Sri.M.Radhakrishnan Nair, Cochin V. The ACIT, Cochin

ITA 257/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81431 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: K R SUDHAKARAN PILLAI
• Keywords: Capital asset; Depreciation; Corroborative evidences
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO.257/COCH/2014 ASSESSMENT YEAR : 2008-09 SHRI M. RADHAKRISHNAN NAIR, FLAT NO. 1 A-2, FOUR SQUARE MANOR, HOLY FAITH BUILDING, THRIKKAKKARA, KOCHI-682 021. [PAN:ACJPN 1259N] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX,CIRCLE-2(2), KOCHI. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI K.R. SUDHAKARAN PILLAI, ADV. REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 08/12/2014 DATE OF PRONOUNCEMENT 12/12/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 15-01- 2014 PASSED BY THE CIT(A)-II, KOCHI FOR THE ASSESSM ENT YEAR 2008-09. 2. THE FIRST GROUND IS WITH REGARD TO SUSTAINING OF ADDITION OF RS. 6,59,699/- BEING 10% OF VARIOUS EXPENSES INCURRED B Y THE ASSESSEE FOR HIS BUSINESS PURPOSES. I.T.A. NO.257/COCH/2014 2 3. THE BRIEF FACTS OF THE CASE ARE THAT OUT OF THE FOLLOWING EXPENSES CLAIMED, 10% OF THE EXPENSES WAS DISALLOWED SINCE T HE ASSESSEE HAD NOT PRODUCED SUPPORTING PROOF/VOUCHERS FOR THE FULL CLA IM OF THE EXPENSES: 1. TRAVELLING & CONVEYANCE 16,93,440/- 2. TELEPHONE & MOBILES 8,56,196 3. REPAIRS & MAINTENANCE 5,54,896/- 4. FESTIVAL EXPENSES 70,465/- 5. BUSINESS PROMOTION 1,13,703/- 6. SALES PROMOTION 14,28,116/- 7. SALES PROMOTION (HO) 5,44,006/- 8. WORKSHOP EXPENSES 72,08,120/- 9. EXPENSES ON VEHICLES 6,15,362/- 10% OF THEREOF 6,59,699/- 4. ON APPEAL, THE CIT(A) OBSERVED THAT DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS NOT ABLE TO PRODUCE S UPPORTING DOCUMENTARY EVIDENCES AND VOUCHERS FOR THE VARIOUS EXPENSES. T HEREFORE, ACCORDING TO THE CIT(A), THE AO HAS MADE ADDITION OF RS.6,59,699 /- BEING 10% OF SUCH EXPENSES AND SINCE THE ASSESSEE HAS NOT BEEN ABLE T O PROVIDE THESE VOUCHERS, THE DISALLOWANCE OF 10% OF VARIOUS EXPENS ES MADE BY THE AO IS QUITE REASONABLE AND JUSTIFIED. ACCORDINGLY, THE CIT(A) CONFIRMED THE ADDITION OF RS.6,59,699/- MADE BY THE AO. AGAINST T HIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT THE ASSESSEES TURNOVE R FOR THIS YEAR WAS 20% HIGHER THAN THE EARLIER YEAR. HOWEVER, EXPENSES INCURRED IS ONLY 3.62% OF TURNOVER WHICH WAS 3.12% IN A.Y. 2007-08. THE LD . AR SUBMITTED THAT I.T.A. NO.257/COCH/2014 3 THERE WAS NO SIMILAR DISALLOWANCE MADE IN THE EARLI ER ASSESSMENT YEAR. THE LD. AR SUBMITTED THAT THERE WAS NO ADVERSE COMMENT IN THE AUDIT REPORT IN RESPECT OF MAINTENANCE OF BOOKS OF ACCOUNTS, BOOKS AND VOUCHERS. BEING SO, THE AO WAS NOT JUSTIFIED IN DISALLOWING 10% OF THE CLAIM OF EXPENSES INCURRED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT THE DIS ALLOWANCE WAS EXCESSIVE AND WAS NOT JUSTIFIED IN VIEW OF THE INCREASE IN TU RNOVER AND HENCE, THE DISALLOWANCE MAY BE DELETED. 6. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDE R OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WHEN THE ASSESSEE HAS CLAIMED EXPENSES IN HIS BOOKS OF ACCOU NTS, IT IS INCUMBENT UPON THE ASSESSEE TO PRODUCE NECESSARY VOUCHERS/BILLS AN D RECEIPTS. THE ASSESSEE PLEADED THAT INCREASE IN EXPENSES IS VERY NOMINAL. HOWEVER, THE ASSESSEE HAS NOT GIVEN ANY SUPPORTING EVIDENCE IN SUPPORT OF THE EXPENSES INCURRED BY HIM AND THE EXPLANATION GIVEN BY THE ASSESSEE WAS O NLY IN THE FORM OF ARGUMENT. IN THE ABSENCE OF NECESSARY EVIDENCE, THE LOWER AUTHORITIES HAVE NO ALTERNATIVE, EXCEPT TO MAKE DISALLOWANCE OF 10% OF EXPENSES ON ESTIMATE BASIS. I.T.A. NO.257/COCH/2014 4 7.1 IN THE PRESENT CASE, INSPITE OF GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE, THE ASSESSEE FAILED TO FURNISH NECESSARY VOUCHERS/BILLS AND RECEIPTS. BEING SO, IN OUR OPINION, IT IS APPROPRIATE TO DISA LLOW 10% OF TOTAL EXPENSES AS THERE IS EVERY CHANCE OF INFLATING THE EXPENSES BY WAY OF SELF-MADE VOUCHERS. ACCORDINGLY, THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED. 8. THE NEXT GROUND RAISED IN THIS APPEAL IS WITH RE SPECT TO DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.3,24,957/-. 9. THE BRIEF FACTS OF THE CASE ARE THAT IN THE P&L ACCOUNT, THE ASSESSEE HAD DEBITED A SUM OF RS.7,85,282/- AS DEPRECIATION O FIXED ASSETS. AS PER THE STATEMENT OF DEPRECIATION, THE ASSESSEE HAS MADE AD DITION TO CAPITAL ASSETS FOR RS. 21,88,734/- DURING THE YEAR. EVEN THOUGH TH E ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITIES THE ASSESSEE COULD NOT PRO DUCE PROOF FOR THE CAPITAL ASSETS AND ADDITION WAS MADE EXCEPT FOR RS.92,000/- / HENCE THE DEPRECIATION CLAIMED ON CAPITAL ASSETS, FOR WHICH N O PROOF WAS SUBMITTED, WAS NOT ALLOWED. AS PER THE REVISED CALCULATION OF DEPR ECIATION, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION OF RS.4,60,325/-ONLY. TH E EXCESS AMOUNT CLAIMED OF RS.3,24,957/-WAS ADDED BACK. 10. ON APPEAL, THE CITA) OBSERVED THAT THE AO HAS M ADE THE ADDITION OF RS.3,24,957/- TOWARDS DEPRECIATION CLAIMED ON FIXED ASSETS AS THE ASSESSEE I.T.A. NO.257/COCH/2014 5 WAS NOT ABLE TO SUBMIT THE PROOF OF ADDITION MADE T O CAPITAL ASSETS OF RS.21,88,734/-. ACCORDING TO THE CIT(A), THOUGH TH E ASSESSEE HAS STATED DURING THE APPELLATE PROCEEDINGS THAT EVIDENCE FOR PURCHASE OF EARTH MOVING EQUIPMENTS AMOUNTING TO RS.17 LAKHS WAS ENCLOSED, H OWEVER, IT WAS FOUND THAT THE ASSESSEE HAS NOT PRODUCED SUCH RECEIPTS. T HE CIT(A) WAS OF THE OPINION THAT SINCE THE ASSESSEE WAS NOT ABLE TO FIL E ANY PROOF FOR THE PURCHASE OF CAPITAL ASSETS RELATING TO EARTH MOVING EQUIPMENTS AND OTHER ASSETS TOTALING RS.21,18,734/-, THE AO WAS JUSTIFIE D IN DISALLOWING DEPRECIATION ON SUCH CAPITAL ASSETS. ACCORDINGLY, T HE CIT(A) CONFIRMED THE ADDITION OF RS.3,24,957/- TOWARDS DEPRECIATION ON C APITAL ASSETS. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LD. AR SUBMITTED THAT JCB WITH REGISTRATION NO.KL-33-1590 WAS PURCHASED FROM SHRI P.K.KUNJUMON FOR RS.17 LAKHS. ACCORDING TO THE LD. AR, FULL PARTICULARS COULD NOT BE PRODUCED BEFORE THE A SSESSING OFFICER DUE TO SHIFTING OF OFFICE AND CHANGE OF ACCOUNTANT. HOWEVE R, THE LD. AR SUBMITTED THAT THE EVIDENCES WERE PRODUCED THE CIT(A) WHO REJ ECTED THE ARGUMENT OF THE ASSESSEE BY STATING THAT NO SUCH RECEIPTS WERE PRODUCED AND THUS CONFIRMED THE DISALLOWANCE. ACCORDING TO THE LD. A R, THE VEHICLE WAS PURCHASED AS PER SALE AGREEMENT DATED 23-08-2007 AN D TAKEN POSSESSION ON THE SAME DATE AND THE ASSESSEE WAS EXPLOITING IT FO R BUSINESS FROM FEBRUARY, 2008 ONWARDS. THE LD. AR SUBMITTED THAT AN AMOUNT OF RS. 10,000 BEING I.T.A. NO.257/COCH/2014 6 RENT WAS CREDITED IN THE PROFIT AND LOSS ACCOUNT AN D THE VEHICLE WAS UNDER HP AGREEMENT WITH L&T FINANCE. IT WAS SUBMITTED THAT T HE ASSESSEE WAS PAYING THE HP INSTALLMENT DURING THE PERIOD OF EXPLOITATIO N AND AS PER THE SALE AGREEMENT, IT COULD BE LEGALLY TRANSFERRED ONLY AFT ER THE HP INSTALLMENTS WERE FULLY PAID. ACCORDING TO THE LD. AR, THE VEHICLE W AS IN THE NAME OF P.K.KUNJUMON AND WAS TRANSFERRED TO THE ASSESSEES NAME W.E.F. 20-10-2010 AS SOON AS THE ASSESSEE CLEARED THE HP INSTALLMENT WITH L&T FINANCE COMPANY. THUS, ACCORDING TO THE LD. AR, THE ASSESSE E WAS THE DE FACTO OWNER OF THE VEHICLE AND EARNED INCOME THEREFROM WH ICH WAS OFFERED FOR TAX DURING THE YEAR UNDER CONSIDERATION. AND HENCE, DEP RECIATION WAS RIGHTLY CLAIMED. THE LD. AR RELIED ON THE JUDGMENT OF SUPR EME COURT IN THE CASE OF MYSORE MINERALS REPORTED IN 239 ITR 775 AND THE JUD GMENT OF THE DELHI HIGH COURT IN THE CASE OF INDIAN RAILWAYS FINANCE CORPOR ATION REPORTED IN 362 ITR 548. HENCE THE DISALLOWANCE OF DEPRECIATION WAS NOT JUSTIFIED. 12. THE LD. DR SUBMITTED THAT THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE AND THE DECISIONS RELIED UPON BY THE ASSES SEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND HENCE, IT IS TO BE REJECTED. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORD. THOUGH THE JCB VEHICLE BEARING REGISTRATION NO. KL-33-1590 WAS ALREADY PURCHASED BY SHRI P.K. KUNJUMON AS PER HIRE AND PURCHASE AGREEME NT ENTERED INTO WITH I.T.A. NO.257/COCH/2014 7 L&T FINANCE COMPANY, THE OWNERSHIP HAS TO BE WITH L &T FINANCE COMPANY WHO IS ENTITLED TO CLAIM DEPRECIATION AND SINCE P. K.KUNJUMON WOULD BECOME THE OWNER OF THE VEHICLE ONLY ON LAST PAYMENT OF HI RE AND PURCHASE INSTALLMENT TO L&T FINANCE COMPANY. IN ORDER TO A VAIL DEPRECIATION UNDER SECTION 32, THE ASSESSEE SHALL BE THE OWNER OF THE ASSET AND THE ASSET SHALL BE USED FOR THE PURPOSE OF BUSINESS. THE LD. AR SU BMITTED BEFORE US THAT BECAUSE THERE IS AGREEMENT BETWEEN THE ASSESSEE AND SHRI P.K.KUNJUMON TO PURCHASE THE VEHICLE, DEPRECIATION IS TO BE GRANTED TO THE ASSESSEE. AS WE HAVE OBSERVED EARLIER, WHEN SHRI KUNJUMON HAS ENTER ED INTO HP AGREEMENT WITH L&T FINANCE COMPANY, HE CANNOT PART WITH THE O WNERSHIP OF THE ASSESSEE AND EVEN IF HE ENTERED INTO SALE AGREEMENT WITH THE ASSESSEE, DEPRECIATION CANNOT BE GRANTED TO THE ASSESSEE AS S HRI KUNJUMON HIMSELF IS NOT THE ABSOLUTE OWNER OF THE VEHICLE. IN OUR OPIN ION, THE EVIDENCE BROUGHT ON RECORD IS NOT SUFFICIENT TO HOLD THAT THE ASSESS EE IS THE OWNER AND HENCE, ENTITLED TO DEPRECIATION UNDER SECTION 32 OF THE I. T. ACT. ACCORDINGLY, WE REJECT THE CLAIM OF THE ASSESSEE IN THIS REGARD. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 12-12-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 12TH DECEMBER, 2014 GJ I.T.A. NO.257/COCH/2014 8 COPY TO: 1. SHRI M. RADHAKRISHNAN NAIR, FLAT NO. 1 A-2, FOUR SQUARE MANOR, HOLY FAITH BUILDING, THRIKKAKKARA, KOCHI-682 021. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -2(2), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN