M/s Surya Traders, Bhopal V. The JCIT, Range-1, Bhopal

ITA 125/IND/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4862 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S SOLANKI
• Keywords: Source of fund
• Section: 143(3); 37(1); 68

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.125/IND/2013 A.Y. 2009-10 SURYA TRADERS, BHPOAL PAN ABNFS 9868 C :: APPELLANT VS JCIT, RANGE-I, BHOPAL :: RESPONDENT APPELLANT BY SHRI S.S. SOLANKI RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 28.8.2013 DATE OF PRONOUNCEMENT 28.8.2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER D ATED 17 TH DECEMBER, 2012 OF THE LEARNED FIRST APPELLATE AUTHO RITY, BHOPAL. THE FIRST GROUND RAISED PERTAINS TO MAINTAINING THE DISALLOWANCE OF MISCELLANEOUS EXPENDITURE OF RS.15,134/- IGNORING T HE FACTS OF THE 2 CASE THAT THE EXPENDITURE WAS MADE WHOLLY AND EXCLU SIVELY FOR BUSINESS PURPOSES, THEREFORE, THE CONCLUSION THAT E XPENSES ARE OF PERSONAL NATURE IS WITHOUT ANY JUSTIFICATION. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE, IS IDENTICAL TO THE GROU ND RAISED BY SUBMITTING THAT FIRSTLY IT IS A CASE OF A FIRM AND SECONDLY THERE IS NO EVIDENCE ON RECORD THAT THE MISCELLANEOUS EXPENSES WERE INCURRED FOR PERSONAL PURPOSES. ON THE OTHER HAND, THE LEAR NED SENIOR DR CONTENDED THAT THE ASSESSEE DID NOT EXPLAIN THAT TH E EXPENSES SO INCURRED WERE EXCLUSIVE FOR BUSINESS PURPOSES. IT W AS ALSO CONTENDED THAT PROPER VOUCHERS AND BILLS WERE NOT P RODUCED BY THE ASSESSEE AND MERELY LEDGER ACCOUNT WAS PRODUCED, TH EREFORE, THE IMPUGNED ORDER WAS DEFENDED. 2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM, ENGAGED IN TRADING OF FOREIGN LIQUOR AS AN EXCISE CONTRACTOR. THE ASSESSEE DECLARED INCO ME OF RS.5,53,290/- IN ITS RETURN FILED ON 29.9.2009. FIN ALLY, THE TAXABLE INCOME WAS DETERMINED AT RS. 49,93,620/- IN THE ASS ESSMENT ORDER 3 DATED 20.12.2011 FRAMED U/S 143(3) OF THE ACT. IT W AS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS DEBITED RS.75,670/- ON ACCOUNT OF MISCELLANEOUS EXPENSES IN PROFIT AND LOS S ACCOUNT. AS PER THE REVENUE, THE ASSESSEE COULD NOT PRODUCE THE BILLS AND VOUCHERS AND ALSO COULD NOT EXPLAIN THAT SUCH EXPEN SES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS ES. CONSEQUENTLY, THE AMOUNT OF RS.15,134/- WAS DISALLO WED ON THE PLEA THAT PERSONAL ELEMENT CANNOT BE RULED OUT. ON APPEAL, THE LEARNED CIT(A) AFFIRMED THE STAND OF THE LEARNED AS SESSING OFFICER AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, CONCLUSIO N DRAWN IN THE IMPUGNED ORDER, ASSERTION MADE BY THE LEARNED RESPE CTIVE COUNSEL AND THE MATERIAL AVAILABLE ON RECORD ARE KEPT IN JU XTAPOSITION, WE FIND THAT A LUMPSUM DISALLOWANCE OF 20% OUT OF CLAI MED MISCELLANEOUS EXPENSES WAS MADE ON THE PRESUMPTION THAT PERSONAL USE CANNOT BE RULED OUT AND PART OF THE EX PENSES WAS NOT ESTABLISHED TO HAVE BEEN INCURRED FOR BUSINESS PURP OSES. IT IS ALSO AN ADMITTED FACT THAT LEDGER ACCOUNT WAS PRODUCED B Y THE ASSESSEE. WE FURTHER NOTE THAT THE BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE ASSESSING OFFICER AND PART DISALLOWANCE WAS MADE ON PRESUMPTIVE 4 BASIS. IT HAS NOT BEEN ESTABLISHED AS TO WHICH OF THE EXPENSES WAS OF PERSONAL NATURE. IF THE CONDITION LAID DOWN IN S ECTION 37(1) OF THE ACT IS ANALYSED, IT IS NOT PROPER ON THE PART OF TH E TAX AUTHORITIES TO PROBE INTO THE QUESTION AS TO WHETHER THE EXPENDITU RE IS LEGITIMATE OR NECESSARY OR EXCESSIVE. THE LEARNED ASSESSING OF FICER HAS NOWHERE MENTIONED THAT THE CLAIMED MISCELLANEOUS EX PENSES ARE EITHER BOGUS OR FALSE OR NOT INCURRED AT ALL, THERE FORE, THE DISALLOWANCE THAT TOO ON PRESUMPTIVE BASIS CANNOT B E SAID TO BE JUSTIFIED. THE RATIO LAID DOWN BY HONBLE JURISDICT IONAL HIGH COURT IN HEMRAJ NEBHOMAL SONS VS. CIT (2005) 278 ITR 345 (MP ) SUPPORTS OUR VIEW. MOREOVER, IT IS THE CASE OF A FIRM, THERE FORE, SUCH A LUMPSUM DISALLOWANCE, THAT TOO WITHOUT BRINGING ANY COGENT MATERIAL ON RECORD, CANNOT BE SAID TO BE JUSTIFIED. THE DISALLOWANCE SO MADE BY THE LEARNED ASSESSING OFFICER IS DIRECTE D TO BE DELETED. THIS GROUND OF THE ASSESSEE IS, THEREFORE, ALLOWED. 3. THE NEXT GROUND PERTAINS TO MAINTAINING THE 1/10 TH OF SALARY EXPENSES AMOUNTING TO RS.84,400/- OUT OF SALARY PAI D BY THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE AS SESSEE IS THAT THERE IS NO JUSTIFICATION TO MAKE THE DISALLOWANCE. ON THE OTHER 5 HAND, THE LEARNED SENIOR DR DEFENDED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE CLAIMED AN AMOUNT OF RS.8,44,000/- ON ACCO UNT OF SALARY. IN THE ABSENCE OF FURNISHING THE DETAILS OF EMPLOYE ES AND THEIR INDIVIDUAL SALARIES PER MONTH, THE LEARNED ASSESSIN G OFFICER DISALLOWED 1/10 TH OUT OF CLAIMED SALARY EXPENSES. ON APPEAL, THE LEARNED CIT(A) AFFIRMED THE STAND OF THE ASSESSING OFFICER. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. WE FIND THAT THE ASSESSEE DEBITED RS.8,44,000/- IN ITS PROFIT AND LO SS ACCOUNT UNDER THE HEAD SALARY. AS PER THE ASSESSING OFFICER, T HE ASSESSEE MERELY PRODUCED LEDGER ACCOUNT BUT DID NOT PRODUCE THE DET AILS OF INDIVIDUAL EMPLOYEES AND PAYMENT OF SALARY TO THEM. A LUMPSUM DISALLOWANCE OF 10% WAS MADE BY THE ASSESSING OFFIC ER. WE NOTE THAT AT FIRST PAGE OF THE ASSESSMENT ORDER ITSELF, THE LEARNED ASSESSING OFFICER HIMSELF HAS MENTIONED THE ASSESS EE PRODUCED ITS BOOKS OF ACCOUNTS, BILLS AND VOUCHERS AS DISCUSSED LATER IN THIS ORDER IN VARIOUS SERIES WHICH HAS BEEN TEST CHECKED AND THE CASE 6 WAS DISCUSSED. ADMITTEDLY, SUCH BOOKS WERE NOT REJ ECTED U/S 145(3) OF THE ACT. A MERE LUMPSUM DISALLOWANCE OF 10% HAS BEEN MADE. KEEPING IN VIEW THE NATURE OF BUSINESS AND TH E FACTS AVAILABLE ON RECORD, NO LUMPSUM DISALLOWANCE IS JUS TIFIED. EVEN OTHERWISE, IT IS NOT THE CASE THAT SALARY HAS BEEN PAID TO UNRELATED PERSONS. THE DISALLOWANCE MADE IS DIRECTED TO BE D ELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 4. THE LAST GROUND PERTAINS TO UPHOLDING INCOME U/S 68 OF THE ACT AS CAPITAL INTRODUCTION BY DIFFERENT PARTIES. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE CAP ITAL INTRODUCTION OF THE RESPECTIVE AMOUNT IS OUT OF THEIR ACCUMULATE D SAVINGS, AGRICULTURAL INCOME, ETC., THEREFORE, THERE IS NO R EASON TO DISALLOW THE SAME. IN THE CASE OF SHRI LAXMINARAYAN PATIDAR , ON QUESTIONING FROM THE BENCH REGARDING LAND HOLDING, IT WAS EXPLA INED BY THE LEARNED COUNSEL THAT SHRI PATIDAR IS HOLDING MORE T HAN 22 ACRES OF LAND. ALL THE PERSONS WERE CLAIMED TO BE INCOME TA X ASSESSEES. IT WAS ALSO CLAIMED THAT ALL THE THREE PARTNERS WERE P RODUCED BEFORE THE LEARNED ASSESSING OFFICER FOR EXAMINATION BUT N EITHER THEIR PRESENCE NOR THEIR STATEMENT WAS RECORDED. THE ADDI TION WAS 7 CLAIMED TO BE MADE ON SURMISES. ON THE OTHER HAND, THE LEARNED SENIOR DR DEFENDED THE CONCLUSION DRAWN IN THE IMPU GNED ORDER BY SUBMITTING THAT THE FINANCIAL WORTH AND THE SOURCE OF THE CLAIMED AMOUNT WAS NEVER SUBSTANTIATED BY THE ASSESSEE. 4.1 NOW WE SHALL TAKE UP THE CASE OF INDIVIDUAL PAR TNERS. SO FAR AS SHRI PRAKASH RATHORE IS CONCERNED, HE CONTRIBUTE D RS.1,30,000/-. WE HAVE PERUSED THE PAPER BOOK. AT P AGE 19 OF THE BALANCE SHEET AS ON 31 ST MARCH, 2009, THE PARTNERS CAPITAL ACCOUNT HAS BEEN FURNISHED BY THE ASSESSEE WHEREIN THE INDI VIDUAL INTRODUCTION OF CAPITAL IN PERCENTAGE HAS BEEN MENT IONED. SHRI PRAKASH RATHORE INTRODUCED RS. 1,30,000/-. AT PAGE 34 THE INCOME TAX RETURN OF SHRI RATHORE HAS BEEN ANNEXED. THE GR OSS INCOME HAS BEEN SHOWN AT RS.2,23,007/-. THE SOURCES OF INCOME HAVE BEEN SHOWN OUT OF RENTAL INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS, ETC. THE INCOME FROM HOTEL AND CATERING W ORK HAS ALSO BEEN SHOWN. AT PAGE 37 OF THE CAPITAL ACCOUNT AS ON 31.3.2009 IT HAS BEEN SPECIFICALLY MENTIONED THAT THE AMOUNT OF RS.97,264/- WAS INTRODUCED IN M/S SURYA TRADERS I.E. THE ASSESS EE FIRM, THEREFORE, WE FIND NO JUSTIFICATION TO MAKE THE ADD ITION. 8 4.2 SO FAR AS THE CASE OF SHRI SANTOSH SHIVHARE IS CONCERNED, HE ALSO FILED INCOME RETURN SHOWING TOTAL INCOME AT RS .2,66,889/- (PAGE 38 OF THE PAPER BOOK). THE INCOME FROM BUSIN ESS FROM M/S SURYA TRADERS HAS BEEN SHOWN. THE TOTALITY OF FACTS INDICATES THAT THE ASSESSEE DULY EXPLAINED THE SOURCE OF INCOME AN D INTRODUCTION OF CAPITAL IN THE ASSESSEE FIRM, THEREFORE, WE FIND NO JUSTIFICATION TO MAKE THE ADDITION. 4.3 SO FAR AS THE CASE OF SHRI PATIDAR IS CONCERNED , HE WAS HAVING MORE THAN 22 ACRES OF LAND. HE INTRODUCED RS.1,50, 000/- IN THE ASSESSEE FIRM. THE COPY OF KISHTABAND KHATAUNI, OWN ERSHIP OF LAND, PROOF OF GROWING OF CROPS, ETC. HAVE BEEN ANNEXED A T PAGES 21 TO 27 OF THE PAPER BOOK. RIN PUSTIKA DULY ISSUED BY THE T EHSILDAR HAS BEEN ANNEXED ON PAGES 28 TO 32 OF THE PAPER BOOK. THE TOTALITY OF FACTS INDICATES THAT SHRI PATIDAR WAS IN A POSITION TO INTRODUCE THE CAPITAL, THEREFORE, WE FIND NO JUSTIFICATION TO MAK E THE ADDITION. THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 9 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 28.8.2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 30.8.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2829