Shri Manish Raichand Shah, Ahmedabad V. The ACIT, Central Circle-6, Ahmedabad

ITA 1513/AHD/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0677 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: PF JAIN
• Keywords: Gift; Business income; Depreciation
• Section: 40A(3); 143(3); 201; 64; 37

Judgement Text

PAGE 1 OF 8 , IN THE INCOME TAX APPELLATE TRIBUNAL , SMC BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI MS . MADHUMITA ROY , JUDICIAL MEMBER ./ ITA NO. 1513/AHD/2015 / ASSTT. YEAR : 2010 - 2011 SHRI MANISH RAICHAND SHAH , B - 11, WEST END PARK , NR. GURUDWARA , S.G. HIGHWAY, BODAKDEV, AHMEDABAD - 350 052 . PAN: AVUPS3273N VS . A.C.I.T , CENTRAL CIRCLE - 6 , AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI P.F. JAIN , A. R REVENUE BY : MS . SONIA KUMAR , SR. D.R / DATE OF HEARING : 09 / 05 / 201 9 / DATE OF PRONOUNCEMENT: 29 /05 /2 01 9 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 13, AHMEDABAD - 5, DATED 27/03/2015 ( IN SHORT LD.CIT(A) ) ARISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 ( HERE - IN - AFTER REFERRED TO AS 'THE ACT') DT.27 / 02/2013 RELEVANT TO THE ASSESSMENT YEAR 2010 - 20 11 . ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 2 PAGE 2 OF 8 THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL 1. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE DISALLOWANCE SALES PROMOTION EXPENSES OF RS.54833/ - MADE BY THE A.O. 2. THE LD.CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING DISALLOWANCE OF RS.8,10,455/ - AS ONE SIXTH OUT OF DEPRECIATION, INSURANCE, PETROL, INTEREST AND TELEPHONE MADE BY THE LD.AO. 3. THE APPELLANT C RAVES LIBERTY TO ADD, AMEND ALTER OR MODIFY ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL DISPOSAL. THE 1 ST ISSUE RAISED BY THE ASSESSEE IN THE GROUND NO . 1 IS THAT THE LD. CIT (A) ERRED IN CONFIRMI NG THE ADDITION MADE BY THE AO F OR RS.54,833/ - ON ACCOUNT OF SALES PROMOTION EXPENSES. 2. AT THE OUTSET, WE NOTE THAT THE ASSESSEE HAS MENTION ED THE AMOUNT OF DISALLOWANCE IN THE GROUND OF APPEAL AT RS. 5 4 , 833 / - WHEREAS THE AMOUNT DISALLOWED BY THE AO AND SUBSEQUENTLY CONFIRMED BY THE LD. CIT ( A ) IS OF RS 6 4 , 833 / - ONLY . AT THE TIME OF HEARING NONE OF THE PARTY , I.E. , T HE ASSESSEE AND THE R EVENUE HA VE BROUGHT TO OUR NOTICE ABOUT THE EXACT AMOUNT WHICH IS IN DISPUTE. HOWEVER , FROM THE MATERIALS AVAILABLE ON RECORD, IT IS REVEALED THAT THE AMOUNT INVOLVED IN THE DISPUTE IS OF RS. 64 , 833 / - ONLY. THEREFORE WE DIRECT THE AO TO CONSIDER THE AMOUNT OF RS. 64 , 833 / - WHILE GIVING EFFECT TO THIS ORDER. 2.1 BRIEFLY STATED FACTS ARE THA T THE ASSESSEE IS AN INDIVIDUAL AND CARRYING THE BUSINESS OF FREIGHT FORWARDING SERVICE UNDER THE NAME & STYLE OF M/S SEATRANS LOGISTICS , AND M/S SHARMA INC. T HE ASSESSEE ALSO CARRIED THE BUSINESS OF SHARE TRADING IN THE NAME OF MANISH R S HAH. ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 3 PAGE 3 OF 8 2.2 THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS DEBITED IN THE PROFIT & LOSS ACCOUNTS OF M/S SEATRANS LOGISTICS SALES PROMOTION EXPENSES AMOUNTING TO RS. 3,24,165/ - . THE ASSESSEE TO SUBSTANTIATE HIS CLAIM SUBMITTED SOME SELF - GENERATED VOUCHERS REGARDING T HE SALE PROMOTION EXPENSES. 2.3 THE AO FROM THE C OPY OF ACCOUNT NOTICED THAT THE PAYMENT FOR THE EXPENSES WAS MADE THROUGH CASH ONLY. THEREFORE THESE EXPENSES ARE NOT VERIFIABLE . A CCORDINGLY , THE AO DISALLOWED A SUM OF RS. 64,833/ - BEING 20% OF THE TOTAL SALES PROMOTION EXPENSES CLAIMED BY THE ASSESSEE. 3. THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO CONFIRMED THE ORDER OF THE AO BY OBSERVING THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD THAT THE ACTION OF THE AO WAS WRONG AND, NOT GIVEN ANY EXPLANATION REGARDING HIS CLAIM OF EXPENSES . BEING AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR BEFORE US SUBMITTED THAT ALL THE NECESSARY DETAILS IN SUPPORT OF THE EXPENSES WERE FURNISHED. THEREFORE, N O DISALLOWANCE IS WARRANTED UNTIL & UNLESS ANY SPECIFIC DEFECT IS POINTED OUT BY THE AUTHORITIES BELOW. 5. ON THE OTHER HAND , THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO HAS MADE THE ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 4 PAGE 4 OF 8 DISALLOWANCE AMOUNTING TO RS. 64 , 833 / - OUT OF SALES PROMOTION EXPENSES OF RS. 3 , 24 , 165 / - ON THE GROUND THAT THESE EXPENSES WERE SUPPORTED BASED ON SELF - GENERATED VOUCH ERS. THEREFORE THE VERIFICATION OF SUCH EXPENSES WAS NOT POSSIBLE. THE LD. CIT - A SUBSEQUENTLY CONFIRMED THE VIEW TAKEN BY THE AO . 6.1 HOWEVER, ON VERIFICATION OF THE STATEMENT OF FACTS FI LED BY THE ASSESSEE BEFORE THE LD. C IT ( A ) , WE NOTE THAT THE ASSESS EE CLAIMED TO HAVE INCURRED SUCH EXPENSES FOR THE WELFARE, GIFT , AND ENTERTAINMENT , ETC. THE RELEVANT SUBMISSION OF THE ASSESSEE BEFORE THE LD. C IT (A) STANDS AS UNDER: APPELLANT HAS TOTAL BUSINESS RECEIPT FOR SERVICES RENDER ED BY HIM ARE OF RS.351 ,200,785/ - . APPELLANT HAS INCURRED EXPENSES FOR PROMOTION OF BUSINESS OF RS. 3,24,1657 - . THE ID. A.O. HAS FAILED IN APPRECIATING THAT CONSIDERING THE VOLUME OF THE BUSINESS OF THE APPELLANT BUSINESS PROMOTION EXPENSES INCURRED BY THE APPELLANT IS SOLELY FO R THE PURPOSE OF BUSINESS. THE EXPENSES INCURRED FOR BUSINESS PROMOTION ARE SUCH AS WELFARE EXPENSES, GIFT, ENTERTAINMENT ETC. THE SAID EX PENSES ARE INCURRED AT VARIOUS OFFICES OF THE APPELLANT. INSPITE OF THE DETAILED ACCOUNT SUBMITTED BY THE APPELLANT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. A.O. HAS NOT BROUGHT ON RECORD ANY SPECIFIC DISCREPANCY OR IRREGULARITY . IT IS TO BE TAKEN NOTE THAT AUDITORS HAS ALSO NOT POINTED OUT ANY DISCREPANCY IN REGARDS TO VOUCHERS MADE BY THE APPELLANT. THE LD. A.O. WITHOUT BRINGING ANY MATERIAL EVIDENCE ON RECORDS, MERELY ON PRESUMPTION AND SURMISES MADE ADHOC DISALLOWANCE @20% OF RS. 64,8337 - AND ADDED TO THE INCOME DISCLOSED BY THE APPELLANT . 6.2 T HE ABOVE SUBMISSION WAS FILED BY THE ASSESSEE BEFORE THE LD. CIT (A). HOWEVER , THE LD. C IT ( A ) HAS NOT POINTED OUT ANY DEFECT IN THE SUBMISSION OF THE ASSESSEE. 6.3 WE ALSO NOTE THAT THERE IS NO DENIAL UNDER ANY PROVISIONS OF THE LAW TO INCUR THE EXPENSES IN CASH EXCEPT IN THE FACTS AND CIRCUMSTANCES AS SPECIFIED ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 5 PAGE 5 OF 8 UNDER SECTION 40A(3) OF THE ACT. BUT THE PROVISIONS OF THE SECTION 40A (3) OF THE ACT HAS NOT BEEN INVOKED IN THE GIVEN FACTS AND CIRCUMSTANCES. THEREFORE WE CAN SAFELY PRESUME THERE WAS NO CONTRAVENTION BY THE ASSESSEE REGARDING THE COMPLIANCE OF THE PROV ISIONS OF SECTION 40A(3) OF THE ACT. 6.4 WE ALSO NOTE THAT ANY OF THE AUTHORITIES BELOW HAVE NOT DOUBTED THE REASONABLENESS OF THE EXPENS ES. WE ALSO FIND THAT THE AMOUNT OF THE EXPENSES CONSIDERING THE GROSS TURNOVER AND THE NUMBER OF OFFICES OF THE ASSE SSEE IS OF NEGLIGIBLE VALUE. 6.5 DURING THE HEARING, A SPECIFIC QUERY WAS POSTED TO THE LD. AR FOR THE ASSESSEE TO DEMONSTRATE WHETHER THE ASSESSEE CLAIMED THE SIMILAR EXPENSES IN THE EARLIER AND THE SUBSEQUENT YEARS. BUT THE LD. AR HAS NOT FURNISHED ANY DETAIL. IN OUR CONSIDERED VIEW, IN A SITUATION WHERE THE VERIFICATION OF THE EXPENSES IS NOT POSSIBLE, THEN THE HISTORICAL DATA OF THE ASSESSEE QUA TO THE EXPENSES UNDER CONSIDERATION WILL PROVIDE SOME GUIDANCE. THE PROVISIONS OF SECTION 37 OF THE ACT , CA ST THE DUTY ON THE ASSESSEE TO FURNISH THE NECESSARY DETAILS AS DESIRED BY THE AO IN SUPPORT OF HIS CLAIM. THUS IN THE ABSENCE OF THE RELEVANT DATA, WE ARE OF THE VIEW TH AT THE POSSIBLE LEAKAGE OF THE R EVENUE SHALL BE CURBED IF THE DISALLOWANCE IS RESTRICT ED TO 10% IN THE GIVEN FACTS AND CIRCUMSTANCES. ACCORDINGLY , WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE OF THE EXPENSES DESCRIBED ABOVE TO THE TUNE OF RS. 32,417/ - BEING 10% OF THE TOTAL SALES PROMOTION EXPENSES. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THE 2 ND ISSUE RAISED BY THE ASSESSEE IN GROUND NO 2 IS THAT THE LD. CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS. 8.10,455/ - AS 1/6 TH OF CERTAIN EXPENSES ON ACCOUNT OF PERSONAL IN NATURE. ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 6 PAGE 6 OF 8 7. THE AO NOTICED FROM THE BALANCE SHEET THAT THE ASSESSEE HA D SHOWN VARIOUS LUXURIOUS CARS LIKE TWO BMW CARS, HOND CITY, CRV HONDA. THE ASSESSEE HAS DEBITED EXPENSES RELATED TO THESES IN HIS PROFIT & LOSS ACCOUNT AS DETAILED UNDER: 1) DEPRECIATION ON CAR RS. 38,25,904/ - 2) P ETROL EXPENSES RS. 2,54,544/ - 3) INSURANCE RS. 1,05,731/ - 4) INTEREST RS. 1,23,572/ - TOTAL RS. 43,09,751/ - 7.1 THE AO ALSO NOTICED THAT THE ASSESSEE HA D DEBITED TELEPHONE OF RS. 5,52,980/ - IN HIS PROFIT & LOSS ACCOUNT. 7.2 ON A QUESTI ON BY THE AO , THE ASSESSEE SUBMITTED THAT THE MOTOR CARS ARE PURELY USED FOR BUSINESS PURPOSE S. 7.3 HOWEVER THE AO DISAGREE D WITH THE SUBMISSION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE DID NOT FILE LOGBOOK IN SUPPORT OF HIS CLAIM AND NEITHER FILE D THE DETAIL OF OTHER CARS WHICH WERE USED BY THE ASSESSEE FOR THE PERSONAL PURPOSE S . IN VIEW OF THE ABOVE , THE AO DISALLOWED 1/6 TH OF THE ALL THESE EXPENSES AMOUNTING TO RS. 8,10,455/ - ( 1/6 TH OF 48,62,731/ - ) AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE . ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 7 PAGE 7 OF 8 7.4 THE A GGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING THAT THE ASSESSEE HAS NOT DENIED THE USE OF CAR AND TELEPHONE FOR PERSONAL USE. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LD.AR BEFORE US SUBMITTED THAT ALL THE NECESSARY DETAILS IN SUPPORT OF THE EXPENSES WERE FURNISHED. THEREFORE, NO DISALLOWANCE IS WARRANTED UNTIL & UNLESS ANY SPECIFIC DEFECT IS POINTED OUT BY THE AUTHORITIES BELOW. 9. ON THE OTHER HAND , THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILAB LE ON RECORD. THE ONUS LIES ON THE ASSESSEE TO JUSTIFY THE EXPENSES INCURRED FOR THE BUSINESS BASED ON THE NECESSARY DOCUMENTARY EVIDENCE. REGARDING THE EXPENSES INCURRED IN CONNECTION WITH THE VEHICLES USED BY THE ASSESSEE FOR THE BUSINESS, IT WAS ESSENTI AL TO MAINT AIN THE LOGBOOK TO JUST IFY THAT THE VEHICLES WERE USED FOR THE BUSINESS. 10.1 T HE CLAIM OF THE ASSESSEE THAT ALL THE VEHICLES WERE USED EXCLUSIVELY FOR THE BUSINESS DOES NOT APPEAR TO BE TRUE IN THE GIVEN FACTS AND CIRCUMSTANCES. IT IS BECAUSE THE POSSIBILITY OF PERSONAL USE OF THE VEHICLES CANNOT BE IGNORED IN VIEW OF THE FACT THAT THERE WAS NO SEPARATE VEHICLE USED BY THE ASSESSEE FOR PERSONAL PURPOSES. HOWEVER, CONSIDERING THE VOLUME OF THE BUSINESS AND THE NUMBER OF THE OFFICES MAINTAINED B Y THE ASSESSEE, THE AMOUNT DISALLOWED BY THE AO AND SUBSEQUENTLY CONFIRMED BY THE LD. CIT (A) APPEARS TO BE ITA NO.1513/AHD/2015 ASSTT. YEARS 2010 - 11 8 PAGE 8 OF 8 UNREASONABLE. IN OUR CONSIDERED VIEW THE JUSTICE WILL BE SERVED TO BOTH THE PAR TIES , I.E. , THE ASSESSEE AND THE R EVENUE IF THE DISALLOWANCE IS RESTRICTED TO 1/20 OF THE EXPENSES CONCERNING THE CARS AS DISCUSSED ABOVE. 10.2 REGARDING THE DISALLOWANCE OF THE TELEPHONE EXPENSES, WE NOTE THAT THE AO HAS NOT BROUGHT SUFFICIENT DETAILS ON RECORD AS DETAILED UNDER: I. WHETH ER THESE TELEPHONE EXPENSES REPRESENT LANDLINE OR MOBILE OR THE COMBINATION OF BOTH. II. WHETHER THE TELEPHONE CONNECTIONS IN RESPECT OF WHICH DEDUCTION WAS CLAIMED WERE ALSO INSTALLED AT THE RESIDEN TIAL PREMISES OF THE ASSESSEE. 10.3 IN VIEW OF THE ABOVE, WE ARE NOT CONVINCED OF THE DISALLOWANCE MADE BY THE AUTHORITIES BELOW. THEREFORE WE ARE INCLINED TO DELETE THE ADDITION MADE BY THE AO WHICH WAS SUBSEQUENTLY CONFIRMED BY THE LD. C IT ( A ) QUA TELEPHONE EXPENSES. HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE COURT ON 29 /05 / 2019 AT AHMEDABAD. - SD - - SD - ( MS . MADHUMITA ROY ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (TRUE COPY) A HMEDABAD; DATED 29 / 05 /2019 M ANISH