SURENDRA KUMAR AGRAWAL,NUAPADA vs. ITO, BHAWANIPATNA WARD, BHAWANIPATNA

per quintal for transportation charges as in one truck 9 to 10 tons of PDS

materials are transported. However, in case of transportation of Dal for

delivery at school point, the transportations are made from Nuapada to all

16562 schools of the five block and two NACs. It was submitted that it is

not possible to supply the Dal in one truck to all the schools. Therefore,

the assessee engaged other vehicles such as three wheelers as road

facilities are not good to enter the heavy vehicles. It was also submitted

that the local areas to which the assessee was supplying Dal are not

supported by banking facilities and, therefore, the truck drivers demand

cash payment only. It was submitted that if the Assessing Officer was

doubted the payment made to transporters, he could have called these

transporters for confirmation to ascertain the correctness of the claim of

the assessee as all the necessary documents and information were supplied

to the Assessing Officer. It was submitted that the Assessing Officer has

not rejected the books of account and has not specified the defects for

which the actual expenditure or profit could not be ascertained.

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that the assessee was engaged in two types of business. He worked as a

procurer of dal, storage agent for the material and transported the dal to

different schools of five blocks of Nuapada district. He also in addition

worked as a transporter of PDS items for the Civil Supply Officer, Nuapada,

Both the works are distinguished from each other because in the first

contract, the assessee purchased dal from outside and inside the state and

brought it to his business premises. Thereafter, he carried the same for

storage and then transported it in different quantities to different schools

of Nuapada district. Whereas as transporter of PDF items, the assessee

has transported the PDF items from the godown of CSO to the civil supply

godowns of five blocks of Nuapada District for which he only received

transportation charges. The CIT(A) observed that the assessee has entered

into agreement with government, from which, it is understood that the

storage of dal and transportation of the same by the assessee to different

schools in the five blocks of Nuapada district where different quantities

are involved and length of distances to be covered by the assessee is

different from transporting the PDS items from the district godown of civil

supply office to the five block office destinations. Therefore, the

transportation charges claimed at Rs.75/- per quintal for transportation of

PDS items from the district godown to the five block offices would not be

comparable with transporting different quantities of dal to around 300

8 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

schools situated in the five block of Nuapada with some of those being at

remote places.

the debit vouchers in token of receipt of cash have not been supported with

revenue stamp even though the amount of cash payments exceeded

Rs.5000/- and many vouchers submitted by the assessee are not

completely filled in to possess evidentiary value. He observed that the

contention of the assessee is that the truck drivers insisted cash payment

as the destinations are not supported by banking facilities. Considering the

above, the CIT(A) observed that an element of discrepancy cannot be ruled

out in maintaining the correct account of transportation expenses as

claimed by the assessee. Therefore, he directed to disallow 10% of the

expenditure claimed under carriage outward being Rs.9,67,000/- and

added the same to the income of the assessee.

before us.

submissions made before the lower authorities. He submitted that the

Assessing Officer has not given any basis in estimation of transportation

charges of dal from Nuapada to different schools. He further observed that

the Assessing Officer has not rejected the books of accounts of the assessee

9 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

and neither pointed out any defects thereon. Therefore, he was not

justified in estimating the transportation expenses. It was argued that the

CIT(A) has assumed that since the payment of transportation charges to

the truck drivers was made in cash who insisted cash payment, therefore,

bills and vouchers could not have been maintained properly by the assessee

to give true and correct picture of transportation charges paid and the

addition was made based on assumption and surmise of the CIT(A). Hence,

it was his prayer that the addition made should be deleted.

the disallowance sustained at 10% of the carriage outward expenses was

on higher side and, therefore, same should be appropriately reduced.

CIT(A) was not justified in giving relief of Rs.75,37,764/- .

under consideration, the assessee has claimed to have paid carriage

outward expenses of Rs.96,71,825/-. However, in the ledger account, the

assessee had debited such expenses of Rs.1,14,14,602/- and credited

Rs.17,42,777/- thereby making a net claim of Rs.96,71,825/-. We find that

the assessee was engaged in two types of business i.e. procurement,

storage and supply of same to different schools of five blocks of Nuapada

10 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

district and transportation of PDS materials for the Civil Supply Officer,

Nuapada. Both the works are distinguished from each other. In case of

transportation of dal, the assessee purchased the same from outside and

inside the State and stored the same in his business premises and

thereafter supplied to different schools of Nuapada district. In case of PDS

materials, the assessee has transported the items from the godown of CSO

to five blocks of Nuapada district for which he received only transportation

charges. Therefore, we are of the considered opinion that both the

transportations are not comparable to each other. With regard to payment

made in cash to truck drivers, we are of the considered that when banking

facilities are not available in remote areas and on the spot the truck drivers

insisted cash payment, the assessee has to succumb to the demand of the

transporters and paid the cash. Further, we find that the books of account

of the assessee were not rejected by the Assessing Officer and without

doing the same, he is not empowered in law to make estimated

disallowance out of the legitimate and genuine business expenditure of the

assessee. Still further, it is not the case of the revenue that the assessee

has claimed bogus expenses in order to reduce its income. Further, no

details have been provided either by the Assessing Officer or by the CIT(A)

as to which of the transportation expenses is not verifiable. Therefore, we

are of the considered view that no estimated disallowance out of total

transportation inward expenses of Rs.96,71,825/- can be made by

theAassessing Officer in law. Hence, we set aside the orders of lower

11 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

authorities and delete the addition of Rs.9,67,000/- sustained by the CIT(A)

and allow this ground No.2 of appeal of the assessee and reject the ground

No. 2 of appeal of the revenue.

the CIT(A) erred in treating the amount of Rs.12,64,611/- as excess

purchases unexplained ignoring the reconciliation and sale tax record

produced by the assessee.

account by the assessee and as requisitioned u/s.133(6) of the Act, there

have been discrepancy in the accounts of five parties. The Assessing Officer

has produced the parties with details of purchases made as per assessee

and sale as per party. Thus, the Assessing Officer found that there have

been excess purchase of Rs.12,64,611/- as shown by the assessee. Since

the assessee could not reconcile the purchases made from the above five

parties, the Assessing Officer treated the excess purchase of rs.12,64,611/-

as unexplained and added the same to the income of the assessee.

not inflated the purchases to reduce profit as all the purchasers are duly

examined and stamped at the check gate and duly recorded in the books

12 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

of account. The books of account were duly checked and verified by the

Sales Tax Authorities.

ground that during the appeal proceedings, the assessee could not produce

any reconciliation of the purchases as claimed and on the other hand, the

Assessing Officer collected information u/s.133(6) of the Act but the

assessee failed to reconcile the same.

statement of difference in purchases order placed at pages 55 to 61 of the

paper book and submitted that there was no difference as alleged by the

Assessing Officer. Therefore, he submitted that the addition should be

deleted.

at paper book at pages 55 to 61 of difference in purchase was not filed

before the Assessing Officer or before the CIT(A). In our considered view,

the same requires verification by the Assessing Officer. Therefore, in the

interest of justice, we restore back this issue to the file of the Assessing

Officer for adjudication after verifying the reconciliation statement of

13 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

difference in purchases of Rs.12,64,611/-. Hence, this ground is allowed

for statistical purposes.

addition towards “direct expenses” to the tune of Rs.7,61,440/-.

that the assessee has debited an amount of Rs.76,14,100/- as Direct

Expenses to the trading account comprising of carriage inward, Hemali and

Wages, Packaging materials and Twine and stitching expenses. The

Assessing Officer further noted that the assessee produced only debit

vouchers in support of expenses claimed under the above heads. Dal have

been transported from Nagpur to Nuapada through two transport carriers.

But the assessee has not produced a single waybill copy or money receipt

of the transporters towards receipt of freight. All tire-payments are stated

to be made by cash on day to day basis. The Assessing Officer found the

expenses claimed under Hemali and Wages, Packaging materials and Twine

and stitching expenses highly excessive considering that the goods traded

by the assessee was meant for human consumption and they are sold in

good packets/bags. On estimation basis, the Assessing Officer disallowed

10% of the above expenses and added an amount of Rs.7,61,440/- to the

total income of the assessee.

14 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

Assessing Officer has disallowed 10% of the Direct Expenses on surmise

and conjectures although the bills and vouchers were produced before him.

The books of accounts were duly verified and accepted by the Assessing

Officer and he could not point out any specific defect regarding the bills and

vouchers. The disallowance of 10% of expenditure on estimation basis, is

contrary to the interest of justice. Before the CIT(A), the assessee filed

ledger account copy of carriage inward, hemali and wages and other

expenses.

that the Assessing Officer has himself stated in the assessment order that

an amount of Rs.52,23,200/-have been claimed as carriage inward by the

assessee and paid to two road transport carriers for getting dal from Nagpur

to Nuapada. Nothing prevented the Assessing Officer to ask the two

transport carriers to produce the evidence of receipts, Income-tax returns

etc. Without such exercise and without bringing into record any evidence

regarding any specific anomaly in the claim of expenses, it is not tenable

to disallow 10% of such expenses claimed. Therefore, he directed the

Assessing Officer to delete the same.

Officer.

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available on record, we find no infirmity in the order of the CIT(A) on this

issue. In this case, the Assessing Officer himself has stated that the

payment of Rs.52,23,200/- has been paid to two transport carriers for

getting dal from Nagpur to Nuyapada. However, the Assessing Officer

without verifying the fact from the transporters, and without bringing on

record any positive material, disallowed 10% of expenses on adhoc basis.

Therefore, we confirm the order of the CIT(A) on this account and reject

the ground of appeal of the revenue.

deletion of Rs.17,78,488/- towards undisclosed receipt.

proceedings, the Assessing Officer found that the assessee did not disclose

receipt of Rs.17,42,777.17 from the DSWO, Nuapada, shown as other

charges in the income tax return filed by the assessee. Therefore, the

Assessing Officer after verifying the ledger account of the assessee and

details of payment from DSWO, Nuapada, treat the amount of

Rs.17,78,488/- as undisclosed receipt of the assessee from DSWO,

Nuapada and added the same to the total income of the assessee.

16 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

turnover from DSWO, Nuapada as shown in the profit & loss account at

Rs.11,04,88,473.85 was correct and after reconciliation of the gross receipt

of Rs.11,96,55,785.12 from DSWO was found by the Assessing Officer. It

was further submitted that transportation charges of Rs.30,05,127/- is

shown by the assessee as income from transportation charges separately

which also forms part of the profit and loss account as well as audit report.

The incidental charges of Rs.17,42,777.16 received from DSWO was

adjusted against the carriage outwards expenses shown by the assessee.

ledger copies of carried outwards alongwith the audit report directed the

Assessing to delete the addition.

lower authorities, we do not find error in the order of the CIT(A) to interfere,

which is hereby confirmed and ground of appeal of the revenue is

dismissed.

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of the CIT(A) deleting the addition of Rs.64,44,354/- towards unexplained

transaction in cash book in violation of Rule 46A.

cash book of the assessee on four dates. He required the assessee to

explain the discrepancies. Since the assessee could not explain the non

cash transaction made in the cash book the Assessing Officer treated the

same as unexplained transaction made in the case book and added the

same to the total income of the assessee.

accounting standard when the assessee paid someone through banking

channel, a contrary entry was passed in the cash book so that the true state

of accounting is maintained. It was submitted that although this was

explained before the Assessing Officer, but he overlooked the explanation

of the assessee. The assessee submitted the explanation regarding the

contra entries in the cash book as under:

i) 7,60,000.00 has been wrongly transferred on 3.4.2010 from current No.11276760986 of the assessee to the account of Sri Suresh Kumar Agarwal vide account No.0030259243934. After adjustment of rent receivable by him he returned back the differential amount of Rs.7,49,191.00 in cash.

ii) Rs.4,35,163.00 has been deposited on 3.4.2010 being the transpo- rtation charges reversed by Sri Balaji Suppliers, Nuapada and accounted in the cash book.

18 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

iii) Rs.7,49,191.00 Returned back by Sri Suresh Kumar Agarwal after deducting the rent receivable by him.

(iv). Rs.45,00,000.00 dated 03.04.2010 the said transaction is nothing but just a inter-bank transactions from Assessee's current account to the cash credit account. To maintain the balance in the cash credit account and to avoid the increase of interest in the cash credit account, your assessee has issued a cheque dated 31.03.2010 from his current account. Since the cheque coulde not be deposited in the cash credit account, your asessee had no other option than to make a contra entry in the cash book. Subsequently the cheque was deposited on 03.04.2010 in the Cash credit account. The finding of the learned A.O. that the transactions is not a valid transactions is wrong and illegal. As there is no cash, your Asssessee has kept the cheque with him, he posted it in the cash book with a narration of cheque in hand. The learned A.O. should not have ignored this fact. If at least he would have made a comparison between two bank statements, certainly he would not have given such a wrong findings. This fact clearly shows that, non application of mind by the learned A.O.

sufficient to remove the ambiguity regarding transaction made in the cash

book. Therefore, he directed the Assessing Officer to delete the addition of

Rs.64,44,354/-.

Officer.

authorities, no discrepancy could be pointed out by ld D.R. in the findings

19 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12

of the CIT(A). As regards violation of Rule 46A, we find that the materials

which have been considered by the CIT(A) were submitted before the

Assessing Officer during assessment proceedings. Hence, it cannot be

viewed that the CIT(A) has accepted fresh materials in contravention of

Rule 46A. Therefore, we confirm the order of the CIT(A) and dismiss the

ground of appeal of the revenue.

facts of the case are that the Assessing Officer found that the actual receipt

of interest on FDRs/STDRs was Rs.2,34,310/- as against Rs.1,79,448/-

disclosed by the assessee. Therefore, the Assessing Officer treated the

differential amount of Rs.54,852/- as undisclosed interest income.

has made an addition of Rs.2,34,310/- as undisclosed interest income.

Therefore, he directed the Assessing Officer to make an addition of

Rs.54,852/-.

of the CIT(A). Hence, we confirm the same and dismiss this ground of

appeal of the revenue.

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statistical purposes and the appeal of the revenue is dismissed.

Order pronounced in the open court on 21 /04/2017.

Sd/- sd/- (Kuldip Singh) (N.S Saini) JUDICIAL MEMBER ACCOUNTANT MEMBER Cuttack; Dated 21/04/2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Assessee: Sri Surendra Kumar Agarwal, At-Sirto, Near Forest Checkgate, Dist: Nuapada 2. The Revenue: ITO, Bhawanipatana, fs 3. CIT(A) Cuttack 4. Pr.CIT,Sambalpur 5. DR, ITAT, Cuttack 6. Guard file. BY ORDER, //True Copy//

SR.PRIVATE SECRETARY ITAT, Cuttack