Shri Satish Kumar,Prop M/s Rellu Ram & Sons Chemists, Patiala V. Addl. CIT, Range Patiala, Patiala

ITA 1072/CHANDI/2014

• Counselvise Citation: 107221514 RSA 2014
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-07-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: TEJ MOHAN SINGH
• Keywords: Gift; Depreciation
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1072/CHD/2014 ASSESSMENT YEAR: 2009-10 SHRI SATISH KUMAR, VS THE ADDL.CIT, PROP: M/S RELLU RAM & SONS CHEMISTS, RANGE, BHUPINDRA ROAD, LUDHIANA. PATIALA. PAN: AFFPK3510F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SING H RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 26.10.2015 DATE OF PRONOUNCEMENT : 29.10.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. CIT(APPEALS) PATIALA DATED 30.09.2014 FOR ASSESSMENT YEAR 2009-10. 2. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NOS. 1 & 2 OF THE APPEAL OF THE ASSESSEE, THE SAME ARE THEREFORE, DISMISSED BEING NOT PRESSED. 3. ON GROUND NO. 3, ASSESSEE CHALLENGED THE ADDITIO N OF RS. 38,206/- ON ACCOUNT OF PERSONAL USE OF CAR AND TELEPHONE. ON GROUND NO. 5, ASSESSEE CHALLENGED TH E DISALLOWANCE OF SALARY PAID TO SHRI NITISH GARG AND PARUL 2 GARG AMOUNTING TO RS. 96,000/-. ON GROUND NO. 6, A SSESSEE CHALLENGED THE DISALLOWANCE OF PROPORTIONATE INTERE ST OF RS. 19,390/-. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SING OFFICER REJECTED THE BOOK RESULTS HAVING SOME DEFEC TS IN THE MAINTENANCE OF THE BOOKS OF ACCOUNT AND MADE ADDITI ON OF RS. 8,04,535/- BY APPLYING HIGHER GP RATE. THE LD. CIT(APPEALS) CONFIRMED THE REJECTION OF THE BOOKS O F ACCOUNT, HOWEVER, RESTRICTED THE ADDITION TO RS. 1 LAC ON ACCOUNT OF HIGHER GROSS PROFIT AS AGAINST RS. 8,04, 535/-. THE ASSESSING OFFICER FURTHER DISALLOWED 1/4 TH OF THE EXPENSES INCURRED ON CAR INSURANCE, CAR REPAIR AND MAINTENANCE, CAR DEPRECIATION AND TELEPHONE EXPENSE S ON GROUND OF PERSONAL USE. THE ASSESSEE HAS SHOWN PAY MENT OF SALARY TO HIS SONS NITISH GARG AND PARUL GARG. THE Y WERE STUDENTS DURING THE PERIOD. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED THAT THEY WERE PART TIME EMPLOYEES AND STATEMENT OF NITISH GARG WAS REC ORDED UNDER SECTION 131 OF THE ACT BUT STATEMENT OF PARUL GARG WAS NOT RECORDED. THE ASSESSING OFFICER DID NOT AC CEPT CONTENTION OF THE ASSESSEE AND MADE THE ADDITION. IT WAS FURTHER NOTED THAT ASSESSEE HAS ADVANCED RS. 1,20,6 61/- TO SMT. KIRAN GARG AND RS. 5,15,642/- TO SMT. SUNITA G ARG. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITT ED THAT SUCH LOAN HAS BEEN GIVEN ON INTEREST BASIS AND INTE REST WAS CHARGED ON SUCH LOANS. HOWEVER, THE ASSESSING OFFI CER CONTENDED THAT THERE DOES NOT APPEAR TO BE ANY BUSI NESS 3 EXPEDIENCY IN GIVING THE LOAN. FURTHER INTEREST @ 9.92% ONLY HAS BEEN CHARGED FROM SMT. SUNITA GARG IN PLAC E OF 13.44% CHARGED FROM SMT. KIRAN GARG. THE ASSESSING OFFICER, THEREFORE, DISALLOWED PROPORTIONATE INTERE ST @ 12% ON THE LOAN AMOUNT AND ADDITION OF RS. 19,390/- WAS MADE. 5. IT WAS SUBMITTED BEFORE LD. CIT(APPEALS) THAT CA R AND TELEPHONE EXPENSES WERE INCURRED FOR BUSINESS PURPO SES AND THERE IS NO ELEMENT OF PERSONAL USES. AS REGARDS P AYMENT OF SALARY TO THE SONS, IT WAS SUBMITTED THAT THEY WERE EMPLOYED PART TIME AND STATEMENT OF NITISH KUMAR GARG WAS RE CORDED, THEREFORE, ADDITIONS ARE UNJUSTIFIED. ON ACCOUNT O F INTEREST FREE ADVANCES, IT WAS SUBMITTED THAT INTEREST WAS C HARGED ON MUTUAL UNDERSTANDING FROM THE RESPECTIVE PARTIES, T HEREFORE, ADDITION SHOULD BE DELETED. THE LD. CIT(APPEALS), HOWEVER, CONFIRMED ALL THE THREE ADDITIONS. HOWEVER, ASSESS ING OFFICER WAS DIRECTED TO TAKE CORRECT VALUE OF DISAL LOWANCE OUT OF CAR AND TELEPHONE EXPENSES IF THERE IS ANY E RROR IN THE CALCULATION. THE LD. CIT(APPEALS), WITH REGARD TO PAYMENT OF SALARY TO THE SONS FOUND THAT BOTH THESE PERSONS WE RE ACTUALLY STUDENTS WHO RENDERED NO SERVICES FOR THE ASSESSEE. A REGARDS PROPORTIONATE DISALLOWANCE OF THE INTERES T, LD. CIT(APPEALS) ALSO CONFIRMED THE ADDITION AND DISMIS SED THESE GROUNDS OF APPEAL OF THE ASSESSEE. 6. AFTER HEARING RIVAL CONTENTIONS, WE ARE OF THE V IEW ADDITIONS NEED TO BE MODIFIED ON ALL THE THREE GROU ND NOS. 3, 5 AND 6 OF THE GROUND OF APPEAL RAISED BY THE ASSES SEE. THE ASSESSING OFFICER DISALLOWED 1/4 TH OUT OF CAR AND TELEPHONE 4 EXPENSES BEING USED FOR PERSONAL PURPOSES. THE ASS ESSEE IS AN INDIVIDUAL AND DID NOT PRODUCE ANY LOG BOOK FOR USE OF THESE FACILITIES ONLY FOR THE PURPOSE OF BUSINESS, THEREFORE, PERSONAL ELEMENT OF USAGE OF THESE FACILITIES IS NO T RULED OUT. THE ASSESSING OFFICER, HOWEVER, NOTED THAT ASSESSEE HAD DEBITED DEPRECIATION OF RS. 54,065/- WHICH INCLUDE DEPRECIATION OF RS. 52,978/- ON CAR. HOWEVER, WHIL E CALCULATING 1/4 TH OF THE DISALLOWANCE, HE HAS TAKEN BOTH THE FIGURES OF RS.54,065/- AS WELL AS RS. 52,978/-. RE ST OF THE CALCULATION IS SAME. THE ASSESSEE, THEREFORE, PLEAD ED BEFORE LD. CIT(APPEALS) THAT THE TOTAL DISALLOWANCE SHOULD BE RS. 24,690/-. THE LD. CIT(APPEALS), ACCORDINGLY DIRECT ED THE ASSESSING OFFICER TO VERIFY THE ERROR AS SUBMITTED BY ASSESSEE AND TO TAKE CORRECT VALUE IF THERE IS ERRO R IN THE CALCULATION. THIS PART WILL TAKE CARE BY THE ASSES SING OFFICER WHILE GIVING APPEAL EFFECT. 6(I) FURTHER, CONSIDERING THE NATURE OF BUSINESS OF ASSESSEE, AND RETURN OF INCOME FILED AT RS. 2,34,36 0/-, WE ARE OF THE VIEW ADDITION IS EXCESSIVE IN NATURE. T HE ASSESSING OFFICER, THEREFORE, IS DIRECTED TO RESTRI CT ADDITION ON THIS ISSUE BY MAKING ADDITION BY DISALLOWING 1/1 0 TH OF THE ACTUAL EXPENDITURE INCURRED BY ASSESSEE INSTEAD OF 1/4 TH . THUS GROUND OF APPEAL NO. 3 OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6II) AS REGARDS SALARY PAID TO SONS OF THE ASSESSEE , SHRI NITIN KUMAR GARG AND SHRI PARUL GARG, IT IS ADMITTE D FACT THAT BOTH THE SONS OF THE ASSESSEE WERE REGULAR BON AFIDE 5 STUDENTS. THE ASSESSEE HAS FAILED TO ADDUCE ANY DOCUMENTARY EVIDENCE REGARDING THE NATURE OF SERVIC ES RENDERED BY THESE PERSONS FOR THE BUSINESS PURPOSE OF THE ASSESSEE. FURTHER, NO EVIDENCE WAS ADDUCED TO PROVE IF THEY WERE ALSO COMPETENT TO DO ANY SERVICES FOR THE BUSI NESS ACTIVITIES OF THE ASSESSEE. THE AUTHORITIES BELOW WERE, THEREFORE, JUSTIFIED IN MAKING AND CONFIRMING ADDIT ION ON ACCOUNT OF DISALLOWANCE OF SALARY TO THEM. GROUND OF APPEAL NO. 5 OF APPEAL OF THE ASSESSEE IS THEREFORE, DISMI SSED. 6(III) AS REGARDS PROPORTIONATE DISALLOWANCE OF INT EREST, THE ASSESSING OFFICER HAS SPECIFICALLY NOTED THAT IN ON E CASE, ASSESSEE HAS CHARGED HIGHER INTEREST BUT FOR OTHERS LESSER INTEREST IS CHARGED FOR WHICH NO EVIDENCE HAS BEEN PRODUCED. THE ASSESSEE ONLY CONTENDED BEFORE LD. CIT(APPEALS) THAT LESSER INTEREST WAS CHARGED AS PE R MUTUAL UNDERSTANDING FOR WHICH ALSO NO EVIDENCE HAS BEEN A DDUCED. THEREFORE, AUTHORITIES BELOW WERE JUSTIFIED IN MAKI NG ADDITION OF RS. 19,390/-. THE LD. COUNSEL FOR THE ASSESSEE ALTERNATIVELY CONTENDED THAT SINCE ADDITION OF RS. 1 LAC HAS BEEN MAINTAINED ON ACCOUNT OF APPLYING HIGHER PROFI T RATE AND BOOK PROFIT OF THE ASSESSEE HAS BEEN ENHANCED, THEREFORE, TELESCOPING BENEFIT OF RS. 1 LAC MAY BE GIVEN. WE ACCEPT CONTENTION OF LD. COUNSEL FOR THE ASSESSEE T HAT WHEN ADDITION OF RS. 1 LAC HAS BEEN CONFIRMED BY LD. CIT (APPEALS) AND ASSESSEE DID NOT PRESS THIS GROUND BEFORE US, T HEREFORE, THE ADDITION OF RS. 1 LAC IS AVAILABLE TO THE ASSES SEE FOR THE PURPOSE OF MODIFYING THE ADDITIONS ON ACCOUNT OF 6 DISALLOWANCE OF VARIOUS EXPENSES ON GROUND NOS. 3, 5 AND 6. THE ASSESSING OFFICER IS, THEREFORE, DIRECTED TO RE DUCE RS. 1 LAC FROM ALL THE THREE ADDITIONS ON WHICH WE HAVE C ONFIRMED THE ADDITIONS ON GROUND NOS. 3, 5 AND 6 AND ASSESSI NG OFFICER SHALL RESTRICT THE ADDITION TO THE BALANCE AMOUNT AFTER MAKING NECESSARY CALCULATION AND GIVING APPEA L EFFECT. IN THE RESULT, COLLECTIVELY GROUND NOS. 3, 5 AND 6 ARE PARTLY ALLOWED. 7. ON GROUND NO. 4, ASSESSEE CHALLENGED THE ADDITIO N OF RS. 4,02,000/- ON ACCOUNT OF UNEXPLAINED LOANS RECE IVED FROM SHALLU GARG, SHEENAM GARG AND AVINASH GARG. THE ASSESSING OFFICER NOTED THAT DURING THE ASSESSMENT YEAR UNDER APPEAL, ASSESSEE HAS RAISED LOANS OF RS. 1,02 ,000/- FROM SHALLU GARG, RS. 1 LAC FROM SHEENAM GARG AND R S. 2 LACS FROM AVINASH GARG. THE ASSESSEE WAS ASKED TO E XPLAIN THE GENUINENESS OF THESE LOANS. THE ASSESSEE SUBMI TTED THAT THESE LOANS WERE TAKEN ON INTEREST BASIS. NAM E OF THE PERSON FROM WHOM LOAN OF RS.2 LACS WAS RAISED WAS, HOWEVER, NOT GIVEN. NO AMOUNT WAS USED FOR THE PUR POSE OF BUSINESS. THE ASSESSING OFFICER, THEREFORE, NOTED T HAT ASSESSEE HAS FAILED TO PROVE THE IDENTITY OF THE CR EDITORS, THEIR CREDIT WORTHINESS AND GENUINENESS OF THE TRAN SACTIONS. THE ASSESSEE ONLY FILED COPIES OF THE ACCOUNTS OF T HESE PERSONS. HOWEVER, SOURCE OF THE SAME WAS NOT EXPLA INED. THE ASSESSING OFFICER, THEREFORE, NOTED THAT ASSESS EE HAS NOT ADDUCED ANY DOCUMENTARY EVIDENCE TO PROVE TAKING LO ANS 7 AND ACCORDINGLY, MADE ADDITION OF RS. 4,02,000/- UN DER SECTION 68 OF THE ACT. 8. THE ASSESSEE SUBMITTED BEFORE LD. CIT(APPEALS) T HAT ASSESSEE FILED COPIES OF THE ACCOUNT AS PER BOOKS O F ACCOUNT, COPY OF THE BANK ACCOUNTS OF THESE DEPOSITORS WITH COMPLETE ADDRESS. SUMMARY OF THE SAME WAS ALSO FILED. IN T HE CASE OF SHRI AVINASH GARG, IT WAS EXPLAINED THAT HE IS Y OUNGER BROTHER OF THE ASSESSEE HAVING MEAGER INCOME. AS P ER DESIRE OF HIS MOTHER AS WELL AS OUT OF NATURAL LOVE AND AF FECTION FOR HIS BROTHER, ASSESSEE GIFTED RS. 2 LACS TO HIS BROT HER VIDE CHEQUE NO. 273591. SHRI AVINASH GARG DEPOSITED RS. 2 LACS IN HIS BANK ACCOUNT AND SUBSEQUENTLY, SAME AMOUNT W AS GIVEN TO THE ASSESSEE TO EARN INTEREST, OUT OF WHIC H RS. 1 LAC HAVE BEEN REPAID. IN THE CASE OF SHEENAM GARG AND SHALLU GARG, BOTH ARE DAUGHTERS OF THE ASSESSEE. IT WAS E XPLAINED THAT AMOUNTS OF RS. 1 LAC AND RS.1,02,000/- HAVE BE EN GIVEN BY THEM OUT OF THE BALANCE AVAILABLE WITH THEM AND RS. 1 LAC EACH HAVE BEEN REPAID. THE LD. CIT(APPEALS) DID NO T ACCEPT CONTENTION OF THE ASSESSEE BECAUSE NO EVIDENCE OF C REDIT WORTHINESS OF THESE PERSONS HAVE BEEN FILED. IN TH E CASE OF SHRI AVINASH GARG, EVEN ASSESSEE HAS GIFTED RS. 2 L ACS TO HIM WHICH WAS GIVEN BACK AS A LOAN, THEREFORE, NO G ENUINE TRANSACTION WAS PROVED AND ACCORDINGLY, THESE GROUN DS WERE DISMISSED. 9. AFTER CONSIDERING RIVAL SUBMISSIONS, WE DO NOT F IND MERIT IN THIS GROUND OF APPEAL OF THE ASSESSEE. TH E ASSESSEE HAS FILED COPY OF THE LEDGER ACCOUNT OF ALL THE THR EE CREDITORS 8 IN THE PAPER BOOK ALONGWITH BANK STATEMENT. ADMITT EDLY IN THE CASE OF SHRI AVINASH GARG, ASSESSEE HAS GIVEN G IFT OF RS. 2 LACS WHICH WAS GIVEN BACK AS A LOAN TO THE ASSESS EE. THIS ITSELF CAUSED A DOUBT IN THE EXPLANATION OF THE ASS ESSEE. THE BANK ACCOUNT OF SHRI AVINASH GARG SHOWS THAT PR IOR TO RECEIPT OF GIFT OF RS. 2 LACS, THERE WAS NO SUFFICI ENT BALANCE AVAILABLE IN HIS BANK ACCOUNT TO ADVANCE LOAN OF RS . 2 LACS. IN THE BANK ACCOUNTS OF SHEENAM GARG AND SHALLU GAR G, PRIOR TO GIVING LOANS OF RS. 1 LAC EACH, THERE WERE BANK BALANCES OF RS.1,01,150/- AND RS.1,14,573/- ONLY. NO CONFIRMATION FROM THESE CREDITORS WAS FILED BEFORE AUTHORITIES BELOW. NO EVIDENCE ON THEIR CREDIT WOR THINESS HAVE BEEN FILED. DURING THE COURSE OF ARGUMENTS, LD . COUNSEL FOR THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THESE THREE CREDITORS. HOWEVER, NO EXPLANATION HAS BEEN GIVEN ABOUT THEIR SOURCE OF CREDITS. FURTHER, IN THE CAS E OF SHRI AVINASH GARG, IT WAS ADMITTED FACT THAT SINCE HE WA S HAVING MEAGER INCOME, THEREFORE, ASSESSEE GAVE GIFT OF RS. 2 LACS TO HIM. 10. CONSIDERING THE ABOVE FACTS, IT IS CLEAR THAT T HE LOANS IN ALL THESE CASES HAVE NOT BEEN CONFIRMED BY THE C REDITORS AND NO EVIDENCE HAVE BEEN BROUGHT ON RECORD TO PROV E THE CREDIT WORTHINESS OF THE CREDITOR AND GENUINENESS O F THE TRANSACTION. THEREFORE, ASSESSEE FAILED TO PROVE G ENUINE CREDITS IN THE MATTER. THE AUTHORITIES BELOW WERE, THEREFORE, JUSTIFIED IN MAKING AND CONFIRMING THE ADDITION OF RS. 9 4,02,000/-. THIS GROUND OF APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. 11. ON GROUND NO.7, ASSESSEE CHALLENGED THE CHARGIN G OF INTEREST, WHICH IS MANDATORY AND CONSEQUENTIAL. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH OCT., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD