IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI
.. ,, ,
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND
SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
/ I.T.A. No. 4391 & 4392/Mum/2013
( / Assessment Year
: 2007-08 & 2008-09
The ACIT-15(1) /
Shri Vikram Vijay Mehta,
Matru Mandir, 1 s t Floor,
32A, Geeta Smruti Bldg.,
Tardeo Road, Pandita Ramabai Road,
Mumbai-400 007 Gamdevi,
. / . /PAN/GIR No. : AGSPM 2802N
( /Appellant) .. ( / Respondent)
/ Appellant by: Shri G.M. Doss
/Respondent by: Shri Vijay Mehta
/ Date of Hearing
/Date of Pronouncement :17.07.2015
/ O R D E R
PER N.K. BILLAIYA, AM:
These two appeals of the Revenue are preferred against two
separate orders of the Ld. CIT(A)-26, Mumbai dt. 25.3.2013 pertaining to
assessment year 2007-08 & 2008-09. Both these appeals have common
grounds though quantum may defer, therefore, they were heard together
and disposed of by this common order for the sake of convenience.
2 ITA. No. 4391 & 4392/M/2013
2. In both these appeals, the Revenue has challenged the order of the
Ld. CIT(A) on two counts. First ground is in relation to the deletion of
the addition made by the AO u/s. 69C of the Act and the second
grievances relates to the deletion of the addition made by the AO on
account of disallowance of freight expenses.
2.1. First we take up the appeal for A.Y. 2007-08 in ITA No.
4391/M/2013. The facts of the case are that A Search & seizure action
u/s 132 of the Income Tax Act, 1961 was carried out on 05.10.2007 in the
case of M/s. Mehta Transport Services(I) Ltd. and assessment
proceedings u/s.153C were completed by Dy.C.I.T., Central Cirde-31,
Mumbai in the case of Shri Vijay J Mehta. During the course of this
proceedings, an intimation has been received from Dy. C.I.T., Central
Cirde-31, Mumbai vide letter No. DCIT/c-31/S &S 2009-10
dtd.12.01.2010 on 25.01.2010 along with copy of seized documents
relating to Shri Vikram V Mehta, a son of Shri Vijay J Mehta, which
were incriminating in nature. Since the provisions u/s 153C are attracted,
proceedings u/s 153C were initiated for A.Y.2002-03 to A.Y.2008-09 by
issue of Notice u/s153C of the I.T. Act, 1961 on 19.03.2010.
2.2. The assessee is a proprietor of M/s. Vikram Transport Services
which is engaged in the business of transport. During the course of
search proceedings, a statement on oath was recorded of Shri Vijay J.
Mehta wherein he has surrendered the amount of Rs. 10 lakhs in the
hands of Shri Vikram V. Mehta which is the assessee of the present
appeals towards unverifiable expenses and/or any discrepancy found as
per the material seized.
3 ITA. No. 4391 & 4392/M/2013
2.3. During the course of search proceedings, various documents were
found and seized. In the case of the assessee, following materials were
Sr. Document Panchnama Seized from
1. A-1 (Page no.1 to 05.10.2007 Residence Goita Bldg.,
69) Pocket Diary Flat No.32, 8th floor,
2 A-2 (Page No.1 to 05.10.2007 -do-
62) Pocket Diary
3. A-3 (Page no.1 to 05.10.2007 -do-
2.4. On analyzing the documents seized with the regular books of
account maintained by the assessee, the Assessing Officer noticed that
various transactions mentioned in the seized documents were not found
recorded in the regular books of accounts. The AO has exhibited the
details of such transaction on page-4 of his assessment order and on page-
5, he has made the year-wise analyses and thereby made the additions of
Rs. 16,76,295/- in A.Y. 2007-08 and Rs. 68,78,239/- in A.Y. 2008-09 u/s.
69C of the Act.
3. The assessee carried the matter before the Ld. CIT(A). Before the
Appellate authority, it was stated that the entire assessment is erroneous
on factual errors. The detailed submissions of the assessee were
transmitted to the AO for his remand report. The AO furnished the
remand report vide letter dt. 8.2.2013. In his remand report, the AO
stated that inspite of several opportunities given to the assessee, the
assessee did not submit any concrete and satisfactory explanation nor he
has furnished any evidence for verification as required.
4 ITA. No. 4391 & 4392/M/2013
3.1. When this remand report of the AO was confronted to the assessee,
the assessee strongly submitted that the AO has sent his reply without
doing any kind of enquiries and verifications from the appellant.
Thereafter the assessee furnished a note on additions made u/s. 69C of the
Act relating to various notings in pocket diary marked A1, A2 and A3.
3.2. After considering the facts and the submissions and the detailed
entry-wise explanation furnished by the assessee, the Ld. CIT(A)
observed that the AO has mechanically added all the figures noted in the
pocket diary as unexplained expenditure of the assessee. The Ld. CIT(A)
further observed that the AO has summarily rejected the explanation of
individual entries given by the assessee. The Ld. CIT(A) was convinced
that all the figures noted in the pocket diary cannot be treated as
unexplained expenditure, particularly when the assessee has given
convincing explanation in respect of major entries in the pocket diary.
The Ld. CIT(A) further observed that the AO has treated even the entries
of cash deposits in the bank account, receipts already recorded in bank
accounts and withdrawals recorded in capital account as unexplained
expenditure. The Ld. CIT(A), however, observed that there are some
difference regarding the amount of expenditure as noted in the pocket
diary and has recorded in the books of account. Though the Ld. CIT(A)
was of the opinion that such entries are less than Rs. 5 lakhs therefore in
the interest of justice, it will be reasonable to treat Rs. 5 lakhs as
unexplained expenditure. Accordingly, the addition made by the AO for
unexplained entries in the seized diary was restricted to Rs. 5 lakhs only.
4. Aggrieved by this, the Revenue is before us.
5. The Ld. Departmental Representative strongly supported the
assessment order relying upon each and every findings of the AO.
5 ITA. No. 4391 & 4392/M/2013
6. Per contra, the Ld. Counsel could not advance anything new other
than what has been advanced before the First Appellate authority.
7. We have given a thoughtful consideration to the findings of the AO
and the findings of the Ld. CIT(A) qua additions. With the assistance of
the Ld. Counsel, we have also gone through the relevant documentary
evidences brought on record before us in the form of a paper book. It is
an undisputed fact that the assessee has filed explanation to each and
every entry recorded in the alleged pocket diary. The additions made by
the AO are mechanical for example on page-10 of the seized diary
marked as A-1, there is no transaction of Rs. 52,000/- on 3.8.2006 or
otherwise. Thus the addition made by the AO is without any substance.
Further, the allegation of the AO that the payments are without any
supporting evidence is also not correct, for example payment of Rs.
28,000/- made to Shree Krupa Roadlines is supported by FAPS, which is
part of the paper book filed before the Revenue authorities. We have
also gone through the remand report of the AO dt. 8.2.2013 which is
exhibited at pages 153 and 154 of the paper book. We find force in the
contention of the Ld. Counsel that the AO has submitted the remand
report without any verification. Considering all these facts in totality and
also considering the fact that at the time of search, Rs. 10 lakhs were
surrendered in the name of the assessee which has been accepted by the
Revenue. Restriction of the impugned addition to Rs. 5 lakhs is justified
and therefore we decline to interfere. Ground No. 1 is accordingly
8. Ground No. 2 relates to the disallowance out of freight expenses.
While scrutinizing the return, the AO noticed that the assessee is showing
commission income and receipts on account of freight charges. Against
6 ITA. No. 4391 & 4392/M/2013
these receipts, the assessee has claimed various expenses. The major
expenses were claimed under the head freight expenses, bank interest.
The assessee was specifically asked to produce the necessary bills and
vouchers in support of expenses claimed. The AO observed that the
assessee has not produced satisfactory evidences as most of the expenses
debited to profit and loss account towards freight charges were incurred
in cash. The AO found that the ratio of cash payments and cheque
payments is 80:20. As proper bills and vouchers were not produced, the
AO disallowed 10% of the expenses claimed and made an addition of Rs.
15,49,773/- in assessment year 2007-08 and Rs. 24,60,075/- in A.Y 2008-
9. The assessee carried the matter before the Ld. CIT(A). It was
contended by the assessee that on the freight charges, the assessee has
shown net profit of 6% which is a normal profit in the transport business.
It was pointed out to the Ld. CIT(A) that the adhoc disallowance made by
the AO is without pointing out any specific instance of any bogus or
allowable business. It was further noticed to the Ld. CIT(A) that if such
disallowances are sustained, then the net profit of the assessee would be
around 16% which is unrealistic. After considering the facts and the
submissions, the Ld. CIT(A) observed that the AO has not made any
enquiry from any of the parties to whom freight charges were paid. The
Ld. CIT(A) further observed that the AO has not pointed out any
abnormal increase in the freight expenses as compared to earlier or
subsequent years. The Ld. CIT(A) was convinced that such huge
disallowance, the profit will make the profit of the assessee abnormally
high. The ld. CIT(A) deleted the addition.
10. Aggrieved by this, the Revenue is before us.
7 ITA. No. 4391 & 4392/M/2013
11. The Ld. Departmental Representative strongly relied upon the
findings of the AO.
12. The Ld. Counsel for the assessee advanced the same argument as
made before the First Appellate authority.
13. We have given a thoughtful consideration to the facts in issue. It is
not in dispute that the disallowances made by the AO are on adhoc basis.
It would be better to consider the following ratio analysis in respect of
freight income vis-à-vis freight charges.
S.No. Particulars A.Y 2007-08 A.Y. 2008-09 A.Y.2009-10 A.Y. 2010- A.Y.2011-12
1. Freight Income 20,712,635 29,330,221 29537,417 11,293,579 15,662,200
2. Freight charges 15,497,726 24,600,744 23,066,752 8,437,206 13,451,652
% 74.8% 83.9% 78.1% 74.7% 85.9%
3. Net Profit 1,242,682 1,395,952 1,578,400 386,790 751,869
% 6.0% 4.8% 5.3% 3.4% 4.8%
Assessment 143(3) r.w.s. 143(3) r.w.s. 143(3) 143(3) 143(3)
Order passed 153A 153A
13.1. A perusal of the aforementioned chart clearly shows that the freight
charges claimed by the assessee are reasonable. We, therefore decline to
interfere with the findings of the Ld. CIT(A). Ground No. 2 is
ITA No. 4392/M/2013 A.Y. 2008-09
14. The grievance of the Revenue is identical in ITA No. 4391/M/13
though the quantum may defer. For similar reasons appeal for A.Y.
2008-09 in ITA No. 4392 is also dismissed.
8 ITA. No. 4391 & 4392/M/2013
15. In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 17th July, 2015
(A.D. JAIN ) (N.K. BILLAIYA)
/JUDICIAL MEMBER / ACCOUNTANT MEMBER
Mumbai; Dated : 17 July , 2015
. ../ RJ , Sr. PS
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent.
3. () / The CIT(A)-
4. / CIT
5. , ,
/ DR, ITAT, Mumbai
6. / Guard file.
/ BY ORDER,
, / ITAT, Mumbai