M/s. Empire Motors Pvt.Ltd., Surat V. The Addl.CIT.,Range-1, Surat

ITA 1472/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50581 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A TIRKEY
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

, , . .. . . .. . , , , , . .. . . .. .!'#$ !'#$ !'#$ !'#$ , % % % % & & & & IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SHRI A.K.GARODIA, A.M.) . ITA NO. 1472/AHD./2009 : ' ()- 2006-2007 M/S. EMPIRE MOTORS PVT. LTD., SURAT VS - A.C.I.T., RANGE-1, SURAT (PAN : AAACE 5123F) (,- /APPELLANT) ( ./,- /RESPONDENT ) ,- 0 1 / APPELLANT BY : SHRI MANISH J. SHAH, A.R. ./,- 0 1 / RESPONDENT BY : SHRI A.TIRKEY, SR.D.R. 2'3 0 4% / DATE OF HEARING : 13/09/2011 5'( 0 4% / DATE OF PRONOUNCEMENT : 13/09/2011 / ORDER PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 16-03-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-I, SURA T CONFIRMING THE DISALLOWANCE OF RS.9,23,707/- BEING 25% OF OVERALL EXPENSES OF R S.36,94,828/- FOR THE ASSESSMENT YEAR 2006-2007. 2. FACTS IN SHORT ARE THAT THE ASSESSEE IS A PRIVAT E LIMITED COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING THE CAR DEALER SHIP OF GENERAL MOTORS. THE BUSINESS IS CARRIED ON AT SURAT. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED HIS E- RETURN OF THE INCOME ON 31.12.2006 DECLARING TOTAL INCOME AT RS.51,52,634/-, ACCOMPANIED BY AUDIT REPORT IN FORM NO.3CB AND 3CD ALONG WITH AUDITED ACCOUNTS. THE AO FRAMED THE ASSESSMENT UNDER SECTION 143(3) O N 24.12.2008 WHEREIN HE DISALLOWED RS.9,23,707/- BEING 25% OF VARIOUS EXPEN SES AMOUNTING TO RS.36,94,828/- LISTED IN PARA 3.1 OF THE ASSESSMENT ORDER. THE REA SONING GIVEN BY THE AO FOR MAKING THIS DISALLOWANCE IS THAT THE AO ASKED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS, BILLS/VOUCHERS PERTAINING TO CLAIM OF THESE EXPENSE S/DEDUCTIONS. HOWEVER, THE ITA NO. 1472-AHD-09 2 ASSESSEE SUBMITTED THAT BILLS AND VOUCHERS HAVE BEE N DESTROYED BECAUSE OF THE FIRE. AFTER CONSIDERING THIS EXPLANATION, THE AO ASKED TH E ASSESSEE TO PRODUCE THE SUPPORTING EVIDENCES AND DOCUMENTS FOR HAVING SPENT THE ENTIRE AMOUNT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO OBS ERVED THAT THE ASSESSEE OMITTED TO DISCHARGE THE ONUS CAST UPON IT BY STATUTE FOR CLAI MING DEDUCTION OF EXPENDITURE WHILE COMPUTING INCOME. THEREFORE, THE CLAIM OF THE ASSES SEE IS NOT VERIFIABLE. FOR THIS REASON, HE MADE THE IMPUGNED DISALLOWANCE OF RS.9,2 3,707/-. 3. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE RE ITERATED THE SUBMISSIONS MADE BEFORE THE AO. IT WAS POINTED OUT THAT BOOKS OF ACC OUNTS AND BILLS/VOUCHERS WERE DESTROYED DURING THE FIRE FOR WHICH HE PRODUCED THE COPY OF THE FIR. AFTER CONSIDERING THE SAME, IN THE IMPUGNED ORDER, THE LD. CIT(A) CON FIRMED THE DISALLOWANCE FOR THE DETAILED REASON GIVEN IN PARA 2.3, WHICH READS AS U NDER: 2.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE AP PELLANT AND THE OBSERVATION OF THE A.O. EVEN IF THE BOOKS OF ACCOUN T, BILLS/ VOUCHERS WERE DESTROYED IN THE FIRE, THE ASSESSEE COULD HAVE MADE AN EFFORT TO PRODUCE THE BANK STATEMENT FROM THE BANK AND SHOULD HAVE SUBMIT TED THE PROOF OF PAYMENTS MADE BY WAY OF CHEQUE IN RESPECT OF VARIOUS EXPENSE S AND SHOULD HAVE ATLEAST MADE A TRY TO PROVE THESE EXPENSES. IN THE ABSENCE OF ANY EVIDENCE OF THESE EXPENSES, THE DISALLOWANCE MADE BY THE A.O- IS CONF IRMED AND THIS GROUND OF APPEAL IS DISMISSED. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, ON BEHALF OF THE ASSESSE E, SHRI MANISH J. SHAH APPEARED AND FILED A PAPER BOOK CONTAINING 12 PAGES, WHICH, INTER ALIA , INCLUDE THE WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A), COMPUTATIO N OF INCOME FOR THE ASSESSMENT EYAR 2006-07 AND COPY OF FIR OF THE POLICE SUB-INSP ECTOR OF UMRA POLICE STATION, SURAT AND THE PANCHNAMA. HE POINTED OUT THAT IN THE PANCHNAMA, IT IS CLEARLY STATED THAT THE ENTIRE BOOKS OF ACCOUNTS AND BILLS/VOUCHER S WERE DESTROYED. HE POINTED OUT THAT SINCE THE ASSESSEE WAS PREVENTED BY SUFFICIENT CAUSE IN PRODUCING THE BOOKS OF ACCOUNTS AND VOUCHERS, THERE IS NO JUSTIFICATION FO R MAKING AD HOC DISALLOWANCE OF 25% OF EXPENSES LISTED IN PARA 3.1 OF THE ASSESSMEN T ORDER. IT WAS ALSO SUBMITTED THAT ITA NO. 1472-AHD-09 3 G.P. RATIO IN THE YEAR UNDER APPEAL HAS BEEN POSITI VE AT 6.56% AS AGAINST 5.21% IN THE IMMEDIATELY PRECEDING YEAR. THE INCOME-TAX PAID IN THE YEAR UNDER APPEAL HAS TAKEN A QUANTUM JUMP AT RS.17,34,375/- AGAINST RS.5,32,902/ - REFLECTING GROWTH OF 225.46% OVER PRECEDING YEAR. IT WAS ALSO SUBMITTED THAT BEF ORE THE LD. CIT(A), THE ASSESSEE HAS FURNISHED THE PERCENTAGE OF GROWTH IN BUSINESS, AS COMPARED TO THE LAST YEAR. FROM THE PERUSAL OF THE SAME, IT CAN BE SEEN THAT IN CASE OF EQUIPMENT EXPENSES, WORKSHOP EXPENSES AND LABOUR CHARGES THE EXPENSES INCURRED D URING THE YEAR UNDER APPEAL ARE LESS BY 40.34%, 0.20% AND 9.87% AS COMPARED TO THE PRECE DING YEAR AND THEREFORE, SHOULD NOT SUFFER ANY DISALLOWANCE. IT WAS FURTHER SUBMITTED THAT JOB WORK PETROL EXPENSES REFLECT MARGINAL INCREASE OF 1.13% AND THE REFORE, SHOULD HAVE BEEN ALLOWED IN FULL. LABOUR CHARGE (DENT/PAINT) AND STORES AND SPARES HAVE SHOWN INCREASE BUT CORRESPONDINGLY OVERALL LABOUR CHARGES INCOME HAS D ISPLAYED GROWTH OF 49.40% AND LOOKING TO THE INFLATIONARY PRESSURE IN THE ECONOMY , SHOULD HAVE BEEN CONSIDERED REASONABLE NOT CALLING FOR ANY DISALLOWANCE. PDI EX PENSES ARE EXPENSES INCURRED DURING THE PRE-DELIVERY PERIOD -SUCH AS TRIAL RUN P ETROL, PETROL FILLED DURING THE TIME OF DELIVERY, SETTING RIGHT ANY MANUFACTURING DEFECTS, CHANGING THE DEFECTIVE PARTS, REMOVING THE DENTS IN THE VEHICLE AND THEN PAINTING THE SAME. DURING THE YEAR UNDER APPEAL, THE APPELLANT HAS SOLD 697 CARS AS AGAINST 619 IN THE PRECEDING YEAR AND THOUGH THE PDI EXPENSES HAVE SHOWN INCREASE BUT LOOKING TO THE GROWTH IN TERMS OF HIGHER VOLUME, HIGHER TOPLINE, BOTTOMLINE AND GROWTH BY 22 5% IN TAX PAYMENTS AND INCREASE IN PETROLEUM PRICES, THE EXPENSES SHOULD NOT SUFFER ANY DISALLOWANCE. 6. ON THE OTHER HAND, SHRI A. TIRKER, SR.D.R., APPE ARING ON BEHALF OF THE REVENUE, POINTED OUT THAT INCREASE IN SALES AND OPERATING IN COME IS 13.04%. AS AGAINST THIS, THE CONSUMPTION OF STORE AND SPARE IS INCREASED BY 75.1 2%, LABOUR CHARGES (DENT AND PAINT) BY 159.13%, ADMINISTRATIVE AND SELLING AND D ISTRIBUTION EXPENSES, ETC. BY 55.50%. LOOKING TO THIS AND THE FACTS THAT THE BOOK S OF ACCOUNTS AND VOUCHERS WERE NOT PRODUCED BEFORE THE AO, DISALLOWANCE OF 25% OF EXPENDITURE IS FAIR AND REASONABLE. THEREFORE, THE DISALLOWANCE MADE BY THE AO BE UPHELD. ITA NO. 1472-AHD-09 4 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT BOO KS OF ACCOUNTS ARE AUDITED WHICH WERE FURNISHED ALONG WITH THE RETURN OF INCOME AND AUDIT REPORT IN FORM NO.3CB AND 3CD. AT THE SAME TIME, THERE IS A DISPROPORTIONATE INCRE ASE IN THE EXPENSES. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, LABOUR CHARG ES (DENT/PAINT) WERE RS.63,500/-. AS AGAINST THIS, IN THE ASSESSMENT YEAR UNDER APPEA L, IT IS RS.1,64,542/-. THUS, THERE IS AN INCREASE OF 159.13%. SIMILARLY, IN THE STORE AND SPARES, THERE IS AN INCREASE OF 75.12%. HOWEVER, IN CASE OF EQUIPMENT EXPENSES AND WORKSHOP EXPENSES, THERE IS A DECREASE OF 40.34% AND 20.20% RESPECTIVELY. KEEPING IN VIEW THE FACTS THAT THE BOOKS OF ACCOUNTS AND BILLS AND VOUCHERS WERE DESTROYED I N FIRE AND ABNORMAL INCREASE IN FEW EXPENSES, WE ARE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE, IF DISALLOWANCE IS RESTRICTED TO 12.5%. WE, ACCORDINGLY, RESTRICT D ISALLOWANCE TO RS.4,61,853/-, BEING 12.5% OF RS.36,94,828/-. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6 0 5'( #' ) 13 / 09 /2011 ' 7 0 !3 8 THIS ORDER PRONOUNCED IN COURT ON 13/09/2011. SD/- SD/- (A.K.GARODIA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13/09/2011 0 00 0 .49 .49 .49 .49 :9(4) :9(4) :9(4) :9(4)- -- - 1. ,- 2. ./,- 3. 4 2> 4. 2>- - 5. 9A! .4' , , 8 6. !$ C6 , D/ F , 8 TALUKDAR/ SR. P.S. ITA NO. 1472-AHD-09 5