DCIT, Muzaffarnagar V. Sh Balbir Singh, Muzaffarnagar

ITA 1692/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52938 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Assessee Lawyers: PREM PRAKASH
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL ITA NO. 1692(DEL)/2010 ASSESSMENT YEAR: 2006-07 DEPUTY COMMISSIONER OF SHRI BALB IR SINGH, INCOME-TAX, CIRCLE 2, VS. S/O SH RI MAN SINGH, MUZAFFARNAGAR. V ILL & POST-KAKDA, TEHSIL BUDHANA, MUZZAFARNAGAR. PAN-ACAPS9233K (APPELLANT) (RESPON DENT) APPELLANT BY : MRS. ANUSHA KHURANA, SR. D R RESPONDENT BY: SHR I PREM PRAKASH, ADVOCATE DATE OF HEARING : 19.09.2011 DATE OF PRONOUNCEMENT: 30.09.2011. ORDER PER K.G. BANSAL : AM IN THIS APPEAL, THE REVENUE HAS TAKEN UP THREE G ROUNDS AGAINST THE DELETING OF THE ADDITION OF- (I) RS. 1,58,000/-, R S. 15,000/- AND RS. 50,000/- OUT OF SOKHTA EXPENSES, BARUD EXPENSES AND MITT I,PATHAR EXPENSES RESPECTIVELY; (II) RS. 8.00 LAKH IN RESPECT OF UNE XPLAINED CREDIT, AND (III) RS. 18,000/- IN RESPECT OF SALARY EXPENSES. ITA NO. 1692(DEL)/2010 2 2. THE BACKGROUND FACTS ARE THAT THE ASSESSEE IS DERIVING INCOME FROM A BRICK KILN, TWO PARTNERSHIP FIRMS AND AGRICUL TURE. THE RETURN FOR THIS YEAR WAS FILED ON 28.06.2007 DECLARING TOTAL INC OME OF RS. 5,61,800/-. RETURN WAS PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT). THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY BY ISSUING NOTICE U/S 143(2) OF THE ACT. THE BOOKS OF ACCOUNT WERE PRODUCED AND TEST CHECKED. THE TOTAL INCOME WAS ASSESSED AT RS. 14, 96,240/- AND AGRICULTURAL INCOME OF RS. 1,50,000/- IN THE ORDER PASSED ON 29.12.2008. 3. COMING TO THE GROUNDS BEFORE US, THE AO MADE D ISALLOWANCE FROM EXPENDITURE DEBITED IN THE BOOKS UNDER THREE HEADS MENTIONED ABOVE. IN RESPECT OF SOKHTA EXPENSES, IT IS MENTIONED THAT BILLS OR VOUCHERS WERE NOT PRODUCED FOR VERIFICATION. THE EXPENSES FOR THI S YEAR HAVE BEEN SHOWN AT RS. 15,80,364/- AGAINST RS. 11,35,675/- IN LAST YE AR, SHOWING A SUBSTANTIAL INCREASE, WHILE THE INCREASE IN PRODUCTION AND TUR NOVER IS MARGINAL. SINCE BILLS WERE NOT PRODUCED FOR VERIFICATION, A SU M OF RS. 1,58,036/-, REPRESENTING 10% OF THE EXPENDITURE, HAS BEEN DI SALLOWED IN COMPUTING THE TOTAL INCOME. IN RESPECT OF BARUDA EXPENSES OF RS. 45,500/-, IT IS MENTIONED THAT SUCH EXPENSES WERE NOT INCURRED IN THE EARLIER YEAR. BILLS ITA NO. 1692(DEL)/2010 3 OR VOUCHERS WERE ALSO NOT PRODUCED. THEREFORE, RS. 15,000/- WERE DISALLOWED OUT OF THIS EXPENDITURE. FINALLY, CO MING TO MITTI, PATHER EXPENSES OF RS. 2,38,200/-, IT IS MENTIONED THAT THEY ARE EXCESSIVE WHEN COMPARED WITH EXPENSES INCURRED BY OTHER BRICK KI LN OWNERS. IN THIS CONNECTION, THE CASES OF MAHESH BRICK FIELDS AND M/S BABA BRICKS SUPPLY HAVE BEEN CITED, WHO INCURRED EXPENSES OF RS. 1, 62,000/- AND RS. 1,05,500/- RESPECTIVELY. THE ASSESSEE IS A PART NER IN THESE FIRMS, WHICH CARRY ON THE SAME BUSINESS. THE BILLS OR VOUCHE RS WERE ALSO NOT PRODUCED. THEREFORE, RS. 50,000/- WERE DISALLOWED OUT OF THI S EXPENDITURE. VARIOUS SUBMISSIONS WERE MADE BEFORE THE FIRST APPELLATE AU THORITY. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSI ONS MADE BEFORE HIM, THE LD. CIT(APPEALS) HAS MENTIONED THAT THE ASSESSEE HAS DECLARED NET PROFIT RATE OF 9.5%, WHICH IS HIGHER THAN PROFIT SHOWN B Y OTHER BRICK KILN OWNERS IN MUZAFFARNAGAR. THIS RATIO IS ALSO BETTER THAN THE RATIO DISCLOSED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR WHEN IT STOOD AT 5.65%. THE APPLICATION OF NET PROFIT RATE OF 8% HAS BEEN HEL D TO BE REASONABLE IN THE CASE OF YOGENDRA SINGH BHATTA, MUZZAFARNAGAR. THE TRIBUNAL HAS ALSO FOUND THE RATE OF 8% TO BE REASONABLE IN THE CAS E OF JAIMATESHWARI INT BHATTA, MUZAFFARNAGAR AND M/S DEVENDER KUMAR CONT RACTOR. THEREFORE, ITA NO. 1692(DEL)/2010 4 EVEN IF THE ASSESSEE HAS NOT PRODUCED THE BILLS, HE SHOULD NOT HAVE MADE ANY ADDITION LOOKING TO THE FACT THAT NET PROFIT RATIO IS QUITE REASONABLE. 4. BEFORE US, THE LD. DR REFERRED TO THE FINDINGS OF THE AO, WHILE THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE FINDI NGS OF THE LD. CIT(APPEALS). THEY HAVE RELIED ON THE RESPECTIVE ORDERS. 4.1 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE ASSESSMENT IN THIS C ASE HAS BEEN MADE ON THE BASIS OF BOOKS OF ACCOUNT PRODUCED BY THE ASSESS EE. IT IS NOT A NO- ACCOUNTS CASE WHERE NET PROFIT RATIO HAS TO BE ESTIMATED. IT IS ALSO NOT A CASE WHERE BOOKS HAVE BEEN REJECTED IN TOTO. IT IS A CASE WHERE BOOKS HAVE BEEN EXAMINED AND IN ABSENCE OF PRODUCTION OF COMPLETE EVIDENCE SOME DISALLOWANCE HAS BEEN MADE OUT OF EXPENSES D EBITED UNDER THREE HEADS. THEREFORE, THE FINDING OF THE LD. CIT(A) BASED UPON REASONABLENESS OF NET PROFIT RATIO IS NOT SUSTAINABLE. FURTHE R, THE ASSESSEE HAS FAILED TO PRODUCE ANY EVIDENCE WHATSOEVER FOR INCURRING TH E EXPENDITURE UNDER THE AFORESAID HEADS. THEREFORE, SUCH EXPENSES HAVE TO BE ESTIMATED. THE AO HAS MADE COMPARISON WITH THE EXPENSES INCURRED IN LAST YEAR AND WITH EXPENSES INCURRED ON MITTI, PATHAR BY OTHER BRIC K KILN OWNERS. NO FAULT ITA NO. 1692(DEL)/2010 5 CAN BE FOUND WITH THE APPROACH FOLLOWED BY HIM. HO WEVER, WHILE COMPARING THE EXPENSES OF LAST YEAR AND THIS YE AR, HE FAILED TO TAKE INTO ACCOUNT THE FACT THAT OTHER FUELS, I.E., MAILLI AN D COAL WERE ALSO USED IN MANUFACTURING PROCESS LAST YEAR. THEREFORE, T HE TOTAL EXPENDITURE ON FUEL AMOUNTED TO RS. 14,67,509/-. IN THIS YEAR, THE A SSESSEE DID NOT USE MAILLI AND COAL BUT USED BARUDA. THUS, TOTAL FUEL EXPE NSES THIS YEAR AMOUNTED TO RS. 16,25,864/-. THESE FIGURES ARE MORE OR LESS COMPARABLE AND, THEREFORE, THE BASIC FINDING THAT EXPENSES INCUR RED IN THIS YEAR ARE MUCH HIGHER THAN LAST YEAR NO LONGER STANDS. ACCORD INGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS RIGHT IN HOLDING THAT NO DISALLOWANCE COULD HAVE BEEN MADE OUT OF SOKHTA AND BARUDA EXPENSES. F URTHER, COMING TO DISALLOWANCE FROM MITTI, PATHAR EXPENSES, IT IS SEEN THAT THE AO HAS CONSIDERED COMPARABLE CASES. WE DO NOT FIND A NY FAULT WITH SUCH DISALLOWANCE ESPECIALLY IN A SITUATION WHERE THE ASSESSEE HAS NOT PRODUCED ANY BILL OR VOUCHER. THEREFORE, THE ORDE R OF THE LD. CIT(A) IS REVERSED IN THIS MATTER. THUS, GROUND NO. 1 IS P ARTLY ALLOWED. 5. IN REGARD TO THE CREDIT OF RS. 8.00 LAKH, BEING LOAN FROM SHRI RAM PAL, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT HIS STATEMENT WAS RECORDED ON 26.12.2008. IT WAS DEPOSED THAT HE RECEIVED RETI REMENT BENEFITS AMOUNTING ITA NO. 1692(DEL)/2010 6 TO RS. 11,81,758/- IN OCTOBER, 2005. OUT OF THIS , A SUM OF RS. 3.00 LAKH WAS EXPENDED AS FEE OF THE DAUGHTER, WHO IS STUD YING IN THE MEDICAL COLLEGE. HIS SON IS ALSO STUDYING IN AN ENGINEERING COLLEGE. IT IS FURTHER DEPOSED THAT THE ASSESSEE IS A NATIVE OF HIS VIL LAGE AND A CLOSE FRIEND. THE AMOUNT WAS LENT AT THE RATE OF INTEREST OF 8% P.A . THE PRINCIPAL AMOUNT IS YET TO BE RETURNED TO HIM. THE AO CONSIDERED VAR IOUS FACTS AND THE STATEMENT. IT IS MENTIONED THAT NEITHER THE ASSESS EE NOR THE LENDER HAVE SHOWN PAYMENT OR RECEIPT OF THE INTEREST. THE A SSESSEE HAS NOT SHOWN THE PURPOSE OF TAKING THE LOAN AS THE AMOUNT HAS NOT BEEN INVESTED IN HIS OWN BRICK KILN OR IN THE PARTNERSHIP FIRMS WHERE HE I S A PARTNER. AN AMOUNT OF RS. 3.00 LAKH WAS CREDITED IN MAY AND JUNE, 2005 I N THE BOOKS OF HIS BRICK KILN. THIS AMOUNT HAS BEEN WITHDRAWN IN MARCH, 200 6. THE AMOUNT WAS DEPOSITED IN THE BANK ACCOUNT MAINTAINED WITH PUN JAB NATIONAL BANK AND IT HAS BEEN WITHDRAWN ON 09.11.2005 AND 12.11.2005 IN INSTALLMENTS OF RS. 2.00 LAKH AND RS. 6.00 LAKH RESPECTIVELY. THE U TILIZATION OF WITHDRAWALS HAS NOT BEEN EXPLAINED. ON THESE FACTS, IT HAS BEEN CONCLUDED THAT THE LOAN IS NOT GENUINE AND THE AMOUNT HAS BEEN RETUR NED TO THE LENDER IN CASH FOR PAYING EXPENDITURE OF THE EDUCATION OF THE C HILDREN. THUS, ADDITION OF RS. 8.00 LAKH HAS BEEN MADE. ITA NO. 1692(DEL)/2010 7 5.1 VARIOUS SUBMISSIONS WERE MADE BEFORE THE LD. C IT(APPEALS). HE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIO NS MADE BEFORE HIM. IT IS MENTIONED THAT THE LOAN HAS BEEN RECEIVED BY WAY OF A DEMAND DRAFT. IN ORDER TO VERIFY THE TRANSACTION, THE PASS BOO K OF THE LENDER HAS BEEN PRODUCED. HE HAS BEEN ASSESSED TO TAX FOR A LON G TIME. HE DEPOSITED THE RETIREMENT BENEFITS IN THE BANK ACCOUNT, FROM WHI CH THE LOAN HAS BEEN GIVEN. THEREFORE, HIS CREDITWORTHINESS AND THE G ENUINENESS OF THE TRANSACTION STANDS ESTABLISHED. IT IS FURTHER MENTIONED THAT THERE IS NO EVIDENCE THAT THE MONEY RECEIVED HAS BEEN RETURNE D TO THE LENDER IN CASH. ACCORDINGLY, IT HAS BEEN HELD THAT APPROPRIATE JUST IFICATION HAS BEEN FURNISHED U/S 68 AND LOOKING TO VARIOUS DECIDE D CASES IN THE MATTER, THE ADDITION IS NOT SUSTAINABLE. 5.2 BEFORE US, THE LD. DR REFERRED TO THE FINDIN GS OF THE AO AND IN PARTICULAR OUR ATTENTION HAS BEEN DRAWN TO THE F ACT THAT BALANCE OF PROBABILITIES STANDS AGAINST THE GENUINENESS OF LOAN. IN REPLY, THE LD. COUNSEL RELIED ON THE ORDER OF LD. CIT(APPEALS) . 5.3 WE HAVE CONSIDERED THE FACTS OF THE CASE. THE LENDER IS AN IDENTIFIED PERSON, WHOSE STATEMENT HAS BEEN RECORDED. IT H AS BEEN DEPOSED THAT HE ITA NO. 1692(DEL)/2010 8 RECEIVED RETIREMENT BENEFITS OF ABOUT RS. 11.81 L AKH, OUT OF WHICH A SUM OF RS. 8.00 LAKH WAS LENT TO THE ASSESSEE BY WAY OF A DEMAND DRAFT. HE HAS BEEN ASSESSED TO TAX FOR A LONG TIME. HIS PASS BO OK HAS BEEN PRODUCED FOR VERIFICATION OF THE TRANSACTION. IN THIS SITUATIO N, THE IDENTITY, THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIO N STAND ESTABLISHED ON A PRIMA FACIE BASIS. THEREAFTER, IT IS FOR THE AO T O BRING EVIDENCE ON RECORD TO DISPROVE ONE OR MORE OF THE ESSENTIAL CONDITIO NS FOR HOLDING LOAN TO BE A GENUINE LOAN. THIS ONUS SOUGHT TO BE DISCHARGED MERELY BY MAKING SOME THEORETICAL ASSUMPTIONS, NAMELY, -(I) INTEREST HA S NOT BEEN CLAIMED OR OFFERED FOR TAX BY THE ASSESSEE AND THE LENDER RESPECTIVELY; (II) THE MONEY HAS PROBABLY BEEN RETURNED IN CASH IMMEDIATELY, AN D (III) THE PURPOSE OF TAKING LOAN HAS NOT BEEN ESTABLISHED BY THE AS SESSEE. ACCORDING TO US, THESE SPECULATIVE ASSERTIONS DO NOT SHIFT THE O NUS AGAIN ON THE ASSESSEE. THEREFORE, THE BURDEN PLACED ON THE ASSESSEE STAND S DISCHARGED. IN VIEW OF THESE FACTS, IT IS HELD THAT THE LD. CIT(APPEA LS) RIGHTLY DELETED THIS ADDITION. IN THE RESULT, GROUND NO. 2 IS DISMISSE D. 6. IN REGARD TO DISALLOWANCE OF SALARY PAID TO PRABHAKAR KAUSHIK FOR PERFORMING ASSESSEES DUTIES AS PARTNER IN TWO FI RMS, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT PROVED THAT THE EXPENDITURE HAS ITA NO. 1692(DEL)/2010 9 BEEN INCURRED FOR THE PURPOSE OF BUSINESS FOR THE REASON THAT NO PROOF OF ACTUAL SERVICES COULD BE BROUGHT ON RECORD. THE LD. CIT(APPEALS) DELETED THE ADDITION BY MENTIONING THAT THE ASSESSEE FIL ED CONFIRMATION LETTER FROM THE PRABHAKAR KAUSHIK FOR ATTENDING TO THE WORK O F TWO PARTNERSHIP FIRMS AS THE ASSESSEE WAS BUSY WITH HIS OWN BRICK KILN . WE DO NOT FIND ANY INFIRMITY IN THIS ORDER. THEREFORE, GROUND NO. 3 IS ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (I.P. BANSAL) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- SHRI BALBIR SINGH, KAKDA, MUZAFFARNAGAR. DY. CIT, CIRCLE-2, MUZAFFARNAGAR. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.