Shri Neelesh H. Agrawal, Ahmedabad V. The Asstt. Commissioner of Income Tax, Circle-12, Ahmedabad

ITA 1436/AHD/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8022 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 30-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: S N DIVETIA
• Keywords: Business expenditure; Non-deduction of tax
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORESHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA NO. 1436/AHD/2016 / ASSESSMENT YEAR: 2011-12 SHRI NEELESH H. AGRAWAL, B-609, FAIRDEAL HOUSE, NR. SWASTIK CHAR RASTA, AHMEDABAD-380009 PAN : AGOPA 4893 R VS. THE ACIT, CIRCLE-12, AHMEDABAD / (APPELLANT) / (RESPONDENT) ASSESSEE BY : S.N. DIVETIA, AR REVENUE BY : S.K. DEV, SR. DR / DATE OF HEARING : 09/10/2017 / DATE OF PRONOUNCEMENT: 04/12/2017 / O R D E R THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAI NST THE ORDER OF LEARNED CIT(A)-6, AHMEDABAD DATED 23.03.2016 PASSED FOR ASSESSMENT YEAR 2011-12. 2. IN THE FIRST GROUND OF APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.3,40,746/-, WHICH WAS MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE ACT. 3. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE HAS PAID INTEREST TO ABN AMRO, BAJAJ CAPITAL AND RELIANCE CAPITAL, TOTAL ING TO RS.3,40,746/-. HE FAILED TO DEDUCT TDS AND THEREFORE, WITH THE HELP O F SECTION 40(A)(IA), THE LD. ASSESSING OFFICER HAS DISALLOWED THE EXPENDITURE. ON APPEAL, LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE. 4. BEFORE ME, LEARNED COUNSEL FOR THE ASSESSEE, ON THE STRENGTH OF THE HONBLE GUJARAT HIGH COURTS DECISION IN TAX APPEAL NO.626 OF 2017 IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME-TAX VS. AS E CAPITAL MARKETS LTD, SMC-ITA NO. 1436/AHD /2016 NEELESH H. AGRAWAL VS. ACIT FOR AY: 2011-12 2 HAS CONTENDED THAT IF THE RECIPIENTS HAVE ACCOUNTED THE INTEREST RECEIPTS IN THEIR TAXABLE INCOME, THEN NO DISALLOWANCE CAN BE M ADE IN THE HANDS OF THE ASSESSEE. HONBLE GUJARAT HIGH COURT HAS RELIED UP ON THE JUDGMENT OF HONBLE DELHI COURT IN THE CASE OF CIT VS. ANSAL LA ND MARK TOWNSHIP (P) LTD, REPORTED IN [2015] 377 ITR 635 (DELHI). 5. ON DUE CONSIDERATION OF THE ABOVE, I AM OF THE V IEW THAT NOW IT HAS BEEN SETTLED THAT IF THE RECIPIENTS HAVE ACCOUNTED THE RECEIPTS, WHICH HAVE BEEN DISALLOWED IN THE HANDS OF THE PAYER ON ACCOUN T OF NON-DEDUCTION OF TAX, AND THE SAME HAS BEEN INCLUDED IN THEIR TAXABL E INCOME, THEN NO DISALLOWANCE IS TO BE MADE IN THE HANDS OF THE PAYE R. CONSIDERING THIS ASPECT, I SET ASIDE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR VERIFICATION. THE ASSESSEE SHALL PROVIDE THE COMPL ETE DETAILS OF RECIPIENTS AND THE LD. ASSESSING OFFICER SHALL CALL FOR INFORM ATION FROM THE RECIPIENTS, I.E. ABN AMRO, BAJAJ CAPITAL AND RELIANCE CAPITAL A S TO WHETHER THEY HAVE INCLUDED THIS AMOUNT IN THEIR TAXABLE INCOME OR NOT . IF THE RECEIPTS ARE ACCOUNTED IN THEIR TAXABLE INCOME, THEN NO DISALLOW ANCE IS TO BE MADE IN THE HANDS OF THE ASSESSEE. THIS GROUND OF APPEAL IS AL LOWED FOR STATISTICAL PURPOSES. 6. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF T HE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,23,300/- OUT OF TRAVELLING EXPENSES. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS DEBITED A SUM OF RS.1,23,300/- TO THE P&L ACCOUNT TOWARDS TRAVELLING EXPENSES. THE LD. ASSESSING OFFICER MADE AN INQUIRY AND RECORDED A FI NDING THAT THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE FOR HIS HO NEYMOON; THEREFORE, LD. SMC-ITA NO. 1436/AHD /2016 NEELESH H. AGRAWAL VS. ACIT FOR AY: 2011-12 3 ASSESSING OFFICER TREATED THIS EXPENDITURE AS NON- BUSINESS PURPOSES AND DISALLOWED THE SAME. 8. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 9. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, I HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS SUBM ITTED THAT HE TOOK A HONEYMOON PACKAGE FROM PCFL TRAVEL HOUSE. ACCORDIN G TO THE ASSESSEE, IT WAS ONLY FOR THE NAMESAKE HONEYMOON PACKAGE, BUT HE DID NOT GO FOR HONEYMOON, BECAUSE HIS MARRIAGE WAS TAKEN PLACE LON G BACK. HOWEVER, AFTER CONSIDERING THE RECORD, I FIND THAT THE ASSES SEE FAILED TO BRING ANY EVIDENCE ON RECORD DEMONSTRATING THAT THE EXPENDITU RE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. LEARNED CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE. I DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY, THIS GROUND OF APPE AL IS REJECTED. 10. IN THE NEXT GROUND OF APPEAL, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1,80,000/- WHICH WAS ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF LOW HO USEHOLD WITHDRAWAL SHOWN BY THE ASSESSEE. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS SHOWN HOUSEHOLD WITHDRAWAL OF RS.5,000/- PER MONTH ONLY. HIS FATHE R HAS SHOWN RS.15,000/ PER MONTH. THE LD. ASSESSING OFFICER HAS ESTIMATED THE HOUSEHOLD WITHDRAWAL AT RS.20,000/- PER MONTH AND MADE AN ADD ITION OF RS.1,80,000 /- . 12. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF T O THE ASSESSEE. 13. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES, I DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A). A PERSON WHO CAN AFFORD A FOREIGN TRIP FOR HONEYMOON, IT IS HIGHLY IMPROBABLE THAT HIS HOU SEHOLD EXPENDITURE SMC-ITA NO. 1436/AHD /2016 NEELESH H. AGRAWAL VS. ACIT FOR AY: 2011-12 4 SHOULD BE ONLY RS.5,000/- PER MONTH IN AY 2011-12. CONSIDERING THE STATUS AND NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE, THE ESTIMATION OF THE HOUSEHOLD EXPENSES AT THE END OF THE ASSESSEE IS QU ITE ON THE LOWER SIDE. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS REJECTED. 14. GROUND NOS. 4 AND 5 ARE INTERCONNECTED WITH EAC H OTHER; THEREFORE, I TAKE BOTH THE GROUNDS TOGETHER. IN GROUND NO.4, TH E ASSESSEE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITIO N OF RS.3,12,049/-, WHICH WAS MADE BY THE ASSESSING OFFICER U/S 37 OF THE ACT ; AND, IN GROUND NO.5, THE ASSESSEE IS CHALLENGING THE DISALLOWANCE OF RS. 6,00,000/-, WHICH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISCREP ANCY IN THE BOOKS OF ACCOUNTS. 15. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS MADE PAYMENTS TOWARDS CREDIT CARD PURCHASES. HE HAS PAID A SUM OF RS.1,91,800/- TO CITI BANK AND RS.1,20,249/- TO STANDARD CHARTERED BANK. ACCORDING TO THE ASSESSEE, THESE EXPENDITURES WERE INCURRED FOR THE PURPOSE OF BUSINESS. HE CONTENDED THAT HE HAS TO EMPLOY A SALESMAN FOR DAY- TO-DAY BUSINESS, AND, IN ORDER TO REIMBURSE THE PETROL EXPENSES TO HIS STAFF , THESE TWO CREDIT CARDS WERE USED. THE LD. ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE FAILED TO SUBMIT ANY VOUCHERS, BILLS, STATEMENT OF THE CREDIT CARD FOR SHOWING THE NATURE OF EXPENDITURE AND HOW THEY HAVE NEXUS WITH THE BUSINESS OF THE ASSESSEE. THUS HE DISALLOWED THE CLAIM OF THE ASSE SSEE. SIMILARLY, THE LD. ASSESSING OFFICER HAS DISALLOWED HALF PERCENTAGE OF THE TOTAL TURNOVER TOWARDS DIFFERENT EXPENDITURES AND LEAKAGE. 16. WITH THE ASSISTANCE OF THE LEARNED REPRESENTAT IVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE IS A DI STRIBUTOR OF VIDEOCON AND HUTCH. THE ASSESSING OFFICER HAS CALLED FOR THE PU RCHASE/SALES REGISTER, BILLS AND VOUCHERS FOR VERIFICATION. HE FOUND THAT COMPLETE DETAILS WERE NOT SMC-ITA NO. 1436/AHD /2016 NEELESH H. AGRAWAL VS. ACIT FOR AY: 2011-12 5 MAINTAINED BY THE ASSESSEE. THEREFORE, HE DISALLOWE D HALF PERCENTAGE OF THE TOTAL TURNOVER AND MADE AN ADDITION OF RS.6,00,000/ -. SIMILARLY, THE ASSESSEE COULD NOT SUBMIT COMPLETE DETAILS RELATING TO THE EXPENDITURES INCURRED THROUGH CREDIT CARDS. THEREFORE, THE ASSE SSING OFFICER DISALLOWED A SUM OF RS.3,12,049/-. WHEN THESE EXPENDITURES AR E CONSIDERED IN THE LIGHT OF OTHER DISALLOWANCES MADE BY THE ASSESSING OFFICE R, I.E., ESTIMATED HOUSEHOLD EXPENDITURE AND FOREIGN TRAVEL EXPENDITUR E ETC., THEN IT WOULD REVEAL THAT INSTEAD OF MAKING ADDITION UNDER EACH I TEM, THE LD. ASSESSING OFFICER OUGHT TO HAVE ADOPTED A UNIFORM POLICY FOR MAKING AN AD-HOC DISALLOWANCE. HE SHOULD NOT HAVE IDENTIFIED EACH I TEM, I.E. CREDIT CARD EXPENDITURE, HOUSEHOLD EXPENDITURE, ETC., BECAUSE A LL THESE EXPENDITURES WILL BE TAKEN CARE OF BY AD-HOC DISALLOWANCE OF RS. 6,00,000/- AS THIS DISALLOWANCE HAS BEEN WORKED OUT AT HALF PERCENTAGE OF THE TOTAL TURNOVER. THEREFORE, I AM OF THE VIEW THAT ONCE ESTIMATED AD- HOC ADDITION ON ACCOUNT OF LOW HOUSEHOLD WITHDRAWAL HAS BEEN MADE AND ESTIM ATED, AD-HOC DISALLOWANCES OUT OF BUSINESS EXPENDITURE HAVE BEEN MADE, THEN THIS CREDIT CARD EXPENDITURE OUGHT NOT TO BE MADE. I, THEREFOR E, ALLOW THE GROUND NO.4 AND DELETE THE DISALLOWANCE OF RS.3,12,049/-. ADDI TION OF RS.6,00,000/- IS CONFIRMED, BECAUSE THE ASSESSEE COULD NOT SUBMIT SU PPORTING DETAILS SHOWING THAT THE EXPENDITURES WERE EXCLUSIVELY INCU RRED FOR THE PURPOSE OF BUSINESS. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 4 TH DECEMBER 2017 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 04/12/2017 BIJU T., SR.PS SMC-ITA NO. 1436/AHD /2016 NEELESH H. AGRAWAL VS. ACIT FOR AY: 2011-12 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD