Income Tax Appellate Tribunal - Ahmedabad
Ravindra M. Shah, Baroda vs Department Of Income Tax on 4 December, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH - AHMEDABAD
(BEFORE S/SHRI BHAVNESH SAINI, JM AND N.S. SAINI, AM)
ITA No.761/Ahd/2008
A.Y.: 2004-05
Shri Ravindra M. Shah, Vs The A. C. I. T.,
Prop. Shah Bulk Carriers, Circle 2 (2),
Chhani, Baroda Baroda
PA No. ALUPS 6135 M
(Appellant) (Respondent)
ITA No.880/Ahd/2008
A.Y.: 2004-05
The A. C. I. T., Vs Shri Ravindra M. Shah,
Circle 2 (2), Prop. Shah Bulk Carriers,
Baroda Chhani, Baroda
PA No. ALUPS 6135 M
(Appellant) (Respondent)
Assessee by Shri Dhiren Shah, AR
Department by Shri D. S. Chaudhry, DR
ORDER
PER BHAVNESH SAINI: Both the cross appeals are directed against the order of the learned CIT(A)-II, Baroda dated 4-12-2007 for assessment year 2004-05.
2. We have heard learned representatives of both the parties, perused the findings of the authorities below and considered the material on record pointed out by the parties. The learned Counsel for the assessee filed a chart of the grounds raised in the appeal of the assessee and the Revenue, filed copies of the following orders of the Tribunal in the case of the same assessee and stated that all the points are covered by the below mentioned orders.
ITA No.761 and 880/Ahd/2008 2Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda Sr. No. ITA No. Date of order Name of the assessee
01. 2254 and 2256/A/07 21-05-10 Shri Ravindra M. Shah AY - 2003-04
02. 2768 and 2769/A/02 08-08-2008 Shri Ravindra M. Shah AY 1998-99 & 1999-2000
3. On ground No.1 the assessee challenged the disallowance on account of carting expenses restricted to 1% and the Revenue on ground No.1 challenged the order of the learned CIT(A) in restricting the disallowance out of carting expenses to 1% from 2.5% of half of these expenses disallowed by the AO.
4. Briefly, facts of the case are that the AO disallowed carting expenses of Rs.8,94,772/-. The AO discussed this issue in Para 4 of the assessment order. It was noticed by the AO that ratio of the carting expenses to the carting receipts this year was 82.96% and on further scrutiny of the details of carting expenses of Rs.11,06, 01,826/-, a sum of Rs.9,17,66,249/- had been paid to the transporters and single operators other than sister concern of the assessee. It was further noticed by the AO that certain vouchers are self made and are not supported by bills. Even addresses and identity of the drivers were not established. It was also noticed that as compared to assessment years 2001-02 and 2000-01 such incidents of lack of supporting bills has increased this year and he accordingly made disallowance @ 2.5% of 50% of the expenses in respect of transporters and single operators other than sister concern in place of 7% of 50% for the assessment years 2000-01 and 2001-02. It was submitted before the learned CIT(A) that ratio of the carting expenses this year has in fact decreased as compared to last year from 90% to 82.97%, therefore, the observation of the AO is incorrect that ratio has increased as compared to earlier years. It was submitted that each assessment year is a separate year and disallowance made in past cannot be the basis for making the disallowance particularly when ITA No.761 and 880/Ahd/2008 3 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda no defects have been pointed out in the books of account. The assessee relied upon the order in the case of the same assessee for assessment year 2000-01 and 2001-02 and requested that these decisions may be followed and disallowance may be restricted to 1% and the balance disallowance may be deleted. The learned CIT(A) considering the facts of the case and submissions of the assessee noted that the carting expenses of this year are not higher as compared to the earlier years. He has further noted that in the assessment year 2000-01 the ratio of the expenses was 84.2% and in assessment year 1999-00 it was 83.36%. Therefore, carting expenses in the assessment year under appeal was lower as compared to earlier years. The learned CIT(A) also noted that the AO has noted various defect in the vouchers, bills and maintenance of records and the defects pointed out by the AO have not been rebutted by the assessee. However, the learned CIT(A) following his appellate orders for preceding assessment years 2000-01, 2001-02 and 2002-03 in the case of the same assessee restricted the disallowance to 1% instead of 2.5% made by him.
5. The learned Counsel for the assessee submitted that same issue has already been decided in favour of the assessee in his own case in assessment year 1998-99 and 1999-2000 in ITA No. 2768 and 2769/Ahd/2002 (supra) in which the Tribunal has relied upon the decision in the case of Shri Hasmukhbhai M. Shah for the same earlier assessment year and also the same point is decided in favour of the assessee in ITA No. 2254 and 2256/Ahd/2007 for assessment year 2003-04 dated 21-05-2010 (supra). He has, therefore, submitted that the entire disallowance may be deleted. On the other hand, the learned DR relied upon the order of the AO and submitted that assessee's Counsel submitted before the learned CIT(A) to follow his appellate order for preceding assessment year and requested that disallowance may be restricted to 1% and balance may be deleted. The learned DR, therefore, ITA No.761 and 880/Ahd/2008 4 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda submitted that appeal of the assessee is not maintainable and is liable to be dismissed because the learned CIT(A) accepted the contention of the assessee to that extent. The learned DR in departmental appeal submitted that the AO has pointed out specific defects in bills and vouchers and that here was self made vouchers and that some of the vouchers were not supported by bills and other evidence. Even the identity and addresses of the drivers have not been established. He has submitted that since the AO has considered previous history of the assessee and also noted that there is a decrease of the incidents of lack of bills in the assessment year under appeal, therefore, the AO has taken a reasonable view for making the disallowance. He has submitted that the AO has also considered the expenses paid to the sister concern but no adverse view is taken. He has relied upon PB -140 which is audit report in which it is specifically mentioned that verification of vouchers have been made wherever evidences have been available and wherever documentary evidence were not available, prop. have been relied upon by the auditors for authentication. The learned DR, therefore, submitted that the learned CIT(A) was not justified in restricting the addition to 1% of the expenses.
6. We have considered the rival submissions and the materials available on record. Section 253 (1) of the IT Act provide that any assessee aggrieved by any of the orders of the learned CIT(A) may file appeal before the Tribunal. The right to prefer appeal, is therefore, provided under the Act if assessee is aggrieved against impugned order of the learned CIT(A). The assessee in the present case submitted before the learned CIT(A) that his appellate order for earlier years may be followed and requested that disallowance may be restricted to 1%. The learned CIT(A) accepted the contention of the assessee and restricted the disallowance by considering his orders for earlier years as well as materials on record. The learned Counsel for the assessee disputed the ITA No.761 and 880/Ahd/2008 5 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda observation of the learned CIT(A) in appellate order and submitted that the assessee has not made any such statement before the learned CIT(A). He has referred to paper book to show that in the written submission the assessee disputed the addition before the learned CIT(A). However, we do not agree with the submission of the learned Counsel for the assessee because if any observation and finding is given by the learned CIT(A) which the assessee disputed now, the assessee was required to take steps before the learned CIT(A) to dispute the correctness of the observation made in the appellate order. The assessee has however, not made any such efforts and even no ground of appeal is raised in this regard before the Tribunal. No material is produced to contradict or rebut the findings of the learned CIT(A) in this regard. Hon'ble Delhi High Court in the case of Ms. Deeksha Suri and others Vs ITAT and others 232 ITR 395 held that "The statement of facts recorded by a court or quasi-judicial Tribunal in its proceedings as regards the matters which transpired during the hearing before it would not be permitted to be assailed as incurred, unless steps are taken before the same forum. It is not open to the parties or counsel to say that the proceedings recorded by the Tribunal are incorrect".
6.1 The statement of fact and observation noted by the learned CIT(A) in the appellate order shows that the learned Counsel made a statement before the learned CIT(A) that addition may be restricted to 1% of the addition made by the AO. Therefore, the assessee cannot be permitted to assail the above finding of the learned CIT(A) unless some steps have been taken in the matter. It is not open to the assessee at this stage after a lapse of considerable period that the finding of fact by learned CIT(A) was incorrect or was not based upon the contention of the assessee's Counsel.
ITA No.761 and 880/Ahd/2008 6Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda
7. Considering the facts of the case and the findings noted by the AO that some of the bills of carting expenses were only supported by some self made vouchers and some of the bills were not supported by other evidence and even the identity of the drivers were not established by the assessee would show that the record maintained by assessee the of carting expenses was not reliable. ITAT Ahmedabad Bench in the case of the assessee in assessment year 2003-04 in ITA No.2254 and 2256/Ahd/2007 (supra) in Para 3.5 to 3.8 held as under:
"3.5 Before us, Learned Authorised Representative of the assessee Mr. Dhiren Shah has placed an order of ITAT Ahmedabad Bench "B" in assessee's own case (in ITA Nos.2768 & 2769/Ahd/2002 for Assessment Years 1998-99 and 1999-2000) dated 08/08/2008 and an another order of this Tribunal decided in the case of Shri Hasmukhbhai Mohanlal Shah (in ITA Nos.2770-2771/Ahd/2002 for A.Ys.1998-99 & 1999-2000) dated 30/05/2008 were referred to, wherein the Revenue's appeals were dismissed and the relief granted by the Learned CIT(Appeals) was affirmed. First, hereinbelow reproduced paragraph No.7 of the order of the Tribunal dated 30/05/2008:-
"7. From the above facts and circumstances, it is clear that the main reason for increase in carting paid is increase in diesel rates, which is supported by the bills and vouchers. It is the case of the assessee that single operator payments are only to the extent of Rs.3,60,032/- for whole of the year which comes to 1.2% of total carting paid and which is apparent from the bifurcation given by the Assessing Officer in his assessment order. The assessee's accounts are audited and complete vouchers are maintained. The Assessing Officer has not pointed out any inflation in figures in the books of account and in the absence of the same the book result cannot be disturbed. Accordingly, we do not want to interfere in the order of CIT(A) and we uphold the same."ITA No.761 and 880/Ahd/2008 7
Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda 3.6. Next, it is appropriate to reproduce the order of the Tribunal dated 08/08/2008 pronounced in assessee's own case dismissing the Revenue's appeal as per the following paragraph:-
"The learned DR did not dispute the facts that the basis of making disallowance on account of alleged inflated carting expenses in the case of Shri Hasmukhbhai Mohanlal Shah (supra) is also the basis for making similar addition in the case of present assessee and thus the facts are very much similar to that in the case of Shri Hasmukhbhai. The learned DR also could not controvert the findings recorded by the learned CIT(A) in the present case noted earlier. Therefore, considering the facts and circumstances of the case and consistent with the view taken by the Tribunal in the case of Shri Hasmukhbhai Mohanlal Shah (supra), we dismiss the ground of the Revenue and uphold the order of the CIT(A) in deleting the impugned addition of Rs.5,70,076 made on the alleged inflated carting expenses."
3.7. In the light of above factual background as well as the principle laid down by the respected Co-ordinate Bench, wherein Revenue's appeals were dismissed, therefore, we hereby follow the said view and direct the Assessing Officer to allow the claim as per law.
3.8. In the result, Revenue's ground is hereby dismissed, whereas Assessee's ground No.1 is allowed".
8. The Tribunal considering the earlier years finding of fact recorded by the Tribunal in which it was specifically noted that the AO has not pointed out any inflation in the figures in the books of account and that assessee maintained complete details and vouchers, therefore, in these premises, the Tribunal followed the order of the various benches and deleted the addition. However, as noted above, the facts of this case are clearly distinguishable because the AO has pointed out specific defects in the maintenance of books of account and that learned CIT(A) has ITA No.761 and 880/Ahd/2008 8 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda specifically noted that the defects pointed out by the AO have not been rebutted by the assessee would show that the details of carting expenses maintained by the assessee were not reliable. However, considering the order of the Tribunal in earlier years it would be reasonable and justified to restrict the addition to 1% as is made by the learned CIT(A) on the basis of the submissions made by the learned Counsel for the assessee.
9. Considering the above discussions, we are of the view that the appeal of the assessee is not maintainable because the assessee agreed for addition of 1% of the carting expenses before the learned CIT(A). However, there is no merit in the departmental appeal on this issue.
10. As a result, appeal of the assessee as well as the appeal of the Revenue on ground No.1 each is dismissed.
11. On ground No.2, the assessee challenged the disallowance of accident expenses of Rs.34,647/-. The AO noted that the assessee debited Rs.34,647/- towards accident expenses. The AO noted that primary liability of the expenses was of the owner of the vehicle and no evidence has been filed as to why the liability was discharged by the assessee. It was contended before the learned CIT(A) that in this line of business, the transporter is responsible to load and unload the materials in the trucks and to deliver the same at the required destination safely. It was, therefore, submitted that it was the responsibility of the transporter to incur the expenses on account of the same, however, even if the trucks are not owned by the transporter. The learned CIT(A) however, following his own appellate order for assessment year 2000-01 dismissed the appeal of the assessee and noted that the assessee has failed to substantiate the claim of business exigency to discharge the liability of a third party.
ITA No.761 and 880/Ahd/2008 9Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda
12. The learned Counsel for the assessee submitted that ITAT Ahmedabad Bench in the case of the same assessee in assessment year 2003-04 vide order dated 21-05-2010 in ITA No.2254 and 2256/Ahd/2007 upheld the order of the learned CIT(A) and dismissed the appeal of the assessee. He has therefore, submitted that the issue is covered against the assessee.
13. On consideration of the above facts, we do not find any merit in this ground of appeal of the assessee. The learned Counsel for the assessee conceded that the issue is covered against the assessee by the judgment of the Tribunal for assessment year 2003-04 (supra) in which also the Tribunal noted that the assessee has not contested this claim seriously, therefore, considering the previous history of the assessee this ground of appeal of the assessee was dismissed. In this view of the matter, this ground of appeal of the assessee is dismissed.
14. On ground No.3, the assessee challenged the disallowance of 10% out of telephone expenses and depreciation amounting to Rs.42,309/-. It was noticed by the AO that the assessee was having only one vehicle at its disposal and personal user of the same is not ruled out. 10% of the total expenses were accordingly disallowed. It was submitted that the vehicle is mainly used for business purposes and if any addition is to be made the same may be restricted to reasonable sum. The learned CIT(A) noted that personal user of the vehicle is not ruled out and that in assessment year 2000-01 disallowance out of vehicle expenses and depreciation was considered and in assessment year 2001-02, 10% was disallowed on the same issue by considering past records of the assessee.
15. The learned Counsel for the assessee submitted that ITAT Ahmedabad Bench in the case of the same assessee for assessment year 2003-04 in ITA No.2254 and 2256/Ahd/2007 (supra) confirmed the ITA No.761 and 880/Ahd/2008 10 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda disallowance and dismissed the appeal of the assessee. He has submitted that the issue is therefore, covered against the assessee.
16. On consideration of the above facts, we are of the view that there is no merit in this ground of appeal of the assessee. The assessee did not contest this issue before the Tribunal in earlier year. Considering the status of the assessee being a carrier and that personal user is not ruled out, this ground of appeal of the assessee is dismissed. This issue is covered against the assessee as is confirmed by the learned Counsel for the assessee. This ground of appeal of the assessee is accordingly dismissed.
17. On ground No.4, the assessee challenged the disallowance of telephone expenses of Rs.31,841/- and on ground No.5 challenged the disallowance of shortage restricted to Rs.8,000/-. The AO disallowed 10% out of the telephone expenses because the telephone was also installed at the residence of the assessee. It was pleaded before the learned CIT(A) that disallowance may be restricted to reasonable sum. The learned CIT(A) following his appellate order for assessment year 2001-02 confirmed the disallowance of 10% out of telephone expenses. On account of shortage, the AO made disallowance of Rs.15,291/- which was on account of loss for evaporation of chemicals transported by the assessee at various destinations. It was submitted before the learned CIT(A) that shortage was caused due to various reasons such as leakage in tankers and evaporation etc. It was submitted that in assessment year 1999-2000 similar disallowance was deleted. The learned CIT(A) however, found that contention of the assessee is not correct because the learned CIT(A) considered the issue in assessment year 2000-01 and restricted the disallowance to Rs.8,000/- on this issue following the decision in earlier assessment year 2000-01 and 2003-04. The learned Counsel for the assessee submitted that the issue of telephone expenses has already been ITA No.761 and 880/Ahd/2008 11 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda decided against the assessee in assessment year 2003-04 by the Tribunal in ITA No.2254 and 2256/Ahd/2007 (supra). He has further submitted that in the same order the shortage addition restricted to Rs.8,000/- has been confirmed by the Tribunal. The learned Counsel for the assessee, therefore, conceded that the issue is squarely covered against the assessee. On consideration of the above facts and submissions of the learned Counsel for the assessee and in the light of the earlier order of the Tribunal in the case of the same assessee for assessment year 2003-04 (supra) we do not find any merit in these grounds of appeal of the assessee. The same are accordingly dismissed.
18. On ground No.6, the assessee challenged the disallowance of bad debt of Rs.3,30,301/-.The AO asked the assessee to furnish documentary evidence in respect of efforts made to realize the debts and as to how the conditions laid down in the Act are fulfilled. The assessee however, could not furnish any documentary evidence and could not prove that there was no hope of recovery of the debts. The AO accordingly disallowed the bad debts. It was submitted before the learned CIT(A) that there were outstanding amounts in the books of account on account of transportation charges for services rendered to various companies and the debts were written off when the debts remained outstanding for a period of more than 2 /3 years. The assessee relied upon amended provisions of section 36(1)
(viii) of the IT Act. The learned CIT(A) however, confirmed the addition on the reasons given by the AO. The learned CIT(A) noted that what was written off was debts and not bad debts and that no evidence has been filed as to what efforts were made for recovery of the amount in question. The learned Counsel for the assessee reiterated the submissions made before the authorities below and submitted that according to amended provisions of section 36(1) (vii) when amount of bad debt was part thereof as written off as irrecoverable in the accounts of the assessee for the previous year, the deduction is allowable. He has relied upon the recent ITA No.761 and 880/Ahd/2008 12 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda decision of the Hon'ble Supreme Court in the case of T. R. F. Ltd. Vs CIT dated 09-02-2010 in Civil Appeal No.5294 reported in 323 ITR 397. On the other hand, the learned DR relied upon the order of the authorities below.
19. We have considered the rival submissions and material available on record. The Hon'ble Supreme Court in the case of T. R. F. Ltd. (supra) held as under:
""This position in law is well-settled. After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the above-mentioned aspect only and that too only to the extent of the write off."
20. The learned Counsel for the assessee submitted that the AO and the learned CIT(A) have not given any finding if the assessee actually written off the bad debts as irrecoverable in the books of accounts. Therefore, the matter should be remanded to the file of the AO for reconsideration as per decision of the Hon'ble Supreme Court in the case of T. R. F. Ltd. (supra). We accordingly, set aside the orders of the authorities below and restore this issue to the file of the AO with the direction to re-decide this issue in the light of the amended provisions of section 36(1) (vii) of the IT Act and as per decision of the Hon'ble ITA No.761 and 880/Ahd/2008 13 Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda Supreme Court in the case of T. R. F. Ltd. (supra). This ground of appeal of the assessee is allowed for statistical purposes.
21. On ground No.7, the assessee challenged the disallowance of traveling expenses of Rs.43,081/-. The AO disallowed 10% out of the traveling expenses of 4,30,812/-. The AO noted that personal traveling expenses debited under this head cannot be ruled out. The assessee was also found not maintaining any separate register in this regard. The learned CIT(A) on the same reasons confirmed the addition.
22. On consideration of the rival submissions we are of the view that the addition is excessive in nature. The learned Counsel for the assessee submitted that no addition is made of the similar nature in the past and that the assessee has spent the expenditure wholly and exclusively for the purpose of business. However, we find that the AO has noted in the assessment order that some of the vouchers are not supported by any cogent and documentary evidences. The learned Counsel for the assessee has not pointed out any specific details and vouchers on this issue to show that the assessee expended all traveling expenses for business purpose. The status of the assessee is that of an individual, therefore, personal traveling expenses debited under this head also cannot be ruled out. However, it is also a fact that the AO has not pointed out and has also not quantified as to how many traveling expenses has not been supported by documentary evidence. Considering the business of the assessee and in the absence of specific finding by the AO, we restrict the addition on this head to Rs.10,000/- in all as against Rs.43,081/- to meet the ends of justice. The AO is accordingly directed to make addition of Rs.10,000/- only. As a result, this ground of appeal of the assessee is allowed partly.
23. No other point is raised in both the appeals.
ITA No.761 and 880/Ahd/2008 14Shri Ravindra M. Shah Vs ACIT, Circle 2(2), Baroda
24. In the result, appeal of the assessee is partly allowed and the departmental appeal is dismissed.
Order pronounced on 23-07-2010
Sd/- Sd/-
(N. S. SAINI) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date : 23-07-2010
Lakshmikant/-
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Dy. Registrar, ITAT, Ahmedabad