Shri Anil Bholabhai Patel, Baroda V. The Dy.CIT., Baroda Circle-5, Baroda

ITA 2886/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0262 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-08-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 21-12-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Principle of natural justice; Onus to prove
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI G.D.AGRAWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER DATE OF HEARING : 10/08/2010 DRAFTED ON: 11/0 8/2010 ITA NO.2886/AHD/2006 ASSESSMENT YEAR : 2003-04 SHRI ANIL BHOLABHAI PATEL 1, DARSHAN PARK SOCIETY VIP ROAD KARELIBAUG, BARODA VS. THE ASSTT.CIT CIRCLE-5 BARODA PAN/GIR NO. : ACTPP2509G (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI M.G. PATEL RESPONDENT BY: SHRI K.M. MAHESH, SR. D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE W HICH HAS EMANATED FROM THE ORDER OF THE LEARNED CIT(APPEALS) -V BARODA DATED 17/04/2006 PASSED FOR ASSESSMENT YEAR 2003-04. 2. GROUNDS RAISED ARE HEREBY DECIDED AS UNDER. GROUND NO.1 1. THAT THE LEARNED C.I.T (APPEALS) ERRED IN CONFIRMIN G THE DISALLOWANCE OF RS.166234/- BEING 50% OF THE EXPENS ES ON MOTOR CAR, MOTOR CAR DEPRECIATION & TELEPHONE EXPEN SES ON THE GROUND OF PERSONAL USE OF CAR. THE LEARNED C.I.T (APPEALS), IN THE FACTS AND CIRCU MSTANCES MENTIONED IN THE STATEMENT OF FACTS, OUGHT NOT TO H AVE CONFIRMED THE DISALLOWANCE OF ANY AMOUNT OUT OF MOT OR CAR ITA NO.2886/AHD /2006 SHRI ANIL BHOLABHAI PATEL VS. ASST.CIT ASST.YEAR - 2003-04 - 2 - EXPENSES, MOTOR CAR DEPRECIATION AND TELEPHONE EXPE NSES OR WITHOUT PREJUDICE TOKEN AMOUNT OUGHT TO HAVE BEEN D ISALLOWED OUT OF TOTAL EXPENSES. 2.1. FACTS IN BRIEF AS EMERGED FROM THE CORRESPON DING ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT, 1961 DATED 24 /03/2006 WERE THAT THE ASSESSEE IN HIS INDIVIDUAL CAPACITY IS DERIVING IN COME AS A SHARE OF PROFIT FROM SEVERAL FIRMS. THE ASSESSEE IS ALSO HAVING I NCOME UNDER THE HEAD HOUSE PROPERTY. ASSESSEE HAS CLAIMED AN EXPENDI TURE OF RS.3,52,868/- INCURRED TOWARDS MOTOR CAR, CAR INSURANCE AND TELEP HONE EXPENSES. ACCORDING TO ASSESSING OFFICER, THE ASSESSEE HAS NO T MAINTAINED ANY LOG- BOOK AS WELL AS ANY SEPARATE REGISTER FOR USE OF TE LEPHONE/CAR, HENCE, 50% OF THE TOTAL CLAIM, I.E. RS.1,66,234/- WAS DISA LLOWED. THE FIRST APPELLATE AUTHORITY HAS AFFIRMED THE ACTION OF THE ASSESSING OFFICER. 3. FROM THE SIDE OF THE APPELLANT, SHRI M.G.PATEL L EARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FROM TH E SIDE OF THE REVENUE SHRI K.M.MAHESH, LEARNED SR,DEPARTMENTAL REPRESENTA TIVE APPEARED. IT HAS BEEN STATED THAT ON IDENTICAL CIRCUMSTANCES IN THE PAST YEARS, THE REVENUE DEPARTMENT HAS ALLOWED 1/5 TH OF THE EXPENSES CLAIMED. IN THAT BACKGROUND, THE LEARNED AUTHORISED REPRESENTATIVE O F THE ASSESSEE HAS URGED THAT 50% DISALLOWANCE WAS EXCESSIVE BECAUSE T HE ASSESSEE BEING A PARTNER IN SEVERAL FIRMS, THEREFORE, USING THE TELE PHONE AND THE MOTOR CAR FOR BUSINESS PURPOSES. NEVERTHELESS, THE AMOUNT OF EXPENDITURE OF PERSONAL NATURE COULD NOT BE RULED OUT. THEREFORE, TO MAINTAIN THE CONSISTENCY FOR THIS YEAR AS WELL WE HEREBY DIRECT TO DISALLOW ONLY 1/5 TH OF THE TOTAL EXPENDITURE. IN THIS MANNER, THIS GROUND IS PARTLY ALLOWED. ITA NO.2886/AHD /2006 SHRI ANIL BHOLABHAI PATEL VS. ASST.CIT ASST.YEAR - 2003-04 - 3 - 4. GROUND NO.2 IS REPRODUCED BELOW: 2. THAT THE LEARNED CIT(APPEALS) ERRED IN CONFIRMI NG THE DISALLOWANCE OF RS.631585/- BEING INTEREST ON LOAN ON THE GROUND THAT THE APPELLANT FAILED TO PROVE THE NEXUS OF LOA N TAKEN AND ITS UTILIZATION. THE LEARNED C.I.T (APPEALS), IN THE FACTS AND CIRCU MSTANCES OF THE CASE, OUGHT NOT TO HAVE CONFIRMED THE DISALLOWANCE OF INTEREST PAID ON BORROWINGS. 4.1. AS PER COMPUTATION FILED ALONG WITH THE RETURN INTEREST INCOME WAS SHOWN AT RS.3,16,773/- AND AGAINST THAT CLAIMED A D EDUCTION OF INTEREST EXPENSES OF RS.6,31,585/-. THE ASSESSING OFFICER H AS ASKED TO ESTABLISH THE NEXUS IN RESPECT OF INTEREST EARNED AND INTERES T PAID. IN HIS OPINION, THE ASSESSEE HAS NOT DISCHARGED THE ONUS TO PROVE THAT THE EXPENDITURE HAD ACTUALLY BEEN INCURRED TO EARN THE SAID INCOME. IN FIRST APPEAL, THE ACTION OF THE ASSESSING OFFICER WAS AFFIRMED PRIMAR ILY ON THE GROUND THAT THE DIRECT NEXUS BETWEEN THE LOAN TAKEN AND THE INT EREST PAID HAS NOT BEEN ESTABLISHED. 5. NOW BEFORE US, THE ASSESSEE HAS TRIED TO ESTABLI SH THAT THE BORROWED FUNDS HAVE IN FACT BEEN UTILIZED FOR BUSINESS PURPO SE IN THE FIRMS AND THE INTEREST INCOME HAS ALSO BEEN EARNED FROM THOSE FIR MS, THEREFORE, THE NEXUS COULD HAVE BEEN ESTABLISHED IF AN ADEQUATE OP PORTUNITY WAS GRANTED. SINCE THE BASIC INFORMATION IN RESPECT O F THE FUNDS BORROWED AND ITS UTILIZATION HAVE NOT BEEN PLACED BEFORE THE REVENUE AUTHORITIES, THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, IT I S FAIR AND REASONABLE TO RESTORE THIS GROUND BACK TO THE STAGE OF THE ASSESS ING OFFICER WITH THE ITA NO.2886/AHD /2006 SHRI ANIL BHOLABHAI PATEL VS. ASST.CIT ASST.YEAR - 2003-04 - 4 - DIRECTION TO FURNISH THE REQUISITE DETAILS AND PRO VE THE NEXUS AS PER THE REQUIREMENT OF THE LAW WITHOUT SEEKING FRIVOLOUS AD JOURNMENT, SO THAT THIS SMALL ISSUE SHOULD GET DECIDED AT AN EARLY DAT E. SINCE THE MATTER HAS BEEN RESTORED BACK TO ASSESSING OFFICER, THEREFORE, THIS GROUND MAY BE TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES. 6. GROUND NO.3 IS REPRODUCED AS UNDER: 3. THAT THE C.I.T (APPEALS) ERRED IN CONFIRMING TH E ADDITION OF RS.175240/- BEING DEPOSITS FROM FRIENDS AND RELATIV ES UNDER THE COVER OF SECTION 68 OF THE I.T. ACT. THE LEARNED C.I.T (APPEALS), IN THE FACTS AND CIRCU MSTANCES MENTIONED IN THE STATEMENT OF FACTS, OUGHT NOT TO H AVE CONFIRMED THE ADDITION UNDER THE COVER OF SECTION 68 OF THE I .T. ACT. 6.1. THE ASSESSING OFFICER HAS NOTED THAT AS PER TH E BALANCE-SHEET, THE ASSESSEE HAS TAKEN A LOAN OF RS.3,74,58,270/-. A LIST HAS ALSO BEEN MENTIONED IN THE ASSESSMENT ORDER. OUT OF THE SAI D LONG LIST OF THE CREDITORS, THE ASSESSING OFFICER HAS FOUND THAT FOL LOWING PERSONS HAVE NOT PROVED THEIR IDENTITY OR CREDITWORTHINESS AS PE R THE REQUIREMENT OF THE LAW, HENCE, THE LOANS OUTSTANDING AGAINST THOSE PER SONS AMOUNTING TO RS.1,75,240/- WAS TAXED BY INVOKING THE PROVISIONS OF SECTION 68 OF THE I.T. ACT, 1961. THE RELEVANT OBSERVATION OF THE AS SESSING OFFICER AS PER PARAGRAPH NO.6.3 IS REPRODUCED FOR THE SAKE OF COMP LETENESS. 6.3. TO ASCERTAIN THE GENUINENESS OF ASSESSEES CL AIM, THE SUMMONS U/S.131 WERE ISSUED AND THE INSPECTOR ATTAC HED TO THE OFFICE OF CIRCLE CARRIED OUT THE INQUIRIES. SUMMON S DTD. 13.03.2006 WERE ISSUED TO THE FOLLOWING PERSONS. SHRI MEHUL V.PATEL SHRI HASMUKHBHAI N.PATEL SHRI ALKESH N.PATEL ITA NO.2886/AHD /2006 SHRI ANIL BHOLABHAI PATEL VS. ASST.CIT ASST.YEAR - 2003-04 - 5 - SHRI KALPESH K.PATEL SHRI RAJNIKANT K.PAREKH SHRI DHARMESH N.PATEL 6.4. THE FOLLOWING INTERESTING ASPECTS CAME INTO L IGHT: (I) IT WAS REPORTED THAT IN THE CASE OF SHRI HASMU KH N.PATEL, KALPANA K.PATEL AND ALKESH N.PATEL, THE GIVEN ADDRE SS WAS INCORRECT AND NO SUCH SOCIETY EXISTS. (II) IN THE CASE OF RAKDHIT K.PAREKH ALSO THE GIVE N ADDRESS WAS INCORRECT. (III) IN CASE OF MR.DHARMESH N.PATEL, THE SUMMON WA S SERVED. HE ATTENDED THE OFFICE OF UNDERSIGNED AND HIS STATEMEN T WAS RECORDED UNDER OATH. IN HIS STATEMENT, HE CATEGORICALLY DE NIED TO HAVE GIVEN ANY LOAN TO THE ASSESSEE. HE ALSO STATED THA T HE DOES NOT HAVE ANY MEAN TO EXTEND LOAN TO ANYBODY. (IV) IN CASE MEHUL N.PATEL THE SUMMON WAS SERVED B UT NOBODY ATTENDED THE OFFICE OF UNDERSIGNED. 7. THE FIRST APPELLATE AUTHORITY HAS AFFIRMED THE A CTION OF THE ASSESSING OFFICER AND MAINLY THE REASON ASSIGNED WA S THAT THE APPELLANT HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION P ARTY-WISE, THEIR CREDITWORTHINESS AS WELL AS THE IDENTITY OF THE LOA N GIVERS. THEREFORE, IN THE ABSENCE OF THE FULFILLMENT OF THE REQUIREMENT O F SECTION 68 OF THE I.T. ACT, 1961, THE ASSESSING OFFICER RIGHTLY TAXED THE AMOUNT. 8. ON HEARING THE SUBMISSIONS, WE HAVE ALSO FOUND THAT MERELY FILING OF CONFIRMATION AS ARGUED BEFORE US, THERE WAS NOTH ING MORE TO SUBSTANTIATE THE CREDITWORTHINESS EVEN THE IDENTITY IN SOME OF THE CASES. RATHER, IT IS PERTINENT TO MENTION THAT THE ASSESSI NG OFFICER HAS TRIED TO ITA NO.2886/AHD /2006 SHRI ANIL BHOLABHAI PATEL VS. ASST.CIT ASST.YEAR - 2003-04 - 6 - CONFIRM THE ADDRESSES, ETC. BUT AS PER THE REPORT O F THE INCOME TAX INSPECTOR IN SOME OF THE CASES, IT WAS FOUND INCOR RECT OR ON ENQUIRY SOME OF THE PARTIES HAVE DENIED ANY SUCH LOAN TRANSACTIO N. THUS, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THIS IS A FIT CASE WHERE THE PROVISION S OF SECTION 68 OF THE I.T. ACT, 1961 HAVE RIGHTLY BEEN APPLIED, THEREFORE, THE ACTION TAKEN BY THE REVENUE AUTHORITIES IS HEREBY AFFIRMED. THEREFORE , THIS GROUND IS DISMISSED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED A S PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 13/ 08 /2010. SD/- SD/- ( G.D.AGRAWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 13 / 08 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-V, BARODA 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD