M/s. Rajhans Gases, Bhavnagar V. The Income Tax Officer, Ward-1(5), Bhavnagar

ITA 2481/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6259 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANTOSH KARNANI
• Assessee Lawyers: P B PARMAR
• Keywords: Depreciation; Principle of natural justice; Revenue expenditure; Capital expenditure

Judgement Text

, ,LK ,LK,LK ,LK- -- -,E ,E,E ,E- -- -LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER !# I.T.A. NO.2481/AHD/2016 ( / ASSESSMENT YEAR : 2012-13) M/S. RAJHANS GASES, D-250, RAMNAGAR, KALVIBID, BHAVNAGAR. # VS. ITO, WARD 1(5), AAYAKAR BHAVAN, BHAVNAGAR. $ # % & # PAN/GIR NO. : AAJFR 7967 E ( !$' / APPELLANT ) .. ( ($' # RESPONDENT ) !$') # APPELLANT BY : SHRI TUSHAR HEMANI & P. B. PARMAR, A.R. ($'*) / RESPONDENT BY : SHRI SANTOSH KARNANI, SR.D.R + ,*-. / DATE OF HEARING 09/01/2018 /012*-. / DATE OF PRONOUNCEMENT 11/01/2018 3# O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, AHMEDABAD, VIDE APPEAL NO.CIT(A)-6/100/15-16 DATED 25/07/2016 FOR THE ASSE SSMENT YEAR (AY) 2012-13 AND FOLLOWING GROUNDS OF APPEAL HAS TAKEN B Y THE ASSESSEE: 1. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF AO IN DIS ALLOWING REPAIRS ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 2 - AND MAINTENANCE EXPENSES OF RS.3,40,705/- AFTER TRE ATING THEM AS CAPITAL EXPENDITURE. 2. THE LEARNED CIT(A) HAS ERRED BOTH IN LAW AND ON THE FACTS OF THE CASE IN CONFIRMING THE ACTION OF THE AO IN DI SALLOWING TELEPHONE, TRAVELLING AND VEHICLE EXPENSES OF RS.34 ,500/- AND TREATING THE SAME AS PERSONAL EXPENDITURE. 3. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACTS AND THEY FURTHER ER RED IN GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFO RMATION SUBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDERED BEFORE PASSING THE IM PUGNED ORDER. THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BR EACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE AND THEREFORE DESERVE S TO BE QUASHED. 4. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN LEVYING INTEREST U/S.234A/B/C OF THE ACT. 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN INITIATING PENAL TY U/S.271(1)(C) OF THE ACT. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- ASSESSING OFFICER MADE DISALLOWANCE OF RS.3,40,705/ - ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES AFTER TREATING A S CAPITAL EXPENDITURE. 4.0 THE APPELLANT FOR THE YEAR UNDER CONSIDERATION CLAIMED EXPENSES OF RS.18,32,311/- ON ACCOUNT OF REPAIRS AND MAINTEN ANCE. IT WAS THE OBSERVATION OF LEARNED AO THAT SOME OF THE TRANSACT ION RECORDED WERE HIGH VALUE TRANSACTION AND HENCE DESERVED TO BE CAP ITALIZED. THE LEARNED AO VIDE SHOW CAUSE NOTICE DATED 19/01/2015 ASKED TH E APPELLANT TO FURNISH PROOFS FOR TRANSACTIONS EXCEEDING RS.25,000 /- ALONG WITH AN EXPLANATION AS TO WHY THE SAID EXPENSES WERE REVENU E IN NATURE. IN RESPONSE THE APPELLANT VIDE LETTER DATED 03/02/2015 FURNISHED ALL THE PROOFS IN RELATION TO ITS CLAIM AND EXPLAINED TO LE ARNED AO THAT AS THE ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 3 - CLAIM WERE IN RELATION TO PURCHASE OF SPARE PARTS, REPAIRING OF MACHINERIES AND REPAIRING OF INTERNAL ROAD WHICH WE RE NOT CREATING ANY ENDURING BENEFIT TO THE APPELLANT, THE SAID EXPENSE S CANNOT BE TREATED AS CAPITAL EXPENDITURE. HOWEVER LEARNED AO DID NOT APP RECIATE THE FACTS AND DISALLOWED RS.3,40,705/- FROM THE ABOVE SAID CL AIM AFTER TREATING IT AS CAPITAL EXPENDITURE. THE DETAILED BREAK OF THE D ISALLOWED REPAIRED MAINTENANCE EXPENSE IS AS UNDER FOR YOUR READY REFE RENCE: S.N. DETAILS OF EXPENSES AMOUNT (RS.) 1. OXYGEN CYLINDER VALUES 2,47,905/- 2. EARTH WORK FOR KACHHA ROAD 52,800/ - 3. BRICKS 40,000/- TOTAL 3,40,705/- 4.1 WITH REGARDS TO OXYGEN CYLINDER VALVES AMOUNTIN G TO RS.2,47,905/- 4.2(1) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LEARNED AO FOUND THAT OUT OF THE TOTAL EXPENSES RELATED TO REPAIRS A ND MAINTENANCE, AN AMOUNT EQUAL TO RS.2,47,905/- WAS INCURRED ON ACCOU NT OF OXYGEN CYLINDER VALVES BEING PURCHASE FROM VIMAL CYLINDER VALVES. THE LEARNED ASKED THE APPELLANT AS TO WHY SAID VALVES S HOULD NOT BE CAPITALIZED AS THE TRANSACTIONS CARRIED OUT IN SUCH VALVES WERE HUGE. IN RESPONSE TO THE SAME, THE APPELLANT SUBMITTED THE L EDGER COPY OF REPAIRS AND MAINTENANCE PLACED AT PAGE NO. 34 TO 44 OF THE P/B AND EXPLAINED TO LEARNED AO THAT SUCH VALVES HAVE A LIFE OF 3 TO 4 M ONTHS ARID ACCORDINGLY THE SAID EXPENSES CANNOT BE TREATED AS CAPITAL IN NATURE AS IT DOES NOT PROVIDE ANY ENDURING BENEFIT TO THE APPELL ANT. HOWEVER, LEARNED AO DID NOT APPRECIATE THE FACTS AND AFTER O BSERVING THAT THE APPELLANT DURING THE YEAR UNDER CONSIDERATION PURCH ASED SOME NEW OXYGEN CYLINDERS AND AFTER ASSUMING THAT THE SAID V ALVES MIGHT HAVE BEEN PURCHASED FOR SUCH CYLINDERS, DISALLOWED RS.2, 47,905/- ON ACCOUNT OF REPAIRS AND MAINTENANCE AFTER TREATING IT AS CAP ITAL IN NATURE. 4.2(2) IN THIS CONNECTION, IT IS MOST RESPECTFULLY SUBMITTED THAT THE LEARNED AO WHILE TREATING OXYGEN CYLINDER HAS PRESU MED THAT THE VALVES PURCHASED FROM VIMAL CYLINDER SUPPLIERS WERE USED F OR THE NEW OXYGEN CYLINDER. IN THIS CONNECTION, IT IS MOST RES PECTFULLY SUBMITTED ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 4 - THAT THE NEW OXYGEN CYLINDER PURCHASED BY THE APPEL LANT WERE ALREADY EQUIPPED WITH THE REQUIRED VALVES AND ACCORDINGLY T HERE WAS NO QUESTION OF BUYING NEW VALVES FOR THE CYLINDERS ALR EADY EQUIPPED WITH THE VALVES. IT IS FURTHER SUBMITTED THAT THE EXPRES SION 'CAPITAL EXPENDITURE' IS NOT DEFINED IN THE ACT AND THE MEAN ING OF THE EXPRESSION SHALL BE CONSTRUED MORE ELASTIC IN ITS APPLICATION TO THE FACTS OF EACH CASE. THE CONSISTENT VIEW OF THE COURTS IS THAT THE EXPRESSION IS TO BE CONSTRUED IN A BUSINESS SENSE SAVE INSOFAR AS THERE MAY BE RULES OF CONSTRUCTION APPLICABLE TO IT. THE WORD CAPITAL C ONNOTES PERMANENCY AND CAPITAL EXPENDITURE IS, THEREFORE, CLOSELY AKIN TO THE CONCEPT OF SECURING SOMETHING, TANGIBLE OR INTANGIBLE PROPERTY , CORPOREAL OR INCORPOREAL RIGHT SO THAT THEY COULD BE OF A LASTIN G OR ENDURING BENEFIT TO THE ENTERPRISES IN ISSUE. REVENUE NATURE EXPENDITUR E, ON THE OTHER HAND, IS OPERATIONAL IN ITS PERSPECTIVE AND SOLELY INTEND ED FOR THE FURTHERANCE OF THE ENTERPRISE. THE WORD 'CAPITAL' CONNOTES PERM ANENCY AND 'CAPITAL EXPENDITURE' IS, THEREFORE, CLOSELY AKIN TO THE CON CEPT OF SECURING SOMETHING, TANGIBLE OR INTANGIBLE PROPERTY, OR CORP OREAL OR INCORPOREAL RIGHT, SO THAT THEY COULD BE OF A LASTING OR ENDURI NG BENEFIT TO THE ENTERPRISE IN ISSUE. REVENUE EXPENDITURE, ON THE OT HER HAND, IS OPERATIONAL IN ITS PERSPECTIVE AND SOLELY INTENDED FOR THE FURTHERANCE OF THE ENTERPRISE. ACCORDINGLY, IT IS MOST RESPECTFULL Y SUBMITTED THAT THE APPELLANT HAS RIGHTLY TREATED SUCH VALVES AS REVENU E IN NATURE. 4.2(3) IT IS FURTHER SUBMITTED THAT THE SOLD DISALL OWANCE HAS BEEN MADE SOLELY ON THE BASIS OF AN ASSUMPTION AND IT IS A WE LL SETTLED LAW THAT NO DISALLOWANCES SHALL BE MADE ONLY ON THE BASIS OF AN ASSUMPTIONS, ASSUMPTIONS OR SURMISES. IN ABSENCE OF ANY MATERIAL PROVING OTHERWISE THE EXPLANATIONS PLACED BY THE APPELLANT NO DISALLO WANCE CAN BE MADE. ACCORDINGLY, EVEN ON THIS COUNT THE APPELLANT MOST RESPECTFULLY SUBMITS THAT NO DISALLOWANCE IS CALLED FOR. 4.2(4) IN VIEW OF THE ABOVE PLACED SUBMISSIONS, FAC TS AND WELL SETTLED LAW, IT IS KINDLY REQUESTED YOUR HONORS TO DELETE S UCH DISALLOWANCE. 4.2 WITH REGARDS TO EARTH WORK FOR KACHHA ROAD & BR ICKS AMOUNTING TO RS.52,800 & RS.40,000/- RESPECTIVELY. ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 5 - 4.3(1) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHILE VERIFYING CLAIM OF REPAIRS AND MAINTENANCE EXPENSES AS CLAIME D BY THE APPELLANT, LEARNED AO FOUND THAT THE APPELLANT INCURRED CERTAI N EXPENSES IN RELATION TO REPAIRS OF ROAD. THE LEARNED AO OPINED THAT SUCH EXPENSES WERE CAPITAL IN NATURE AND THUS ASKED THE APPELLANT AS TO WHY SUCH EXPENSES SHOULD NOT BE DISALLOWED AND TREATED AS CA PITAL EXPENDITURES. IN RESPONSE, THE APPELLANT EXPLAINED TO LEARNED AO THAT THE APPELLANT INCURRED EXCAVATION WORK AND PURCHASED BRICKS FOR T HE PURPOSE OF LEVELING THE ROAD ALREADY BUILT IN ORDER TO AVOID M AJOR DAMAGES DURING MONSOON. HOWEVER, LEARNED AO DID NOT APPRECIATE THE FACTS PLACED BY THE APPELLANT AND TREATED THE EXPENSES AS CAPITAL E XPENSES AFTER HOLDING THAT THE APPELLANT BUILD A PAKKA ROAD WHICH ITSELF INDICATES OF PROVIDING ENDURING BENEFITS TO THE APPELLANT. 4.3(2) IN THIS CONNECTION, IT IS MOST RESPECTFULLY SUBMITTED THAT THE PLANT SITE OF THE APPELLANT IS SITUATED 20 K.M (APPROX) F ROM THE MAIN ROAD. FOR THE YEAR UNDER CONSIDERATION, THE APPELLANT INCURRE D REPAIRS TO KACHHA ROAD WHICH WAS ALREADY BUILT BY THE AUTHORITIES IN THE AREA. IT IS FURTHER PERTINENT TO NOTE THAT A 20K.M PAKKA ROAD CANNOT BE BUILT WITH THE HELP OF BRICKS ALONE AND THAT TOO WORTH A MEAGRE RS.1,00 ,000/- (INCLUDES EXCAVATION, BRICKS AND SUPERVISION CHARGES). IT IS FURTHER SUBMITTED THAT THE EXPRESSION 'CAPITAL EXPENDITURE' IS NOT DEFINED IN THE ACT AND THE MEANING OF THE EXPRESSION SHALL BE CONSTRUED MORE E LASTIC IN ITS APPLICATION TO THE FACTS OF EACH CASE. THE CONSISTE NT VIEW OF THE COURTS IS THAT THE EXPRESSION IS TO BE CONSTRUED IN A BUSI NESS SENSE SAVE INSOFAR AS THERE MAY BE RULES OF CONSTRUCTION APPLICABLE TO IT. THE WORD 'CAPITAL' CONNOTES PERMANENCY AND CAPITAL EXPENDITURE IS, THE REFORE, CLOSELY AKIN TO THE CONCEPT OF SECURING SOMETHING, TANGIBLE OR I NTANGIBLE PROPERTY, CORPOREAL OR INCORPOREAL RIGHT SO THAT THEY COULD B E OF A LASTING OR ENDURING BENEFIT TO THE ENTERPRISES IN ISSUE. REVEN UE NATURE EXPENDITURE, ON THE OTHER HAND, IS OPERATIONAL IN ITS PERSPECTIV E AND SOLELY INTENDED FOR THE FURTHERANCE OF THE ENTERPRISE. THE WORD 'CA PITAL' CONNOTES PERMANENCY AND 'CAPITAL EXPENDITURE' IS, THEREFORE, CLOSELY AKIN TO THE CONCEPT OF SECURING SOMETHING, TANGIBLE OR INTANGIB LE PROPERTY, OR CORPOREAL OR INCORPOREAL RIGHT, SO THAT THEY COULD BE OF A LASTING OR ENDURING BENEFIT TO THE ENTERPRISE IN ISSUE. REVENU E EXPENDITURE, ON THE OTHER HAND, IS OPERATIONAL IN ITS PERSPECTIVE AND S OLELY INTENDED FOR THE FURTHERANCE OF THE ENTERPRISE. ACCORDINGLY, IT IS M OST RESPECTFULLY ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 6 - SUBMITTED THAT THE APPELLANT HAS RIGHTLY TREATED SU CH REPAIR EXPENSES AS REVENUE IN NATURE AS IT DOES NOT ENDURE ANY RIGHT O F PERMANENT IN NATURE. 4.3(3) IT IS FURTHER SUBMITTED THAT THE SAID HAS BE EN MADE SOLELY ON THE BASIS OF AN ASSUMPTION THAT A PAKKA ROAD WOULD HAVE BEEN CREATED BY THE APPELLANT. IT IS A WELL SETTLED LAW THAT NO DIS ALLOWANCES SHALL BE MADE ONLY ON THE BASIS OF PRESUMPTIONS, ASSUMPTIONS OR S URMISES. IN ABSENCE OF ANY MATERIAL PROVING OTHERWISE THE EXPLANATIONS PLACED BY THE APPELLANT NO DISALLOWANCE CAN BE MADE. ACCORDINGLY, EVEN ON THIS COUNT THE APPELLANT MOST RESPECTFULLY SUBMITS THAT NO DIS ALLOWANCE IS CALLED FOR. 4.3(4) IN VIEW OF THE ABOVE PLACED SUBMISSIONS, FAC TS AND WELL SETTLED LAW, IT IS KINDLY REQUESTED YOUR HONORS TO DELETE S UCH DISALLOWANCE. 4.3 ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOV E, THE APPELLANT MOST RESPECTFULLY SUBMITS THAT IF AT ALL THE ABOVE SAID EXPENSES ARE TREATED AS CAPITAL IN NATURE, A DIRECTION MAY KINDL Y BE GIVEN TO THE LEARNED AO TO PROVIDE THE BENEFIT OF DEPRECIATION O N SUCH CAPITAL EXPENDITURE.' 3. LD CIT(A) DECIDED THE MATTER AGAINST THE ASSESSE E WITH FOLLOWING OBSERVATION: 7. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND THE SUBMISSION OF THE APPELLANT. IT IS SEEN THAT THE AP PELLANT HAS SHOWN EXPENSES INCURRED ON ACCOUNT OF OXYGEN CYLINDER VAL VES OF RS. 2,47,905/-, EARTH WORK FOR KACHHA ROAD OF RS.52,800 /- AND BRICKS OF RS.40,000/- AS REPAIR AND MAINTENANCE EXPENDITURE A ND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE AO IS JUSTIFIED IN TREATING THE SAME AS CAPITAL EXPENDITURE AS THE BENEFIT OUT OF EXPENDITU RE IS LONG LASTING AND HAVING ENDURING BENEFIT. THE APPELLANT COULD NOT SU BMIT FURTHER DETAILS OF EARLIER YEARS WHERE THE SAME WAS TREATED AS REVE NUE EXPENDITURE. IN VIEW OF THE ABOVE DISALLOWANCE MADE BY THE AO IS CO NFIRMED. THE GROUND IS DISMISSED. ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 7 - 4. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF IND USTRIAL OXYGEN GASES. LD. AO AND LD. CIT(A) FAIL TO APPRECIATE THAT OXYGE N CYLINDER VALVES ARE PART OF OXYGEN CYLINDER. SUCH VALVES HAVE A LIFE OF 3 TO 4 MONTHS. IN OUR CONSIDERED OPINION, ASSESSEE IS ENTITLE FOR DEPRECI ATION. THEREFORE, WE REMAND THIS MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER TO CALCULATE THE DEPRECIATION AND GIVE BENEFIT OF THE SAME AS PE R LAW. 5. SO FAR AS GROUND RELATES TO DISALLOWANCE OF RS,3 4,500/- ON ACCOUNT OF TELEPHONE TRAVELING AND VEHICLE EXPENSES BEING P ERSONAL IN NATURE IS CONCERNED. THE AO IN THE ASSESSMENT ORDER HAS NOTED AS UNDER: '5. ON VERIFICATION TELEPHONE EXPENSES A/C. OF RS.2 4765/-, IT IS NOTICED THAT SUCH EXPENSES INCLUDE EXPENSES INCURRE D ON TELEPHONE/CELLS USED/OR PERSONAL PURPOSES. THEREFORE, THE ASSESSEE WAS, VIDE NOTICE U/S.142(1) OF THE ACT DATED 19.01.2015, REQUESTED T O SHOW CAUSE AS TO WHY A LUMP SUM AMOUNT OF RS.6000/- BEING 25 % THERE OF SHOULD NOT BE DISALLOWED.' IN RESPONSE THERETO, THE ASSESSEE FILED ITS REPLY O N 03.02.2015 AS UNDER:- 'REGARDING TELEPHONE EXPENSES, WE WISH TO SUBMIT TH AT WE ARE IN THE BUSINESS OF MANUFACTURING OF INDUSTRIAL OXYGEN GASE S AND HAVE STAFF TEAMS OF PLANT AND SELLING & ADMINISTRATIVE STAFF T O WHOM WE PROVIDE MOBILE PHONES AT FIRM'S EXPENSE. THEREFORE, IT IS V ERY OBVIOUS THAT TOTAL TELEPHONE EXPENSES OF RS.24,765/- INCLUDE STAFF MOB ILE PHONES BILLS, LANDLINE PHONE BILLS, AND THEREFORE THERE IS NO POR TION OF PERSONAL EXPENSES INVOLVED IN IT. IT IS CLEAR FROM THE ABOVE THAT BEING USED EXCLUSIVELY FOR BUSINESS PURPOSES, NO AMOUNT SHOULD BE DISALLOWED ON THE GROUND OF PERSONAL USE.' THE REPLY OF THE ASSESSEE WAS CAREFULLY PERUSED, HO WEVER, THE SOME CANNOT BE ACCEPTED SINCE THE ASSESSEE HAS FAILED TO FURNISH ITS EXPLANATION WITH EVIDENCES VIZ. CALF REGISTERS/DETA ILED BILLS CONTAINING DIALED NUMBERS AND PURPOSE FOR DIALING SUCH NUMBERS . THEREFORE, ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 8 - INVOLVEMENT OF PERSONAL USAGE OF TELEPHONE AND CELL PHONES CANNOT BE DENIED. HENCE, A LUMP SUM AMOUNT OF RS.6,000/- BEIN G 25 % THEREOF IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE. (DISALLOWANCE OF RS.6,000/-). 6. ON VERIFICATION TRAVELING EXP. A/C. OF RS. 49721 /-, IT IS NOTICED THAT SUCH EXPENSES INCLUDE EXPENSES OF PERSONA/PURPOSES. THEREFORE, THE ASSESSEE WAS, VIDE NOTICE U/S.142(1) OF THE ACT DAT ED 19.01.2015, REQUESTED TO SHOW CAUSE AS TO WHY A LUMP SUM AMOUNT OF RS.12500/- BEING 25 % THEREOF SHOULD NOT BE DISALLOWED. IN RESPONSE THERETO, THE ASSESSEE FILED ITS REPLY O N 03.02.2015 AS UNDER: 'IN CASE OF TRAVELLING EXPENSES, WE WISH TO INFORM YOU THAT PARTNERS OF THE COMPANY DID BUSINESS TRIPS FOR PROMOTION AND EX PANSION OF BUSINESS FOR WHICH THEY INCURRED EXPENSES OF RS.49,721/-. FU RTHER, THE TRIPS ARE FOR ONLY BUSINESS PURPOSES AND HENCE NO PORTION OF PERSONAL EXPENSES INVOLVED IN IT. THEREFORE, NO AMOUNT SHOULD BE DISA LLOWED ON THE GROUND OF PERSONAL USE.' THE REPLY OF THE ASSESSEE WAS DULY PERUSED, HOWEVER , THE SAME CANNOT BE ACCEPTED SINCE THE ASSESSEE HAS FAILED TO FURNIS H TRIP REGISTER ALONG WITH DOCUMENTARY EVIDENCES ESTABLISHING TRIPS BEING MADE EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE, A LUMP SUM AMOUNT OF RS.12,500/- BEING 25% THEREOF IS DISALLOWED AND ADD ED BACK TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF INVOLVEMENT OF EXPENSES OF PERSONAL NATURE IN TRAVELING EXP. (DISALLOWANCE OF RS.12,500/-) 7. ON VERIFICATION VEHICLE RUNNING & MAINTENANCE A/ C. OF RS. 153758/-, IT IS NOTICED THAT SUCH EXPENSES INCLUDE EXPENSES I NCURRED ON VEHICLES USED FOR PERSONAL PURPOSES. THEREFORE, THE ASSESSEE WAS VIDE NOTICE U/S.142(1) OF THE ACT, REQUESTED TO SHOW CAUSE AS T O WHY A LUMP SUM AMOUNT OF RS.38500/- BEING 25 % THEREOF SHOULD NOT BE DISALLOWED. IN RESPONSE THERETO, THE ASSESSEE FILED ITS REPLY O N 03.02.2015 AS UNDER:- 'WITH REGARDS TO VEHICLE RUNNING & MAINTENANCE EXPE NSES, WE WISH TO INFORM YOU THAT WE HAVE STAFF MEMBERS TO WHOM WE PR OVIDE VEHICLE AT THE FIRM'S EXPENSE TO USE IT FOR BUSINESS PURPOSES. FURTHER, VEHICLE RUNNING & MAINTENANCE EXPENSES ALSO INCLUDE FUEL AN D REPAIRING EXPENSES OF THE CAR WHICH IS EXCLUSIVELY USED BY TH E PARTNERS FOR THE BUSINESS I.E. AS A MEAN OF TRANSPORT TO AND FROM TH E PLANT WHICH IS SITUATED AT ALONG, AROUND 55 KM FROM BHAVNAGAR. THE REFORE, IT IS OBVIOUS THAT TOTAL EXPENSES OF VEHICLE RUNNING AND EXPENSES ARE USED FOR BUSINESS AND NO PORTION OF PERSONAL EXPENSES INVOLV ED IN IT' ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 9 - THE REPLY OF THE ASSESSEE WAS CAREFULLY PERUSED, HO WEVER, THE SAME CANNOT BE FULLY ACCEPTED SINCE THE ASSESSEE HAS FAI LED TO SUBSTANTIATE ITS EXPLANATION WITH EVIDENCES. THEREFORE, INVOLVEMENT OF EXPENSES INCURRED ON PERSONAL USE OF VEHICLES IN VEHICLE RUN NING & MAINTENANCE EXPENSES CANNOT BE OVERRULED. HOWEVER, CONSIDERING THE DISTANCE OF THE BUSINESS PREMISES OF THE ASSESSEE (I.E. 55 K.M. FRO M BHAVNAGAR), A LUMP SUM AMOUNT OF RS.16,000/- BEING 10% OF RS.1,53 ,758/- IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE ON ACCOUNT OF PERSONAL USAGE OF VEHICLES.' 6. LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS.34,5 00/-. 7. IN OUR CONSIDERED OPINION, THERE IS NO CONCRETE BASIS FOR THE SAME THAT ASSESSEE HAS SPENT THIS AMOUNT FOR ITS PERSONA L USE. WE THINK JUSTICE WOULD MEET IF RS.10,000 IS DISALLOWED. 8. IN THE RESULT, APPEAL OF THE APPELLANT IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 11/01/2017 SD/- SD/- ( ) 4 5 ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 11/01/2017 PRITI YADAV, SR.PS ITA NO.2481/AHD /2016 M/S. RAJHANS GASES VS ITO. ASST.YEAR 2012-13 - 10 - !'# $#! # COPY OF THE ORDER FORWARDED TO : 1. !$' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 67- + 8- / CONCERNED CIT 4. + 8- 4!5 / THE CIT(A)-6, AHMEDABAD. 5. 9:;-67 !.!672 ! / DR, ITAT, AHMEDABAD 6. ;<=, # GUARD FILE. % & / BY ORDER, (9-- //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 09/01/2018 (DICTATION-PAD 2 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10/01/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER