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Income Tax Appellate Tribunal, BANGALORE BENCH ‘ C ’
Before: SMT. P. MADHAVI DEVI & SHRI JASON P. BOAZ
Assessee By : Shri V. Srinivasan, C.A. Revenue By : Dr. K. Shankar Prasad, JCIT (D.R). Date of Hearing : 24.02.2015. Date of Pronouncement : 23.3.2015. O R D E R Per Shri Jason P. Boaz, A.M. : These are cross appeals by the assessee and revenue, directed against the order of the ld. CIT (Appeals), Mysore dt.30.7.2013 for Assessment Year 2010-11.
The facts of the case, briefly, are as under :- 2.1 The assessee, a firm in business as clearing and forwarding and steamer agents, filed its return of income for Assessment Year 2010-11 on 15.10.2010 declaring Nil income. The return 1677/Bang/2013 was processed under Section 143(1) of the Income Tax Act, 1961 (herein after referred to as 'the Act') and the case was subsequently taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer noticed that the assessee paid Rs.97,44,179 in cash to various port workers towards incentive (‘Speed Money’) through vouchers, over and above the regular payment through NMPT. The Assessing Officer noticed that the said payments made were only supported by self vouchers and that the payments were made to the Gang Leaders. The Assessing Officer held that the expenditure claimed was not incurred wholly and exclusively towards the business of the assessee and considering the defects in the vouchers, especially the unverifiable nature of the documentary evidence, made a disallowance of 20% thereof as not genuine and accordingly added a sum of Rs.19,48,835 to the assessee's income in the order of assessment passed under Section 143(3) of the Act vide order dt.7.12.2012. 2.2 Aggrieved by the order of assessment for Assessment Year 2010-11 dt.7.12.2012, the assessee preferred an appeal before the CIT (Appeals), Mysore. The learned CIT(A) placing reliance on the decision of the co-ordinate bench of the ITAT, Bangalore Bench in the assessee's own case for Assessment Year 2004-05 in dt.18.7.2008, reduced the disallowance from 20% of the expenditure claimed to 10%. In this manner, the learned CIT(A) vide order dt.30.7.2013 allowed the assessee partial relief, against which both the assessee and revenue are in appeal before the Tribunal. We shall now proceed to dispose off these cross appeals hereunder :-
1677/Bang/2013 Revenue’s appeal for Assessment Year 2010-11 in 3.0 The grounds raised by revenue in its appeal are as under :- “1. The order of the learned CIT (Appeals) is opposed to law and facts of the case.
2. The learned CIT (Appeals) ought to have upheld the decision of the Assessing Officer in respect of disallowance of speed money.
3. The learned CIT (Appeals) has erred in restricting the disallowance of speed money to 10%. As the assessee has failed to establish that the speed money has been actually received by the labourers and the expenditure is supported only by self made vouchers for cash payment made to recipients who are not identifiable and the work turned out or benefit / advantage is not measurable, there being every scope for inflation of expenses, the Assessing Officer disallowed 20% of the speed money on estimate basis which the learned CIT (Appeals) has failed to appreciate.
4. For these and such other grounds it is urged that the order of the CIT (Appeals), on the above points may be set aside and the order of the Assessing Officer be restored.
5. The appellant craves leave to add, alter or amend all or any of the grounds of appeal before or at the time of the hearing of the appeal.”
4. Ground Nos.1 & 5 of Revenue’s appeal are general in nature and therefore no adjudication is called for thereon. 5.1 The Grounds at S.Nos. 2 to 4 of Revenue’s appeal pertain to the only issue for consideration, i.e. whether the learned CIT(A) was correct in restricting the disallowance out of speed money claimed by the assessee to 10% as against 20% disallowed by the Assessing Officer. It is contended by the learned Departmental Representative that the assessee failed to establish that the speed money paid by the assessee has been actually received by the labourers as the expenditure is supported only by self made vouchers and the recipients are not identifiable. It is pleaded that there is every scope for inflation of expenses by the assessee and therefore the Assessing Officer’s disallowance of 20% on estimate basis ought to have been upheld by the learned CIT(A).
1677/Bang/2013 5.2 At the outset, the learned Authorised Representative submitted that there was no error in the impugned order of the learned CIT(A) as he had followed the order of the co-ordinate bench of the ITAT, Bangalore in the assessee's own case for Assessment Year 2004-05 in dt.18.7.2008 wherein similar disallowance made in the assessee's case was considered. In view of this, it was prayed that revenue’s appeal on this issue is liable to be dismissed. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decision cited. We find that similar disallowance on account of speed money payments was considered in the assessee's own case for Assessment Year 2004-05 (supra) and at para 3 thereof it has been held as under :- “ 3. The main issue pertains to disallowance made by the A.O. at Rs.14,37,370 on account of expenses incurred in respect of incentive paid to port labourers for assessment year 2004-05. From the facts it is seen that the A.O. has disallowed 20% of the claim of Rs.71,86,854 (Rs.14,37,370). The learned CIT (Appeals), when the matter travelled before him considered the arguments of the assessee's authorised representative and granted part relief to the assessee by reducing the addition by ½ (Rs.7,18,685). From the facts appearing on record, it is seen that the Assessing Officer himself made the estimated disallowance. The learned CIT (Appeals), after having noted various factors such as incentive paid to labourers, additional payment on account of extra hours of work etc., again estimated the same by reducing it to Rs.7,18,685. Considering this aspect, we do not find any infirmity in the order of the learned CIT (Appeals). At the time of hearing, ld. D.R. was unable to assail the conclusion drawn by the learned CIT (Appeals) with any convincing material. We, therefore, confirm the order of the learned CIT (Appeals). It is ordered accordingly.” 5.3.2 Following the aforesaid decision of the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2004-05 (supra), we hold that the learned CIT(A) was justified in deleting the disallowance on account of speed money expenditure claimed to the extent of 50% thereof, thereby restricting it to 10% of the said expenditure claimed.
1677/Bang/2013 6. In the result, Revenue’s appeal for Assessment Year 2010-11 is dismissed. Assessee's appeal for Assessment Year 2010-11 in ITA No.299/Bang/2014.
Order on the petition for condonation of delay in filing the appeal before the Tribunal. 7.1 The impugned order of the CIT (Appeals), Mysore in dt.30.7.2013 was admittedly received by the assessee on 9.10.2013. In these circumstances, the assessee ought to have filed the appeal before the Tribunal on or before 8.12.2013, but the appeal was however filed only on 28.2.2014, thus leading to a delay of 82 days in filing the appeal before the Tribunal. Along with the petition seeking condonation of the aforesaid delay of 82 days, the assessee has also filed an Affidavit dt.21.2.2015 duly sworn to by the Managing Partner of the assessee firm. It is submitted that the assessee had entrusted the matter of filing an appeal to its authorised representative, Rajaram Shenoy, C.A., who due to his professional pre-occupations, did not immediately advice the assessee to file an appeal as the matter skipped his attention. When this came to their attention in Feb., 2014, the assessee sought the advice of Sri S. Venkatesan,CA and immediate steps were taken to file this appeal. It is submitted by the assessee, that there was no intentional, wilful or deliberate delay in filing this appeal belatedly and the mistake of oversight by the assessee’s A.R. is sufficient cause for condoning the delay. The ld. DR for Revenue on his part strongly opposed the condonation of delay in filing this appeal by the assessee. 7.2 We have heard the rival contentions and carefully considered the material on record. Considering the explanation put forth by the assessee in its petition, we are of the view that this is a fit case for condoning the delay of 82 days, as it is apparent that the delay in filing the 1677/Bang/2013 appeal is neither intentional nor wilful. The mistake and oversight of the assessee's AR in preparing the appeal in time is, in our view, sufficient cause and it appears to us that the explanation of the assessee is bona fide. We, therefore, condone the delay of 82 days in filing this appeal before the Tribunal and this appeal is accordingly admitted for adjudication. O R D E R 8. The Grounds raised
in the assessee's appeal are as under :- “1. The order of the learned CIT (Appeals) in so far as it sustains additions impugned in this appeal and only allowing the appeal partly instead of totally is opposed to law, equity, weight of evidence, facts and circumstances of the appellant’s case.
2. The learned CIT (Appeals) is not justified in sustaining disallowance to the extent of 10% from out of such disallowance to the extent of 20% made by the ld. A.O. in respect of expenditure incurred towards speed money instead of vacating the entire disallowance made under the facts as set-out in Annexure – 1 and in the circumstances of the appellant’s case. 2(b) The authorities failed to appreciate that the books of accounts have not been rejected and the entire expenditure is supported by vouchers as are in vogue in this line of business and rejecting them is only on conjectures, surmise and suspicion on the mere ground that there is scope for inflation without any cogent evidence such inflation has taken place and further, the expenditure has no nexus to the income earning activity and disallowance thus is on non-germane grounds and requires to be vacated in the light of the order of the Hon'ble ITAT on this issue in a subsequent case, which stultifies the earlier decision of the Hon'ble ITAT on the issue ought to have been considered in preference to appellant’s own case as better facts and exposition of law has been given by the Hon'ble ITAT in the later case.
3. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
9. Ground Nos. 1 and 3 of the assessee's appeal are general in nature and not being urged before us are dismissed as infructuous. 10.1 Ground No.2 is the only ground for our consideration and relates to the disallowance sustained by the learned CIT(A) to the extent of 10% of the speed money claimed to have been 1677/Bang/2013 paid or incurred. It is submitted by the learned Authorised Representative that a co-ordinate bench of this Tribunal had an occasion to examine and consider this issue in the case of HML Agencies Pvt. Ltd. in dt.30.6.2010. In the said order, the Tribunal had dismissed revenue’s appeal following the ratio of the decision of the jurisdictional High Court in the case of Konkan Marine Agencies reported in 323 ITR 308. The learned Authorised Representative prayed that in view of the order of the co-ordinate bench of the Tribunal in the case of HML Agencies P. Ltd. (supra), the disallowance requires to be entirely deleted and no reliance is to be placed on the order of another co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2004—05 (supra). The learned Authorised Representative however fairly brought to our notice the decision of another co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 in ITA No.833/Bang/2011 dt.14.6.2013; wherein the Tribunal has considered the judgment of the Hon'ble High Court of Karnataka in the case of Konkan Marine Agencies (supra). 10.2 Per contra, the learned Departmental Representative supported the order of the learned CIT(A). 10.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial decisions cited and placed reliance upon. On an appreciation of the facts on record, we are of the view that the order of the learned CIT(A) does not require any interference. A co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2005-06 in ITA No.833/Bang/2011 dt.14.6.2013 at para 9 of its order has held as under :-
1677/Bang/2013 “9. We have heard the submissions of the ld. Counsel for the assessee and the ld. D.R. The facts are identical to the facts as it prevailed in assessee's own case for the A.Y. 2004-05. In that year, the Tribunal had considered identical facts and circumstances and was of the view that disallowance of 10% of the expenses would be just and fair. The ld. Counsel for the assessee however placed strong reliance on the decision of the ITAT, Bangalore in the case of DCIT Vs. M/s. HML Agencies Pvt. Ltd. for A.Y. 2005-06 in which this Tribunal confirmed order of CIT (Appeals) in an identical case of stevedore agent deleting adhoc addition of 25% of speed money expenses. We have considered the aforesaid decision and find that the aforesaid decision was rendered on the basis of facts as it prevailed in that case. We however find that this Tribunal has taken a particular view in assessee's own case in the earlier assessment year. We are of the view that the decision of Tribunal in assessee's own case has to be followed. Respectfully following the aforesaid order of the Tribunal, we uphold the order of the CIT (Appeals) on this issue and dismiss ground NO.2 raised by the assessee in this regard.” 10.3.2 It is relevant to mention here that the co-ordinate bench of this Tribunal in the assessee's case for Assessment Year 2005-06 has considered the judgment of the Hon'ble High Court of Karnataka in the case of M/s. Konkan Marine Agencies (supra) and the decision of the Tribunal in the case of HML Agencies (supra) and held that the decision rendered in the assessee's own case has to be followed. Since the facts of the assessee's case in the year under consideration are also similar, we uphold the order of the learned CIT(A) and dismiss the grounds raised by the assessee in this regard.
11. In the result, the assessee's appeal for Assessment Year 2010-11 is dismissed.
12. To sum up, both the appeals of Revenue and the Assessee for Assessment Year 2010-11 are dismissed. Order pronounced in the open court on 23rd March, 2015.