The ACIT,Vapi Circle, Vapi V. Shri Jignesh Dahyabhai Sheth, Vapi

ITA 1435/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9392 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 1435/AHD/2011 (ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX VAPI CIRCLE, VAPI V/S SHRI JIGNESH DAHYABHAI SHETH PROP. OF SHETH ENTERPRISE GIDC, VAPI (APPELLANT) (RESPONDENT) PAN: AEQPS7127A APPELLANT BY : SHRI R.P. MAURYA, SR. DR RESPONDENT BY : NONE ( )/ ORDER DATE OF HEARING : 23 -02-201 6 DATE OF PRONOUNCEMENT : 26 -02-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A), VALSAD DATED 17.01.2011 PERTAINING TO A.Y. 2007-08. ITA NO .1435 /AHD/2011 . A.Y. 2007- 08 2 2. THE REVENUE HAS RAISED THREE SUBSTANTIVE GROUNDS OF APPEAL WHICH READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A0 HAS ERRED IN DELETING ADDITION OF RS. 32,83,522/- ARISED DUE TO DIFFERENCE IN PURCHASE/SALES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A0 HAS ERRED IN DELETING ADDITION ON ACCOUNT OF UNSUPPORTED EXPENDI TURE OF RS. 3,77,481/- BEING 50% OF RS. 7,54,962/- WHICH WAS TREATED AS UN UNSUP PORTED EXPENDITURE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A0 HAS ERRED IN DELETING ADDITION ON ACCOUNT OF BANK LOAN INTEREST OF RS. 2,13,956/-. 3. A PERUSAL OF OUR RECORD SHOWS THAT WHEN THE APPEAL CAME UP FOR HEARING ON 22.08.2014, NONE APPEARED ON BEHALF OF T HE ASSESSEE IN SPITE OF THE SERVICE OF THE NOTICE. THE CASE WAS AD JOURNED TO 24.09.2014 WITH A DIRECTION TO SERVE NOTICE THROUGH D.R. ON 24.09.2014, THE CASE WAS ADJOURNED TO 11.11.2014, O N 11.11.2014, THE CASE WAS AGAIN ADJOURNED TO 16.12.2014 AND AGAI N ON 16.12.2014, THE CASE WAS ADJOURNED TO 30.01.2015. ON ALL THESE THREE DATES REPRESENTATIVE OF THE ASSESSEE WAS PRESENT. 4. THE CASE WAS POSTED FOR HEARING AGAIN ON 17.03.2015 , 16.11.2015, 18.01.2016 WITHOUT ANY REPRESENTATION FROM ASSESSEE S SIDE IN SPITE OF THE SERVICE OF NOTICE. 5. WITH THIS FACTUAL MATRIX, WE DECIDE TO HEAR THE APP EAL EX-PARTE. LD. D.R. WAS HEARD AT LENGTH WHO SUPPORTED THE FINDINGS OF THE A.O. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. GROUND NO. 1 RELATES TO THE DELETION OF THE ADDITION OF RS.32, 83,522/-. FACTS OF THIS ISSUE ARE THAT DURING THE COURSE OF THE SCRUTINY AS SESSMENT PROCEEDINGS, THE A.O NOTICED THAT AS PER PROFIT AND LOSS ACCOUNT THE SALES AND PURCHASES FIGURES ARE AS UNDER: ITA NO .1435 /AHD/2011 . A.Y. 2007- 08 3 SALES RS. 4,44,72,104/-. PURCHASES RS. 4,16,05,266/- 6. HOWEVER, FROM THE DETAILS OF PURCHASE AND SALES SUB MITTED BY THE ASSESSEE, THE SALES WAS AT RS. 4,62,10,539/- AND PU RCHASES WAS AT RS. 4,31,50,539/-. THE ASSESSEE WAS ASKED TO FILE A RE- CONCILIATION. ON RECEIVING NO PLAUSIBLE REPLY, THE A.O PROCEEDED BY MAKING THE ADDITION OF THE DIFFERENCE BETWEEN THE TWO FIGURES WHICH COM ES TO RS. 32,83,522/-. 7. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE TH E LD. CIT(A) STATING THAT THE A.O HAS NOT CONSIDERED THE REPLY DATED 15. 07.2007 WHEREIN IT WAS EXPLAINED THAT THE DIFFERENCE IN PURCHASE AND S ALES FIGURES ARE BECAUSE OF VAT & CST. AFTER CONSIDERING THE FACTS A ND THE DETAILS FURNISHED BY THE ASSESSEE, THE LD. CIT(A) WAS CONVI NCED THAT BECAUSE OF THE AMENDED SECTION 145A, THE FIGURES OF CST & V AT HAVE TO BE CONSIDERED. AFTER CONSIDERING THE FIGURES OF CST & VAT, THE LD. CIT(A) DIRECTED THE A.O. TO RESTRICT THE ADDITIONS TO RS. 1,93,348 AS THE ASSESSEE HAS NOT INCLUDED THE VAT AMOUNT IN THE CLO SING STOCK BY SHOWING PURCHASE AND SALES NET OF VAT. 8. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS CORRE CTLY APPRECIATED THE FACTS AND AFTER CONSIDERING THE FIGURES OF CST & VA T DIRECTED THE A.O TO RESTRICT THE DISALLOWANCE TO RS. 1,93,348. WE, T HEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD . CIT(A), GROUND NO. 1 IS ACCORDINGLY DISMISSED. GROUND NO. 2 RELATES TO THE DELETION OF THE ADDITI ON ON ACCOUNT OF UNSUPPORTED EXPENDITURE. ITA NO .1435 /AHD/2011 . A.Y. 2007- 08 4 9. THE A.O HAS CONSIDERED THIS ISSUE AT PARA C OF HIS ORDER WHEREIN HE HAS OBSERVED THAT SINCE THE ASSESSEE HAS NOT PRODUCED T HE BOOKS OF ACCOUNTS, THE EXPENDITURE ARE NOT VERIFIABLE AND AC CORDINGLY DISALLOWED 50% OF THE EXPENDITURE AFTER ALLOWING DEDUCTION OF STATUTORY EXPENSES CLAIM, THE DISALLOWANCE WAS COMPUTED AT RS. 3,77,48 1/-. 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CONTENDED THAT THE A.O HAS IGNORED THE FACT THAT TH E BOOKS OF ACCOUNTS WERE AUDITED AND ALL THE EXPENSES WERE DULY SUPPORT ED BY BILLS/VOUCHERS EXAMINED BY THE AUDITORS. THE LD. CI T(A) WAS CONVINCED THAT SINCE THE BOOKS OF ACCOUNTS HAVE UNDERGONE AN AUDIT, THE DISALLOWANCES OF 50% OF THE EXPENDITURE IS UNREASON ABLE AND RESTRICTED THE DISALLOWANCE AT 15%. BEFORE US, THE LD. D.R. SIMPLY RELIED UPON THE FINDINGS OF THE A.O. THERE IS NO DE NIAL THAT BOOKS OF ACCOUNTS WERE AUDITED AND THE AUDITORS HAVE NOT MAD E ANY QUALIFICATION IN SO FAR AS THE CLAIM OF EXPENDITURE IS CONCERNED. 11. IN OUR CONSIDERED OPINION, THE RESTRICTION OF THE D ISALLOWANCE AT 15% BY THE FIRST APPELLATE AUTHORITY SHOULD MEET TH E ENDS OF JUSTICE. WE, THEREFORE, DECLINE TO INTERFERE; GROUND NO. 2 I S ACCORDINGLY DISMISSED. GROUND NO. 3 RELATES TO THE DELETION OF THE AD DITION ON ACCOUNT OF BANK LOAN INTEREST OF RS. 2,13,956/-. 12. THE A.O HAS CONSIDERED THIS ISSUE AT PARA D OF HIS ORDER WHEREIN HE HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED INTER EST EXPENSES OF RS. 2,13,956/- ON LOANS OBTAINED FROM THE BANK. THE A.O FURTHER FOUND ITA NO .1435 /AHD/2011 . A.Y. 2007- 08 5 THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOAN OF R S. 18,89,802/- TO SHRI JIGNESH D. SHETH, HUF. THE A.O WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS DIVERTED THE INTEREST BEARING FUNDS TO HIS RELATIVE FROM WHOM HE HAS NOT CHARGED ANY INTEREST. AFTER DISCUSS ING CERTAIN JUDICIAL DECISIONS, THE A.O DISALLOWED RS. 2,13,956 OUT OF I NTEREST EXPENSES. 13. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CONTENDED THAT THE A.O HAS NOT APPRECIATED THE FACT S IN TRUE PERSPECTIVE. IT WAS BROUGHT TO THE NOTICE OF THE LD . CIT(A) THAT ASSESSEE HAS IN FACT CHARGED INTEREST OF RS. 1,04,8 83/- FROM THE HUF. AFTER VERIFICATION OF THIS FACT, THE LD. CIT(A) DIR ECTED THE A.O TO REDUCE THE DISALLOWANCE BY THE AMOUNT OF RECOVERY OF INTER EST EARNED BY THE ASSESSEE. 14. SINCE THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDIN G THAT THE ASSESSEE HAS RECOVERED INTEREST FROM THE HUF AND TH EREBY RESTRICTED THE DISALLOWANCE BY DIRECTING THE A.O TO REDUCE THE DISALLOWANCE BY THE AMOUNT OF RECOVERY OF INTEREST. THIS FINDING OF THE LD. CIT(A) IS BASED ON THE FACTS AND THEREFORE, WE DO NOT FIND AN Y ERROR TO INTERFERE; GROUND NO. 3 IS ALSO DISMISSED. 15. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 02 - 2016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH