Shri Bhadresh Jashwantlal Shah, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 1530/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0028 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 20-08-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Depreciation; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D.AGRAWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING : 20/08/2010 DRAFTED ON: 24/0 8/2010 ITA NO.1530/AHD/2010 ASSESSMENT YEAR : 2007-2008 MR.BHADRESH JASHWANTLAL SHAH 6, OPP.LATI BAZAR GITA MANDIR ROAD LATI BAZAR, AHMEDBAD VS. THE DCIT CIRCLE-11 AHMEDABAD PAN/GIR NO. : AINPS 8863 L (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI TUSHAR HEMANI RESPONDENT BY: SHRI SHELLEY JINDAL, CIT-DR O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WHICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XVI , AHMEDABAD DATED 01/04/2010 PASSED FOR ASSESSMENT YEAR 2007-0 8. GROUNDS RAISED HEREBY ARE DECIDED AS FOLLOWS:- 2. GROUND NO.1:- 1. (A) THE LD. COMMISSIONER OF INCOME TAX (APPE ALS):XVI, AHMEDABAD (HEREINAFTER REFERRED TO AS CIT(A) HAS GR OSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLO WANCE OF THE SALARY OF RS.84,000/- PAID TO MR.JASHWANTLAL N. SHAH, FATHER OF THE APPELLANT, IN TOTAL DISREGARD OF THE FACTS OF THE CASE AND MERELY RELYING ON THE STATEMENT OF MS.RAGI NI THAKKAR, A JUNIOR MOST EMPLOYEE OF THE APPELLANT, W HICH ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 2 - WAS RECORDED TO ASCERTAIN THE GENUINENESS OF THE SA LARY PAID TO HER AND HAS IN THE PROCESS FAILED TO APPREC IATE THE SERVICES RENDERED BY MR.JASHWANTLAL N.SHAH. (B) WHILE CONFIRMING THE ADDITION MADE BY THE ASSE SSING OFFICER, THE CIT(A) HAS FAILED TO APPRECIATE THE FA CT THAT (I) NO EFFORT WAS MADE BY THE ASSESSING OFFICER TO ASCERTAIN THE GENUINENESS OF SALARY PAYMENT TO SHRI JASHWANT N.SHAH EITHER BY EXAMINING THE RECIPIENT OR THE PAY ER APPELLANT AS WAS DONE BY HIM IN THE CASE OF MS.RAGI NI THAKKAR. (II) NO SHOW CAUSE NOTICE WAS EVER ISSUED TO THE AP PELLANT BEFORE REJECTING THE CLAIM OF RS.84,000/-. 2.1. THE ABOVE GROUNDS 1(A) & (B) ARE NARRATIVE AS WELL AS ARGUMENTATIVE IN NATURE, HOWEVER, THE ONLY ISSUE EM ERGES FROM THE SAID GROUND IS IN RESPECT OF DISALLOWANCE OF SALARY OF R S.84,000/- PAID TO SHRI JASHWANTLAL N.SHAH, FATHER OF THE APPELLANT. FACT S IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DATED 29/12/2009 IS THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRADING OF ELECTRIC MOTORS. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE HAS MENTIONED THAT T HE ASSESSEE IS DEALING THE ELECTRIC MOTORS OF CROMPTON & GREAVES. THERE WAS A CLAIM OF PAYMENT OF SALARY OF RS.84,000/- TO SHRI JASHWANTLA L NANDLAL SHAH, FATHER OF THE APPELLANT. AN INSPECTOR WAS DEPUTED TO EN QUIRE ABOUT THE CORRECTNESS OF THE CLAIM. HE HAS REPORTED THAT TH E SAID PERSON WAS NOT AVAILABLE AT THE SHOP. IT HAS ALSO BEEN INFORMED BY HIM THAT THE SAID PERSON REMAINED MOST OF THE TIME OUT OF AHMEDABAD F OR RELIGIOUS WORK. THEREAFTER, AN ACCOUNTANT MRS.RAGINI THAKKAR HAS AL SO BEEN SUMMONED U/S.131 OF THE I.T. ACT, 1961 AND HER STATEMENT WAS RECORDED. IN HER ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 3 - STATEMENT, SHE HAS NOT MENTIONED THE NAME OF THE SA ID PERSON WHETHER EMPLOYED AND DOING SOME PARTICULAR WORK FOR THE ASS ESSEE. THE ASSESSING OFFICER HAS ALSO MENTIONED THAT SEVERAL N OTICES WERE ISSUED U/S.143(2) OF THE I.T. ACT, 1961 TO EXPLAIN THE GEN UINENESS OF THE PAYMENT OF SALARY OF RS.84,000/- PAID TO THE SAID P ERSON. IN THE ABSENCE OF ANY EVIDENCE AND CONSIDERING THE REPORT OF THE I NSPECTOR AS WELL AS THE STATEMENT OF THE ACCOUNTANT, THE SAID CLAIM WAS HEL D AS A BOGUS CLAIM AND, ACCORDINGLY, DISALLOWED. 3. WHEN THE MATTER HAS GONE IN APPEAL BEFORE THE FI RST APPELLATE AUTHORITY, THE LEARNED CIT(APPEALS) HAS REPRODUCED THE STATEMENT OF MRS.RAGINI THAKKAR, ACCOUNTANT AND, THEREAFTER, AFF IRMED THE ADDITION VIDE PARAGRAPH NO.4.3; REPRODUCED BELOW:- 4.3. AS REGARDS THE CONTENTION OF THE AUTHORISED R EPRESENTATIVE THAT MRS RAGINI THAKKAR WAS NOT ASKED ANY SPECIFIC QUESTION ABOUT THE SERVICES RENDERED BY THE FATHER OF THE PAP SHRI JASWANT SHAH, I DO NOT AGREE WITH THE APPELLANT THAT A PERSON WHO H AS BEEN WORKING WITH THE APPELLANT FOR LAST 3-4 YEARS AND W HO IS HAVING TOTAL NUMBER OF EMPLOYEES BE3TWEEN 6 TO 9, WOULD NO T REMEMBER THE NAME OF SHRI JASWANT SHAH. A SPECIFIC QUESTION WAS ASKED TO RAGINI SHAH AS TO HOW MANY PEOPLE ARE WORKING WITH HER AND WHAT TYPE OF DUTIES THEY ARE PERFORMING. IN RESPONSE T O THAT QUESTION NO.5, SHE HAS GIVEN NAMES OF SHRI JIGAR RECEIVING S ALARY RS.4,000/-, SHRI ASHOK RECEIVING SALARY RS.2,500/-, SHRI MITESH RECEIVING SALARY RS.2,5000/-, SHRI NITIN THAKKAR (S ALES EXECUTIVE GETTING ONLY COMMISSION) AND SHRI PUNAMBHAI PATEL G ETTING SALARY OF RS.8,000/-. IN RESPONSE TO THIS QUESTION SHE HAS NOT GIVEN THE ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 4 - NAME OF SHRI JASHWANT SHAH. FURTHER THE ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER INDICATE THAT THE FATHER OF T HE APPELLANT IS DEVOTING MOST OF HIS TIME IN ASHRAM LOCATED AT PRAN TIJ. MERELY BECAUSE THAT THE NAME OF JASWANTBHAI PATEL IS APPEA RING IN THE SALARY/WAGES REGISTER DOES NOT JUSTIFY THE PAYMENT OF SALARY TO HIM IF HE HAS NOT RENDERED ANY SERVICES. I THEREFORE U PHOLD THE ADDITION OF RS.84,000/- MADE BY THE ASSESSING OFFIC ER. 4. WE HAVE HEARD BOTH THE SIDES. WE HAVE ALSO PER USED THE COMPILATION IN THE LIGHT OF THE OBSERVATIONS OF THE AUTHORITIES BELOW. THOUGH THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SHRI TUSHAR HEMANI HAS EMPHASIZED THAT AS PER THE SALARY REGISTER, A SALARY OF RS.6,000/- MONTHLY WAS PAID TO HIM BUT FROM THE SID E OF THE REVENUE SHRI SHELLEY JINDAL, CIT-LEARNED DEPARTMENTAL REPRE SENTATIVE HAS VEHEMENTLY OBJECTED THE SAID EVIDENCE ON THE GROUND THAT THE SALARY REGISTER CAN BE SAID TO BE A CONCOCTED EVIDENCE BEC AUSE THE ASSESSEE HAS NOT FURNISHED ANY OTHER DOCUMENT OR EVIDENCE TO EST ABLISH THE NATURE OF DUTY OF THE SAID PERSON OR THE SERVICES RENDERED BY HIM FOR WHICH HE WAS ENTITLED FOR THE PAYMENT OF SALARY. CONSIDERING TH E FINDINGS ON FACT AS RECORDED BY THE ASSESSING OFFICER BASED UPON THE EN QUIRY OF THE INSPECTOR AS WELL AS THE STATEMENT RECORDED OF THE ACCOUNTANT, WE HEREBY UPHOLD THE DISALLOWANCE MADE U/S.40A(2)(B) OF THE I .T. ACT, 1961. IT HAS ALSO BEEN ARGUED BEFORE US THAT THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T. ACT, 1961 HAS WRONGLY BEEN INVOKED, HOWEV ER, WE ARE NOT CONVINCED WITH THE SAID ARGUMENT BECAUSE THIS SECTI ON PRESCRIBES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT RELATING TO THE COMPUTATION OF INCOME UNDER THE ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 5 - HEAD PROFITS AND GAINS OF BUSINESS, WHERE ANY EXP ENDITURE IS INCURRED IN RESPECT OF PAYMENT MADE TO ANY PERSON DEFINED TH EREIN, I.E. RELATIVE OF THE ASSESSEE, IN THE PRESENT CASE FATHER OF THE ASS ESSEE; AND IF ASSESSING OFFICER IS OF THE OPINION THAT SUCH AN EXPENDITURE IS EITHER EXCESSIVE OR UNREASONABLE, THEN THAT MUCH OF THE EXPENDITURE SO CONSIDERED BY HIM TO BE EXCESSIVE OR UNREASONABLE SHALL NOT BE ALLOWED A S A DEDUCTION. IN THE PRESENT CASE, IT WAS FOUND THAT THE PAYMENT MADE TO THE FATHER OF THE ASSESSEE WAS ABSOLUTELY UNREASONABLE AND HELD AS A BOGUS CLAIM, THEREFORE, WE ARE NOT INCLINED TO DISTURB THOSE FAC TUAL FINDINGS AND HEREBY CONFIRM THE SAME. THUS, THE GROUND IS DISMISSED. 5. GROUND NO.2:- 2.(A) THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND ON FACTS IN CONFIRMING THE FOLLOWING DISALLOWANCES AGGREGATING TO RS.1,16,106/- INCURRED BY THE APPELLANT ON TWO WHEE LER VEHICLES OWNED BY HIM AND USED BY HIS EMPLOYEES FOR THE PURPOSES OF HIS BUSINESS AND HAS IN THE PROCESS BRU SHED ASIDE ALL THE FACTS: FUEL EXPENDITURE RS. 46,4 49/- DEPRECIATION RS. 58,330/- INSURANCE EXPENSES RS. 11,327/- --------------- TOTAL RS.1,16,106/- --------------- (B) THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FAC T THAT THE ASSESSING OFFICER DISALLOWED THE VARIOUS EXPENSES O N TWO WHEELERS AGGREGATING TO RS.1,16,106/-. (I) MERELY RELYING ON THE STATEMENT OF MS.RAGINI THAKKA R WHICH WAS RECORDED FOR ASCERTAINING THE GENUINENESS OF SALARY PAID TO HER AND ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 6 - (II) NO SHOW CAUSE NOTICE WAS EVEN ISSUED TO THE APPELLANT BEFORE REJECTING THE VARIOUS CLAIMS PERTAINING TO TWO WHEELERS. 5.1. THE ABOVE GROUNDS 2(A) AND (B) ARE ALSO NARRAT IVE AS WELL AS ARGUMENTATIVE IN NATURE CANNOT BE SAID TO BE AS PRE SCRIBED IN RULE-8 OF ITAT RULES, 1962. HOWEVER, THE ONLY GRIEVANCE IS IN RESPECT OF DISALLOWANCE OF RS.1,16,106/- PERTAINING TO THE EXP ENDITURE ON MOTOR VEHICLE AND TWO WHEELERS VEHICLE, BIFURCATION GIVEN AS FOLLOWS:- FUEL EXPENDITURE RS. 46,4 49/- DEPRECIATION RS. 58,330/- INSURANCE EXPENSES RS. 11,327/- --------------- TOTAL RS.1,16,106/- --------------- 6. IN RESPECT OF MOTOR CAR FUEL AND MAINTENANCE EXP ENSES AMOUNTING TO RS.56,570/-, THE ASSESSING OFFICER HAS MADE 50% DISALLOWANCE OF RS.28,285/-. LIKEWISE, IN RESPECT OF VEHICLE FUEL AND MAINTENANCE, IT WAS HELD BY THE ASSESSING OFFICER THAT THE SAME WAS NOT IN RESPECT OF THE BUSINESS ACTIVITY OF THE ASSESSEE, BUT EXPENSES WER E MEANT FOR USE OF FAMILY MEMBERS, THEREFORE, THE TOTAL AMOUNT OF RS.4 6,449/- WAS FULLY DISALLOWED. THE MATTER HAS GONE IN APPEAL WHERE TH E DISALLOWANCE IN RESPECT OF THE USE OF CAR STATED TO BE TOYOTA COROL LA WAS RESTRICTED TO 1/5 TH OF THE TOTAL CLAIM. HOWEVER, IN RESPECT OF VEHICL E EXPENSES, THE FIRST APPELLATE AUTHORITY HAS AFFIRMED THE DISALLOWANCE. 7. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AND AFTER PERUSAL OF THE CASE RECORD, WE ARE OF THE VIEW THAT THIS IS A CASE OF A TAXPAYER ASSESSED IN THE STATUS OF INDIVIDUAL. THE USE OF MOTOR CAR VIZ. TOYOTA ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 7 - COROLLA FOR PERSONAL PURPOSES CANNOT BE RULED OUT A LTOGETHER. THEREFORE, THE VIEW TAKEN BY THE LEARNED CIT(APPEALS) TO RESTR ICT THE DISALLOWANCE TO 1/5 TH OF THE TOTAL CLAIM CANNOT BE HELD TO BE UNREASONA BLE ESTIMATE, THEREFORE, WE HEREBY CONFIRM THE SAID DIRECTIONS OF LEARNED CIT(APPEALS). AS FAR AS THE EXPENDITURE ON OTHER V EHICLE MAINTENANCE IS CONCERNED, IT WAS INFORMED THAT FOR RUNNING AROUND OF THE STAFF, THE APPELLANT HAS PROVIDED TWO WHEELERS TO THE STAFF ME MBERS. OUR ATTENTION HAS BEEN DRAWN ON THE DEPRECIATION CHART TO DEMONST RATE THAT AS MANY AS FIVE SCOOTERS ARE MEANT FOR THE PURPOSE OF THE STAF F TO RUN AROUND FOR BUSINESS PURPOSES. IT HAS ALSO BEEN CONTESTED THAT THE VIEW TAKEN BY THE REVENUE AUTHORITIES THAT THE STAFF MEMBERS WERE USI NG THEIR OWN VEHICLES FOR COMING FROM THE RESIDENCE TO OFFICE HA S NOT RELEVANCE BECAUSE THE FUEL EXPENSES AS CLAIMED WAS IN THE NOR MAL COURSE OF BUSINESS AND IN CONNECTION WITH THE TWO WHEELERS PR OVIDED TO THE STAFF AS IS EVIDENT FROM THE FACTS OF THE CASE. WE FIND F ORCE IN THIS ARGUMENT BECAUSE THE ASSESSING OFFICER HAS NOT CITED A SINGL E INSTANCE THAT THE VEHICLE MAINTENANCE EXPENDITURE WAS NOT MEANT FOR T HE PURPOSE OF THE BUSINESS. AS FAR AS THE QUESTION OF PERSONAL USE OF SCOOTERS WAS CONCERNED, A DECISION HAS ALREADY BEEN TAKEN TO DIS ALLOW AND THE MOTOR CAR EXPENSE AS PER THE ABOVE PARAGRAPH. THEREFORE, ON THE SAME REASONS AGAIN THE DISALLOWANCE SHALL NOT BE JUSTIFIABLE. WITH THE RESULT, THE DISALLOWANCE IN RESPECT OF VEHICLE FUEL AND MAINTEN ANCE EXPENSES IS HEREBY DIRECTED TO BE DELETED. THEREFORE, THIS G ROUND IS PARTLY ALLOWED. 7.1. THE NEXT GROUND IS THE DISALLOWANCE IN RESPEC T OF INSURANCE EXPENSES. THE SAME HAS TO BE DECIDED AS PER THE AB OVE OBSERVATION THAT IN RESPECT OF THE MOTOR CAR UPTO THE EXTENT OF 1/5 TH OF THE TOTAL CLAIM HAS TO ITA NO. 1530/AHD/2010 MR.BHADRESH JASHWANTLAL SHAH VS. DCIT ASST.YEAR 2007-08 - 8 - BE DECIDED, HOWEVER, THE INSURANCE IN RESPECT OF TH E OTHER VEHICLES IS TO BE FULLY ALLOWED. THUS, THIS GROUND IS ALSO PARTLY ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 31 / 08 /2010. SD/- SD/- ( G.D.AGRAWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 31/ 08 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XVI, AHMEDABAD 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD