ACIT, Moradabad V. M/s. Super Sarkar Bidi Factory, Budaun

ITA 3414/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3446 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 12-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Business expenditure
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT & SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO. 3414/DEL/2010 ASSESSMENT YEARS: 2006-07 ACIT, VS. M/S SUPER SARKAR BIDI FACTORY, CIRCLE-II, SARAI NAHAR KHAN, MORADABAD. BUDAUN. AADES0885N (APPELLANT) (RESPONDENT) APPELLANT BY : DR. B.R.R. KUMAR, SR. DR RESPONDENT BY : SH. K. SAMPATH, ADV. ORDER PER I.P. BANSAL, J.M. THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A) DATED 29.03. 2010 FOR A.Y. 2006-07. GROUNDS OF APPEAL READ AS UNDER: - 1. THE COMMISSIONER OF INCOME TAX (APPEAL), BAREIL LY HAS ERRED IN LAW AND CIRCUMSTANCES IN ALLOWING RELI EF OF RS. 5,83,479/- WHICH WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER TREATING THE SUM APPEARING IN THE BALANCE SHEET AS RECEIVABLE FROM SHRI MUZAFFAR ALI AS ITA NO. 3414/D/2010 2 HAVING BEEN WITHDRAWN BY HIM FOR NON-BUSINESS PURPOSES. 2. THE COMMISSIONER OF INCOME TAX(A) HAS ERRED IN L AW AND CIRCUMSTANCES OF THE CASE IN ACCEPTING THE SUBMISSIONS OF THE ASSESSEE FIRM THAT THE ENTIRE SU M OF RS. 91,02,920/- WAS ALLOWED FOR KEEPING BY SHRI MUZAFFAR ALI FOR INCURRENCE OF BUSINESS RS. 91,02,9 20/- EXPENSES IN SPITE OF THE FACT THAT: I. AT ALL PLACES WHERE EVER THE BUSINESS ACTIVITIES ARE CARRIED ON BY THE ASSESSEE, THERE HAD BEEN SEPARATE BANK ACCOUNTS AND, THEREFORE, ANY AMOUNT WHICH WAS NEEDED FOR INCURRENCE COULD HAVE BEEN WITHDRAWN FROM BANK AT ALL SUCH PLACES, IN THIS VIEW ALSO THERE WAS NO NEED FOR ALLOWING SUCH CASH AMOUNT BY THE PARTNER SHRI MUZAFFAR ALI. II. AGAINST SUCH HUGE CASH KEPT FOR INCURRENCE OF BUSINESS EXPENSES, SHRI MUZAFFAR ALI HAS INCURRED MEAGER EXPENSES TO THE TUNE OF RS. 12,501/- ONLY. WHILE DURING FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION BALANCE HELD BY SHRI MUZAFFAR ALI WAS INCREASED FROM RS. 42,40,573/- TO RS. 91,02,920/- MEANING THEREBY THAT AGAINST THE EXPENDITURE INCURRED AT RS. 12,501/-, THE FIRM ALLOWED FURTHER CASH TO THE TUNE OF RS. 48,62,347/- FOR KEEPING IT BY SHRI MUZAFFAR ALI. III. AS A MATTER OF FACT, SUCH CASH AMOUNT IS GENERALLY ALLOWED TO BE KEPT FOR INCURRENCE OF ITA NO. 3414/D/2010 3 PETTY EXPENSES BELOW RS. 20,000/-. IN OTHERWISE SITUATION, THERE WOULD BE A CONTRAVENTION OF PROVISIONS OF SEC. 40A(3) OF THE I.T. ACT, 1961. IV. DURING THE EARLIER YEAR ALSO NOTHING EXPENDITUR E WAS FOUND AS HAVING BEEN INCURRED BY SHRI MUZAFFAR ALI. 3. THE CIT(A) HAS ERRED IN LAW AND CIRCUMSTANCES OF THE CASE IN ALLOWING RELIEF TO THE ASSESSEE FOR RS. 36, 000/- WHICH WAS RIGHTLY DISALLOWED BY THE AO AFTER TREATI NG THE SUM OF RS. 30,000/- AS HAVING BEEN WITHDRAWN BY SHRI MUZAFFAR ALI PARTNER OF THE FIRM FOR NON-BUSIN ESS PURPOSES. 4. THE ORDER PASSED BY THE CIT(A) MAY BE SET-ASIDE AND THE ORDER PASSED BY THE AO MAY BE RESTORED. 5. ANY OTHER GROUND WHICH MAY BE TAKEN DURING THE COURSE OF THE APPELLATE PROCEEDINGS. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT IN THE LIST OF SUNDRY DEBTORS A CLOSIN G BALANCE OF RS. 91,02,920/- WAS SHOWN AS DUE FROM SHRI MUZAFFAR ALI WHO IS ONE OF THE PARTNERS OF THE ASSESSEE FIRM. IN RE SPONSE TO SHOW CAUSE TO EXPLAIN THE SAID ENTRY THE ASSESSEE S UBMITTED THAT THE SAID AMOUNT IS CASH KEPT WITH THE MANAGING PARTNER/POWER ATTORNEY HOLDER FOR USE IN BUSINESS L OCATED AT GURSHAIGANJ, MAKRAND NAGAR AND BADUAN. THE AO DISB ELIEVE ITA NO. 3414/D/2010 4 THE SAID VERSION OF THE ASSESSEE. THE AO ALSO OBSE RVED THAT MUZAFFAR ALI WAS ALSO PAID A SUM OF RS. 7,79,123/- BEING INTEREST ON THE CAPITAL BALANCE INVESTED BY HIM IN THE FIRM. HE NOTICED THAT HE WAS HAVING OPENING CAPITAL BALANCE OF RS. 64,92,689/- ON WHICH THE SAID INTEREST WAS GIVEN AN D AO HAS COME TO THE CONCLUSION THAT SH. MUZAFFAR ALI WITHDR AW AN AMOUNT OF RS. 48,62,327/- FROM THE FUNDS OF THE FIR M LYING IN THE SHAPE OF HIS CAPITAL WITHOUT ANY BUSINESS PURPO SE. CALCULATING INTEREST THEREON @ 12% AT RS. 5,83,479/ - THE SAME WAS DISALLOWED FROM THE INTEREST CLAIM TO BE P AID TO SH. MUZAFFAR ALI OF AN AMOUNT OF RS. 7,79,122/-. IT IS IN THIS MANNER, THE DISALLOWANCE OF RS. 5,83,479/- WAS MADE . 3. IT WAS FURTHER SEEN THAT A SUM OF RS. 3 LAC WAS OUTSTANDING IN THE NAME OF SH. MUZAFFAR ALI WHICH A CCORDING TO AO WAS WITHOUT ANY SUBSTANTIAL BUSINESS PURPOSE AND THE SAID AMOUNT WAS REFLECTED IN THE BALANCE SHEET OF E ARLIER YEAR I.E. FOR AY 2005-06 AND CALCULATING INTEREST THEREO N A FURTHER DISALLOWANCE OF RS. 36,000/- WAS MADE. 4. BOTH THESE ADDITIONS HAVE BEEN DELETED BY THE LD . CIT(A). A FINDING OF FACT HAS BEEN RECORDED BY THE CIT(A) THAT ITA NO. 3414/D/2010 5 ASSESSEE WAS HAVING OUTSTANDING CREDITORS TO THE EX TENT OF RS. 1.45 CRORES WHICH WERE INTEREST FREE. THE ASSESSEE WAS ALSO HAVING BANK BALANCE OF RS. 1.6 CRORE IN THE CURRENT ACCOUNT ON WHICH NO INTEREST WAS EARNED AND LD. CIT(A) HAS ALS O MADE THE REFERENCE TO THE DECISION OF CIT(A) IN RESPECT OF A.Y. 2005- 06 AS WELL AS ITAT, DELHI BENCH, COPY OF WHICH WERE FILED BEFORE HIM AND HE FOUND THAT ITAT UNDER SIMILAR FAC TS HAS ACCEPTED THE CONTENTION OF THE ASSESSEE BY UPHOLDIN G THE ORDER PASSED BY CIT(A) AND IN THIS MANNER, LD. CIT( A) HAS DELETED THE ADDITION OF RS. 5,83,479/-. 5. SO AS IT RELATES TO ANOTHER AMOUNT OF RS. 36,000 /- DISALLOWED ON THE AMOUNT OF RS. 3 LAC. THE FINDING S OF LD. CIT(A) ARE THAT IN THE ASSESSMENT ORDER FOR A.Y. 20 05-06 NO SUCH ADDITION WAS MADE. THE SAID AMOUNT WAS KEPT A S SECURITY IN THE COURT IN CONNECTION WITH ROBBERY IN THE CASE OF THE ASSESSEE AND, THUS, HE HAS RECORDED A FINDING T HAT THE SAID FUND WAS NOT UTILIZED BY THE PARTNER AND, THER EFORE, HE HAS DELETED THE ADDITION. 6. BEFORE US, AFTER NARRATING THE FACTS, LD. AR HAS PLACED BEFORE US COY OF ORDER OF THE TRIBUNAL DATED 20.11. 2009 IN ITA ITA NO. 3414/D/2010 6 NO. 2980/DEL./09 FOR A.Y. 2005-06 IN THE CASE OF AS SESSEE ITSELF, WHEREIN SIMILAR ADDITION WAS MADE OF RS. 5, 08,868/- ON THE TRAVELING ADVANCE OF RS. 42,40,573/- MADE TO TH E PARTNER AND IT WAS FOUND BY LD. CIT(A) THAT SH. MUZAFFAR AL I THE PARTNER WHO WAS GRANTED THE FUNDS TO BE SPENT FOR THE USE O F BUSINESS AT DIFFERENT PLACED, THEREFORE, THOSE ADVANCES WERE NOT IN THE NATURE OF TRAVELING ADVANCES FOR HIS PERSONAL PURPO SES. THE ADVANCE WAS IN THE NATURE OF AN IMPREST ACCOUNT FRO M WHICH DAY TO DAY EXPENSES WERE MET FOR THE PURPOSE OF BUS INESS IN THE COURSE OF MANUFACTURE AND OTHER ACTIVITIES AND THE DISALLOWANCE WAS MADE BY THE AO ON WRONG ASSUMPTION ON THOSE FINDINGS OF LD. CIT(A) ITAT HAS OBSERVED AS U NDER: - 4.2 WHILE THE LD. DR RELIED ON THE ORDER OF THE AO, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(APPEALS). WE FIND THAT THE LD. CIT(APPEALS) HAS EXAMINED THE ISSUE WITH REFERENCE TO REAL INTENT OF THE TRANSACTION. IT ALSO APPEARS TO US THAT THE AO WAS GUIDED BY THE NOMENCLATURE OF THE ADVANCE, WHICH WHEN TRANSLATED INTO ENGLISH GIVES A WRONG PICTURE OF THE PURPOSE OF THE ADVANCE. THE FINDING OF THE LD. CIT(A) HAS NOT BEEN DISPLACED IN ANY MANNER BY THE LD. DR. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH HIS ORDER IN THIS MATTER ALSO. ITA NO. 3414/D/2010 7 7. REFERRING TO THE AFOREMENTIONED ORDER, IT WAS TH E CONTENTION OF LD. AR THAT THE ISSUE RAISED BY THE R EVENUE IS SQUARELY COVERED BY THE AFOREMENTIONED ORDER OF THE TRIBUNAL AND DEPARTMENTAL ISSUE ON THIS GROUND IS LIABLE FOR DISMISSED. 8. ON THE OTHER ADDITION OF RS. 36,000/- IT WAS THE SUBMISSION OF LD. AR THAT A FINDING OF FACT HAS BEE N RECORDED BY LD. CIT(A) THAT THE SAID AMOUNT WAS DEPOSITED IN COURT AND NOT GIVEN TO THE PARTNER OF THE ASSESSEE AND IN ABS ENCE OF ANY CONTRARY MATERIAL BEING BROUGHT ON RECORD BY THE RE VENUE, THE DELETION BY CIT(A) IS JUSTIFIED. 9. ON THE OTHER HAND, RELYING UPON THE ORDER OF AO, IT WAS THE CONTENTION OF LD. DR THAT ADDITIONS HAVE WRONGL Y BEEN DELETED BY LD. CIT(A) AND THE CASE CANNOT BE CONSID ERED TO BE COVERED BY THE AFOREMENTIONED ORDER OF THE TRIBUNAL . 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF MATERIAL PLACED BEFORE US. IN RESPECT OF A.Y. 2005- 06 TRIBUNAL HAS UPHELD THE FINDINGS OF LD. CIT(A) I N WHICH IT WAS HELD THAT THE AMOUNT ADVANCED TO THE PARTNER OF THE FIRM ITA NO. 3414/D/2010 8 WAS NOT MADE IN HIS PERSONAL CAPACITY BUT WAS FOR U TILIZATION IN THE BUSINESS OF THE ASSESSEE AS PER REQUIREMENT OF THE BUSINESS. THE BUSINESS OF THE ASSESSEE WAS SCATTER ED AT DIFFERENT PLACES. HENCE, THE DISALLOWANCE WAS DELE TED. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SUGGEST THAT THE FACTS OF THE PRESENT YEAR ARE IN A NY MANNER DIFFERENT WITH THE FACTS OF IMMEDIATE PRECEDING YEA R FOR WHICH THE ORDER OF THE TRIBUNAL IS AVAILABLE. IN VIEW OF ABSENCE OF ANY SUCH CONTROVERTING MATERIAL, AS PER LAW OF PREC EDENCE, WE FOLLOW OUR ORDER AND HOLD THAT ADDITION HAS RIGHTLY BEEN DELETED OF A SUM OF RS. 5,83,479/-. 11. NOW, COMING TO THE ANOTHER ADDITION OF RS. 36,0 00/-, A FINDING OF FACT HAS BEEN RECORDED BY THE CIT(A) THA T THE SAID AMOUNT WAS NOT GIVEN TO THE PARTNER OF THE ASSESSEE FIRM BUT IT WAS KEPT AS SECURITY IN THE COURT IN CONNECTION WIT H ROBBERY IN THE CASE OF ASSESSEE. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO CONTROVERT THOSE FINDING OF FACT. THEREF ORE, WE FIND NO REASON TO INTERFERE IN THE DELETION MADE BY LD. CIT(A) ON THIS GROUND. ITA NO. 3414/D/2010 9 12. IN VIEW OF OUR DISCUSSION, FINDING NO MERIT IN DEPARTMENTAL APPEAL, THE SAME IS DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY, 2011. SD/- SD/- (G.E. VEERABHADRAPPA) (I.P. BANSAL ) VICE PRESIDENT JUDICIAL MEMBER DATED: 22.7.11 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR