDITED IN T HE ACCOUNT OF MR DHARMENDRA B DUBEY. THE IDENTITY OF MR DUBEY HAS N OT BEEN EXPLAINED EARLIER BY MR AGNANI OR BY THE ASSESSEE. THEREFORE WE AGREE WITH THE VIEW TAKEN BY CIT (A) THAT UNDER THE SE CIRCUMSTANCES THE PAYMENT MADE AND CREDITED IN THE ACCOUNT OF MR DHARMENDRA B DUBEY AT RS 3 45 925/- CANNOT BE CONSIDERED AS HAVI NG BEEN INCURRED NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 11 FOR GENUINE BUSINESS PURPOSE. ACCORDINGLY THE ORD ER OF THE CIT (A) CONFIRMING THE DISALLOWANCE TO THE TUNE OF RS 3 45 925/- IS UPHELD. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN TERMS OF THE ORDER ABOVE. ORDER PRONOUNCED ON 30TH DAY OF MAR CH 2010. SD/- SD/- (N V VASUDEVAN) (RAJENRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATE: 30TH MARCH 2010 . COPY TO 1. THE APPELLANT. 2. THE RESPONDENT 4. CIT(A)-XIV MUMBAI. 5. CIT 4 MUMBAI. 6. D R F BENCH MUMBAI. 7. GUARD FILE. BY ORDER ASST. REGISTRAR ITAT MUMBAI BENCHES MUMBAI *CHAVAN/- NEW EMPIRE TEXTILES PROCESSORS PVT LTD ITA 7235/M/2007 12 SNO DATE INITIALS 1 DRAFT DICTATED ON 12-03-2010 31-03-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 16-03-2010 31-03-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER DOH :.DOD: 12.3.2010/25.3.2010 DOS:17.3.2010/30. 3.2010