ITO, WD-40(1), KOLKATA, KOLKATA vs. SHRI SANJAY KUMAR SINGH, KOLKATA

- This Revenue’s appeal for assessment year 2010-11 challenges correctness of Commissioner of Income Tax (Appeals)-12. Kolkata’s order dated 10.02.2016 passed in case No.126/CIT(A)-12/Kol/Wd-40(1)/2014-15 partly restricting the Assessing Officer’s action disallowing / adding assessee’s claim of truck / lorry hire payments of ₹46,70,337 to 4,76,240/- thereby granting relief of ₹41,94,097/- in proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’.

We notice at the outset that CIT(A)’s detailed discussion has summarized all relevant particulars of assessee’s claim as well as Assessing Officer’s findings as under:- “3. The AO disallowed payment of Rs.46,70,337/- made to various parties on account of transportation charges on the grounds that the assessee was not able to discharge their onus. The assessee had claimed certain expenses as transportation charges which were paid to various parties. All supporting documents were produced A.Y.2010-11 ITO Wd-40(1), Kol. Vs. Sh Sanjay Kr. Singh Page 2 at the time of assessment proceedings. The AO chose to sent notices u/s.133(6) seeking confirmation of their accounts. Some notices were returned unserved and some parties filed their confirmations to the AO. Letters were returned unserved in cases of Manfuli Oil Stores, Abdul Quyyum, Bhupendra Singih & Hind Enteprises upon which the Assessing Officer disallowed the whole amount which is debited on account of Transportation Charges of these parties. One of the parties Kinkar Ghosh replied back to the notice stating that he did not posses any documents to support the payment received from the appellant. Impugned order have considered the submissions of the appellant carefully and perused all the documents submitted by them as well as perused the Assessment order. The appellant has submitted that the Rajasthan High Court in the case of Shiv lal Tak v CIT 251 ITR 37 (Raj.) held that mere inability to substantiate would not mean that assessee furnished false explanation for the same. In this case the assessment was not in the position to vouch each and every item of expenses. The court held that this could not be treated as a deliberate false explanation nor it could be treated as a presumption about deliberate concealment. I find that the AO ha not conducted his investigation systematically but has reached a conclusion rater hurriedly. Just because some notices came back unserved or because some notices were never replied to does not mean that the expenditure claimed by the appellant was bogus. Just because Kinkar Ghosh replied that he had no documentary evidence does not mean that all other parties are bogus and would also not have any documentary evidence to prove that the appellant had indeed made some payments to them. During the assessment proceedings the appellant had produced all the ledger accounts of all the parties. Most of the payments were through banking channels and wherever TDS was deductible it was done so. The AO never established that the ledger accounts of these parties were not genuine nor that the books of accounts maintained by the appellant were inaccurate, unreliable and erroneous. The AO disallowed the following payments towards transportation charges of the following parties as below:- Party name in respect of Amount debited transportation charges paid Manfuli Oil Stores 650524 Abdul Quyyum 74770 Ahupinder Singh 55762 Hiind Enterprises 430437 Kinkar Ghosh 395798 Laxmi Shankar Pandey 116105 Ram Lakhan Pandey 179444 Rama Shankar Pandey 47043 Robin Kumar Singh 525258 Mahendra Singh 314233 Ram Lachan Shaw 152731 Sajahan Mullick 342172 Shree Ganeshjsi Transport 457312 Dinanath Prasad Shaw 464248 Debi Prasad Singh 464500 Total 4670337 The appellant has submitted copies of accounts from the books of 8 parties out of the above namely Ram Lakhan Pandey (Rs.1,79,44/-), Shri Ganeshji Transport (R.4,57,312/-), Bhupinder Singh (Rs.55,762/-), Robini Kumar Singh (Rs.5,25,258/-), Ram Bachan Shaw (Rs.1,52,731/-), Dinanath Prasad Shaw (Rs.4,64,248/-), Devi Prasad Singh (Rs.4,64,500/-), Kinkar Ghosh (Rs.3,95,758/-). These add up to Rs.26,95,013/- which were examined and found to be tallying with the ledger A.Y.2010-11 ITO Wd-40(1), Kol. Vs. Sh Sanjay Kr. Singh Page 3 accounts in the books of the Appellant. There is nothing on record to doubt these submissions, hence the amount of Rs.26,95,013/- paid to above parties is deleted. The appellant has further submitted the ledger accounts of the balance parties namely:

Abdul Quyyum Rs. 74,770.00 2. Hind Enterprise Rs.4,30,437.00 3. Manafuli Oil Stores Rs.6,50,524.00 4. Laxmi Shankar Pandey Rs.1,16,105.00 5. Rama Shankar Pandey Rs. 47,043.00 6. Mahender Singh Rs.3,14,233.00 7. Sajahan Mollick Rs.3,42,172.00 Rs.19,75,284/- The appellant has stated that they have no business dealings with the parties today and that they have shifted from their old office premises long back. It is seen that most payments are made by cheques and some payments are by cash. The appellant has deducted TDS wherever applicable. The Appellant was asked to submit details of cash expenses supported by documentary evidence and bank stats evidencing payment by cheque. They have submitted that in transport business it is not possible to pay for all payments by cheques. It is not practical to give the driver and his helper an account payee cheque to take care of all their trip expenses. The appellant submits that it is for this reason that the Income Tax Act currently allows payment in cash by Rs.35000/- in case of transportation charges, whereas for other business, the same is limited to Rs.20000/- only. But these must be supported by documentary evidence for it to be allowable under the Income Tax Act. A closer look at these ledger accounts reveal that out of Rs.19,75,284/-, an amount of Rs.4,75,240/- has been paid through cash. The appellant has submitted the following chart: Sl. Party name Amount originally Cash payment No. Disallowed 1 Abdul Quyyum 74,770.00 5,090.00 2 Hind Enterprises 430,437.00 156,931.00 3 Manfuli Oil Store 650,524.00 70,460.00 4 Laxmi Shankar Pandey 116,105.00 69,609.00 5 Rama Shankar Pandey 47,043.00 26,212.00 6 Mahendra Singh 314,233.00 83,179.00 7 Sajahan Mullick 342,172.00 64,759.00 Total 19,75,284.00 4,76,240.00 The Appellant was not able to support these expenses with any kind of supporting documents or vouchers. Hence these deserve to be disallowed. To sum up, the Assessing Officer has disallowed an amount of Rs.46,70,337/- paid to various parties on account of transportation charges. For reasons discussed above, out of the amount of Rs.46,70,337/-, only an amount of Rs.4,76,240/- is hereby confirmed.”