SRI AMIT KUMAR SEN,KOLKATA vs. D.C.I.T CIR - 51,KOLKATA, KOLKATA

Grounds No. 1 and 2 raised in the appeal of the assessee challenging the validity of the assessment made by the Assessing Officer under section 143(3) of the Act are not pressed by the ld. counsel for the assessee at the time of hearing before us. The same are accordingly dismissed as not pressed.

The issue raised in Ground No. 3 of the assessee’s appeal relates to the addition made by the Assessing Officer by way of disallowance under section 40(a)(ia) on account of transport charges, which is sustained by the ld. CIT(Appeals) to the extent of Rs.7,26,274/-.

The assessee in the present case is an individual, who is engaged in transport business. The return of income for the year under consideration was filed by him on 19.09.2008 declaring total income of Rs.4,72,887/-. During the course of assessment proceedings, the claim of the assessee for expenditure incurred on transport charges paid amounting to Rs.89,92,615/- was examined by the Assessing Officer. On such examination, he found that no tax at source was deducted by the assessee from the payment made on account of transport charges to the extent of Rs.68,56,869/-. Since no satisfactory explanation in this regard could be offered by the assessee, the Assessing Officer invoked the provisions of section 40(a)(ia) and disallowed transport charges to the extent of Rs.68,56,869/- in the assessment completed under section 143(3) vide an order dated 31.12.2010.

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), a detailed submission was filed by the assessee along with the additional evidence in support of his claim that the disallowance & 631/KOL./2013 Assessment year: 2008-2009 Page 3 of 6 made by the Assessing Officer under section 40(a)(ia) on account of transport charges was not sustainable. The said submissions along with the additional evidence filed by the assessee were forwarded by the ld. CIT(Appeals) to the Assessing Officer and after taking into consideration the remand report submitted by the Assessing Officer as well as the counter comments offered by the assessee thereon, the ld. CIT(Appeals) found that the payments in question made by the assessee on account of transport charges were not exceeding Rs.50,000/- in a year in case of any single party. He, however, found that some of the said payments exceeded Rs.20,000/- on single occasion and the assessee, therefore, was required to deduct tax at source from the said payments. Accordingly, he held that the disallowance made by the Assessing Officer under section 40(a)(ia) was sustainable to the extent of such payments amounting to Rs.7,26,274/-. He also found that all these payments exceeding Rs.20,000/- were made by the assessee in cash and the same, therefore, were hit by the provisions of section 40A(3) of the Act. He, therefore, held that the same were liable to be disallowed even under section 40A(3) and accordingly directed the Assessing Officer to make a disallowance under section 40A(3). Keeping in view this disallowance made under section 40A(3), the ld. CIT(Appeals) held that no addition was separately required to be made under section 40(a)(ia) to avoid double addition of the same amount.

We have heard the arguments of both the sides and also perused the relevant material available on record. The only contention raised by the ld. counsel for the assessee on this issue is that the order of the ld. CIT(Appeals) has resulted into double addition of the same amount once by way of disallowance under section 40(a)(ia) and another by way of disallowance under section 40A(3). It is, however, observed that the ld. CIT(Appeals) has specifically clarified in his impugned order that since the disallowance amounting to Rs.7,26,274/- was confirmed by him under section 40A(3), no separate addition under section 40(a)(ia) was & 631/KOL./2013 Assessment year: 2008-2009 Page 4 of 6 required to be made. Thus the impugned order of the ld. CIT(Appeals) has not resulted into double addition as alleged by the ld counsel for the assessee and there being no merit in the appeal of the assessee on this issue, we dismiss Ground No. 3 of the assessee’s appeal.

In Ground No. 4, the assessee has challenged the action of the ld. CIT(Appeals) in directing the Assessing Officer to make an addition of Rs.8,90,262/- on account of bogus expenses allegedly claimed by the assessee under the head ‘transport charges’.

On the basis of various discrepancies pointed out by the Assessing Officer in the vouchers maintained by the assessee in support of his claim for transport charges, the ld. CIT(Appeals) was of the view that the claim of the assessee for transport charges was not fully verifiable. The assessee, therefore, was called upon by him to explain as to why 10% of the transport charges should not be disallowed as bogus. In reply, the assessee contended that even though some of the expenses claimed under the head ‘transport charges’ were not fully verifiable, the addition made under section 40A(3) was sufficient to cover such unverifiable element. This explanation of the assessee was not found acceptable by the ld. CIT(Appeals) and keeping in view the deficiencies pointed out by the Assessing Officer in the relevant vouchers, he held that the claim of the assessee for transport charges was not fully verifiable. Accordingly, he directed the Assessing Officer to treat 10% of the transport charges claimed by the assessee as bogus and disallow the same.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As rightly submitted by the ld. counsel for the assessee, the main defect pointed out by the Assessing Officer in the vouchers of transport charges maintained by the assessee was that the same were paid in cash and, therefore, the & 631/KOL./2013 Assessment year: 2008-2009 Page 5 of 6 verification thereof was not possible. However, such cash payments exceeding Rs.20,000/- were already disallowed by the ld. CIT(Appeals) under section 40A(3) and, therefore, the deficiency in the relevant vouchers of cash payments was already taken care of. Moreover, the net profit declared by the assessee for the year under consideration was 5% and if the disallowance under section 40A(3) is taken into consideration, it gives a net profit of about 12.5% and the same being much more than the net profit of 8% declared by the assessee and accepted by the Department in A.Y. 2007-08, we are of the view that there is no case for making any further disallowance on account of alleged unverifiable element involved in transport charges claimed by the assessee. We, therefore, delete the disallowance made by the ld. CIT(Appeals) on this issue and allow Ground No. 4 of the assessee’s appeal.

The solitary issue involved in the appeal of the Revenue relates to the deletion by the ld. CIT(Appeals) of the addition made by the Assessing Officer under section 40(a)(ia) of the Act to the extent of Rs.52,31,333/-.

We have heard the arguments of both the sides and also perused the relevant material on record. As already discussed, transport charges claimed by the assessee were disallowed by the Assessing Officer to the extent of Rs.68,56,869/- under section 40(a)(ia) after having found that no tax at source was deducted by the assessee from the payments made thereof. Before the ld. CIT(Appeals), the case made out by the assessee, however, was that there being no payment exceeding Rs.50,000/-made on account of transport charges to any single party during the year under consideration, there was no requirement of deduction of tax at source and the question of disallowance under section 40(a)(ia) would not arise. After getting this aspect verified from the Assessing Officer, the ld. CIT(Appeals) found merit in the case of the assessee. He, however, held that a sum of Rs.7,26,274/- out of transport charges was disallowable under section 40A(3) while a further sum of Rs.8,90,262/- was & 631/KOL./2013 Assessment year: 2008-2009 Page 6 of 6 disallowable on account of unverifiable element involved in transport charges paid by the assessee. Accordingly, he allowed a relief of Rs..52,31,333/- to the assessee. At the time of hearing before us, the ld. D.R. has not been able to bring anything on record to dispute the finding recorded by the ld. CIT(Appeals) that the transport charges paid by the assessee during the year under consideration did not exceed Rs.50,000/- in case of any single party. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and upholding the same, we dismiss this appeal of the Revenue.

In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.