Shri Rajeshbhai Gunvantilal Shah, Ahmedabad V. The Income Tax Officer, Ward-10(4), Ahmedabad

ITA 2060/AHD/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4562 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-01-2020
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P S PARMAR
• Keywords: Corroborative evidences; Capital expenditure
• Section: 37(1); 143(2); 13; 22; 145; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I RAJPAL YADAV , VICE PRESIDENT AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHREE RAJESHBHAI GUNVANTLAL SHAH, 401, SUBH HOUSE, 77, SWASTIK CENTRE, B/H, CITY CENTRE, OFF: C.G. ROAD, AHMEDABAD PAN: ACWPS4000N (APPELLANT) VS THE IT O , WARD - 10 (4) , AHMEDABAD (RESPONDENT) SHREE SNEHAL GUNVANTAL SHAH, 401, SUBH HOUSE, 77, SWASSTIK CENTRE, B/H, CITY CETRE, OFF: C.G. ROAD, AHMEDABAD PAN: AHZPS0623F (APPELLANT) VS THE IT O , WARD - 10(4) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI D ILIP KUMAR , SR. D . R. ASSESSEE BY: SHRI P. S. PARMAR , A.R. DATE OF HEARING : 27 - 0 1 - 2 020 DATE OF PRONOUNCEMENT : 20 - 02 - 2 020 I T A NO . 2060 / A HD/20 15 A SS ESSMENT YEAR 2010 - 11 ITA NO. 2061 /AHD/20 15 ASS ESSMENT YEAR 2010 - 11 I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 2 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THESE TWO APPEALS FILED BY TWO DIFFERENT ASSESSEES FOR A.Y. 2010 - 11 , ARI SE FROM ORDER OF THE CIT (A), AHMEDABAD - 5, DATED 19 - 05 - 2 015 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; I N SHORT THE ACT . 2. THE SOLITARY ISSUE IN THE GROUNDS OF APPEAL FILED BY ASSESSEE AGA INST THE DECISION OF LD. CIT(A) ARE AGAINST CONFIRMING THE DISALLOWANCE ON VARIOUS REV ENUE EXPENSES TO THE AMOUNT OF R S. 13 , 44 , 624/ - IN THE CASE OF SH. RAJESHBHAI G . SH AH AND RS. 5,22,373/ - IN THE CASE OF OTHER ASSESSEE, SH. SNEHAL G. SHAH AND BOTH THE ASSESSEES ARE BROTHERS. SINCE IDENTICAL ISSUES ON SIMILAR FACTS ARE INVOLVED IN BOTH THE CASES THEREFORE THESE CASES ARE ADJUDICATED TOGETHER BY TAKING THE CASE OF SH. R AJESHBHAI G. SHAH VIDE ITA NO. 2060/AHD/2015 AS LEAD CASE AND ITS FINDINGS WILL BE APPLICABLE TO THE OTHER CASE. 3. THE FACT IN BRIEF IS THAT ASSESSEE HAS FILED RET URN OF INCOME ON 31ST JULY, 2010 DECLARING TOTAL INCOME AT RS . 2 , 06 , 118/ - . THE CASE WAS SU BJECT TO SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 29 TH AUGUST, 2011. DURING THE COUR S E OF ASSES SMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN LOSSES FROM THE BUSINESS OF TRADING OF SHARES AND SECURITIES IN THE PROPRIETA RY CON CERN NAMELY M/S, ADISHWAR ENTERPRISE AND M /S. IDEA CONCERN . IN THE CASE OF ADISHWAR ENTERPRISES AND M/S. IDEA CONCERN THE ASSESSEE HAS SHOWN LOSS OF RS. 11 , 58 , 847/ - AND RS. 10 , 386/ - RESPECTIVELY . I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 3 ON VERIFICATION IN THE CASE OF M/S. ADISHWAR ENTERPRISE, T HE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS SHOWN OPENING STOCK AS ON 01 - 04 - 2009 AT RS. N IL AND TOTAL PURCHASE W ERE S HOWN AT RS. 82 ,5 00 / - AGAINST WHICH TOTAL SALE WA S WORKED OUT AT RS. 1 , 01 , 593/ - . A GAINST THESE TRANSACTIONS THE ASSESSEE CLAIMED SUBST ANTIAL AMOUNT OF EXPENSES WHICH RESULTED IN NET LOSS OF RS. 1 , 17 , 915/ - . ON VERIFICATION OF THE DETAIL OF VARIOUS EXPENSES, THE ASSESSING OFFICER NOTICED THAT ASSSESEE HAS CLAIMED VARIOUS PERSONAL EXPENSES AND CA PI TAL EXPENSES HA V ING NOT ANY NEXUS WITH THE BUSINESS OF TRADING IN SHARES DURING THE YEAR. THE ASSESSING OFFICER NOTICED THAT THE E XPENS ES CLAIMED INCLUDED HOME EXPENSES OF RS. 2 , 53 , 187/ - CLUB EXPENSES O F RS. 9 , 081, ELECTRICITY EXPENSES OF RS. 41 , 211/ - , EN TERTAINMENT EXPENSES OF RS. 18,1 07/ - , PETR OL EXPENSE S OF RS. 1,90,745 / - ETC. T HE COMPLETE DETAIL OF SUCH EXPENSES ARE REPORTED BY T H E ASSESSING OFFICER AT PAGE NO. 6 & 7 OF THE ASSESSMENT ORDER. SIMILARLY IN THE CASE OF IDEA CONCERN, THE ASSESSEE HAS SHOWN OPENING STOCK OF R S. 29 , 921/ - WITHOUT ANY SALES/PURCHASES AND REPORTED THE SAME OPENING STOCK AS CLOSING STOCK DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THE ASSESSEE HAS DEBITED MAJOR EXPENSES TOTALING TO THE AMOUNT OF RS. 1 , 80 , 713/ - INCLUDING CLAIM OF LOSS FROM SALE OF CAR NIKKI FORD AT RS. 17 , 3 27/ - . THE ASSESSING OFFICER OB SERVED THAT VARIOUS EXPENSES WERE OF THE NATURE OF PERSONAL AND CAPITAL EXPENDITURE WHICH WERE NOT ALLOWABLE U/S. 37(1) OF THE ACT. THE ASSESSING OFFICER HAS ALSO STATED THAT IN RESPECT OF CERTAIN EXPENDITURE THE AS SESSEE HAS FAILED TO FURNISH THE RELEVANT SUPPORTING BILL AND VOUCHER TO SUBSTANTIATE THE GENUINENESS OF EXPENSES AND HAS ALSO DEBITED THE HOUSEHOLD EXPENDITURE IN TH E P & L ACCOUNT OF THE M/S. ADISHWAR ENTERPRISE. IN RESPECT OF SUBSTANTIAL AMOUNT OF EXP ENSES PERTAINING TO LOSS ON SALE OF NIKKI FOR D CAR, THE ASSESSE E HAS NOT FURNISHED I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 4 ANY RELEVANT SUPPO RTING BILL AND EVIDENCES . THE ASSESSEE HAS ALSO ADOPTED SAME NATURE OF MODUS OPERANDI WHICH WAS ADOPTED IN THE CASE OF ASSESSEE S BROTHER , SHREE SNEH AL G. SHAH FOR CREATING BOGUS LOSSES TO SET OFF AGAINST INCOME SHOWN BY THE ASSESSEE FROM SAROJBEN SH AH (AOP) . AFTER CONSIDERING THE DEFICIENCY FOUND IN THE BILL/VOUCHER FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT U/S. 145 OF THE ACT AND DISALLOWED THE T OTAL EXPENSES TO THE AMOUNT OF R S. 13 , 44 , 624/ - ( 11 , 63 , 911+ RS. 1 , 80 , 713 / - ) AND ADDED BACK TO THE ASSESSEE S TOTAL INCOME . 4 . AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSSESSEE HOLDING THAT CLAIM OF LOSS MADE BY THE ASSESEE WAS NOT IN THE NATURE OF BUSINESS LOSSES AND ALSO JUSTIFIED THE REJECTION OF BOOKS OF ACCOUNT AFTER INVOKING THE PROVISION OF SECTION 145 OF THE ACT CONSIDERING THE VARIOUS DEFECTS POI NTED OUT BY THE ASSESSING OFFICER. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADI NG OF SHARES. DURING THE COUR SE OF ASSESSMENT ON V E RIFI CAT I ON OF THE BILL AND VOUCHER T HE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED FOLLOWING EXPENSES IN THE CASE OF PROPRIETARY CONCERNS: - (I) ADI SHWAR ENTERPRISES RS. 11 , 63 , 911/ - (II) M /S. IDEA CONCERN RS. 1 , 80 , 713/ - AND CLAIMED LOSSES WITHOUT SHOWING MAJOR TRANSACTIONS IN THE BUSINESS OF TRADING IN SHARES. I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 5 THE ASSESSING OFFICER HAS DISALLOWED 100% OF THESE EXPENSES ON THE GROUND THAT SOME OF THESE EXPENSES WERE OF THE NATURE OF PERSO NAL EXPENDITURE AND CAPITAL EXPE N DIT URE AND IN RESPE CT OF CERTAIN EXPENSES SUPPORTING BILL AND VOUCHER W ERE NOT FURNISHED. AFTER CONSIDERING THE VARIOUS DEFECTS IN THE BILL AND VOUCHER I.E. DEBITING OF HOUSEHOLD EXPENSE TO THE P & L ACCOUNT, CLAIM OF MAJOR EXPENSES LIKE I.E. DEBIT OF LOSS OF SALE OF NIKKI C AR WITHOUT AN Y RELEVANT SUPPORTING EVIDENCES, T HE A SSESSING OFFICER HAS INVOKED THE PROVISION OF 145 OF THE ACT AND REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE. AFTER CONSIDERING THE ABOVE FACTS THAT ASSESSEE HAS NOT MAINTAINED CORRECT AND COMPLETE BOOKS OF ACCOUNT, WE DO NOT FIND ANY REASON TO INTERFER E IN THE FINDING OF LD. CIT(A) IN SUSTAINING THE REJECTION OF BOOKS OF ACCOUNT U/S. 145 OF THE ACT. 6. HOWEVER, IN RESPECT OF DISALLOWANCE OF 100% OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE, I T IS OBSERVED THAT WITHOUT ANY REASON THE ASSESSEE H AS DEBITED SPECIFIC EXPENSES LIKE HOUSEHOLD EXPENSES , CAPITAL EXPENSES , A ND LOSS FROM SALE OF NIKKI FORD C AR FOR WANT OF NEXUS WITH THE BUSINESS OF THE ASSESSEE . THEREFORE, WE JUSTIFY THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING 100% OF SUCH SPECIFIC UNRELATED EXPENSES TO THE BUSINESS OF THE ASSSESSEE. HOWEVER, THE ASSESSING OFFICER HAS NOT DISPROVED THE FACT WITH ANY FURTHE R INVESTIGATION THAT ASSESSEE HAS NOT CARRIED OUT ANY BUSINESS OR TRADING IN SHARES, THEREF ORE, WE OF T HE VIEW TH AT IT WILL BE A PPROPRIATE TO RESTRICT THE DISALLOWANCES UPT O THE EXPEN DI TURE 50% OF SUCH EXPENSES IN THE CASE OF ADI SHWAR ENTERPRISE AND M/S. IDEA CONCERN. ACCORDINGLY, IN THE CASE OF ADI SHWAR ENTERPRISE , THE DISALLOWANCE OF FOLLOWING EXPENSES AT 100% ARE SUSTAINED (I) HOME EXPENSE S RS. 2 ,5 3 ,187/ - (II) CLUB EXPENSE S I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 6 RS. 9081/ - , (III) TRAVELLING EXPENSES RS. 2 , 09 , 207/ - , (IV) PETROL EXPENSES RS. 1 , 90 , 745 . IN RESPECT OF RE M A IN ING EXPENSES, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE UP TO 50% OF SUCH EXPENSES . SIMILARLY IN THE CASE OF IDEA CONCERN THE CLAIM OF EXPENSES ON ACCOUNT OF LOSS FROM SALE OF NIKKI CAR TO THE AMOUNT FOR RS . 170327/ - IS FULLY DISALLOWED AS ASSESSEE HAS FAILED TO FURNISH ANY RELEVANT SUPPORTING EVIDENCES TO SUBSTANTIATE THAT TH ESE EXPENSES AND LOSSES WAS INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IN RESPECT OF REMAINING EXPENSES, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE UPTO 50% OF SUCH EXPENSES. IN THE CASE OF OTHER ASSESSSEE WHO IS BROTHER OF THE ASSESSEE SHRI SNEHAL G. SHAH ON SIMILAR FACT THE ASSESSEE HAS CLAIMED VARIOUS EXPENSES IN THE BUSINESS OF TRADING IN SHARES . ON SIMILAR BASIS ASSESSING OFFICER HAS ALSO DISALLOWED TOTAL EXPENSES TO THE AMOUNT OF RS. 5 , 22 , 573/ - TREATING THE SAME AS OF THE NATURE OF PERSONAL EXPENSES AND CAPITAL EXPENSES AN D THE DETAIL OF SUCH EXPENSES HAS BEEN REPORTED BY THE ASSESSING OFFICER AT PAGE NO. 7 & 8 O F THE ASSESSMENT ORDER. WE HAVE GONE THROUGH THE DETAIL OF SUCH EXPENSES AND OBSERVED THAT SIMILAR TO OT HER CA SES AS ADJ U DI C AT ED ABOVE VIDE ITA NO. 2060/AHD/2015 , THE DISALLOWANCE S OF THE FOLLOWING EXPENSES ARE FULLY SUSTAINED AS THE ASSESSEE HAS FAILED TO SUBSTANTIATE WITH RELEVANT EV IDENCES OF THEIR NEXUS TO THE B U SINE SS OF THE ASSESSEE I.E. NIKKI FORD CA R RS. 1 , 14 , 273/ - , TRAVELLING EXPENSES OF RS. 18 ,629/ - INSURAN CE FOR C OR RA LA ALTIS 27364/ - , ELECTRICITY EXPENSES OF RESIDENCE RS.71 , 445/ - , CORPORATION TAX RS. 27361/ - AND LEGAL FEES RS. 5000/ - IN RESPECT OF THE REMAINING EXPENSES, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF RS. 50% FOR THE REASONS DISCUSSED IN THE CASE OF SH. RAJESHBHAI C. SHAH AS ABOVE IN THIS I.T.A NO S . 2060 & 2061 /AHD/20 15 A.Y. 2010 - 11 PAGE NO SHREE RAJESHBHAI C. SHAH VS. IT O & SHREE SNEHLAL G. SHAH VS. ITO 7 ORDER. ACCORDINGLY , THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . 7 . IN THE RESULT , BOTH THE APPE AL S OF THE ASSESSE ES ARE PARTLY ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 20 - 02 - 20 20 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD : DATED 20 /02 /2020 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,