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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.: These are the cross appeals by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals)-33, Mumbai dated 24.12.2012 and pertains to the assessment year 2009-10.
The grounds of appeal in assessee’s appeal read as under:
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On the facts and circumstances of the case, the Ld. CIT(A) erred in restricting the disallowance made under the head, sundry creditors to Rs.19,869/-.
2. On the facts and circumstances of the case, the Ld. CIT(A) has restricted the disallowance to an amount of Rs.26,99,776/- out of a total disallowance of RS.54,82,815/- for non deduction of TDS u/s. 40(a)(ia) of the Income Tax Act, 1961. 3. The appellant prays that the above disallowance of Rs.19,869/- and of Rs.26,66,776/- should be allowed. 3. The grounds of appeal in Revenue’s appeal read as under:
1. On the facts and circumstances of the case, the Ld. CIT(A) erred in restricting the disallowances made under the head, sundry creditors from Rs.47,00,000/- to Rs. 19,869/.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of material purchased Rs.34,00,000/- and addition on account of transport charges of Rs.13,00,000/- without appreciating the fact that the transport charges and material purchase could not be determined whether these were outstanding payments for A.Y .2008-09 or fresh purchases for A.Y.2009-10. : . \ 3. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in restricting the disallowance made of Rs.54,82,815/- for non deduction of TDS u/s 40(a)(ia) of Rs.26,99,776/-. 4 The appellant prays that the order of Id. CIT(A) on the above grounds be; reversed and that of the Assessing Officer be restored. , Apropos issue relating to sundry creditors:
The Assessing Officer noted that the assessee has shown sundry creditor of Rs.58,24,798/-. The sundry creditors were material suppliers of Rs.17,48,028/- and transport charges of Rs.40,76,774/-. He further noted that the assessee has debited transport charges of Rs.1,04,21,115/- and material purchased of Rs.69,91,092/- in the profit and loss account. However, during the assessment proceedings the assessee’s representative filed the reconciliation statement of the transport charges and material charges debited to the account. As per the reconciliation statement the total
3 Satyawan Atmaram Raut transportation charge debited in the P & L account is Rs. 67,82,815/- and material purchased of Rs.1,06,29,392/-. The ld. Counsel of the assessee was asked to provide the details of bills vouchers and supporting evidence related to the sundry creditors of material purchase and transport charges as shown in the annexure of the balance sheet. the ld. Counsel of the assessee could not provided any details/confirmations of sundry creditors of Rs.13,00,000/- for transport charges and Rs.34,00,000/- for material purchase of the following parties.
Material charges : S.No. Name of the party Amount in Rs 01 Adarsh Stone Crushing Co. 459515 02 Bhavesh Stone 91075 03 J.M. Mhatre 1100977 04 Laxmi Stone Trading 818854 05 Navkar Stone Crushing 327064 06 Ravi Stone 377822 07 Sandeep Stone Crushing 204824 08 Shriram Sales & Services 19869 Total 3400000 Transport charges : S.No. Name of the party Amount in Rs. 01 Dakshata Transport 1,4200 02 Hari Om Transport 11825 03 Krishna Transport 101690 04 Lalit Transport 433094 05 Laxmi Transport 284706 06 P.K.Transport 17500 07 Roshan Transport 78750 08 Shree Krupa Transport 11750. 09 Tirupati Transport 19778 10 Vivek transport 326707 Total 1300000
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The assessee vide his letter dated 5.12.2011 declared that he had wrongly debited the material purchases A/c of Rs.34,00,000/- and transportation charges of Rs.13,00,000/- which are pertaining to F.Y. 2009-10 in the above mentioned parties and offered for taxation. Hence, the sundry creditors for material purchased of Rs.44,00,000/- and Transport charges of Rs.13,00,000/- totaling to Rs.47,00,000/- were added to the total income.
Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals).
Before the ld. Commissioner of Income Tax (Appeals), the assessee filed confirmation from eight sundry creditors for supplies and 10 sundry creditors for transport expenses as well as 15-I form from transporters. The ld. Commissioner of Income Tax (Appeals) asked for remand report from the Assessing Officer in this regard.
After obtaining the remand report, the ld. Commissioner of Income Tax (Appeals) also obtained a rejoinder from the assessee. The ld. Commissioner of Income Tax (Appeals) consequent upon the remand report also obtained further details from the assessee.
Thereafter, the ld. Commissioner of Income Tax (Appeals) elaborately considered the issue and restricted the disallowance to only one party Shivam Sales and Services of Rs.19,869/-, where the reply was found contradictory. The ld. Commissioner of Income Tax (Appeals) accordingly granted relief for the remaining amount. The order of the ld. Commissioner of Income Tax (Appeals) in this regard reads as under:
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4.4 In view of this, I have gone through the assessment folder, submissions made by the appellant, remand report filed by the officer and bills as asked for specially in case of parties who did not reply during the remand proceedings. The A.O.has commented that it is not clear if these payments are made for the bills pertaining to earlier year or bills pertaining to subsequent period. The A.O has also brought this fact on record that assessee has declared the income of Rs.47,00,000/- by filing his letter dated 5/12/11 during the assessment proceedings. I have gone through the assessment records and noted that assessee said that material purchased shown in the name of parties Adarsh Stone Crushing Co., an amount Rs.4,59,515/-, Bhavesh stone Rs.91,075/, J M Mahtre Rs. 11,00,977/-, Laxmi Stone Trading an amount Rs.8,18, 851/-, Navkar Stone Crushing Unit an amount Rs.3,27,064/-, Ravi Stone Rs.3,77,825/-, Sandeep Stone Crushing an amount Rs.2,04,824/- and Sriram Sales and Services, an amount Rs.19,869/- totalling to Rs.34,00,000/- are wrongly debited under the head 'Material Purchase Account'. Then in the same letter for transportation charges shown in the name of Dakshata Transport and amount Rs.14,200/-, Hari Om Transport ; Rs.11,825/- Krishna Transport Rs.1,01,690/-, Lalit Transport Rs.4,33,094, Laxmi Transport Rs.2,84?706/-, P.K Transport Rs.17,500/-, Roshan Transport Rs,78,750/-, Shree Krupa Transport Rs.11,750/, Tirupati Transport Rs.19,778/- and Vivek Transport Rs.3,26,707/-in all totalling to Rs.13,00,000/- have also been declared by the appellant has wrongly debited under the head Transportation Charges' as they are pertaining to financial year 2009 - 10. Thus, The assessee declared during the assessment proceeding the amount wrongly debited under the head 'Material Purchase' account of Rs.34,00,000/- and under the head Transportation arges'Rs. 13,00,000/-, totalling to Rs. 47,00,000/-. 4.5 In view of this I have gone through the comments made in the remand report by the assessing officer on details of material purchased from concerned parties. It is noted that during the remand proceedings appellant did file proof of payment made to these parties in the subsequent assessment year that is in the financial year 2009 - 10 . A copy of these parties' ledger accounts as they appears in the appellant's books of accounts were also filed by the appellant. I have also checked the confirmation of account with bills filed in case of few parties in the light of reply given by appellant to the remand report also. 4.6 It is seen that three parties i.e. Adarsh Stone crushing Co., J.M. Mahatre and Laxmi Stone Trading, did not reply to the notices issued by the A.O under section 133(6). From their confirmation, it is also noted that material purchases show only amount but no bill number and then no payment were made to these parties in A.Y.2009-10 during the whole year relevant to A.Y.2009-10. From the material supplier Adarsh Stone Crushing Cos confirmation filed by the appellant, it is noted that appellant has relied upon the payments made to them in subsequent year rather than showing details of material supply along with proof of delivery, if any done by them. Then in case of Ravi Stone, it is noted that in response to notice issued under section 133 (6) that party has filed a copy of Ledger account of the 6 Satyawan Atmaram Raut appellant as it appears in the books. Surprisingly, the same does not show any bill number and again there were no entries for the payments. I have gone through their confirmation and noted that material purchases are credited only for the amount without mentioning any bill number and infact the date of material purchased has no correlation with the bills date and number, which were filed by the appellant on being asked for the same in case of these three parties. It is also noted that no payments were made throughout the period relevant to A.Y.2009-10. Then coming to party i.e. Sriram Sales and Service it is noted that they simply replied that they have no transactions with them for the period whereas confirmation was filed in their name showing material purchased on 25.03.2009 for Rs. 19,869/-. 4.7 In view of this appellant was asked to furnish their sales tax / VAT registration numbers and alternatively their registration number under the shop and establishment act, which is mandatory for carrying on a business from a particular premise. The appellant has furnished the bills in case of Adarsh Stone Curshing Co., J.M. Mahatre, Laxmi Stone Trading Co., Navkar Stone Crushing Unit and also in case of Bhavesh Stone. Out of this, as discussed above, in case of first three parties, it was found that bill amount has been credited for number of bills raised in 15 days duration. Individual bills are not numbered. However, details like lorry number and quantity are available. The pattern is same in case of Adarsh Stone Crushing Co., J.M.Mahatre and Laxmi Stone Trading and Sandip Crushing Co. Probably for this reason A.O has commented that bills are not matching with the amount credited in the name of party. Then, it is a fact that payments made to these very parties in subsequent years which were filed as additional evidence alongwith bank account statement the appellant have not been doubted by the A.O. In view of this, merely because A.O found that it is not ascertainable whether payments were made for outstanding dues of financial year 2008-09 or for fresh purchases made in F.Y.2009-10 is not tenable and hence rejected herewith. 4.8 Accordingly, I am of the considered view that the amount shown for material purchased from these parties including those which are shown outstanding cannot be taken as non-genuine. However, in case of party named Shivam Sales & Services Rs.19,869/- where the reply was found totally contradicted to the confirmation, expenses being bogus has to be disallowed. Accordingly, addition made under the head 'sundry creditors' for Rs.47,00,000/- is restricted to Rs.19,869/-.
Against the above order, the assessee and the Revenue are in cross appeal before us.
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We have heard the ld. Departmental Representative. None appeared on behalf of the assessee despite notice. In our considered opinion, the issues raised can be adjudicated by hearing the ld. Departmental Representative and perusing the records.
Upon careful consideration, we find that the ld. Commissioner of Income Tax (Appeals) has elaborately considered the factual aspect in this regard. He has also considered the additional evidence which have been submitted by the assessee subsequent to the Assessing Officer’s order. The ld. Commissioner of Income Tax (Appeals) has also obtained the remand report. Thereafter, after elaborating and analyzing the remand report and the assessee’s rejoinder, the ld. Commissioner of Income Tax (Appeals) has given a finding that the creditors cannot be considered to be non genuine, except for one party namely, Shivam Sales and Services for Rs.19,869/-. In our considered opinion, there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). He has correctly appreciated the facts and, hence, we uphold the order of the ld. Commissioner of Income Tax (Appeals) in this regard.
Apropos issue relating to disallowance u/s. 40(a)(ia) of the Act:
On this issue, the Assessing Officer made the addition by observing as under:
As per the reconciliation statement the total transportation charges debited in the P & L account is Rs.67,782,815/-. Out of that assessee already agreed of Rs.13,00,000/- as bogus sundry creditors for transport charges. Assessee was-, asked to file the details of copy of ledger account of TDS deducted on transport- charges payment. The assessee's representative stated that the TDS was not deducted on transport charges paid and he asked to show caused as why the same should not be disallowed. The assessee's representative accepted the mistake and agreed for the addition of Rs. 54,82,815/- u/s 40(a)(ia) of the IT. Act, 1961.
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Before the ld. Commissioner of Income Tax (Appeals), the assessee submitted that the assessee has not deducted TDS u/s.40(a)(ia) towards transportation charges paid.
However, Form 15-I was filed of various transporters to whom transport charges are paid to the ITO 3(2) TDS Circle, Mumbai for claiming exemption towards non deduction of TDS. Accordingly, the assessee submitted that eleven letters and 15-I duly submitted to ITO 3(2) were presented before the Assessing Officer. It was claimed that the assessee was not in default for non deduction of TDS u/s.40(a)(ia). The ld. Commissioner of Income Tax (Appeals) referred to the remand report referred hereinabove in issue 1 in this regard. He noted that in the remand report, the Assessing Officer has not doubted the authenticity. The ld. Commissioner of Income Tax (Appeals) wrote the letter to the ITO- TDS. The ITO TDS responded that all the records are not traceable. In view of the above, the ld. Commissioner of Income Tax (Appeals) went through the form 15-I filed by the assessee. He noted that the forwarding letters were duly acknowledged by the ITO TDS.
He further noted that they have been specifically asked for by the Assessing Officer and they have not been denied by the ITO TDS. Hence, the ld. Commissioner of Income Tax (Appeals) rejected the objection of the Assessing Officer that this form 15-I are afterthought. However, thereafter the ld. Commissioner of Income Tax (Appeals) referred to the Assessing Officer’s enquiry and restricted the disallowance to five parties amounting to Rs.26,99,776/-. In this regard, the ld. Commissioner of Income Tax (Appeals) held as under:
5.4 However, as regards the findings of the enquiry made by A.O during remand proceeding it is noted that no replies have been received from certain parties who are Hari Om Transport and Roshan Transport. In view of this I have 9 Satyawan Atmaram Raut gone through these accounts, and it is noted that in the case of all these transport parties there is no mention of bill in their ledger account maintained in the books of accounts of appellant. Then 1 have gone through the form 15 I filed by parties and noted that certain parties named; Raghunath Chander Ghanat proprietor of Hind Transport, of the Avinash Lad proprietor of Lalit Transport, Santosh Manik Itkar proprietor of Vivek Transport, Sumitra Krishna Kadu proprietor of P.K Transport, Santosh Kashinath Gaikar proprietor of Shree Krupa Transport and Rajendran Tulashiram proprietor of S . N transport and they have not shown any heavy goods vehicle registered in their names and hence, the appellant was questioned what is relevance of 151 for claiming exemption u/s. 194C (6) of the Act when they do not own any vehicle in their name. The appellant has not been able to reply, how in absence of any goods vehicle owned in their names, these parties have made their claim in form 15-1 when they are not able to fulfill the requirement in sub sec. (6) of sec. 194C of the Act. In view of this finding which has not brought to notice by appellant or the A.O,, I am convinced that transport expenses claimed as paid to them are not admissible business expenses disallowed as no TDS were made on these payments when they were not exempted U/S.194C. Incidentally one party P.K. Transport from whom A.O. did not get any reply is also included among them. The amount shown as paid to these parties as under— S.No. Name & Address Total Amount (Rs. l VivekTransport,RoomNo.305,PlotNo.8, Sector-8, 11,77,072/- Kamotha 2 Lalit Transport,323, Shirawane Village, Near 7,41,094/- H.P.Company, Thane District, Navi Mumbai 3 Shree Krupa Transport,At-Kopra, Post.Kharghar, 2,23,500/- Tal.Panvel, Dist. Raigad, Navi Mumbai - 410 210 4. P.K.Transport, House No. 109, Jasai village, 3,17,500/- Opp. Shivkupa Hotel, Uran- 410 206.
5. Hind Transport, 304, Ekveera Nivas, Gavhan 2,40,610/- Village, Tal-Panvel, Dist-Raigad 6. S.N.Transport,Prop. Shri RajendraTulsiram Not found in the list.
5.5 The total amount in case of party appearing at Sr.No. 1,2,3,4& 5 itself comes to. Rs.26,99,776/-, and then in case of party appearing at Sr.No.6, the amount being not available in the assessment folder, it is clear that same being not covered by any exempted provisions of Sec.l94C are clearly disallowable u/s.40{a)(ia). The A.O is directed to ascertain the amount of transport expenses claimed in the name of this party i.e. S.N.Transport, in o der to disallow the same u/s.40(a)(ia) for the reason mentioned as per the discussion made above. Hence, disallowances
10 Satyawan Atmaram Raut made u/s.40(a)(ia) in case of these five parties amounting to Rs.26,99,776/- alongwith amount paid to party no.6 has to be disallowed and hence confirmed against the disallowances made at Rs.54,82,815/-.
Against the above order, the assessee and the Revenue are in cross appeal before us.
We have heard the ld. Departmental Representative. None appeared on behalf of the assessee. Upon careful consideration, we note that the ld. Commissioner of Income Tax (Appeals) has correctly analyzed the facts of the case. The assessee has subsequently submitted Form 15-I which the ld. Commissioner of Income Tax (Appeals) has rightly observed to be not an afterthought as held by the Assessing Officer. Thereafter, factually analyzing the issue, the ld. Commissioner of Income Tax (Appeals) has restricted the disallowance to five parties. In our considered opinion, the ld. Commissioner of Income Tax (Appeals) has correctly appreciated the issue and there is no infirmity in his order.
Accordingly, we uphold the same.
In the result, these appeals by the assessee and the Revenue stands dismissed.
Order pronounced in the open court on 30.07.2018