Shri Rahul Navinkumar Sharma, Ahmedabad V. The Income Tax Officer, Ward-1, Bharuch

ITA 260/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2203 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL DHAKA
• Keywords: Business expenditure; Corroborative evidences; Bonafide mistake

Judgement Text

3 , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.260/AHD/2015/SRT / ASSESSMENT YEAR: 2010-11 RAHUL NAVINKUAMAR SHARMA, 125, RACHNA NAGAR-3, BHARUCH 392 001. [PAN: BQZPS 9363L] VS. INCOME TAX OFFICER, WARD-1, BHARUCH. ( # / APPELLANT) ( $%# /RESPONDENT) . / ITA NO.432/AHD/2016/SRT / ASSESSMENT YEAR: 2010-11 MINAXIBEN NAVINKUMAR SHARMA, 125, RACHNA NAGAR-3, BHARUCH 392 002. [PAN: CQJPS 7456K] VS. INCOME TAX OFFICER, WARD-1, BHARUCH. ( # / APPELLANT) ( $%# /RESPONDENT) / ASSESSEE BY : SHRI ANIL R. SHAH, C.A MRS. KINJAL SHAH, C.A /REVENUE BY : SHRI ANIL DHAKA, SR. D.R /DATE OF HEARING : 19-09-2018 / DATE OF PRONOUNCEMENT : 25-09-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-III, BARODA & 2 ITA NOS.260/AHD/2017/SRT & 432/AHD/2016/SRT (A.Y: 2 010-11) SHRI RAHUL NAVINKUMAR SHARMA & MINAXIBEN NAVINKUMAR SHARMA COMMISSIONER OF INCOME TAX (APPEALS)-3, VADODARA ( CIT(A) FOR SHORT) DATED 24.10.2014 & 30.12.2015 FOR THE ASSESSMENT YE AR (A.Y) 2010-11. 2. BOTH THE PARTIES HAVE AGREED TO THE FACT THAT TH E FACTS AND CIRCUMSTANCES OF BOTH THE CASES ARE IDENTICAL AND S IMILAR THEREFORE, WE ARE TAKING ITA NO.260/AHD/2015/SRT AS LEAD CASE FOR THE SAKE OF CONVENIENCE AND BREVITY. THE SOLE ISSUE RAISED BY THE ASSESSEE IN ITA NO.260/AHD/2015/SRT READS AS FOLLOWS: THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACT IN CON FIRMING ADDITION OF RS. 7,00,000/- MADE BY THE AO ON ADHOC AND ESTIMATE BASIS OUT OF VARIOUS HEADS OF EXPENSES LIKE LABOUR WAGES, WORKER S SALARY, SUPERVISOR SALARY ETC., 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE A SSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS WHICH HAVE BEE N DULY AUDITED BY THE AUDITOR AND SUPPORTED BY THE RELEVANT BILLS AND VOUCHERS. THE LD. AR FURTHER SUBMITTED THAT THE AUDITORS HAS NOT MADE AN Y ADVERSE REMARK AND THEREFORE, THE AO OUGHT TO HAVE ACCEPTED THE CLAIM OF EXPENSES OF APPELLANT WHICH ARE INCURRED DURING THE COURSE OF B USINESS & FOR PURPOSE OF BUSINESS. THE LD. AR FURTHER SUBMITTED THAT KEE PING IN MIND THE NATURE OF BUSINESS, BOOKS OF ACCOUNTS AND SUBSIDIARY REGIS TERS, VOUCHER BILLS, RECEIPTS ETC. MAINTAINED AND PRODUCED BEFORE THE AU THORITIES THE 3 ITA NOS.260/AHD/2017/SRT & 432/AHD/2016/SRT (A.Y: 2 010-11) SHRI RAHUL NAVINKUMAR SHARMA & MINAXIBEN NAVINKUMAR SHARMA DISALLOWANCE OF GENUINE AND BUSINESS EXPENDITURE CA NNOT BE MADE MUCH LESS ON ADHOC AND ESTIMATE BASIS AND THE SAME THERE FORE THE DELETED. ALTERNATIVELY, THE LD. AR SUBMITTED THAT EVEN IF AN Y FAILURE, FAULT OR BONAFIDE MISTAKE IS ATTRIBUTED TO THE ASSESSEE THEN ALSO ONLY A PART OF CLAIMED EXPENDITURE CAN BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 4. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) SUBMITTED THAT THE AUTHORITIES BELOW RIGHTLY DISALL OWED THE EXPENDITURE WHICH WAS NOT SUPPORTED BY THE PROPER BILLS AND VOU CHERS AND OTHER RELEVANT BOOKS OF ACCOUNTS. HOWEVER, HE SUBMITTED THAT THE DEPT. HAS NO SERIOUS OBJECTION IF A REASONABLE PART OF CLAIM OF EXPENDITURE IS DISALLOWED. 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS IN THE BUSINES S OF CONSTRUCTION AND DEVELOPING AND HAS INCURRED TOTAL EXPENDITURE OF RS . 54,70,132/- ON THE LABOUR WAGES, WORKERS SALARY, SUPERVISOR SALARY AND OTHER SALARY OUT OF WHICH THE AO MADE ADHOC ADDITION OF RS. 7,00,000/- IN ABSENCE OF SUPPORTING EVIDENCES FOR THE ABOVE NOTED AND CLAIME D EXPENDITURE BY ALLEGING THAT THE VERACITY OF THE SAME COULD NOT BE VERIFIED. THE FIRST APPELLATE AUTHORITY UPHOLD THE ADDITION BY OBSERVIN G THAT THE APPELLANT FAILED TO PRODUCE SUPPORTING EVIDENCES. 4 ITA NOS.260/AHD/2017/SRT & 432/AHD/2016/SRT (A.Y: 2 010-11) SHRI RAHUL NAVINKUMAR SHARMA & MINAXIBEN NAVINKUMAR SHARMA 6. IN THE PRESENT CASE, SOME GLARING FACTS ARE NOTE D THAT THE ASSESSEE HAS INCURRED EXPENDITURE ON HIS BUSINESS OF CONSTRU CTION AND DEVELOPMENT OF REAL ESTATE AND HIS BOOKS OF ACCOUNT S HAVE BEEN AUDITED WITHOUT ANY ADVERSE REMARK OR QUALIFICATION. THE M AIN GRIEVANCE OF THE AO IS THAT THE ASSESSEE HAS INCURRED EXPENDITURE IN CASH AND HAVE NOT PROPERLY MAINTAINED BILLS, VOUCHERS AND RELEVANT AC COUNTS PROPERLY FOR VERIFICATION. HOWEVER, IN ANY CASE THE ELEMENT OF EXPENDITURE AND ITS INCURRING CANNOT BE DOUBTED AS WITHOUT ANY EXPENDIT URE THE ASSESSEE COULD NOT PERFORM HIS BUSINESS ACTIVITIES. HOWEVER , FROM OF THE AUTHORITIES BELOW, IT IS CLEAR THAT THE AUTHORITIES HAS MADE AN D UPHELD ADHOC DISALLOWANCE WITHOUT ANY REASONABLE AND JUSTIFIED B ASIS. DEFINITELY, IN SUCH TYPE OF CASES THE AO IS REQUIRED TO MAKE A DIS ALLOWANCE TO COVER UP THE POSSIBLE LEAKAGE OF REVENUE WHEN THE EXPENDITUR E IS INCURRED IN CASH AND BILLS AND VOUCHERS ARE NOT AVAILABLE FOR VERIFI CATION OF THE CLAIM. IN OUR CONSIDERED OPINION, LOOKING INTO THE ENTIRE FACTS A ND CIRCUMSTANCES OF THE CASE ADHOC DISALLOWANCE OF RS. 7,00,000/- OUT OF TO TAL EXPENDITURE APPROXIMATE RS. 54,70,132 /- IS NOT JUSTIFIED AS NO BASIS OR LOGIC HAS BEEN GIVEN BY THE AUTHORITIES BELOW FOR THIS ESTIMATION. THEREFORE, WE FIND IT APPROPRIATE TO ALLOW THE DISALLOWANCE OF CERTAIN PE RCENTAGE OF TOTAL EXPENDITURE TO COVER UP ALL POSSIBLE LEAKAGES OF RE VENUE AND TO MEET THE ENDS OF JUSTICE AND THUS, WE DIRECT THE AO TO DISAL LOW 8% OF TOTAL 5 ITA NOS.260/AHD/2017/SRT & 432/AHD/2016/SRT (A.Y: 2 010-11) SHRI RAHUL NAVINKUMAR SHARMA & MINAXIBEN NAVINKUMAR SHARMA EXPENDITURE CLAIMED BY THE ASSESSEE. ACCORDINGLY, SOLE GROUND/ISSUE OF THE ASSESSEE IS PARTLY ALLOWED. 7. SINCE, THE FACTS AND CIRCUMSTANCES OF THE CASE O F THE CASE SMT. MINAXIBEN N. SHARMA ARE IDENTICAL TO THE FACTS OF T HE PRESENT CASE THEREFORE, OUR CONCLUSION DRAWN IT THE CASE OF SHRI RAHUL N. SHARMA WOULD APPLY MUTATIS MUTANDIS TO ITA NO.432/AHD/2016/SRT ALSO. ACCORDINGLY, SOLE GROUND/ISSUE IN THIS APPEAL IS AL SO PARTLY ALLOWED AND AO IS DIRECTED TO MADE DISALLOWANCE OF 8% OF TOTAL CLAIM OF EXPENDITURE OF RS. 36,89,425/- IN THIS CASE. 8. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE PARTLY ALLOWED IN THE MANNER AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 5 TH SEPTEMBER, 2018. / SURAT ; DATED : 25 TH SEPTEMBER, 2018 EDN $ ' / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. $ ( ) / THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER