M/s. Checkmate Security Service, Ahmedabad V. The Income tax Officer, Ward-2(3), Baroda

ITA 2889/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9272 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-08-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 05-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: ANIL R SHAH
• Keywords: Business expenditure; Principle of natural justice; Fuel Charges
• Section: 43B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH,AHMED ABAD. BEFORE :SHRI MAHAVIR SINGH, JUDICIAL MEM BER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-2003) M/S. CHECKMATE SECURITY SERVICE, GROUND FLOOR, SAJNI APARTMENTS, DALAL ROAD, FATEHGUNJ, BARODA. VERSUS INCOME TAX OFFICER, WD.2(3), BARODA. (APPELLANT) (RESPONDENT) PAN: AABIC 0553 F FOR THE APPELLANT: SHRI ANIL R. SHAH, AR FOR THE RESPONDENT SHRI C.K. MISHRA, SR. DR ORDER PER SHRI D.C. AGRAWAL: THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOLLOWING GROUNDS. 1.THE CIT(A) HAS ERRED IN LAW AND IN FACT IN RETAI NING DISALLOWANCE OF RS. 2,89,460/- OUT OF RS. 4,73,842/- ADDED BY THE A SSESSING OFFICER AS UNDISCLOSED INCOME. YOUR APPELLANT SUBMITS THAT IN VIEW OF THE ACCOUNTI NG SYSTEM REGULARLY FOLLOWED AND IN VIEW OF THE CONCEPT OF REAL INCOME RS.2,89,460/- IS NOT LIABLE TO BE ADDED AS INCOME OF YOUR APPELLANT. ALTERNATIVELY AND WITHOUT PREJUDICE SUM OF RS.2,89, 460/- BEING WRITTEN OFF AS BAD DEBT IN THE ACCOUNT OF FASCEL LTD. BE AL LOWED AS BUSINESS EXPENDITURE. 2.THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACT IN C ONFIRMING DISALLOWANCE OF RS.5,51,028/- ALLEGING THAT THERE I S A DELAY IN CONTRIBUTION BY THE EMPLOYER TO ESIC. 2 ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-03) IT IS SUBMITTED THAT YOUR APPELLANT HAS MADE CONTRI BUTION TO ESIC IN TIME AND WITHIN DUE DATE AND SEC.43B DOES NOT APPLY AND THEREFORE DISALLOWANCE OF RS.5,51,028/- BE DELETED. 3.THE CIT(A) HAS ERRED BOTH IN LAW AND IN FACT IN R ETAINING ADDITION OF RS.3,850/- OUT OF RS.1,49,135/- DISALLOWANCE BY THE ASSESSING OFFICER U/S. 43B OF THE ACT. IT IS SUBMITTED THAT PROVISIONS OF SAID SECTION ARE NOT APPLICABLE AND THE AMOUNT HAVING BEEN PAID IN STATUTORY TIME THE DISAL LOWANCE BE DELETED. 4.THE COMM. OF INCOME-TAX(A) HAVE ALSO ERRED IN CON FIRMING DISALLOWANCE OF RS.70,530/- MADE BY THE ASSESSING O FFICER OUT OF TELEPHONE, VEHICLE EXPENSES ON AD HOC AND ESTIMATE BASIS @ 10%. YOUR APPELLANT SUBMITS THAT THE ENTIRE EXPENDITURE UNDER THIS HEADS IS INCURRED DURING COURSE OF BUSINESS AND FOR PURPOSE OF BUSINESS AND THERE BEING NO PERSONAL OR NON BUSINESS ELEMENT, TH E DISALLOWANCE BE DELETED. 5.THE COMM. OF INCOME-TAX(A) WAS ERRED BOTH IN LAW AND IN FACT IN NOT DISPOSING OFF GROUND OF APPEAL RAISED BY YOUR APPEL LANT REGARDING TREATING RS.3,86,967/- AS INCOME U/S. 36(1) (VA) R. W.S.2(24)(X) OF THE ACT. IT IS SUBMITTED ON FACTS AND CIRCUMSTANCES OF THE C ASE AND AS PER PROVISIONS OF LAW THE SAID SUM OF RS.3,86,967/- TOW ARDS CONTRIBUTION P.F. AND ESIC IS NOT INCLUDABLE AS INCOME OF YOUR A PPELLANT. 6.THE INCOME-TAX OFFICER HAS ERRED IN CHARGING INTE REST U/S. 234 OF THE ACT. THE ORDER WITH REGARD TO CHARGING OF INTEREST IS VAGUE, UNCLEAR AND THEREFORE ILLEGAL. ON FACTS OF THE CASE IT IS ALSO SUBMITTED THAT VARI OUS ADDITIONS MADE BY THE ASSESSING OFFICER WERE NOT KNOWN OR ANTICIPATED BY YOUR APPELLANT 3 ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-03) AT THE TIME OF MAKING ESTIMATE AND PAYING ADVANCE T AX AND THEREFORE INTEREST CHARGED BY THE ITO IS REQUIRED TO BE DELET ED. 2. THE ASSESSEE HAS NOT PRESSED GROUND NO. 3 AND HE NCE IT IS REJECTED AS NOT PRESSED. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVI DING SECURITY SERVICES TO VARIOUS CLIENTS. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN RECEIPT S OF RS.1, 69,25,271/-. IN THE ANNUAL CONTRACT RECEIPTS SUBMITTED ON QUERY MAD E BY THE ASSESSING OFFICER, WHEREAS AS PER PROFIT AND LOSS ACCOUNT ONLY A RECEI PT OF RS. 1,64,51,429/- IS SHOWN. THUS, ASSESSING OFFICER FOUND A DIFFERENCE OF RS.4,73,842/-. THE ASSESSING OFFICER TREATED THIS AS UNEXPLAINED AND M ADE THE ADDITION. BEFORE LD. CIT(A), ASSESSEE SUBMITTED RECONCILIATION AND D OCUMENTS RELATING TO CERTAIN DEDUCTION MADE BY CLIENTS ON ACCOUNT OF SEC URITY GUARDS FALLING ILL OR DUE TO THEFT OF MATERIAL. THE ASSESSEE ALSO FURNIS HED CERTAIN DOCUMENTS IN SUPPORT OF HIS CONTENTION. IT WAS NOT ADMITTED BY THE LD. CIT(A) REFERRING TO RULE 46(A). THE ASSESSEE HAS SUBMITTED FOLLOWING R ECONCILIATION BEFORE THE LD. CIT(A). TOTAL BILLS RAISED DURING THE YEAR RS. 1,76,01,27 2/- LESS: SECURITY GUARD PATROLLING CHARGES CREDITED I N VEHICLE FUEL CHARGES A/C RS. 700/- SALARY A/C RS. 23,100/- RS. 23,800/- RS. 1,75,77,472/- ADD: DEFAULT PENALTY RS. 17,542/- RS. 1,75,95,014/- LESS: SERVICE TAX RS. 8,54,124/- RS. 1,67,40,890/- LESS: SALES WRITTEN OFF - FASCEL RS. 2,89,4 60/- RECEIPTS SHOWN IN TRADING A/C RS. 1,64,51,430/- THE ASSESSEE ALSO CLAIMED THAT A CLIENT M/S. FASCEL LIMITED HAD MADE DEDUCTION OF RS. 2,89,460/- AS UNDER: 30.04.2001 FASCEL LTD. RS. 26,137/- 31.03.2002 FASCEL LTD. RS.2,63,460/- 4 ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-03) RS.2,89,460/- THE LD. CIT(A) REJECTED THE CLAIM AND CONFIRMED THE ADDITION ON THE GROUND THAT NO EVIDENCE RELATING TO SUCH DEDUCTION HAS BEE N FURNISHED. 4. WE HAVE HEARD LD. A.R. AND LD. D.R. IN OUR CONS IDERED VIEW, LD. CIT(A) OUGHT TO HAVE CONSIDERED THE EVIDENCES REGAR DING DEDUCTION MADE BY THE CLIENTS AND THE REASONS THEREOF. SINCE THERE I S A VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IN NOT CONSIDERING THE CLAIM OF THE ASSESSEE, WE RESTORE THE MATTER TO HIS FILE. IF ASSESSEE IS ABLE TO PRODUCE EVIDENCE TO THE EFFECT THAT CLIENTS HAVE DEDUCTED MONEY BEFORE MAKING PAYMENT T O THE ASSESSEE AND THERE IS A SETTLEMENT OF FINAL PAYMENT TO BE MADE BY THE CLIENTS TO THE ASSESSEE, THEN, CLAIM OF THE ASSESSEE FOR SHORTER RECEIPT FROM THE CLIENTS SHOULD BE ALLOWED. 5. AS A RESULT THIS GROUND OF APPEAL IS ALLOWED, BU T FOR STATISTICAL PURPOSES. 6. GROUND NO. 2 RELATES TO CLAIM OF CONTRIBUTION BY THE EMPLOYER TO ESIC. IT WAS CLAIMED THAT THE ASSESSEE HAS MADE THE PAYME NT BEFORE FILING OF THE RETURN. THE ASSESSING OFFICER HAS ALSO ANNEXED A C HART IN HIS ORDER AS UNDER: MONTH AMOUNT DEDUCTED DUE DATE AMOUNT DEPOSITED DATE OF DEPOSIT APR.01 4525.00 20.04.2001 22405.00 19.05.2001 MAY 01 6936.00 20.05.2001 25606.00 16.07.2001 JUN-01 6140.00 20.07.2001 22800.00 20.07.2001 JUL-01 6369.70 20.07.2001 23652.00 17.10.2001 AUG-01 5862.65 20.08.2001 21772.00 17.10.2001 SEP-01 6128.40 20.09.2001 22755.00 21.12.2001 OCT-01 6963.75 20.10.2001 25859.00 03.12.2001 NOV-01 7146.60 20.11.2001 26537.00 21.12.2001 DEC-01 7460.15 20.12.2001 27702.00 15.01.2002 JAN-02 6521.65 20.01.2002 24220.00 27.02.2002 5 ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-03) FEB-02 6579.40 20.02.2002 24433.00 20.03.2002 MAR-02 6820.00 20.03.2002 25326.00 04.05.2002 77453.35 293067 7. THE LD. CIT(A) HOWEVER, DISALLOWED THE CLAIM FOL LOWING DECISION OF HON'BLE MADRAS HIGH COURT IN CIT VS. SYNERGY FINANC IAL EXCHANGE LIMITED 2005 CIR 481/(2007) 288 ITR 366 (MADRAS). IT IS HE LD THEREIN THAT CHANGE IN LAW WITH EFFECT FROM 01-04-2004 PERMITTING STATUARY DUES TO BE PAID BEFORE FILING OF RETURN TO QUALIFY FOR DEDUCTION IS NOT RE TROSPECTIVE. THEREFORE THE CLAIM IS NOT ALLOWABLE UNDER SECTION 43B. THE LD. A.R. ON THE OTHER HAND RELIED ON THE DECISION OF HON'BLE GUJARAT HIGH COUR T IN CIT VS. GOVIND GLASS AND INDUSTRIES(T.A. NO. 484 OF 2008 ORDER DATED 10/ 09/2008) WHEREIN IT IS HELD THAT 2 ND PROVISO AMENDMENT IN FIRST PROVISO TO SECTION 43 B ARE RETROSPECTIVE IN OPERATION AND THEREFORE DELAYED PAYMENT OF P.F. AN D E.S.I. THOUGH BEYOND DUE DATES SPECIFIED IN SECTION 36(1) (VA) BUT BEFORE TH E DUE DATE OF FILING OF RETURN IS ALLOWABLE UNDER SECTION 43B. THE HON'BLE GUJARA T HIGH COURT HAS FOLLOWED THE DECISION OF THE HON'BLE SUPREME COURT IN CASE O F CIT VS. VINAY CEMENT LIMITED (20070 213 CIR 268 (SC). FOLLOWING THE ABOV E DECISION WE ALLOW THE CLAIM OF THE ASSESSEE AS IT IS EMPLOYERS CONTRIBUT ION AND HAS BEEN PAID BEFORE FILING OF RETURN OF INCOME. 8. THE GROUND NO. 4 RELATES TO DISALLOWANCE OF TELE PHONE AND VEHICLE EXPENSES REDUCED TO 10% BY LD. CIT(A). AFTER CONSI DERING THE RIVAL SUBMISSION, WE RESTORE THE DISALLOWANCE TO 5%. THE ASSESSEE GETS CONSEQUENTIAL RELIEF. 9. IT IS CLAIMED THAT ISSUE RAISED IN GROUND NO. 5 THOUGH RAISED BEFORE LD. CIT(A) BUT IS NOT ADJUDICATED BY HIM. AFTER HEAR ING THE PARTIES, WE RESTORE THE MATTER TO ITS FILE FOR ADJUDICATION. 6 ITA NO.2889/AHD/2007 (ASSESSMENT YEAR 2002-03) 10. GROUND NO. 6 IS CONSEQUENTIAL AND THEREFORE DOE S NOT REQUIRE ANY SPECIFIC ADJUDICATION. 11. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PA RTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 28 TH AUGUST, 2009. SD/- SD/- (MAHAVIR SINGH) (D .C. AGRAWAL) JUDICIAL MEMBER ACCOUN TANT MEMBER AHMEDABAD; DATED: 28/08/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.