Income Tax Appellate Tribunal - Ahmedabad
Kulwansingh Randhwa, Baroda vs Assessee on 8 August, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "A" BENCH
Before: Shri Anil Chaturvedi, Accountant Member
and Sri Kul Bharat, Judicial Member
ITA No. 844/Ahd/2011
Assessment Year 2006-07
Shri Kulwantsingh DCIT,
Randhawa Prop. Radiant Circle 2 (1),
Tanker Services, B-112, Vs Baroda
Ranoli Commercial (Respondent)
Complex, At & Post
Ranoli, Dist. Baroda
PAN: ADGPR 3309 E
Assessee by: Sri Urvashi Sodhan, A.R.
Revenue by: Sri Dinesh Singh, Sr. D.R.
Date of hearing : 25-07-2014
Date of pronouncement : 08-08-2014
आदे श/ORDER
PER : ANIL CHATURVEDI, ACCOUNTANT MEMBER:-
This appeal is filed by the assessee against the order of Ld. CIT(A)- II, Baroda dated 26-11-2010 for A.Y. 2006-07.
I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 2Kulwantsingh Randhawa vs. DCIT
2. The facts as culled out from the material on record are as under.
3. Assessee is an individual and proprietor of "Radiant Tanker Service"
and is stated to be engaged in the business of transportation of liquid material. Assessee filed his return of income for AY 06-07 on 30.12.2006 declaring total income of Rs 9,86,280/-. The case was selected for scrutiny and thereafter assessment was framed u/s. 143(3) vide order dated 31.12.2008 and the total income was determined at Rs. 17,92,500/-. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A). Ld. ClT(A) vide order dated 26.11.2010 granted partial relief to the Assessee. Aggrieved by the order of Ld. CIT(A), Assessee is now in appeal before us and has raised the following effective grounds:
"1. Ld. CIT (A) has erred in law and on facts in confirming adhoc disallowance made by AO of Rs. 50,000/- out of total trip expenses holding the same to be non business expenses. Both the lower authorities failed to appreciate that the expenses incurred for the purpose of conducting tanker business were fully vouched for and particulars submitted. Under the facts and the circumstances of the case, Ld. CIT (A) ought to have allowed the trip expense in full as "Business Expenditure".
2. Ld. CIT (A) has erred in law and on facts in confirming disallowance of Rs. 4,00,863/- made by AO as income notionally earned on account of rate difference. The order of Id. CIT(A) is without properly appreciating the facts and further erred in ignoring various submissions, explanations and information submitted by the appellant that ought to have been considered before passing the impugned order.
3. Ld. CTT (A) has erred in law and on facts in confirming ad hoc addition of Rs. 50,000/- out of total addition of Rs. 3,01,709/- made by AO u/s 69C of the act. Ld CIT (A) erred in appreciating the contention that provisions of section 69C, when proper explanation for the expenses incurred is submitted are not applicable for I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 3 Kulwantsingh Randhawa vs. DCIT estimated expenses never incurred. Ld. CIT (A) ought not to have confirmed addition of Rs. 50,000/-.
4. Ld. CIT (A) erred in law and on facts in confirming adhoc disallowance of 10% out of 20% made by AO out of telephone and vehicle expenses."
1st ground is with respect to disallowance of adhoc disallowance of trip expenses of Rs. 50,000/-
4. AO noticed that assessee had debited Rs 2,06,378/- as trip expenses in the Profit and Loss account. On verification of the vouchers, he noticed that most of the expenses were incurred in cash and the expenses were not fully verifiable and therefore whether the expenses were incurred wholly for the purpose of business was not proved. He accordingly disallowed Rs 50,000/- of the total expenses. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A). Ld. CIT(A) upheld the order of AO. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
5. Before us, Ld AR reiterated the submissions made before Ld. CIT(A). She further submitted that expenses have been incurred by the cleaners and drivers during their trip and have necessarily to be incurred in cash. She further submitted that no such disallowance was made in the earlier year. She thus urged that the addition be deleted. Ld DR on the other hand supported the orders of AO and Ld. CIT(A).
6. We have heard the rival submissions and perused the material on record. The issue in the present case is about the disallowance of trip expenses which have been incurred in cash. AO considering that the I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 4 Kulwantsingh Randhawa vs. DCIT expenses have been incurred in cash and the expenses being not fully verifiable disallowed Rs. 50000/-. Before us, Ld. AR has also not submitted the nature of expenses nor has placed on record the assessment orders of earlier years in support of the contention that similar expenses incurred by the Assessee have been accepted by Revenue in past. Further considering the nature of business in which the assessee is engaged in and considering that the total receipts of the assessee from the business at Rs 3.51 crores, we are of the view that in such circumstances the disallowance of Rs 50000/- which works out to only 0.14% of the receipts, is reasonable in the present circumstances and therefore no interference is called for. In the result this ground is dismissed.
2nd ground is with respect to confirming disallowance of Rs 4,00,863/-.
7. AO noticed that Assessee had apart from using the own trucks had also used trucks hired from associate concerns and also from others. He also noticed that Assessee had received income from contracting (rate difference] from two associates at 8.82 % and 8.10% whereas from the other two concerns did not receive any income. AO was of the view that Assessee should have earned income from the other two concerns also. He accordingly worked out the income on the basis of percentage of freight charges and made an addition of Rs 4,08,863/-. Aggrieved by the order of AO, Assessee carried the natter before Ld. CIT(A). Ld. CIT(A) confirmed the action of AO by holding as under:
"4.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. The appellant has plied 4 vehicles of his relative during the year. From two of them he has shown remuneration while in case of other two he has not shown any remuneration. No reason has been given for this I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 5 Kulwantsingh Randhawa vs. DCIT apparent discrepancy except stating that it has not charged any remuneration from these two as he has done in the case of other two. The explanation is not convincing. It is not explained why transaction with the other two relatives is not at arm's length. When appellant is running others' vehicle for remuneration then is no convincing reason why he is not showing similar arm's length transaction from these two. On the facts of the case, the Assessing Officer is justified in estimating income at the same rate as is received from other two contractee. This ground is rejected."
8. Aggrieved by the order of Ld. CIT(A), Assessee is now in appeal before us.
9. Before us Ld AR reiterated the submissions made before Ld CIT(A) and further submitted that AO has failed to establish that Assessee has in fact received the income and has taxed notional income. She further submitted that only real income can be taxed and not notional income and therefore the addition made by the AO needs to be deleted. Ld DR on the other hand supported the orders of AO and Ld. CIT(A).
10. We have heard the rival submissions and perused the material on record. In the present case it is seen that AO has worked out the income that the Assessee ought to have received from two associate concerns. We further find that AO has not brought any material on record to demonstrate that the Assessee has in fact received the income but had proceeded to work out the income on the basis of percentage of income received by assessee from two other associate concerns. It is a settled law that only real income can be taxed. In such circumstances, we are of the view that no addition is called for more so when the addition is made on I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 6 Kulwantsingh Randhawa vs. DCIT the basis of assumption. We thus direct its deletion. Thus this ground of Assessee is allowed.
3rd ground is with respect to addition of Rs 50000/- u/s 69C.
11. AO noticed that assessee had purchased 5 tankers during the year and had incurred expenses for the body work of the tankers. On perusing the details of expenses of body building submitted by the Assessee, he was of the view that in respect of steel purchase there was huge variation in expenses in the case of each tanker. He thereafter worked out the difference on the basis of the expenses shown by the assessee and expenses of tanker at Rs 2,06,000/- and worked out the difference at Rs 3,01,709/- (working at page 6 of the order) and made addition u/s 69C of the Act. Aggrieved by the order of AO, Assessee carried the matter before Ld. CIT(A). Ld. CIT(A) after considering the submissions of the assessee granted substantial relief by holding as under:
"5.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. The Assessing Officer has made addition as tanker wise manufacturing expenses showed discrepancy as noted at page-5 of assessment order. The appellant on the other hand has argued that all the tankers were manufactured within 15 days and therefore expenditure should be looked into totality. It is apparent from the details filed before the Assessing Officer that the appellant's accounting was faulty. In some cases purchase of steel has been shown at very high quantity while in other cases it has been shown at a very small quantity. Similarly in one case labour charges have been shown at a very substantial amount, while in other cases no labour expenses at all has been shown, A superficial analysis would show that while in some cases expenses have been exaggerated, in other case expenses have been suppressed. From the point of view of a tax-payer both will conceal each other as both are mutually offsetting. Apparently, such superficial analysis would not help in this case. It is obvious that since all the tankers were built within 15 days of I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 7 Kulwantsingh Randhawa vs. DCIT each other accounting have been mixed up. It is also seen that in total six tankers were built but the Assessing Officer has considered only 5 tankers. According to the appellant, the Assessing Officer has not considered Truck No. GJ6Z 6646. It is most likely that material purchased initially were also utilized for subsequent body building. Similarly there is no possibility of no labour expenses being incurred as is seen in some cases. It also makes no sense that while in case of one tanker labour expenses are exaggerated and in case of another tanker the expenses is shown as nil. The appellant has filed certificate from M/s. Relax Techno Fab regarding requisite material required for fabrication of M.S. Tanker, according to which for six tankers 2005 kgs of steel and 700 kg of angles would be required as against which the appellant has purchased 2002 kgs of steel and 701 kgs of angles. Thus, there seem to be logic in the contention of the learned Authorized Representative that accounting have been mixed up. Yet considering the fact that expenses are not fully reconcilable an amount of Rs.50,000/- is disallowed. The appellant gets partial relief on this issue."
12. Aggrieved by the order of CIT(A), Assessee is now in appeal before us.
13. Before us, Ld AR reiterated the submissions made before Ld. CIT(A) and further submitted that when the entire explanation of the Assessee has been accepted there was no reason to make adhoc disallowance of Rs 50,000/- without any basis. She therefore submitted that the disallowance upheld by Ld. CIT(A) be deleted. Ld DR on the other hand supported the order of AO.
14. We have heard the rival submissions and perused the material on record. We find that Ld. CIT(A) after considering the submissions and on the basis of the certificate of the fabricator who had done the work of body building has accepted that purchase of steel and angles to be matching with the purchases of steel and angles made by assessee. He has further given a finding that a superficial analysis show that in some cases the I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 8 Kulwantsingh Randhawa vs. DCIT expenses have been exaggerated and in the other cases it has been suppressed and both, mutually offset each other. In view of the aforesaid findings of ld CIT(A), we are of the view that no disallowance is called for in the present case. We thus direct its deletion. In the result this ground of Assessee is allowed.
4th ground is with respect to disallowance of telephone and vehicle expenses.
15. AO noticed that Assessee has claimed telephone expenses and vehicle maintenance expenses aggregating to Rs. 2,36,221/-. AO was of the view that the personal use of telephone and car cannot be ruled out and accordingly disallowed Rs. 47,324/- (being 20% of the expenses). Aggrieved by the order of AO, Assessee carried the matter before Ld CIT(A). Ld. CIT(A) restricted the disallowance to 10% as against 20% made by the AO. Aggrieved by the order of Ld. CIT(A), Assessee is now in appeal before us. Before us for Ld AR reiterated the submissions made before Ld. CIT(A) and on the other hand, Ld DR relied on the order of AO.
16. We have heard the rival submissions arid perused the material on record. In the present case, AO had considered 20% of the telephone and vehicle expenses to be for non business purposes and on account of personal use and made the disallowance. The disallowance was scaled down to 10% of the expenses by Ld. CIT(A). We are of the view that Ld. CIT(A) was quite reasonable in restricting the disallowance and therefore no interference is called for. Thus this ground of Assessee is dismissed.
I.T.A No. 844/Ahd/2011 A.Y. 2006-07 Page No 9Kulwantsingh Randhawa vs. DCIT
17. In the result the appeal of Assessee is partly allowed Order pronounced in open court on the date mentioned hereinabove at caption page Sd/- Sd/-
(KUL BHARAT) ( ANIL CHATURVEDI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad : Dated 08/08/2014
ak
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद