M/S.a.m.transport Corporation v. The Additional Commissioner Of Income-Tax, Business Range-Viii

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 08.03.2022 CORAM : THE HONOURABLE MR. JUSTICE R. MAHADEVANAND THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD TCA.NO.29 OF 2012 M/s.A.M.Transport Corporation, No.329, Thambu Chetty Street, Parrys, Chennai - 600 001. ... Appellant Vs The Additional Commissioner of Income-tax, Business Range-VIII, No.611, Anna Salai, Chennai - 600 006. ... Respondent Appeal preferred under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal,Chennai “B” Bench, dated 16.09.2011 in I.TA.No.220/Mds/2011 forthe assessment year 2007-2008. Against the order dated 08.11.2010 made in ITA.No.119/2009-2010 on the file of the Commissioner of Income-tax (Appeals)-IX,Chennai-34 PAN.GIR.No. for the assessment year 2007-2008 against the order dated 24.12.2009 made inPAN.GIR.NO.AAHFA2077Q on the file of the Additional Commissionerof Income-tax, Chennai-6 for the Assessment Year 2007-2008. For Appellant : Mr.N.Muthukumar For Respondent : Mr.T.RavikumarSenior Standing Counsel JUDGMENT (Judgment of the court was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant /assessee, challenging the order dated 16.09.2011 passed by theIncome Tax Appellate Tribunal, 'B' Bench, Chennai, inI.T.A.No.220/Mds/2011, relating to the assessment year 2007-08. 2.The appellant is a partnership firm and is engaged in thebusiness of transport contract. For the assessment year 2007-08,they filed its return of income at Rs.17,77,727/-. During thescrutiny proceedings, the assessing officer raised certainqueries regarding the expenditure claimed by the appellantherein. According to the appellant, the expenditure is genuineand incurred wholly in connection with its business. Though thesaid explanation was accepted, the assessing officer took a viewthat 10% of the expenses has to be disallowed, on the premisethat the complete set of vouchers have not been produced.Accordingly, the assessing officer disallowed 10% of theexpenditure incurred and assessed the income of the appellant byorder dated 24.12.2009. Challenging the said order ofassessment, the appellant filed an appeal, which was dismissedby the Commissioner of Income Tax (Appeals)-IX, Chennai, onthe ground that the possibility of inflation of expenditurecannot be ruled out. Aggrieved over the same, the appellant wenton further appeal before the Tribunal, which restricted thedisallowance on account of the loading and unloading expenditureto a sum of Rs.5,00,000/- and accordingly, partly allowed theappeal. Being dissatisfied with the same, the appellant isbefore this court with this tax case appeal. 3.The following substantial questions of law are framed inthis tax case appeal for consideration of this court: (i) Whether on the facts and in the circumstancesof the case, the income Tax Appellate Tribunal isright in law in disallowing a sum of Rs.5,00,000/- outoftheloadingandunloadingexpenditurenotwithstanding its observation that the expenses arenot faulty and fully vouched?(ii) Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal is right in law in not adjudicating thegrounds of appeal in connection with the disallowanceof Rs.2,53,186/- being expenses incurred on businesspromotion, general, travel, office and miscellaneousrequirements? 4.Heard both sides and perused the materials available onrecord. 3.The following substantial questions of law are framed inthis tax case appeal for consideration of this court: (i) Whether on the facts and in the circumstancesof the case, the income Tax Appellate Tribunal isright in law in disallowing a sum of Rs.5,00,000/- outoftheloadingandunloadingexpenditurenotwithstanding its observation that the expenses arenot faulty and fully vouched?(ii) Whether on the facts and in thecircumstances of the case, the Income Tax AppellateTribunal is right in law in not adjudicating thegrounds of appeal in connection with the disallowanceof Rs.2,53,186/- being expenses incurred on businesspromotion, general, travel, office and miscellaneousrequirements? 4.Heard both sides and perused the materials available onrecord. 5.It could be seen that the appellant produced its books ofaccounts and vouchers in support of its claim relating to theassessment year in question. However, the assessing officerconcluded that the expenses incurred by the appellant were inthe nature of wages paid to loading and unloading workers andwere supported only by self-made vouchers; the said claim couldnot be allowed fully in the absence of proper evidence, thoughthe appellant's business cannot be carried on without incurringsuch charges; and hence, 10% of the loading and unloadingexpenses was disallowed. The said order of the assessing officerwas confirmed by the CIT(A), after having observed that thepossibility of inflation cannot be ruled out. Taking note of theorders passed by the assessing officer and the CIT(A), theTribunal was of the view that no specific voucher has been foundto be faulty; and considering the possible inflation in theexpenditure, an ad hoc addition of Rs.5 lakhs would meet theinterest of justice. Accordingly, the Tribunal reduced thedisallowance of 10% towards loading and unloading charges madeby the assessing officer as confirmed by the CIT(A), to Rs.5lakhs, by order dated 16.09.2011, which is impugned in this writappeal. 6.Having regard to the admitted fact that the appellant isinvolved in the business of transport contract, the preparationof self made vouchers by them towards the loading and unloadingexpenses, could not be said to be against the trade practice andthe method of accountancy. Further, the vouchers produced by theappellant were not disputed by the authorities below. In suchevent, the course adopted by the assessing officer bydisallowing 10% of loading and unloading charges, which wasreduced to Rs.5 lakhs by the Tribunal on ad hoc basis, withoutproper verification of the same, cannot be countenanced by thiscourt. 7.In similar circumstances, a co-ordinate bench of thiscourt, by order dated 05.02.2021 in TCA No.612 of 2019, in thecase of V.C.Arunai Vadivelan v. Assistant Commissioner of IncomeTax, Chennai, has observed as follows: “7...We find that the Assessing Officer has madeobservation that the vouchers are self made/handwritten and some vouchers are not produced. This inour opinion appears to be a vague statement. Thisfinding has been recorded by the Assessing Officerwith regard to the amount claimed by the assessee asexpenses towards transport charges. Given the natureof the industry, we can take judicial notice of thefact that always computer generated vouchers may not be issued by the transporters unless they are anorganization owning a large fleet. If the AssessingOfficer had any doubt with regard to the genuinity ofany one of the vouchers produced, he could have drawnsample vouchers and called upon the assessee toestablish its genuineness. Without doing so, making anadhoc disallowance by not specifically assigning anyreason to a voucher or bunch of vouchers is notlegally tenable. be issued by the transporters unless they are anorganization owning a large fleet. If the AssessingOfficer had any doubt with regard to the genuinity ofany one of the vouchers produced, he could have drawnsample vouchers and called upon the assessee toestablish its genuineness. Without doing so, making anadhoc disallowance by not specifically assigning anyreason to a voucher or bunch of vouchers is notlegally tenable. 8.Before us, the learned counsel for the assesseehas produced a tabulated statement with regard to thededuction claim by the assessee under the headTransport Charges for the assessment year 2011-12,2012-13, 2013-14, 2014-15 and 2015-16. We find thatfor the assessment year 2012-13, 2013-14 and 2015-16,there has been no disallowance and assessment has beencompleted under section 143(3) based on the documentsproduced by the assessee and it is only for theassessment year under consideration, namely, 2014-15,there has been disallowance of 10%. The learnedcounsel has also produced the copy of the service taxledger account for the period from 01.04.2013 to31.03.2014 evidencing payment of service tax. Thus, wefind that it is not a case where there is no recordavailable with the assessee to justify their claim andhad the Assessing Officer taken a little effort toexamine the correctness of the vouchers, in allprobabilities the assessee might have not been beforeus by way of this appeal. Thus, we are convinced thatthe assessment requires to be re-done after a thoroughverification of all the documents which may be placedbefore the Assessing Officer during the denovoconsideration including the documents already placedfor consideration. 9.For all the above reasons, the tax case appealis allowed and the substantial questions of law areanswered in favour of the appellant/assessee and thematter is remanded to the Assessing Officer for freshconsideration in terms of the observations made above.No costs.” 8.Following the aforesaid judgment, which is squarelyapplicable to the facts of the present case, this court is ofthe opinion that the adhoc disallowance of Rs.5,00,000/- made bythe Tribunal is not correct and hence, the order of the Tribunalrequires interference by this court. Accordingly, the firstsubstantial question of law involved herein is answered infavour of the assessee and the matter is remanded to the Assessing Officer for fresh consideration, who shall passorders, after a thorough verification of all the documents filedby the appellant. Such an exercise shall be done by theassessing officer, within a period of eight weeks from the dateof receipt of a copy of this judgment. 9.This tax case appeal stands disposed of in the aboveterms. No costs. Sd/-Assistant Registrar(CS IX) //True Copy// Sub Assistant Registrar avTo1. The Income Tax Appellate Tribunal, “B” Bench, Chennai2. The Additional Commissioner of Income -tax, Business Range-VIII, No.611, Anna Salai, Chennai - 600 006.3. The Commissioner of Income Tax (Appeals) IX 121, Mahatma Gandhi Road, Chennai-34. +1cc to Mr.G.Baskar, Advocate, S.R.No.16024+1cc to Mr.T.Ravikumar, Advocate, S.R.No.15646 TCA.No.29 of 2012 GMR(CO)PM/01/04/2022