SHRI MAHESH CHANDRA CHAHAR, JHUNJHUNU V. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU

ITA 155/JPR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5126 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 06-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANMOHAN KANDPAL ACIT DHK
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Rectification of order
• Section: 143(3); 145(3); 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH JES'K LH 'KEKZ] YS[KK LNL; DS LE{K BEFORE: SHRI RAMESH C SHARMA , ACCOUNTANT MEMBER VK;DJ VIHY LA -@ ITA NO. 960/JP/2017 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 SHRI MAHESH CHANDRA CHAHAR, M/S AJAY MOTORS, ROAD NO.3, JHUNJHUNU. C UKE VS. A.C.I.T., CIRCLE-JHUNJHUNU. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: ACUPC 1787 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA -@ ITA NO. 155/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 SHRI MAHESH CHANDRA CHAHAR, M/S AJAY MOTORS, ROAD NO.3, JHUNJHUNU. C UKE VS. A.C.I.T., CIRCLE-JHUNJHUNU. LFKK;H YS[KK LA -@THVKBZVKJ LA -@ PAN/GIR NO.: ACUPC 1787 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKS J LS @ ASSESSEE BY : SHRI K.L. MOOLCHANDANI (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI MANMOHAN KANDPAL (ACIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 22/11/2019 MN?KKS 'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/02/2020 VKNS'K@ ORDER PER: R.C. SHARMA, A.M. THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-3, JAIPUR DATED 09/10/2017 AND 21/01/2018 ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 2 RESPECTIVELY FOR THE A.Y. 2012-13 AND 2013-14 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT). 2. COMMON GRIEVANCE OF THE ASSESSEE IN BOTH THE YEARS RELATE TO AD HOC ADDITION ON ACCOUNT OF SERVICE CHARGES RECEIPTS AND AD HOC DISALLOWANCE OF VEHICLE AND TELEPHONE EXPENSES ON ESTIMATED BASIS WITHOUT GIVING ANY REASONABLE JUSTIFICATION FOR THE SAME. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MOTOR AND SPARE PARTS. DURING THE A.Y. 2012-13, THE A.O. HAS MADE ADDITION OF RS. 6.00 LACS ON ACCOUNT OF SERVICE RECEIPTS. THE A.O. OBSERVED THAT OUT OF TOTAL SERVICE RECEIPTS OF RS. 10,69,715/-, THE ASSESSEE HAS CLAIMED FREE SERVICE CHARGES AMOUNTING TO RS.10,29,044/-, IF THE AMOUNT OF FREE SERVICE CHARGES ARE EXCLUDED FROM THE TOTAL SERVICE RECEIPTS DECLARED THAN ONLY AN AMOUNT OF RS. 40,670/- REMAINS FOR THE PAID SERVICE CHARGES. THE ASSESSEE IS AN AUTHORIZED DEALER OF HERO HONDA MOTOR CYCLE AT DISTRICT HEADQUARTER AND THE MAJORITY OF MOTOR BIKES ARE OF THE HERO HONDA COMPANY THEN THERE WOULD HAVE BEEN CONSIDERABLE CHARGES ON ACCOUNT OF PAID SERVICES. NOT ACCEPTING THE ASSESSEES CONTENTION, THE A.O. ESTIMATED ADDITIONAL INCOME OF RS. 6.00 LACS ON ACCOUNT OF SERVICE CHARGES. BY THE ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 3 IMPUGNED ORDER, THE LD. CIT(A) HAS CONFIRMED THE ACTION OF THE A.O. AFTER OBSERVING AS UNDER: 4.3 I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME. I FIND THAT THE ASSESSEE IS SOLE DEALER OF HERO HONDA COMPANY IN THE CITY OF JHUNJHUNU AND MOST OF THE OWNERS OF THE VEHICLES ARE AVAILING PAID SERVICE FROM THIS DEALER ONLY. THE CONTENTION OF THE ASSESSEE THAT PEOPLE ARE AVAILING THE SERVICES FROM UNORGANIZED SECTOR IS NOT AT ALL FULLY JUSTIFIED BECAUSE MOST OF THE OWNERS ARE APPROACHING TO THE AUTHORIZED DEALERS FOR PAID SERVICES AFTER THEIR FREE SERVICES. FURTHERMORE, THE ASSESSEE IS ALSO CARRYING OUT REPAIRING OF ENGINE WORKS AT DEALER WORKSHOP FOR WHICH HUGE AMOUNT IS PAID BY THE VEHICLE OWNERS. MOREOVER, THE ASSESSEE HAS NOT COUNTED FOR THE ENGINE OIL FOR WHICH MONEY IS PAID BY THE OWNERS EVEN DURING THE FREE SERVICES OF THE VEHICLES. THE WORTHY CIT(A) VIDE HIS ORDER DATED 24/12/2012 IN APPEAL NO.965/JPR/11-12 IN THE ASSESSEE'S OWN CASE FOR A.Y.2009-10 HAS SUSTAINED THE ADDITION MADE FOR THIS COUNT. THEREFORE THE PAID SERVICE CHARGED RECEIPTS DURING THE YEAR UNDER CONSIDERATION ARE ESTIMATED ON CONSUMMATIVE BASIS AT RS.6,00,000/- AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE A/R OF THE APPELLANT MADE GENERAL SUBMISSION BUT HE DID NOT ARGUE ON DIRECTLY ON THE ESTIMATION OF THE SERVICE INCOME. THE CIT(A) ALSO CONFIRMED THE ADDITION IN A.Y. 2009-10 AND THE APPELLANT ALSO ACCEPTED. THEREFORE CONSIDERING THE FACTS OF THE CASE AND NATURE OF BUSINESS I AM THE VIEW THAT ASSESSING OFFICER RIGHTLY ESTIMATED AND MADE ADDITION OF RS.6,00,000/- IN SERVICE INCOME. HENCE I CONFIRM THE ADDITION OF RS.6,00,000/-. THIS GROUND IS NOT ALLOWED. ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 4 4. SHRI K.L. MOOLCHANDANI, THE LD AR APPEARING ON BEHALF OF THE ASSESSEE HAS CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A DETAILED LEDGER ACCOUNT OF THE SERVICE INCOME WAS PRODUCED WHICH WAS TEST CHECKED BY THE ID. AO. COPY OF SUCH LEDGER ACCOUNT IS SUBMITTED HEREWITH IN THE PAPER BOOK PLACED AT PAGES NO. 1 TO 37). AS PER THIS ACCOUNT IT IS NOTED THAT ALL THE RECEIPTS ARE PROPERLY ACCOUNTED FOR AND VOUCHED. NO DISCREPANCY OR ANY MISTAKE COULD BE POINTED OUT IN RESPECT OF SUCH RECEIPTS. IN ABSENCE ANY SPECIFIC MISTAKE OR DISCREPANCY, NO VALID ADDITION CAN BE MADE ON 'PRESUMPTIONS' AND 'SURMISES'. FOR MAKING AND CONFIRMING ADDITION UNDER THIS HEAD, THE AUTHORITIES BELOW HAD REFERRED TO THE ADDITION OF RS.3,56,043/- MADE IN THE A.Y. 2009-10. IN SUPPORT, OF SUCH INCOME AND RECEIPTS, DETAILED LEDGER ACCOUNT WAS SUBMITTED. NO INSTANCE OF SUPPRESSION OF THE 'SERVICE INCOME' OR ANY INSTANCE OF THE UN-VOUCHED RECEIPTS COULD BE POINTED OUT OR BROUGHT ON RECORD TO MAKE THE ADDITION TO THE MAGNITUDE OF RS.6 LAC; PARTICULARLY WHEN THE BOOKS WERE DULY AUDITED AND ACCEPTED BY THE DEPARTMENT. IN ABSENCE OF ANY SPECIFIC AND DEFINITE INSTANCE OF THE SUPPRESSED INCOME, NO VALID ADDITION COULD BE MADE. THE SAME DESERVES TO BE DELETED SUMMARILY FOR THE FOLLOWING REASONS: ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 5 (I) ON PERUSAL OF THE ASSESSMENT ORDER, IT IS NOTED THAT THE BOOKS OF THE APPELLANT WERE DULY AUDITED AND ACCEPTED BY THE DEPARTMENT. NO DISCREPANCY WHATSOEVER COULD BE POINTED OUT IN ANY MANNER. IN THE CIRCUMSTANCES, THE BOOK RESULTS WERE NOT REJECTED U/S 145(3) OF THE . ACT. THIS FACT IS EVIDENT FROM THE BODY OF THE ASSESSMENT ORDER. AS PER PLETHORA OF JUDICIAL CITATIONS, NO VALID ADDITION CAN BE MADE IN ABSENCE OF THE REJECTION OF THE BOOK RESULTS U/S 145(3) OF THE ACT. FOR THE PURPOSE, RELIANCE IS PLACED ON THE JUDGMENT OF HONORABLE SUPREME COURT IN THE CASE OF M/S SARGAM CINEMA V CIT (2011) 197 TAXMAN (203). 5. IT WAS FURTHER ARGUED BY THE LD AR THAT THE LD. AUTHORITIES BELOW HAD HOWEVER ATTEMPTED TO JUSTIFY SUCH ADDITION ON THE BASIS OF THE ADDITION OF RS.3,56,000/- ALLEGEDLY MADE AND CONFIRMED BY THE AO & CIT (A) IN THE ASSESSMENT YEAR 2009-10. ON CAREFUL STUDY OF THE SAID APPEAL ORDER IT IS NOTED THAT INITIALLY SUCH ADDITION WAS DELETED BY THE LD. CIT (A) VIDE PARA 5.3 AT PAGE NO.8 OF THE APPEAL ORDER WHICH IS BEING REPRODUCED HEREUNDER FOR READY REFERENCE: 'HOWEVER, THIS CANNOT BE A BASIS FOR MAKING SUCH ADDITION IN AS MUCH AS THERE IS NOTHING ON RECORD WHICH MAY INDICATE THAT THE ASSESSEE HAS SUPPRESSED ANY RECEIPTS. IN FACT, DURING THE ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 6 ASSESSMENT PROCEEDINGS EVEN BEFORE THE AO THE ASSESSEE HAS FILED EXPLANATION AS TO WHY SUCH RECEIPTS HAVE DECREASED. IN THIS BACK-GROUND SUCH ADDITION OF RS.3,56,000/- BY THE AO WAS SIMPLY ON PRESUMPTION BASIS THAT WITH THE INCREASED IN THE TURN-OVER THE SERVICES CHARGES RECEIPT SHOULD ALSO INCREASE. KEEPING IN VIEW THESE FACTS SUCH ADDITION OF RS.3,56,000/- IS FOUND WITHOUT ANY BASIS AND THEREFORE THE SAME IS DELETED.' COPY OF THE RELEVANT APPEAL ORDER IS PLACED IN THE PB AT PAGE NO. 38 TO 54 FOR READY REFERENCE AND RECORD. SUBSEQUENTLY, ON BEING POINTED OUT BY THE AO ABOUT THE SELF-CONTRADICTORY FINDINGS RECORDED IN THE SAME PARA, THE LD. CIT (A) SOUGHT TO RECTIFY SUCH FINDINGS ON THE PLEA THAT IT WAS A TYPOGRAPHICAL MISTAKE OCCURRED DUE TO PASTING OF THE INCORRECT PARA AND DISMISSED THE APPEAL OF THE APPELLANT ON THIS POINT VIDE RECTIFICATION ORDER DATED 25.2.2015. (COPY OF RECTIFICATION ORDER IS PLACED IN PB AT PAGE NO.55 TO 57 FOR KIND PERUSAL AND RECORD). OBVIOUSLY, THE RECTIFICATION ORDER SO PASSED WAS NOT LEGALLY AND FACTUALLY MAINTAINABLE FOR THE REASONS (I) THE 'FINDINGS' AS RECORDED REGARDING MAKING OF THE ADDITION OF RS.3,56,000/- ON THE BASIS OF 'PRESUMPTIONS' CANNOT BE AN APPARENT MISTAKE TO BE COVERED U/S 154 OF THE ACT. THUS, RECTIFICATION OF SUCH 'FINDINGS' WITHIN THE MEANING OF SECTION 154 OF THE ACT IS PATENTLY INCORRECT AND OUT OF THE PURVIEW OF SECTION 154 OF THE ACT. (II) EVEN OTHER- ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 7 WISE ALSO, NO SHOW CAUSE WHAT-SO-OVER WAS ISSUED TO THE APPELLANT TO RECTIFY SUCH ALLEGED MISTAKE. THUS, THE RECTIFICATION ORDER SO PASSED U/S 154 OF THE ACT WAS NOT LEGALLY MAINTAINABLE. DESPITE OF SUCH SHORTCOMINGS IN THE RECTIFICATION ORDER PASSED U/S 154 OF THE ACT, THE APPELLANT DID NOT OBJECT TO THE VALIDITY OF THE ORDER WITH A VIEW TO GET THE PROCEEDINGS CONCLUDED AMICABLY TO AVOID FURTHER CONTROVERSY ON THE POINT. 6. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT NO BASIS HAS BEEN GIVEN BY ANY OF THE LOWER AUTHORITIES FOR MAKING AD HOC ADDITION ON ACCOUNT OF SERVICE CHARGES INCOME. EVEN DURING THE COURSE OF SCRUTINY ASSESSMENT, NO DEFECT WAS POINTED OUT BY THE A.O. IN THE BOOKS OF ACCOUNT NOR THE SAME WERE REJECTED. IN ABSENCE OF ANY SPECIFIC DEFECT OR DISCREPANCY, NO VALID ADDITION CAN BE MADE. IN THE PRESENT CASE, THE AUTHORITIES BELOW HAVE FAILED TO POINT OUT ANY SPECIFIC INSTANCE OF SUPPRESSION OF SERVICE INCOME, OR ANY DISCREPANCY OR MISTAKE IN ANY MANNER. UNDER THESE CIRCUMSTANCES, NO SUCH ADDITION WAS LEGALLY MAINTAINABLE. FOR THIS PURPOSE, RELIANCE CAN ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 8 BE PLACED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF M/S MYSORE FERTILISER CO. VS CIT (1966) 59 ITR 268 AND THE DECISION OF THE ITAT, JAIPUR BENCH IN THE CASE OF RAJ ENTERPRISES VS ITO (1995) 51 TTJ 408 (JP). 8. EVEN THE ORDER OF THE LD. CIT(A) FOR THE A.Y. 2009-10 CLEARLY INDICATES THAT THE ADDITION WAS MADE BY THE A.O. ON PRESUMPTION WITHOUT POINTING OUT ANY DEFECT. EVEN THE RECTIFICATION ORDER PASSED BY THE LD CIT(A) U/S 154 OF THE ACT REVERSING HIS EARLIER FINDINGS, APPEARS TO BE NOT LEGALLY SUSTAINABLE IN SO FAR AS THERE WAS NO APPARENT MISTAKE IN HIS EARLIER ORDER WHICH COULD BE RECTIFIED IN GARB OF SECTION 154 OF THE ACT. HOWEVER, WITHOUT COMMENTING ON THE ORDER PASSED BY THE LD. CIT(A) U/S 154 FOR THE A.Y. 2009-10 REVERSING HIS EARLIER ORDER PASSED, I DO NOT FIND ANY MERIT IN THE AD HOC ADDITION MADE DURING THE YEARS UNDER CONSIDERATION. ACCORDINGLY, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS. 6.00 LACS IN THE A.Y. 2012-13 AND SIMILAR ADDITION OF RS. 3.00 LACS MADE IN THE A.Y. 2013-14. 9. IN THE A.Y. 2012-13, THE A.O. HAS ALSO MADE AD HOC DISALLOWANCE OF RS. 60,000/- ON ACCOUNT OF VEHICLE EXPENSES AND RS. 8,000/- ON ACCOUNT OF TELEPHONE EXPENSES, WHICH WAS RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF RS. 50,000/- ON ACCOUNT OF VEHICLE EXPENSES AND RS. 5,000 ON ACCOUNT OF TELEPHONE EXPENSES. I FOUND THAT THE DISALLOWANCE HAS BEEN ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 9 MADE BY THE LOWER AUTHORITIES ON ESTIMATE BASIS AND WITHOUT POINTING OUT ANY SPECIFIC MISTAKE OR INSTANCE OF DISALLOWABLE NATURE OF EXPENDITURE. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, I RESTRICT THE DISALLOWANCE ON ACCOUNT OF VEHICLE EXPENSES TO THE EXTENT OF RS. 25,000/- AND RS. 2,500/- ON ACCOUNT OF TELEPHONE EXPENSES. 10. IN THE A.Y. 2013-14, THE A.O. HAD MADE ADDITION OF RS. 1,50,000/- OUT OF PETROL EXPENSES AND RS. 10,000/- OUT OF TELEPHONE EXPENSES, WHICH HAD BEEN RESTRICTED BY THE LD. CIT(A) TO THE EXTENT OF RS. 1,00,000/- ON ACCOUNT OF PETROL EXPENSES AND RS. 7,500/- ON ACCOUNT OF TELEPHONE EXPENSES RESPECTIVELY. FOLLOWING THE REASONING GIVEN HEREINABOVE, I DIRECT THE A.O. TO RESTRICT DISALLOWANCE ON ACCOUNT OF PETROL EXPENSES TO THE EXTENT OF RS. 50,000/- AND RS. 3,000/- ON ACCOUNT OF TELEPHONE EXPENSES. I DIRECT ACCORDINGLY. 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN PART, IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2020. SD/- JES'K LH 'KEKZ ( RAMESH C SHARMA ) YS[KK LNL; @ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH FEBRUARY, 2020 *RANJAN ITA 960/JP/2017 &155/JP/2018 MAHESH CHANDRA CHAHAR VS. ACIT 10 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI MAHESH CHANDRA CHAHAR, JHUNJHUNU. 2. IZR;FKHZ @ THE RESPONDENT- THE A.C.I.T., CIRCLE-JHUNJHUNU. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 960/JP/2017 & 155/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR