Shri Prafulbhai M.Velani, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

ITA 2761/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2323 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 07-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 28-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Principle of natural justice; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' BEFORE SHRI MUKUL SHRAWAT,JM & SHRI A N PAHUJA,AM ITA NO.2761/AHD/2010 (ASSESSMENT YEAR:-2006-07) SHRI PRAFUL M VELANI, PROP. M/S VELANI ENTERPRISE, B-6, SARDAR PATEL INDUSTRIAL ESTATE, B/H NATIONAL RESTAURANT, NAROL, AHMEDABAD V/S ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-6, AHMEDABAD PAN: AAKPV 9721 H [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI TUSHAR HEMANI, AR REVENUE BY:- SHRI RAJDEEP SINGH, DR O R D E R A N PAHUJA: THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DAT ED 21-04-2010 OF THE LD. CIT(APPEALS)-XVI, AHMEDABAD, RAISES THE FOLLOWING GROUNDS:- 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING THE ACTION OF ID. AO IN DISALLOWING DEPRECIATION OF RS.1,06,50 0/- ON ASSETS AMOUNTING TO RS.7,10,000/- SOLD DURING THE YEAR UND ER CONSIDERATION. 2. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF ID. AO IN NOT REDUCING PROFIT BY RS.7,10,000/- B EING AMOUNT OF SALE PROCEEDS OF ASSETS. 3. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN MAKING AD HOC AD DITION OF RS.10,184/- AGAINST THE ADDITION OF RS.20,000/- MAD E BY THE ID. AO. 4. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDER S WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THEY FURTHER ERRED I N GROSSLY IGNORING VARIOUS SUBMISSIONS, EXPLANATIONS AND INFORMATION S UBMITTED BY THE APPELLANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEE N CONSIDERED BEFORE PASSING THE IMPUGNED ORDER. THIS ACTION OF T HE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLE S OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. ITA N O.2761/AHD/2010 2 5. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE ID. AO IN LEVYING INTEREST U/S 234B/C OF THE ACT. 6. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING ACTION OF THE LD. AO IN INITIATING PENAL TY U/S 271(1)(C) OF THE ACT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, E DIT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE T IME OF OR BEFORE THE HEARING OF THE APPEAL. 2 ADVERTING FIRST TO GROUND NOS.1, 2 & 4 IN THE APP EAL , FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN D ECLARING INCOME OF RS.29,37,141/-FILED ON 27-12-2006 BY THE ASSESSEE, AFTER BEING PROCESSED ON 08-05-2007 U/S 143(1) OF THE INCOME-TA X ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 30.6.2007. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE ASSESSING OFFICER[AO IN SHORT] NOTICED THAT THE AS SESSEE HAD SOLD MACHINERIES WORTH RS.7,10,000/-. HOWEVER, THE ASSES SEE DID NOT REDUCE THE AMOUNT OF SOLD MACHINERIES FROM THE WDV OF BLOCK OF ASSETS AND THEREBY, CLAIMED EXCESS DEPRECIATION ON THIS AMOUNT. THE AO, THEREFORE, DISALLOWED EXCESS DEPRECIATION O F RS.1,06,500/- @ 15% ON RS.7,10,000/- . 3. ON APPEAL, THE ASSESSEE CONTENDED THAT TWO MA CHINERIES WERE SOLD VIDE INVOICE NO. 8870506 DATED 11-6-05 FOR RS. 4,10,000/- AND NO. 345/0506 DATED 26-11-05 FOR RS.3,00,000/-. THIS AMOUNT WAS I NCLUDED IN THE TOTAL SALES OF RS.1,10,72,802/- AND WAS DIRECTLY TAKEN INTO SALES ACCOUNT VIDE A JOURNAL VOUCHER ENTRY AND HAD NOT BEEN REDUCED FROM THE PL ANT & MACHINERY UNDER THE FIXED ASSETS SHOWN IN THE BALANCE SHEET. AFTER CONS IDERING THESE SUBMISSIONS, THE LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE I N THE FOLLOWING TERMS: 5. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT. ACCORDING TO THE APPELLANT, THE SALE OF MACHINERY W AS INCLUDED IN THE SALE ACCOUNT & THE JOURNAL ENTRY TO REVERSE THE ENTRY RE MAINED TO BE MADE. THEREFORE THE FIGURE OF RS.7,10,000/- WAS NOT REDUC ED FROM THE ITA N O.2761/AHD/2010 3 DEPRECIATION CHART FROM THE BLOCK OF ASSETS OF PLAN T & MACHINERY. NO PROOF WAS FURNISHED BEFORE ME THAT THE SALE OF PLANT & MA CHINERY WORTH RS.7,10,000/- WAS NOT REVERSED BY THE APPELLANT.. I N ABSENCE OF ANY PROOF, THE ACTION OF ASSESSING OFFICER IN DISALLOWING DEPR ECIATION OF RS.1,06,500/- ON THE SOLD PLANT & MACHINERY IS CONFIRMED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINS T THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED AR ON B EHALF OF THE ASSESSEE SUBMITTED THAT BOTH THE LOWER AUTHORITIES DID NOT PROPERLY APPRECIATE THE FACTS AND IGNORED THEIR SUBMISSIONS AND INFORMATION SUBMITTED BY THEM. THE LEARNED AR, THEREFORE, CONTE NDED THAT THIS ACTION OF THE LOWER AUTHORITIES IS IN CLEAR BREACH OF LAW AND PRINCIPLES OF NATURAL JUSTICE. THE LEARNED DR, ON T HE OTHER HAND, SUPPORTED THE IMPUGNED ORDER. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE LD. CIT(A) UPHELD THE FINDINGS OF THE AO ONLY ON THE GROUND THAT NO PROOF WAS FURNISHED BEFO RE HIM THAT THE ENTRY RELATING TO SALE OF PLANT & MACHINERY WORTH RS.7,1 0,000/- WAS NOT REVERSED BY THE ASSESSEE. THE LD. AR ON BEHALF OF THE ASSESSEE VEH EMENTLY ARGUED BEFORE US THAT THE AMOUNT OF RS. 7,10,000/- ON ACCOUNT OF S ALE MACHINERY WAS DIRECTLY CREDITED TO SALES ACCOUNT AND HAD NOT BEEN REDUCED FORM BLOCK OF ASSETS INADVERTENTLY. IN THESE CIRCUMSTANCES AND IN THE IN TEREST OF JUSTICE, WE CONSIDER IT FAIR AND APPROPRIATE TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUES RAISED BEFORE US IN THE GROUND NOS.1 & 2 TO HIS FI LE WITH THE DIRECTIONS TO READJUDICATE THESE ISSUES IN ACCORDANCE WITH LAW , AFTER ALLOWING SUFFICIENT OPPORTUNITY TO BOTH THE PARTIES. THE ASSESSEE IS D IRECTED TO PLACE ALL THE RELEVANT EVIDENCE BEFORE THE LD. CIT(A) . SUBJECT TO THESE DIRECTIONS, AFORESAID GROUND NOS. 1,2 & 4 RAISED IN THE APPEAL BEFORE US ARE DI SPOSED OF. 6. GROUND NO.3 RELATES TO ADHOC DISALLOWANCE OF RS 10.184/-. THE AO DISALLOWED AN AMOUNT OF RS. 20,000/- OUT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES OF RS.81,470/-, INCLUDING DEPRECIATION ON CAR ON THE GROUND THAT PERSONAL USE OF VEHICL E/CAR WAS NOT ITA N O.2761/AHD/2010 4 DENIED. ON APPEAL , THE LD. CIT(A) REDUCED THE DIS ALLOWANCE TO 1/8TH OF THE TOTAL EXPENSES, IN THE ABSENCE OF ANY LOG BOOK. 7. AFTER HEARING BOTH THE PARTIES AND CONSIDE RING THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HAS NOT REFERRED US TO ANY MATER IAL WARRANTING INTERFERENCE WITH THE FINDINGS OF THE LD. CIT(A). SINCE PERSONAL USE OF CAR BY THE ASSESSEE AND HIS FAMILY MEMBERS OR STAFF HAS NOT BEEN DENIE D NOR IT WAS CLAIMED THAT THE ASSESSEE HAD INDEPENDENT VEHICLES FOR PERSONAL USE , IN OUR OPINION DISALLOWANCE OF 1/8 TH OF THE EXPENSES ON RUNNING AND MAINTENANCE OF VEH ICLES, INCLUDING DEPRECIATION THEREON, IN THE LIGHT OF PROVISIONS OF SEC. 38(2) OF THE ACT, IS REASONABLE . THEREFORE, GROUND NO. 3 OF THE APPE AL IS REJECTED 8. GROUND NO.5 RELATES TO LEVY OF INTEREST U/S 23 4 B/C OF THE ACT. THE LD. AR ON BEHALF OF THE ASSESSEE DID NOT M AKE ANY SUBMISSIONS ON THIS GROUND NOR THIS GROUND APPEARS TO HAVE BEEN RAISED BEFORE THE LD. CIT(A) AND CONSEQUENTLY , THE LD. CIT(A) DID NOT RECORD ANY SUCH FINDINGS IN THE IMPUGNED ORDER. IN THESE CIRCUMSTANCES, ESPECIALLY WHEN NO SUCH ISSUE EMERGES FROM THE IMPUGNED ORDER, THIS GROUND IS DISMISSED. 9. GROUND NO.6 RELATES TO INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT.NO SUCH GROUND APPEARS TO HAVE BEEN RAI SED BY THE ASSESSEE BEFORE THE LD. CIT(A) NOR ANY FINDINGS HAV E BEEN RECORDED BY THE LD. CIT(A) IN THE IMPUGNED ORDER. IN THESE C IRCUMSTANCES, ESPECIALLY WHEN NO APPEAL IS PROVIDED AGAINST MERE INITIATION OF PENALTY PROCEEDINGS, THIS GROUND IS DISMISSED. 10. NO ADDITIONAL GROUND HAVING BEEN RAISED IN TERM S OF THE RESIDUARY GROUND , ACCORDINGLY, THIS GROUND IS ALSO DISMISSED. ITA N O.2761/AHD/2010 5 11 IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 13 -01-2011 SD/- SD/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 13-01-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI PRAFUL M VELANI, PROP. M/S VELANI ENTERPRIS E, B-6, SARDAR PATEL INDUSTRIAL ESTATE, B/H NATIONAL RESTAU RANT, NAROL, AHMEDABAD 2. ACIT, CIRCLE-6, AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVI, AHMEDABAD 5. DR, ITAT, AHMEDABAD BENCH-C, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD