M/s. Shri Banwari Dal Mill, Kanpur V. The Income Tax Officer-2(1), Kanpur

ITA 276/LKW/2012

• Counselvise Citation: 27623714 RSA 2012
• Duration Of Justice: 3 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.276/LKW/2012 ASSESSMENT YEAR:2005-06 INCOME TAX OFFICER-2(1), KANPUR. VS M/S SHRI BANWARI DAL MILL, 84/185-D, KARWALO NAGAR, KANPUR. PAN:ABFFS0339N (RESPONDENT) (APPELLANT) SHRI RAKESH GARG, ADVOCATE APPELLANT BY SHRI AMIT NIGAM, D. R. RESPONDENT BY 16/10/2015 DATE OF HEARING 31/12/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE OR DER PASSED BY LEARNED CIT(A)-II, KANPUR DATED 16/03/2012 FOR THE ASSESSME NT YEAR 2005-2006. 2. THIS APPEAL WAS EARLIER DISPOSED OF AS PER ORDER DATED 06/01/2015. THEREAFTER, THE ASSESSEE FILED A MISC. APPLICATION STATING THEREIN THAT GROUND NOS. 5 TO 9 OF THE APPEAL WERE NOT DECIDED BY THE T RIBUNAL. IN THE MISC. APPLICATION ORDER IN M.A. NO.16/LKW/2015 DATED 13/0 8/2015, THIS TRIBUNAL ORDER WAS RECALLED FOR THE PURPOSE OF DECIDING THE ISSUES RAISED IN GROUND NO. 5 TO 9 AND THEREFORE, NOW WE HAVE TO DECIDE GRO UND NO. 5 TO 9 OF THIS APPEAL, WHICH ARE REPRODUCED BELOW: 5. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE ADDITION OF RS. 17,5007- ON ACCOUNT OF EXPENDITURE MADE FOR THE PURPOSE OF PURCHASE OF ELE CTRIC METER AS 'CAPITAL' IN NATURE AS AGAINST THE CLAIM O F THE ASSESSEE AS 'REVENUE EXPENDITURE'. 2 6. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE AD HOC ADDITION OF RS.25,000/- ON AC COUNT OF TOTAL WAGES PAID OF RS.1,29,825/-. 7. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE AD HOC ADDITION OF RS.20,000/- MADE BY THE AO OUT OF PALLEDARI'S PAYMENT OF RS.L,13,105/-. 8. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.11,112/- OUT OF TELEPHONE EXPENSES OF RS.44,448/-. 9. BECAUSE THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS.10,000/- OUT OF G ENERAL EXPENSES OF RS.31,647/-. 3. REGARDING GROUND NO. 5, IT WAS SUBMITTED BY LEA RNED A. R. OF THE ASSESSEE THAT THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER IS AVAILABLE ON PAGES 22 TO 39 OF THE PAPER BOOK AND I N PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA NO. 5 OF THIS SUBMISSIO N AVAILABLE ON PAGE NO. 23 OF THE PAPER BOOK. REGARDING GROUND NO. 6 TO 9, IT WAS SUBMITTED BY HIM THAT THE ASSESSING OFFICER HAS MADE AD HOC DISA LLOWANCE WITHOUT ANY VALID REASONS. OUR ATTENTION WAS DRAWN TO THE SUBM ISSIONS MADE BEFORE THE ASSESSING OFFICER, AVAILABLE ON PAGES 44 TO 46 AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PAGE NO. 45 OF THE PAPER BOO K WHERE THE ASSESSEE HAS GIVEN THE DETAILS REGARDING TELEPHONE, VEHICLE ETC. AND ALSO THE COMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT. 4. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER S OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGAR DING GROUND NO. 5, WE FIND THAT A FINDING HAS BEEN GIVEN BY CIT(A) ON PAGE NO. 4 OF HIS ORDER THAT DISALLOWANCE OF RS.17,500/- WAS MADE BECAUSE T HIS EXPENSE WAS INCURRED FOR THE PURPOSE OF PURCHASE OF ELECTRIC ME TER AND THIS IS OF CAPITAL NATURE AS AGAINST THE CLAIM OF THE ASSESSEE THAT TH IS IS OF REVENUE NATURE. 3 HE HAS ALSO GIVEN A FINDING THAT A NEW ELECTRIC MET ER HAS BEEN PURCHASED, WHICH HAS RESULTED INTO ADDITION OF ASSETS BY THE A SSESSEE. AS PER PAGE NO. 23 OF THE PAPER BOOK TO WHICH OUR ATTENTION WAS DRA WN BY THE LEARNED AR OF THE ASSESSEE, IT WAS SUBMITTED BY THE ASSESSEE BEFO RE THE ASSESSING OFFICER THAT THIS AMOUNT OF RS.17,500/- WAS INCURRED FOR PU RCHASE OF A NEW ELECTRIC METER FOR REPLACING THE OLD METER WITH NEW ELECTRON IC METER ON THE DIRECTION OF KESCO AND THEREFORE, IT IS OF REVENUE NATURE. A PART FROM THIS SUBMISSION MADE BEFORE THE ASSESSING OFFICER, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THIS EXPENDITURE IS OF REVENUE NA TURE. THE ASSESSEE HAS NOT BROUGHT ON RECORD THE SAID DIRECTION OF KESCO, WHICH IS REFERRED TO BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS BEFORE THE ASSESSING OFFICER AVAILABLE ON PAGE NO. 23 OF THE PAPER BOOK. HENCE, IT IS NOT CLEAR AS TO WHETHER A NEW METER WAS PURCHASED ON THE DIRECTION OF KESCO OR WITHOUT SUCH DIRECTION AND WHETHER THE NEW METER PURCHASED WAS O F THE SAME CAPACITY AS OF THE OLD METER, IF ANY AND IT IS ALSO NOT CLEA R AS TO WHETHER THE NEW METER WAS PURCHASED FOR REPLACEMENT OF OLD METER OR FOR INSTALLING ADDITIONAL METER FOR SOME PURPOSE. UNDER THESE FAC TS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LEARNED CIT(A) ON THIS IS SUE. ACCORDINGLY, GROUND NO. 5 IS REJECTED. 6. REGARDING GROUND NO. 6 TO 9, WE FIND THAT AS PER GROUND NO. 6, THE DISPUTE IS REGARDING CONFIRMING THE AD HOC DISALLOW ANCE OF RS.25,000/- OUT OF TOTAL WAGES PAID OF RS.1,29,825/-. ON THIS ISSU E, WE FIND THAT IN PARA 9 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER SAYS TH AT THE ASSESSEE CLAIMED EXPENDITURE OF RS.1,29,825/- ON ACCOUNT OF WAGES AS AGAINST SIMILAR EXPENDITURE CLAIMED IN THE PRECEDING YEAR OF RS.85, 125/- ONLY. THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE PRESENT YEAR A S WELL AS PRECEDING YEAR ARE AVAILABLE IN THE PAPER BOOK. IN THE PRESENT YE AR, THE TURNOVER OF THE ASSESSEE COMPANY IS RS.418.17 LAC AS AGAINST TURNOV ER OF RS.290.88 LAC IN THE PRECEDING YEAR. HENCE, IT COMES OUT THAT THERE IS INCREASE IN TURNOVER 4 OF ABOUT RS.43.75% AND THE INCREASE IN WAGES EXPENS ES IS 52.51%. HENCE, AT THE BEST, 10% INCREASE IN EXPENDITURE CAN BE CON SIDERED AS EXCESSIVE AND THEREFORE, WE HOLD THAT DISALLOWANCE OF RS.8,50 0/- WILL MEET THE ENDS OF JUSTICE. GROUND NO. 6 IS PARTLY ALLOWED. 7. REGARDING GROUND NO. 7, WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 10 OF THE ASSESSMENT ORDER THAT THE ASSESSEE CLAIMED EXPENDITURE OF RS.1,13,105/- ON ACCOUNT OF PALLEDAR I AS AGAINST SIMILAR CLAIM OF RS.64,557/- IN THE PRECEDING YEAR AND THE ASSESS EE COULD NOT SUBMIT SATISFACTORY REPLY REGARDING ABNORMAL INCREASE IN T HE EXPENSES. WE FIND THAT THE INCREASE IN THIS EXPENDITURE IS ABOUT 75% AS AGAINST INCREASE IN TURNOVER OF ABOUT 43.75% AND THEREFORE, 30% OF THE EXPENDITURE OF THE EARLIER YEAR IS EXCESSIVE INCREASE IN THE PRESENT Y EAR. THE AMOUNT OF 30% OF EARLIER YEARS EXPENDITURE OF RS.64,557/- COMES TO RS.19,367/- AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS OF RS .20,000/-. IN OUR CONSIDERED OPINION, THE DISALLOWANCE MADE BY THE AS SESSING OFFICER IS REASONABLE AND THEREFORE, WE DECLINE TO INTERFERE I N THE ORDER OF CIT(A) ON THIS ISSUE. GROUND NO. 7 IS REJECTED. 8. GROUND NO. 8 & 9 ARE REGARDING DISALLOWANCE OF RS.11,112/- OUT OF TELEPHONE EXPENSES OF RS.44,448/- BEING 25% OF TOTA L EXPENSES AND DISALLOWANCE OF RS.10,000/- OUT OF GENERAL EXPENSES OF RS.31,647/-. REGARDING TELEPHONE EXPENSES, WE FIND THAT ON PAGE NO. 45, IT WAS SUBMITTED BY THE ASSESSEE THAT ONE TELEPHONE WAS IN STALLED AT THE RESIDENCE AS AGAINST TWO TELEPHONES AT THE OFFICE/FACTORY AND THERE IS EXPENSES ON ACCOUNT OF MOBILE PHONE OF SHRI S. K. AGARWAL. POS SIBILITY OF PERSONAL USE OF TELEPHONE OUT OF PHONE INSTALLED AT THE RESIDENCE A ND MOBILE PHONE IS DEFINITELY THERE. THE ASSESSEE HAS NOT MADE OUT A CASE THAT APART FROM THESE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT , THE PARTNERS OF THE ASSESSEE FIRM WERE HAVING PERSONAL PHONES AT THE RE SIDENCE OR PERSONAL MOBILES FOR WHICH EXPENSES WERE BORNE BY THEM AND N OT CLAIMED IN THE 5 PROFIT & LOSS ACCOUNT. UNDER THESE FACTS, DISALLOW ANCE OF 25% OUT OF TOTAL TELEPHONE EXPENSES IS REASONABLE IN OUR CONSIDERED OPINION AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) ON T HIS ISSUE. ACCORDINGLY, GROUND NO. 8 IS REJECTED. 9. REGARDING GROUND NO. 9, WE FIND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 12 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS CLAIMED GENERAL EXPENSES OF RS.31,467/-, SCOOTER EXPENSES R S.2,233/- AND TRAVELLING EXPENSES RS.20,965/- AND ALL THESE EXPENSES WERE IN CURRED IN CASH AND THE DETAILS OF THE PAYEES ARE NOT AVAILABLE. ON THIS B ASIS, HE MADE DISALLOWANCE OF RS.10,000/- OUT OF THESE EXPENSES. PERSONAL U SE OF SCOOTER CANNOT BE RULED OUT AND DEBITING OF CERTAIN PERSONAL EXPENSES UNDER THE HEAD GENERAL EXPENSES AND TRAVELLING EXPENSES ALSO CANNOT BE RULED OUT IN THE ABSENCE OR DETAILS OF PAYEES AND THEREFORE, ON THIS ISSUE A LSO, WE FIND NO REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). ACCORDIN GLY GROUND NO. 9 IS REJECTED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED:31/12/2015 *SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. RE GISTRAR