SHRI HABIB KHAN, Jaipur V. INCOME TAX OFFICER, WARD-2-5, Jaipur

ITA 239/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5353 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 19-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 239/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. SHRI HABEEB KHAN PROP. M/S, H.K. EXPORT CORPORATION, 2259, TAKIYA YAQEEN SHAH, CHOKDI TOPKHANA HUZOORI, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD-2(5), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABPPK 5855 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PC PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.10.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 17/10/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 11 TH NOVEMBER, 2017 OF LD. CIT (A)-1, JAIPUR FOR THE A SSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DECIDING THE APPEAL EX-PARTE WITHOUT PROVIDING ADEQUATE OPPORTUN ITY OF HEARING TO THE ASSESSEE. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN REJECTING THE BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SEC TION 145(3) OF IT ACT, 1961. 3. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS. 9,95,984/- BY APPLYING AVER AGE G.P. RATE OF THREE YEAR I.E. 12.13% AS AGAINST G.P. RATE OF 1 0.41% DECLARED BY THE ASSESSEE. 2 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 2 4. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OUT OF FOLLOWING EXPENSES :- PARTICULARS AMOUNT CLAIMED (IN RS.) AMOUNT OF EXPENSES DISALLOWED (IN RS.) SALARY EXPENSES 6.46,500/ - 64,650/ - TELEPHONE EXPENSES 68,033/ - 6,800/ - GENERAL EXPENSES 97,493/ - 9,750/ - TRAVELLING EXPENSES 14,68,820/ - 1,00,000/ - TOTAL 22,80,846/ - 1,81,200/ - 5. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF RS. 60,000/- U/S 68 OF T HE IT ACT BY TREATING THE AMOUNT PAYABLE TO CREDITOR M/S. GEMS & JEWELLERY INFORMATION CENTRE AS UNEXPLAINED INCOME OF THE ASS ESSEE. 6. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 7. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2. AT THE TIME OF HEARING, THE LD. A/R OF THE ASSES SEE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT WANT TO PRESS GROUND NO.1 OF THE ASSESSEES APPEAL AND THE SAME MAY BE DISMISSED AS NOT PRESSED. THE LD. D/R HAS RA ISED NO OBJECTION IF THE GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED AS NOT PRESSED. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRE SSED. GROUND NO. 2 IS REGARDING THE REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) INVOKED BY THE LD. CIT (A). 3. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HOUGH THE AO HAS MADE A TRADING ADDITION BY APPLYING GP RATE OF 12.13% AS A GAINST THE DECLARED GP RATE OF 10.41% BY THE ASSESSEE, HOWEVER, THERE WAS NO REJEC TION OF BOOKS OF ACCOUNT AS THE AO HAS DULY EXAMINED AND VERIFIED THE BOOKS OF ACCOUNT AND ALL OTHER SUPPORTING EVIDENCE. HE HAS REFERRED TO THE RELEVANT FINDING OF THE AO AT PAGE 3 AND SUBMITTED 3 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 3 THAT THE AO HAS RECORDED THAT ON VERIFICATION HE WA S SATISFIED ABOUT THE VALUE OF STOCK, QUANTIFICATION AND STOCK REGISTER. THE SALE S AND PURCHASES MADE WERE ALSO VERIFIED BY THE AO FROM PURCHASE & SALES REGISTER A ND BILL/INVOICES PRODUCED BY THE ASSESSEE. THUS ONCE THE A.O. DID NOT FIND ANY INFI RMITY OR DEFICIENCY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THEN WITHOUT POINTING OUT ANY DEFECT BY THE LD. CIT (A) THE REJECTION OF BOOKS OF ACCOUNT IS NOT JUSTIFIED. HE NCE THE LD. A/R HAS CONTENDED THAT INVOKING THE PROVISIONS OF SECTION 145(3) BY THE LD . CIT (A) IS ILLEGAL AS THERE IS NOTHING TO CONCLUDE THAT THE BOOKS OF ACCOUNT OF TH E ASSESSEE SUFFER FROM ANY DEFECT OR DEFICIENCY. 4. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THOUGH THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT, HOWEVER IT WAS A MIS TAKE ON THE PART OF THE AO AND INADVERTENTLY THE BOOKS WERE NOT REJECTED. HOWEVER, IN SUBSTANCE THE AO WHILE MAKING THE TRADING ADDITION HAS REJECTED THE BOOK R ESULT. THE SAID MISTAKE IN THE ASSESSMENT ORDER IS NOW MADE UP BY THE LD. CIT (A) HAVING COTERMINOUS POWER WITH THAT OF THE AO. HE HAS RELIED UPON THE ORDER OF TH E LD. CIT (A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO IN THE ASSESSMENT PROCEEDINGS HAS GI VEN THE COMPARATIVE DETAILS OF SALES, GP RATIO AND NET PROFIT OF THE ASSESSEE AT P AGE 2 AS UNDER :- PARTICULARS ASSTT. YEAR 2012-13 ASSTT. YEAR 2011-12 ASSTT. YEAR 2010-11 SALES 58135710 41188848 35627645 GROSS PROFIT 6055878 5290323 4682088 GP RATIO 10.41% 12.84% 13.14% NET PROFIT 2075581 14311479 1230888 NET PROFIT RATIO 3.57% 3.47% 3.45% 4 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 4 SINCE THERE WAS A DECLINE IN THE GP RATIO FOR THE Y EAR UNDER CONSIDERATION IN COMPARISON TO THE PRECEDING TWO YEARS, THE AO UNDER TOOK TO VERIFY THE REASONS FOR SUCH DECLINE. THE AO HAS OBSERVED AT PAGE 3 OF THE ASSESSMENT ORDER AS UNDER :- I HAVE CONSIDERED THE SUBMISSION MADE BY THE AR OF ASSESSEE WHICH REVEALED THAT THE ASSESSEE HAS DECLARED NET P ROFIT IN INCREASING MANNER AS COMPARED TO PRECEDING YEARS BU T THE GP RATE FOUND LESS BY 2.43% IN COMPARISON TO JUST PREC EDING ASSESSMENT YEAR. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS CONSISTING PURCHASE AND SALES REGISTERS RELATED SAL E/PURCHASE INVOICE. ON VERIFICATION IT HAS FOUND THAT VALUE OF THE STOCK HAS BEEN QUANTIFIED AND DULY BEEN RECORDED IN THE STOCK REGISTER FOR WHICH DETAILS OF THE SAME OBTAINED. THE SALES & PUR CHASES MADE ARE VERIFIABLE FROM SALE AND PURCHASE REGISTERS AND BILLS/INVOICES PRODUCED AND THE SAME ARE SUPPORTED BY VAT QUARTERL Y RETURNS FURNISHED BY THE ASSESSEE BEFORE THE SALES TAX DEPT T. THE TRADING ACCOUNT IS SUPPORTED BY THE SALE AND PURCHA SE BOOKS WHICH ARE DULY AUDITED UNDER SECTION 44AB OF I.T. A CT, 1961. ON GOING THROUGH THE DETAILS AND INVOICES OF SALE AND PURCHASE PRODUCED DURING ASSESSMENT PROCEEDINGS, IT IS OBSER VED THAT RATE OF DIAMONDS ARE VARIED IN EACH INVOICE AND NO SPECI FICATION OF DIAMOND/STONES AND ITS QUALITY IS RECORDED ON IT. T HEREFORE CORRECT VALUE OF ITEM SOLD CANNOT BE ASCERTAINED IN CORRECT MANNER. IN THE YEAR UNDER REVIEW, THE ASSESSEE HAS ALSO DECLARED GP RATE ON LOWER SIDE IN COMPARISON TO EARLIER 2 FI NANCIAL YEARS WHICH SHOWS THAT ASSESSEE HAS SUPPRESSED HIS PROFIT BY CLAIMING DIRECT EXPENSES. IN VIEW OF ABOVE DISCUSSION AND FA CTS OF THE CASE TRADING RESULTS DECLARED BYTHE ASSESSEE ARE NOT ACC EPTABLE. I 5 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 5 THEREFORE APPLIED AN AVERAGE GP RATE @ 12.13% ON TO TAL TURNOVER OF RS. 5,81,35,710/- WHICH WORKS OUT A TRADING ADDI TION OF RS. 9,95,984/- (RS. 70,51,862- RS. 60,55,878) TO COVER UP ALL POSSIBLE LEAKAGE OF REVENUE FOR THE YEAR AND ADDED BACK TO T HE TOTAL INCOME. IT IS EVIDENT FROM THE FINDING RECORDED BY THE AO T HAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT ALONG WITH ALL OTHER RELEVANT RECORD INC LUDING STOCK REGISTER, SALES & PURCHASE REGISTER, BILLS/VOUCHERS AS WELL AS SALES- TAX RECORD FOR VERIFICATION AND EXAMINATION OF THE AO. THE AO DID NOT FIND ANY DEFE CT OR DEFICIENCY IN THE RECORD PRODUCED BY THE ASSESSEE WHICH WERE DULY AUDITED UN DER SECTION 44 AB OF THE IT ACT, HOWEVER, THE AO MADE A TRADING ADDITION ONLY B ECAUSE THERE IS A DECLINE IN THE GP RATIO FOR THE YEAR UNDER CONSIDERATION IN COMPAR ISON TO THE EARLIER YEARS. IT IS SETTLED PROPOSITION OF LAW THAT DECLINE IN GP CANNO T BE A BASIS FOR REJECTION OF BOOKS OF ACCOUNT UNTIL AND UNLESS THE AO ON VERIFICATION OF BOOKS OF ACCOUNT AS WELL AS OTHER RELEVANT RECORD WAS SATISFIED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT REFLECTING THE TRUE AND CORRECT STATE OF AFFAIRS AN D ARE SUFFERING FROM DEFECT AND DEFICIENCY. SINCE THE AO HAS NOT GIVEN ANY ADVERSE FINDING OR OBSERVATION RECORDING THE DEFICIENCY OR DEFECTS IN THE BOOKS OF ACCOUNT, THEREFORE, THE PROVISIONS OF SECTION 145(3) CANNOT BE INVOKED IN THIS CASE. THE LD. CIT (A) HAS INVOKED THE SAID PROVISION UNDER SECTION 145(3) BY CITING THE REASON THAT THE AO HAS INADVERTENTLY NOT REJECTED THE BOOKS IN THE ASSESSMENT ORDER. IT IS P ERTINENT TO NOTE THAT THE LD. CIT (A) HAS NOT GIVEN A SEPARATE FINDING ON THE CORRECT NESS OF THE BOOKS OF ACCOUNT BUT HAS REPEATED THE OBSERVATION AS RECORDED BY THE AO IN THE ASSESSMENT ORDER. 6 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 6 THEREFORE, WITHOUT DISPUTING THE POWERS OF LD. CIT (A) HAVING COTERMINOUS WITH THAT OF THE AO BUT IN THE ABSENCE OF ANY MATERIAL OR FIN DING THAT THE BOOKS OF ASSESSEE ARE SUFFERING FROM DEFECT OR DEFICIENCY, THE PROVIS IONS OF SECTION 145(3) CANNOT BE INVOKED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED OR DER OF THE LD. CIT (A) QUA THIS ISSUE OF REJECTION OF BOOKS OF ACCOUNT. GROUND NO. 3 IS REGARDING TRADING ADDITION. 6. THIS GROUND IS CONSEQUENTIAL TO THE GROUND NO. 2 AS THE AO HAS MADE THE TRADING ADDITION WITHOUT REJECTION OF BOOKS OF ACCO UNT AND WE HAVE DECIDED THE ISSUE OF REJECTION OF BOOKS IN FAVOUR OF THE ASSESSEE. A CCORDINGLY NO ADDITION CAN BE MADE ON ACCOUNT OF DECLINE IN THE GP RATE UNTIL AND UNLE SS THE BOOKS OF ACCOUNTS ARE REJECTED. HENCE WE DELETE THE TRADING ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A). GROUND NO. 4 IS REGARDING DISALLOWANCE OF VARIOUS E XPENSES. 7. THE AO IN THE ASSESSMENT ORDER HAS MADE DISALLOW ANCE OF 10% OF VARIOUS EXPENSES, NAMELY, SALARY, TELEPHONE, GENERAL EXPENS ES AND A LUMP SUM OF RS. 1 LAC WAS DISALLOWED ON ACCOUNT OF TRAVELLING EXPENSES. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ADHOC DISALLOWANCE MADE BY THE A O FOR WANT OF SUPPORTING EVIDENCE AS THE ASSESSEE PRODUCED SELF MADE VOUCHER S AND FURTHER THE TELEPHONE EXPENSES WERE DISALLOWED ON ACCOUNT OF PERSONAL USE . HOWEVER, IT IS NOT THE CASE OF THE AO THAT THE EXPENSES ARE NOT INCURRED FOR THE P URPOSE OF BUSINESS. THE LD. A/R HAS SUBMITTED THAT WHEN ALL THE EXPENSES ARE INCURR ED FOR THE PURPOSE OF BUSINESS AND ARE DULY SUPPORTED BY VOUCHERS THEN AN ADHOC DI SALLOWANCE IS NOT JUSTIFIED FOR WANT OF VOUCHERS FROM THE PARTIES. THE NATURE OF E XPENSES ARE SUCH THAT THE INVOICES/BILLS FROM THE OTHER PARTIES IS NOT POSSIB LE AND, THEREFORE, THE ASSESSEE 7 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 7 PRODUCED SELF MADE VOUCHERS IN SUPPORT OF THE EXPEN SES. THE AO HAS NOT POINTED OUT THAT THE EXPENSES ARE EXCESSIVE OR BOGUS AND, T HEREFORE, ONLY BECAUSE THE ASSESSEE HAS PRODUCED SELF MADE VOUCHERS THE AO HAS MADE ADHOC DISALLOWANCE. AS REGARDS THE TRAVELLING EXPENSES, THE AO HAS MADE A LUMP SUM DISALLOWANCE WITHOUT GIVING A FINDING THAT THE CLAIM OF THE ASSE SSEE IS EXCESSIVE OR BOGUS. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE D ECISION OF MUMBAI BENCHES OF THE TRIBUNAL IN CASE OF DCIT VS. ABC BEARING LTD., 157 DTR 242 (MUM. TRIB.) AS WELL AS HONBLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS . PREMIER VEGETABLE PRODUCTS LTD., 97 DTR 230 (RAJ.). HENCE THE LD. A/R HAS SUBMITTED THAT THE DISALLOWANCES MADE BY THE AO MAY BE DELETED. 8. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS GIVEN THE FINDI NG THAT THE ASSESSEE HAS NOT PRODUCED THE SUPPORTING EVIDENCES TO SUBSTANTIATE T HE CLAIM OF EXPENSES, ONLY SELF MADE VOUCHERS WERE PRODUCED BY THE ASSESSEE IN SUPP ORT OF THE CLAIM, THEREFORE, THE AO WAS VERY LIBERAL AND REASONABLE IN MAKING TH E 10% DISALLOWANCE OF CLAIM OF THE ASSESSEE. HENCE, THE LD. D/R HAS SUBMITTED THA T THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE ARE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED TOTAL EXPENDITURE OF RS. 41,45,992/- UNDER THE HEAD SELLING & DISTRIBUTION WHICH INCLUDES EXPENSES OF SALARY, TRAVELLING, TELEPHONE, CONVEYANCE AND OTHER ADMINISTRATIVE EXPENSES . THE AO DEALT WITH THE CLAIM OF THE ASSESSEE IN THE ASSESSMENT ORDER IN PARA 4 TO 7 AS UNDER :- 8 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 8 4. SALARY EXPENSES:- IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS DEBITED THE SALARY EXPENSES OF RS 646500/- FOR WHICH THE AR OF THE ASSESSEE PRODUCED VOUCHERS ON VERIFICATION OF W HICH IT IS FOUND THAT MOST OF THE VOUCHERS ARE SELF MADE AND NO PAYM ENT EVIDENCE HAS BEEN PRODUCED DURING ASSESSMENT PROCEEDINGS, TH EREFORE THE EXPENSES CLAIMED AND SEEMS WITHOUT BASIS AND THE SA ME ARE FULLY NOT ALLOWABLE THEREFORE OUT OF ABOVE A SUM OF RS. 6 4650/- (BEING 10% OF RS. 646500/-) ARE DISALLOWED AND ADDED TO TH E TOTAL INCOME. 5. TELEPHONE EXPENSES:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DEBITED IN THE P&L ACCOUNT RS. 68033/- FOR THE TELEPHONE EXPENSES. AS THE PERSONAL USE OF TELEPHON E IS CANNOT BE DENIED IN THE DAY TO DAY LIFE BY THE PROPRIETOR OF THE BUSINESS THEREFORE A LUMP SUM ADDITION OF RS. 6800/- IS HERE BY MADE ON THIS ACCOUNT BEING PERSONAL INVOLVEMENT AND TO COVER UP THE LEAKAGE OF REVENUE. 6. GENERAL EXPENSES:- DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS DEBITED IN THE P&L ACCOUNT RS.97493/- AS GENERAL EXPENSES. AS THE DETAILS AND NATURE OF EXPENSES ARE FOUND IN GENERAL IN NATURE WHICH IS REQUIRED AND ESSENTIAL IN THIS T YPE OF BUSINESS BUT PAYMENT MADE CASH AND VOUCHERS ARE ALSO FOUND SELF MADE THEREFORE AN ADDITION OF 10% OF ABOVE SUM IS HEREBY MADE RESU LTING ADDITION OF RS. 9,750/- ADDED TO THE TOTAL INCOME TO COVER UP T HE LEAKAGE OF REVENUE. 7. TRAVELLING EXPENSES:- IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAS DEBITED THE SALARY EXPENSES OF RS. 1468820/- FO R WHICH THE AO OF THE ASSESSEE PRODUCED VOUCHERS ON VERIFICATION O F WHICH IT IS FOUND THAT SOME OF THE VOUCHERS ARE SELF MADE AND NO PAYM ENT EVIDENCE 9 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 9 HAS BEEN PRODUCED DURING ASSESSMENT PROCEEDINGS, TH EREFORE THE EXPENSES CLAIMED WHICH SEEMS WITHOUT BASIS AND POSS IBILITY F LEAKAGE OF REVENUE ATTRACTED AND IN VIEW THE SAME CLAIM OF EXPENSES FULLY NOT ALLOWABLE THEREFORE OUT OF ABOVE A LUMP SUM DIS ALLOWANCE OF RS. 1,00,000/- ON THIS HEAD AND ADDED TO THE TOTAL INCO ME. THUS IT IS CLEAR THAT THE ASSESSEE HAS PRODUCED ONL Y SELF MADE VOUCHERS IN RESPECT OF SALARY EXPENSES, GENERAL EXPENSES AND TRAVELING EXP ENSES. FURTHER THESE EXPENSES WERE PAID IN CASH AND, THEREFORE, IN THE ABSENCE OF ANY SUPPORTING EVIDENCE THE AO MADE DISALLOWANCE OF 10% OF THESE EXPENSES. THERE IS NO DISPUTE THAT IF SOME PETTY EXPENSES ARE INCURRED BY THE ASSESSEE AND THE NATURE OF EXPENSES ARE SUCH THAT IT IS NOT POSSIBLE AND PRACTICAL TO TAKE THE B ILLS/VOUCHERS FOR EACH AND EVERY ITEM OF EXPENDITURE, THEN IF THE EXPENDITURES ARE NOT FO UND TO BE EXCESSIVE OR BOGUS, THE SAME CANNOT BE DISALLOWED FOR WANT OF VERIFIABLE SU PPORTING EVIDENCE. HOWEVER, THE EXPENSES ON ACCOUNT OF SALARY, GENERAL EXPENDITURE AND TRAVELLING EXPENSES ARE NOT IN THE CATEGORY OF PETTY, GENERAL AND MISC. EXPENDI TURE. THEREFORE, THE ASSESSEE IS DUTY BOUND AND UNDER OBLIGATION TO ESTABLISH THAT T HE EXPENDITURE IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THEREFORE, IT IS A CLEAR CASE OF FAILURE ON THE PART OF THE ASSESSEE TO PROD UCE THE VERIFIABLE SUPPORTING EVIDENCE IN RESPECT OF THESE EXPENDITURES. HOWEVER , THE AO HAS NOT GIVEN THE FINDING OF BOGUS OR EXCESSIVE CLAIM OF EXPENDITURE, THEREFORE, HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT TH E DISALLOWANCE TO 5% OF THESE THREE EXPENSES. 10 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 10 10. AS REGARDS THE TELEPHONE EXPENSES, THE AO HAS M ADE THE DISALLOWANCE OF RS. 6800/- WHICH IS ABOUT 10% OF THE EXPENDITURE ON THE GROUND OF PERSONAL USE OF TELEPHONE. THE AO HAS DISALLOWED THE EXPENDITURE O NLY ON THE BASIS OF SUSPICION AND WITHOUT GIVING A DEFINITE AND CONCLUDING FINDIN G THAT THE TELEPHONE WAS USED FOR PERSONAL PURPOSES AND NOT FOR BUSINESS PURPOSES. T HEREFORE, ON VERIFICATION OF THE RECORD THE TELEPHONES ARE NOT FOUND TO BE USED OTHE R THAN THE BUSINESS HOURS, THEN NO DISALLOWANCE CAN BE MADE ON THIS ACCOUNT. ACCOR DINGLY, THE DISALLOWANCE MADE ONLY ON THE SUSPICION IS NOT SUSTAINABLE AND THE SA ME IS DELETED. GROUND NO. 5 IS REGARDING AN ADDITION OF RS. 60,000 /- MADE UNDER SECTION 68 OF THE IT ACT. 11. THE AO NOTED THAT IN THE BALANCE SHEET, THE ASS ESSEE HAS SHOWN SUNDRY CREDITORS OF RS. 9,49,96,902/-. ON VERIFICATION OF THE LEDGER ACCOUNT AND CONFIRMATION OF NEW CASH CREDITORS ON TEST CHECK BASIS, THE AO O BSERVED THAT A SUM OF RS. 60,000/- HAS BEEN SHOWN AS AMOUNT PAYABLE TO THE CR EDITOR M/S. GEMS & JEWELLERY INFORMATION CENTRE. ON VERIFICATION FROM THE SAID CREDITOR, IT WAS INFORMED THAT NO TRANSACTION WAS MADE WITH THE ASSESSEE DURING THE Y EAR. ACCORDINGLY, THE AO MADE THE ADDITION OF RS. 60,000/- UNDER SECTION 68 OF TH E ACT. ON APPEAL, THE LD. CIT (A) HAS CONFIRMED THE ADDITION BY OBSERVING THAT THE LD . A/R APPEARING ON BEHALF OF THE ASSESSEE COULD NOT EXPLAIN ITS CASE. 12. BEFORE US, THE LD. A/R OF THE ASSESSEE HAS SUBM ITTED THAT THE ASSESSEE BOOKED AN ADVERTISEMENT WITH M/S. GEMS & JEWELLERY INFORMATION CENTRE FOR WHICH THE ASSESSEE SUBMITTED A COPY OF BILL. HOWEVER, DUE TO THE DISPUTE BETWEEN THE PARTIES, THE PAYMENT WAS NOT MADE. THE LD. A/R HAS REFERRED TO THE COPY OF BILL DATED 31 ST JANUARY, 2001 FOR A SUM OF RS. 90,000/-. HOWEVER, DUE TO CERTAIN DISPUTE 11 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 11 THE BILL WAS NOT ACCOUNTED FOR THE FINANCIAL YEAR 2 000-01 AND THEREAFTER IN THE ASSESSMENT YEAR 2006-07 THIS BILL WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AT RS. 60,000/- AFTER SOME NEGOTIATIONS WITH THE OTHER PAR TY. THE LD. A/R HAS ALSO SUBMITTED THAT THE PAYMENT WAS ALSO MADE BY THE ASS ESSEE DURING THE SUBSEQUENT ASSESSMENT YEAR I.E. 2014-15. HENCE, THE LD. A/R HA S SUBMITTED THAT THIS IS NOT THE AMOUNT INTRODUCED OR CREATED DURING THE YEAR UNDER CONSIDERATION BUT IT IS OPENING BALANCE BROUGHT FORWARD FROM THE EARLIER YEARS AND, THEREFORE, THE SAME CANNOT BE ADDED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 O F THE ACT. 13. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED TH AT THE AO HAS CONDUCTED AN ENQUIRY FROM THE ALLEGED CREDITOR WHO HAS CLEARLY S TATED THAT THERE WAS NO TRANSACTION WITH THE ASSESSEE. FURTHER THE ASSESSE E HAS NOT EXPLAINED ANYTHING BEFORE THE LD. CIT (A) IN SUPPORT OF THE CLAIM. NO W THE ASSESSEE HAS REFERRED TO A BILL OF 2001 THAT TOO FOR A SUM OF RS. 90,000/- AND NOT FOR RS. 60,000/-. THE LD. D/R HAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE AS THE EXPLANATION OF THE ASSESSEE IS NOT MATCHING WITH THE ENTRY IN THE BOOKS OF ACCOUNT. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS SHOWN THE OUTSTANDING OF SUNDRY CREDITORS INCLUDING RS. 60,000/- TO M/S. GEMS & JEWLLERY INFORMATION CENTRE . THE AO HAS CONDUCTED AN ENQUIRY FROM THE SAID CREDITOR AND FOUND THAT THERE WAS NO TRANSACTION WITH THE SAID PARTY DURING THE YEAR UNDER CONSIDERATION. THE ASS ESSEE HAS ADMITTED THE FACT THAT THERE WAS NO TRANSACTION WITH THE SAID CREDITOR M/S . GEMS & JEWELLERY INFORMATION CENTRE DURING THE YEAR UNDER CONSIDERATION. HOWEVE R, THE LD. A/R HAS REFERRED TO AN INVOICE OF 31 ST JANUARY, 2001 FOR A SUM OF RS. 90,000/-. FURTHER, THE ASSESSEE HAS CONTENDED THAT THERE WAS A DISPUTE ABOUT THE AMOUNT AND FINALLY THE PARTIES HAVE 12 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 12 SETTLED FOR RS. 60,000/- WHICH WAS RECORDED IN THE BOOKS OF ACCOUNT FOR THE ASSESSMENT YEAR 2006-07. THUS IT IS THE CLAIM OF T HE ASSESSEE THAT THE AMOUNT WHICH WAS ACCOUNTED IN THE BOOKS FOR THE ASSESSMENT YEAR 2006-07 IS BEING CARRIED FORWARD AND THERE IS NO NEW ENTRY OR INTRODUCTION O F CASH CREDIT DURING THE YEAR UNDER CONSIDERATION. FURTHER THE ASSESSEE HAS SUBM ITTED THAT THE SAID AMOUNT WAS PAID IN THE SUBSEQUENT YEAR I.E. 2014-15. WE FIND THAT ALL THESE EXPENSES WERE NOT FURNISHED BEFORE THE AUTHORITIES BELOW. THEREFORE, THIS ISSUE REQUIRES A PROPER VERIFICATION OF RELEVANT RECORD AS WELL AS THE FACT OF REPAYMENT OF THE AMOUNT BY THE ASSESSEE. ACCORDINGLY, IN THE FACTS AND CIRCUMSTAN CES OF THE CASE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO FOR PROPER VERIFICATI ON AND EXAMINATION AND RE- ADJUDICATE THE SAME AFTER AFFORDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 17/10/20 18. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 17/10/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI HABEEB KHAN, JAIPUR. 2. THE RESPONDENT THE ITO, WARD-2(5), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 239/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 13 ITA NO. 239/JP/2018. SHRI HABEEB KHAN, JAIPUR. 13