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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA
आयकर अपीऱीय अधिकरण, म ुंबई न्यायपीठ ‘एस.एम.सी’, म ुंबई । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”, BENCH MUMBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER आमकय अऩीर सं./ (नििाारण वषा / Assessment Year :2011-2012) M/s Virchand Khimji & Company Vs. ITO 15(2)(3), Mumbai 142/44, Grant Road, Opp. Two Tank, Mumbai - 400008 स्थामी रेखा सं./ जीआइआय सं./ PAN/GIR No. : AADFV5555A (अऩीराथी /Appellant) (प्रत्मथी / Respondent) .. ननधाारयती की ओर से /Assessee by : Shri Rajiv Khandelwal with Shri Nilkant Khandelwal याजस्व की ओर से /Revenue by : Shri R.A.Dhyani सुनवाई की तायीख / Date of Hearing : 18/08/2016 घोषणा की तायीख/Date of Pronouncement 09/11/2016 आदेश / O R D E R This is an appeal filed by the assessee against the order of CIT(A) for the assessment year 2011-2012, in the matter of order passed u/s.143(3).
In this appeal, assessee is aggrieved by the action of CIT(A) confirming the adhoc addition of 3% in respect of transport, freight, telephone and travelling charges. Assessee is also aggrieved for confirming addition u/s.69C of Rs.2,26,136/- being amount paid to M/s. Hiten Enterprises and M/s. Ronak Overseas for purchase of miscellaneous office items.
In ground No.3 assessee is aggrieved for confirming the addition u/s.69C @2% of the total purchases made from M/s. Ronak Overseas.
Rival contentions have been heard and record perused.
Facts in brief are that the assessee is engaged in business of supply of food grains items like edible oil, ghee, provision stores etc., Return of 2 Virchand Khimji & Co., income declaring total income of Rs.12,61,162/- was filed by the assessee which was assessed at Rs.41,98,618/- after making the following additions: (i)Disallowance out of transport and freight Rs.10,00,000/- (ii)Disallowance out of Telephone and Travelling Rs. 65,957/- (iii) Unexplained Expenditure u/s.69C Rs.18,71,499/- 6. By the impugned order CIT(A) upheld the addition to the extent of 3% on these expenses and assessee is in further appeal before us.
We have considered rival contentions and carefully gone through the extract of comparative statement of freight, transport charges and sample self-made voucher in respect of transport charges paid. We found that transport charges paid by assessee through regular transporters were duly supported by their bills / cash memo and in other cases they are mostly supported by third party signed vouchers but prepared by the assessee’s staff and some time self-vouchers. Since vouchers are signed by third party, they cannot be termed as self-made vouchers simply on account of fact that the same are prepared by officials of the assessee in regular voucher forms in the regular course of business.
We had verified the sample copies of vouchers signed by the third parties and self-made vouchers and found that assessee has genuinely incurred the expenditure in regular course of business and adhoc disallowance so made by AO and party upheld by CIT(A) in respect of transport and freight is unwarranted. Accordingly, we delete the disallowance of transport / freight expenses so upheld by CIT(A).
3 Virchand Khimji & Co., 9. With regard to 3% disallowance upheld by CIT(A) on account of telephone, travelling expenses, looking to the nature of assessee’s business, it appears to be on higher side, accordingly, we restrict the same to the extent of 1% of the expenditure so incurred.
In ground No. 2 & 3, assessee is aggrieved for upholding addition by CIT(A) u/s.69C.
We have gone through the orders of the authorities below and found that on the basis of information by sales tax department, AO had added the purchases made from Hiten Enterprises and Ronak Overseas in assessee’s income.
By the impugned order CIT(A) observed as under:- Considering the facts of this case and various case laws as above, it is not a case of bogus purchase. As per the ledger account of M/s. Ronak . Overseas, the total purchase is Rs.3.02 crores and outstanding balance as on 31.03.2012. is only Rs.963.00. Further from the nature and periodicity of transactions, it is seen that payments are made' shortly (within- 3-5 days) after purchase. Payments made are appearing in the bank .statement. Quantitative tally is not disputed. The payments are generally made bill wise. Purchase and payments are regular during the period of. transaction. The credit of 3-5 days cannot be said to be abnormal in this line of trade. Moreover, G.P shown .in these suspicious purchases is also similar to the G.P shown in other purchases.
Even after having the above observation, the CIT(A) upheld the addition of 2% on such purchases. We do not find any merit in the action of CIT(A). In so far as a clear finding has been given by him to the effect that out of total purchase of Rs.2.02 crores, during the year the outstanding balance as on 31/03/2012 was only Rs.963.00. The CIT(A)
4 Virchand Khimji & Co., has also observed the nature and periodicity of transactions, the payments were made shortly within 2-3 days after the purchases. The purchase so made was duly reflected in the bank statement. Quantitative tally is not disputed means whatever sale has been made out of these has been accepted by the department. The CIT(A) also observed that G.P. shown in these purchases are similar to the G.P. shown on other purchases.
In view of these findings, we do not find any merit from the addition so upheld by the CIT(A). Accordingly, we direct the AO to delete the addition in respect of purchases made from M/s. Hiten Enterprises and M/s. Ronak Overseas. We direct accordingly.
In the result, appeal of the assessee is allowed in part.
Order pronounced in the open court on this 09/11/2016