SDFC Securities Ltd., Baroda V. The Dy.CIT.,Circle-4, Baroda

ITA 1432/AHD/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63012 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 17-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Depreciation; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1432 / AHD/2009 (ASSESSMENT YEAR 2005-06) SDFC SECURITIES LTD., 306-B, PAYAL COMPLEX, SAYAJIGUNJ, BARODA VS. DCIT, CIRCLE 4, BARODA PAN/GIR NO. : AAFS8224B (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI MUKUND BAKSHI, AR RESPONDENT BY: SHRI ALBINUS TIRKEY, SR.DR DATE OF HEARING: 17.09.2012 DATE OF PRONOUNCEMENT: 12.10.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDE R OF LD. CIT(A) III, BARODA DATED 02.02.2009 FOR THE ASSESSMENT YEAR 200 5-06. 2. GROUND NO.1 IS AS UNDER: THE LD. C.I.T. (APPEALS) III, BARODA HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ACTION OF THE DY. CIT, CIRCLE -4, BARODA IN CONFIRMING THE DISALLOWANCE OF INTEREST PROPORTIONA TE TO ADVANCES GIVEN TO MR. RAMESH JINDAL, MR. MUKESH DALAL AND MR . KSHITIJ DESAI HOLDING THAT THE ADVANCES GIVEN TO THEM ARE F OR NON-BUSINESS PURPOSE. IN CONFIRMING THE DISALLOWANCE, THE LD. CI T(A)-III, BARODA COMPLETELY IGNORED THE FACT THAT THESE ADVAN CES WERE GIVEN OUT OF OWN FUNDS. 2.1 IT IS SUBMITTED BY THE LD. A.R. THAT THE DISALL OWANCE OF INTEREST IS MADE BY THE A.O. AND CONFIRMED BY LD. CIT(A) IN RES PECT OF ADVANCE I.T.A.NO. 1432 /AHD/2009 2 GIVEN TO MR. RAMESH JINDAL OF RS.2,21,630/-, MUKESH DALAL RS.34,57,123/- AND KSHITIZ DESAI RS.3 LACS, TOTALIN G RS.39.79 LACS APPROXIMATELY. HE FURTHER SUBMITTED THAT OWN FUNDS OF THE ASSESSEE AS ON 31.03.2005 WAS OF RS.254.25 LACS AS PER THE AUDITED BALANCE SHEET SUBMITTED AND HENCE, THE ENTIRE SUCH ADVANCE WERE G IVEN OUT OF INTEREST FREE OWN FUNDS AND, THEREFORE, DISALLOWANCE OF INTE REST IN RESPECT OF THESE THREE INTEREST FREE ADVANCES IS NOT JUSTIFIED. IN SUPPORT OF THIS, RELIANCE WAS PLACED ON THE TRIBUNAL DECISION RENDERED IN THE CASE OF BELGIUM GLASS & CERAMICS PVT. LTD. VS ACIT IN I.T.A.NO. 296/AHD/2 012 DATED 18.05.2012 AND IT WAS SUBMITTED THAT THE COPY OF TH IS TRIBUNAL DECISION IS AVAILABLE ON PAGES 38-41 OF THE PAPER BOOK. 2.2 LD. D.R. SUPPORTED THE ASSESSMENT ORDER. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE DECISION OF THE TRIBUNAL CITED BY THE LD. A.R. OF T HE ASSESSEE. IN THAT CASE, IT IS NOTED BY THE TRIBUNAL THAT THE ASSESSEE HAS RS.2.13 CRORES AS CAPITAL AND INTEREST FREE SUNDRY CREDITORS WHEREAS THE ASSESSEE HAS ADVANCED A SUM OF RS.49.47 LACS TO HIS SISTER CONCE RN WITHOUT INTEREST AND HENCE, THE SAME IS FULLY COVERED WITH INTEREST FREE CAPITAL AVAILABLE WITH THE ASSESSEE AND, THEREFORE, IT WAS HELD THAT NO DI SALLOWANCE OF INTEREST IS CALLED FOR. IN THE PRESENT CASE ALSO, WE FIND THAT THE INTEREST FREE ADVANCES GIVEN TO THREE PERSONS IS FULLY COVERED BY THE INTE REST FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE FORM OF EQUITY SHARE CAPIT AL AND RESERVE & SURPLUS OF RS.254.25 LACS AND, THEREFORE, RESPECTFULLY FOLL OWING THIS TRIBUNAL DECISION CITED BY THE LD. A.R. IN THE CASE OF BELGI UM GLASS & CERAMICS PVT. LTD. (SUPRA), WE HOLD THAT THE DISALLOWANCE MA DE BY THE A.O. OF INTEREST IS NOT SUSTAINABLE. WE, THEREFORE, DELETE THE SAME. THIS GROUND OF THE ASSESSEE IS ALLOWED. I.T.A.NO. 1432 /AHD/2009 3 3. GROUND NO.2 IS AS UNDER: 2. THE LD. C.I.T. (APPEALS) III, BARODA HAS E RRED IN LAW AND IN FACTS IN UPHOLDING THE ACTION OF THE DY. CIT, CIRCL E - 4, BARODA IN CONFIRMING THE DISALLOWANCE OF RS.4,69,794/- BEING 50% OF INCREMENTAL SALARY PAID BY THE APPELLANT COMPANY TO IT'S STAFF MEMBERS WITHOUT APPRECIATING THE CONTENTIONS OF THE APPELLANT. THE DISALLOWANCE OF RS.4,69,794/- BEING ARBITRARY A ND IN DISREGARD TO THE AVAILABLE FACTS AND BAD IN LAW IS PRAYED TO BE DELETED. 3.1 LD. A.R. OF THE ASSESSEE REITERATED THE SAME CO NTENTIONS WHICH ARE RAISED BEFORE LD. CIT(A). 3.2 LD. D.R. OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THIS ISSUE WAS` DECIDED BY LD. CIT(A) AS PER P ARA 3.3 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REF ERENCE: 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE COU NSEL AND FACTS OF THE CASE. THE ASSESSING OFFICER MADE THE DISALLO WANCE ON THE GROUND THAT THE APPELLANT DID NOT GIVE THE DETAILS OF EMPLOYEES, THEIR ADDRESSES, DESIGNATION, SALARY DRAWN ETC. THE SALARY WAS ALSO GIVEN BY CASH, THEREFORE NO VERIFICATION POSSIBLE. THE INCREASE IN SALARY IS ALMOST 75% OVER ONE YEAR WHICH IS QUITE E XTRA ORDINARY. THE REASON GIVEN FOR INCREASE IN SALARY IS THAT THE SAME WAS FOR INCREASE IN PROFIT. HOWEVER, THE PROFIT DURING THE YEAR IS JUST RS.8.41 LACS ON WHICH INCREASE IN SALARY OF RS.9.39 LACS IS NOT JUSTIFIED. IN THE ABSENCE OF ANY DETAILS AND THE FA CT THAT PAYMENTS WERE MADE IN CASH, IT IS HELD THAT THE APPELLANT HA S NOT DISCHARGED THE ONUS TO ESTABLISH THE GENUINENESS OF THE EXPENS E. IT IS HELD BY HON. APEX COURT IN THE CASE OF CALCUTTA COMPANY LTD , 19 ITR 191 THAT ONUS TO ESTABLISH THE GENUINENESS AND BUSINES S PURPOSE OF THE EXPENSE IS ON THE APPELLANT ONLY. SINCE THE APPELLA NT HAS NOT DISCHARGED ITS ONUS BY ESTABLISHING SUCH A SHARP RI SE IN SALARY BY GIVING NECESSARY DETAILS, THE 50% OF THE INCREASED SALARY DISALLOWED BY THE ASSESSING OFFICER IS JUSTIFIED. I N VIEW OF THIS AND CONSIDERING THE FACTS OF THE CASE, THE DECISIONS RE LIED UPON BY THE APPELLANT ARE NOT APPLICABLE. THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. I.T.A.NO. 1432 /AHD/2009 4 3.4 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN BY LD. CIT(A) THAT THE ASSES SEE HAS NOT DISCHARGED ITS ONUS BY ESTABLISHING SUCH A SHARP RISE IN SALAR Y BY GIVING NECESSARY DETAILS AND HENCE, 50% OF INCREASE IN SALARY DISALL OWED BY THE A.O. IS JUSTIFIED. WE FIND THAT IT IS NOTED BY LD. CIT(A) IN THE SAME PARA THAT THE INCREASE IN SALARY IN THE PRESENT YEAR IS ALMOST 75 % OVER THE PRECEDING YEAR WHICH IS QUITE EXTRA ORDINARY. BEFORE US ALS O, NO JUSTIFIABLE REASON COULD BE EXPLAINED BY THE LD. A.R. REGARDING THIS E XTRA ORDINARY INCREASE IN SALARY IN THE PRESENT YEAR AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. GROUND NO.2 OF THE ASSESSEES APPEAL IS EJECTED. 4. GROUND NO.3 OF THE APPEAL IS AS UNDER: 3. THE LD. C.I.T. (APPEALS) III, BARODA HAS ERRED IN LAW AND IN FACTS IN UPHOLDING THE ACTION OF THE DY. CIT, CIRCL E -4, BARODA IN CONFIRMING THE DISALLOWANCE OF RS.70,824/ - OUT OF DEPRECIATION IN RELATION TO COMPUTER SYSTEMS PURCHASED DURING THE Y EAR UNDER CONSIDERATION OF RS.1,18,040/-. THE DISALLOWANCE BE ING COMPLETELY IN DISREGARD TO FACTS AVAILABLE AND BAD IN LAW IS P RAYED TO BE ALLOWED AS SUCH. 4.1 ON THIS ISSUE ALSO, THE LD. A.R. REITERATED THE SAME ARGUMENTS WHICH WERE RAISED BY HIM BEFORE LD. CIT(A). LD. D. R. SUPPORTED THE ORDER OF LD. CIT(A). 4.2 WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE FIND THAT THIS ISSUE WAS DECIDED BY LD. CIT(A) AS PER PARA 4.3 OF HIS ORDER WHICH IS REPRODUCED BELOW: I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNSEL A ND FACTS OF THE CASE. IT IS NOT IN DISPUTE THAT THE PURCHASE BILLS FOR ASSETS AMOUNTING TO RS.1,18,040/- ARE NOT IN THE NAME OF THE APPELLA NT. IN THE ABSENCE OF PURCHASE BILL, THE MOVABLE ASSETS CANNOT BE SAID TO BE OWNED BY THE APPELLANT. IN THE ABSENCE OF ANY DETAI LS SUBMITTED TO THE ASSESSING OFFICER, IT CANNOT BE SAID THAT THE A PPELLANT WAS OWNING THESE ASSETS. THE CERTIFICATES NOW SUBMITTED THAT THE BILLS I.T.A.NO. 1432 /AHD/2009 5 WERE RAISED IN THE NAME OF KIFSL INSTEAD OF THE APP ELLANT ARE ADDITIONAL EVIDENCES WHICH WERE NOT SUBMITTED TO TH E ASSESSING OFFICER. THERE WAS NO REQUEST FOR ADMISSION OF ADDI TIONAL EVIDENCES UNDER RULE 46A MENTIONING CIRCUMSTANCES; THESE ADDITIONAL EVIDENCES ARE NOT CONSIDERED. IN THE ABS ENCE ANY EVIDENCE TO PROVE THE OWNERSHIP OF THESE ASSETS, DI SALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. 4.3 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A), WE FIND THAT THE ASSESSEE HAS NOT FURNISHED THE PURCHASE BILLS IN RE SPECT OF THE ASSETS ON WHICH DEPRECIATION IS CLAIMED BY IT. DEPRECIATION IS ALLOWABLE TO THE ASSESSEE IN RESPECT OF THE ASSETS WHICH ARE OWNED B Y THE ASSESSEE AND WHICH ARE USED BY THE ASSESSEE FOR ITS BUSINESS PUR POSE. THE ASSESSEE COULD NOT ESTABLISH BOTH OF THESE ASPECTS THAT IT O WNED THE ASSET IN QUESTION WHICH WAS USED BY IT FOR ITS BUSINESS PURP OSE. THEREFORE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). THIS GROUND OF THE ASSESSEE IS ALSO EJECTE D. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 1432 /AHD/2009 6 1. DATE OF DICTATION 28/09/2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 09.10.2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 12/10/12 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.12/10/2012 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .