Vilas Prabhakar Mungi, Pune V. Income-tax Officer,

ITA 128/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9084 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-03-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Keywords: Business income; Corroborative evidences
• Section: 43B

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , , . , ! , '# BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO, AM . / ITA NO.128/PUN/2016 $ % % / ASSESSMENT YEAR : 2007-08 SHRI VILAS P. MUNGI, FLAT NO. A-2, SHRIRAM RESIDENCY, SURANA BAUG COLONY, BEHIND MIRCH MASALA HOTEL, KOTHRUD, PUNE-411 009. PAN : AAVPM4444M ....... / APPELLANT &$ / V/S. THE INCOME TAX OFFICER, WARD-1, AHMEDNAGAR. / RESPONDENT APPELLANT BY : SHRI KISHORE PHADKE RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 20.03.2018 / DATE OF PRONOUNCEMENT : 26.03.2018 ' / ORDER PER D. KARUNAKARA RAO, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, PUNE DATED 10.11.2014 FOR ASSESSMENT YE AR 2007-08. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE LEARNED CIT(A), PUNE ERRED IN LAW AND ON FAC TS IN AFFIRMING THE ADDITION MADE BY THE LEARNED AO ON ACCOUNT OF CAPITAL INTROD UCTION IN M/S KALPANA AGENCIES OF RS. 2,00,000/- BY TREATING IT AS UNEXPL AINED AMOUNT. 2 ITA NO.128/PUN/2016 A.Y.2007-08 2. THE LEARNED CIT(A), PUNE ERRED IN LAW AND ON FAC TS IN AFFIRMING THE ADDITION MADE BY THE LEARNED AO ON ACCOUNT OF DISALLOWANCE O F EXPENSES DEBITED IN M/S KALPANA AGENCIES OF RS.1,00,000/- TREATING IT AS UN EXPLAINED EXPENDITURE. 3. THE LEARNED CIT(A), PUNE ERRED IN LAW AND ON FAC TS IN AFFIRMING THE ADDITION MADE BY THE LEARNED AO ON ACCOUNT OF AD-HOC DISALLO WANCE OF RS.1,96,190/- BEING 30% OF THE TOTAL EXPENSES DEBITED IN M/S POOJA AGEN CIES. 4. THE APPELLANT CRAVES TO ADD/MODIFY/ALTER/ DELETE ALL/ ANY OF THE GROUNDS OF APPEAL. 3. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO AN AFFIDAV IT DATED 07.01.2016 FILED BY ASSESSEE AND SUBMITTED THAT THERE IS DELAY OF 220 DAYS IN FILING THIS APPEAL. THE DELAY IS OCCURRED DUE TO INSUFFICIENT FUNDS FOR FILING APPEA L BEFORE HON'BLE INCOME TAX APPELLATE TRIBUNAL, THE INSTANT APPEAL COULD NO T BE FILED WITH THE PRESCRIBED TIME LIMIT OF 60 DAYS. THEREFORE, THE LD. COUNSEL OF ASSESSEE PRAYED FOR ADMITTING THE APPEAL FOR ADJUDICATION CONDONING THE DELAY IN FILING THE APP EAL. 4. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE CONT ENTS OF AFFIDAVIT DATED 07.01.2016 FILED BY THE ASSESSEE, WE ARE OF THE OPINION THAT THE DELAY OF 220 IN FILING APPEAL IS REQUIRED TO BE CONDONED AND TAKEN UP THE APPEAL FOR ADJU DICATION. 5. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS AS DISTRIBUTOR OF CONSUMER GOODS UNDER THE NAME AND STYLE OF M/S. POOJA AGENCIES. THE ASSESSEE FILED RETURN OF INCOME DECLARIN G TOTAL INCOME ON GROSS PROFIT RS.10,24,127/- ON THE TOTAL SALES OF RS. 1.17 CRORES ( ROUNDED OFF). IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE VARIOUS ADDITIONS DETERMINING TOTAL INCOME RS.17,40,250/-. THE DETAILS OF THE ADDITIONS ARE AS UNDER : 11. SUBJECT TO THIS, TOTAL INCOME OF THE ASSESSEE I S COMPUTED AS UNDER: NET PROFIT FROM POOJA AGENCY 1,89,826/- ADD : I) ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES AS DISCUSSED IN PARA 10.II ABOVE 9,33,322/- II) INCOME FROM KALPANA AGENCY TAKEN AT RS. 3 LAC AS AGAINST NET PROFIT RS. 51, 8 96/- DISCUSSED IN PARA 10.III ABOVE 3,0 0,000/- III) ADDITION ON ACCOUNT OF EXPENSES DISAL LOWED 3 ITA NO.128/PUN/2016 A.Y.2007-08 FOR POOJA AGENCY AD DISCUSSED IN PARA 10.V ABOVE 1,96,190/- IV. ADDITION ON ACCOUNT OF VAT PAYABLE AS PER PROVI SIONS OF SECTION 43B OF THE I.T. ACT, 1961 A S DISCUSSED IN PARA 10.V ABOVE 1,70,914/- GROSS TOTAL INCOME 17,90,252 LESS : DEDUCTION UNDER CHAPTER VIA 5 0,000 TOTAL INCOME 17,40,252 I.E. 17,40,250 DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE RAISE D VARIOUS GROUNDS REQUESTING FOR DELETION OF ADDITIONS. HOWEVER, THE COMMISSIONE R OF INCOME TAX (APPEALS) GAVE PART RELIEF TO THE ASSESSEE. THE COMMISSIONE R OF INCOME TAX (APPEAL) CONFIRMED THE ADDITIONS AT SL. NO. (II) AND (III) ABOVE. 6. AGGRIEVED WITH THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), ASSESSEE FILED AN APPEAL BEFORE US WITH THE GROUNDS EXTRACTED ABOVE. 7. WE SHALL NOW PROCEED TO GIVE THE GROUND WISE ADJUDICAT ION. GROUND NO. 1 RELATES TO ADDITION OF RS.2,00,000/- ON ACCOUNT OF CAPITAL INTRODUCTION IN M/S. KALPANA AGENCIES., PROPRIETARY CONCERN OF THE ASSESSEE. THE GRO UND NO. 2 RELATES TO AD-HOC DISALLOWANCE OF RS.1,00,000/- OUT OF THE TOTAL EXPEND ITURE OF RS.1,39,999/- DEBITED TO M/S. KALPANA AGENCIES. THE COMMISSIONER OF INCOM E TAX (APPEALS) DISCUSSED THESE ISSUES IN PARA 8.2 OF HIS ORDER WHICH READS AS UNDER : 8.2 I HAVE CAREFULLY PERUSED THE SUBMISSIONS MADE B Y THE LD. COUNSEL. IT IS SEEN FROM THE MATERIAL PLACED ON RECORD THAT IN THE PROPRIETOR'S CAPITAL ACCOUNT FOR THE YEAR ENDED ON 31.03.2007 IN THE CAS E OF M/S KALPANA AGENCIES, THERE IS A CREDIT ENTRY OF RS. 2,00,000/- WITH THE NARRATION 'BY ADDITION', WHICH MEANS FRESH CAPITAL OF RS. 2,00,00 0/- WAS INTRODUCED BY THE APPELLANT DURING THE YEAR. THE APPELLANT ARGUED IN THE PRESENT PROCEEDINGS THAT CAPITAL INTRODUCED IN M/S KALPANA AGENCY WAS DEBITED IN THE BOOKS OF M/S POOJA AGENCY . BUT, ON VERIFICATION OF PROPRIETOR'S CAPITAL ACCOUNT FOR THE YEAR ENDED ON 31.03.2007 IN THE CASE OF M/S POOJA AGENCIES, NO SUCH DEBIT ENTRY OF RS.2,00,000/- WAS FOUND EXCEPT GENERAL DRAWINGS OF RS.2,70,000 /- . THERE IS NO DATE WISE CORRELATION BETWEEN THESE DRAWINGS AND THE CAPITAL OF RS.2,00,000/- INTRODUCED IN M/S KALPANA AGENCIES. AS REGARDS THE DISALLOWANCE 'OF EXPENDITURE OF RS1,00,000 /- DEBITED IN THE CASE OF KALPANA AGENCY, IT IS TRITE LAW THAT FOR CLAIMING ANY EXPENDITURE , THE ONUS IS ALWAYS ON THE ASSESSEE TO PROVE WITH CREDIBLE EVIDENCE THAN THE EXPENDITU RE IS GENUINE 4 ITA NO.128/PUN/2016 A.Y.2007-08 AND IT IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS OF THE ASSESSEE. IN THE CASE OF THE APPELLANT, EVEN IN THE PRESENT PROCEEDINGS, NO SUPPORTING EVIDENCE WAS PRODUCED TO PROVE THE GENUI NENESS OF EXPENDITURE OF RS.1,39,999/- DEBITED IN THE CASE OF M/S. KALPANA AGENCY. THE CASE LAW RELIED UPON BY THE APPELLANT I.E. DECI SION OF ITAT DELHI BENCH IN THE CASE OF ACIT VS. GANPATI ENTERPRISES LTD. IS ALSO NOT OF MUCH ASSISTANCE TO THE APPELLANT BECAUSE THE DECISIONS P ERTAINS TO THE CASE OF A COMPANY WHEREAS THE CASE ON HAND IS A PROPRIETARY C ONCERN, WHERE POSSIBILITY OF DEBITING SAME EXPENSES TWICE CANNOT BE RULED OUT WHEN THE APPELLANT IS THE PROPRIETOR OF TWO CONCERNS AND THE BUSINESS IS CARRIED OUT FROM THE SAME PREMISES. IN SUCH CIRCUMSTANCES AND I N THE ABSENCE OF ANY EVIDENCE PRODUCED BY THE APPELLANT IN SUPPORT OF TH E SOURCES OF CAPITAL AND THE EXPENDITURE DEBITED TO THE ACCOUNTS, THE ADDITI ON OF RS.2,00,000 /- ON ACCOUNT OF UNEXPLAINED CAPITAL INTRODUCED AND ADDIT ION OF RS.1,00,000 /- (INCLUDING NET PROFIT OF RS.51,896 /- SHOWN BY THE APPELLANT IN THE P & L' A/C OF KALPANA AGENCIES) ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE MADE BY THE ASSESSING OFFICER CANNOT BE SAID TO BE UNJUSTIFIED. ACCORDINGLY, THE AGGREGATE ADDITION OF RS.3,00,000 /- MADE ON THIS GROUND IS AFFIRMED. GROUND OF APPEAL NO.4 THUS, FAILS. EVENTUALLY, AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE O N THIS ISSUE, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED BOTH THE ADD ITION OF RS.2,00,000/-ON ACCOUNT OF CAPITAL INTRODUCTION IN M/S.KALPA NA AGENCIES AND RS. 1,00,000/- ON DISALLOWANCE MADE OUT OF EXPENSES CLAIMED IN THE SAID CONC ERN. 8. AGGRIEVED WITH THE SAME, THE ASSESSEE RAISED GROUND N O. 1 AND 2 ON THE ISSUES OF CAPITAL INTRODUCTION OF RS.2,00,000/-AND RS.1,00,000/- DISALLOWANCE OF ADHOC EXPENDITURE. IT IS THE CASE OF ASSESSEE THAT THE SAID SUM OF RS.2,00,000/- WAS INTRODUCED OUT OF FUNDS OF M/S. POOJA AGENCY. HOWEVER , ON VERIFICATION OF THE BOOKS OF CAPITAL ACCOUNT OF M/S. POOJA AGENCY, THE ASSESS ING OFFICER AND COMMISSIONER OF INCOME TAX (APPEAL) CAME TO THE CONCLUSION THAT NO SUCH DEBIT ENTRY OF RS. 2,00,000/- WAS FOUND EXCEPT GENERAL DRAWING OF RS. 2,70,000/-. CONSIDERING THE ASSESSEES FAILURE TO PROVIDE ANY EVIDENCE TO PROVE DATE WISE CORRELATION BETWEEN THESE DRAWINGS, THE COMMISSIONER OF IN COME TAX (APPEALS) CONFIRMED THE SAME. 9. WITH REGARD TO OTHER ADDITION OF RS.1,00,000/- OF DISALLOW ANCE ON ADHOC EXPENDITURE, IT IS THE CASE OF REVENUE THAT DISALLOWANCE IS REQUIRED SINCE THE ASSESSEE FAILED TO DISCHARGE ONUS BY PROVIDING THE CRED IBLE EVIDENCES IN SUPPORT OF HIS CLAIM. 5 ITA NO.128/PUN/2016 A.Y.2007-08 10. ON HEARING BOTH THE PARTIES, REGARDING THE ADDITION OF RS. 2,00,000/-, WE FIND M/S. POOJA AGENCY, PROPRIETARY CONCERN OF ASSESSEE, HAS SHOWN T HE WITHDRAWAL RS.2,70,000/- IN ITS ACCOUNT. THE SAME IS AN UNDISPUTED FA CT. MERE, FAILURE TO PRODUCE EVIDENCE ON CORRELATING THE DATES OF WITHDRAWAL O F CAPITAL INTRODUCTION OF RS.2,00,000/- IN M/S. KALPANA AGENCY WITH THE SAID WITHDRAWA L OF RS.2,70,000/-, THE AUTHORITIES BELOW HAVE PROCEEDED TO MAKE ADDITIONS W ITHOUT ESTABLISHING THE FACT THAT RS. 2,70,000/- HAS NOT BEEN UTILIZED BY THE SAID ASSESSEE FOR SOME OTHER PURPOSE. IN OUR VIEW, THE SAID ADDITIONS IS NOT CALLED FOR C ONSIDERING THE UNDISPUTED FACT OF WITHDRAWAL OF RS. 2,70,000/- IN THE BOOKS OF ACCOUNT OF M/S. POOJA AGENCY. ACCORDINGLY, GROUND NO. 1 IS ALLOWED. 11. REGARDING DISALLOWANCE ON ADHOC DISALLOWANCE OF RS. 1,00,000 /-, IT IS THE CASE OF ASSESSEE THAT SAID DISALLOWANCE OUT TO TOTAL EXPE NDITURE CLAIM OF RS.1,33,999/- IS EXTREMELY ON HIGHER SIDE AND EVIDENCES AR E AVAILABLE TO SUPPORT THE CLAIM. BUT THE REVENUE AUTHORITIES NEEDED THIRD PARTY EVIDENCES IN THIS REGARD AND OBTAINING THE SAME FOR SUCH MISCELLANEOUS EXPENDITURE IS NOT A PRACTICAL PROPOSITIONS. ON HEARING BOTH THE PARTIES ON THIS ISSUE, WE FIND THIS IS THE ISSUE OF AD-HOC ADDITION. WE FIND THERE IS NO JUSTIFICATION FOR THE REVENUE FOR DISALLOWING RS. 1,00,000/- OUT OF TOTAL CLAIM RS. 1,33,999/- WITHOUT IGNORING THE FACT OF EARNING INCOME BY THE CONCERN PARTY. IT IS NOT THE CASE OF THE REVENUE THAT BUSINESS IS BOGUS OR EXPENSES ARE NOT GENUINE. IN OUR VIEW, DISALLOWA NCE OF RS.1,00,000/- OUT OF THE SAME IS EXTREMELY ARBITRARY AND ON THE HIGHER S IDE. THEREFORE, WE ARE OF THE OPINION THAT DISALLOWANCE OF NOMINAL SUM OF RS.25,000/- ON TH IS ACCOUNT SHOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, GROUND NO. 2 IS PARTLY ALLOWED . 12. THE GROUND NO. 3 RELATES TO AD-HOC DISALLOWANCE OF RS.1 ,96,190/- BEING 30% OF THE TOTAL EXPENSES DEBITED IN M/S. POOJA AGENCIES, ANO THER PROPRIETARY CONCERN 6 ITA NO.128/PUN/2016 A.Y.2007-08 OF ASSESSEE. REASONS FOR DISALLOWANCE ARE SIMILAR TO THE ONE AT GROUND NO. 2 MENTIONED ABOVE. ARGUMENTS OF THE PARTIES ARE ALSO THE S AME. IT IS A CASE OF ASSESSEES FAILURE TO FURNISH THIRD PARTYS EVIDENCES. ASSE SSING OFFICER NEVER DOUBTED THE GENUINENESS OF EXPENDITURE. 13. ON HEARING BOTH THE PARTIES, ON THIS AD-HOC DISALLOWANC ES, WE ARE OF THE VIEW THAT MAKING DISALLOWANCE AT 10% ON ENTIRE EXPENDITURE , IN THE PLACE OF 30%, SHOULD MEET THE ENDS OF JUSTICE. WE DIRECT THE ASSESSING OFFICER ACCORDINGLY. HENCE, GROUND NO. 3 RAISED BY ASSESSEE IS PARTLY AL LOWED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 26TH DAY OF MARCH, 2018. SD/- SD/- ( / SUSHMA CHOWLA ) ( . / D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; ! ' / DATED : 26 TH MARCH, 2018. SB '()*+,-,* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)-1, PUNE. 4. THE CIT-1, PUNE. 5. %&' () , * () , - +,- , / DR, ITAT, SMC BENCH, PUNE. 6. './ 01 / GUARD FILE. // TRUE COPY // * 2 / BY ORDER, 3 (- /PRIVATE SECRETARY * () , / ITAT, PUNE.