Sh. Ravinder Kumar Singhal, Faridabad V. DCIT, Faridabad

ITA 3318/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52563 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 17-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 07-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Depreciation; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 3318/DEL/2010 ASSESSMENT YEAR: 2004-05 RAVINDER KUMAR SINGHAL, VS. DCIT, 86, SECTOR-16A, CENTRAL CIRCLE, FARIDABAD. FARIDABAD. ABZPS3051P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ASHWANI TANEJA, CA RESPONDENT BY : SMT. PRATIMA KAUS HIK, SR. DR ORDER PER C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER DATED 26.4.2010 PASSED BY THE LD. CIT(A), FOR THE A.Y. 20 04-05. 2. GROUND NO. 1 IS DIRECTED AGAINST CIT(A)S ORDER IN UPHOLDING THE ACTION OF THE AO IN MAKING ADDITION O F RS. 26,015/- ON ACCOUNT OF VALUATION OF CLOSING STOCK. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ITA NO. 3318/D/2010 2 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT ASSESSEE HAD SHOWN THE VALUE OF CLOS ING STOCK OF MEHNDI LEAVES WEIGHT 4230 KG. AT RS. 75,505/- AT RS. 17.85 PER KG. THE AO STATED THAT ASSESSEE WAS NOT MAINTA INING DAY TO DAY STOCK REGISTER. HE, THEREFORE, STATED THAT IN THE ABSENCE OF STOCK REGISTER, IT WAS NOT POSSIBLE TO VERIFY TH E GENUINENESS AND CORRECTNESS OF THE CLOSING STOCK. THE AO THEN ADOPTED THE AVERAGE PRICE METHOD DETERMINING THE AVERAGE PR ICE AT RS. 24 PER KG. THE AO, THEREFORE, VALUE THE STOCK AT RS. 101520/- AND MADE AN ADDITION OF RS. 26015/-. 5. ON AN APPEAL, THE LD. CIT(A) CONFIRMED THE AOS ORDER FOR THE SAME REASON THAT ASSESSEE DID NOT MAINTAIN STOCK REGISTER. 6. WE HAVE PERUSED THE MATERIAL ON RECORD AND FIND FROM THE DETAILS OF PURCHASES THAT ASSESSEE PURCHASED 42 30 KG OF MEHNDI LEAVES ON 28.3.2004 @ RS. 17.85. THE ASSESS EE HAD VALUED THE STOCK OF 4230 KG OF MEHNDI LEAVES AT THE COST PRICE OF RS. 17.85 PER KG. THE ASSESSEE THUS, TAKE N THE VALUE OF STOCK OF 4230 KG OF MEHNDI LEAVES AT RS. 75,505. 15/-. IT IS ITA NO. 3318/D/2010 3 WELL SETTLED THAT THE CLOSING STOCK IS TO BE VALUED AT THE COST PRICE OR MARKET PRICE WHICHEVER IS LOWER. WE, THER EFORE, DO NOT FIND ANY BASIS IN THE ADDITION OF RS. 26,015/- ON ACCOUNT OF VALUATION OF CLOSING STOCK. WE, THEREFORE, DELETE THE ADDITION, AND THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 7. GROUND NO. 2 IS DIRECTED AGAINST CIT(A)S ORDER IN UPHOLDING THE DISALLOWANCE OF RS. 32,221/- ON ACCOU NT OF INTEREST PAID U/S 36(1)(III) OF THE ACT. IT WAS FO UND BY THE AO THAT ASSESSEE HAD GIVEN INTEREST FREE LOAN OF RS. 1 4,20,000/- TO OTHER PERSON, THOUGH, ON THE OTHER HAND, THE ASS ESSEE PAID INTEREST ON LOAN BORROWED FROM BANK AND PRIVATE PAR TIES. THE AO, THEREFORE, WORKED OUT THE INTEREST OF RS. 32,22 1/- BEING PROPORTIONATE INTEREST ON THE AMOUNT ADVANCED WITHO UT CHARGING ANY INTEREST AND MADE THE DISALLOWANCE OF RS. 32,221/- ON THIS ACCOUNT. 8. ON AN APPEAL, THE LD. CIT(A) CONFIRMED THE AOS ORDER FOR THE SIMILAR REASON THAT ASSESSEE ADVANCED INTER EST FREE LOAN TO OTHERS, THOUGH, THE ASSESSEE WAS PAYING INT EREST ON LOAN BORROWED. ITA NO. 3318/D/2010 4 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 10. ON PERUSAL OF LD. CIT(A) ORDER, WE FIND THAT TH E LD. CIT(A) HAS TAKEN A VIEW THAT THE PLEA TAKEN BY THE ASSESSE E THAT FUNDS WERE GIVEN FROM PERSONAL ACCOUNT, WOULD NOT R ELEVANT. THE LD. CIT(A) HAD OBSERVED THAT HAD THE APPELLANT NOT GIVEN INTEREST FREE LOANS, HIS LIABILITY TO PAY INTEREST TO THAT EXTENT WOULD HAVE REDUCED. FROM THE ORDER OF THE LD. CIT( A), IT IS, THUS, CLEAR THAT THERE IS NO FINDING THAT THE BORRO WED MONEY ON WHICH ASSESSEE PAID INTEREST WAS ACTUALLY UTILIZED FOR THE PURPOSE OF MAKING INTEREST FREE ADVANCES TO OTHERS. THE LD. CIT(A) HAS TAKEN A VIEW THAT GIVING FUNDS FROM PERS ONAL ACCOUNTS WOULD NOT HELP THE ASSESSEE IN AS MUCH AS HAD THE ASSESSEE NOT GIVEN INTEREST FREE LOANS, HIS LIABILI TY TO PAY INTEREST TO THAT EXTENT WOULD HAVE REDUCED. WE DO NOT AGREE WITH THIS PROPOSITION UNLESS IT IS ESTABLISHED BY T HE REVENUE THAT INTEREST FREE LOAN HAS BEEN PAID OUT OF THE BO RROWED FUND ON WHICH INTEREST WAS PAID OR OTHERWISE THE BORROWE D FUND WAS UTILIZED NOT FOR THE PURPOSE OF BUSINESS. WE, THEREFORE, DELETE THE ADDITION AND ALLOW THIS GROUND OF APPEAL RAISED BY THE ASSESSEE. ITA NO. 3318/D/2010 5 11. GROUND NO. 3 IS DIRECTED AGAINST CIT(A)S ORDER IN MAKING DISALLOWANCE OF RS. 6,617/- AND RS. 13,010/- BEING 1/6 TH OF TELEPHONE AND CAR EXPENSES AND DEPRECIATION ON CAR FOR THE REASON THAT THE TELEPHONE AND CAR WERE USED FOR PERSONAL PURPOSES. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 13. THE ASSESSEE IS AN INDIVIDUAL. THE ASSESSEE IS DOING MEHNDI BUSINESS. THE ASSESSEE HAS DEBITED TELEPHON E AND CAR EXPENSES TO THE PROFIT AND LOSS ACCOUNT. IN TH E COURSE OF HEARING OF THIS APPEAL, THE ASSESSEE HAS NOT BEEN A BLE TO PROVE AND ESTABLISH THE TELEPHONE EXPENSES AND CAR EXPENSES WERE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS AND THEY WERE NOT USED FOR ASSESSEES PERS ONAL PURPOSES. THE ASSESSEE HAS ALSO NOT BEEN MAINTAINI NG ANY LOG BOOK FOR USE OF CAR AS WELL AS OF TELEPHONE. W E, THEREFORE, DO NOT FIND ANY IRREGULARITY IN THE ORDER OF LD. CI T(A) IN SUSTAINING THE DISALLOWANCE OF 1/6 TH OF CAR AND TELEPHONE EXPENSES INCLUDING DEPRECIATION ON CAR. THEREFORE, THE ITA NO. 3318/D/2010 6 DISALLOWANCE OF RS. 6,617/- AND RS. 13,010/- ON ACC OUNT OF TELEPHONE EXPENSES AND CAR EXPENSES AND DEPRECIATIO N ARE SUSTAINED, AND THIS GROUND RAISED BY THE ASSESSEE I S REJECTED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS ABOVE. 15. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 19.8.2011 . SD/- SD/- (SHAMIM YAHYA) (C .L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19.8.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR