The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that addition for unexplained expenditure could not be made on mere extrapolation and presumption.
The assessee, Assam Kerala Roadways Pvt. Ltd. was engaged in the business of transportation of goods. AO observed from the details filed by the assessee that the assessee has claimed a sum as vehicle operating and maintenance expenses under the head other expenses. The AO randomly checked and verified some of the hired vehicle from the website of VAHAN national registered e-portal, Ministry of Road, Transport & Highways, Govt. of India and found that the assessee was hiring vehicle like motorcycle, Maxi Cab, tractors etc which were not possible to be used for transportation of goods.
The AO also noted that some of the vehicles were not even registered or were not appearing in the website. Accordingly, the AO came to the conclusion that the expenses claimed by the assessee were not genuine and reliable. AO calculated the disallowance by applying 12% on the amount of lorry hire charges
Sunil Surana, on behalf of the revenue submitted that AO had given his observations on the basis of information contained in the Website of Ministry of Road Transport & Highways, Govt. of India and only on that basis calculated the disallowance at 12% of the entire expenditure relating to 9068 vehicles as these vehicles were found to be not goods carriers.
He further submitted that the assessee could not submit any plausible explanation to the show cause notice issued by the AO as to these vehicles which were stated to be transport carriers which were found to be maxi cabs, tractors and motorcycles etc.
Ranu Biswas, on behalf of the assessee submitted that the assessee had filed all the details relating to these vehicles with the AO and the AO after doing wrong verifying the vehicles details in the website VAHAN of Ministry of Road Transport & Highways, came to the conclusion that some vehicle as noted in the assessment order were not goods transporters and were in fact motorcycles, tractors and maxi cabs etc. which had been controverted by the Commissioner of Income Tax Appeals (CIT(A)) by referring to the same website and finally recorded a finding that the observations by the AO were incorrect.
The Division Bench of Rajesh Kumar, (Accountant Member) and Sonjoy Sarma, (Judicial Member) allowed the appeal and observed that, all the vehicles as test checked by the AO were duly registered as goods carriers on the web portal of VAHAN, Ministry of Road Transport & highways and in couple of cases the data were not available due to non-digitization of data.
“Order passed by the AO was just on extrapolation and on presumption basis without any verification of details/information filed by the assessee”, the Bench observed.
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