THE DY. CIT- 2(1), RAIPUR (CG) V. M/S. AVINASH DEVELOPERS PVT. LTD., RAIPUR (CG)

ITA 127/BIL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0198 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 17-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT MALOO JAIN
• Keywords: Depreciation; Rule of consistency
• Section: 143(3); 153A; 132

Judgement Text

1 ITA NOS. 127, 128 & 129/RPR/2014. IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI C.M. GARG, JUDICIAL MEMBER.. I.T.A. NOS.127, 128 & 129/RPR/2014 ASSESSMENT YEARS : 2009 - 10,2010 - 11 & 2011 - 12. DY. COMMISSIONER OF INCOME - TAX, M/S AVINASH DEVELOPERS PVT. LTD. CIRCLE - 2(1), RAIPUR. VS. RAIPUR. PAN AADCA 4060E. APPELLANT. RESPONDENT. APPELLANT BY : NONE. RESPONDENT BY : AMIT MALOO JAIN. DATE OF HEARING : 20 - 10 - 2016 DATE OF PRONOUNCEMENT : 27 TH DECEMBER , 2016. O R D E R. PER SHAMIM YAHYA, A.M. THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF LEARNED CIT(APPEALS) FOR THE CONCERNED ASSESSMENT YEARS. SINCE THE ISSUES ARE COMMON AND THE APPEALS WERE HEARD TOGETHER, THESE ARE CONSOLIDATED AND DISPOSED OF TOGETHER FOR THE SAKE OF CONVENIENCE. 2. COMMON GROUNDS OF APPEAL READ AS UNDER : 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO BEING 1% OF CONSTRUCTION EXPENSES FOR WHICH PROPER BILLS & VOUCHERS WERE NOT AVAILABLE W ITH ASSESSEE. 2. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF 1/5 TH OF CAR DEPRECIATION ON CAR & MOBILES AND TELEPHONE EXPENSES AS PERSONAL USE BY PARTNERS CANNOT BE RULED OUT. 2 ITA NOS. 127, 128 & 129/RPR/2014. 2. SINCE THE FACTS ARE IDENTICAL, WE ARE REFERRING TO FIGURES FOR ASSESSMENT YEAR 2009 - 10. 3. BRIEF FACTS OF THE CASE ARE AS UNDER : THE ASSESSEE IS A COMPANY DERIVING INCOME FROM BUSINESS OF BUILDERS AND DEVELOPERS. SEARCH AND SEIZUR E OPERATION U/S 132 OF THE INCOME TAX ACT WAS CARRIED OUT ON 23 - 06 - 2010 AT THE BUSINESS PREMISES OF THE ASSESSEE COMPANY. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 26 - 04 - 2012 DECLARING TOTAL INCOME OF RS.25,80,240/ - . AS SESSMENT WAS COMPLETED U/S 153A R.W.S. 143(3) BY ORDER DATED 28 - 03 - 2013 DETERMINING TOTAL INCOME AT RS.68,15,320/ - . 4. THE AO MADE THE FOLLOWING DISALLOWANCES: I) DISALLOWANCE OF RS.39 LAKHS ON ACCOUNT OF CONSTRUCTION EXPENSES. II) DISALLOWANCE OF RS.3, 35,080/ - ON ACCOUNT OF DEPRECIATION ON CAR AND TELEPHONE EXPENSES FOR PERSONAL USE. 5. THE DISALLOWANCE OF RS.39 LAKHS OUT OF CONSTRUCTION EXPENSES WAS MADE BY THE AO AS LUMPSUM DISALLOWANCE OF 1% OF TOTAL EXPENSES TO COVER UP THE POSSIBLE LEAKAGES IN PROF IT, IF ANY AS THE AO WAS OF THE OPINION THAT SOME OF THE EXPENSES WERE NOT FOUND SUPPORTED BY PROPER BILLS AND VOUCHERS. THE DISALLOWANCE OUT OF TELEPHONE EXPENSES, CAR EXPENSES AND DEPRECIATION ON CAR WAS ALSO MADE BEING 1/5 TH OF EXPENSES CLAIMED ON ADHO C BASIS AS THE ASSESSEE HAS NOT MAINTAINED LOG BOOK FOR USE OF VEHICLES AND TELEPHONE. 6. THE LEARNED CIT(APPEALS) HAS DELETED THE DISALLOWANCE OF RS.39 LAKHS BY CONCLUDING AS UNDER : I AM OF THE CONSIDERED OPINION THAT THE DISALLOWANCE CANNOT BE MADE ME RELY DUE TO THE REASON THAT SUCH EXPENSES WERE PAID IN CASH ON THE BASIS OF SELF MADE VOUCHERS. IN THIS CASE SEARCH WAS CONDUCTED AND NO EVIDENCE WAS REFERRED IN THE ASSESSMENT ORDER TO SUPPORT THE CONCLUSION ARRIVED AT BY THE AO. IN THE CASE OF ACIT VS. R AM KISHAN VERMA (2012) 143 TTJ (JP) (UO) 1, IT WAS HELD THAT NO MATERIAL HAS BEEN BROUGHT ON 3 ITA NOS. 127, 128 & 129/RPR/2014. RECORD BY AO TO PROVE THAT EXPENSES CLAIMED UNDER THIS HEAD ARE INFLATED OR EXCESSIVE. THEREFORE, NO AD HOC DISALLOWANCE IS JUSTIFIED MERELY ON THE GROUND THAT CER TAIN VOUCHERS ARE SELF MADE. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AS ALSO DECISIONS CITED ABOVE, THE ADHOC DISALLOWANCE MADE BY THE A.O. CANNOT BE SUSTAINED. HENCE, THE DISALLOWANCE IS DELETED. 7. THE DISALLOWANCE OF 1/5 TH OF CAR AND TELEPH ONE EXPENSES WAS DELETED BY THE LEARNED CIT(APPEALS) BY CONCLUDING AS UNDER : I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSIONS OF THE APPELLANT. THE A.O. HAS DISALLOWED 1/5 TH OF TELEPHONE EXPENSES, CAR EXPENSES AND DEPRECIATION ON CAR FOR ITS PERSONAL USE. THE APPELLANT HAS CONTENDED THAT FBT HAS BEEN PAID FOR FRINGE BENEFIT AVAILED BY THE EMPLOYEES / DIRECTORS OF THE COMPANY, HENCE, THERE CANNOT BE ANY DISALLOWANCE FOR PERSON AL PURPOSES. IT HAS ALSO BEEN CONTENDED THAT IN CASE OF COMPANY, THERE CANNOT BE ANY DISALLOWANCE FOR PERSONAL PURPOSES. HAVING GONE THROUGH THE FACTS OF ISSUE, I AM OF THE CONSIDERED OPINION THAT WHERE FBT HAS BEEN PAID BY THE APPELLANT, THERE CANNOT BE A NY DISALLOWANCE FOR PERSONAL USE OTHERWISE ALSO. FURTHER,, IN THE CASE OF COMPANY, THERE CANNOT BE ANY DISALLOWANCE ON ACCOUNT OF PERSONAL USE AS HELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. NUCHEM LTD. (2012) 20 TAXMANN.COM 814/ 208 TAXMAN 250 (MAG.) (PUNJ. & HAR.) AND ALSO BY HONBLE GUJARAT HIGH COURT IN CASE OF SAYAJI IRON ENGG. CO. VS. CIT 253 ITR 749 (GUJ.). DELHI TRIBUNAL HAS ALSO HELD THE SAME VIEW IN THE CASE OF MIDLAND INTERNATIONAL LTD. VS. DCIT, 109 ITD 198 (DEL). LOOK ING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO DECISIONS CITED ABOVE, THE DISALLOWANCE MADE BY THE AO AMOUNTING TO RS.3,35,080/ - IS HEREBY DELETED. 8. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE THE ITAT. 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ADDITION S IN THIS CASE HAVE BEEN MADE ON AN ADHOC BASIS. THE AO HAS NOT BROUGHT ON RECORD THE SPECIFIC DEFECT AND AMOUNTS INVOLVED. LEARNED COUNSEL FURTHER SUBMITTED THAT IDENTICA L ADDITIONS IN EARLIER YEAR WERE DELETED BY THE LEARNED CIT(APPEALS) AND THE SAME WAS CONFIRMED BY THE ITAT IN ITA NO. 126/RPR/2014 FOR ASSESSMENT YEAR 2008 - 09 VIDE ORDER DATED 27 TH JULY, 2016. 4 ITA NOS. 127, 128 & 129/RPR/2014. 10. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AO. 11. UPON CAREFUL CONSIDERATION WE FIND THAT SIMILAR ADDITIONS WERE MADE IN THE CASE OF THE SAME ASSESSEE FOR EARLIER ASSESSMENT YEAR I.E. 2008 - 09. THE ITAT VIDE ITS ORDER DATED 27 TH JULY, 2016 HAS CONFIRMED THE DELETION. WHILE DELETING THE SIMILAR ADDITION OF DISALLOWANCE OF 1% OF CONSTRUCTION EXPENSES, THE ITAT HAS HELD AS UNDER : 8. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBMISSIONS AND CAREFUL PERUSAL OF THE ORDER OF ASSESSMENT, APPELLATE ORDER AND RATIO OF DECISIONS OF THE HONBLE ALLAHABAD HIGH C OURT (SUPRA), AT THE VERY OUTSET, WE NOTE THAT THE AO MADE DISALLOWANCE ON THE ALLEGATION OF ABSENCE OF PROPER BILLS AND VOUCHERS AND ALSO NOTED THAT THE QUANTUM BEING ON HIGHER SIDE, LUMPSUM ADDITION IS WARRANTED. AT THE SAME TIME, WHEN WE LOGICALLY ANALY SE, THE CONCLUSION OF THE CIT(A), THEN WE OBSERVE THAT THE CIT(A) HAS HELD THAT IF GENERAL/CASUAL & ROUTINE OBSERVATIONS OF THE AO ARE TO BE CONSIDERED AS MATERIAL EVIDENCE FOR THE PURPOSE OF FRAMING AN ASSESSMENT, THEN THE AO SHALL HAVE BLANKET AND ARBITR ARY POWERS TO DISPOSE OF THE SCRUTINY ASSESSMENT ACCORDING TO HIS WHIMS AND FANCIES WHICH IS NOT THE SPIRIT OF THE CIRCULAR ISSUED BY THE BOARD ON SCRUTINY ASSESSMENTS. PLACING RELIANCE ON THE DECISIONS OF THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF MAHESH CHAND [1983] 199 ITR 247 AT PAGE 249 [ALL], THE CIT(A) OBSERVED THAT ASSESSMENT CANNOT BE MADE ARBITRARILY AND IN ORDER THAT AN ASSESSMENT CAN BE SUSTAINED, IT MUST HAVE NEXUS TO THE MATERIAL ON RECORD. FINALLY, AFTER CAREFUL CONSIDERATION OF THE R ELEVANT OPERATIVE PART OF THE FIRST APPELLATE ORDER, WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE CIT(A) THAT DISALLOWANCE CANNOT BE MADE MERELY DUE TO THE REASON THAT SUCH EXPENSE WERE PAID IN CASH ON THE BASIS OF SELF MADE VOUCHERS. IN THE CASE OF BUIL DERS, SOME PAYMENTS MADE TO ILLITERATE LABOURERS AND PETTY CONTRACTORS ON THE BASIS OF SELF MADE VOUCHERS WITHOUT ANY BILLS OR VOUCHERS FROM THE RECIPIENT AND THE GENUINENESS OF SELF MADE VOUCHERS CANNOT BE DOUBTED WITHOUT ANY SUBSTANCE AND COGENT MATERIAL . 9. IN THE PRESENT CASE, UNDISPUTEDLY, SEARCH OPERATION WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE AND IN THE ASSESSMENT ORDER NO MATERIAL WAS UNEARTHED AND FOUND DURING SEARCH HAS BEEN REFERRED FOR MAKING DISALLOWANCE ON ESTIMATE BASIS. WE ALSO ARE IN AGREEMENT WITH THE CONCLUSION OF THE CIT(A) THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO PROVE THAT THE EXPENSES CLAIMED UNDER THE HEAD ARE EXCESSIVE OR BOGUS. THEREFORE, NO DISALLOWANCE CAN BE MADE ON THE BASIS OF 5 ITA NOS. 127, 128 & 129/RPR/2014. ALLEGATIONS RECORDED BY THE AO. FINALLY, RESPECTFULLY FOLLOWING THE RATIO OF THE DECISIONS MENTIONED HEREINABOVE (SUPRA), WE ARE INCLINED TO HOLD THAT THE ADDITI ON MADE BY THE AO IS NOT BASED ON ANY COGENT MATERIAL BUT PURELY ON CONJECTURES AND SURMISES AND HIGHER TECHNICAL APPROACH OF THE ASSESSEE WHICH CANNOT BE HELD AS JUSTIFIED AND THUS WE DEMOLISH THE SAME. CONSEQUENTLY, WE HOLD THAT THERE IS NO VALID REASON BEFORE US TO INTERFERE WITH THE IMPUGNED ORDER OF THE CIT(A) AND UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 1 OF THE REVENUE STANDS DISMISSED. 12. FURTHER MORE, AS REGARDS DELETION OF DISALLOWANCE ON ACCOUNT OF CAR AND TELEPHONE EXPENSES, THE ITAT HAS HELD AS UNDER : WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. IN OUR CONSIDERED OPINION, THE CIT(A) WAS CORRECT IN FOLLOWING THE RULE OF CONSISTENCY AND FOLLOWING THE ORDERS OF VARIOUS HIGH COURTS (SUPRA) WHER EIN ON SIMILAR DISALLOWANCE MADE BY THE AO WAS DIRECTED TO BE DELETED. IN OUR VIEW, UNTIL AND UNLESS THE AO BRINGS ON RECORD ANY RELEVANT MATERIAL TO ESTABLISH THIS FACT THAT A PART OF THE CLAIMED DISALLOWANCE WERE NOT FOR THE PURPOSE OF BUSINESS OF THE AS SESSEE, THEN ONLY ANY DISALLOWANCE CAN BE MADE ON ESTIMATE BASIS BY ALLEGING THE ELEMENT OF PERSONAL USE. IN THE PRESENT CASE, THE AO HAS NOT UNDERTAKEN ANY SUCH EXERCISE TO ESTABLISH THE REQUIRED FACTS AGAINST THE ASSESSEE FOR MAKING ADDITION ON ACCOUNT OF CAR, DEPRECIATION TELEPHONE EXPENSES, ETC. THEREFORE, WE HAVE NO REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER ON THIS COUNT AND WE UPHOLD THE SAME. CONSEQUENTLY, RESPECTFULLY FOLLOWING THE RATIO OF DECISIONS CITED ABOVE, WE DISMISS GROUND NO.2 . 1 3. WE FIND THAT SINCE IN IDENTICAL CIRCUMSTANCES THE ITAT HAS CONFIRMED DELETION OF SIMILAR DISALLOWANCE , ADHERING TO THE DOCTRINE OF STARE DECISIS WE UPHOLD THE ORDER OF LEARNED CIT(APPEALS). 14. IN THE RESULT, THESE APPEALS FILED BY THE REVENUE STAND D ISMISSED. ORDER PRONOUNCED ON THIS 27 TH DAY OF DECEMBER , 2016. SD/ - SD/ - ( C.M. GARG) ( SHAMIM YAHYA ) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DATED: 27 TH DECEMBER , 2016. 6 ITA NOS. 127, 128 & 129/RPR/2014. COPY FORWARDED TO : 1. M/S AVINASH DEVELOPER PVT. LTD. AVINASH HOUSE, MARUTI BUSINESS PARK, G.E. ROAD, RAIPUR (C.G.) 2. D.C.I.T. - CIRCLE - 2(1), RAIPUR. 3. C.I.T., RAIPUR. 4. CIT(APPEALS), RAIPUR. 5. D.R., ITAT, RAIPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.