2017 (6) TMI 1312 - AT - Income Tax

Disallowance as lorry hire charges - production of self vouchers and PAN - proof of reasonable probability - HELD THAT - Sum shown by the assessee as lorry hire charges payable and it appeared in its balance sheet as freight payable . It is mentioned by AO in the remand report the such amounts were, even as per the assessee cleared only in April, 2014, which is more than two years after the end of the relevant previous year. Since the amount was represented by 117 entries all of which were below ₹ 20,000/-, it is clear that the concerned parties, if at all they were there, were all small business persons. To presume that such small business people would have waited for more than 24 months for getting their payments is beyond preponderance of probability. Assessee was having a net profit of ₹ 19,39,154/- for the relevant previous year and a turnover of ₹ 9,46,63,745/-. Hence, there was no reason to postpone he payment to small parties for a period of 24 months. In my opinion, mere production of self vouchers and PAN will not be sufficient to believe an expenditure, which otherwise show by itself as quite against all reasonable probability. In such circumstances,lower authorities had every reason to disbelieve the claim and make the disallowance. - Decided against assessee.

Summary

Issues Involved:
Disallowed lorry hire charges claimed by the assessee.

Detailed Analysis:

1. Assessee's Claim of Lorry Hire Charges:
The assessee, a goods transporter, filed a return declaring an income for the relevant assessment year. During the assessment proceedings, the Assessing Officer noted that the assessee had claimed a significant amount as lorry hire charges. The claimed amount was split into multiple entries, with some entries dated on different days. The Assessing Officer disallowed the claim as the necessary details were not furnished by the assessee, except for ledger copies.

2. Appeal Before the Commissioner of Income Tax (Appeals):
The assessee moved in appeal before the Commissioner of Income Tax (Appeals) contending that proper opportunity was not given by the Assessing Officer to support the claim of lorry hire charges. The assessee requested for details of freight charges payable, payment vouchers for lorry freight charges paid, lorry owners' details, and PAN numbers. The Commissioner sought a remand report from the Assessing Officer, who stated that the assessee failed to substantiate the claim with documentary evidence during the scrutiny assessment.

3. Decision of the Commissioner of Income Tax (Appeals):
After considering the remand report, the Commissioner affirmed the disallowance of the lorry hire charges claimed by the assessee. The Commissioner found that the assessee did not provide sufficient evidence to support the claim, and the vouchers submitted were self-made and lacked credibility.

4. Appeal Before the ITAT Chennai:
The authorized representative of the assessee strongly contested the lower authorities' orders, arguing that PAN numbers of lorry owners were provided, and payments in cash were necessary for the business. The representative claimed that the vouchers, though self-made, should not have been rejected without identifying any defects. However, the Departmental Representative supported the decisions of the lower authorities.

5. Judgment by ITAT Chennai:
The ITAT Chennai upheld the decision of the lower authorities to disallow the lorry hire charges claimed by the assessee. The Tribunal noted that the claimed amount was cleared more than two years after the relevant previous year, raising doubts about the credibility of the transactions. Considering the small amounts and the delay in payments to small business persons, the Tribunal found it unreasonable to believe the expenditure based solely on self-made vouchers and PAN numbers. Therefore, the appeal of the assessee was dismissed.

In conclusion, the ITAT Chennai affirmed the disallowance of the lorry hire charges claimed by the assessee, emphasizing the lack of credible evidence to support the claim and the unlikelihood of small business persons waiting for payments for an extended period.