ITO, WARD-2(2), KOLKATA, ASANSOL vs. M/S. MAA TARA TRASNPORT CO., BURNPUR

- This Revenue’s appeal for assessment year 2010-11 challenges correctness of Commissioner of Income Tax (Appeals)-Asansol’s order dated 22.09.2014, passed in case No.142/C.I.T.(A)/Asl/W-2(2)/Asl/13-14 restricting Assessing Officer’s action disallowing transport charges of₹60,68,502/- @12.5% only coming to this ₹7,58,562/-, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

Learned Departmental Representative vehemently contends during the course of hearing that CIT(A) has erred in law as well as on facts in restricting the impugned disallowance vide following detailed discussion:- “24. Ground 18 is against disallowance under section 40a(ia). The Assessing Officer disallowed entries transportation charge as vouchers were not produced and tax was not deducted under section 194-I. After hearing a notice was issued to Assessing Officer as under:- A.Y.2010-11 ITO Wd-2(2), Asl. Vs. M/s Maa Tara Transport Co. Page 2 ‘In regard to disallowance of Rs.6,068,502/- under section 40a((ia), prior identification of personwise default under section 194-I is needed. This is absent. You may call for and verify the books of account and vouchers and give a report on the extent of disallowance to be made.’ In reply the Assessing Officer reported as under:- ‘As directed, a letter dated 23.06.2014 vide letter no. AAMFM 3326M/Wd-2(2)/Asl/2014-15/79 was issued to the assessee by seed post for verification of the fact, regarding enquiry of transactions relating to section 40a(ia) of Rs.60,68,502/- and addition of Rs.5,83,695.21 without taking views of the assessee and an opportunity was allowed to the assessee. The assessee was requested to comply on 29.06.2014 alongwith evidence in support of transactions relating to section 40a(ia) and Rs.5,83,695.21 without taking views of the assessee alaong with ledger copy of all relevant papers but the assessee has not submitted any details and not appeared till date. The assessee or its au9thorized representative did not appear before the undersigned and did not prove the transactions relating to section 40a(ia) of Rs.60,68,502/- and addition of Rs.5,83,695.21 without taking views of the assessee along with ledger copy of all relevant papers with verification of books of account and vouchers.’ 25. Analysis of above reveal that no case is made for disallowance under section 40a(ia). However, non production of vouchers prove that accounts are not correct and complete warranting assessment to best of judgment. However appellant submitted that proportionate transportation charges is coming down year after year and hence no disallowance is needed. The picture is as under:- F.Y Transportation charges Transportation Percentage received charges paid 2007-08 Rs.2,11,81,800/- Rs.94,60,081/- 44.66% 2008-09 Rs.2,10,99,894/- Rs.69,41,277/- 32.89% 2009-10 Rs,1,88,53,303/- Rs.60,68,502/- 32.18% 26. The matter is considered. Production of vouchers is a mandatory requirement to prove correctness and completeness of accounts. Transportation charges debited depend on nature of work done, how it is executed, and other surrounding circumstances. Hence, viewing transportation charges in isolation is not a way to view correctness of accounts. In exercise of power under explanation to section 251, I hold that a disallowance is need to absorb for deficiency in accounts. The Authorised representative objected to same again by pointing to decreasing proportion of transportation charges to turnover. This is rejected since the nature of work, manner execution etc. were not established. Accordingly I estimate the disallowance to m9y best of judgment at 12.5% of sums debited and thus comes to 7,58,562/-. The Assessing Officer is directed to replace the addition of Rs.60,68,502/- made under section 40a(i) by Rs.7,58,562/- as a disallowance to absorb deficiency in books of account and vouchers. The ground is treated as partly allowed.”