The ITO, Ward-5(3), Surat V. Shri Prakashchandra R.Chopra, Surat

ITA 2306/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5648 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 17-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDANDR
• Keywords: Depreciation; Additional evidence; Third party statement; Assessment record; Set aside
• Section: 142(1); 143(1); 143(2); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'B' [BEFORE SHRI MAHAVIR SINGH,JM& SHRI A N PAHUJA,AM] ITA NO.2306/AHD/2008 (ASSESSMENT YEAR:-2005-06) INCOME-TAX OFFICER, WARD- 5(3), ROOM NO.315, 3 RD FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT V/S SHRI PRAKASHCHANDRA R CHOPRA, PROP. OF CHOPRA ENTERPRISES, BASEMENT, PARSHWANATH APARTMENT, GOPIPURA, SURAT [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI K MADHUSUDAN,DR ASSESSEE BY:- SHRI SAKAR SHARMA, AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 04- 04-2008 OF THE LD. CIT(APPEALS)-III, SURAT,RAISES T HE FOLLOWING GROUNDS :- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN DELETING THE ADD ITION OF NEW DEPOSITS OF RS.8,60,498/- MADE BY THE ASSESSING OFF ICER U/S.68 OF THE IT ACT. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-III, SURAT HAS ERRED IN RESTRICTING THE ADDITION OF DISALLOWANCE OF VARIOUS EXPENSES AT 10% OF EXPENSES DEBITED TO P & L ACCOUNT INSTEAD OF DISALLOWANCE MADE BY THE ASS ESSING OFFICER AT 20% OF EXPENSES. [3] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A)-III, SURAT OUGHT TO HAVE UPHELD THE ORDE R OF THE ASSESSING OFFICER. [4] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. CIT(A)-III, SURAT MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 2 FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING INCOME OF RS.1,42,920/- FILED ON 30-10-2 005 BY THE ASSESSEE, DERIVING INCOME FROM THE BUSINESS OF SALE OF COMPUTER ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 2 AND ITS PERIPHERALS, YARN AND LACES, AFTER BEING PR OCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REF ERRED TO AS THE ACT],WAS SELECTED FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 12.7.2006. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE CONF IRMATION, COPY OF RETURN OF INCOME FILED, COPY OF ACCOUNT AND COPY OF BALANCE SHEET AS WELL AS BANK STATEMENT OF THE FOLLOWING DEPOSITO RS : NIKUNJ B.SHAH RS.2,96,498 RANJANA P.CHOPRA RS.1,44,000 HANSA R.CHOPRA RS.2,00,000 JITENDRA R.CHOPRA RS.2,20.000 --------------- RS.8,60,498 HOWEVER, THE ASSESSEE DID NOT FILE ANY REPLY NOR ES TABLISHED THE IDENTITY, CREDITWORTHINESS OF THE DEPOSITORS AND GE NUINENESS OF THE TRANSACTIONS, DESPITE SEVERAL OPPORTUNITIES PROVIDE D BY THE AO. ACCORDINGLY, THE ASSESSING OFFICER[AO IN SHORT] INV OKED THE PROVISIONS OF SEC. 68 OF THE ACT, RESULTING IN AN ADDITION OF RS.8,60,498/-. 3. ON APPEAL, THE LD. CIT(A), DELETED THE ADDITION, HOLDING AS UNDER:- BEFORE ME, THE ID. AR SUBMITTED THAT COMPLETE INFO RMATION REGARDING THE DEPOSITS WAS FILED BEFORE THE AO VIDE LETTER DATED 30.09.2007. THE APPELLANT FURNISHED CONTRA CONFIRMATION, BALANCE SH EET OF THE DEPOSITORS, PAN, COPY OF INCOME-TAX RETURNS BEFORE THE AO. COPI ES OF THE SUBMISSIONS MADE DURING THE ASSESSMENT WERE FILED B EFORE ME, ALSO. I HAVE CONSIDERED THE SUBMISSIONS AND HAVE GONE THR OUGH THE ASSESSMENT RECORDS. I FIND THAT THE APPELLANT HAS F URNISHED COMPLETE INFORMATION IN RESPECT OF THESE DEPOSITORS AND I DO NOT UNDERSTAND THE REASON AS TO WHY THE INFORMATION WAS NOT TAKEN INTO ACCOUNT BY THE AO. THERE IS NO JUSTIFICATION IN DOUBTING THE GENUINENE SS OF THE DEPOSITORS SINCE THE ENTIRE INFORMATION IS AVAILABLE ON RECORD . THE ACTION OF THE AO IN TREATING THESE DEPOSITS AS AN UNEXPLAINED IS WITHOU T ANY BASIS AND THE ENTIRE ADDITION IS DIRECTED TO BE DELETED. ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 3 4. THE REVENUE IS NOW IN APPEAL BEFORE US AG AINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED DR WHILE INVITING OUR ATTENTION TO THE ASSESSMENT ORDER CONTENDED THAT NO SUCH INFORMATION AS HAD BEEN REFERRED TO BY THE LD. CIT( A) IN THE IMPUGNED ORDER WAS EVER SUBMITTED BEFORE THE AO VID E LETTER DATED 30.9.2007 NOR ANY CONFIRMATIONS OF THE AFORESAID DE POSITORS WERE EVER FILED. THEREFORE, HE ARGUED THAT THE LD. CIT(A ) WAS NOT JUSTIFIED IN DELETING THE ADDITION WITHOUT GIVING ANY OPPORTU NITY TO THE AO OR HAVING A REMAND REPORT. HE ADDED THAT THE LD. CIT(A ) WAS NOT JUSTIFIED IN ADMITTING ADDITIONAL EVIDENCE IN CONTR AVENTION OF RULE 46A OF THE IT RULES,1962. ON THE OTHER HAND, THE LE ARNED AR ON BEHALF OF THE ASSESSEE, WHILE REFERRING TO STATEMEN T OF FACTS ANNEXED TO THE APPEAL FILED BEFORE THE LD. CIT(A) CONTENDED THAT THE ASSESSEE HAD SUBMITTED THE RELEVANT DETAILS VIDE LETTER DATE D 5.9.2007 AND LATER ON FURTHER DETAILS WERE FILED. IN THESE CIRCU MSTANCES, HE SUPPORTED THE FINDINGS OF THE LD. CIT(A).TO A QUERY BY THE BENCH, THE LD. AR REPLIED THAT THE EVIDENCE OF SUBMITTING THE DETAILS TO THE AO AND REFERRED TO BY THE LD. CIT(A) IN HIS ORDER, WE RE NOT AVAILABLE WITH HIM. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. AS IS APPARENT FROM THE ASSESSMENT ORDER , AFTER EXAMINING THE DETAILS IN RESPECT OF NEW LOANS/DEPO SITS, COPIES OF BANK ACCOUNTS AND BANK STATEMENT, THE ASSESSEE WAS ASKED TO SUBMIT CONFIRMATIONS. COPIES OF RETURNS, COPIES OF ACCOUNT, COPIES OF BALANCESHEET AS WELL BANK STATEMENT OF THE AFORESAI D FOUR DEPOSITORS. HOWEVER, THE ASSESSEE DID NOT RESPOND T O NOTICE/LETTER ISSUED U/S 142(1) OF THE ACT AND SERVED UPON THE AS SESSEE ON 25.10.2007. THEREFORE, THE AO ADDED THE AMOUNT U/S 68 OF THE ACT. THE LD. CIT(A) DELETED THE ADDITION ON THE SUBMISSI ONS OF THE ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 4 ASSESSEE THAT COMPLETE INFORMATION WAS FILED BEFORE THE AO VIDE LETTER DATED 30.9.2007 AND THAT THE ENTIRE INFORMA TION WAS AVAILABLE ON RECORD. THERE IS NOTHING TO SUGGEST THAT THE LD. CIT(A) EVER CONFRONTED THE SUBMISSIONS MADE BY THE ASSESSEE BEF ORE HIM TO THE AO NOR SEEMS TO HAVE CALLED FOR ANY REPORT FROM THE AO IN THE LIGHT OF HIS FINDINGS IN THE ASSESSMENT ORDER. EVEN IN RE SPONSE TO A QUERY BY US, THE LD. AR DID NOT SUBSTANTIATE THEIR CLAIM THAT ENTIRE INFORMATION WAS SUBMITTED BEFORE THE AO NOR COULD P LACE ANY EVIDENCE BEFORE US AS TO WHETHER OR NOT THE ASSESSE E RESPONDED TO LETTER SERVED BY THE AO ON HIM ON 25.10.2007.IN THE STATEMENT OF FACTS, THE REVENUE HAVE MENTIONED THAT THE ASSESSEE NEVER FILED CONFIRMATION OF ANY OF THE DEPOSITORS BEFORE THE AO . IF ANY INFORMATION WAS NOT CONSIDERED BY THE AO AS OBSERVE D BY THE LD. CIT(A), THE LATTER COULD HAVE, AT LEAST, CONFRONTED THIS FACT TO THE AO APPARENTLY, THIS HAS NOT BEEN DONE NOR THE LD. CIT( A) RECORDED HIS SPECIFIC FINDINGS AS TO HOW CREDITWORTHINESS OF EAC H OF THE AFORESAID DEPOSITORS AND GENUINENESS OF THE TRANSACTIONS HAS BEEN ESTABLISHED BY THE ASSESSEE. IN THESE CIRCUMSTANCES , ESPECIALLY WHEN THERE IS NOTHING IN THE IMPUGNED ORDERS AS TO HOW IDENTITY AND CREDITWORTHINESS OF EACH OF THE DEPOSITORS OR EVEN GENUINENESS OF THE TRANSACTIONS WAS ESTABLISHED BY THE ASSESSEE AN D THE LD. CIT(A) HAVE NOT PASSED A SPEAKING ORDER ON THESE ASPECTS, WE ARE OF THE OPINION THAT MATTER NEEDS TO BE RECONSIDERED BY HIM. THE APPLICA TION OF MIND TO THE MATERIAL FACTS AND THE ARGUMENTS SHOULD MANIFEST ITSELF IN T HE ORDER. SECTION 250(6) OF THE INCOME TAX ACT MANDATES THAT THE ORDER OF THE CIT(A ) WHILE DISPOSING OF THE APPEAL SHALL BE IN WRITING AND SHALL STATE THE POIN TS FOR DETERMINATION, THE DECISION THEREON AND THE REASON FOR THE DECISION. AS IS APP ARENT FROM THE IMPUGNED ORDER, IN OUR OPINION, THE ORDER PASSED BY THE LD. CIT(A) IS CRYPTIC AND GROSSLY VIOLATIVE OF ONE OF THE FACETS OF THE RULES OF NATURAL JUSTIC E, NAMELY, THAT EVERY JUDICIAL/QUASI-JUDICIAL BODY/AUTHORITY MUST PASS RE ASONED ORDER, WHICH SHOULD REFLECT APPLICATION OF MIND BY THE CONCERNED AUTHOR ITY TO THE ISSUES/POINTS RAISED ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 5 BEFORE IT. THE REQUIREMENT OF RECORDING OF REASONS AND COMMUNICATION THEREOF HAS BEEN READ AS AN INTEGRAL PART OF THE CONCEPT OF FAIR PROCEDURE AND SAFEGUARD TO ENSURE OBSERVANCE OF THE RULE OF LAW. IT INTRODU CES CLARITY, CHECKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND MINIMIZES ARBITRARINESS IN THE DECISION-MAKING PROCESS. WE MA Y POINT OUT THAT A DECISION DOES NOT MERELY MEAN THE CONCLUSION. IT EMBRACES WITHIN ITS FOLD THE REASONS FORMING BASIS FOR THE CONCLUSION.[MUKHTIAR SINGH VS . STATE OF PUNJAB,(1995)1SCC 760(SC)]. 5.1 IN VIEW OF THE FOREGOING, ESPECIALLY WHEN TH E LD. CIT(A) HAS NOT PASSED A SPEAKING ORDER ,WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUE RAISED IN THIS GROUND NO.1 TO HIS FILE FOR DECIDING THE MATTER AFRESH IN ACCORDANCE WITH LAW, AFTER ALLOWIN G SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. NEEDLESS TO SAY THAT WHILE REDECIDING THE APPEAL, THE LEARNED CIT(A) SHALL PASS A SPEAKING ORDER, KEEPING IN MIND, INTER ALIA, THE MANDATE OF PROVISIONS OF SEC. 250(6) OF THE ACT, BRINGING OUT CLEARLY AS TO HOW CREDITWORTHINESS OF EACH OF THE AFORESAID FOUR DEPOSITORS AND GENUINENESS OF TRANSACTIONS IS ESTABLISHED.. WITH THESE OBSERVATIONS, GROUND NO. 1 IS DISPOSED O F. 6. GROUND NO.2 RELATES TO RELATES TO DISALLOWANCE O F 20% OF THE FOLLOWING EXPENSES: (1) MOBILE EXPENSES RS.17,642 (2) PETROL EXPENSES RS.59,994 (3) RIM BILL EXP. RS.32,241 (4) TELEPHONE EXP. RS.40,427 (5) DEP. ON MOTOR CAR RS.62,243 ------------ TOTAL RS.2,12,546 20% = 42,509 ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 6 THE AO DISALLOWED 20% OF THE AFORESAID EXPENSES ON THE GROUND OF PERSONAL USER OF PHONES AND VEHICLES, INVOKING PROV ISIONS OF SEC. 38(2) OF THE ACT. 7. ON APPEAL, THE LD. CIT(A) REDUCED THE DISALLOWAN CE TO 10%, HOLDING AS UNDER:- THE NEXT GROUND OF APPEAL IS REGARDING DISALLOWANC E OF RS.42,509/- OUT OF EXPENSES. THE AO DISALLOWED 20% OF PETROL EXPENSES, TELEPHONE EXPENSES AND DEPRECIATION ON MOTOR CARS ON GROUND O F POSSIBLE PERSONAL USE. IT WAS SUBMITTED THAT THE APPELLANT IS IN COMP UTER MAINTENANCE BUSINESS FOR WHICH HE HAD EMPLOYED 6 ENGINEERS WHO ARE GIVEN PETROL EXPENSES AND MOBILE PHONES AND MOST OF THE EXPENDIT URE WAS IN RESPECT OF THESE EMPLOYEES. ALTHOUGH I AM INCLINED TO AGREE WITH LD. AR BUT SINCE, NON-BUSINESS AND PERSONAL USE OF THESE FACILITIES I S ALWAYS LIKELY, THE DISALLOWANCE IS DIRECTED TO BE RESTRICTED TO 10% OF THE CLAIM. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. DR SUPPORTED TH E FINDINGS OF THE AO WHILE THE LD. AR RELIED UPON THE IMPUGNED ORDER OF THE LD. CIT(A). 9. AFTER HEARING BOTH THE PARTIES AND CONSIDERING THE FACTS OF THE CASE, WE FIND THAT THE REVENUE HAVE NOT REFERRED US TO ANY M ATERIAL WARRANTING INTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A). SINCE PERSONA L USE OF CAR AND TELEPHONE BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF H AS NOT BEEN DENIED NOR IT WAS CLAIMED THAT THE ASSESSEE OR HIS FAMILY HAD ANY I NDEPENDENT VEHICLES OR TELEPHONES FOR PERSONAL USE, IN OUR OPINION DISALL OWANCE OF 1/10 TH OF THE EXPENSES ON TELEPHONES/MOBILES, RUNNING AND MAINTEN ANCE OF VEHICLES INCLUDING DEPRECIATION THEREON, IN THE LIGHT OF PROVISIONS OF SEC. 38(2) OF THE ACT, IS REASONABLE . THEREFORE, GROUND NO. 2 IS REJECTED. 10. GROUND NOS. 3 & 4 BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . ITA NO.2306/AHD/2008 FOR AY 2005-06 SHRI PRAKASHCHANDRA R CHOPRA, PROP. M/S CHOPRA ENTERPRISES 7 11. IN THE RESULT, APPEAL IS PARTLY ALLOWED, BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 9- 7-2010 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 9 - 7-2010 COPY OF THE ORDER FORWARDED TO: 1. SHRI PRAKASHCHANDRA R CHOPRA, PROP. OF CHOPRA ENTERPRISES, BASEMENT, PARSHWANATH APARTMENT, GOPIN ATH, SURAT 2. INCOME-TAX OFFICER, WARD-5(3), ROOM NO.315, 3 RD FLOOR, AAYAKAR BHAVAN, MAJURA GATE, SURAT 3. CIT CONCERNED 4. CIT(A)-III, SURAT 5. THE DR, BENCH-B, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD