Mahipatlal Patel, Sambalpur V. DCIT, Sambalpur

ITA 155/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4369 (ITAT-CUTTACK)
• Duration Of Justice: 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 29-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 25-03-2011
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTY
• Assessee Lawyers: S DEYAR

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 155/CTK/2011 (ASSESSMENT YEAR 2007 - 08) MAHIPATLAL PATEL, NEAR BUDHARAJA HIGH SCHOOL, BUDHARAJA, SAMBALPUR. PAN: ABNDPP 6175 D VERSUS DCIT, CIRCLE 2(1),SAMBALPUR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S.DEY,AR FOR THE RESPONDENT SHRI S.C.MOHANTY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSES SEE AGITATES THE ACTION OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE ON ACCOUNT OF NON - RETURN OF EMPTY DRUMS BY THE ASSESSEE WHICH EXPENSES WERE CLAIMED AS PART OF THE CONTRACT BUT NOT PAID FOR BY THE CONTRACTEE. 2. TH E ASSESSEE RAISES THE FOLLOWING GROUNDS. 1. FOR THAT THE DISALLOWANCE OF EXPENDITURE CLAIMED AMOUNTING TO 3,17,456 TOWARDS RECOVERY OF COST OF EMPTY DRUMS BY THE CONTRACTEE IS TOTALLY ARBITRARY, ILLEGAL AND UNJUSTIFIED IN THE PARTICULAR CIRCUMSTANCES OF THE CASE. THE AFORESAID EXPENDITURE HAVING BEEN INCURRED FOR THE PURPOSE OF BUSINESS, THE SAME SHOULD BE A LLOWED. 2. FOR THAT THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AUTHORITY HAVE COMPLETELY MISCONCEIVED THE FACT WHILE DISALLOWING THE EXPENDITURE CLAIMED TO THE TUNE OF 3,17,456 BEING THE COST OF EMPTY DRUMS RECOVERED BY THE DEPARTMENT. THE AF ORESAID EXPENDITURE HAVING BEEN INCURRED WHILE EXECUTING THE WORKS CONTRACT THE SAME IS ALLOWABLE EXPENDITURE. HENCE THE DISALLOWANCE MADE IS LIABLE TO BE STRUCK DOWN. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SOLE ISSUE AGITATED BEFORE US WAS CONSIDERED BY THE LEARNED ASSESSING OFFICER AS FOLLOWS : ITA NO. 155/CTK/2011 2 THE ASS ESSEE HAS CLAIMED DEDUCTION FOR 3,17,456 UNDER THE HEAD COST OF EMPTY DRUMS DEDUCTED BY DEPARTMENT. AS PER THE PROVISIONS, THE CONTRACTOR IS REQUIRED T O RETURN THE EMPTY CEMENT BAGS/DRUMS ETC. DUE TO NON - RETURN OF THE SAME THE COST OF THESE MATERIALS ARE RECOVERED BY THE DEPARTMENT. HENCE, THIS IS NOT AN ADMISSIBLE EXPENDITURE. THE AUTHORISED REPRESENTATIVE O F THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF EVIDENCES, BUT HE WAS UNABLE TO FURNISH THESE EVIDENCES. HENCE, THIS EXPENDITURE, AMOUNTING TO 3,17,456 IS DISALLOWED AN D ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY WHO ON THE ISSUE HAS NOTED AS FOLLOWS: 3.3. I HAVE CAREFULLY CONSIDERED THE MATTER. THE APPELLANT HAS SUBMITTED IN THE FACTS OF THE CAS E THAT AS PER THE TERMS AND CONDITION OF CONTRACT AGREEMENT HE HAS TO RETURN THE EMPTY DRUMS AND BAGS TO THE DEPARTMENT IN SERVICEABLE CONDITION. THE FACTS REMAINS THAT THE TERMS & CONDITION OF THE CONTRACT AGREEMENT IS BINDING ON BOTH THE CONTRACTOR AND THE DEPARTMENT. AN AGREEMENT WHICH IS ENFORCEABLE BY LAW IS A CONTRACT. CONSEQUENTLY, THE A.O. HAS RIGHTLY DISALLOWED 3,17,.456 UNDER THE HEAD COST OF EMPTY DRUMS DEDUCTED BY THE DEPARTMENT. THE DISALLOWANCE OF 3,17,456 IS CONFIRMED. 5. ON PERUSAL OF THESE TWO OBSERVATIONS OF THE TWO DIFFERENT AUTHORITIES CLEARLY INDICATE THAT THE ASSESSEE HAS BEEN SUBJECTED TO DOUBLE DISALLOWANCE ONCE FROM THE DEPARTMENT CONTRACTEE AND THEN AGAIN FROM THE I.T. DEPARTMENT. THE PROPOSAL BY THE LEARNED DR TO BRING IT TO TAX AS A CLOSING STOCK SERVES NO PURPOSE INSOFAR AS THE TAXATION OF A SCARP MATERIAL WHOSE VALUE MAY NOT BE DETERMINABLE CANNOT BE HELD AS STOCK AGAINST WHICH THE OPENING STOCK FOR THE SUBSEQUENT YEAR WILL HAVE TO BE ALLOWED AS EXPENSE WITHOUT RAISING A BILL ON THE DEPARTMENT . THE EXPENDITURE HAS BEEN INCURRED ITA NO. 155/CTK/2011 3 I S AN UNDISPUTED FACT AND THE ASSESSING OFFICER COULD NOT TAKE SEAT OF THAT OF THE CONTRACTEE FOR NOT PAYING AS WELL AS DEDUCTING FOR BILL PAYMENT . THE ASSESSEE IS ENTITLED TO CLA IM THIS EXPENDITURE AGAINST INCOME WHICH HAS BEEN POINTED OUT NOT PAID TO THE ASSESSEE REQUIRES NO FURTHER DELIBERATION. THIS DISALLOWANCE IS THEREFORE, DIRECTED TO BE DELETED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLA NT: MAHIPATLAL PATEL, NEAR BUDHARAJA HIGH SCHOOL, BUDHARAJA, SAMBALPUR. 2. THE RESPONDENT: DCIT, CIRCLE 2(1),SAMBALPUR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY OR DER, SENIOR PRIVATE SECRETARY.