Income Tax Appellate Tribunal - Bangalore
M/S Maruthi Traders, Chitradurga vs Assessee on 25 February, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'C' :BANGALORE
BEFORE SMT. P.MADHAVI DEVI, JUDICIAL MEMBER
and
SHRI JASON P.BOAZ, ACCOUNTANT MEMBER
ITA No.1359/Bang/2012
(Assessment year: 2008-09)
M/s.Maruthi Traders,
Main road, Belagur,
Hosadurga Taluk,
Chitradurga District. ... Appellant
PAN: AAEFM4207H
Vs.
Income-tax Officer,
Ward-1,
Chitradurga. ... Respondent
Appellant by : Shri C.R.Nulvi, CA
Respondent by : Shri M.K.Biju, JCIT(DR).
Date of hearing : 25-02-2014.
Date of pronouncement : 07-03-2014.
O R D E R
Per Smt.P.MADHAVI DEVI, JM:
This appeal by the assessee is directed against the order of the of the CIT(A), Hubli, dated 17-9-2012 for the assessment year 2008-09.
2. The assessee has raised the following effective grounds of appeal:
1. The order of the authorities below is against the facts and circumstances of the case and against the evidence produced before them.ITA No.1359/Bang/2012 Page 2 of 8
2. The authorities below erred in adding and sustaining the addition of 50% of hamali charges and local loading chargers which is against the fact that for payment of such expenses, the register were maintained which are impounded by the AO during the course of survey.
3. The Hon'ble CIT(A), Hubli has sustained the addition sof Rs.268,752/- by stating that the statement of partner of appellant reconciled with the books of account by AO but AO has not made any such claims in his remand report.
4. The Hon'ble CIT(A), Hubli has erred in sustaining the additions of Rs.11,523/- on account of difference in sundry credits wherein reciprocal mistake has been happened and principle of natural justice has not been followed in making the addition.
5. The Hon'ble CIT(A), Hubli has erred in making addition of Rs.1,810,562/-, though the AO in his remand report has not requested for upholding the additions based on the documentary evidence.
3. Brief facts of the case are that the assessee is a partnership firm doing the business of trading in coconut and copra. For the relevant assessment year, the assessee filed its return of income declaring total income of Rs.9,930/-. Initially the return was processed u/s 143(1) of the Income-tax Act,1961 [hereinafter referred to as 'the Act'] accepting the returned income resulting in a refund of Rs.41,176/-. Subsequently the return was selected for scrutiny. The Assessing Officer (AO) called for the books of account and other details relating to computation of income of the assessee. The assessee filed the necessary details as well as its books of account. On perusal of the said documents, the AO found certain discrepancies relating to (i) payment of hamali charges and local labour charges (ii) ITA No.1359/Bang/2012 Page 3 of 8 commission on local sales (iii) difference in sundry creditors, and
(iv) difference in closing stock of gunny bags. He accordingly made the disallowance and consequential additions to the returned income of the assessee.
4. Aggrieved, the assessee preferred an appeal before the CIT(A) along with necessary details. The CIT(A) called for a remand report from the AO on the details submitted by the assessee and after taking note of the remand report submitted by the AO, the CIT(A) confirmed the additions made by the AO.
5. Aggrieved by the order of the CIT(A), the assessee is in second appeal before us.
6. As regards ground No.2 relating to disallowance of 50% of hamali charges and local loading charges are concerned, the learned counsel for assessee submitted that the assessee, being in the trading of coconut and copra, has to necessarily engage labour for loading and unloading of the goods. He submitted that the assessee has maintained vouchers for payments made towards hamali charges and loading charges and has also maintained Acquittance Register in support of engaging the labour. He submitted that the assessee has filed copies of all the vouchers before the AO but the AO has refused to consider the same holding them to be self-made vouchers. He submitted that ITA No.1359/Bang/2012 Page 4 of 8 he has made a submission before the AO that Acquittance Register has been found and impounded during the course of survey and was in possession of the assessing authority and therefore the same may also be considered to verify the veracity of the claim of hamali charges and loading charges. He submitted that neither the AO nor the CIT(A) has looked into the claim of the assessee with regard to the Acquittance Register but has simply made an ad hoc disallowance of 50% of the claim of hamali charges and local loading charges, which is not justified. 6.1 The learned Departmental Representative, on the other hand, supported the orders of the authorities below and submitted that the assessee is supposed to maintain bills and vouchers for all the expenditure claimed by him and since the assessee has failed to avail the opportunity of producing the relevant documents before the authorities below, the disallowance made is reasonable and justified. 6.2. Having heard both the parties and having considered the rival contentions, we find that the assessee's business definitely calls for engagement of labour and hamali. Therefore, the assessee is not only required to make payment for hamali and labour but the assessee is also supposed to maintain necessary evidence in support of its claim of incurring expenditure. The assessee has maintained self-made vouchers which by ITA No.1359/Bang/2012 Page 5 of 8 themselves may not offer any credibility but if the same is verified with the Acquittance Register, it might prove the veracity of the assessee's claim. In view of the same, we set aside the addition made by the AO and remand the issue back to the file of the AO with a direction to re-consider the evidence such as Acquittance register, which is in possession of the revenue authorities, to verify the claim of the assessee that Hamali and other labourers have been engaged by it and that the charges claimed to have been paid by it are commensurate with the No. of labourers engaged by it. This issue is accordingly set aside to the file of the AO for de novo consideration.
7. With regard to ground No.3 relating to alleged commission from local sales, we find that the AO has relied upon the statement of a partner during the course of survey that the assessee is also collecting commission from local sales. Except for the statement of the partner, neither the AO nor the CIT(A) have been able to bring on record any evidence in support of such addition. It is now a settled position that the statement of a partner alone cannot form the basis for any addition, but corroborative evidence has to be found to make and sustain an addition. In the absence of any corroborative evidence, we hold that the statement of a partner alone cannot form the basis for making the addition. This addition is accordingly deleted. ITA No.1359/Bang/2012 Page 6 of 8
8. As regards ground No.4 relating to difference in sundry creditors, the learned counsel for assessee submitted that it is on account of reciprocal mistake in the books of account and the authorities below have failed to consider the contentions of the assessee and made the addition which amounts to double addition.
After hearing both the parties, we are of the opinion that this issue also should be remanded to the file of the AO for verification of the assessee's contentions and if it is found that it is a double addition and is on account of a mistake occurring in the books of account, then the AO is directed to delete the addition. This ground is accordingly allowed for statistical purposes.
9. As regards ground No.5, the learned counsel for assessee submitted that the AO has made the addition on account of difference in the closing stock of empty gunny bags. He submitted that in the remand report, the AO has clearly stated that the sale bills/forwarding notes have been verified and it has been noticed that all coconuts sold are not packed in gunny bags but some are also sold loose and, therefore, the number of gunny bags sold has been adopted on the total sales without considering whether the coconuts are sold loose or packed in gunny bags and hence addition is not proper and that the assessee's claim requires to be considered on merits. He ITA No.1359/Bang/2012 Page 7 of 8 submitted that the CIT(A), without considering the remand report of the AO, has confirmed the addition which is against the principles of natural justice.
9.1 The learned Departmental Representative placed reliance on the orders of the authorities below. However, he conceded that the AO, in his remand report, has stated that the addition made on account of closing stock of gunny bags was made on the basis of total sales without considering the fact that some coconuts are sold loose also.
9.2 After hearing both the parties and after perusal of the material on record, we are of the opinion that this issue also should be remanded to the file of the AO for re-consideration of the issue in accordance with law and after taking into account the remand report of the AO on this issue. This ground is accordingly allowed for statistical purposes.
10. In the result, the assessee's appeal is partly allowed for statistical purposes.
Order pronounced in the open court on 7 th March, 2014.
sd/- sd/-
(Jason P.Boaz) (Smt. P.Madhavi Devi)
ACCOUNTANT MEMBER JUDICIAL MEMBER
eksrinivasulu
ITA No.1359/Bang/2012
Page 8 of 8
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file
By order
Senior Private Secretary
Income-tax Appellate Tribunal
Bangalore