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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & DR. DIPAK P. RIPOTE
आदेश / ORDER PER RAVISH SOOD, JM:
The present appeal filed by the revenue is directed against the order passed by the CIT(Appeal)-I, Raipur, dated 25.07.2019, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income- tax Act, 1961 (for short ‘Act’), dated 31.12.2017 for A.Y. 2015-16. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,58,66,776/- without taking into account the fact that the AO has made the disallowances only after the assessee failed to produce any evidence regarding diesel expenses hired vehicles & booked bogus transportation expenses. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the affirmation on oath in statements recorded u/s.131 of the IT Act by Shri Balbir Singh Khatri thereby admitting that the vehicles owned by him are operated by the assessee under his proprietorship concern, M/s Swastik Mineral and that no bills were ever issued by him. In fact, he was paid commission by the assessee?"
3. Whether on points of law and on points of facts & circumstances of the case, the Ld. CIT(A) having concurrent powers of the AO u/s 250(4) of the Act, was justified in deleting the addition of Rs. 1,56,58,506/- out of total addition made by the AO as the assessee could not substantiate the alleged transaction as genuine by producing the relevant documents against the finding of the AO?"
4. The order of Ld. CIT (A) is erroneous both in law and on facts.
5. Any other ground that may be adduced at the time of hearing.”
3 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania
Succinctly stated, the assessee who is engaged in transportation business had e-filed his return of income for A.Y.2015-16 on 31.03.2016, declaring an income of Rs.10,01,500/-. Subsequently, the case of the assessee was selected for limited scrutiny assessment u/s.143(2) of the Act.
During the course of the assessment proceedings, it was, inter-alia, observed by the A.O that the assessee had in his profit and loss account debited an amount of Rs.4,31,26,247/- towards diesel expenses. Observing, that the aforesaid diesel expenses booked by the assessee were on the higher side, the A.O called upon him to place on record documentary evidence in support of his claim a/w. reasonability of the same. Also, the A.O directed the assessee to produce log books in support of his aforesaid claim, which the assessee expressed his inability to do for the reason that no such records were maintained by him.
Apropos the diesel expenses that were debited by the assessee in his profit & loss account, it was observed by the A.O that a substantial amount out of the same was incurred on the vehicles which were not owned by the assessee but were claimed to have been used on a hiring basis in his transportation business. On the basis of information received u/s.133(6) the Act from the petrol pump owners from whom assessee had claimed to have purchased diesel, it was observed by the A.O that the 4 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania amount of Rs.1,56,58,506/- was incurred by the assessee towards diesel expenses on vehicles other than those owned by him, as under:
S. No. Name of the Petrol Pump Diesel expenses claimed (other than assessee’s vehicle) 1. M/s. Balaji Fuel Station, Kharora 29,53,405/- 2. M/s. Tulsi Fuel, Tulsi 37,52,833/- 3. M/s. Rishik Fuels, Baloda Bazar 82,98,529/- 4. M/s. Sourabh Fuel, Tilda 6,53,739/- Total 1,56,58,506/- On being confronted with the aforesaid facts, it was the claim of the assessee that he had incurred transportation expenses of Rs.1,25,03,358/- towards hiring of vehicles of third parties which were deployed in his business. Admitting that diesel expenses of Rs.1,56,58,506/- were incurred by him on third party vehicles that were deployed in his business on a hiring basis, it was the claim of the assessee that payments towards transportation charges were made to the owners of the vehicles after deducting diesel expenses. However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee, for the reason that it appeared to be unrealistic that diesel expenses would have exceeded the transportation charges. On the other hand, the assessee in order to substantiate his aforesaid claim produced before the A.O vouchers
5 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania as per which payments were made to the transporters after deduction of diesel expenses incurred on their vehicles. On being queried by the A.O as to whether the respective owners of the vehicles had raised any bills towards hiring charges of their vehicles, the assessee answered in the negative. Considering the aforesaid facts, the A.O was of the view that the assessee’s claim of having incurred third party vehicle expenses in absence of supporting documentary evidence/proof was not open for verification.
In order to verify the authenticity of the aforesaid claim of the assessee the A.O examined two persons, viz., (i) Shri Balveer Singh Khatri, Prop. M/s. Sangam Road Carrier, Fafadih, Raipur; and (ii) Shri Manoj Kumar Singhania, 201, Dolphin Trend, 2nd floor, Near Sai Mandir, Devendra Nagar, Raipur, whose vehicles the assessee had claimed to have deployed in his transportation business on a hiring basis. As is discernible from the assessment order, Shri Balveer Singh Khatri (supra) had though admitted that his vehicles were operated by the assessee on a hiring basis in his transportation business that was run under the name and style of M/s. Swastik Mineral, and he was in receipt of commission from the assessee after deduction of diesel and maintenance expenses, but on being confronted with the supporting vouchers which were produced by the assessee before the A.O he declined of having signed the same. On the other hand Shri Manoj Kumar Singhania (supra) though admitted that the vehicles owned by him and his wife Smt. Reema Singhania were operated
6 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania by the assessee under his proprietary concern, viz. M/s. Swastik Minerals on a hiring basis, against which they were in receipt of commission after deduction of diesel expenses, drivers salary, cleaner expenses and minor repair expenses, but it was stated by him that no vehicles were provided by either of them to the assessee during the year under consideration i.e. FY 2014-15. Considering the aforesaid statement of Shri Manoj Kumar Singhania (supra), the A.O was of the view that now when the said person had stated that no vehicles were provided by him or by his wife to the assessee during the year under consideration, therefore, it could safely be concluded that the assessee’s claim for deduction of transportation expenses of Rs.2,08,270/- in his books of account against the names of the aforesaid persons was nothing but a bogus claim. Accordingly, the A.O on the basis of his aforesaid observations disallowed transportation expenses of Rs.2,08,270/- (supra) [out of Rs.1,25,03,358/-] as claimed by the assessee.
On the basis of his aforesaid observations, the A.O holding a conviction that the assessee had inflated his claim for deduction of diesel expenses in respect of third party vehicles which he had taken on a hiring basis, thus, disallowed the entire amount of Rs.1,56,58,506/- (supra) that was claimed in respect of the same. Accordingly, the A.O after, inter-alia, making the aforesaid disallowances assessed the income of the assessee vide his order passed u/s.143(3) dated 31.12.2017 at Rs.1,88,35,470/-.
7 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania
Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). Observing that the A.O without examining the complete details and submissions of the assessee had drawn adverse inferences as regards his claim for deduction of diesel expenses w.r.t third party vehicles, the CIT(Appeals) after referring to the details of freight charges which after deduction of diesel expenses etc. were paid to the respective truck owners, viz. Shri Ajju Kureshi and Shri Amrit Pal Singh observed, that there was no justification on the part of the A.O to have made the said disallowance. Referring to the statements of the two vehicles owners which were recorded by the A.O, it was observed by the CIT(Appeals) that both the transporters had admitted of having hired their vehicles to the assessee and also, receipt of net payments (after deduction of expenses) towards hiring charges from him. As regards the statement of Shri Manoj Kumar Singhania (supra) that neither he nor his wife had given any vehicles to the assessee on a hiring basis during the year under consideration i.e. A.Y.2015-16, it was observed by the CIT(Appeals) that the same was on account of a mistake which the said person had corrected by furnishing an affidavit, wherein, it was deposed by him that he had provided vehicles on a hiring basis to the assessee during the year under consideration, and in his statement instead of stating A.Y.2014-15 had wrongly mentioned F.Y.2014-15. Considering the aforesaid clarification of Shri Manoj Kumar Singhania (supra), the CIT(Appeals) observed that as 8 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania the same was not there in the course of the assessment proceedings, therefore, he directed the A.O to verify the fact as to whether or not the income from trucks owned by the aforementioned persons a/w. the co- relating expenses figured in the books of account of the assessee. On the basis of the aforesaid facts, the CIT(Appeals) subject to necessary verification by the A.O vacated the disallowance of transportation charges of Rs.2,08,270/-. Also, the CIT(Appeals) finding no justification in disallowance of any part of the diesel expenses incurred by the assessee on the vehicles of third parties that were deployed by him on a hiring basis in his transportation business, vacated the entire disallowance of Rs.1,56,58,506/-.
The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record.
Controversy involved in the present appeal hinges around two issues, i.e., (i) sustainability of the deletion by the CIT(Appeals) of the disallowance of diesel expenses of Rs.1,56,58,506/-; and (ii) sustainability of the deletion of disallowance of transportation expenses of Rs.2,08,270/-.
9 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania
As is discernible from the grounds of appeal, the grievance of the revenue as regards deletion of the disallowance of diesel expenses of Rs.1,58,66,776/- (supra) by the CIT(Appeals) revolves around three issues, viz. (i) failure on the part of the CIT(Appeals) to take note of the fact that disallowance of the diesel expenses was made for the reason that the assessee had failed to produce any evidence in support thereof; (ii) the CIT(Appeals) had lost sight of the statement of Shri Balveer Singh Khatri (supra) that was recorded on oath u/s.131 of the Act, wherein he had admitted that no bills were raised by him towards hiring charges on the assessee; and (iii) that though the CIT(Appeals) was vested with co- terminus powers as that of an A.O u/s.250(4) of the Act, as per which, he could before disposing off the appeal either carry out any such further enquiry as he thought fit or directed the A.O to make further enquiry and report the result of the same to him, however, he had merely vacated the disallowance of the assessee’s claim for deduction of diesel expenses which were stated to have been incurred on third party vehicles, despite the fact that no documents in support of his said claim for deduction were placed on record.
As is discernible from the orders of the lower authorities, we find that the assessee had claimed to have incurred transportation/hiring charges of Rs.1,25,03,355/- towards hiring of vehicles of third parties which were stated to have been deployed by him in the course of his
10 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania business of transportation. Although the A.O had disallowed transportation/hiring charges of Rs.2,08,270/- (supra) booked by the assessee against the names of two transporters, viz. Shri Manoj Kumar Singhania and Smt. Reema Singhania, but had not drawn any adverse inferences in respect of balance amount of transportation/hiring charges of Rs.1,22,95,088/- [ Rs.1,25,03,358/- (-) Rs.2,08,270/-]. On the basis of the aforesaid facts, it transpires that the claim of the assessee that he had deployed vehicles of third parties on hiring basis had not been doubted by the A.O.
Although, the assessee had claimed to have incurred diesel expenses of Rs.1,56,58,506/- (supra) with respect to third party vehicles which were deployed by him in his transportation business on a hiring basis, but the A.O considering the fact that the respective owners of the vehicles had not raised any bills/invoices towards hiring charges for the vehicles which were provided by them to the assessee; and also that the assessee had failed to substantiate the veracity of his aforesaid claim on the basis of supporting documentary evidence, had observed that the genuineness of the said claim for deduction of diesel expenses could not be verified. Also, the A.O was not inspired with the aforesaid claim of the assessee in the backdrop of the statements of two persons, viz. Shri Balveer Singh Khatri and Shri Manoj Kumar Singhania that were recorded during the course of the assessment proceedings u/s.131 of the Act. On the basis of the 11 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania aforesaid facts, the A.O holding a conviction that the assessee had inflated his claim for deduction of diesel expenses in respect of third party vehicles, thus, declined his entire claim for deduction of Rs.1,56,58,506/-.
As the A.O had admitted that the vehicles of third parties were taken by the assessee on a hiring charges, and had not drawn any adverse inferences as regards the transportation expenses of Rs.1,22,95,088/- (supra) (out of Rs.1,25,03,358/-) therefore, it would be absolutely illogical to hold that no diesel expenses would have been incurred by the assessee for plying the said hired vehicles. At the same time, we find that the assessee had in the course of the assessment proceedings absolutely failed to place on record any documentary evidence to substantiate his claim for deduction of diesel expenses of Rs.1,56,58,506/-(supra) that were stated to have been incurred in respect of hired vehicles. As the aforesaid claim for deduction had been raised by the assessee, therefore, as per Section 37(1) of the Act onus was cast upon him to substantiate the allowability of his said claim of deduction to the satisfaction of the A.O. As stated by the Ld. DR, and, rightly so, the assessee had not only failed to substantiate his aforesaid claim for deduction of diesel expenses of Rs.1,56,58,506/- (supra), but also, the CIT(Appeals) without carrying out any verification, on his own; or calling upon the A.O to carry out necessary enquiries on the said issue and report the result of the same to him, had most casually taking cognizance of certain stray references as were placed by the 12 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania assessee before him about payment of hiring charges to certain third parties (after deduction of diesel expenses), had without affording any opportunity to the A.O summarily accepted the claim of the assessee. In our considered view the said approach of the CIT(Appeals) is totally arbitrary. Not only the CIT(Appeals) had summarily accepted the unsubstantiated claim for deduction of diesel expenses of Rs. 1,56,58,506/-(supra), but had done so without confronting to the A.O the additional details that were filed for the very first time by the assessee in the course of the proceedings before him. We, thus, are unable to persuade ourselves to subscribe to the manner adopted by the CIT(Appeals) for summarily accepting the claim of the assessee of having incurred diesel expenses of Rs.1,56,58,506/- (supra) in respect of hired vehicles. Accordingly, we herein set-aside the order of the CIT(Appeals) and restore the issue as regards the assessee’s claim for deduction of diesel expenses of Rs.1,56,58,506/- (supra) to the file of the CIT(Appeals) who is directed to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee. Also, the assesee in the course of set-aside proceedings shall remain at a liberty to substantiate his claim on the basis of fresh documentary evidences, if any.
Apropos, the deletion of transportation charges of Rs.2,08,270/- (supra) pertaining to Shri Manoj Kumar Singhania and Smt. Reema Singhania by the CIT(Appeals), we are of the considered view that as the 13 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania latter had restored the issue to the file of the A.O for verifying as to whether or not the income from trucks belonging to Shri Manoj Kumar Singhania a/w. corresponding expenses had been accounted for by the assessee in his books of accounts, therefore, we find no infirmity in the said view so taken by the CIT(Appeals). At the same time, we may herein observe that as Shri Manoj Kumar Singhania (supra) had also on behalf of his wife, viz. Smt. Reema Singhania (supra) similarly stated that no vehicles were provided by her to the assessee during the year under consideration, therefore, the direction of the CIT(Appeals) in respect of Shri Manoj Kumar Singhania would apply mutatis-mutandis in respect of vehicles of viz. Smt. Reema Singhania (supra) as had been claimed by the assessee to have been deployed in his business on a hiring basis during the year under consideration. Thus, the Grounds of appeal No(s). 1 to 3 raised by the revenue are allowed for statistical purposes in terms of our aforesaid observations.
Grounds of appeal No(s). 4 & 5 being general in nature are dismissed as not pressed.
14 ITO, Ward-1(2), Raipur Vs. Shri Jagdish Prasad Singhania
In the result, appeal of the revenue is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced under rule 34(4) of the Appellate Tribunal Rules, 1963, by placing the details on the notice board.