The ITO, Vapi Ward-3, Vapi V. Shri Durjansingh M. Rathod, SILVASSA

ITA 2877/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2072 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 13-10-2015
• Court: TRIBUNAL

Judgement Text

DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 1 OF 12 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.3062/AHD/2015 / A.Y.:2005-06 SHRI DURJANSINGH M. RATHOD, PROP. M/S. KOYAL CONSTRUCTION , H-2, GOKUL VIHAR, TOKARKHADA, SILVASA PAN:AACFN 4414 H V S . INCOME TAX OFFICER, WARD- SILVASA, SILVASA APPELLANT /RESPONDENT . . ./ I.T.A NO.2877/AHD/2015 / A.Y.:2005-06 INCOME TAX OFFICER, WARD- SILVASA, SILVASA VS. SHRI DURJANSINGH M. RATHOD, PROP. M/S. KOYAL CONSTRUCTION , H-2, GOKUL VIHAR, TOKARKHADA, SILVASA PAN:AACFN 4414 H APPELLANT /RESPONDENT /ASSESSEE BY SHRI RAJESH M. UPADHAYAY, A.R. /REVENUE BY SHRI J. K. CHANDANI, SR. D.R. / DATE OF HEARING: 06.06.2018 /PRONOUNCEMENT ON .06.2018 DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 2 OF 12 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THESE CROSS APPEAL BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - VALSAD (IN SHORT THE CIT (A)) DATED 03.08.2015 PERTAINING TO ASSESSMENT YEAR 2005-06, WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE INCOME TAX OFFICER, WARD- 3, VAPI (IN SHORT THE AO) DATED 31.03.2005 UNDER SECTION 144 OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. WE FIRST TAKE UP APPEAL BY THE ASSESSEE IN I.T.A. NO. 3062/AHD/2015 /A.Y.2005-06: 3. THE SOLE GROUNDS OF APPEAL OF THE ASSESSEE STATES THAT RS.22,81,184/- ARE PAID IN CASH, ARE VERY MUCH ESSENTIAL FOR HIS TRANSPORT AS WELL AS CONSTRUCTION BUSINESS AND WITHOUT INCURRING SUCH EXPENSE, REVENUE CANNOT BE GENERATED. DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 3 OF 12 4. SUCCINCT FACTS ARE THAT IN SECOND ROUND OF PROCEEDINGS BEFORE CIT (A), A REMAND REPORT WAS CALLED FOR FROM THE ASSESSING OFFICER (AO) IN WHICH THE AO VIDE PARA 9 OF REMAND REPORT SUBMITTED THAT EXPENSES OF RS.22,81,184/- COULD NOT BE VERIFIED BECAUSE THE LD. A.R. OF THE APPELLANT WAS UNABLE TO PRODUCE THE SOURCE OF EXPENSES AND RELATED BILLS AND VOUCHERS. IN COUNTER COMMENTS, THE LEARNED AUTHORISED REPRESENTATIVE (LD.A.R) DID NOT MAKE ANY COMMENTS ON THIS. IN VIEW OF THIS, THE DISALLOWANCE OF EXPENSES OF RS.22,81,184/- WAS CONFIRMED. 5. BEING AGGRIEVED, THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SHOWN NET PROFIT AT 2.59% AS AGAINST OF 4.28% LAST YEAR IN THE CASE OF KOYAL CONSTRUCTION (PROPRIETARY CONCERN) AND 4.13% AS AGAINST LAST YEAR NET PROFIT OF 4.52% DURING LAST YEAR IN D.M.RATHOD CONSTRUCTION. THEREFORE, RELYING ON THE DECISION OF DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 4 OF 12 AHMEDABAD TRIBUNAL IN THE CASE OF ITO VAPI V. UPENDRA SHRIIRAMAPATI SINGH [I.T.A. NO. 1583/AHD/2011/A.Y.2006- 07 DTD. 23.09.2011] THE LD.COUNSEL CONTENDED THAT WHERE EXPENSES ARE NOT SUPPORTED BY BILLS AND VOUCHERS, IT WOULD NOT BE REASONABLE TO DISALLOW 100% OF EXPENSES, BUT TO ESTIMATE NET PROFIT RATE ON TURNOVER TO ARRIVE AT REASONABLE NET PROFIT. 6. AU CONTRAIRE, LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF LOWER AUTHORITIES AND SUBMITTED THAT IN ABSENCE OF BILLS AND VOUCHERS, THE DISALLOWANCE SUSTAINED BY THE CIT (A) SHOULD BE UPHELD. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS BEEN UNABLE TO PROVIDE NECESSARY BILLS AND VOUCHERS TO SUPPORT THE EXPENSES. BUT, IT IS EQUALLY TRUE THAT WITHOUT INCURRING EXPENDITURE BUSINESS CANNOT BE RUN BY THE ASSESSEE. AFTER CAREFUL CONSIDERATION OF FACTS, WE ARE OF THE DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 5 OF 12 OPINION THAT IT WOULD BE REASONABLE TO ESTIMATE NET PROFIT TO ARRIVE AT CORRECT PROFIT OF BUSINESS. WE FIND THAT THE ASSESSEE HAS SHOWN NET PROFIT AT 2.59% IN KOYAL CONSTRUCTION AND 4.13% IN M/S. D M RATHOD CONSTRUCTION WHICH GIVES COMBINED AVERAGE OF 3.36% I.E. [2.59% + 4.13%=6.72/2=3.36%] AS AGAINST NET PROFIT OF 4.28% OF KOYAL CONSTRUCTION AND 4.52% OF DM RATHOD CONSTRUCTION GIVING COMBINED AVERAGE AT 4.40% I.E. [4.28% +4.52%=8.8/2=4.40%]. THUS, IT IS SEEN THAT COMBINED AVERAGE NET PROFIT FOR THE YEAR UNDER CONSIDERATION COMES TO 2.36% ON AGGREGATE TURNOVER OF RS.2,36,99,502/- AS AGAINST LAST YEAR`S NET PROFIT OF 4.40% ON AGGREGATE TURNOVER OF RS.1,11,33,728/-. IN VIEW OF THIS MATTER, WE DEEM IT FIT TO ESTIMATE NET PROFIT @5% ON AGGREGATE TURNOVER OF THE YEAR OF RS.2,36,99,502/- WHICH WORKED OUT TO RS.11,84,975/- AS AGAINST THE DISCLOSED NET PROFIT OF RS.7,72,302/- [RS.3,40,288/- KOYAL CONSTRUCTION + DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 6 OF 12 RS.4,32,014/- DM RATHOD] . ACCORDINGLY, THE NET ADDITION ON ACCOUNT OF ESTIMATED NET PROFIT WOULD BE AT RS.4,12,673/- [RS.11,84,975 ESTIMATED PROFIT LESS PROFIT DISCLOSED IN BOOKS AT RS.7,72,302/-]. IN VIEW OF ABOVE BACKDROP, THE DISALLOWANCE OF EXPENSES OF RS.22,81,184/- ARE RESTRICTED TO RS.4,12,673/-. ACCORDINGLY ADDITION OF RS.4,12,673/- IS CONFIRMED AND BALANCE ADDITION OF RS.18,68,851 I.E. [RS.22,81,184 RS.4,12,673] IS DELETED. THIS GROUND OF THE ASSESSEE IS THEREFORE, PARTLY ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. I.T.A. NO. 2877/AHD/2015/SRT (BY REVENUE) : 9. GROUND NO. 1 STATES THAT CIT (A) ERRED FOR GRANTING DEPRECIATION OF RS.7,44,066/- ON PURCHASES OF NEW ASSETS AS THE ASSESSEE HAS NOT PRODUCE ANY EVIDENCE FOR PURCHASE OF ASSETS AND EVIDENCE OF PUT TO USE. DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 7 OF 12 10. SHORT FACTS ARE THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.14,23,609/- ON WHICH REMAND REPORT WAS OBTAINED FROM THE AO. THE AO SUBMITTED THAT THE ASSESSEE HAS MADE ADDITION IN FIXED ASSETS ON WHICH DEPRECIATION OF RS.7,44,066/- HAS BEEN CLAIMED. BUT RELATED DETAILS VOUCHERS SHOWING PURCHASES WERE NOT FILED. THE LD. A.R. IN HIS COUNTER COMMENTS OF REMAND REPORT SUBMITTED THAT IN THE FIRST ROUND OF APPEAL , THE CIT (A) HAS ALLOWED DEPRECIATION OF RS.13,75,609/- IN DURAJANSINGH M RATHOD AGAINST WHICH NO APPEAL WAS FILED BY THE REVENUE, HENCE, NO DISALLOWANCE OF THE SAME CAN BE MADE IN SECOND ROUND APPEAL. IN VIEW OF THIS MATTER, CIT (A) OBSERVED THAT THE ONLY OBJECTION OF THE AO IS NON-PRODUCTION OF VOUCHERS WHEREAS NO FURTHER, ENQUIRY WAS MADE AND PAYMENTS IS MADE THROUGH BANK ACCOUNT AND REFLECTED IN BOOKS. HENCE, THE CLAIM OF DEPRECIATION OF RS.14,23,629/- WAS ALLOWED. DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 8 OF 12 11. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT WITH REFERENCE TO NEW FIXED ASSETS, THE ASSESSEE HAS NOT FILED VOUCHERS HENCE, SAME DOES NOT STAND TO VERIFICATION AND PUT TO USE. THEREFORE, CIT (A) HAS WRONGLY ALLOWED DEPRECIATION OF RS.7,44,066/- ON NEW ASSETS. 12. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED THAT IN THE REMAND REPORT, THE AO HAS NOT MENTIONED THAT ASSETS WERE NOT PUT TO USE. FURTHER, THE FIXED ASSETS WERE PURCHASED FOR WHICH PAYMENT WAS MADE THROUGH BOOKING CHANNEL, HENCE, GENUINENESS OF PURCHASES AND THEIR USE HAS BEEN ESTABLISHED. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS [PURCHASED FIXED ASSETS OF WHICH PAYMENT HAS BEEN MADE BY BANK ACCOUNT WHICH HAS BEEN DULY VERIFIED AND REFLECTED DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 9 OF 12 IN BOOKS. THEREFORE, MERELY BECAUSE VOUCHERS ARE NOT PRODUCED DOES NOT MEAN THAT THE AO HAS NOT PURCHASED FIXED ASSETS WHICH ARE DULY REFLECTED IN THE DEPRECIATION SCHEDULE OF BOOKS OF ACCOUNTS. IN SUCH VIEW, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THIS GROUND OF REVENUE IS DISMISSED. 14. GROUND NO. 2 RELATES TO DELETION OF RS.26,60,239/- MADE BY THE AO UNDER SECTION 68 OF THE ACT IGNORING THE FACTS THAT THE ASSESSEE HAS NOT PROVED IDENTITY, CREDIT- WORTHINESS AND GENUINENESS OF TRANSACTIONS. 15. SUCCINCT FACTS ARE THAT THE AO ADDED RS.26,60,239/- WHOSE GENUINENESS NOT PROVED IN ORIGINAL ASSESSMENT UNDER SECTION 68 READ WITH SECTION 41(1) OF THE ACT. IN SECOND ROUND OF APPELLATE PROCEEDINGS, THE ASSESSEE HAS STATED THAT IT IS STRANGE THAT THE AO DISALLOWED THE SECURED LOAN UNDER SECTION 68 READ WITH SECTION 41(1) OF THE ACT DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 10 OF 12 WITHOUT ANY REASON. THE ASSESSEE HAS FILED DETAILS OF SECURED LOAN AS TABULATED BELOW : NATURE OF SECURED LOAN BALANCE AS ON 31.03.04 BALANCE AS ON 31.03.05 REMARK SRF INTERNATIONAL LTD. 1,20,367 1,20,367 TATA ENGINEERING & LOCO LTD. 7,40,753 3,33,103 ( - ) 4,07 650 RE PAID AMOUNT TATA MOTORS LTD. 3,93,468 12,15,890 8,22,422 NEW ADDITION CITY FINANCE (I) LTD. 9,90,879 TOTAL: 12,54,588 26,60,239 16. AFTER GOING THROUGH THE SAME , THE CIT (A) NOT THAT THE APPELLANT HAS BEEN FILING RETURN OF INCOME AND ALREADY SHOWN AN AMOUNT OF RS. 12,55,588 AS OPENING BALANCE WHICH HAS INCREASED TO RS. 26,60,239 DURING THE YEAR UNDER CONSIDERATION. THE LOANS HAVE BEEN TAKEN FROM REPUTED PARTIES AND ALSO REPAID AN AMOUNT OF RS.4,07,650/- TO TATA ENGINEERING AND LOCO LTD. IN THE REMAND REPORT, THE AO IS SILENT ON THIS ISSUE. THEREFORE, CONSIDERING THE WRITTEN SUBMISSIONS OF THE ASSESSEE, AS WELL AS LAW APPLICABLE AND PROVISION OF SECTION 68 AND SECTION 41(1) OF THE ACT AND THE FACT THAT NO EFFORT WAS MADE BY THE AO TO CORRELATE FIGURES DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 11 OF 12 WITH PAST RECORDS AND NO COGENT REASON HAS BEEN STATED. IN VIEW OF THIS MATTER, CIT (A) DELETED THE DISALLOWANCE /ADDITION OF RS.26,60,239/-. 17. BEING AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. SR. DR RELIED ON THE ORDER OF ASSESSMENT ORDER. PER CONTRA, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT (A) AND SUBMITTED THAT NO ADDITION CAN BE MADE UNDER SECTION 41(1) OF THE ACT ON THE LIABILITY STANDING IN BALANCE SHEET WITHOUT ANY CESSION OF LIABILITY. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE SECURED LOAN OBTAINED BY THE ASSESSEE ARE FROM REPUTED PARTIES LIKE SRF ENGINEERING LTD., TATA ENGINEERING, TATA MOTORS AND CITY FINANCE (I) LTD. IT IS SEEN THAT THE ASSESSEE HAS SHOWN OPENING BALANCE LIABILITY AS ON 01.04.2004 AT RS.12,54,588/- WHICH HAS BEEN INCREASED TO DURJANSINGH M. RATHOD V. ITO-SILVASA /I.T.A. NO. 3062 & 2877/AHD/2015/A.Y.:05-06 PAGE 12 OF 12 RS.26,60,239/-. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A), ACCORDINGLY, SAME IS UPHELD. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 20. IN THE LIGHT OF ABOVE, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF REVENUE IS DISMISSED. 21. THE ORDER PRONOUNCED IN THE OPEN COURT ON 18-06-2018. SD/- SD/- ( . . /C.M. GARG) ( . . / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / SURAT, DATED: 18 TH JUNE , 2018 COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT