Dipesh Panchabhai Sukhadia, Ahmedabad V. The Dy.CIT.,Circle-12, Ahmedabad

ITA 302/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5996 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 28-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHAVERI
• Assessee Lawyers: JASWANT CHHAGANLAL SHAH
• Keywords: Bogus purchase; Gift; Depreciation; Principle of natural justice; Capital receipt
• Section: 143(3); 131

Judgement Text

ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 1 IN THE INCOME_TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGARWAL,V.P. AND SHRI MUKUL SHRAV AT J.M. ITA. NO. 302 /AHD/2008 (ASSESSMENT YEAR: 2004-05) SHRI DIPESH PANCHABHAI SUKHADIA, PROP. M/S. BHAVYA CORPORATION, 9, PRAGATI ESTATE, GUJARAT BOTTLING ROAD,RAKHIAL, AHMEDABAD-380023. VS DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12, NARAYAN CHAMBER, AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AEGPS 5956 K APPELLANT BY : SHRI JASWANT CHHAGANLAL SHAH RESPONDENT BY : DR. JAYANT JHAVERI, SR. D.R. ( (( ( )/ )/)/ )/ ORDER PER SHRI MUKUL SHRAVAT,J.M. THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF THE C.I.T.(A)-XX, AHMEDABAD DATED 5-12 0-2007.SEVERAL GROUNDS HAVE BEEN RAISED WHICH ARE HEREBY DECIDED AS FOLLOW S : GROUND NO.1 . 1. THE LD. CIT(A) HAD ERRED TO CONFIRM DISALLOWANCE OF RS.70,560/- AS BOGUS AND NON GENUINE PURCHASES WITHOUT NOT GOING THROUGH MY CASE RECORD. I HAD PAID AMOUNT OF PURCHASES BY [PAYEES ACCOUNT CH EQUES ONLY. SO, RS.70,560/- TO BE ALLOWED FULLY. THE LD. DY. CIT HAD ERRED TO DISALLOW RS.70,560/- A S BOGUS AND NON GENUINE PURCHASES FROM M/S.YAMUNA TRADERS. I HAD MADE PURCHASES OF RS.2,82,238/- FROM M/S. YAMUNA TRADERS AND MADE PAY MENTS THROUGH ACCOUNT PAYEES CHEQUES. THE LD. DY.CIT HAD DISALLOWED 25% OF TOTAL PURCHAS ES FROM M/S. YAMUNA ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 2 TRADERS WITHOUT ANY GENUINE BASIS. I AM RELYING ON THE DECISION OF GUJARAT HIGH COURT IN CASE OF CIT VS. M.K. BROTHERS 163 IT R-249(GUJ.) . I HAD MADE PAYMENT THROUGH ACCOUNT PAYEE CHEQUES AND XERO X COPY OF BANK STATEMENT OF MY CURRENT A/C. OF UTI HAD ALREADY BEE N VERIFIED BY THE DY. CIT. IT SHOULD BE FULLY ALLOWED OF RS.70,560/-. 1.1. THE FACTS IN BRIEF AS EMERGED FROM THE CORRESP ONDING ASSESSMENT ORDER PASSED U/S. 143(3) DATED 16-11-2006 WERE THAT THE A SSESSEE IN HIS INDIVIDUAL CAPACITY IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF AGARBATTIS. IN RESPECT OF THE ABOVE GROUND THE A.O. HAS NOTICED THAT FOR THE PURPOSE OF THE MANUFACTURING OF AGARBATTIS CERTAIN RAW MATERIALS WERE CONSUMED BY THE ASSESSEE VIZ. FRAGRANCES, RESIN, KEWDA, GUGAL, PHEN YLACSTATE ACID, WOODEN STICK AND JAGGERY ETC. ONLY IN RESPECT OF JAGGERY T HE A.O. HAD A DOUBT PRIMARILY BECAUSE OF THE REASON THAT ONE OF THE PARTY NAMELY M/S. YAMUNA TRADERS, AHMEDABAD HAD NOT RESPONDED THE NOTICES. IT WAS NOT ICED BY THE A.O. THAT PURCHASES OF RS.2,82,338/- CLAIMED TO HAVE BEEN MAD E FROM THE SAID PARTY. FOR THE PURPOSE OF THE VERIFICATION A NOTICE U/S. 133(6 ) WAS ISSUED AND LATER ON A SUMMON U/S. 131 WAS ISSUED HOWEVER, RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS NOT-KNOWN. ON THE OTHER HAND FROM THE SID E OF THE ASSESSEE IT WAS VEHEMENTLY CONTESTED THAT THE TRANSACTION SHOULD NO T BE DOUBTED BERCAUSE THE PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUE OF U.T.I. BANK. THE A.O. WAS NOT CONVINCED AND HELD THAT SINCE THE WHEREABOU TS OF THE SAID PARTY COULD NOT BE TRACED AND MERELY ON THE PLEA THAT THE SAID TRANSACTION WAS CARRIED OUT THROUGH A BANKING CHANNEL IT COULD NOT BE CONCLUSIV ELY HELD AS A GENUINE TRANSACTION. THEREUPON HE HAS HELD THAT OUT OF THE TOTAL PURCHASES AT-LEAST 25% WAS BOGUS PURCHASE WHICH WAS DISALLOWED AND ADDED B ACK IN THE TAXABLE INCOME OF THE ASSESSEE. WITH THE RESULT AN ADDITION OF RS.70,560/- WAS MADE WHICH WAS CHALLENGED. 1.2. WHEN THE ISSUE WAS CONTESTED BEFORE THE FIRST APPELLATE AUTHORITY AGAIN THE FACT IN RESPECT OF THE PAYMENT THROUGH BANKING CHANNEL WAS STRESSED UPON. THE LD. C.I.T.(A) HAS AFFIRMED THE VIEW OF THE A.O. MAINLY ON THE GROUND THAT THE ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 3 SAID PARTY FROM WHOM THE RAW MATERIAL WAS PURCHASED COULD NOT BE MADE AVAILABLE FOR THE PURPOSES OF THE VERIFICATION, THE REFORE, THE ASSESSEE HAD FAILED TO DISCHARGE HIS PRIMARY ONUS ABOUT THE GENUINENESS OF THE CLAIM. THE ACTION OF THE A.O. WAS AFFIRMED. 1.3. WITH THIS BRIEF FACTUAL BACKGROUND WE HAVE HEA RD BOTH THE SIDES. AS FAR AS THE QUESTION OF TRANSACTION MADE THROUGH BANK AND T HE IMPUGNED PAYMENTS WERE THROUGH ACCOUNT PAYEE CHEQUES OF UTI BANK OF T HE ASSESSEE HAVE NOT BEEN ELABORATELY DISCUSSED BY BOTH THE LOWER AUTHOR ITIES. THERE IS NO SPECIFIC DENIAL FROM THE SIDE OF THE REVENUE THAT THE TRANSA CTION IN QUESTION WAS NOT THROUGH BANKING CHANNEL. ON THE OTHER HAND NOW BEFO RE US IN SUPPORT OF THE ABOVE CLAIM THE LD. A.R. SHRI JASWANT C. SHAH HAS P LACED RELIANCE ON A DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF CIT VS. M. K. BROTHERS (163 ITR-249) (GUJ.) ) WHEREIN IT WAS HELD THAT ONCE THE PAYMENTS FOR PURCHASES WERE MADE BY CHEQUE AND THERE WAS NO EVIDENCE ADEQUATE E NOUGH TO CONCLUDE THAT THE PURCHASES WERE BOGUS THEN IN THESE CIRCUMSTANCE S, THE DELETION OF ADDITION BY THE TRIBUNAL WAS CORRECT AND NOT AGAINST WEIGHT OF EVIDENCE. PARTIES APPEARING BEFORE US HAVE FAIRLY MADE A SUGGESTION T HAT IN THE ABSENCE OF A CONCLUSIVE FINDING EITHER BY THE A.O. OR BY C.I.T.( A) ABOUT THE SAID TRANSACTION STATED TO BE MADE THROUGH ACCOUNT PAYEE CHEQUE AND THAT THE ACCOUNT PAYEE CHEQUE WERE IN FACT ENCASHED BY THE SAID PARTY THEN WHY HIS EXISTENCE OR ADDRESS COULD NOT BE TRACED REMAINED UNANSWERED. HE NCE, THE NATURAL JUSTICE DEMANDS TO REFER THE ISSUE BACK TO THE STAGE OF THE A.O. FOR DE-NOVO INVESTIGATION. WE DIRECT ACCORDINGLY. THIS GROUND OF THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 2. GROUND NO.2 . THE LD. C.I.T.(A) HAD ERRED TO CONFIRM ADDITION OF RS.4,59,102/- WITHOUT ANY GENUINE REASONS. I HAD TRANSFERRED SARAFI LOANS OF RS.4,59,102/- TO MY CAPITAL ACCOUNT DURING THE YEAR. THE SARAFI LOAN S OF RS.4,59,102/- WERE OUTSTANDING UP TO 31-03-2003 AND TRANSFERRED T O CAPITAL ACCOUNT DURING THE YEAR ASST. YR. 2004-05. IT IS ONLY TRA NSFER ENTRY TO MY CAPITAL A/C. SO, IT IS NOT MY INCOME FOR THE ASST. YR. 2004 -05. BUT IT IS ONLY MY ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 4 CAPITAL RECEIPT. THE LD. DY.CIT HAD ERRED TO ADD RS . 4,59,102/- AS INCOME WITHOUT ANY GENUINE REASONS. I HAD RECEIVED SARAFI DEPOSITS OF RS.2 LACS BY DEMAND DRAFT ON 20-10-1993 FROM SHRI NARANDAS JE RAMBHAI & RS.1 LAC BY DEMAND DRAFT ON 21-04-1994 FROM SHRI HEERJIB HAI NARANBHAI. THE AMOUNT WAS TRANSFERRED TO CAPITAL ACCOUNT AS CAPITA L RECEIPT BUT LD. DY. CIT HAD CONSIDERED IT AS INCOME WITHOUT ANY GENUINE BASIS. IT IS NOT MY TRADING RECEIPTS OF BUSINESS. I HAD NOT CLAIMED ABO VE AMOUNTS AS EXPENSES IN THE PAST YEARS. IT IS ONLY MY CAPITAL R ECEIPT. I HAD RECEIVED ABOVE SARAFI DEPOSITS BEFORE SO MANY YEARS. I HAD N OT CLAIMED THE ABOVE SARAFI DEPOSITS AS EXPENSES IN THE PAST YEARS. SO, THERE IS NO POINT OF ADDING IT AS INCOME. IT SHOULD BE DELETED IN TOTO O F RS.4,59,102/-. 2.1. ON GOING THROUGH THE CAPITAL ACCOUNT IT WAS NO TICED BY THE A.O. THAT THERE WERE TWO CREDIT ENTRIES WITH THE FOLLOWING NARRATIO N:- BY GIFT RECEIVED BY HIRJIBHAI NARANBHAI RS. 1,47 ,062/- BY GIFT RECEIVED BY NARANBHAI JERAMBHAI RS. 3,12, 040/- THE A.O. HAS ASKED THE PARTICULARS OF THE SAID GIFT AS FOUND CREDITED IN ASSESSEES CAPITAL ACCOUNT. IN COMPLIANCE IT WAS SU BMITTED THAT BOTH THE ABOVE AMOUNTS REPRESENTED AN OLD LOAN TAKEN IN THE PAST W AY BACK IN THE YEAR 1993 AND 1994, RESPECTIVELY. IT WAS EXPLAINED THAT A SUM OF RS.2 LACS WAS RECEIVED FROM ONE SHRI NARANBHAI JERAMBHAI THROUGH A DEMAND DRAFT ON 20-10-1993 AND IN THAT YEAR IT WAS DISCLOSED AS A SARAFI DEPOSITS FOR A.Y. 1994-95. LIKEWISE, IN RESPECT OF THE OTHER CREDIT ENTRY IT WAS EXPLAINED THAT A SUM OF RS.1 LAC WAS RECEIVED THROUGH A DEMAND DRAFT ON 21-4-1994 FROM O NE SHRI HIRJIBHAI NARANBHAI WHICH WAS ALSO DISCLOSED AS A SARAFI DEPOSITS FOR THE RETURN OF A.Y. 1995-96. IT HAS ALSO BEEN EXPLAINED TO THE A.O. THAT ON THESE L OANS THE INTEREST WAS CLAIMED IN THE NEXT FOLLOWING ASSESSMENT YEAR. THEREFORE, T HE EXPLANATION OF THE ASSESSEE WAS THAT ONCE THE AFOREMENTIONED LOAN AMOU NTS WERE ALREADY DISCLOSED IN THE PAST, THEREFORE, THE IMPUGNED TRAN SACTION MUST BE TREATED AS EXPLAINED, NOW CREDITED IN THE CAPITAL ACCOUNT. THE A.O. WAS NOT CONVINCED AND ACCORDING TO HIM DURING THE YEAR THE ASSESSEE HAD T RANSFERRED THE ENTIRE AMOUNTS ALONG WITH INTEREST IN ITS CAPITAL ACCOUNT TREATING THE SAME AS GIFT RECEIVED AND THAT ACTION WAS A UNILATERAL DECISION OF THE ASSESSEE. HIS FIRST OBJECTION WAS THAT THE INGREDIENT OF GIFT WERE NO T FULFILLED. IN RESPECT OF THE CLAIM OF GIFT THE A.O. HAS STATED FEW PARAGRAPHS WHEREIN HE HAS DISCUSSED THE ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 5 DEFINITION OF GIFT AS PER THE RELEVANT ACT. ON TH AT BASIS, HE HAS ARRIVED AT A CONCLUSION THAT IN THE ABSENCE OF EVIDENCE ON RECOR D IT WAS NOT ACCEPTABLE THAT THESE CREDITORS HAVE MADE A GIFT IN FAVOUR OF THE A SSESSEE. ACCORDING TO HIM IT WAS A UNILATERAL ACT ON THE PART OF THE ASSESSEE WI THOUT THE CONSENT OF THE CREDITORS AND THE BASIC INGREDIENTS OF THE GIFT WER E ALSO ABSENT RATHER AN ATTEMPT WAS MADE TO INTRODUCE THE IMPUGNED AMOUNT IN THE CA PITAL ACCOUNT IN THE GUISE OF THE GIFT, THEREFORE, TAXABLE IN THE HANDS OF THE ASSESSEE. RESULTANTLY, AN ADDITION OF RS.4,59,102/-, WAS MADE WHICH WAS CHALL ENGED. 2.2. THE LD. C.I.T.(A) HAS EXAMINED THE FACTS OF TH E CASE AS ALREADY DISCUSSED HEREINABOVE AND THEREAFTER AFFIRMED THE ACTION OF T HE A.O. WITH THE OBSERVATION THAT SINCE NO LIABILITY OF THE OUTSTANDING LOAN WAS TREATED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THEREFORE, THE AMOUNT IN QUESTION HAVE BECOME THE INCOME OF THE ASSESSEE IN THE YEAR. BECAUSE THE ADD ITION WAS CONFIRMED THEREFORE THE ASSESSEE IS NOW FURTHER IN APPEAL. 2.3. THE LD. A.R. SHRI JASWANT C. SHAH HAS PRIMARIL Y EXPLAINED ABOUT THE TWO LOANS TAKEN IN THE PAST AND IN THIS REGARD HE HAS E MPHASIZED THAT THOSE LOANS WERE ACCEPTED THROUGH DEMAND DRAFTS AND THE REVENUE DEPARTMENT HAS NOT OBJECTED THE ACCEPTANCE OF THOSE LOANS PERTAINING T O THE A.YS 1994-95 RS.2 LACS AND A.Y. 1995-96 RS.1 LAC. IN SUPPORT HE HAS REFERR ED THE RELEVANT BANK STATEMENT OF THAT PERIOD. HE HAS EMPHASIZED THAT TH E AMOUNT IN QUESTION WAS THEREFORE, IN THE NATURE OF A CAPITAL RECEIPT HENCE RIGHTLY CREDITED IN THE CAPITAL ACCOUNT AND SHOULD NOT BE HELD AS AN INCOME OR REVE NUE RECEIPT IN THE HANDS OF THE ASSESSEE. HE HAS ALSO ARGUED THAT THE AMOUNT IN QUESTION WAS NOT AT ALL A TRADING RECEIPT OUT OF THE BUSINESS ACTIVITY OF THE ASSESSEE. RELIANCE WAS PLACED ON FEW DECISIONS AS FOLLOWS :- 1) PONNI SUGARS & CHEMICALS LTD. VS. CITA (2008) 36 0 ITR-392 2) INFOSYS TECHNOLOGIES LTD. VS. CIT (2008) 297 ITR -167 3) SIDDHESWAR SAHKARI SAKAR KARKHANA LTD. VS. CIT ( 2004) 269 ITR- 397. ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 6 4) NEW HORIZON SUGAR MILLS P. LTD. VS. CIT (2004) 2 69 ITR-397. 5) INDO NIPPON CHEMICALS CO. LTD. VS. CIT (2003) 26 1 ITR-275. FROM THE SIDE OF THE REVENUE LD. D.R. HAS VEHEMENTL Y OBJECTED THE LINE OF ARGUMENT OF THE LD. COUNSEL PRIMARILY ON THE GROUND THAT FIRSTLY ASSESSEES CLAIM OF ALLEGED GIFT REMAINED UNPROVED HENCE THE ENTIRE AMOUNT WAS RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE. HE HAS ARGUED THAT ONCE A LIABILITY HAD CEASED TO EXIST AND THE IMPUGNED LOAN AMOUNT WAS NOT TO BE PA ID ANY MORE AS PER ASSESSEES OWN VOLITION, THEREFORE, BOTH THE AMOUNT S WERE RIGHTLY TAXED IN THE HANDS OF THE ASSESSEE. LD. D.RS SECOND LINE OF ARG UMENT WAS THAT IN CASE THE ASSESSEES CONTENTION OF THE GIFT IS ACCEPTED, EVEN THEN THE PROVISIONS OF SEC. 41(1) SHOULD BE APPLIED IN RESPECT OF THE PORTION O F INTEREST WHICH WAS CLAIMED IN THE PAST AS AN EXPENDITURE BY THE ASSESSEE. HIS THI RD LINE OF ARGUMENT WAS THAT DUE TO THE CESSATION OF LIABILITY THE ASSESSEE HAD BECOME RICHER THEREFORE, SHOULD BE ASSESSED TO TAX AND IN SUPPORT CASE-LAWS CITED A RE SUNDERAM INDUSTRIES 253 ITR 396 AND T.V. SUNDERRAM IYENGER 222 ITR-344. 2.4. WE HAVE HEARD BOTH TRHE SIDES,. WE HAVE ALSO C AREFULLY PERUSED THE DETAILS FURNISHED BEFORE US IN THE LIGHT OF THE ORD ER OF THE AUTHORITIES BELOW, COMPILATION FILED AND CASE-LAWS CITED. UNDISPUTEDLY THE ASSESSEE WAS UNDER STRICT OBLIGATION TO PLACE ON RECORD THE EVIDENCE O F GIFT AS CREDITED IN THE CAPITAL ACCOUNT AND ALLEGEDLY PLEADED BEFORE THE AUTHORITI ES BELOW. ON THE PART OF THE ASSESSEE ADEQUATE STEPS WERE NOT TAKEN TO PROVE THE EXISTENCE OF GIFT BY THOSE CREDITORS IN FAVOUR OF THE ASSESSEE. ONCE THE GENUI NENESS OF THE GIFTS WAS NOT ESTABLISHED, HENCE THEREAFTER, QUESTION OF CESSATIO N OF LIABILITY HAD AROSEN IF AT ALL IT HAD CEASED TO EXIST DURING THE YEAR UNDER CONSID ERATION. THE QUESTION OF CESSATION OF LIABILITY CAN ONLY BE ANSWERED IF AN E VIDENCE IS ON RECORD IN THIS REGARD. THERE IS NO SUCH EVIDENCE PLACED BEFORE US THROUGH WHICH IT COULD BE DEMONSTRATED THAT THE SAID TWO PERSONS WHO HAVE ADV ANCED THE LOAN HAVE DECIDED NOT TO RECOVER OR CLAIM THE SAID AMOUNT OF LOAN FROM THE ASSESSEE. EVEN IF IT WAS SO THE QUESTION IS THAT WHETHER A CAPITAL RECEIPT I.E. A LOAN IN THE PRESENT CASE, HAD BECOME THE CAPITAL OF THE ASSESSEE ON ACC OUNT OF DISCLAIMER BY THE ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 7 CREDITORS. THUS THE SAID CLAIM HAS TO BE DULY SUPP ORTED BY AN UNQUESTIONABLE VOLITION FROM THE SIDE OF THOSE CREDITORS. EVEN IF IT WAS SO WHETHER IT WAS MERELY A CAPITAL RECEIPT NON TAXABLE IN THE CASE OF THE ASSE SSEE OR HAS TAKEN A CHARACTER OF REVENUE RECEIPT BECAUSE IT HAD BECOME NON REFUND ABLE RECEIPT OF THE ASSESSEE. FINALLY AN ANOTHER QUESTION HAS ALSO NOT BEEN INVESTIGATED THAT UNDER SUCH CIRCUMSTANCES WHAT WILL BE THE EFFECT OF THE PROVISIONS OF SECTION 41(1) OF THE ACT ESPECIALLY ON THE INTEREST AMOUNT WHICH WAS HITHERTO CLAIMED AS AN EXPENDITURE BY THE ASSESSEE IN THE PAST IN RESPECTI VE ASSESSMENT YEAR. SINCE ALL THESE LEGAL QUESTIONS REMAINED UNANSWERED AND BOTH THE SIDES HAVE PLEADED THAT CERTAIN NEW EVIDENCES AND COGENT MATERIAL ARE YET TO BE FURTHER INVESTIGATED UPON, THEREFORE, IN THE INTEREST OF NATURAL JUSTICE WE DEEM IT PROPER TO REFER THIS ISSUE AS WELL BACK TO THE STAGE OF A.O. TO BE DECID ED AFRESH AS PER LAW. 3. GROUND NO.3 . THE LD. C.I.T.(A) HAD ERRED TO CONFIRM 1/8 TH EXPS. FOR ADDITION OF RS.31,422/- OUT OF TELEPHONE, VEHICLE EXPS & DEPREC IATION ON MOTOR CAR WITHOUT ANY GENUINE REASONS. I HAD MADE TOTAL EXPEN SES OF RS.7,216/- FOR TELEPHONE EXPENSES RS.69,274/- FOR VEHICLE EXPENSES AND RS.1,74,888/- FOR DEPRECIATION ON MOTOR CARS FOR TURNOVER OF RS.3 .26 CRORES. IT IS VERY REASONABLE EXPENSES COMPARE TO TURNOVER. SECTION 38 FOR DEPRECIATION IS NOT APPLICABLE DUE TO CONCEPT OF DEPRECIATION CLAIM ON BLOCK OF ASSETS. SO, ADDITIONS OF RS.31,422/- TO BE DELETED IN TOTO. THE LD. DY. C.I.T. HAD ERRED TO DISALLOW 1/6 TH EXPENSES OF RS.41,896/- OUT OF TELEPHONE, VEHICLE EXPENSES AND DEPRECIATION ON MOTOR CAR WITHOUT ANY BASIS. I HAD MADE TURNOVER OF RS.3.26 CRORES, IN COMPARISON TO MY TUR N OVER THE EXPENSES CLAIMED ARE REASONABLE. THERE IS CONCEPT OF BLOCK O F ASSETS FOR CLAIMING DEPRECIATION EXPENSES IN THE INCOME TAX ACT. SO, TH ERE IS NO POINT OF DISALLOWANCE OUT OF DEPRECIATION EXPENSES OF MOTOR CAR. THE SAME SHOULD BE DELETED IN TOTO OF RS.31,422/-. 3.1. IN RESPECT OF CERTAIN EXPENSES NAMELY TELEPHON E EXPENSES, VEHICLE EXPENSES AND DEPRECIATION ON VEHICLE THE OBSERVATIO N OF THE A.O. WAS THAT THOSE EXPENSES WERE NOT TOTALLY VERIFIABLE. HE HAS ALSO M ENTIONED THAT THERE WAS A PROBABILITY OF PERSONAL USE OF THOSE EXPENSES HENCE 1/6 TH WAS HELD AS SPENT FOR ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 8 NON BUSINESS PURPOSE. WHEN THE MATTER WAS CARRIED B EFORE THE FIRST APPELLATE AUTHORITY VIDE PARAGRAPH 5.3, PART RELIEF WAS GRANT ED AS FOLLOWS:- 5.3. I HAVE GONE THROUGH THE FACTS OF THE CASE, A SSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT BEFORE ME. I F IND THAT THE A.O. HAS DISALLOWED A PART OF THESE EXPENSES AS EXPENSES ARE NOT VERIFIABLE AS WELL AS FOR THE ELEMENT OF PERSONAL USE OF THE SERVICES. IT IS SEEN THAT THE TURNOVER DURING THE YEAR IS SHOWN AT RS.3.26 CRORES BY THE APPELLANT. THE ADDITION ON ACCOUNT OF TELEPHONE EXPENSES SAND VEHI CLE EXPENSES OF RS.41,896/- IS VERY MEAGER AS COMPARED TO TOTAL SAL ES/TURNOVER OF THE APPELLANT. MOREOVER, I FIND THAT THE ASSESSING OFFI CER HAS NOT SPECIFICALLY POINTED OUT SPECIFIC INSTANCES AS TO WHAT EXTENT, E XPENSES HAVE BEEN INCURRED TOWARDS PERSONAL USE. THE APPELLANTS CONT ENTION THAT AFTER CONCEPT OF BLOCK OF ASSETS, A PART OF DEPRECIATION CANNOT BE ALLOWED IS NOT ACCEPTABLE BECAUSE EVEN AFTER THIS CONCEPT, SECTION 38 OF THE I.T. ACT IS STILL THERE. THEREFORE, KEEPING IN VIEW THE TOTAL S ALES/TURNOVER OF THE APPELLANT, THE ADDITION MADE BY THE A.O. IS DIRECTE D TO BE RESTRICTED TO 1/8 TH INSTEAD OF 1/6 TH DISALLOWED BY THE A.O. THEREFORE, THIS GROUND OF A PPEAL IS PARTLY ALLOWED. 3.2. WE HAVE HEARD BOTH THE SIDES. THIS IS A CASE O F AN INDIVIDUAL AND NOT THE CASE OF A CORPORATE BODY. IN SUCH TYPE OF CASES THI S TRIBUNAL HAS CONSISTENTLY TAKEN A DECISION THAT ONCE THE ASSESSEE AS ALSO THE REVENUE BOTH HAVE NO INDEPENDENT MATERIAL TO DEMONSTRATE WHETHER THE ENT IRE AMOUNT OF SUCH EXPENDITURE WAS MEANT FOR THE PURPOSE OF THE BUSINE SS THEN NO OPTION WAS AVAILABLE TO THE REVENUE DEPARTMENT BUT TO ADOPT TH E RE-COURSE OF ESTIMATION OF DISALLOWANCE. IN THE PRESENT CASE, IN OUR OPINION, THE FIRST APPELLATE AUTHORITY HAS TAKEN A VERY CONSIDERATE AND REASONABLE PROPORTION OF DISALLOWANCE HENCE NEEDS NO INTERFERENCE. WE HEREBY AFFIRM THE VIEW TAKEN BY THE LD. C.I.T.(A). WITH THE RESULT, THIS GROUND IS DISMISSED. 4. IN THE RESULT THE APPEAL IS PARTLY ALLOWED PROTA NTO. ORDER PRONOUNCED IN OPEN COURT ON 11/06 /2010. SD/- SD/- (G.D. AGARWAL) (MUKUL S HRAVAT) VICE PRESIDENT. JUDICIAL MEMBER. ITA.302-08 A.Y.04-05 DIPESH PANCHABHAI SUKHADIA. 9 AHMEDABAD. DATED:11/06 /2010. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNED. 5. THE DR.,ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD.