Shri Upendra N.Patel, Baroda V. The ACIT., Circle-2(2), Baroda

ITA 1775/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8612 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO. 1775/AHD/2015 (ASSESSMENT YEAR: 2006-07) UPENDRA N. PATEL 3, UTKANTH SOCIETY, BEHIND ALKAPURI CLUB ROAD, BARODA - 390007 APPELLANT VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2(2), BARODA RESPONDENT PAN: ACWPP0823G /BY ASSESSEE : ARTI N. SHAH, A.R. /BY REVENUE : SHRI ROOPCHAND, ADDL. CIT D.R. /DATE OF HEARING : 29.08.2017 /DATE OF PRONOUNCEMENT : 30.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006-07 ARISES FROM THE CIT(A)-5, VADODARAS ORDER DATED 04.02.2015, IN CAS E NO. CAB/II-400/13-14, UPHOLDING ASSESSING OFFICERS ACTION IMPOSING PENAL TY OF RS.12,66,788/- IN ITA NO. 1775/AHD/15 (UPENDRA N. PATEL VS. ACIT) A.Y. 2006-07 - 2 - HIS ORDER DATED 31.01.2014, IN PROCEEDINGS U/S. 271 (1)(C) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. 2. WE NOTICE AT THE OUTSET THAT BOTH THE LOWER AUTH ORITIES LEVY THE IMPUGNED PENALTY OF RS.12,66,788/- PERTAINING TO TW O QUANTUM DISALLOWANCES/ADDITIONS OF BAD DEBTS OF RS.20,40,45 1/- AND THE ONE PERTAINING TO LAND LEVELLING EXPENSES OF RS.17,23,034/- MADE I N THE COURSE OF A REGULAR ASSESSMENT FRAMED ON 26.12.2008 AS UPHELD IN CIT(A) S QUANTUM LOWER APPELLATE ORDER DATED 04.03.2010. LEARNED AUTHORIZ ED REPRESENTATIVE INFORMS US THAT THE ASSESSEE HAD PREFERRED HIS QUAN TUM APPEAL ITA NO.1564/AHD/2010. A CO-ORDINATE BENCH THEREIN DELE TED THE ABOVE FORMER DISALLOWANCE OF BAD DEBTS IN ITS ORDER DATED 11.03. 2016. COPY OF THE SAID ORDER FORMS PART OF THE CASE FILE. WE ACCORDINGLY OBSERVE THAT THE CORRESPONDING IMPUGNED PENALTY THEREFORE HAS NO LEG S TO STAND. THE SAME IS THEREFORE DIRECTED TO BE DELETED. 3. WE NOW ADVERT TO THE LATTER ISSUE OF LAND DEVELO PMENT EXPENSES. THE ABOVE CO-ORDINATE BENCH ADJUDICATES ASSESSEES QUAN TUM PLEA AS FOLLOWS: 5. THIS LEAVES US WITH ASSESSEE'S SECOND SUBSTANTI VE GROUND CHALLENGING DISALLOWANCE OF RS. 24,95,442/- OF LAND DEVELOPMENT EXPENSES. HE HAD DEBITED VARIOUS SUMS OF LEVELING EXPENSES, LAND WIRE FENCIN G EXPENSES AND LAND DEVELOPMENT EXPENSES OF RS. 8,54.440/-, RS. 4,49,10 0/- AND RS. 42,81,434/- AS PER ASSESSMENT ORDER. HE WOULD SUBMIT THE RELEVANT LEDG ER ACCOUNT. THE ASSESSING OFFICER SOUGHT FOR RELEVANT DETAILS THEREOF LIKE BI LLS, VOUCHERS AND REGISTERS AFTER NOTICING THAT WHOLE OF THE EXPENSES WERE INCURRED I N CASH. HE TOOK COGNIZANCE OF THE FACT THAT LAND DEVELOPMENT EXPENSES OF RS. 9,90 ,400/- WAS INCURRED IN ASSESSMENT YEAR 2003-04 AND RS. 7,32,634/- IN THE N EXT ASSESSMENT YEAR. THE ASSESSING OFFICER TREATED THE SAME AS PRIOR PERIOD EXPENSES DEBITED TO P & L ACCOUNT OF THE IMPUGNED ASSESSMENT YEAR. THE ASSESS ING OFFICER ACCORDINGLY DISALLOWED THE IMPUGNED SUM FORMING GROSS TOTAL OF THE ABOVE TWO FIGURES COMING TO RS. 17,23,034/-. ITA NO. 1775/AHD/15 (UPENDRA N. PATEL VS. ACIT) A.Y. 2006-07 - 3 - IT EMERGES FROM THE CASE FILE THAT THE ASSESSING OF FICER THEREAFTER DISALLOWED 20% OF RS. 38,61,940/- {(854,440/- +4491 00+2558400-(42,81,434/- LESS 17,23,034/-)}BY HOLDING THE SAME TO HAVE BEEN INCURRED TOWARDS NON-BUSINESS PURPOSES COMING TO RS. 7,72,388/-. THIS DISALLOWANC E IS ACCORDINGLY AGGREGATING TO RS. 24,95,422/- I.E. RS. 17,23,034/- + RS. 7,72, 388/-. 6. THE CIT(A) REJECTS ASSESSEE'S ARGUMENTS AS FOLLO WS:- '5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. COUNSEL AND THE FACTS OF THE CASE. AS FAR AS THE EXPENSES INCURRED IN THE EARLIER YEARS ARE CONCERNED, THE LIABILITY OF EXPENSES WAS NOT RELATE D TO THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL COULD NOT PROVE THAT THE LIABILITY WAS MATERIALISED DURING THE YEAR UNDER CONDIDERATION. S INCE, THE EXPENSES WERE INCURRED IN THE A.Y. 2003- 04 AND A.Y. 2004-05, THE SAME CANNOT BE ALLOWED. IN VIEW THEREOF, HAVE NO ALTERNATIVE EXCEP T TO CONFIRM THE FINDING OF THE ASSESSING OFFICER. THE DISALLOWANCES OF EXPE NSES OF RS. 17,23,034/- (RS. 9,90,400/- + RS. 7,32,634/-) ARE ACCORDINGLY S USTAINED. I HAVE ALSO GONE THROUGH THE DETAILS OF OTHER EXPENSES. THE LEV ELING EXPENSES WERE PAID TO EIGHT-NINE PERSONS IN CASH ON SELF MADE VOUCHERS ON THE BASIS OF RS. 8,000/- TO 9,400/- PER DAY. THE LD. COUNSEL COULD N OT EXPLAIN AS TO WHAT WAS THE BASIS OF RS. 8,000/- TO 9,400/- PER DAY PER PERSON. THE LAND WIRE FENCING EXPENSES OF RS. 4,49,100/- WERE PAID TO ONE SHRI BHARATBHAI PRAJAPATI ON THE BASIS OF RS. 18,500/- RS. 19,000/- AND RS. 19,500/- PER DAY FOR TWENTY FOUR DAYS AND THE SAME WERE PAID IN CASH . THE LD. COUNSEL COULD NOT EXPLAIN AS TO WHAT WAS THE BASIS OF RS. 1 8,500/- TO 19,500/- PER DAY. LIKEWISE, THE LAND DEVELOPMENT EXPENSES OF RS. 25,58,400/- WERE PAID TO SIX- SEVEN PERSONS ON THE BASIS OF RS. 12,000/- TO 18,800/- PER DAY PER PERSON AND THE SAME WERE PAID IN CASH. THERE WAS NO BASIS TO EXPENSES OF RS. 1,50,000/-, RS. 2,50,000/-, RS. 1,00,000/- RS. 1,25,000/-, RS. 1,25,000/- AND RS. 1,00,000/- PAID RESPECTIVELY TO SHRI VINOD PATEL, SHRI ROHIT PATEL, SHRI BHARAT PATEL, SHRI SUDHIR PATEL, SHRI SANJAY P ATEL (HUF) AND SHRI N.B. PATEL (HUF). NO VOUCHERS WERE SEEN TO BE MAINT AINED FOR THESE EXPENSES. THE LD. COUNSEL COULD NOT EXPLAIN THE BAS IS AND THE PURPOSE OF THESE EXPENSES. THOUGH, COPIES OF VOUCHERS OF SOME OF THE EXPENSES WERE FURNISHED, THE SAME WERE NOT FURNISHED BEFORE THE A SSESSING OFFICER. THESE EXPENSES WERE INCURRED IN CASH AND ON SELF MADE VOU CHERS WHERE THE ADDRESSES OF THE PAYEES ARE ABSENT. THE EXPENSES AR E THUS NOT SUBJECT TO VERIFICATION. SINCE, THE APPELLANT HAD NOT FURNISHE D THE VOUCHERS BEFORE THE ASSESSING OFFICER AND COULD NOT EXPLAIN THE BASIS ' OF DAILY PAYMENTS EVEN DURING APPELLATE PROCEEDINGS, THE ASSESSING OFFICER WAS JUSTIFIED IN J DISALLOWING 20% OF THE EXPENSES OF RS. 38,61,940/-. THE FINDING OF THE ASSESSING OFFICER IS IN ORDER AND THE SAME IS SUSTA INED. THE DISALLOWANCES SO MADE ARE CONFIRMED. THE ADDITIONS OF RS. 24,95,4 22/- ( RS. 9,90,400/- + RS. 7,32,634/- + RS. 7,72,388/-) ARE CONFIRMED. THE FOURTH GROUND OF APPEAL IS ACCORDINGLY DISMISSED.' 7. WE HAVE HEARD BOTH THE PARTIES WHO REITERATE THE IR RESPECTIVE PLEADINGS FOR AND AGAINST THE SUBSTANTIVE GROUND RAISED IN THE IN STANT APPEAL. THERE IS NO DISPUTE THAT THE ASSESSEE HAS CARRIED FORWARD THE L AND DEVELOPMENT EXPENSES AS ITA NO. 1775/AHD/15 (UPENDRA N. PATEL VS. ACIT) A.Y. 2006-07 - 4 - INCURRED IN ASSESSMENT YEAR 2003-04 AND 2004-05 TO THE IMPUGNED ASSESSMENT YEAR UNDER THE HEAD FIXED ASSETS. HE FILES BEFORE U S COPY OF THE RELEVANT BOOKS OF ACCOUNTS, ASSESSMENT ORDER OF THESE TWO ASSESSMENT YEARS. HIS CASE IS THAT HE NEVER CLAIMED THE SAME IN THE SAID TWO ASSESSMENT Y EARS AND ALSO THAT THE ASSESSING OFFICER FRAMED ASSESSMENT THEREIN WITHOUT RAISING ANY QUESTION. THE ASSESSEE'S CASE ACCORDINGLY IS THAT HE HAS ONLY CLA IMED THE IMPUGNED EXPENDITURE IN THE RELEVANT PREVIOUS YEAR. WE CONFRONTED LD. DE PARTMENTAL REPRESENTATIVE WHO COULD NOT REBUT THIS FACTUAL. IT FURTHER FOUND THAT THE ASSESSEE HAD INCURRED ALL THESE EXPANSES IN CASH. 8. WE NOW COME TO THE LATTER COMPONENT OF THE DISAL LOWANCE (SUPRA) ON THE GROUND THAT THE SAME HAD NOT BEEN INCURRED FOR THE PURPOSE OF DEVELOPING THE LAND IN QUESTION. IT EMINATES DURING THE COURSE OF HEARI NG THAT NEITHER THE REVENUE HAS BEEN ABLE TO SUPPORT THE IMPUGNED DISALLOWANCE @ 20 % HEREINABOVE AFTER POINTING OUT SPECIFIC MATERIAL REBUTTING CONTENTS O F THE RELEVANT EVIDENCE ON RECORD NOR THE ASSESSEE LEADS US TO ANY COGENT EVIDENCE FO R HAVING INCURRED WHOLE OF THE EXPENDITURE FOR DEVELOPING ITS AKOTA LAND STATED HE REINABOVE. WE OBSERVE IN THESE FACTS THAT BOTH THE PARTIES HAVE FAILED TO DISCHARG E THEIR RESPECTIVE ONUSES IN SUPPORT OF AND AGAINST THE LAND DEVELOPMENT CLAIM. WE FEEL APPROPRIATE IN THE LARGER INTEREST OF JUSTICE IN THESE FACTS AND CIRCU MSTANCES THAT A LUMP SUM DISALLOWANCE OF RS. 2,50,000/- INSTEAD OF RS. 24,95 ,422/- IN QUESTION WOULD BE JUST AND PROPER. THE ASSESSEE ACCORDINGLY GETS PART RELI EF ON THIS ISSUE. 4. WE PROCEED IN THIS BACKDROP TO OBSERVE THAT THER E IS HARDLY ANY DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAD CLAIMED THE TO TAL LAND LEVELLING EXPENSES OUT OF WHICH ONLY A LUMP SUM DISALLOWANCE ON ESTIMA TION BASIS AMOUNTING TO RS.2,50,000/- OUT OF RS.24,95,422/- ONLY SURVIVES. AND THAT TOO DOES NOT REJECT ASSESSEES CASE ALTOGETHER. IT IS EVIDENT T HAT THE ASSESSING OFFICER AS WELL AS THE CIT(A) CONCLUDE THE ASSESSEE TO HAVE CO NCEALED AS WELL AS FURNISHED INACCURATE PARTICULARS OF INCOME WHEREAS THE FACT REMAINS THAT HE HAD PLACED ON RECORD ALL THE RELEVANT DETAILS CULMI NATING INTO QUANTUM DISALLOWANCE OF PRIOR PERIOD EXPENSES. ALL THESE F ACTS INDICATE THAT THE ASSESSEES CASE OF HAVING RAISED HIS EXPENDITURE CL AIM NEITHER AMOUNTS TO CONCEALMENT NOR THAT OF FURNISHING OF INACCURATE PA RTICULARS AS IT IS A QUESTION OF ADMISSIBILITY OF EXPENSES RATHER IN THE IMPUGNED ASSESSMENT YEAR. WE REITERATE THAT MORE THAN 90% OF THE QUANTUM DISALLO WANCE AMOUNT STANDS DELETED. WE THEREFORE CONCLUDE THAT THE REMAINING QUANTUM DISALLOWANCE OF RS.2,50,000/- AS AFFIRMED IN TRIBUNALS ORDER DATED 11.03.2016 CANNOT BE HELD ITA NO. 1775/AHD/15 (UPENDRA N. PATEL VS. ACIT) A.Y. 2006-07 - 5 - TO BE COVERED UNDER THE TWO LIMBS HEREINABOVE U/S. 271(1)(C) OF THE ACT. WE THEREFORE DELETE THE CORRESPONDING REMAINING PENALT Y AS WELL. 5. THIS ASSESSEES APPEAL IS ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 30 TH DAY OF AUGUST, 2017.] SD/- SD/- ( AMARJIT SINGH ) (S. S. GODA RA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 30/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0