MADIYAM VENKATARAVINDRA REDDY, ANANTAPUR,HYDERABAD vs. ITO, WARD-3, ANANTAPUR, ANANTAPUR

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” SMC BENCH: HYDERABAD BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA. No.952/Hyd/2016 Assessment Year: 2008-2009 Modiyam Venkataravindra vs. The Income Tax Officer, Reddy, Ward-3, Prop: Lahari Transport, Aayakar Bhawan, 3rd Road, New Anantapur. Town, Anantapur – 515001. PAN: AKTPR 8387 E (Appellant) (Respondent) For Assessee: Shri K.A. Sai Prasad For Revenue : Shri M. Naveen, DR Date of Hearing : 08.05.2018 Date of Pronouncement : 08.05.2018 ORDER PER J. SUDHAKAR REDDY, AM.

This is an appeal filed by the assessee directed against the order of the Ld. CIT(A), Kurnool dated 29.04.2016 for the A.Y. 2008-2009 u/s 250 of the Income Tax Act, 1961 (the Act). 2. Facts in brief: The assessee is an individual and is a Transport Contractor. He runs a proprietary concern in the name and style of M/s. Lahari Transport. For the impugned Assessment Year 2008-2009. The assessee filed return of income on 30.09.2008 declaring a total income Rs. 1,96,140/-. The same was processed u/s 143(1) of the Act. 3. The Assessing Officer issued a notice to the assessee u/s 154 of the Act on 26.08.2010 proposing rectification of certain mistakes pertaining to expenditure claimed on vehicle maintenance and TDS. No action was taken on this notice. Later a notice u/s 148 of the Act was

issued to the assessee based on a finding in the audit report by the Income Tax Officer (IAP), Tirupati. An assessment order u/s 143(3) r.w.s of the Act was passed on 15.03.2012. 4. Thereafter a show-cause notice was issued by CIT, Tirupati u/s 263 of the Act on 07.10.2013, proposing revision of the assessment order passed on 15.03.2012. Thereafter, vide order dated 14.03.2014, the Ld. CIT, Tirupati passed an order u/s 263 of the Act. At paras 7, 8 and 9 he held as follows: “7. Again, during the course of assessment proceedings, the assessee’s AR produced a fresh Ledger extract for verification. 8. From the above narrated facts of assessee, it is coherent that the assessee had filed incorrect and inaccurate particulars to the Department at the time of earlier assessment proceedings. This aspect is agreed by the assessee himself with a reason that the nature of business itself is tedious. The explanation offered by the assessee that the accountant who fed into the system confused and entered the vehicle numbers wrongly and in consequent to that the payment particulars shows as if not to paid to Motor Lorries is not acceptable. Furnishing inaccurate particulars to the Department leads to levy of penalty u/s 271(1)(c) of the I.T. Act. Moreover, it is pertinent to mention that the assessee is not eligible to claim any new benefit in assessment proceedings pursuant to section 263 as per the case law ACIT vs. ITW India (P) Ltd (2010) 40 SOT 318 (Hyd.) (Trib.). Hence, producing a fresh ledger extract for verification is not viable. The onus of proving the genuinity of transactions and business affairs lies on the assessee himself. The assessee, thus has failed to discharge his complete onus to prove the same. 9. In view of the above, the assessment completed u/s 143(3) on 26.12.2011 is set-aside with a direction to Assessing Officer to redo the assessment de novo after examining al the issues, in details and eliciting appropriate material from the assessee on issues refered to in the foregoing paras by affording reasonable opportunity of being heard to the assessee.”

towards transport charges by giving vehicle number and producing vouchers for the amounts paid for such vehicles. On verification of the vehicle numbers, it has come to light that these vehicles are either 3 wheeler goods vehicles, Auto Rickshaws, Cab Commander Jeeps etc., and that the vehicle numbers do not belong to Trucks or Lorries which were required for transport. Thus, the Assessing Officer alleged that the assessee has inflated expenditure incurred towards transport charges by producing fake and fabricated vouchers and receipts. 6. The assessee explained that the accountant, who fed the vehicle numbers into the computer system, jumbled the numbers and hence there was variation in the digits and that this has led to conclusion that the vehicles used are not public transport lorry vehicles. He provided a list of the vehicle numbers that are the correct number of the vehicle as per him and submitted that a perusal of the correct numbers and the recorded numbers demonstrates that, there is single number variation, which can occur if numbers are not fed correctly in to the computer, which resulted in the error. He explained that the error was of data entry and that the assessee has in fact incurred the expenditure for transportation of goods as per the contract and has earned revenues on the same. 7. The Assessing Officer rejected the claim of the assessee by holding as follows. “The explanation as submitted by AR of the assessee in respect of transportation business is verified. The assessee has also requested at the time of hearings that the rectified / amended ledger account of Transportation Charges may kindly be considered. After careful consideration of the explanation, the claim of rectified / amended ledger account of Transportation Charges produced before the Commissioner of Income Tax & also the assessee has made a request at the time of hearings before the undersigned is not accepted on the following grounds:- i) That the assessee has claimed and produced the rectified / amended ledger account of Transportation Charges before the Commissioner of Income Tax is not accepted as Commissioner of Income Tax has not accepted the same on the ground that the

assessee is not eligible to claim any new benefit in the assessment proceedings pursuant to section 263 as per the case law in the case of ACIT vs. ITW India (P) Ltd (2010) 40 SOT 348 (Hyd) (Trib.). It is also considered by the Commissioner of Income Tax that mere producing a fresh ledger extract before the Commissioner of Income Tax is not viable and the onus of proving the genuinenity of transactions & business affairs lies on the assessee only. Thus, the assessee failed to discharge his complete onus to prove the same. ii) That the A.R. of the assessee has explained that the wrong entries were occurred while preparing the financial statements but failed to produce the bills / vouchers so as to consider / verify the rectified / amended ledger account copy of the Transportation Charges. iii) That the A.R. of the assessee has given explanation only without producing the vehicle owners / drivers of the vehicles since most of the vehicles are registered before the Road Transport Department of Anantapur District so as to cross verify the genuineness of the payments made to the vehicle owners / drivers at the time of payment made by the assessee. iv) That the assessee has also failed to furnish confirmation letters from the vehicle owners, in case the vehicle owners and or drivers are not produced due to busy schedule / held up with their own work so as to consider the transportation charges paid by the assessee to the vehicle owners / drivers w.r.t the bills / vouchers as maintained by the assessee. v) That the assessee has failed to discharge his complete onus to prove that the transportation charges paid by the assessee to the vehicles. In view of the above grounds, the rectified / amended ledger account copy is treated as fictitious / fabricated expenditure in respect of Transportation Charges. Therefore, the total amount of Rs. 27,89,712/- as mentioned in the above table is disallowed and added back to the income returned.” 8. Aggrieved, the assessee carried the matter in appeal. The assessee submitted before the First Appellate Authority that the clarification given by the assessee on the data entry errors of vehicle numbers should have been verified and investigated into by the Assessing Officer and that the explanation should not have been rejected without enquiry. Alternatively, he pleaded that a reasonable percentage of turnover may be taken as profit earned and may be determined as the assessee’s income, in view of the passage of time. Ld. CIT(A) held that the amended ledger extract and evidence filed by the assessee are all fictitious and fabricated in nature. He also rejected the pleading of the assessee for

estimate of Gross Profit as a percentage of total turnover. He upheld the order of the A.O. Aggrieved the assessee is in appeal before us. 9. The learned Counsel for the Assessee, Shri K.A. Sai Prasad, submitted that the Ld. CIT in his order u/s 263 of the Act, relied on the case law viz., ACIT vs. ITW India (P) Ltd (supra), for the proposition that the assessee is not eligible to make claim for any new benefit in assessment proceedings pursuant to an order u/s 263 of the Act and hence the assessee is not entitled to produce an amended ledger extract and evidence for verification. He drew the attention of this Bench to a copy of the order of the ITAT and pointed out that the facts are totally different. In ACIT vs. ITW India (P) Ltd (supra), the assessee filed additional ground before the Ld. CIT(A) claiming deduction of provision of doubtful debts and withdrawal of doubtful debts, while computing book profits u/s 115JB of the Act. In the case on hand, the issue of claim of transportation charges was itself a subject matter of set-aside and this case law cannot be applied to shut the doors of the assessee in substantiating his claim of having incurred transportation charges. He vehemently contended that the Ld A.O. has not examined the evidence produced by the assessee which demonstrated typographical and data entry errors committed by the accountant, in recording the vehicle numbers while entering them in the books of account. He argued that it is wrong to hold that the expenditure incurred is bogus and that the evidence produced is false and fabricated, even without examining the same. Alternatively, he submitted that as the matter pertains to the assessment year 2008-2009, a percentage of gross turnover may be adopted as profit and the assessee taxed accordingly. He relied on the following orders of the Coordinate Bench of the ITAT for the proposition that the Gross Profit as a percentage of turnover was determined by the Tribunal at the rate of 5%. (i) ACIT vs. ITW India (P) Ltd. ( 40 SOT 348) (Hyd.)

(ii) ITO vs. Sri Gundapaneni Nageswara Rao, ITAT Order dated 29.04.2014 (iii) Sri Veera Vadivel Murugan Transport Agency vs. ITO (ITA No.1919/H/2011, dated 28.06.2012) (iv) Sri Venkata Balaji Transport vs. ACIT (ITA No.1236/H/2015, dated 16.03.2016) and (v) DCIT vs. M/s. Sri Sai Ram Transport (ITA No. 102/Hyd/2013, dated 03.12.2014) 10. Learned Departmental Representative Mr. M. Naveen, on the other hand, strongly opposed the contention of the Learned Counsel for the Assessee and submitted that this is a clear-cut case of inflation of expenditure, by producing false and fabricated evidence. He submitted that the assessee is not entitled to produce additional evidence before the Assessing Officer in the fresh round of assessment proceedings pursuant to an order u/s 263 of the Act as the assessee had himself accepted to a mistake in reply to the show-cause notice u/s 263 of the Act. He relied on the order of the Ld. CIT(A) and prayed that the findings thereon be upheld. 11. After hearing the rival contentions, perusing the papers on record and the orders of the authorities below, I hold as follows: 12. In the case of ACIT vs. ITW India (P) Ltd (supra), there is no proposition laid down that the assessee cannot substantiate its claim of a particular expenditure, which was remanded to the file of the Assessing Officer by the CIT while exercising revisionary powers u/s 263 of the Act for fresh adjudication on merit, in accordance with law. This is not a new claim. It is a case of substantiating the expenditure claimed. In that judgment, the Tribunal has held that no new claim can be made before the Learned First Appellate Authority consequent to assessment made u/s 143(3) r.w.s 263. In the case on hand, the very purpose of setting aside of the assessment to the file of the Assessing Officer is for a fresh adjudication of the expenditure already claimed to examine all the issues in detail and elicit appropriate material from the

assessee. In my view, the Assessing Officer was wrong in refusing to examine the explanation given by the assessee and the evidence produced by him. To verify the genuineness of the claim of the assessee, the Assessing Officer should have conducted an enquiry into the evidence given by the assessee to verify whether the claim made that typographical and data entry errors of vehicle numbers had crept in was correct or not. Thus, the conclusion of the Assessing Officer drawn without considering the expenditure and without enquiry and verification of the evidence cannot be upheld. 13. Be it as it may, keeping in view the fact that the assessee has not properly supported his case by producing necessary evidence in support of the expenditure claimed, in my view, interest of justice would be met if the income in this case is estimated @ 5% of the gross receipts as held by the Coordinate Bench of the Tribunal in the case of Sri Venkata Balaji Transport vs. ACIT (supra) and in the case of Sri Sai Ram Transport (supra) etc. Accordingly, the Assessing Officer is directed to assess the income @ 5% of gross receipts of the assessee. The disallowances made are hereby deleted. 14. In the result, appeal of the assessee is allowed in part. Order pronounced the in open Court on 08th May, 2018. Sd/- (J. SUDHAKAR REDDY) ACCOUNTANT MEMBER Hyderabad, Dated: 08th May, 2018.

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