Ashok Gupta, V. ACIT cicle 32 (1),

ITA 3128/DEL/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3938 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-05-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 27-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Keywords: Opportunity of being heard; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI K .G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.3128/D/07 ASSESSMENT YEAR : 2003-04 SHRI ASHOK GUPTA, VS. A.C.I.T., C-195, DAYANAND COLONY, CIRCLE 32(1), LAJPAT NAGAR-IV, NEW DELHI NEW DELHI PAN NO.AAKPG 3771 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TARANDEEP SINGH, CA RESPONDENT BY : SMT. PRATIMA KAUSHIK, SR. DR ORDER PER K.G. BANSAL: AM: IN THIS CASE, A BENCH OF DELHI TRIBUNAL HAD PASSE D THE ORDER ON 12.05.2009, IN WHICH THE APPEAL OF THE AS SESSEE WAS DISMISSED FOR NON-PROSECUTION. THE ASSESSEE FILED A MISCELLANEOUS APPLICATION ON 15.09.2009 REQUESTING FOR RECALLING THE ORDER AND DECIDING THE APPEAL ON MERI TS. THE ORDER WAS RECALLED IN ORDER DATED 05.03.2010 ON M.A . NO.498/D/2009. THAT IS HOW THE APPEAL CAME UP FOR HEARING BEFORE US. 2. GROUND NO.1 IS THAT THE LEARNED CIT(A) WAS NOT J USTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.75,000/- OUT OF EX PENSES DEBITED IN THE ACCOUNTS PERTAINING TO RACE BUSINESS . IN THIS 2 CONNECTION, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE EARNED GROSS PROFIT OF RS.2,92,922/- IN TH E BUSINESS OF BOOK-MAKER. EXPENSES AMOUNTING TO RS.4,98,847/- WERE DEBITED IN THE PROFIT AND LOSS ACCOUNT. SOME EXPEN SES DID NOT RELATE TO BOOK-MAKING BUSINESS, THEREFORE, A SUM OF RS.1,25,000/- WAS DISALLOWED IN COMPUTING THE TOTAL INCOME. THE MATTER WAS AGITATED BEFORE THE LEARNED CIT(A). HE MENTIONED THAT THE ASSESSING OFFICER MADE THE DISAL LOWANCE AFTER OBSERVING THAT SOME EXPENSES WERE NOT RELATED TO BOOK- MAKING BUSINESS. THIS WAS DONE AFTER GOING THROUGH BILLS AND VOUCHERS. THE ASSESSEE FURNISHED COMPARATIVE FIGUR ES AND CLAIMED THAT THE EXPENSES WERE REASONABLE. HOWEVER , THAT BY ITSELF DOES NOT LEAD TO A CONCLUSION THAT ALL THE E XPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. KEEPING OVERALL FACTS IN VIEW, IT WAS HELD THAT THE DISALLOWANCE WAS EXCESSIVE AND, THEREFORE, IT WAS REDUCED TO RS. 50,000/-. IT WILL THUS BE SEEN THAT THE DISALLOWANCE UPHELD BY T HE LEARNED CIT(A) AMOUNTED TO RS.50,000/- AND NOT RS.75,000/- AS MENTIONED IN THE GROUND. 2.1 BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BOOKS OF ACCOUNT HAD BEEN AUDITED AND THEY WERE PRODUCED BEFORE THE ASSESSING OFFICER. IN SUCH A CIRCUMSTAN CE, THERE IS NO REASON TO MAKE OR SUSTAIN DISALLOWANCE ON AN AD HOC BASIS. IN REPLY, THE LEARNED DR SUBMITTED THAT THE ASSESSI NG OFFICER HAD MADE A SPECIFIC OBSERVATION THAT SOME OF THE EX PENSES DID NOT RELATE TO BOOK-MAKING BUSINESS. 3 2.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. IT IS SEEN THAT THE ASSESSEE HAD M AINTAINED BOOKS WHICH WERE PRODUCED BEFORE THE ASSESSING OFFI CER. THEY WERE EXAMINED ON A TEST-CHECK BASIS. THEREAFT ER, THE ASSESSING OFFICER MADE THE OBSERVATION THAT SOME EX PENSES DID NOT PERTAIN TO BUSINESS. THIS OBSERVATION HAS BEEN UPHELD BY THE LEARNED CIT(A). IN SUCH CIRCUMSTANCES WHAT COULD BE DISALLOWED IS THE AMOUNT OF EXPENDITURE WHICH IS NO T RELATED TO THE BUSINESS. THEREFORE, WE RESTORE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DETERMINING THE EXPENSES WHIC H ARE NOT RELATED WITH THE BUSINESS AND DISALLOW THE SAME. N EEDLESS TO SAY THAT THE ASSESSEE SHALL PRODUCE THE BOOKS OF AC COUNT FOR CARRYING OUT THIS EXERCISE AND THEREAFTER HE WILL B E GRANTED A REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER . 3. GROUND NO.2 IS THAT THE LEARNED CIT(A) WAS NOT J USTIFIED IN UPHOLDING ADDITION OF RS.30,024/- MADE BY THE ASSES SING OFFICER OUT OF FOREIGN-TOUR EXPENSES. IN THIS CONN ECTION, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF EXPORT OF AUTOMOBILE CO MPONENTS. SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED FOR THIS BUSINESS. THIS BUSINESS SHOWED TURN OVER OF RS.1,88,36,257/-, GROSS PROFIT OF RS.88,23,569/- AND NET PROFIT OF RS.67,04 ,232/-. THE ASSESSEE INTER ALIA DEBITED AN EXPENDITURE OF RS.3, 00,242/- IN RESPECT OF FOREIGN-TRAVEL. FROM THIS EXPENDITURE, A SUM OF RS.30,024/- WAS DISALLOWED BEING OF PERSONAL NATURE AND WITHOUT SUPPORTING EVIDENCE. THIS MATTER WAS ALSO AGITATED BEFORE THE LEARNED CIT(A). IT WAS MENTIONED BY HIM THAT THE 4 ASSESSEE TRIED TO JUSTIFY THE NECESSITY OF FOREIGN- TRAVEL ON THE BASIS OF EXPORT TURN OVER OF ABOUT RS.1.88 CRORE. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT SOME EXPENDITURE IS OF PERSONAL NATURE AND SOME IS NOT S UPPORTED BY EVIDENCE. IT WAS FURTHER OBSERVED THAT ELEMENT OF PERSONAL BENEFIT TO THE ASSESSEE CANNOT BE DENIED EVEN BY HI M. THEREFORE, THE DISALLOWANCE WAS UPHELD. 3.1 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT T OURS HAD BEEN UNDERTAKEN FOR THE PURPOSE OF BUSINESS AND, THEREFO RE, THERE IS NO JUSTIFICATION FOR MAKING AD HOC DISALLOWANCE FRO M THE EXPENDITURE. IN REPLY, THE LEARNED DR SUBMITTED TH AT THE DISALLOWANCE WAS UPHELD ON THE GROUNDS THAT THERE W AS NO EVIDENCE FOR SOME EXPENDITURE AND SOME EXPENDITURE WAS OF PERSONAL NATURE. IN SUCH CIRCUMSTANCE, AD HOC DISA LLOWANCE WAS JUSTIFIED. 3.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. IT IS SEEN THAT AN AD HOC DISALLOW ANCE HAS BEEN MADE ON GROUNDS THAT SUPPORTING EVIDENCE IS NO T THERE FOR SOME EXPENSES AND ELEMENT OF PERSONAL BENEFIT TO TH E ASSESSEE IS THERE IN UNDERTAKING FOREIGN TOURS. IT IS NOT THE FINDING OF THE LOWER AUTHORITIES THAT THE FOREIGN T OUR WAS NOT UNDERTAKEN FOR THE BUSINESS. IF AN EXPENDITURE HAS BEEN INCURRED IN THE COURSE OF BUSINESS AND IT LEADS TO ANY INCIDENTAL BENEFIT TO THE ASSESSEE OR ANY THIRD PARTY, THAT WO ULD BE AN IRRELEVANT CONSIDERATION FOR THE PURPOSE OF DISALLO WING THE EXPENDITURE, THE REASON BEING THAT THE EXPENDITURE WAS INCURRED IN THE COURSE OF BUSINESS. THEREFORE, ONE LEG OF THE 5 ARGUMENT OF DISALLOWANCE IS UNTENABLE IN LAW. THE SECOND LEG IS THAT THERE IS NO SUPPORTING EVIDENCE FOR SOME EX PENSES. IF THAT IS THE CASE, SUCH EXPENDITURE CAN BE DISALLOWE D BY DRAWING ADVERSE INFERENCE. THUS, THIS GROUND IS ALSO RESTO RED TO THE FILE OF THE ASSESSING OFFICER TO QUANTIFY THE AMOUNT OF EXPENDITURE WHICH IS NOT SUPPORTED BY ANY EVIDENCE AND DISALLOW THE SAME. OBVIOUSLY THE OBSERVATION MADE IN REGARD TO GROUND NO.1 REGARDING PRODUCTION OF EVIDENCE AND OPPORTUNITY OF BEING HEARD WILL BE APPLICABLE IN RESPECT OF THIS GROUND ALSO. 4. GROUND NO.3 IS THAT THE LEARNED CIT(A) WAS NOT J USTIFIED IN UPHOLDING THE DISALLOWANCE OF RS.25,000/- FROM LIC COMMISSION BUSINESS. IN THIS CONNECTION, IT IS MENTIONED IN T HE ASSESSMENT ORDER THAT THE ASSESSEE SHOWED RECEIPT OF COMMISSIO N OF RS.4,02,403/- AND NET PROFIT AT RS.2,39,692/-. THE ASSESSEE DEBITED EXPENSES OF RS.1,77,960/- IN THIS BUSINESS, FOR WHICH SEPARATE ACCOUNTS WERE MAINTAINED. HOWEVER, SUCH A CCOUNTS WERE NOT AUDITED. HE MADE A DISALLOWANCE OF RS.50, 000/- BY OBSERVING THAT EXPENSES WERE NOT PROPERLY VOUCHED. THIS MATTER WAS ALSO AGITATED BEFORE THE LEARNED CIT(A). HE NOTED THE FACT THAT THE BOOKS OF ACCOUNT OF THIS BUSINESS WERE NOT AUDITED AS REQUIRED UNDER THE LAW. HE ALSO NOTED T HE FACT THAT SOME EXPENSES WERE NOT VOUCHED. HOWEVER, LOOKING O VERALL FACTS, HE REDUCED THE DISALLOWANCE FROM RS.50,000/- TO RS.25,000/-. 4.1 BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT A LTHOUGH THE ACCOUNTS WERE NOT AUDITED BUT THERE WAS NO JUSTIFIC ATION IN 6 MAKING AD HOC DISALLOWANCE. THE CASE OF THE LEARNE D COUNSEL WAS THAT ALL THE EXPENSES WERE NOT VOUCHED. 4.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. THE OBSERVATIONS MADE IN THIS REGA RD IN GROUND NO.1 & 2 ARE EQUALLY APPLICABLE TO THIS GROU ND. THEREFORE, IT IS HELD THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AMOUNT INVOLVED IN UNVOUCHED EXPEN SES ONLY COULD BE DISALLOWED BY DRAWING ADVERSE INFERENCE. THUS, THIS GROUND IS ALSO RESTORED TO THE FILE OF THE ASSESSIN G OFFICER FOR QUANTIFYING THE AMOUNT INVOLVED IN UNVOUCHED EXPENS ES FOR DISALLOWING THE SAME. 5. IN RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 06.05 .2010. SD/- SD/- ( R.P. TOLANI ) ( K.G. BANS AL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.06.05.2010. NS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).