Rajeev Garg, Moradabad V. DCIT, Range-I, Moradabad

CO 122/DEL/2009

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5498 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-12-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 01-12-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 09-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset; Depreciation
• Section: 40A(3)

Judgement Text

ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2510/DEL/2008 A.Y. : 2004-05 DY. COMMISSIONER OF INCOME TAX, RANGE-1, MORADABAD VS. SH. RAJEEV GARG, S/O SH. RADHEY SHYAM, MOH.-THER, SAMBHAL DISTT. MORADABAD (PAN: AABHR8510D) AND C.O. NO. 122/DEL/2009 (IN ITA NO. 2510/DEL/2008) A.Y. 2004-05 SH. RAJEEV GARG, C/O SH. A.K. SINGHAL, ADVOCATE, B-556, LAJPAT NAGAR, MORADABAD (UP) (PAN: AABHR8510D) (APPELLANTS) VS. DY. COMMISSIONER OF INCOME TAX, RANGE-1, MORADABAD (RESPONDENTS) ASSESSEE BY : SH. K. SAMPATH, ADVOCATE DEPARTMENT BY : SH. R.P. SINGH, SR. D.R. PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDERS OF LD. COMMISSIONER OF INCOME T AX (APPEALS) DATED 29.4.2008 PERTAINING TO ASSESSMENT YEAR 2004-0 5. REVENUES APPEAL (ITA NO. 2510/DEL/2008) 2. THE FIRST ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING RELIEF TO THE ASSES SEE AT ` 1,72,489/- WHICH WAS ADDED TO THE TOTAL INCOME OF THE ASSESS EE BY THE ASSESSING ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 2 OFFICER AFTER INVOKING THE PROVISIONS OF SECTION 199 OF THE IT ACT, 1961. 3. ASSESSEE IN THIS CASE IS A TRADER OF SULPHER AND COAL TAR PITCH. AS PER THE TDS CERTIFICATE ANNEXED ALONGWITH THE RETURN OF INCOME, ASSESSING OFFICER NOTED THAT PAYMENTS HAVE BEEN MADE BY THE VARIOUS PERSONS ON ACCOUNT OF CONTRACT. TDS WERE ALS O DEDUCTED U/S 194C. A PERUSAL OF THE PROFIT AND LOSS ACCOUNT SHOWS THAT ASSESSEE HAD NOT ACCOUNTED THIS CONTRACT RECEIPT IN HIS PR OFIT AND LOSS ACCOUNT BECAUSE ONLY SALES HAVE BEEN DISCLOSED. ON THE OTHE R HAND ASSESSEE HAD CLAIMED BENEFIT OF TDS. ASSESSEE RESPONDED THAT TAX HAS BEEN DEDUCTED BY THE ABOVE PARTIES ON SUPPLY OF GOODS. IN SUPPORT OF THIS CONTENTION ASSESSEE ALSO SUBMITTED COPIES OF AGREEME NTS/ ORDER, BILLS ETC. HOWEVER, THE ASSESSING OFFICER WAS NOT CONVIN CED. HE HELD THAT ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THESE RECE IPTS HAVE BEEN ACCOUNTED FOR IN SALES ACCOUNT OR UNDER ANY OTHER A CCOUNT. ASSESSING OFFICER HELD THAT THE INCOME RELATING TO THESE CON TRACTS IS LIABLE TO BE INCLUDED UNDER THE PROVISIONS OF SECTION 199 OF TH E IT ACT, 1961 AND HE ADDED A SUM OF ` 1,72,489/-. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASSESSEE SUBMITTED THAT PAYMENTS WERE RECEIVED FROM SUPPLY OF GOODS AND THERE WAS NO CONTRACTUAL PAYMENTS. THE TRANSACT IONS HAVE BEEN MADE THROUGH ACCOUNT PAYEE CHEQUE AND RECEIPTS HAVE BEEN PROPERLY ACCOUNTED. ON CONSIDERATION OF THE SAME, LD. COMMIS SIONER OF INCOME TAX (APPEALS) AGREED WITH THE ASSESSEES COUNSEL AND DELETED THE ADDITION. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 3 6. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT ASSESSEE HAD STATED BEFORE THE ASSESSING OFFICER THAT HE HAS RECEIVED THE AMOUNTS ON ACCOUNT OF SALES MADE AND NO CONTRACTUAL RECEIPTS WERE RECEIVED BY THE ASSESSEE. ASSESSEE H AD ALSO PRODUCED VOUCHERS, BILLS IN THIS REGARD. ASSESSING OFFICE R HAS ALSO ACCEPTED THE FACT THAT THE ASSESSEE IS A TRADER OF SULPHER AND COAL TAR PITCH. UNDER THE CIRCUMSTANCES, THESE ADDITIONS OF SALES TR EATED AS CONTRACTUAL RECEIPT BY THE ASSESSING OFFICER IS NO T JUSTIFIABLE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) IN THIS REGARD. 7. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN GRANTING THE RELIEF TO THE ASSES SEE AT ` 58,771/- WHICH WAS RIGHTLY ADDED TO THE TOTAL INCOME AFTER IN VOKING THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT. 8. ON THIS ISSUE ASSESSING OFFICER NOTED THAT A PE RUSAL OF SULPHER PURCHASE ACCOUNT REVEALED THAT ASSESSEE HAD MADE CER TAIN PAYMENTS IN CASH IN ADDITION TO THE PAYMENTS MADE BY CHEQUE S. THE TOTAL OF THESE PAYMENTS CAME TO ` 2,93,855/-. ASSESSING OF FICER OBSERVED THAT ASSESSEE HAD NOT ADDUCED ANY DOCUMENTARY EVIDE NCE THAT THESE PAYMENTS ARE COVERED UNDER THE EXCEPTIONS PROVIDED U NDER RULE 6DD READ WITH SECTION 40A(3). ACCORDINGLY, ASSESSING OFFICER DISALLOWED 20% OF THESE PAYMENTS U/S 40A(3) OF THE ACT. 9. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IT WAS SUBMITTED NO CASH PAYMENT WAS MADE TO ANY SELLER FOR THE COST OF SULPHER PURCHASED. THE PAYMENTS SHOWN IN THE ASS ESSMENT ORDER WERE MADE TO THE TRUCK DRIVER IN ODD HOURS AS FREIGH T CHARGES. COPIES OF RESPECTIVE GRS WERE ALSO ENCLOSED. PAYME NTS HAVE BEEN ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 4 MADE AT THE TIME OF UNLOADING OF GOODS DURING NON-B ANKING HOURS. IT WAS ALSO SUBMITTED THAT ENTRY OF HEAVY VEHICLES WER E PROHIBITED IN CITY FROM 8 AM TO 8 PM THEREBY THESE VEHICLES WERE UNLOA DED IN ODD HOURS AFTER 8 PM TO 8 AM IN THE MORNING IN THE NON-BANKING HOURS. SECONDLY, CHEQUES WERE NOT ACCEPTED BY THESE TRUCK DRIVERS AS THEY BELONG TO PLACE OUTSIDE STATE. IT WAS FURTHER PLE ADED THAT PAYMENTS WERE MADE TO THE DRIVERS, WERE DULY COVERED U/R 6DD. UPON CONSIDERATION OF THE SAME, LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT PAYMENTS MADE TO DRIVERS WERE COVERED U/R 6DD AND ALSO COVERED BY BOARDS CIRCULAR DATED 30.5.77. THEREF ORE, THE ADDITIONS WERE UNJUSTIFIED AND THE SAME WAS DELETED. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. IT IS CLEAR FROM THE ASSESSEES SUBMISSIONS THAT THE PAYME NTS WERE MADE TO TRUCK DRIVERS AT ODD HOURS DURING NON-BANKING H OURS. MOREOVER, THE TRUCK DRIVERS HAVE REFUSED TO ACCEPT THE CHEQUE PAY MENTS. UNDER THE CIRCUMSTANCES, LD. COMMISSIONER OF INCOME TAX (APPEAL S) IS CORRECT TO HOLD THAT THE PAYMENT MADE TO TRUCK DRIVERS IS COVERE D UNDER RULE 6DD AND ACCORDINGLY, WE UPHOLD THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 11. THE LAST ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN GRANTING RELIEF TO THE ASSES SEE AT ` 7,38,478/- WHICH WAS DISALLOWED BY THE ASSESSING OFFICER OUT OF INTEREST PAID BY THE ASSESSEE DUE TO THE REASONS THAT THE ASSESSEE H AS UTILIZED ITS BORROWED FUNDS IN THE ACQUISITION OF CAPITAL ASSET WHICH WERE NOT FORMING CAPITAL ASSETS OF THE BUSINESS CARRIED ON BY THE ASSESSEE. 12. ON THIS ISSUE ASSESSING OFFICER NOTED THAT CER TAIN ADVANCES WERE TAKEN BY THE ASSESSEE FOR UTILIZATION OF THE ACQUIS ITION OF CAPITAL ASSET. ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 5 ON THIS ISSUE ASSESSING OFFICER ALSO HELD THAT AS SESSEE HAS BORROWED MONEY FOR ACQUISITION OF IMMOVABLE ASSETS AND DISALL OWED ` 7,38,478/- U/S 36(1)(III). 13. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER:- I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE COUNSEL ON THIS ISSUE. IT IS OBSERVED THAT THE INTEREST HAS BEEN CLAIMED BY THE APPELLANT ON THE LOANS WHICH WERE TAKEN IN EARLIER YEARS AND NO LOAN WAS TAKEN DURING THE YEAR IN QUESTION. MOR EOVER, THE CAPITAL OF THE PROPRIETOR APPELLANT IS MORE THAN THE MONEY ADVANCED. THE ASSESSING OFFICER HAS NOT MADE O UT A CASE THAT THE APPELLANT HAS UTILIZED THE BORROWED F UNDS (ON WHICH THE INTEREST IS PAID AND CLAIMED) FOR ACQUIRIN G ANY ASSET OR FOR EXTENSION OF EXISTING BUSINESS. BESIDE S, IT HAS BEEN EXPLAINED THAT THE INVESTMENT WAS MADE ON DIFF ERENT DATES DURING THE YEAR WHEREAS THE ASSESSING OFFICER AS DISALLOWED THE INTEREST TREATING THE INVESTMENT FOR WHOLE OF THE YEAR. IN VIEW OF THE FACTS OF THE CASE AND COU RT DECISIONS REFERRED TO BY THE COUNSEL, I AM OF THE CO NSIDERED VIEW THAT SINCE THE AMOUNT OF INVESTMENT IS LESS TH AN THE TOTAL CAPITAL OF THE PROP. OF THE FIRM, THE DISALLOW ANCE OF THE INTEREST WAS NOT JUSTIFIED. THE ASSESSING OFFICER HAS ALSO NOT ESTABLISHED THE NEXUS BETWEEN THE FUNDS BORROWE D ON INTEREST AND THE ADVANCES MADE. THE DISALLOWANCE I S HEREBY DELETED. THE APPELLANT GETS THE RELIEF ACC ORDINGLY. 14. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BE FORE US. ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 6 15. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AT THE OUTSET, WE NOTE THAT THE NATURE OF ASSET WHI CH WAS PURCHASED IN THIS CASE HAS NOT BEEN BROUGHT OUT EITHER IN THE AS SESSMENT ORDER OR IN THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S OR DER. WITHOUT EXAMINING THE NATURE OF ASSET, ADJUDICATION ON THIS I SSUE IS NOT POSSIBLE. THOUGH THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT ALL ASSETS PURCHASED WERE FOR BUSINESS PURPOSES. HOWE VER, THIS FACT IS NOT EMANATING OUT OF THE RECORDS. UNDER THE CIRCU MSTANCES, WE REMIT THIS ISSUE TO THE FILES OF THE ASSESSING OFFICER T O EXAMINE THE ISSUE AFRESH IN LIGHT OF OUR DIRECTION AS ABOVE. ASSESSEES CROSS OBJECTION (122/DEL/2009) 16. THE FIRST ISSUE RAISED IN THE ASSESSEES CROSS OBJECTION IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CO NFIRMING THE DISALLOWANCES ON ACCOUNT OF VEHICLE RUNNING AND MAI NTENANCE EXPENSES AND DEPRECIATION ON A CAR AT ` 3881/- AND ` 36041/- RESPECTIVELY. 17. ON THIS ISSUE ASSESSING OFFICER NOTED THAT IN THE PROFIT AND LOSS ACCOUNT ASSESSEE HAS CLAIMED EXPENSES OF ` 38817/- INCURRED ON PETROL AND VEHICLE REPAIR. ASSESSING OFFICER WAS OF THE OPINION THAT NATURE OF EXPENSES INCURRED ON THESE HEADS ARE SUCH THAT THE INVOLVEMENT OF ELEMENT OF PERSONAL USE CANNOT BE DENIED. NO LOG BOOK OF THE VEHICLES WERE PRODUCED BY THE ASSESSEE. UNDER THE CIRCUMSTANCES, ASSESSING OFFICER DISALLOWED 20% OF SUCH EXPENSES . SIMILAR DISALLOWANCE OF 10% WAS MADE OUT CLAIM OF DEPRECIATI ON ON CAR. 18. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITIONS. ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 7 19. AGAINST THIS ORDER THE ASSESSEE IS IN CROSS O BJECTION BEFORE US. 20. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT ASSESSING OFFICER HAS DISALLOWED 10% OF THESE EXPENSES ON ESTIMATE BASIS ON THE GROUND THAT NECESSARY LOGBOOK S WERE NOT MAINTAINED TO ESTABLISH THAT VEHICLES WERE USED EXCL USIVELY FOR BUSINESS PURPOSES. UNDER THE CIRCUMSTANCES, WE UPH OLD THE ORDER OF THE AUTHORITIES BELOW ON THIS ISSUE. 21. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS NO JUSTIFICATION FOR CONFIRMING TELEP HONE AND TRAVELLING EXPENSES AT ` 4574/- AND ` 3518/- RESPECTIVELY. 22. ASSESSING OFFICER HAD MADE DISALLOWANCE OF 10% OUT OF TOTAL TELEPHONE EXPENSES CLAIMED BY NOTICING THAT EXPENS ES DEBITED IN THE PROFIT AND LOSS ACCOUNT INCLUDING THE TELEPHONE BIL LS RELATING TO PHONE INSTALLED AT RESIDENCE ALSO. FURTHER ASSESSING OFF ICER HAS ALSO DISALLOWED 10% OUT OF TRAVELLING EXPENSES BY HOLDIN G THAT EXPENSES UNDER THIS HEAD ARE IN CASH AND SUPPORTING DETAILS WERE NOT PROPERLY AVAILABLE. 23. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS RESTRICTED THE DISALLOWANCE TO 5%. 24. AGAINST THIS ORDER THE ASSESSEE IS IN CROSS OBJ ECTION BEFORE US. 25. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT DISALLOWANCE ON ACCOUNT OF TELEPHONE HAS BEEN MADE BECAUSE TELEPHONE ARE ALSO INSTALLED AT RESIDENCE O F THE ASSESSEE AND TRAVELLING EXPENSES ALSO CONTAINS CERTAIN VOUCHERS WHICH WERE NOT ITA NO. 2510/DEL/2008 & CO NO. 122/DEL/2009 A.Y. 2004-05 8 PROPER. UNDER THE CIRCUMSTANCES, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. ACCORDINGLY, WE UPHOLD THE SAME. 26. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION FILED BY TH E ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/12/2010. SD/- SD/- [I.P. BANSAL] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 03/12/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES