Deputy Commissioner Income-tax, V. Shri Ashokchandra Ramkisan Kabra, Jalgaon

ITA 1969/PUN/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9461 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-09-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Keywords: Depreciation; Business expenditure; Additional evidence; Corroborative evidences
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.1969/PUN/2014 / ASSESSMENT YEAR : 2010-11 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1, JALGAON. . / APPELLANT V/S SHRI ASHOKCHANDRA RAMKISAN KABRA, PROP RAM AGRO SALES, SHOP NO.65, JALGAON 425 001. PAN : ACAPK4363L. . / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI VIVEK AGGARWAL. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE REVENUE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) 2, NASHIK DT. 18.08.2014 FO R THE ASSESSMENT YEAR 2010-11. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL STATED TO BE DEALING IN SEEDS. ASS ESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2010-11 ON 14.09.2010 D ECLARING TOTAL INCOME OF RS.13,47,400/- THE CASE WAS SELECTED FOR S CRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER / DATE OF HEARING : 11.01.2018 / DATE OF PRONOUNCEMENT: 12.01.2018 2 DATED 28.03.2013 AND THE TOTAL INCOME WAS DETERMINED AT RS.74,67,740/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A) WHO VIDE ORDER DATED 18.08.2014 (IN APPEAL NO.NSK/CIT(A)-2/133/13-14) GRANTED SUBSTANTIAL RELIEF TO T HE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE U S. 3. THE GROUNDS RAISED BY THE REVENUE IN APPEAL READS AS UNDER: 1 . ON THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A)-II, NASHIK HAS ERRED IN DELETING THE ADDITIO N MADE ON A/C OF DISALLOWANCE ON ACCOUNT OF E XCESS DEPRECIATION WITHOUT GRANTING AN OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE INCOME TAX RULES, 1962 FOR THE ADDITIONAL EVIDENCES AS PRODUCE D BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE HON'BLE CIT(A), NASHIK HAS ERRED IN NOT GRANTING AN OPPORTUNITY TO THE ASSESSING OFFICER UNDER RULE 46A OF THE INCOME TAX RULES, 1962 FOR THE ADDITIONAL EVIDENCES AS PRODUCED BY THE ASSESSEE BE FORE THE APPELLATE AUTHORITY FOR THE ADDITIONS MADE ON ACCOUNT OF QUAN TITY SHORTAGE AND ON A/C OF CLOSING STOCK. 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE CIT(A) HAS ERRED IN ALLOWING THE EXPENSES U /S.37(1) FOR THE EXPENSES MADE TOWARDS KEYMAN INSURANCE POLICY WITHOUT CONSIDERING THE FACT THAT THE INSURANCE PREMIUM PAID RECEIPT DO ES NOT INDICATE THAT THE PAYMENT IS MADE UNDER KEYMAN INSURANCE SCHEME . 4 . ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW , THE ORDER OF THE LD . CIT(A)-II , NASHIK BE CANCELLED ON THE ABOVE ISSUES AND THAT OF THE AO BE RESTORED. 5 . THE APPELLANT CRAVES LEAVE TO ADD, ALTER , MODIFY , DELETE, AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HON'BLE CI T, AS PER THE CIRCUMSTANCES OF THE CASE . 6. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONA L EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN I N APPEAL . 4. GROUND NOS. 1 & 2 ARE WITH RESPECT TO ADMISSION OF A DDITIONAL EVIDENCE IN VIOLATION OF PROVISIONS OF RULE 46A BY LD.CIT(A). 3 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTIC ED THAT ASSESSEE HAS CLAIMED HIGHER DEPRECIATION OF 30% AS PER TH E PROVISIONS OF THIRD PROVISO TO CLAUSE (II) OF SUBSECTION (1) OF SEC.32 OF THE ACT IN RESPECT OF TATA 407 AND BOLEVA CAMPER PICK UP VAN FOR THE REASO N THE SAME WERE PURCHASED BY THE ASSESSEE IN 1998-99. AO NOTED T HAT SINCE ASSESSEE HAS NOT FURNISHED THE RELEVANT DETAILS, HE DENIE D THE CLAIM OF DEPRECIATION OF RS.63,089/-. 5. AO ON PURSUING THE DETAILS OF STOCK NOTICED THAT THER E WAS QUANTITY SHORTAGE OF RS.28,91,005/- IN THE MONTHS OF SE PTEMBER, NOVEMBER AND DECEMBER, 2009 AND AT THE END OF THE YE AR, THE ASSESSEE HAD WORKED OUT CLOSING STOCK AT RS.28,66,242/-. HE ALSO N OTED THAT ASSESSEE ACCEPTED THAT SOMETIMES DUE TO PRESSURE OF SALES, SALES WERE EFFECTED WITHOUT THERE BEING PURCHASE BILL FROM ITS SISTER CO NCERN M/S RAM AGRO AGENCIES. AO NOTED THAT SINCE THE ASSESSEE HA S NOT BEEN ABLE TO SUBSTANTIATE THE CLAIM, HE PROCEEDED TO MAKE ADDITION OF RS.28,91,005/- ON ACCOUNT OF QUANTITY SHORTAGE AND RS.28 ,66,242/- TO THE CLOSING STOCK. AGGRIEVED BY THE ORDER OF AO, ASSESS EE CARRIED THE MATTER BEFORE LD.CIT(A) WHO DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY OBSERVING AS UNDER: 6.1 THE GROUND NO.1 RELATES TO DISALLOWANCE ON ACC OUNT OF QUALITY SHORTAGE OF RS.28,91,005/- AND CLOSING STOCK OF RS. 28,66,242/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER (IN PARA 2.2) HAD CONSIDERED THE DETAILS FURNISHED BY THE APPELLANT WITH RESPECT TO THE MONTH-WISE SALE AND PURCHASE. T HE ASSESSING OFFICER PREPARED A CHART FOR DETERMINING THE CLOSIN G STOCK BY APPLYING THE C.P. RATIO OF 3.40%. FROM THIS CHART, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD NEGATIV E STOCK IN THE 3 MONTHS AND IT WAS SUBMITTED THAT THE SAME TO BE VER IFIED FROM THE BOOKS PRODUCED BY THE ASSESSEE AND ON THESE FACTS T HE AMOUNT OF RS.28,91,005/- WAS ADDED TO THE TOTAL INCOME ON ACC OUNT OF QUANTITY SHORTAGE AND ON THE SAME BASIS THE ASSESSI NG OFFICER HAD WORKED OUT CLOSING STOCK OF RS. 28,66,242/-. 4 6.2 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT VIDE HIS LETTERS 17/06/2014 AND 10/07/2014 HAS FURNISHED HIS EXPLANA TION ALONG WITH SUPPORTING EVIDENCES. THE APPELLANT HAS ALSO S UBMITTED THE WORKING CHART AS PER DELIVERY CHALLAN WHICH WAS TES T CHECKED AND FOUND THAT NO QUANTITY SHORTAGE/NEGATIVE STOCK AROS E IN ANY MONTH AND HENCE NO QUESTION OF CLOSING STOCK AROSE AT THE END OF THE YEAR. 6.3 THE APPLICANT HAS REFERRED TO AND RELIED ON TH E CASE LAW OF [2013 TAX PUB (DT) 2578 (DEL- TRIB) DATED 20/05/2013 FOR A. Y. 2008-09 BENCH 'A '] ITO V ANAND PRAKASH GUPTA . I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. I HAVE FOUND THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF AC COUNT. NO DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT BY THE A.O. THE QUANTITATIVE DETAILS OF STOCK WERE DULY CERTIFIED B Y THE ASSESSEE/AUDITORS. THE ASSESSING OFFICER HAS NOT BE EN ABLE TO MAKE OUT THE CASE OF INFLATED PURCHASES OR UNACCOUN TED SALES. THE PURCHASE, SALE, GROSS PROFIT AND NET PROFIT AMOUNT REMAINED THE SAME. THE QUANTITATIVE DETAILS ON DELIVERY CHALLAN BASIS IS ENCLOSED IN THE LETTER DATED 28/06/2014 AND DULY EX PLAINED THAT THERE WAS NO NEGATIVE STOCK IN ANY OF THE MONTH AS DELIVERY OF THE GOODS WAS RECEIVED EARLIER AND BILLS WERE ACCOUNTED FOR SUBSEQUENTLY. IN THE INSTANT CASE, THE GOODS ARE RE CEIVED ON THE BASIS OF DELIVERY CHALLANS, BUT IN THE BOOKS OF ACC OUNTS MAINTAINED BY THE APPELLANT, THE GOODS ARE RECORDED ON THE BAS IS OF PURCHASE BILLS. THIS HAS CREATED NEGATIVE STOCK FOR THREE MO NTHS. THE A.O.'S WORKING IS NOT BASED ON QUANTITY DETAILS, BUT BY AP PLYING GROSS PROFIT RATIO. THE A.O. HAS NOT FOUND ANYTHING WRONG WITH THE TOTAL PURCHASES AND SALES MADE BY THE APPELLANT. THE PURC HASES AND SALES MADE BY THE APPELLANT REMAIN THE SAME THROUGH OUT THE YEAR WHETHER THE CHART IS PREPARED ON THE BASIS OF PURCH ASES OR DELIVERY CHALLANS. THE CHART PREPARED ON THE BASIS OF DELIVE RY CHALLANS IS AS PER ANNEX-I. I HAVE ALSO EXAMINED THE PACKETS OF SEEDS ON SAMPLE AND TEST CHECK BASIS WHICH SHOW THE DATE OF TESTING, DATE OF ' PACKING, EXPIRY DATE, LOT NUMBERS, ETE. THE SEEDS ARE ABSOLU TELY USELESS AFTER THE EXPIRY DATE. THE SEEDS ARE TO BE USED FOR A PARTICULAR SEASON ONLY. THE SEEDS LAST FOR ABOUT 9 MONTHS OR S O. THE UNSOLD SEEDS ARE RETURNED TO THE SEED COMPANIES. I AM INCL INED TO AGREE WITH THE SUBMISSION OF THE COUNSEL OF THE ASSESSEE THAT THE ASSESSING OFFICER HAS ERRED IN HIS APPROACH AND THE FIGURE OF NEGATIVE STOCK ARRIVED AT BY THE ASSESSING OFFICER IS ERRONEOUS. UNDER THE CIRCUMSTANCE, I DO NOT FIND ANY NEGATIVE STOCK AND NO CLOSING STOCK. CONSIDERING THE FACTS OF THE CASE AN D IN VIEW OF THE FACT THAT THE A.O. IS NOT JUSTIFIED IN QUANTIFYING THE SHORTAGE, QUESTION OF DISALLOWANCE/ADDITION ON THE BASIS OF Q UANTITY SHORTAGE OR CLOSING STOCK DOES NOT ARISE. THE APPEL LANT HAS SUBMITTED 5 YEARS TRADING A/C SHOWING NIL CLOSING S TOCK BECAUSE DATE OF USE OF SEEDS IS FOR LIMITED PERIOD AND BALA NCE STOCK IS TO BE RETURNED COMPULSORILY TO SEED COMPANY WHICH APPEARS TO BE GENUINE. AS SUCH, THE SAME IS CONSIDERED AS VALID A ND THEREFORE, BOTH THE ADDITIONS MADE ON ACCOUNT OF QUANTITY SHOR TAGE AND CLOSING STOCK ARE DELETED. THIS GROUND IS ALLOWED. 7. THE GROUND NO. 2 RELATES TO EXCESS DEPRECIATION ON ACCOUNT OF HIGHER DEPRECIATION RATE AT 30% IN RESPECT OF COMME RCIAL VEHICLE TATA 407 & BOLEVA CAMPER PICK UP FOR THE REASON THAT THE SAME 5 WERE PURCHASED DURING THE PERIOD 1998-99 AS PER PRO VISIONS OF THIRD PROVISO TO CLAUSE (II) OF SUBSECTION (I) OF SECTION 32. THE APPELLANT HAS GIVEN THE EXPLANATION THAT AS DURING THE YEAR BOTH THE VEHICLES ARE GIVEN ON HIRE AND FREIGHT RECEIVED OF RS.1,47,167/- WAS ACCOUNTED AND CREDITED THROUGH TRANSPORTATION A /C INSTEAD OF SHOWING SEPARATELY AND NET BALANCE WAS TAKEN TO PRO FIT & LOSS ACCOUNT. THE VEHICLES ARE REGISTERED AS COMMERCIAL VEHICLES AND RTO BOOKS ARE SUBMITTED AND VEHICLES ARE USED FOR C OMMERCIAL PURPOSE, HENCE ELIGIBLE FOR HIGHER RATE OF DEPRECIA TION I.E. 30%. THE A.O IS NOT JUSTIFIED IN DISALLOWANCE OF THE APPELLA NTS CLAIM. ACCORDINGLY, DISALLOWANCE OF EXCESS DEPRECIATION OF RS. 63,089/- IS HEREBY DELETED. AGGRIEVED BY THE ORDER OF LD.CIT(A), REVENUE IS NOW IN APPEAL BEFORE U S. 6. BEFORE US, LD DR TOOK US THROUGH THE STATEMENT OF FAC TS FILED BY THE REVENUE AND SUBMITTED THAT LD.CIT(A) ADMITTED ADDITION AL EVIDENCES DURING THE COURSE OF APPELLATE PROCEEDINGS. HE SUBMITTED T HAT THE AO WAS NOT GIVEN AN OPPORTUNITY TO EXAMINE THE ADDITIONAL EV IDENCES SUBMITTED BY THE ASSESSEE AND THUS THERE WAS VIOLATION OF PROVISIONS OF RULE 46A OF IT RULES. HE THEREFORE SUBMITTED THAT THE ORD ER OF LD.CIT(A) BE SET ASIDE. LD AR ON THE OTHER HAND SUBMITTED THAT W ITH RESPECT TO THE STOCK, ASSESSEE HAD SUBMITTED THE DETAILS BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. HE POINTED TO THE LETTER ADDRE SSED TO AO (COPY OF WHICH ARE PLACED AT PAGES 20 TO 131 OF THE PAPER BOO K) THROUGH WHICH THE DETAILS WERE SUBMITTED BEFORE AO. WITH RESPECT TO T HE DEPRECIATION ALSO THE DETAILS WERE SUBMITTED BEFORE AO AND NO NEW DET AILS WERE FURNISHED BEFORE LD.CIT(A). HE FURTHER SUBMITTED THAT THE DE TAILS SUBMITTED BEFORE LD.CIT(A) WERE THE SAME DETAILS AND THUS THERE WAS NO NEW EVIDENCE. HE THUS SUPPORTED THE ORDER OF LD CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE PERUSAL OF THE GROUND RAISED BY THE REVENU E REVEALS THAT REVENUE IS AGGRIEVED ONLY FOR THE REASON OF ADDITIONAL EVID ENCE BY 6 LD.CIT(A) IN VIOLATION OF RULE 46A OF THE IT RULES. THE PAPER BOOK SUBMITTED BY THE ASSESSEE REVEALS THAT DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD FURNISHED THE NECESSARY DETA ILS AND THE SAME DETAILS HAVE BEEN EXAMINED BY LD CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE. BEFORE US, REVENUE COULD NOT CONTRO VERT THE SUBMISSIONS OF LD AR AND THEREFORE FIND NO FORCE IN THE SU BMISSION OF LD DR WITH RESPECT TO VIOLATION OF PROVISIONS OF RULE 46A. IN VIEW OF THE AFORESAID, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A). THUS THE GROUNDS OF REVENUE ARE DISMISSED. 8. 3 RD GROUND IS WITH RESPECT TO ALLOWING EXPENSES TOWARDS KEY MAN INSURANCE POLICY. 8.1 AO NOTICED THAT ASSESSEE HAS SHOWN TO HAVE PAID RS 2 LAC TOWARDS KEYMAN INSURANCE SCHEME ON THE LIFE OF SANJAY KABRA, SON OF ASSESSEE. AO NOTICED THAT THE DETAILS SUBMITTED BY THE ASSESSEE D ID NOT INDICATE THAT THE PAYMENT WAS FOR KEYMAN INSURANCE POLICY AND FU RTHER AS PER IRDA, KEYMAN INSURANCE POLICY CAN BE TAKEN ONLY UNDER T ERM INSURANCE POLICY AND NOT IN RESPECT OF OTHER POLICIES. HE ACCORDINGLY DISALLOWED THE EXPENDITURE. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD CIT(A), WHO DECIDED THE ISSUE IN FAVOUR OF ASSE SSEE BY OBSERVING AS UNDER: 8. THE GROUND NO. 3 RELATES TO KEYMAN INSURANCE POL ICY. AS PER THE EXPLANATION AND THE DOCUMENTS PRODUCED BEFORE ME, T HE POLICY WAS TAKEN BY THE APPELLANT FOR EMPLOYEE UNDER EMPLOYEE AND EMPLOYER SCHEME WHICH IS ELIGIBLE FOR DEDUCTION AND THE SAME EXPENDITURE IS ALLOWED AS BUSINESS EXPENDITURE U/S.37(1) OF INCOME TAX ACT. THE A.O. WAS NOT JUSTIFIED IN ADDING THE SAME AS INCOME OF THE APPELLANT. THE ADDITION OF RS.2,00,000/- IS HEREBY DELETED. AGGRIEVED BY THE ORDER OF LD CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 7 9. BEFORE US, LD DR SUBMITTED THAT THE PREMIUM RECEIPT DO ES NOT INDICATE AS TO WHETHER THE PREMIUM IS TOWARDS KEYMAN IN SURANCE SCHEME. HE THUS SUPPORTED THE ORDER OF AO. LD AR ON THE OTHER HAND POINTED TO THE LETTER ISSUED BY ICICI LIFE PRUDENTIAL (PLAC ED AT PAGE 14- 15 OF THE PAPER BOOK) WHEREIN IT IS CERTIFIED THAT THE PREM IUM AS EMPLOYER EMPLOYEE CASE. HE THUS SUPPORTED TO THE ORDER OF LD CIT(A ). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO ALLOWING OF PREMIUM PAID TOWARDS KE YMAN INSURANCE POLICY. WE FIND THAT ICICI LIFE INSURANCE POLICY HAV E CERTIFIED THAT THE POLICY IS ISSUED AS EMPLOYEE EMPLOYER CASE. THIS F ACT HAS NOT BEEN CONTROVERTED BY REVENUE. IN SUCH A SITUATION, WE FIN D NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THE GROUND OF REVENUE IS DISMISSED. 11. GROUND NOS.4 TO 6 ARE GENERAL IN NATURE AND REQUIRES NO ADJUDICATION. 12. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON 12 TH DAY OF JANUARY, 2018. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; DATED : 12 TH JANUARY, 2018. YAMINI 8 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-II, NASHIK. CIT-2, NASHIK. '#$ %%&',) &', / DR, ITAT, B PUNE; $+,-/ GUARD FILE. / BY ORDER // TRUE COPY // ./0%1&2 / SR. PRIVATE SECRETARY ) &', / ITAT, PUNE.