Shri Kaushal Vinodchandra Mehta, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 112/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60228 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 16-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Rule of consistency
• Section: 143(3)

Judgement Text

ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH , AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T.A. NO. 112/AHD/2012 (ASSESSMENT YEAR: 200 8- 09) SHRI KAUSHAL VINODCHANDRA MEHTA, 4 JAIN MERCHANT SOCIETY, PALDI, AHMEDABAD-380 007. (APPELLANT) VS. DEPUTY COMMISSIONER OF INCOME- TAX, CIRCLE-11, NARAYAN CHAMBERS, NEAR PATRANG HOTEL, ASHRAM ROAD, AHMEDABAD. (RESPONDENT) PAN: ACAPM 6054G APPELLANT BY : MS. URVASHI SHODHAN RESPONDENT BY : MR. SAMIR TEKRIWAL, SR.D.R. ( )/ ORDER DATE OF HEARING : 19-3-2012 DATE OF PRONOUNCEMENT : 13/4/2012 PER: SHRI ANIL CHATURVEDI, A.M. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT (A)- XVI, AHMEDABAD DATED 5-10-2011 FOR THE ASSESSMENT Y EAR 2008-09. ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 2 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPE AL:- 1. LD CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG ADHOC ADDITION OF RS.2,01,129/- OUT OF TOTAL ADDITION OF RS.3,00,000/- MADE BY A.O. ON ACCOUNT OF LOW WITHDRAWALS FOR HOUS EHOLD EXPENSES. LD. CIT(A) ERRED IN NOT APPRECIATING DETA ILED EXPLANATION, SUBMISSIONS AND EVIDENCES IN SUPPORT O F SUFFICIENT WITHDRAWALS BY THE APPELLANT. LD. CIT(A) OUGHT TO H AVE DELETED TOTAL ADDITION MADE BY A.O. IN ABSENCE OF ANY EVIDE NCE BROUGHT ON RECORD THAT ANY SUCH EXPENSES WERE MADE OUT OF U NDISCLOSED SOURCES. 2. LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG ACTION OF A.O. IN DISALLOWING ENTIRE INTEREST EXPENDITURE OF RS.5,43,069/- WITHOUT PROPERLY APPRECIATING VARIOUS FACTS AND LAW IN ITS PROPER PERSPECTIVE. LD. CIT(A) OUGHT TO HAVE DELETED DISAL LOWANCE MADE BY A.O. 3. LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT TH AT NEITHER ANY DISALLOWANCE ON ACCOUNT OF LOW HOUSEHOLD WITHDR AWAL NOR OF INTEREST EXPENDITURE WAS MADE IN THE EARLIER YEA R. THE RULE OF CONSISTENCY IN ABSENCE OF ANY CHANGE IN FACTS DESER VES TO BE APPLIED TO THE FACTS OF THE YEAR UNDER CONSIDERATIO N. 4. LD. CIT(A) ERRED IN NOT TAKING INTO CONSIDERATIO N AND ADJUDICATING ALTERNATE PLEA OF THE APPELLANT THAT A T THE MOST ONLY NET INTEREST EXPENDITURE DESERVED TO BE DISALLOWED AND NOT ENTIRE EXPENDITURE. ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLA NT FILED RETURN OF INCOME ON 27-09-2008 DECLARING TOTAL INCOME OF RS.1 6,48,230/-. LATER ON CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSING OFFICER (A.O) FRAMED THE ASSESSMENT BY DETERMINING TOTAL INCOME A T RS.24,43,300/- AFTER MAKING AN ADDITION OF RS. 7,95,069/- TO THE T OTAL IN INCOME. THE ASSESSEE IS A MANAGING DIRECTOR OF ANNAPURNA POLYME RS PVT. LTD. AND GETS SALARY AND COMMISSION. DURING THE COURSE OF AS SESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO JUSTIFY THE HOUSEHOLD EXPENSES WITH REFERENCE TO WITHDRAWALS. THE ASSESS EE STATED THAT THERE ARE 3 MEMBERS IN HIS FAMILY I.E. HIMSELF, WIF E AND ELDER BROTHER. FOR THE HOUSEHOLD EXPENSES THEY ARE CONTRIBUTING TO SHRI VINODCHANDRA C. MEHTA, HUF AND FROM THERE WITHDRAWA LS FOR MEETING HOUSEHOLD EXPENSES ARE MADE. ACCORDING TO THE ASSES SEE THE WITHDRAWALS FROM HIS BANK ACCOUNT FOR HOUSEHOLD EXP ENSES WAS RS.13,000/- PER MONTH AND THE TOTAL WITHDRAWAL WAS RS.1,56,000/-. CONSIDERING THE REQUIREMENT OF FUNDS TO MEET THE HO USEHOLD EXPENSES, PERSONAL EXPENSES, CONVEYANCE, MEDI-CLAIM , SOCIAL OBLIGATIONS AND ENTERTAINMENT ETC., THE A.O. ESTIMA TED THE HOUSEHOLD EXPENSES AT RS.25,000/- PER MONTH I.E. RS.3 LACS PE R ANNUM. TAKING INTO CONSIDERATION THE AMOUNT OF RS.48,000/- CONTRI BUTED BY THE ASSESSEE AN ADDITION OF RS.2,52,000/- (RS.3,00,000 RS.48,000) WAS MADE TO THE TOTAL INCOME. BEING AGGRIEVED WITH THE ORDER OF A.O., THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD . CIT(A). 4. BEFORE CIT (A), IT WAS SUBMITTED THAT MEDI-CLAIM OF RS.20,200/- WAS PAID AND THEREFORE THE QUESTION OF MEETING THE SAID EXPENSES OUT ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 4 OF UNDISCLOSED SOURCES DOES NOT ARISE. AS FAR AS TH E CONVEYANCE EXPENDITURE IS CONCERNED, THE APPELLANT SUBMITTED T HAT HE IS A MANAGING DIRECTOR OF ANNAPURNMA POLYMERS PVT. LTD., AND HAS BEEN ALLOTTED CAR BY THE COMPANY AND THE EXPENDITURE IS ALSO BORNE BY THE COMPANY, AND THEREFORE, THERE IS NO QUESTION OF INC URRING ANY CONVEYANCE EXPENDITURE BY THE ASSESSEE. CIT(A) GAVE PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 3.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSION O F THE LD. COUNSEL AND THE FINDING OF THE A.O. RECORDED IN THE ASSESSMENT ORDER. AS PER THE DETAILS FURNISHED BY THE LD. COUN SEL, THE ASSESSEE HAD SEPARATELY PAID TELEPHONE EXPENSES AND ELECTRICAL EXPENSES. IN ADDITION TO THE ELECTRICITY AND TELEPH ONE EXPENSES, THE WITHDRAWALS FOR HOUSEHOLD EXPENSES WERE ONLY RS .48,000/-. THE WITHDRAWALS SHOWN OTHER THAN RS.48,000/- IS NOT SUBJECT TO VERIFICATION AND NO ANY EVIDENCE FOR THE SAME WAS F ILED DURING THE COURSE OF APPELLATE PROCEEDINGS. NO ANY EVIDENC E WAS FILED FOR THE PAYMENT OF MEDI-CLAIM. THE WITHDRAWALS ARE THEREBY TAKEN ONLY AT RS.48,000/-. NO ANY EXPENSES FOR PERS ONAL PURPOSE, CONVEYANCE EXPENSES AND MEDI-CLAIM EXPENSE S WERE SEPARATELY WITHDRAWN. THE ASSESSEE IS THE MANAGING DIRECTOR OF ANNAPURNA POLYMERS PVT. LTD., AND GETS THE SALARY A ND COMMISSION OF RS.20,64,547/-.CONSIDERING THE STATUS OF THE ASSESSEE, THE HOUSEHOLD EXPENSES SO WITHDRAWN FOR R S.48,000/- SEEM TO BE VERY LOW AND THE ASSESSING OFFICER WAS T HUS JUSTIFIED IN ESTIMATING THE HOUSEHOLD EXPENSES OF RS.25,000/- P.M. ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 5 HOWEVER, HE HAS NOT ALLOWED THE CREDIT OF TELEPHONE EXPENSES AND ELECTRIC EXPENSES SEPARATELY WITHDRAWN. AFTER C ONSIDERING THE TELEPHONE AND ELECTRICAL EXPENSES AND OTHER WIT HDRAWALS, THE DEDUCTION OF RS.98,861/- IS ALLOWABLE TO THE AS SESSEE. THUS, THE ADDITION IS SUSTAINED FOR RS.2,01,129/- (RS.3,0 0,000 98,861).THE REST OF THE ADDITION IS HEREBY DELETED. THE FIRST GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE US. 5. BEFORE US THE LD,. A.R. SUBMITTED THAT ALL THE 3 MEMBERS OF THE FAMILY ARE CONTRIBUTING RS.14,000/- PER MONTH FOR H OUSEHOLD EXPENSES. IT WAS FURTHER STATED THAT SINCE THE CAR IS IN THE NAME OF THE COMPANY, THERE IS NO QUESTION OF ANY EXPENDITURE ON ACCOUNT OF CONVEYANCE. THE LD. A.R. ALSO DREW OUR ATTENTION TO THE WRITTEN SUBMISSION MADE BEFORE THE CIT(A) WHEREIN HE HAS S TATED THAT THE EXPENDITURE WHICH HAS BEEN INCURRED BY HIM AS UNDER :- NATURE AMOUNT IN RS. PER ANNUM HOUSE-HOLD 1,56,000/- MEDI-CLAIM 20,200/- ELECTRICITY. 39,680/- TELEPHONE 11,181/- TOTAL 2,27,061/- ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 6 ACCORDING TO THE ASSESSEE THIS EXPENDITURE IS SUFFI CIENT TO LIVE PEACEFUL LIFE. BEFORE US LD. D.R. HAS NOT BROUGHT A NY CONTRARY MATERIAL ON RECORD. THEREFORE, UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT THAT THE ADDITION OF RS 2,01,1 29/- IS PURELY BASED ON ASSUMPTION AND PRESUMPTIONS WE ARE HOWEVER OF TH E VIEW THAT CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF T HE CASE, WE HOLD THAT DISALLOWANCE OF RS.1 LAC WOULD MEET THE ENDS O F JUSTICE AND THEREFORE, ADDITION OF RS.1 LAC IS SUSTAINED AND TH E BALANCE IS DELETED. THIS GROUND OF APPEAL IS ALLOWED PARTLY. 6. SECOND GROUND IS THAT THE A.O. OBSERVED FROM VE RIFICATION OF THE STATEMENT OF TOTAL INCOME THAT THE ASSESSEE HAS CLA IMED INTEREST PAID TO THE TUNE OF RS.5,43,069/- AS EXPENSES COMPRISIN G OF RS.2,23,496/- PAID TO ANNAPURNA AGENCY AND RS.3,19,573/- PAID TO ANNAPURNA TRADERS. THE ASSESSEE HAS DISCLOSED THE INTEREST IN COME OF TO THE TUNE OF RS.1,37,608/- FROM THE DEPOSIT. THE A.O. CO NSIDERED THE INTEREST PAID TO BE NON BUSINESS RELATED AND THEREF ORE, DISALLOWED THE INTEREST PAYMENT OF RS.5,43,069/-. 7. AGGRIEVED WITH THE ABOVE ADDITION, ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE LD. CIT (A). BEFORE THE CIT (A), T HE APPELLANT HAD SUBMITTED THAT IT HAD NEVER CLAIMED INTEREST EXPEND ITURE AMOUNTING TO RS,5,43,069/- AS BUSINESS EXPENDITURE BUT ON THE C ONTRARY THE SAME WAS CLAIMED U/S. 57 OF THE ACT UNDER THE HEAD INCO ME FROM OTHER SOURCE. CIT (A) CONFIRMED THE FINDING OF A.O. OF T REATING THE SAME AS BUSINESS EXPENDITURE WAS NOT CORRECT. CIT (A) HEL D THAT THE INTEREST ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 7 EXPENDITURE OF RS.5,43,069/- PAID TO 2 BUSINESS CON CERNS CANNOT BE ALLOWED AS EXPENDITURE WHOLLY AND EXCLUSIVELY INCUR RED FOR EARNING THE INTEREST INCOME AS INCOME FROM OTHER SOURCE. AC CORDINGLY, HE SUSTAINED THE ADDITION OF RS.5,43,069/-. AGAINST TH IS, ASSESSEE IS NOW IN APPEAL BEFORE US. 8. BEFORE US THE LD. A.R. HAS SUBMITTED THE LEDGER ACCOUNT OF INTEREST EXPENSE WHICH SHOWS THAT INTEREST OF RS.2, 23,496/- AND RS.3,19,573/- WAS PAID TO ANNAPURNA AGENCY AND ANNA PURNA TRADERS RESPECTIVELY. HE ALSO PLACED ON RECORD THE LEDGER A CCOUNT OF INTEREST INCOME WHEREIN INTEREST RECEIPTS OF RS.7,281/- HAS BEEN SHOWN TO BE RECEIVED FROM ANNAPURNA FIBRES PVT. LTD., AND RS.1, 30,327/- FROM ANNAPURNA POLYMERS PVT. LTD. ACCORDING TO THE LD. A.R., THE AMOUNT BORROWED FROM ANNAPURNA AGENCY AND ANNAPURNA TRADER S AND ON WHICH INTEREST WAS PAID WAS GIVEN TO ANNAPURNA FIBR ES PVT. LTD., AND ANNAPURNA POLYMERS PVT. LTD. ACCORDING TO THE LD. A ,.R., RECEIPT OF INTEREST AND PAYMENT OF INTEREST IS CONNECTED AND A RE LINKED ACCORDINGLY, IT WAS URGED BY THE LD. A.R. THAT NETT ING OF INTEREST RECEIPTS AND INTEREST EXPENSES BE ALLOWED. THE LD. AR ALSO PLACED ON RECORD, THE ASSESSMENT ORDER PASSED U/S. 143(3) FOR ASSESSMENT YEAR 2007-08 WHEREIN THE INTEREST WAS RECEIVED FROM ANNA PURNA FIBRES AND ANNPURNA POLYMERS PVT.LTD., AND HAD PAID INTEREST T O ANNAPURNA AGENCY AND ANNAPURNA TRADERS, NO ADDITION WAS MADE ON THAT ACCOUNT. THE LD. D.R. ON THE OTHER HAND, STATED THA T AS PER THE PROVISIONS OF SECTION 57(III), EXPENDITURE WHICH HA S BEEN LAID OUT OR ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 8 EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OR NETTING SUCH INCOME IS DEDUCTIBLE. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. FROM THE ORDERS PASSED BY THE A.O. IT IS SE EN THAT HE HAS NOT CONSIDERED THE PROVISIONS OF SECTION 57(III). WE AC CORDINGLY, DIRECT THE A.O. TO VERIFY AND ALLOW INTEREST EXPENDITURE FROM THE INTEREST INCOME IN ACCORDANCE WITH THE REQUIREMENTS OF THE PROVISIO NS. NEEDLESS TO SAY THAT SUFFICIENT AND PROPER OPPORTUNITY OF HEARI NG BE GIVEN TO THE ASSESSEE TO REPRESENT HIS CASE. 10. GROUND NO.5 AND 6 ARE OF CONSEQUENTIAL IN NATUR E AND THEREFORE DO NOT REQUIRE ADJUDICATION. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 13- 4 - 2012. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.1 12/AHD/2012 ASSESSME NT YEAR 2008- 09 . 9 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) XVI, AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 19 - 3 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 9 / 4 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S 12 - 4 -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 13 - 4 -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 13 - 4 -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 13 - 4 -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..