Shri Amarkumar Agrawal, Sendhwa V. The ACIT, Indore

ITA 215/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2900 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 05-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K KARAN
• Assessee Lawyers: R P MANDOVRA; PIYUSH MANDOVRA S
• Keywords: Depreciation
• Section: 80IB

Judgement Text

PAGE 1 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AATPT3580H I.T.A.NO. 279 & 280/IND/2008 A.YS. : 2003-04 AND 2004-05 SHRI KISHORE KUMAR TAYAL, ACIT, PROP. M/S. SARBULAL GANGASAHAY, INDORE. VS 5(1), INDORE. APPELLANT RESPONDENT PAN NO. : AATPT3581G I.T.A.NO. 213/IND/2009 A.Y. : 2005-06 SHRI GRIRISH KUMAR TAYAL, ACIT, PROP. M/S. PRADEEP COTEX INDUSTRIES 4,DURGA NAGAR, INDORE. VS RANGE 5, INDORE. APPELLANT RESPONDENT PAN NO. : AATPT3580H I.T.A.NO. 214/IND/2009 A.Y. : 2005-06 SHRI KISHORE KUMAR TAYAL, ACIT, PROP. M/S. KUNAL COTTON INDUSTRIES, 4,DURGA NAGAR, INDORE. VS 5(1), INDORE. APPELLANT RESPONDENT PAGE 2 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. PAN NO. : ABBPA1280E I.T.A.NO. 215/IND/2009 A.Y. : 2005-06 SHRI AMAR KUMAR AGRAWAL, PROP. M/S. OM COTTON FIBERS, ACIT, A.B.ROAD, GOI, SENDHWA VS 5(1), INDORE. APPELLANT RESPONDENT APPELLANTS BY : SHRI R.P. MANDOVRA AND SHRI PIYUSH MANDOVRA, ADVOCATES RESPONDENT BY : SHRI V.K.KARAN, SR. DR DATE OF HEARING : 06.05.2010 O R D E R PER BENCH THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND THESE ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I. T.A.NO. 279/IND/2008, WHEREIN THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. PAGE 3 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. CIT(A) IN CONFIRMING THE ACTION OF ADDITION OF RS. 1,05,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF LOW HOUSE-HOLD WITH DRAWALS. 4. THE LEARNED COUNSEL INITIALLY TRIED TO SUGGEST THAT THE ISSUE WAS COVERED BY THE EARLIER ORDERS OF THE TRIBUNAL IN T HE CASE OF SUNIL KUMAR TAYAL IN I.T.A.NO. 760/IND/2006 ORDER DATED 31.12.2 008 AND IN THE CASE OF SHRI PRADEEP KUMAR TAYAL IN I.T.A.NO. 761/IND/20 06 ORDER DATED 15.12.2009, WHEREIN THE HOUSE HOLD WITHDRAWALS SHOW N BY THE ASSESSEE HAD BEEN ACCEPTED. THE LEARNED COUNSEL FURTHER SUBM ITTED THAT THE A.O. HAD ESTIMATED WITHDRAWALS @ RS.10,000/- PER MONTH A ND DID NOT GIVE TOTAL CREDIT OF RS. 77000/- BEING WITHDRAWALS BY AL L THE MEMBERS OF JOINT FAMILY. 5. THE LD. SR. DR, AT THIS STAGE, SUBMITTED THAT HAVIN G REGARD TO THE STATUS OF THE ASSESSEE FAMILY AND NUMBER OF FAMILY MEMBERS, THE WITHDRAWALS WERE FACTUALLY VERY LOW AND IN SOME OF THE MONTHS THERE WERE NO WITHDRAWALS AT ALL. HENCE, THE EARLIER DECI SIONS SHOULD NOT BE FOLLOWED. THE LD, AT THIS STAGE, FAIRLY AGREED FOR ADDITION OF RS. 30,000/- AFTER CONSIDERING THE TOTAL FAMILY WITHDRAWALS AT R S. 77000/- BOTH AGGREGATING TO RS. 1,07,000/- AS AGAINST TOTAL WITH DRAWALS ESTIMATED BY THE ASSESSING OFFICER AT RS. 1.20 LAKHS. WE ORDER A CCORDINGLY. THUS, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. PAGE 4 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. 7. NOW, WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A.NO . 280/IND/2008. 8. ONE OF THE ISSUES INVOLVED, IN THIS APPEAL, IS REGA RDING LOW HOUSE HOLD WITHDRAWALS. THE SUBMISSIONS OF BOTH THE PARTIES ARE SAME HAVING REGARD TO THE EARLIER ORDERS OF THE TRIBUNAL AND FACTS, WE REDUCE THE QUANTUM OF ADDITION TO RS. 35,000/- FROM RS. 68 ,500/-. THUS, GROUND NO.1(A) IS PARTLY ALLOWED. 9. IN GROUND NO. 1(B), THE ISSUE IS REGARDING THE ADDI TION OF RS. 9625/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 10. THE LEARNED COUNSEL PLEADED THAT IF THIS ADDITION W AS SUSTAINED, THEN OPENING STOCK OF NEXT YEAR HAD TO BE MODIFIED, WHICH WAS DONE. WE AGREE WITH THIS PLEA OF THE ASSESSEE AND DIRECT THE A.O. TO MODIFY THE VALUE OF OPENING STOCK REPRESENTED BY THIS CLOSING STOCK IN THE NEXT YEAR. THUS, THIS GROUND OF THE ASSESSEE IS DISMISSED IN T ERMS INDICATED ABOVE. 11. GROUND NOS. 1(C) & 1(D) ARE OUT OF VEHICLE EXPENSES AND TELEPHONE EXPENSES. 12. BOTH THESE ADDITIONS HAVE BEEN MADE BY THE REVENUE AUTHORITIES ON AD HOC BASIS ON ACCOUNT OF PERSONAL USE, WHICH, IN OUR OPINION, CANNOT BE RULED OUT. HENCE, WE DO NOT FIND ANY MERIT IN THESE GROUNDS OF THE ASSESSEE. THE SAME ARE, THEREFORE, D ISMISSED. PAGE 5 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. 13. AS REGARD THE ISSUE RAISED IN GROUND NO.1(E), THE F ACT IS THAT THE CANTEEN EXPENSES HAVE BEEN CLAIMED BY THE ASSESSEE FOR PROVIDING FACILITIES TO WORKERS/LABOURERS IN THE BUSINESS PRE MISES AND THIS ADDITION HAS BEEN MADE ON A PURELY AD HOC BASIS WITHOUT POIN T OUT ANY SPECIFIC REASON AND THERE CANNOT BE ANY PERSONAL ELEMENT IN THESE EXPENSES. HENCE, WE ACCEPT THIS GROUND OF THE ASSESSEE. 14. AS REGARD THE ISSUE OF NETTING OF INTEREST RAISED I N GROUND NO. 1(F), WE FIND THAT IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN FOLLOWING CASES :- I) I.T.A.NO. 756/IND/2006 II) I.T.A.NO. 757/IND/2006, III) I.T.A.NO. 759/IND/2006 AND IV) I.T.A.NO. 761/IND/2006 AND THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF A.O. BY OBSERVING AS UNDER :- 14. AS REGARD TO NETTING OF INTEREST IS CONCERNED, IT IS NOW A SETTLED JUDICIAL PROPOSITION THAT ONLY NET INTERE ST INCOME HAS TO BE EXCLUDED FROM THE PROFITS OF AN ELIGIBLE INDUSTRIAL UNDERTAKING. THE LD. DEPARTMENTAL REPRESENTATIVE, T HOUGH, HAS TRIED TO STATE THAT THERE WAS NO DIRECT NEXUS A S OBSERVED BY THE CIT(A). HOWEVER, FROM THE PERUSAL OF THE APP ELLATE PAGE 6 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. ORDER, IN OUR VIEW, NO SUCH FINDING EMERGES. EVEN T HE A.O. HAS NOT DEALT WITH THIS ASPECT. FURTHER, THE DECISI ON RELIED ON BY THE LD. DEPARTMENTAL REPRESENTATIVE IN THE CASE IS ALSO, ON A DIFFERENT ASPECT AND NOT ON THE ASPECT OF NETT ING, HENCE, NOT RELEVANT. SINCE THE ASPECT OF NEXUS HAS NOT BEE N EXAMINED AT ANY STAGE, HENCE, WE RESTORE THIS ISSUE TO THE FILE OF A.O. TO EXAMINE THE SAME AND IF THE NEXUS BETWEE N THE INTEREST PAID AND INTEREST EARNED IS ESTABLISHED BY THE ASSESSEE, THEN, TO EXCLUDE ONLY NET INTEREST FROM T HE ELIGIBLE PROFITS OF THE INDUSTRIAL UNDERTAKING. THUS, THIS P ART OF THIS GROUND IS ACCEPTED. 15. SINCE THE FACTS ARE IDENTICAL. HENCE, THE ISSUE RAISED IN THIS APPEAL, IS ALSO RESTORED TO THE FILE OF A.O. TO BE DISPOSED OF IN A SIMILAR MANNER. THUS, THIS GROUND OF THE ASSESSEE STANDS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 17. NOW, WE SHALL TAKE UP THE APPEAL IN I.T.A.NO. 214/I ND/2009. 18. IN GROUND NOS. 1(A) AND (B), THE ISSUE IS DISALLOWA NCE OUT OF TELEPHONE/VEHICLE RUNNING EXPENSES, WHICH DESERVE T O BE SUSTAINED AS PAGE 7 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. HELD BY US IN I.T.A.NO. 280/IND/2009. HENCE, GROUND NO.1(A) & (A) STAND DISMISSED. 19. IN GROUND NO. 1(C), THE ISSUE IS REGARDING DISALLOW ANCE OUT OF CANTEEN EXPENSES, WHICH NEEDS TO BE DELETED IN VIEW OF OUR FINDINGS GIVEN IN I.T.A.NO. 280/IND/2008 HEREINBEFORE. HENCE, WE O RDER ACCORDINGLY. THUS, THIS GROUND STANDS ALLOWED. 20. THE ISSUE RAISED IN GROUND NO.1(D) IS AGAIN REGARDI NG ADDITION MADE ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS. 21. HAVING REGARD TO THE FACTS OF THE GROUP AS A WHOLE AND EARLIER DECISIONS OF THE TRIBUNAL, WE REDUCE THE QUANTUM OF SUCH DISALLOWANCE TO RS. 40,000/-. THUS, THIS GROUND OF THE ASSESSEE STA NDS PARTLY ALLOWED. 22. IN GROUND NO.1(E), THE ISSUE INVOLVED IS REGARDING NETTING OF INTEREST FOR COMPUTING DEDUCTION U/S 80-IB, WHICH I S RESTORED TO THE FILE OF A.O. AS DONE WHILE DISPOSING OF GROUND NO.1(F) OF I .T.A.NO. 280/IND/2008 HEREINABOVE. IN THIS GROUND, THE CONSI DERATION OF INTEREST RECEIVED FROM CUSTOMERS ON DELAYED PAYMENT IN COMPU TING DEDUCTION U/S 80IB IS ALSO INVOLVED, WHICH ISSUE IS ALSO RESTORED TO THE FILE OF A.O. TO VERIFY THESE FACTS AND IF THE SAME IS FOUND TO BE C ORRECT, THEN THE A.O. SHALL CONSIDER THE SAME AS ELIGIBLE FOR DEDUCTION U /S 80IB. THUS, GROUND NO.1(E) IS ALLOWED FOR STATISTICAL PURPOSES IN TERM S INDICATED ABOVE. PAGE 8 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 24. NOW, WE SHALL TAKE UP APPEAL IN I.T.A.NO. 213/IND/2 009. 25. ONE OF THE ISSUES INVOLVED IS REGARDING COMPUTATION OF DEDUCTION U/S 80-IB, WHICH IS IDENTICAL TO ISSUE RA ISED IN GROUND NO.1 (F) OF I.T.A.NO. 280/IND/2008 AND GROUND NO.1(E) OF I.T .A.NO. 214/IND/2009. HENCE, WE RESTORE THIS ISSUE TO THE FILE OF A.O. ON SIMILAR LINES. THE CONSIDERATION OF INTEREST RECEIVED FROM CUSTOMERS O N DELAYED PAYMENT IN COMPUTING DEDUCTION U/S 80IB IS ALSO INVOLVED, WHIC H ISSUE IS ALSO RESTORED TO THE FILE OF A.O. TO VERIFY THESE FACTS AND IF THE SAME IS FOUND TO BE CORRECT, THEN THE A.O. SHALL CONSIDER THE SAME A S ELIGIBLE FOR DEDUCTION U/S 80IB. 26. NEXT ISSUE INVOLVED IS IN RESPECT OF DISALLOWANCE O F RS. 3,74,013/- MADE BY THE ASSESSING OFFICER OUT OF WAG ES EXPENSES. 27. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE FAILED T O PRODUCE THE LABOUR REGISTER. HENCE, THE A.O. CONCLUDED THAT WAG ES PAYMENT REMAINED UN-SUBSTANTIATED. ACCORDINGLY, HE DISALLOWED 20 % O F SUCH EXPENSES. THE A.O. IN DOING SO REJECTED THE CONTENTION OF THE ASS ESSEE THAT VOUCHERS HAD BEEN PREPARED FROM WAGES REGISTER AND THERE WAS SUB STANTIAL TURNOVER TO THE TUNE OF RS. 35.86 CRORES, WHICH COULD NOT HAVE BEEN ACHIEVED WITHOUT PAGE 9 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. DEPLOYMENT OF LABOURS. THE LD. CIT(A) REDUCED THE Q UANTUM OF DISALLOWANCE TO 10 %. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 28. THE LEARNED COUNSEL SUBMITTED THAT NO DISALLOWANCE HAD BEEN MADE IN EARLIER YEARS AND IN THE NEXT YEAR ONLY A S UM OF RS. 1 LAKH HAD BEEN DISALLOWED OUT OF TOTAL EXPENSES OF RS. 45 LAK HS CLAIMED UNDER THIS HEAD AND THAT ISSUE WAS ALSO BEING CONTESTED. ON A QUERY, THE ASSESSEE CLARIFIED THAT THE SUM OF RS. 1 LAKH HAD BEEN DISAL LOWED FOR DEFICIENCIES IN THUMB IMPRESSIONS ON THE VOUCHERS. HOWEVER, WHEN IT WAS CLARIFIED THAT IN THE YEAR UNDER CONSIDERATION, THE DISALLOWA NCE HAD BEEN MADE ONLY BECAUSE THE ASSESSEE FAILED TO PRODUCE THE WAGES RE GISTER OR TO SUBSTANTIATE ITS CLAIM OTHERWISE IN A SPECIFIC MANN ER, THE LEARNED COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. 29. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PREFERRED TO RELY STRONGLY ON THE ORDERS OF THE REV ENUE AUTHORITIES. 30. ON DUE CONSIDERATION OF THE FACT THAT THE ASSESSEE HAS FAILED TO PRODUCE THE WAGES REGISTER NOR ANY FIR HAS BEEN LOD GED. HENCE, ITS CLAIM REGARDING THEFT/LOSS LOSS OF WAGES REGISTER REMAINS UN-SUBSTANTIATED. HOWEVER, IN OUR VIEW, THE DISALLOWANCE SHOULD BE RE STRICTED TO 5 % OF THE TOTAL EXPENSES AS NO DISALLOWANCE HAS BEEN MADE IN EARLIER YEARS AND IN SUBSEQUENT YEAR THE DISALLOWANCE HAS BEEN MADE @ AP PROX. 2 %. THUS, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED. PAGE 10 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. 31. THE REMAINING ISSUE INVOLVED IS REGARDING DISALLOWA NCE MADE BY THE ASSESSING OFFICER OUT OF VEHICLE RUNNING EXP ENSES AND DEPRECIATION ON ACCOUNT OF PERSONAL USE. 32. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE DIS ALLOWED 1/8 TH OF THESE EXPENSES AND INSPITE OF THAT THE A.O. INC REASED THE RATE OF DISALLOWANCE TO 25 %, WHICH WAS REDUCED BY THE CIT( A) TO 20 %. HENCE, NO FURTHER DISALLOWANCE WAS WARRANTED. IN OUR OPINI ON, THE RATE OF DISALLOWANCE 20% APPEARS TO BE REASONABLE HAVING RE GARD TO, THE FACTS OF THE CASE. HENCE, WE DISMISS THIS GROUND OF THE ASSE SSEE. 33. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PA RTLY ALLOWED. 34. NOW, WE SHALL TAKE UP THE ASSESSEES APPEAL IN I.T. A.NO. 215/IND/2009. 35. THE ONLY ISSUE INVOLVED, IN THIS APPEAL, IS REGARDI NG NETTING OF INTEREST FOR COMPUTING DEDUCTION U/S 80IB AND CONSI DERATION OF INTEREST RECEIVED FROM CUSTOMERS ON DELAYED PAYMENTS FOR THE PURPOSE OF DEDUCTION U/S 80-IB. 36. THIS ISSUE IS RESTORED TO THE FILE OF A.O. TO BE DE CIDED IN THE MANNER AS DIRECTED IN I.T.A.NOS. 214 & 213/IND/2009 . 37. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 38. TO SUM UP, ALL THE APPEALS OF THE ASSESSEE STAND PA RTLY ALLOWED. PAGE 11 OF 11 - KISHORE KUMAR TAYAL AND OTHERS I.T.A.NOS. 279 & 280/IND/2008 ETC. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 11TH MAY, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH MAY, 2010. CPU* 6105