M/s. C. K. Shah & Co., Mehsana V. The Income Tax Officer, Ward-1, Mehsana Circle, Mehsana

ITA 3461/AHD/2016

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5476 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure
• Section: 44AD; 205; 32

Judgement Text

, ,LK ,LK,LK ,LK- -- -,E ,E,E ,E- -- -LH LHLH LH- -- - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 3461/AHD/2016 / ASSESSMENT YEAR: 2013-14 M/S. C. K. SHAH & CO. STATION ROAD MEHSANA 384 001. (PAN NO. AADFC 7828 B) VS. ITO, WARD 1, MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI HARDIK VORA, A.R. REVENUE BY : MS. APOORVA BHARDWAJ, SR. D.R. / DATE OF HEARING : 07.08.2018 / DATE OF PRONOUNCEMENT : 01.11.2018 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF T HE ASSESSEE AGAINST THE APPELLATE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-GANDHINAGAR, AHMEDABAD [CIT(A) IN SHORT] REL EVANT TO ASSESSMENT YEAR 2013-14. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW O N THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED I N CONFIRMING ADDITION OF RS. 54,504/- AS DEPOSIT INTEREST INCOME. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED I N CONFIRMING ADDITION OF RS. 78,493/- AS BROKERAGE INCOME. 3. IT IS PRAYED THAT ABOVE ADDITION MADE BY ASSESSING OFFICER AND CONFIR MED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE ANY GROUND(S) EITHER B EFORE OR IN THE COURSE OF HEARING OF THE APPEAL. 2 3. AT THE OUTSET WE NOTE THAT THERE IS DELAY IN FILIN G THE APPEAL OF THE ASSESSEE BY 21 DAYS ONLY. THE ASSESSEE BEFORE US FILED AN AFFIDAVIT JUSTIFYING THE REASONS FOR THE DELAY AND ACCORDINGLY, PRAYED FOR THE CON DONATION. THE RELEVANT EXTRACT OF THE AFFIDAVIT ARE AS REPRODUCED BELOW: AFFIDAVIT I UNDERSIGNED, KALPESHKUMAR J SHAH, PARTNER OF C. K. SHAH & CO., MAJOR, VAISHNAV VANIYA BY CASTE, RESIDENT OF MEHSANA, HEREBY MAKE OATH OF MY RELIGION AND STATE, 1. I, BEING PARTNER OF C.K. SHAH & CO. HAVE FILED AN APPEAL A GAINST THE ORDER OF LD. CIT(A)-GSANDHINAGAR DATED 19.09.2016 BEFORE INCOME TAX APPELLAT E TRIBUNAL, AHMEDABAD O 21.12.2016. THE SAID APPEAL IS TIME BARRED B Y 21 DAYS. 2. I COULD NOT FILE AN APPEAL BEFORE ITAT WITHIN SPECIFIE D TIME. AS I WAS SUFFERING FROM MALARIA, I COULD NOT ARRANGE FILLING OF APPEAL BEFORE ITAT, AHMEDABAD. DUE TO ILLNESS, I WAS NOT ATTENDING REGULAR OF FICE FROM 16/11/2016 TO 17/12/2016. 3. AFTER RESUMING OFFICE FROM 19/12/2016, I HAVE IMMEDIATELY C ONTACTED MY CHARTERED ACCOUNTANT FOR FILLING FURTHER APPEAL. 4. IN VIEW OF ABOVE FACTS DELAY IN PREFERRING APPEAL BEFORE YOUR HONOURS, DELAY OF 21DAYS MAY PLEASE BE CONDONED. ON THE OTHER HAND THE LD. DR CONSIDERING THE REASONS O F DELAY IN FILING THE APPEAL DID NOT OBJECT IF THE SAME IS CONDONED. IN VIEW OF ABOVE AND CONSIDERING THE SMALL DELAY OF 21 DAYS WE CONDONE THE DELAY AND PROCE ED TO HEAR THE APPEAL. 4. THE FIRST ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT LD CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 54,504/- ON ACCOUNT OF INTERES T INCOME. 5. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN THE PRESE NT CASE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF TRADING IN STATIONARY ARTICLES & BOOKS, SUB-BROKER OF STOCK MARKET. THE ASSESSEE DURIN G THE YEAR HAS OFFERED ITS 3 INCOME U/S 44AD OF THE ACT FOR RS. 4,14,690/- AGAINST THE GRO SS TURNOVER OF RS. 49,79,322/-. HOWEVER, THE LD AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSEE HAS EARNED INTEREST INCOME ON THE DEPOSITS FO R RS. 54,504/- WHICH WAS NOT OFFERED TO TAX. ACCORDINGLY, THE AO SOUGHT AN EXPL ANATION FROM THE ASSESSEE. THE ASSESSEE IN COMPLIANCE TO IT, SUBMITTED THAT IT H AS INCURRED INTEREST EXPENSES OF RS. 1,46,221/-. THEREFORE, THERE WAS NO INTEREST INCOME OFFERED TO TAX. HOWEVER, THE LD AO DISAGREED WITH THE SUBMISSION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS ALREADY CLAIMED INTEREST EX PENSES UNDER THE PROVISION OF SECTION 44AD OF THE ACT. THEREFORE THERE CANNOT BE ANY QUESTION FOR ALLOWING THE INTEREST EXPENSE AGAINST SUCH INTERES T INCOME. ACCORDINGLY, THE AO ADDED A SUM OF RS. 54,504/- TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD CIT(A) WH O HAS CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT OR DER AND SUBMISSION MADE BY THE APPELLANT. APPELLANT HAS DISCLOSED INCOME U/ .S 44AD OF THE ACT. IT HAD RECEIVED INTEREST ON DEPOSIT FOR RS.54,504/- WHICH IS TAXED BY THE AO AS THE SAME IS NOT COVERED AS BUSINESS RECEIPT U/S 44AD OF THE ACT. APPELLANT HAS RECEIVED INTEREST ON DEPOSIT WHICH IS REQUIRED TO BE TAXED SEPARATELY. EVEN APPELLANT HAS NOT ESTABLISHED THAT BORROWED FUNDS ARE USED FOR GIVING SUCH DEPOSIT AND HENCE AO WAS CORRECT IN NOT GIVING DEDUCTION O F INTEREST EXPENDITURE AGAINST INTEREST INCOME. THUS, ADDITION MADE BY THE AO OF RS.54,504/- IS HELD JUSTIFIED / AND IS HEREBY UPHELD. BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSESSEE IS IN APPEAL B EFORE US. 4 7. THE LD AR BEFORE US LEFT THE ISSUE AT THE DISCRETIO N OF THE BENCH. ON THE OTHER HAND, LD DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITI ES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATE RIALS AVAILABLE ON RECORD. IT IS UNDISPUTED FACT THAT THE INCOME U/S 4 4AD IS CALCULATED ON PRESUMPTION BASIS. IT IS FURTHER PRESUMED THAT THE ASSE SSEE HAS CLAIMED ALL THE EXPENSES AGAINST SUCH PRESUMPTION INCOME UNDER THE PR OVISION OF SECTION 32 TO 38 OF THE ACT. THEREFORE, IN OUR CONSIDERED VIEW, THE IN TEREST EXPENSES AS DISCUSSED ABOVE FOR RS. 1,46,221/- HAS ALREADY BEEN CLAIMED BY THE ASSESSEE AGAINST THE INCOME CALCULATED U/S 44AD OF THE ACT. THUS I N OUR CONSIDERED VIEW NO FURTHER ALLOWANCE OF INTEREST EXPENSES CAN BE MADE AGAINST THE INTEREST INCOME. HENCE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 9. THE NEXT ISSUE RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT LD CIT(A) ERRED IN CONFIRMING THE ORDER OF AO FOR RS. 78,493/- AS BROKERAGE INCOME. 10. THE LD AO DURING THE ASSESSMENT PROCEEDINGS OBSERV ED THAT THE ASSESSEE EARNED BROKERAGE INCOME OF RS. 4,52,809/- FROM HIS SHARE MARKE T BUSINESS BUT THE SAME WAS NOT OFFERED TO TAX. ON QUESTION BY THE AO, THE ASSESSEE AGREED THAT HE HAS NOT DISCLOSED ANY INCOME FROM SHARE BROKING BUSINESS INADVERTENTLY. THE ASSESSEE FURTHER SUBMITTED THAT TH E SHARE BROKING BUSINESS CANNOT BE EARNED WITHOUT INCURRING THE EXPENDITURE. AC CORDINGLY, THE ASSESSEE ALLOCATED AN EXPENSE OF RS. 1,84,795/- AGAINST SUCH BROKERAGE IN COME BUT THE AO AGREED TO ALLOCATE A SUM OF RS. 1,06,302/- ONLY AGAINST SUCH BROKERAGE INCOME. ACCORDINGLY, THE AO ADDED A SUM OF RS. 3,46,507/- (4 ,52,809 1,06,302) TO THE TOTAL INCOME OF THE ASSESSEE. 5 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD CIT(A). T HE ASSESSEE BEFORE THE LD CIT(A) SUBMITTED THAT THE AO WITHOUT POINTING OUT ANY MISTAKE IN THE EXPENSES ALLOCATED BY HIM FOR RS. 1,84,795/- HAS ALLOWED AN EX PENSE OF RS.1,06,302/- ONLY. HOWEVER, THE LD CIT(A) DISREGARDED THE CON TENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF AO BY OBSERVING AS UNDER: 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSESSMENT OR DER AND SUBMISSION MADE BY THE APPELLANT. APPELLANT HAS EARNED BROKERAGE I NCOME OF RS.4,52,809/- WHICH WAS NOT TAXED IN THE RETURN OF INCOME AND APPELLANT A LSO AGREED FOR THIS ADDITION. APPELLANT HAS CLAIMED EXPENDITURE AGAINST SUC H INCOME WHICH WAS PARTLY ALLOWED BY THE AO AT RS.1,06,302/-. APPELLANT HAS CLAI MED EXPENSES OF RS.1,84,795/- BUT THE SAME WAS RESTRICTED BY THE AO AT RS.1, 06,302/-. APPELLANT HAS CLAIMED DEPOSIT INTEREST OF RS.58,488/- IN SHARE MARKE T BROKERAGE BUSINESS AND AS BROKERAGE DOES NOT REQUIRE ANY BORROWED FUND. AO WAS CORRECT IN NOT ALLOWING SUCH EXPENDITURE. APPELLANT HAS CLAIMED SALARY E XPENSES OF RS.79,200/- OUT OF TOTAL SALARY OF RS.1,18,800/- AS EXPENDITURE ATT RIBUTABLE TO SHARE MARKET BUSINESS BUT AO ALLOWED RS.59,400/- BEING 50% OF TOTAL EXP ENDITURE AS ALLOWABLE EXPENSES. AS AO HAS ALLOCATED 50% OF EXPENDITUR E TO SHARE MARKET BUSINESS WHICH IS REASONABLE LOOKING TO THE TOTAL TURN OVER U/S 44AD AND SHARE MARKET BUSINESS/ NO INFERENCE IS CALLED FOR ALLOCATI ON OF SALARY EXPENDITURE AND OTHER EXPENDITURE MADE BY THE AO. THUS, AO WAS CORRECT IN ALLOWING EXPENDITURE OF RS.1,06,302/-AGAINST BROKERAGE INCOME OF RS.4,52,809/- THUS, THE ADDITION MADE BY THE AO OF RS.3,46,507/- IS HELD JUSTIFIED AN D ADDITION MADE IS HEREBY CONFIRMED. BEING AGGRIEVED BY THE ORDER OF LD CIT(A) ASSESSEE IS IN APPEAL B EFORE US. 12. THE ASSESSEE BEFORE US REITERATED THE SUBMISSION AS MADE BEFORE THE LD CIT(A) WHEREAS, THE LD DR VEHEMENTLY SUPPORTED THE OR DER OF AUTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE ISSUE IN THE CASE RELATES TO THE ALLOCAT ION OF THE EXPENSES OFFERED 6 BY THE ASSESSEE VIS--VIS ALLOCATED BY THE AO. THE NECES SARY DETAILS OF THE DISPUTED EXPENSES STAND AS UNDER: SR NO. EXPENSES EXPENSES ALLOCATED BY THE ASSESSEE FOR ITS SHARE MARKET BUSINESS EXPENSES ALLOWED BY THE AO DIFFERENCE 1. COMPUTER EXP. 2050 1845 205 2. DEPOSIT INTEREST EXP. 58,488 NIL 58,488 3. SALARY EXP. 79,200 59,400 19,800 ON PERUSAL OF THE ABOVE DETAILS, WE NOTE THAT THE MAJOR EXPENSE WHERE THE DISPUTE ARISES IS WITH REGARD TO INTEREST EXPENSES AND SALARY EX PENSES. 13.1 AS WE HAVE ALREADY HELD THAT THE INTEREST EXPENSES HAS BEEN CLAIMED BY THE ASSESSEE AGAINST THE INCOME OFFERED TO TAX U/S 44AD OF THE ACT. THEREFORE IN OUR CONSIDERED VIEW, NO SUCH EXPENSES CAN BE ALLOCATED TO SHARE MARKET BUSINESS. 13.2 IN ADDITION TO THE ABOVE, WE ALSO NOTE THAT THE LD COUNSEL FOR THE ASSESSEE HAS ALSO NOT BROUGHT ANYTHING ON RECORD JUSTIFYING THE ALLOCATION OF INTEREST EXPENSES TOWARDS THE SHARE MARKET BUSINESS. THEREFORE W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF LOWER AUTHORITIES. 13.3 SIMILARLY, WE ALSO NOTE THAT THE ASSESSEE HAS REASONAB LY ALLOCATED THE SALARY EXPENSES BY 50% TOWARDS THE SHARE MARKET BUSINESS. THEREFORE WE DO NOT FIND ANY REASON TO TAKE THE VIEW CONTRARY TO THE FI NDINGS OF LOWER AUTHORITIES. IN VIEW OF THE ABOVE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF AUTHORITIES BELOW. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE I S DISMISSED. 7 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 1 ST NOVEMBER, 2018 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER ( WASEEM AHMED ) ACCOUNTANT MEMBER AHMEDABAD; DATED 01/11/2018 PRITI YADAV, SR.PS ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' # / CONCERNED CIT 4. ' # () / THE CIT(A) GANDHINAGAR, AHMEDABAD. 5. &'( ! , ! , *+, , / DR, ITAT, AHMEDABAD. 6. (- ./ / GUARD FILE. / BY ORDER, & //TRUE COPY// '/# $% ( DY./ASSTT.REGISTRAR) &'(, #)* / ITAT, AHMEDABAD