Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: S/SHRI N.S SAINI & KULDIP SINGH
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.
7 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12
The CIT(A) after considering the submission of the assessee observed
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.
With regard to expenses incurred in cash, the CIT(A) observed that
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.
Being aggrieved, both the assessee and the revenue are in appeal
before us.
Ld Authorised Representative of the assessee reiterated the
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.
In the alternative, the argument of ld A.R. of the assessee was that
the disallowance sustained at 10% of the carriage outward expenses was
on higher side and, therefore, same should be appropriately reduced.
Ld Departmental Representative on the other hand argued that the
CIT(A) was not justified in giving relief of Rs.75,37,764/- .
We find that the undisputed facts of the case are that during the year
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.
In Ground No.3 of the appeal, the grievance of the assessee is that
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.
The Assessing Officer found that purchases furnished through ledger
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.
On appeal before the CIT(A), it was submitted that the assessee has
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.
The CIT(A) confirmed the action of the Assessing Officer on the
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.
Before us, ld A.R. of the assessee has filed copy of the reconciliation
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.
Ld D.R. relied on the orders of lower authorities.
We find that the reconciliation statement filed by the assessee placed
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.
Ground No.3 of the appeal of the revenue relates to deletion of
addition towards “direct expenses” to the tune of Rs.7,61,440/-.
The undisputed facts of the case are that the Assessing Officer found
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
On appeal before the CIT(A), the assessee submitted that the
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.
The CIT(A) after considering the submission of the assessee observed
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.
Ld Departmental representative relied on the order of the Assessing
Officer.
15 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12
After considering the rival submission and perusing the materials
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.
Ground No.1 of the appeal of the revenue is directed against the
deletion of Rs.17,78,488/- towards undisclosed receipt.
The undisputed facts of the case are that during the scrutiny
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
On appeal before the CIT(A), the assessee submitted that the gross
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.
The CIT(A) after verifying the reconciliation of gross receipt and
ledger copies of carried outwards alongwith the audit report directed the
Assessing to delete the addition.
Before us, ld D.R. relied on the order of the Assessing Office.
Ld A.R. of the assessee supported the order of the CIT(A).
After hearing the rival submissions and perusing the order of the
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.
17 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12
Ground No.4 of the appeal of the revenue is directed against the order
of the CIT(A) deleting the addition of Rs.64,44,354/- towards unexplained
transaction in cash book in violation of Rule 46A.
The Assessing Officer found the discrepancies of Rs.64,44,354/- in
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.
On appeal before the CIT(A), it was submitted that as per normal
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.
The CIT(A) observed that the above explanation of the assessee is
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/-.
Before us, ld Departmental relied on the order of the Assessing
Officer.
Ld A.R. supported the order of the CIT(A).
After hearing the rival submissions and perusing the orders of lower
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.
Apropos Ground No.5 of the appeal of the revenue, the undisputed
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.
On appeal the CIT(A) observed that the Assessing Officer by mistake
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/-.
After hearing the rival submissions, we find no error in the findings
of the CIT(A). Hence, we confirm the same and dismiss this ground of
appeal of the revenue.
20 ITA No. 55/ CTK/2016 ITA No. 59/ CTK/2016 Asse ssment Year :20 11- 12
In the result, the appeal filed by the assessee is partly allowed for
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