V K Dewan & Co., New Delhi V. ITO, New Delhi

ITA 1817/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61744 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR
• Assessee Lawyers: SUMER GARG
• Keywords: Question of law
• Section: 143(3)

Judgement Text

ITA NO.1817/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ITA NO. 1817/DEL/2012 ASSESSMENT YEAR: 2008-09 V.K. DEWAN & CO., VS INCOME TAX OFFICER, MD-67, PITAMPURA, W ARD 38(2), 2 ND FLOOR, NEW DELHI. C.R. BUILDING, (PIN AAAFV3548C) I.P . ESTATE, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUMER GARG RESPONDENT BY: SHRI B.R.R. KUMAR, SR.DR O R D E R PER CHANDRA MOHAN GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF CIT(A)-XXVIII, NEW DELHI DATED 27.3.2012 BY WHICH H E PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, CONFIRMING THE ADDITION MAD E BY AO FOR THE AY 2008-08. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN SUSTAINING THE DISALLOWANCE OF RS.35,000 OUT OF AD HOC ADDITION MADE BY THE AO IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 2. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS I N MAKING AN AD HOC DISALLOWANCE OF RS.7000/- OUT OF EXPENSES UNDER THE HEAD SALARIES TO STAFF TO AVOI D ANY ITA NO.1817/DEL/2012 2 LEAKAGE OF REVENUE AND THE LD. CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE AT RS.35000/- WITHOUT ASSIGNING ANY REASON WHATSOEVER. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE AO FINALIZED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) AND NOTED THAT THE ASSESSEE WAS ENGAG ED IN THE BUSINESS OF MANUFACTURING OF READY MIX CONCRETE AND SHOWED NET LOSS OF RS.2,17,766/- FOR THE YEAR UNDER CONSIDERATION. HE ALSO NOTED TH AT THE ASSESSEE DEBITED SALARIES TO STAFF OF RS.3,90,105 IN THE PROFIT & LO SS ACCOUNT AND ON EXAMINATION OF BOOKS, IT WAS FOUND THAT THESE EXPEN DITURES WERE NOT PROPERLY VOUCHED AND AN AMOUNT OF RS.70,000 WAS ADDED TO THE INCOME OF THE ASSESSEE CONSIDERING THE NATURE OF RECEIPTS AND ALS O UNVOUCHED NATURE OF SUCH EXPENSES TO AVOID LEAKAGE OF REVENUE. 4. THE ASSESSEE INVOKED THE CIT(A) AND THE CIT(A) P ARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY IMPUGNED ORDER AND REDUCE D THE ADDITION OF RS.70000/- MADE BY THE AO TO RS.35000/-. HENCE, TH IS APPEAL BEFORE THIS TRIBUNAL BY THE ASSESSEE. 5. THE AR SUBMITTED THAT THE LD. CIT(A) AGREED TO T HE SUBMISSIONS AND CITATIONS PLACED BEFORE HIM BUT HE PARTLY ALLOWED T HE APPEAL AND CONFIRMED THE ADDITION TO THE TUNE OF RS.35,000 WITHOUT ANY R EASONABLE BASIS. THE LD. DR SUPPORTED THE ACTION OF THE AO BY SUBMITTING THA T THE EXPENSES CLAIMED ITA NO.1817/DEL/2012 3 BY THE ASSESSEE WERE NOT PROPERLY VOUCHED, THEREFOR E, THE ADDITION WAS MADE TO AVOID LEAKAGE IN THE REVENUE AND THE LD. CIT(A) USED HIS DISCRETION ON PROPER APPLICATION OF HIS AUTHORITY AND EXTENDED 50 % RELIEF TO THE ASSESSEE. HE VEHEMENTLY SUBMITTED THAT IT IS THE PRIME DUTY O F THE ASSESSEE TO PROPERLY VOUCH THE EXPENSES WHICH HE INTENDED TO CLAIM AS DE DUCTION BUT HE FAILED TO DO SO, THEREFORE, THE ACTION OF THE AO, AS CONFIRME D BY THE CIT(A), IS CORRECT AND BASED ON REASONABLE GROUNDS. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THE RIVAL ARGUMENTS AND PERUSED ENTIRE RECORD BEFORE US. LD. CIT(A) WHILE DEALING WITH GROUND NOS. 1 TO 4 OBSERVED AS UNDER:- GROUNDS NO. 1 TO 4 WHEREIN THE APPELLANT HAS CHALLENGED DISALLOWANCE OF RS.70000/- OUT OF SALARI ES PAID TO STAFF. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS CONTENDED THAT DURING THE FINANCIAL YEAR 2007-08 RE LEVANT TO AY 2008-09, THE ASSESSEE HAS SHOWN NET LOSS (-) 217766/-. ON EXAMINATION OF DETAILS FILED BY THE A SSESSEE IT WAS NOTICED THAT ASSESSEE HAS DEBITED SALARIES T O STAFF OF RS.390105/- IN HIS PROFIT & LOSS ACCOUNT. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS A SKED TO FILE BILLS AND VOUCHERS. IT WAS FOUND DURING TH E COURSE OF EXAMINATION OF BOOKS OF ACCOUNTS THAT THESE EXPE NSES ARE NOT PROPERLY VOUCHED. THEREFORE, AN AMOUNT OF RS.70,000/- WAS DISALLOWED TO AVOID ANY LEAKAGE OF REVENUE. IT IS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE APPELLANT TO ITA NO.1817/DEL/2012 4 PRODUCE BOOKS OF ACCOUNT AND RELEVANT VOUCHERS FOR VERIFICATION, WHICH WAS DULY COMPLIED BY THE APPELL ANT. IT WOULD BE RELEVANT HERE TO SAY THAT THE APPELLANT MA INTAINS COMPLETE DETAILS AND EVIDENCE OF PAYMENT OF SALARIE S TO STAFF. IF THE AO WAS NOT SATISFIED WITH THE DETAIL S FURNISHED BY THE APPELLANT, HE SHOULD HAVE ASKED FOR FURTHER DETAILS FROM THE APPELLANT. NO SUCH DETAILS WERE ASKED FOR FROM THE APPELLANT. IT IS SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE APPELLANT ARE LIABLE TO AUDIT U/S 44AB OF THE ACT. THE TAX AUDITORS HAVE DULY AUDITED THE SAID VOUCHERS AND EXPENSES. THE ASSESSEE WAS NEVER INFORMED BY AO OF ANY DEFECT OR DISCREPANCY IN THE VOUCHERS PRODUCED BEFO RE HIM. MOREOVER, THE AO HAS FAILED TO RECORD SPECIFI C DEFECTS AND PARTICULAR VOUCHERS IN HIS ASSESSMENT O RDER. THE HONBLE DELHI COURT IN THE CASE OF CIT V HARISH MOHINI KATHURIA (ITA NO. 679/2011) DISMISSED THE DEPARTMENTS APPEAL HOLDING AS UNDER:- AFTER GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW, WE ARE OF THE OPINION THAT THE TRIBUNAL RIGH TLY OBSERVED THAT THE DISALLOWANCE OF A PART OF EXPENDI TURE ON ACCOUNT OF WAGES AS WELL AS CONSUMABLE GOODS WAS ON AD HOC BASIS AND THERE WAS NO RATIONAL BEHIND THE SAME . THE TRIBUNAL ALSO RIGHTLY RECORDED THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECT IN THE VOUCHERS AND THERE W AS NO FINDING THAT ANY EXPENDITURE WAS NOT FOUND TO BE GE NUINE OR NOT RELATING TO THE BUSINESS. A SIMILAR VIEW HAS BEEN TAKEN BY THE PUNJAB & HARYANA HIGH COURT IN CIT VS M/S S.S.P. LTD. (ITA B I, 535 OF 2010) WHEREIN IT WAS HELD THAT: THE CIT(A) HAD CONCLUDED THAT THE AUDITED BOOKS OF ACCOUNT ALONG WITH VOUCHERS WERE PRODUCED BY THE ASSESSEE AND THEREAFTER THE AO HAD FAILED TO SHOW T HAT THE SAID EXPENDITURE WAS NOT FOR BUSINESS PURPOSES. FU RTHER, THE DISALLOWANCE WAS MADE ON AD HOC BASIS WITHOUT T HERE ITA NO.1817/DEL/2012 5 BEING ANY MATERIAL WHICH WOULD JUSTIFY THAT THE AMO UNT HAD BEEN SPENT FOR PERSONAL USE OF THE DIRECTORS. THE AFORESAID FINDINGS WERE CONFIRMED BY THE TRIBUNAL. THE FINDINGS OF THE CIT(A) AND THE TRIBUNAL HAVE NOT BEEN SHOWN TO BE PERVERSE OR ILLEGAL IN ANY MAN NER, BY THE LEARNED COUNSEL FOR THE APPELLANT SO AS TO PERS UADE THIS COURT TO INTERFERE THEREWITH. NO SUBSTANTIAL QUESTION OF LAW, THUS, ARISES FOR THE CONSIDERATION OF THIS COURT. ACCORDINGLY, THERE IS NO MERIT IN THE APPEAL AND TH E SAME IS DISMISSED. THE HONBLE DELHI ITAT IN M/S MATRIX INC. V ITO (ITA NO.54/DEL/2009) HAS ALSO OBSERVED THAT: WHEREVER PAYMENT IS MADE BY CASH, THE NAME OF THE PERSON CONCERNED TO WHOM THE PAYMENT HAS BEEN M ADE IN CASH TOWARDS VARIOUS EXPENSES ARE MENTIONED. TH E AO HAS NOT MADE ANY SORT OF ENQUIRY OR CROSS VERIFICAT ION FROM THE RESPECTIVE PERSON TO ASCERTAIN THE GENUINE NESS OF THE EXPENSES. WHEN THE ASSESSEE DID NOT PRODUCE SUPPORTING VOUCHERS BUT DETAILS OF PAYMENT WERE DUL Y FURNISHED, THE AO SHOULD HAVE EXAMINED AND VERIFIED THE EXPENSES BY MAKING NECESSARY ENQUIRY, AND IF ON ENQ UIRY, THE EXPENSES WERE FOUND TO BE NOT GENUINE, THE AO C OULD HAVE PROCEEDED TO DISALLOW THE EXPENSES TO CERTAIN PERCENTAGE BUT THAT EXERCISE HAS NOT BEEN DONE BY T HE AO DESPITE THE VARIOUS DETAILS OF EXPENSES WERE FURNIS HED BY THE ASSESSEE. THEREFORE, IN THIS BACKGROUND, THE A D HOC DISALLOWANCE OF 1/3 RD OF ALL THE EXPENSES IS NOT CALLED FOR. WE, THEREFORE, DELETE THE SAME. THE HONBLE MUMBAI ITAT IN THE CASE OF DCIT V M/S EPCOT SECURITIES (P) LTD. (ITA NO. 395/MUM/2009 ) HAS ALSO SIMILARLY HELD THAT: AS RIGHTLY CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) AS WELL AS BEFORE US, THERE I S NOTHING IN THE ORDER OF THE AO TO SHOW AS TO WHAT DETAILS A ND DOCUMENTS WERE EXACTLY CALLED FOR BY HIM, WHICH THE ITA NO.1817/DEL/2012 6 ASSESSEE FAILED TO FURNISH. THERE IS ALSO NOTHING BROUGHT ON BY THE AO TO SHOW THAT THE COMMISSION AND BROKER AGE EXPENSES CLAIMED BY THE ASSESSEE WERE EXCESSIVE AND UNREASONABLE. THE DISALLOWANCE OF 10% MADE BY THE AO OUT OF COMMISSION AND BROKERAGE EXPENSES THUS WAS N OT SUSTAINABLE AND THE LD. CIT(A), IN OUR OPINION, WAS FULLY JUSTIFIED IN DELETING THE SAID DISALLOWANCE. IN THE CASE OF PEARL FARBEN CHEM (P) LTD. (ITA NO. 1122/MUM/2010) ALSO THE HONBLE MUMBAI BENCH OF ITAT HAS HELD THAT: WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARD ING THE ESTIMATED DISALLOWANCE OUT OF EXPENSES UNDER THE HE ADS REPAIRS AND MAINTENANCE, BUSINESS PROMOTION EXPE NSES AND TRAVELING EXPENSES. THERE IS NO DISPUTE THAT THE ASSESSEE HAD FAILED TO PRODUCE BILLS AND VOUCHERS I N SUPPORT OF THESE EXPENSES. THE AO THEREFORE IS ENT ITLED TO CONSIDER DISALLOWANCES OF EXPENSES CLAIMED UNDER TH E ABOVE HEADS. HOWEVER, THE AO HAS TO GIVE BASIS FOR DISALLOWANCE. THE DISALLOWANCE HAS TO BE BASED ON SOME MATERIAL AND CANNOT BE ARBITRARY. THE AO HAS NOT P LACED ANY MATERIAL ON RECORD TO SHOW THAT THE EXPENSES WE RE EXCESSIVE COMPARED TO THE EARLIER YEAR. THEREFORE, THE ROUND FIGURE ESTIMATED ADDITIONS MADE BY THE AO WIT HOUT GIVING ANY BASIS CANNOT BE SUSTAINED. THE ORDER OF THE CIT(A) CONFIRMING THE ADDITION IS, THEREFORE, SET A SIDE AND THE ADDITIONS MADE ARE DELETED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LAWS CITED BY THE APPELLANT, I SUSTAIN THE DISALLOWANCE MADE BY THE AO TO THE TUNE OF RS.35,00 0/-. THE APPELLANT GETS A RELIEF OF RS.35,000 OUT OF THE TOTAL DISALLOWANCE MADE UNDER THE HEAD SALARIES OF RS.700 00/-. APPEAL ON THESE GROUNDS IS PARTLY ALLOWED. ITA NO.1817/DEL/2012 7 7. ADMITTEDLY, THE ASSESSEE WAS ENGAGED IN THE BUSI NESS OF READY MIX CONCRETE AND CLAIMED RS.3,90,105 AS SALARIES PAID T O STAFF DEBITING THE P& L ACCOUNT. THE AO NOTED THAT THESE EXPENSES WERE NOT PROPERLY VOUCHED AND HE MADE AN ADDITION OF RS.70,000. THE LD. CIT(A) A GREED TO THE ABOVE ACTION OF THE AO BUT HE REDUCED THE ADDITION TO 50% TO THE TUNE OF RS.35,000. WE OBSERVE THAT THE ASSESSEE, NEITHER B EFORE THE LD. CIT(A) NOR BEFORE US, SUBMITTED ANY EXPLANATION REGARDING ABOV E INFIRMITY, AS NOTED BY AUTHORITIES BELOW, DESPITE AN OPPORTUNITY TO SUBMIT THE SAME. THE ADDITION OF RS.35,000 FINALLY MADE BY LD. CIT(A) COMES TO LE SS THAN 10% OF EXPENSES CLAIMED I.E. AMOUNTING TO RS.3,90,105 AND, ACCORDIN GLY, THE ADDITION ON ACCOUNT OF UNVOUCHED EXPENSES DESERVES TO BE SUSTAI NED. 8. WE ALSO OBSERVE THAT THE ASSESSEES REPRESENTATI VE MISERABLY FAILED TO ESTABLISH THAT THE ACTION OF THE AO AS PARTLY CONFI RMED BY THE LD. CIT(A) WAS BEARING SOME PERVERSITY OR INFIRMITY. IN VIEW OF A BOVE, WE HAVE NO REASON TO INTERFERE WITH THE FINDINGS OF THE AUTHORITIES BELO W. ACCORDINGLY, WE FINALLY HOLD THAT THIS APPEAL IS DEVOID OF MERITS AND DESER VES TO BE DISMISSED AND WE DISMISS THE SAME. 9. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS DI SMISSED. ITA NO.1817/DEL/2012 8 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2012. SD/- SD/- ( J.S. REDDY) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 29TH JUNE 2012 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR TRUE CO PY BY ORDER ASSTT. REGISTRAR