SHRI GOVIND RAM MODI, Kota V. JOINT COMMISSIONER OF INCOME TAX, Kota

ITA 216/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3656 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 12-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAN SINGH
• Assessee Lawyers: S L PODDAR
• Keywords: Rejection of books of accounts; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 244A; 234B; 32

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 216/JP/2018 & 770/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 & 2011-12 SHRI GOVIND RAM MODI C/O M/S AGARWAL FLOORING STONE CO.-1-DHABADEH ROAD, MORAK STATION, RAMGANJMANDI, KOTA (RAJ.) CUKE VS. ADDL. CIT RANGE-1, KOTA LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AECPM1628Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S. L. PODDAR (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI RAN SINGH (ADDL.CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/01/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 26/02/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDERS OF LD. CIT(A), KOTA DATED 05.12.2017 FOR THE ASSESS MENT YEAR 2010-11 AND LD. CIT(A), ALWAR DATED 25.08.2017 FOR THE ASSE SSMENT YEAR 2011- 12 RESPECTIVELY. 2. IN ITA NO. 216/JP/2018, THE ASSESSEE HAS TAKEN T HE FOLLOWING GROUNDS OF APPEAL:- 1. THE IMPUGNED ADDITIONS AND DISALLOWANCE MADE IN THE ORDER U/S 143(3) OF THE ACT DATED 12.03.2013 ARE BA D IN LAW AND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE THE SAME KINDLY BE DELETED. ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 2 2.1 RS. 1,50,000/- THE LD. CIT(A) ERRED IN LAW AS W ELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE APPLICATION OF SEC. 145(3). THE PROVISION SO INVOKED AND CONFIRMED BY T HE CIT(A) BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, THE SAME MAY KINDLY BE QUASHED. CONSEQUENTLY THE TRADING ADDITIO N OF RS. 1,50,000/- MAY KINDLY BE DELETED IN FULL. ALTERNATIVELY AND WITHOUT PREJUDICE TO ABOVE, 2.2 THE LD. CIT(A) FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN DIRECTING TO APPLY GP RATE OF 11.34% (AS AGAINST 14% APPLIED BY THE AO) AND AS AGAINST 9.74% DECLARE D BY THE ASSESSEE AND THUS THERE BY PARTLY CONFIRMING TRADIN G ADDITION SO MADE BY THE AO AND PARTLY SUSTAINED BY THE LD. CIT( A) IS TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON THE RECORD AND HENCE THE ADDITION MAY KINDLY BE DELETED IN FULL. 3. RS. 11,000/-: THE LD. CIT(A) ERRED IN LAW AS WEL L AS ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS. 11,000/- ON ACCOUNT OF ADVERTISEMENT EXPENSES. THE DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY B E ALLOWED. 4. RS. 1,80,080/-: THE LD. CIT(A) ERRED IN LAW AS W ELL AS ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS. 1,80,080/- ON ACCOUNT OF EXPENSES CLAIMED FOR USING LAND FOR MINING PURPOSES. THE DISALLOWANCE SO MADE AND CONFI RMED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY BE ALLOWED. 5. THE LD. AO FURTHER ERRED IN LAW AS WELL AS ON TH E FACTS OF THE CASE IN CHARGING INTEREST U/S 234A, 234B, 234C & 234D OF THE ACT AND AS ALSO IN WITHDRAWING INTEREST U/S 244 A OF THE ACT. THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARG ING AND WITHDRAWAL OF ANY SUCH INTEREST. THE INTEREST SO CHARGED/WITHDRAWN, BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 3 3. GROUND NO. 1 WAS NOT PRESSED BY THE LD. AR DURI NG THE COURSE OF HEARING. HENCE, THE SAME IS DISMISSED AS NOT PRE SSED. 4. REGARDING GROUND NO. 2, BRIEFLY STATED, THE FACT S OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM MINING, PROCE SSING AND TRADING OF KOTA STONES AND HAS DISCLOSED SALES OF RS. 93,79 ,614/- ON WHICH GROSS PROFIT OF RS. 9,13,557/- WAS DISCLOSED GIVING GP RATE OF 9.74%. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. ASSESSING OFFICER OBSERVED THAT EXPENSES OF JHARAI AND KATAI OF RS. 8 0,84,040/- WERE NOT SUPPORTED BY VOUCHERS, PRODUCTION EXPENSES WERE ALSO NOT VERIFIABLE, HIRE CHARGES OF RS. 33,86,000/- WERE CO VERED U/S 40A(2)(B) AND WERE EXCESSIVE AND UNREASONABLE AND THERE WERE OVERWRITING IN THE PRODUCTION REGISTER. IN VIEW OF THE AFORESAID D EFECTS, THE AO REJECTED THE BOOKS OF ACCOUNTS U/S 145(3) AND INCRE ASED THE GP RATE BY 5% AND MADE ADDITION OF RS. 3,99,589/-. ON APPEA L, THE LD CIT(A) UPHELD THE FINDING OF THE AO REGARDING REJECTION OF BOOKS OF ACCOUNTS AND APPLICATION OF SECTION 145(3). HOWEVER, ON NOTI CING THAT THE AO HAD INCREASED GP RATE BY 5% ON THE BASIS OF SOME CO MPARABLE CASES BUT SUCH CASES HAVE NOT BEEN SPECIFIED NOR ASSESSEE WAS GIVEN ANY OPPORTUNITY, RESTRICTED THE TRADING ADDITION TO RS. 150,000/- ONLY. THUS AS AGAINST APPLICATION OF GP RATE OF 14.74% BY THE AO, THE LD. CIT(A) HAS RESTRICTED THE SAME TO 11.34% AND THE ADDITION OF RS. 1,50,000/- WAS CONFIRMED. NOW, THE ASSESSEE IS IN APPEAL BEFO RE US. 5. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT IN THE ASSESSMENT FOR THE ASSESSMENT YEAR 2011-12 COMPLETE D U/S 143(3), THE ASSESSING OFFICER APPLIED GP RATE OF 9.74% (AS DISCLOSED BY THE ASSESSEE IN ASSESSMENT YEAR 2010-11) AS AGAINST GP RATE OF 8.89% ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 4 DISCLOSED BY THE ASSESSEE. IN APPEAL THE GP RATE OF 8.89% AS DISCLOSED BY THE ASSESSEE WAS UPHELD AND ADDITION M ADE ON ACCOUNT OF HIGHER APPLICATION GP RATE OF 9.74% WAS DELETED BY THE LEARNED CIT(A). THE AFORESAID FACTS REVEAL FIRS TLY THAT THE GP RATE OF 8.89% DISCLOSED BY THE ASSESSEE IN ASSESSME NT YEAR 2011-12 WAS ACCEPTED AS REASONABLE. THIS GP RATE WA S DISCLOSED ON TURNOVER OF RS. 1,13,62,511/-. SECONDL Y THE DEPARTMENT ALSO CONSIDERED THE GP RATE OF 9.74% AS IDEAL AND THEREFORE APPLIED THE SAME IN ASSESSMENT YEAR 2011- 12 AS AGAINST GP RATE OF 8.89% DISCLOSED BY THE ASSESSEE. ALTHOUGH THE LEARNED CIT(A) CONSIDERED GP RATE OF 8.89% AS R EASONABLE. BUT THIS DISCLOSES THE GP RATE OF 9.74% WAS FOUND M OST REASONABLE BY THE DEPARTMENT. THIS IS THE VERY GP R ATE DISCLOSED BY THE ASSESSEE DURING THE YEAR UNDER CON SIDERATION. THUS WHEN THE DEPARTMENT CONSIDERS GP RATE OF 8.89% AS REASONABLE THEN THERE IS NO GROUND FOR MAKING ADDIT ION AGAINST DISCLOSURES OF GP RATE OF 9.74%. IN VIEW OF THIS, I T IS SUBMITTED THAT THE LEARNED CIT(A) ERRED IN CONFIRMING ADDITIO N OF RS. 1,50,000/-. IT IS SETTLED PRINCIPLE OF LAW THAT IT IS THE ASSESSEE'S OWN CASE WHICH IS THE BEST GUIDE FOR APP LICATION OF GP RATE. 6. IT WAS FURTHER SUBMITTED BY THE LD AR THAT BOTH THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A) ERR ED IN REJECTING THE BOOKS OF ACCOUNTS AND IN APPLYING THE PROVISIONS OF SECTION 145(3). THE ASSESSEE HAS MAINTAINED REGU LAR BOOKS OF ACCOUNTS WHICH ARE ALSO AUDITED U/S 44AB. THE ASSES SEE HAS MAINTAINED CASHBOOK, LEDGER, PRODUCTION REGISTER, J OURNAL AND SUPPORTING VOUCHERS. THE AUDITORS HAVE NOT POINTED OUT ANY DEFECT IN THE MAINTENANCE OF REGULAR BOOKS OF ACCOUNTS. IT WAS FURTHER ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 5 SUBMITTED THAT THE ASSESSEE MAINTAINED PRODUCTION R EGISTER SUPERVISED BY THE MINING DEPARTMENT. THE MINING DEP ARTMENT HAS NOT FOUND ANY DISCREPANCY IN THE MAINTENANCE OF STO CK REGISTER. IN THE CASE OF THE ASSESSEE'S BUSINESS, THE PRODUCT ION REGISTER IS THE SOUL OF IT. ONCE PRODUCTION STANDS ACCEPTED BY THE MINING DEPARTMENT, THERE REMAINS NO CASE FOR ANY ADDITION. THE LEARNED ASSESSING OFFICER WRONGLY REJECTED THE BOOKS OF ACC OUNTS INCLUDING THE PRODUCTION REGISTER OBSERVING THAT TH ERE WERE CUTTINGS AND OVERWRITING IN THE PRODUCTION REGISTER . IN THIS REGARD IT IS SUBMITTED THAT OVERWRITING IS SOMETIME DONE T O CORRECT A MISTAKE, SO IS ALSO THE CASE OF CUTTINGS IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT OVERWRITING AND CUTTINGS WER E PREJUDICIAL TO THE INTEREST OF THE REVENUE. THERE IS NO CUTTING OR OVERWRITING SO AS TO HAVE ANY IMPACT ON THE PRODUCTION OF GOODS. I N VIEW OF THIS MERE OBSERVATION OF THE ASSESSING OFFICER THAT THER E WERE CUTTINGS AND OVERWRITING IS OF NO HELP. IT WAS FURTHER SUBMI TTED THAT THE ASSESSING OFFICER HAS ALSO ERRED IN OBSERVING THAT THE EXPENSES OF JHIRAI, KATAI AND PRODUCTION WERE NOT SUPPORTED BY VOUCHERS. IT IS SUBMITTED THAT ASSESSEE HAS GOT COMPLETE VOUCHERS O F ALL THE EXPENDITURE INCURRED IN RESPECT OF JHIRAI, AND PROD UCTION. THE LEARNED ASSESSING OFFICER IN FACT NEVER MADE ANY EF FORT TO VERIFY THE EXPENDITURE. IN RESPECT OF LABOUR PAYMENT AND A MANI EXPENDITURES AND HIRE CHARGES OF MACHINERIES WHICH INCLUDED JCB, TATA HITACHI AND DUMPERS ETC. THE ASSESSEE IS SUBMI TTING COPIES OF ALL THESE VOUCHERS AVAILABLE AT APB 31-78. THE L EARNED ASSESSING OFFICER HAS WRONGLY OBSERVED THAT THE EXP ENDITURE INCURRED ON HIRE CHARGES IS EXCESSIVE AND UNREASONA BLE AND IS COVERED U/S 40A(2)(B). THE LEARNED ASSESSING OFFICE R HAS NOT GIVEN THE MARKET VALUE OF THE EXPENDITURE INCURRED BY THE ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 6 ASSESSEE ON HIRE CHARGES ON VARIOUS MACHINERIES WIT HOUT BRINGING ON RECORD THE MARKET VALUE OF SERVICES OBTAINED BY THE ASSESSEE, THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE PAYMENT OF HIRE CHARGES WAS EXCESSIVE AND REASONABL E. IN VIEW OF THIS IT IS SUBMITTED THAT THE FINDING OF THE LEARNE D ASSESSING OFFICER WAS ERRONEOUS. THE ASSESSEE HAD MADE PAYMEN TS OF HIRE CHARGES AS PER PREVAILING MARKET RATES. IN VIEW OF THE AFORESAID SUBMISSIONS, IT IS STATED THAT THERE WAS NO CASE FO R REJECTING THE BOOKS OF ACCOUNTS BY THE LEARNED ASSESSING OFFICER U/S 145(3). THE LEARNED CIT(A) ALSO ERRED IN CONFIRMING THE FIN DING OF THE LEARNED ASSESSING OFFICER. IN VIEW OF THE AFORESAID FACTS IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER ERRED IN REJECTING THE BOOKS OF ACCOUNTS AND MAKING TRADING ADDITIONS. THE LEARNED CIT(A) FURTHER ERRED IN CONFIRMING THE FINDING OF T HE LEARNED ASSESSING OFFICER OF REJECTING THE BOOKS OF ACCOUNT S. THE LEARNED CIT(A) ALSO ERRED IN UPHOLDING TRADING ADDITION OF RS. 1,50,000/-. IT IS THE SUBMISSION OF THE ASSESSEE THAT COMPLETE RECORDS AND ACCOUNTS HAVE BEEN MAINTAINED WHICH ARE DULY SUPPOR TED BY VOUCHERS. THE PRODUCTION REGISTER IS REGULARLY SUPE RVISED BY THE MINING AUTHORITY. ON TOP OF ALL, THE GP RATE DISCLO SED BY THE ASSESSEE IS THE HIGHEST SO FAR DISCLOSED BY HIM. IN VIEW OF THIS, THE TRADING ADDITION SUSTAINED BY THE LEARNED CIT(A ) DESERVES TO BE DELETED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURUSED THE MATERIAL AVAILABLE ON RECORD. FOR THE DETAILED REA SONING GIVEN BY THE AO AND THE LD CIT(A), THE BOOKS OF ACCOUNTS HAV E RIGHTLY BEEN REJECTED AND THE SAME IS UPHELD. REGARDING ESTIMAT ION OF GROSS PROFIT RATE, THE AO HAS CITED SOME COMPARABLE CASE WHERE GROSS ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 7 PROFIT RATE OF 14% HAS BEEN DECLARED BUT THE DETAIL S THEREOF ARE NOT AVAILABLE ON RECORD AS RIGHTLY NOTICED BY THE L D CIT(A) AND THE BASIS THUS ADOPTED BY THE AO WAS RIGHTLY REJECTED B Y THE LD CIT(A). AT THE SAME TIME, THE LD CIT(A) HAS RESTRIC TED THE TRADING ADDITION TO RS 1.5 LACS. HOWEVER, WE FIND THAT EVE N THE LD CIT(A) HAS NOT GIVEN ANY BASIS AS TO HOW THE SAID ESTIMATI ON HAS BEEN ARRIVED AT. IT IS A SETTLED LEGAL POSITION THAT ON CE THE BOOKS OF ACCOUNTS ARE REJECTED, THE ASSESSING OFFICER IS REQ UIRED TO ESTIMATE THE GROSS PROFIT RATE AND SUCH ESTIMATION SHOULD HAVE SOME RATIONALE BASIS. IN THE INSTANT CASE, WE FIND THAT BOTH THE LOWER AUTHORITIES HAVE NOT SPECIFIED THE BASIS FOR THEIR ESTIMATION AND THUS, THE ADDITION SO MADE IS DIRECTED TO BE DE LETED. IN THE RESULT, THE GROUND OF APPEAL IS ALLOWED. 8. REGARDING GROUND NO. 3, THE BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED A SUM OF RS. 11,000/- UNDER THE HEAD ADVERTISEMENT EXPENSES. THE PAYMEN T WAS MADE TO AGARWAL SEVA SAMITI JHALAWAR AND THE SAME W AS DISALLOWED BY THE AO HOLDING THAT THE PAYMENT IS NO T RELATED TO BUSINESS OF THE ASSESSEE AND CANNOT BE HELD TO BE I NCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. DURING THE COURSE OF HEARING, THE LD AR SUBMITTED A COPY OF RECEIPT ALON G WITH ADVERTISEMENT OF THE ASSESSEE PUBLISHED IN THE MAGA ZINE PUBLISHED BY AGARWAL SEVA SAMITI JHALAWAR AND SUBMI TTED THAT LEARNED ASSESSING OFFICER WRONGLY HELD THAT THE EXP ENDITURE WAS NOT FOR BUSINESS PURPOSES. IT WAS FURTHER SUBMITTED THAT ON TURNOVER OF RS. 93,79,614/- THE EXPENDITURE OF RS. 11,000/- ON ADVERTISEMENT COMES TO JUST 0.1% AND THE SAME DESER VES TO BE ALLOWED. ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 8 9. HEARD BOTH THE PARTIES AND PURUSED THE MATERIAL AVAILABLE ON RECORD. AN AMOUNT OF RS 11,000 HAS BEEN PAID BY THE ASSESSEE TO AGARWAL SEVA SAMITI FOR PUBLISHING THE ASSESSEES ADVERTISEMENT IN THE MAGAZINE PUBLISHED BY THEM AN D HENCE, THE EXPENDITURE IS CLEARLY FOR BUSINESS PURPOSES AND IS ALLOWABLE FOR TAX PURPOSES. THE ADDITION SO MADE IS HEREBY DIREC TED TO BE DELETED. 10. REGARDING GROUND NO. 4, THE LD AR SUBMITTED TH AT THE ASSESSEE IS DOING MINING WORK AND OWNS MINES AT ARO LIYA JHALAWAR DISTRICT. THE MINING WORK IS DONE UNDER TH E NAME AND STYLE OF MODI KOTA STONE CO. THE MAIN WORK IS OF EX CAVATING OF KOTA STONE. WHILE DOING THE EXCAVATION FROM THE MIN ES, THERE IS LOT OF DEBRIS WHILE DIGGING OUT THE STONES. SUCH DE BRIS IS ALSO TAKEN OUT FROM THE MINES AND UNLOADED AT NEARBY PLA CES. AS PER THE POLICY OF THE MINING DEPARTMENT, ASSESSEE HAS T O TAKE CARE OF THE DEBRIS AT HIS OWN LEVEL. SUCH DEBRIS TAKEN OUT IS OF NO USE. AS PER POLICY, ASSESSEE HAS TO HAVE HIS OWN LAND FOR D UMPING PURPOSES OF THE DEBRIS. IT WAS IN THIS CONNECTION T HAT ASSESSEE PURCHASED A PIECE OF LAND ON 25.09.2009 FOR A SUM O F RS. 4,00,000/- FROM ONE SHRI RAJU S/O KAJOD AT VILL AGE AROLIYA TEHSIL PACHPAHAD DIST JHALAWAR. AS PER THIS AGREEME NT THE ASSESSEE GOT THE RIGHT OVER 3 BIGHA 10 BISWA LAND F OR USING THE SAME FOR ALL WORK RELATED TO MINING. IT WAS THIS EX PENDITURE OF RS. 4,00,000 + EXPENDITURE ON MINING ETC THE TOTAL COST WORKED OUT AT RS. 9,00,400/-. THIS COST HAS REMAINED UNCHALLENGED BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT (A). SINCE THE LAND WAS TO BE USED FOR LOADING AND UNLOADING DEBRI S ON MINING, ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 9 NATURALLY IT WAS PART OF PRODUCTION EXPENDITURE. KE EPING THIS FACT IN VIEW AND ALSO THE FACT THAT AT THE MAXIMUM THE L AND COULD BE USED FOR PLACING DEBRIS NOT MORE THAN 5 YEARS, THE ASSESSEE SPREAD THE EXPENDITURE OF RS. 9,00,400/- IN FIVE YE ARS AND ACCORDINGLY, CLAIMED A SUM OF RS. 1,80,080/- AS PAR T OF PRODUCTION EXPENDITURE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE EXPENDITURE CLAIMED BY THE ASSESSEE IS REVENUE EXPE NDITURE. IT IS DIRECTLY RELATED TO PRODUCTION OF STONE FROM MINES. UNLESS THE ASSESSEE GET A PLACE TO UNLOAD THE DEBRIS THE MININ G WORK CANNOT BE CONTINUED. IN OTHER WORDS, SUCH EXPENDITURE WAS WHOLLY AND EXCLUSIVELY REQUIRED FOR THE CONDUCT OF BUSINESS. T HEREFORE THE SAME IS ALLOWABLE AND THE ADDITION MADE DESERVES TO BE DELETED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS PURCHASED A PIECE OF LAND WHICH IS USED FOR LOADING AND UNLOADING DEBRIS IN CONNECT ION WITH HIS MINING ACTIVITIES AND HAS SPREAD THE EXPENDITURE OF RS. 9,00,400/- ON PURCHASE OF SUCH LAND OVER FIVE YEARS AND HAS CL AIMED A SUM OF RS. 1,80,080/- AS PART OF PRODUCTION EXPENDITURE DU RING THE YEAR UNDER CONSIDERATION. IN OUR VIEW, ONCE THE ASSESSE E HAS ACQUIRED THE OWNERSHIP RIGHTS OVER A PIECE OF LAND, SUCH RIG HT IS COUPLED WITH THE RIGHT OF USAGE AND RIGHT OF SUBSEQUENT DIS POSAL AND ANY EXPENDITURE INCURRED IN ACQUIRING SUCH RIGHTS IS ON CAPITAL FIELD AND THUS CANNOT BE CLAIMED AS REVENUE EXPENDITURE. THE USAGE OF SUCH PIECE OF LAND COULD BE FOR ACTUAL MINING ACTIV ITY OR FOR ANCILLARY ACTIVITY OF DUMPING THE DEBRIS SO PRODUCE D DURING THE COURSE OF MINING. MERELY BECAUSE THE USAGE IS FOR ANCILLARY ACTIVITY OF DUMPING THE DEBRIS SO PRODUCED DURING T HE COURSE OF MINING, THE SAME WILL NOT CHANGE THE OWNERSHIP RIGH TS OF THE ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 10 ASSESSEE OVER SUCH LAND AND THUS THE EXPENDITURE SO INCURRED IS CLEARLY A CAPITAL EXPENDITURE AND CANNOT BE CLAIMED AS REVENUE EXPENDITURE. IN THE RESULT, GROUND OF APPEAL IS DI SMISSED. 12. GROUND NO. 5 IS REGARDING LEVY OF INTEREST U/S 234A, 234B, 234C ETC AND THE SAME BEING CONSEQUENTIAL IN NATURE, DOE SNT REQUIRE ANY SEPARATE ADJUDICATION. HENCE, THE SAME IS DISMISSE D. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ITA NO. 770/JP/2017 14. IN ITA NO. 770/JP/2017, THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THE IMPUGNED ADDITIONS AND DISALLOWANCE MADE IN THE ORDER U/S 143(3) OF THE ACT DATED 25.08.2017 ARE BAD IN LAW A ND ON FACTS OF THE CASE, FOR WANT OF JURISDICTION AND VARIOUS OTHER RE ASONS AND HENCE THE SAME KINDLY BE DELETED. 2. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS. 1,00,000/- ON ACCOUN T OF PRODUCTION EXPENSES. THE DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF T HE CASE. HENCE, THE SAME KINDLY BE ALLOWED. 3. THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FA CTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS. 63,720/- [IE. 10% OF RS. 6,37,201/- CLAIMED BY THE ASSESSEE] ON ACCOUNT OF STOCK AMANI EXPENSES. THE ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 11 DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. CIT(A ) IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY BE ALLOWED. 4. RS. 13,700/-: THE LD. CIT(A) ERRED IN LAW AS WEL L AS ON THE FACTS OF THE CASE IN PARTLY CONFIRMING DISALLOWANCE @ 10% OF RS. 13,700/- [AS AGAINST RS. 41,227/- (@ 30%) MADE BY THE AO] ON ACCOUNT OF CAR RUNNING & MAINTENANCE EXPENSES. THE DISALLOWANCE SO MADE AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO THE PROV ISIONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY BE ALLOWE D. 5. THE LD. AO FURTHER ERRED IN LAW AS WELL AS ON TH E FACTS OF THE CASE IN CHARGING INTEREST U/S 234B & 234D OF THE AC T AND AS ALSO IN WITHDRAWING INTEREST U/S 244A OF THE ACT. THE APPEL LANT TOTALLY DENIES ITS LIABILITY OF CHARGING AND WITHDRAWAL OF ANY SUC H INTEREST. THE INTEREST SO CHARGED/WITHDRAWN, BEING CONTRARY TO TH E PROVISIONS OF LAW AND FACTS, KINDLY BE DELETED IN FULL. 15. GROUND NO. 1 WAS NOT PRESSED DURING THE COURSE OF HEARING AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 16. REGARDING GROUND NO. 2, THE LD AR STATED THAT A SSESSEE OWNS MINES AT KOTA AND FOR THE PURPOSES OF EXCAVATION/PR ODUCTION, VARIOUS MACHINERIES ARE EMPLOYED. THESE INCLUDE JCB , TATA HITACHI, DUMPER ETC. BESIDES EXPENDITURE ON LABOUR. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE INCURRED TOT AL EXPENDITURE OF RS. 83,58,351/- ON PRODUCTION EXPENSES. OUT OF T HIS, RENT ON MACHINERY WHICH INCLUDED JCB, TATA HITACHI AND DUMP ER WAS OF ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 12 RS. 28,53,000/-. THE EXPENDITURE IS FULLY VOUCHED A ND VOUCHERS ARE AVAILABLE ON RECORD. THE EXPENDITURE ON DIESEL ALONE IS OF RS. 16,18,441/-. THE REST OF EXPENDITURE WHICH IS OF RS . 38,86,910/-. COMPLETE VOUCHERS OF HIRE CHARGES OF JCB, TATA HITA CHI, DUMPER, DIESEL AND ON SALARIES OF MECHANICS, KULI, BELDAR, JHIRI AND KATAI WORK ARE AVAILABLE. DESPITE ALL THIS THE LEARNED AS SESSING OFFICER DISALLOWED A SUM OF RS. 1,00,000/-PURELY ON ADHOC B ASIS ON THE GROUND THAT VOUCHERS WERE SELF-MADE AND NATURE OF E XPENDITURE WAS NOT MENTIONED NOR THE NAME AND ADDRESS OF THE R ECIPIENT. THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER W ERE FALSE. THE VOUCHERS OF HIGHER CHARGES ARE ALL FROM MODI FLOORI NG STONE CO. PROP. RAM RATAN MODI AND THIS FACT IS SELF-EVIDENT FROM THE VOUCHERS ITSELF. THE VOUCHERS OF HIGHER CHARGES ARE OF RS. 28,53,000/-. SIMILARLY THE VOUCHERS OF DIESEL FOR R UNNING THE MACHINES ARE OF RS. 16,18,441/- AND ENTIRE DIESEL H AS BEEN PURCHASED FROM M/S PIPALIA FILLING STATION, JHALAWA R ROAD, PIPALIYA. THIS FACT IS ALSO SELF-EVIDENT FROM THE V OUCHER OF DIESEL. THEREFORE IT IS INCORRECT ON PART OF ASSESSING OFFI CER TO STATE THAT VOUCHERS DID NOT CONTAIN THE NAME AND ADDRESS OF TH E RECIPIENT OR THE NATURE OF EXPENDITURE. 17. IT WAS FURTHER SUBMITTED THAT THE LD CIT(A) HA S CONFIRMED THE ADDITION ON THE GROUND THAT SUCH DISALLOWANCE W AS JUSTIFIED TO COVER ANY DISCREPANCY. OBVIOUSLY THE LD CIT(A) H AS CONFIRMED THE ADDITION ON ASSUMPTION AND PRESUMPTION THAT THE RE MAY BE SOME DISCREPANCY. HOWEVER ON RECORD NEITHER THE LEA RNED ASSESSING OFFICER NOR THE LEARNED CIT(A) HAS BROUGH T ANY DISCREPANCY. IN VIEW OF THIS THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AND SO CONFIRMED BY THE L EARNED ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 13 CIT(A) IS MOST UNJUSTIFIED. THE ENTIRE EXPENDITURE IS EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE SAME THEREFORE DE SERVES TO BE ALLOWED. THE ADDITION CONFIRMED BY THE LEARNED CIT( A) MAY KINDLY BE DELETED. 18. REGARDING GROUND NO. 3, THE LD AR SUBMITTED TH AT THE ASSESSEE HAD CLAIMED A SUM OF RS. 6,37,201/- UNDER THE HEAD AMANI EXPENSES. COPY OF STOCK AMANI REGISTER IS AVA ILABLE ON RECORD. THE EXPENDITURE IS ON STACKING. THE WORK IN VOLVED SHIFTING OF KOTA STONES FROM ONE PLACE TO ANOTHER O N THE BASIS OF THEIR SIZES. THE MAIN WORK WAS TO TAKE THE STONES F ROM THE PLACE WHERE TRUCKS UNLOAD IT AND CARRY IT TO THE PLACE OF ITS SIZE. THE LABOUR WAS PAID FOR THIS AND THE COMPLETE EXPENDITU RE IS VOUCHED AS PER AMANI REGISTER. IN THE ASSESSMENT OR DER THE LEARNED ASSESSING OFFICER HAS DISALLOWED 10% OF THE EXPENDITURE PURELY ON ESTIMATE BASIS AND ON THE SOL E GROUND THAT THE VOUCHERS ARE SELF-MADE. IT IS SUBMITTED THAT EX PENDITURE CANNOT BE DISALLOWED ON THE GROUND THAT THE VOUCHER S ARE SELF- MADE. THE LEARNED ASSESSING OFFICER HAS NOT MADE OU T ANY CASE THAT THE VOUCHERS WERE BOGUS OR THAT THE EXPENDITUR E WAS EXCESSIVE AND UNREASONABLE. AS THE AMANI REGISTER K EPT FOR THE PURPOSES IS HAVING STAMPED SIGNATURES OF THE RECIPI ENTS. NO EFFORT WAS MADE BY THE LEARNED ASSESSING OFFICER TO GO THR OUGH THE AMANI REGISTER. IT MAY BE MENTIONED THAT THE PAYMEN T TO LABOURERS WAS ALWAYS BELOW RS. 10000/- AS SUCH THE SAME WAS PAID IN CASH. THE PAYMENT WAS IN ACCORDANCE WITH LA W AND DID NOT VIOLATE THE PROVISIONS OF SECTION 40A(3). THEREFORE IT WAS A FUTILE OBSERVATION OF THE LEARNED ASSESSING OFFICER THAT T HE PAYMENT WAS MADE IN CASH. IT IS SUBMITTED THAT AGAINST THE PAYM ENT OF EACH ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 14 PERSON DETAILS OF WORK DONE BY HIM ARE MENTIONED. T HEREFORE IT IS THE SUBMISSION OF THE ASSESSEE THAT THE AMANI EXPEN DITURE WAS FULLY LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPO SES OF BUSINESS. THE SAME WAS FULLY VOUCHED. THE LEARNED CIT(A) ERRE D IN CONFIRMING THE EXPENDITURE TO COVER ANY POSSIBLE DI SCREPANCY. THE ADDITION HAS BEEN CONFIRMED BY THE LEARNED CIT(A) P URELY ON PRESUMPTION OF SOME DISCREPANCY WITHOUT POINTING OU T ANY SUCH DISCREPANCY. NO ADDITION IS CALLED FOR ON ASSUMPTIO N, PRESUMPTION AND SURMISES. IT IS THEREFORE SUBMITTED THE ADDITIO N MAY KINDLY BE DELETED. 19. REGARDING GROUND NO. 4, THE LD AR SUBMITTED TH AT THE ASSESSEE CLAIMED EXPENDITURE OF RS. 56,982/- ON RUN NING OF CAR AND ITS MAINTENANCE AND INSURANCE AND ALSO CLAIMED DEPRECIA TION OF RS. 80,441/-. THE LEARNED ASSESSING OFFICER DISALLOWED 30% OF THE EXPENDITURE AND MADE ADDITION OF RS. 41,227/- (5698 2+80441). THE LEARNED ASSESSING OFFICER DISALLOWED THE EXPEND ITURE SIMPLY ON THE GROUND OF PERSONAL USE OF VEHICLE FOR FAMILY USE. THE LEARNED CIT(A) HAS RESTRICTED THE EXPENDITURE T O 10% AND CONFIRMED ADDITION OF RS. 13700/-. 20. IT WAS SUBMITTED BY THE LD AR THAT THE CLAIM OF DEPRECIATION OF RS. 80,441/- WHICH IS STATUTORY EVE N IF THE VEHICLE IS PUT TO USE EVEN FOR A DAY IN THE YEAR TH E DEPRECIATION IS ALLOWANCE. THEREFORE NO DISALLOWANCE SHOULD HAVE BEEN MADE ON SUCH STATUTORY ALLOWANCE AVAILABLE TO THE ASSESS EE U/S 32 OF THE INCOME TAX ACT, 1961. HENCE BOTH THE LEARNED AS SESSING OFFICER AND THE LEARNED CIT(A) ERRED IN MAKING DISA LLOWANCE OF DEPRECIATION. IT IS SUBMITTED THAT THE JAIPUR BENCH HAS HELD IN ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 15 THE CASE OF SHRI KAILASH CHAND GUPTA VS. DEPUTY COM MISSIONER OF INCOME TAX 35 TAXWORLD 36 THAT DEPRECIATION IS A LLOWED UNDER STATUTORY PROVISION, NO PART OF IT CAN BE DIS ALLOWED EVEN IF THE ASSETS IS USED PARTLY FOR PERSONAL PURPOSES. IN VIEW OF THESE FACTS THE LEARNED ASSESSING OFFICER WAS NOT J USTIFIED IN MAKING DISALLOWANCE OUT OF DEPRECIATION. IT WAS SUB MITTED THAT REMAINING VEHICLE RUNNING EXPENDITURE COMES TO RS. 56982/- IN RESPECT OF WHICH THE AO COULD HAVE DONE THE DISALLO WANCE. THE LEARNED CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 1 0% AND AS SUCH THE DISALLOWANCE WORKS OUT TO RS. 5698/- AS AG AINST RS. 13,700/- SUSTAINED BY THE LEARNED CIT(A). IT IS THE REFORE SUBMITTED THAT LOOKING TO THE BUSINESS NEEDS, NO DI SALLOWANCE IS REQUIRED TO BE MADE AS THE SAME WORKS OUT TO A PALT RY AMOUNT OF RS. 5689/-. 21. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT DISALLOWANCE OF PRODUCTION EXPENSES, STOCK ANAMI EXPENSE AND CAR RUNNING & MAI NTENANCE EXPENSES HAVE BEEN DONE BY THE ASSESSING OFFICER ON PURELY AN ADHOC BASIS AND WE DONOT FIND ANY JUSTIFIABLE BASIS TO SU STAIN THE SAID DISALLOWANCES. HENCE, ALL THESE ADDITIONS ARE HEREB Y DIRECTED TO BE DELETED AND GROUND NO 2-4 ARE HEREBY ALLOWED. 22. GROUND NO. 5 IS REGARDING LEVY OF INTEREST U/S 234A, 234B, 234C ETC AND THE SAME BEING CONSEQUENTIAL IN NATURE, DOE SNT REQUIRE ANY SEPARATE ADJUDICATION. HENCE, THE SAME IS DISMISSE D. 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ITA NO. 216/JP/20 18 & 770/JP/2017 SHRI GOVIND RAM MODI, KOTA VS. THE ITO, KOTA 16 IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESS EE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2019. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/02/2019. *GANESH KR VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI GOVIND RAM MODI, KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE JCIT, RANGE-1, KOTA 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 216/JP/2018 & 770/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR