SHYAM SUNDAR LALANI, Ajmer V. ITO, Ajmer

ITA 1451/JPR/2010

• Counselvise Citation: 145123114 RSA 2010
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R PAREEK
• Assessee Lawyers: SARAL GARG
• Keywords: Revenue expenditure
• Section: 133A

Judgement Text

1 ITA 1451-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 1451/JP/2010 ASSTT. YEAR : 2007-08. SHRI SHYAM SUNDER KALANI VS. THE INCOME-TAX OFFIC ER, PROP. SHYAM SUNDER POKHARDAS, WARD 1(2), DIGGI BAZAR, AJMER. AJMER. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SARAL GARG RESPONDENT BY : SHRI G.R. PAREEK ORDER DATE OF ORDER : 10/06/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. VARIOUS GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ITS APPEAL. FIRST GROUND RELATES TO CONFIRMING THE ADDITION OF RS. 4,80,673/- ON ACC OUNT OF EXCESS STOCK FOUND ON THE DATE OF SURVEY CONDUCTED UNDER SECTION 133A ON 28.2.2007 . 3. IN THIS CASE THE SURVEY WAS CONDUCTED UNDER SECT ION 133A AT THE BUSINESS PREMISES OF THE ASSESSEE ON 28.2.2007. STATEMENT OF ASSESSEE WAS RECORDED. AS PER BOOKS OF ACCOUNT THE STOCK SHOWN BY ASSESSEE WAS AT RS. 3 4,18,468/-. HOWEVER, ON THE BASIS TAG PRICE THE SURVEY TEAM ADOPTED THE VALUATION OF STOCK AT RS. 38,99,141/- AFTER DEDUCTING THE PROFIT ELEMENT @ 10.55%. THE EXCESS STOCK WAS WORKED OUT AT RS. 2 4,80,673/-. AN EXPLANATION BEFORE AO WAS FILED THA T CERTAIN GOODS WERE RECEIVED ON APPROVAL AND THEY COULD NOT BE TAKEN INTO CONSIDERA TION AT THE TIME OF SURVEY DUE TO MISTAKE, DETAILS OF SUCH GOODS RECEIVED ON APPROVAL WERE FILED. HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION AS IN HIS VIEW THE ASSESSEE HIMSELF HAS OFFERED THE INCOME OF RS. 4 LACS OR ODD DURING THE COURSE OF SURVEY ON ACCOUNT OF EXCESS STOCK. THEREFORE, HE MADE THE ADDITION. THE LD. CIT (A) CONFIRMED THE ACTION OF THE AO. 4. HERE BEFORE THE TRIBUNAL COPY OF WRITTEN SUBMISS IONS WAS FILED ON BEHALF OF THE ASSESSEE. 5. ON THE OTHER HAND, LD. D/R PLACED RELIANCE ON TH E ORDER OF LD. CIT (A), 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART. THIS IS NOT A CASE THAT EXCESS STOCK WAS FOUND ON ACCOUNT OF EXCESS QUANTITY OF ST OCK NOT RECORDED IN THE BOOKS OF ACCOUNT. THE DIFFERENCE IN VALUATION OF STOCK WAS ON ACCOUNT OF VALUATION OF STOCK. ASSESSEE HAS SHOWN STOCK AS PER PURCHASE PRICE WHER EAS DEPARTMENTAL AUTHORITIES HAVE TAKEN THE VALUATION ON THE BASIS OF TAG PRICE. THE EXPLANATION WAS FILED DURING THE ASSESSMENT PROCEEDINGS THAT GOODS TO THE EXTENT OF RS. 2,50,607/- WERE RECEIVED ON APPROVAL WHICH COULD NOT BE ACCOUNTED FOR. THE INV OICE WAS RECEIVED ON A LATER DATE AND PAYMENT WAS ALSO MADE. THEREFORE, TO THIS EXTENT T HE AO SHOULD HAVE ALLOWED THE CLAIM OF THE ASSESSEE. IT IS FURTHER SEEN THAT G.P. RATE SHOWN BY ASSESSEE IS 11.84% WHEREAS SURVEY PARTY HAS GIVEN BENEFIT OF G.P. RATE @ 10.55 % ON THE BASIS OF LAST YEAR AND IF THIS FACTOR IS TAKEN INTO CONSIDERATION THE DISCREPANCY TO THE EXTENT OF RS. 1,04,065/- FOUND TO BE REMOVED. IN VIEW OF THESE FACTS AND CIRCUMSTANC ES WE HOLD THAT ADDITION OF RS. 2,15,607/- AND RS. 1,04,065/- WAS NOT JUSTIFIED. A CCORDINGLY, THE SAME ARE DELETED. 3 6.1. THE REMAINING ADDITION IS SUSTAINED AS NO EXPL ANATION HAS BEEN OFFERED BY THE ASSESSEE IN RESPECT TO REMAINING DISCREPANCY IN THE VALUATION OF STOCK. 7. NEXT ISSUE RELATES TO CONFIRMING THE ADDITION OF RS. 1,00,000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT IN SHOW ROOM. 8. DURING THE COURSE OF SURVEY, THE ASSESSEES SHOP WAS UNDER RENOVATION, FURNISHING AND EXTENSION OF GROUND FLOOR/FIRST FLOOR AND SECON D FLOOR AND THE DETAILS OF RENOVATION WORK ENQUIRED UPON BY THE SURVEY TEAM. THE SURVEY TEAM ULTIMATELY GOT SURRENDERED A SUM OF RS. 1 LAC TOWARDS UNDISCLOSED INVESTMENT IN RENOVATION AND SHOW ROOM ON ESTIMATE BASIS. BEFORE AO, COMPLETE DETAILS OF RENO VATION AND FURNISHING OF SHOW ROOM WAS FILED. ALL THE EXPENSES WERE RECORDED IN THE BO OKS OF ACCOUNT, BILLS AND VOUCHERS WERE PRODUCED. HOWEVER, THE AO WAS NOT SATISFIED AS THE SUM OF RS. 1 LAC WAS SURRENDERED DURING THE SURVEY PROCEEDINGS. THEREFOR E, HE ADDED THE SAME. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE AO. 9. AFTER CONSIDERING THE WRITTEN SUBMISSIONS AND TH E ORDERS OF THE AO AND LD. CIT (A), WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN T HIS GROUND. UNDISPUTEDLY, AT THE TIME OF SURVEY, THE FURNISHING AND RENOVATION WORK WAS G OING ON, PROPER DETAILS COULD NOT BE GATHERED AND COULD NOT BE GIVEN TO THE SURVEY TEAM. HOWEVER, ON A LATER STAGE COMPLETE DETAILS WERE FILED BEFORE THE AO. BILLS WERE PRODU CED. THEREFORE, IN OUR VIEW, THE AO SHOULD HAVE ACCEPTED THE EXPLANATION WHICH WAS SUPP ORTED BY VALID VOUCHERS AND SHOULD NOT HAVE DRAWN ADVERSE INFERENCE TAKEN DURING THE C OURSE OF SURVEY BY THE SURVEY TEAM. ON AN ESTIMATE BASIS RS. 1 LAC WAS ADMITTED TO BE S HOWN JUST TO AVOID THE HARDSHIP BY THE SURVEY TEAM. IF ON A LATER STAGE ASSESSEE SUCCESSF ULLY EXPLAIN THE DISCREPANCY THEN IT SHOULD BE ADMITTED AS HELD BY VARIOUS COURTS. FULL DETAILS OF RENOVATION WORK WAS FILED, 4 COPIES OF WHICH ARE PLACED ON RECORD. IN VIEW OF TH ESE FACTS AND CIRCUMSTANCES, WE DELETE THE ADDITION OF RS. 1 LAC. 10. GROUND NO. 3 WHICH IS AGAINST SUSTAINING THE AD DITION FOR LOW HOUSEHOLD WITHDRAWALS IS NOT PRESSED, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 11. GROUND NO. 4 RELATES TO CONFIRMING THE ADDITION OF RS. 48,000/- OUT OF SALARY CLAIMED AT RS. 4,43,406/-. 12. THERE WAS INCREASE IN SALARY OF TWO SONS OF THE ASSESSEE @ RS.2,000/- PER MONTH. THE AO DISALLOWED A SUM OF RS. 48,000/- UNDER SECTI ON 40A(2)(B) WHICH IS CONFIRMED BY LD. CIT (A). 13. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND. IT IS SEEN THAT AFTER RENOVATION OF SH OW ROOM THE BUSINESS ACTIVITY OF THE ASSESSEE WAS INCREASED. INCREASE IN SALARY OF STAFF WAS NOT DISTURBED BY THE AO. HOWEVER, INCREASE IN SALARY OF TWO SONS DOUBTED BY THE AO. I T IS A SMALL INCREASE IN SALARY I.E. RS. 2,000/- PER MONTH WHICH, IN OUR CONSIDERED VIEW, IS NOT UNREASONABLE AND, THEREFORE, SHOULD NOT HAVE BEEN DISALLOWED. ACCORDINGLY, WE DE LETE THE ADDITION OF RS. 48,000/-. 14. GROUND NOS. 5 & 6 RELATE TO DISALLOWANCE OF TEL EPHONE EXPENSES AND DISALLOWANCE OF PETROL AND RUNNING EXPENSES @ 30% AND 25% RESPEC TIVELY WHICH RESULTED IN AN ADDITION OF RS. 10,283/- AND RS. 3,088/-. 15. THE LD. CIT (A) HAS CONFIRMED BOTH THESE ADDITI ONS. 16. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT THE DISALLOWANCE IS ON HIGHER SIDE. THEREFORE, WE DIRECT TO RESTRICT THESE DISALLOWANCE S AT 1/6 TH OF THE TOTAL CLAIM ON ACCOUNT OF TELEPHONE & MOBILE, PETROL AND RUNNING EXPENSES . 5 17. GROUND NO. 7 RELATES TO DISALLOWANCE OF RS. 25, 000/- OUT OF RENT PAID TO SMT. KANTA DEVI, WIFE OF THE ASSESSEE. 18. SINCE SHOW ROOM WAS RENOVATED AND EXCESS FLOOR WAS ACQUIRED BY THE ASSESSEE ON RENT FROM HIS WIFE, ACCORDINGLY RENT WAS ALSO INCRE ASED. INCREASE IN RENT WAS NOT ACCEPTED BY THE AO UNDER SECTION 40A(2)(B)AND THE SAME WAS D ISALLOWED. THE LD. CIT (A) ALSO CONFIRMED THE ACTION OF THE AO. 19. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT DISALLOWANCE MADE BY AO WAS UNREASONABLE. IT HAS BEEN MENTIONED IN THE WRITTEN SUBMISSIONS THAT ASSESSEE EARLIER WAS HAVING BUSINESS AT GROUND FLOOR AND FIRST FLOOR. L ATER, AFTER RENOVATION, FURNISHING AND HIRING OF SECOND FLOOR ALSO, THE CARPET AREA OF SHO W ROOM INCREASED AND, THEREFORE, THE RENTAL OF THE SHOW ROOM WAS INCREASED AS COMPARED T O PREVIOUS YEAR. RENT WAS PAID THROUGH PROPER BANKING CHANNEL AND WIFE OF THE ASSE SSEE HAS SHOWN THE INCOME AS PER RECEIPT. THEREFORE, IN OUR VIEW, THE AO WAS NOT J USTIFIED IN ATTRACTING THE PROVISIONS OF SECTION 40(A)(2)(B) SPECIALLY WITHOUT BRINGING ANY MATERIAL OR COMPARABLE CASE TO HOLD THAT RENT PAID BY ASSESSEE IS UNREASONABLE. ACCOR DINGLY WE DELETE THIS ADDITION OF RS. 25,000/-. 20. GROUND NO. 8 RELATES TO CONFIRMING RS.1,08,213/ - DISALLOWED BY THE AO UNDER SECTION 40A(2)(B) BEING INTEREST PAID TO THREE FAMI LY MEMBERS FOR THE REASON THAT IN PREVIOUS YEAR NO INTEREST WAS PAID TO THESE FAMILY MEMBERS AS COMPARED TO CURRENT YEAR. 21. THE LD. CIT (A) HELD THAT PROVISIONS OF SECTION 40A(2)(B) ARE NOT ATTRACTED AS INTEREST WAS PAID AS PER MARKET RATE. HOWEVER, THE ALTERNATE CONTENTION OF THE AO THAT ASSESSEE HAS NOT DEDUCTED TDS, THEREFORE, PROVISION S OF SECTION 40(A)(IA) ARE APPLICABLE 6 ALSO WAS HELD BY LD. CIT (A) IS CORRECT AND SINCE N O TDS WAS DEDUCTED IN TIME, THEREFORE, ADDITION WAS SUSTAINED. 22. AFTER CONSIDERING THE SUBMISSIONS, IT IS NOTICE D THAT TDS HAS BEEN DEDUCTED ON THE LAST DATE OF END OF THE YEAR I.E. 31.3.2007 AND HAS BEEN DULY DEPOSITED IN BANK ACCOUNT ON 11.5.2007. THEREFORE, THIS IS NOT A CASE THAT TDS HAS NOT BEEN DEDUCTED AND NOT PAID. THE TDS HAS BEEN PAID BEFORE DUE DATE OF FILING OF THE RETURN, THEREFORE, NO ADDITION CAN BE MADE UNDER SECTION 40(A)(IA). ACCORDINGLY, WE D ELETE THIS ADDITION ALSO. 23. GROUND NO.9 RELATES TO CONFIRMING DISALLOWANCE OF RS. 11,730/- OUT OF TRAVELING EXPENSES CLAIMED OF RS. 23,461/- BEING 50% FOR NON AVAILABILITY OF VOUCHERS OF EXPENSES. 24. THE LD. CIT (A) HAS CONFIRMED THE SAME. 25. AFTER CONSIDERING THE SUBMISSIONS, WE FIND THAT DISALLOWANCE IS ON HIGHER SIDE. WE ARE OF THE VIEW THAT IF DISALLOWANCE IS RESTRICT ED TO RS. 2,000/- THAT WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY. 26. GROUND NO. 10 RELATES TO CONFIRMING THE DISALLO WANCE OF RS. 30,935/- OUT OF SHOP AND REPAIR EXPENSES. 27. THIS DISALLOWANCE WAS MADE BY OBSERVING THAT TH ESE ARE CAPITAL IN NATURE. 28. AFTER CONSIDERING THE SUBMISSIONS, IT IS SEEN T HAT THESE EXPENSES WERE ON ACCOUNT OF REPAIR OF SHOW ROOM AND RENOVATION ETC., WHICH A RE REVENUE IN NATURE. WHATEVER THE CAPITAL NATURE WERE INCURRED BY THE ASSESSEE THEY H AVE ALREADY BEEN CAPITALIZED. THEREFORE, WE HOLD THAT DISALLOWANCE OF EXPENSES ON ACCOUNT OF REPAIR WERE NOT JUSTIFIED. ACCORDINGLY, THE SAME IS DELETED. 29. NEXT ISSUE RELATES TO CONFIRMING DISALLOWANCE O F RS. 9,028/- OUT OF SHOP RETAIL EXPENSES @ 25%. 7 30. DISALLOWANCE IS ON HIGHER SIDE. THEREFORE, WE RESTRICT THE DISALLOWANCE @ 10%. AO IS DIRECTED TO MODIFY HIS ORDER ACCORDINGLY. 31. REMAINING ISSUE IS AGAINST CONFIRMING DISALLOWA NCE OF RS.528/- BEING MUNICIPAL TAX OF SHOP PAID. 32. THE AO DISALLOWED THIS EXPENDITURE BY OBSERVING THAT IN THE LEDGER IT IS MENTIONED THAT TAX IS PAID TOWARDS HOME TAX. 33. IN FACT, THE PREMISES IS RENTED AND HOUSE TAX O N SHOP IS PAYABLE BY THE TENANT AND, THEREFORE, THE ASSESSEE HAS PAID THE MUNICIPAL TAX. MUNICIPAL TAX LIABILITY OF TENANT IS ALLOWABLE AS REVENUE EXPENDITURE. ACCORDINGLY WE DE LETE THIS ADDITION ALSO. 34. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 35. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 .6.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- SHRI SHYAM SUNDAR KALANI, AJMER. THE ITO WARD 1(2), JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 1451/JP/10) BY ORDER, AR ITAT JAIPUR.