Sh. Sudhir Budhiraja, Ludhiana V. ITO, Ludhiana

ITA 354/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73558 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 06-03-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PBH
• Keywords: Depreciation; Additional evidence
• Section: 143(3); 142(1); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.354 /CHD/2013 ASSESSMENT YEAR : 2009-10 SH.SUDHIR BUDHIRAJA, VS. THE INCOME TAX OFFICE R, M/S SHIVAM TRADERS, WARD IV(2), VISHKARMA CHOWNK, GILL ROAD, LUDHIANA. LUDHIANA. PAN: ABYPB2324H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARI OM ARORA RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 06.03.2014 DATE OF PRONOUNCEMENT : 25.03.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-II, LUDHIANA D ATED 22.02.2013 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THAT THE IMPUGNED ORDER HAS BEEN PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WITHOUT PROPER APPLICATION OF MIND, AS SUCH IT IS NOT SUSTA INABLE IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I S NOT JUSTIFIED IN HOLDING THAT THE ADDITION ON ACCOUNT OF CREDIT ENTRIES AMOU NTING TO RS.22, 12,450 CAN BE MADE U/S 41 (1) OF THE IT. ACT, 1961 IF NOT U/S 68 OF THE IT. ACT, 1961. THE ADDITION OF RS.22, 12,450 MADE BY THE LD. ASSESSING OFFICER ON ACCOUNT OF FOLLOWING 4 PARTIES HAS WRONGLY BEEN CONFIRMED:- (I) M/S K. S.MUNJAL INDS. RS.6,80,200/- 2 (II) M/S NEW ERA ENTERPRISES RS. 4,08,825/- (III) M/S LUDHIANA METALS RS. 5,65,000/- (IV) M/S G. K.ENTERPRISES RS.5,58,425/- TOTAL: RS.22,12,450/- THE EVIDENCE AND MATERIAL PLACED ON RECORDS BY THE APPELLANT HAS NOT BEEN APPRAISED PROPERLY AND ADDITION HAS WRONGLY BEEN CONFIRMED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS WRONGLY CONFIRMED ADDITION OF RS.2, 32,2897- ON ACCOUNT OF OU TSTANDING LIABILITIES DUE TO COMMISSION PAYABLE TO FOLLOWING 4 PARTIES:- (I) M/S S.GUNVEEN SINGH RS. 743/- (II) S.ARUNJIT RS. 59,869/- (III) S.SIMARJIT RS. 59,802/- (IV) SH.ARUN KUMAR RS.1,11,875/- TOTAL: RS.2,32,289/- PROVISIONS OF SECTION 41 (1) OF THE IT. ACT, 1961 H AVE BEEN MISCONSTRUED AND MISAPPLIED IN THE APPELLANT'S CASE. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS WRONGLY CONFIRMED ADDITION OF RS.8,638 + RS.3,97,000 TOTAL RS.4,05,63 87- ON ACCOUNT OF ADVANCES RECEIVED FROM THE FOLLOWING TWO PARTIES:- M/S. INDUSTRIAL MACHINERY CORP. RS. 8,638/- M/S. M.K. INDUSTRIES RS. 3.97.000/- TOTAL: RS. 4.05.638/- 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS.2,00,000 OUT OF ADDITION OF RS.3,10,440 MADE BY THE LD. ASSESSING OFFICER ON ACCOUNT OF LOW G.P. PAST H ISTORY OF THE CASE AND APPELLANT'S CONTENTION ON LEGAL AND FACTUAL ISSUE H AVE NOT BEEN APPRAISED PROPERLY, WHICH HAS RESULTED IN UNTENABLE CONCLUSIO N. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS.50,000/- OUT OF ADDITION OF RS.96,10 07- MADE BY THE LD. ASSESSING OFFICER ON ACCOUNT OF VARIOUS EXPENSES INCURRED BY THE APPE LLANT FOR BUSINESS PURPOSES. 7. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) IS NOT JUSTIFIED IN CONFIRMING 1/5 TH DISALLOWANCE OUT OF CAR EXPENSES AND DEPRECIATION. DISALLOWANCE OF RS.73,622/- OUT OF CAR EXPENSES INCURRED BY THE APPELLANT FOR BUSINESS PURPOSES IS UNTENABLE AND UNCALLED FOR. 8. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) IS NOT JUSTIFIED IN CONFIRMING ADDITIONS AND DISALLOWANCES WITHOUT CONSIDERING APP ELLANTS VARIOUS LEGAL AND FACTUAL CONTENTIONS. THE EVIDENCE AND MATERIAL ON RECORDS H AS NOT BEEN GIVEN DUE WEIGHT, WHICH HAS RESULTED IN UNCALLED FOR ADDITION AND UNT ENABLE CONCLUSION. 3 9. THAT THE ORDER IS DEVOID OF JUDICIOUS AND RATION AL APPROACH AND IT HAS BEEN PASSED CONTRARY TO WELL ESTABLISHED LAW. ADDITIONS CONFIRM ED ON ACCOUNT OF BROUGHT FORWARD BALANCES, WHICH HAVE NOT ENTERED THE PROFIT & LOSS ACCOUNT OF THE YEAR HAVE WRONGLY BEEN CONFIRMED. 10. THAT THE ORDER IS CONTRARY TO LAW AND FACTS OF THE CASE, AND IN ANY CASE THE ADDITIONS AND DISALLOWANCES CONFIRMED ARE UNREASONABLE AND HI GHLY EXCESSIVE. 11. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND A ND/OR MODIFY THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENERA L IN NATURE AND THE SAME IS DISMISSED. 4. THE ISSUE IN GROUND NOS. 2 AND 3 RAISED BY THE ASSESSEE IS AGAINST ADDITIONS MADE UNDER SECTION 41(1) OF THE ACT. 5. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE HAD E- FILED RETURN OF INCOME AT RS.1,82,580/-. VARIOUS N OTICES WERE ISSUED UNDER SECTION 143(2) AND 142(1) OF THE ACT BUT THE ASSESSEE FAILED TO REPLY EXCEPT AT THE END OF THE PROCEEDINGS. THE AS SESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF POWER TOOLS & ANCHOR FAS TNESS AND GRINDING STORES. THE ASSESSING OFFICER AS PER THE BALANCE S HEET NOTED THAT THERE WERE SUNDRY CREDITORS AMOUNTING TO RS.1.34 CRORES A ND THE ASSESSEE WAS ASKED TO PRODUCE CONFIRMED COPIES OF ACCOUNT OF VAR IOUS PARTIES. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE COPIES OF ACCOUNT OF THE SUNDRY CREDITORS TOTALING RS.22,12,450/- AND AS THE ASSESSEE HAD FAILED TO DISCHARGE HIS LIABILITY, THE SAID AMOUNT WAS ADDED AS INCOME UNDER SECTION 68 OF THE ACT. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD REFLECTED LIABILITY OF RS.2,32,289 /- ON ACCOUNT OF COMMISSION PAYABLE. THE ASSESSEE WAS ASKED TO FURN ISH CONFIRMATION AND ALSO SINCE WHEN THE SAME WAS OUTSTANDING. THE ASSESSING OFFICER HAD NOTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE ON COMMISSION AND HAD ALSO NOT INCURRED ANY EXPENDITURE ON COMMISSION IN ASSESSMENT YEARS 2007- 08 AND 2008-09. 4 THE EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSIN G OFFICER WAS THAT THE SAID COMMISSION PAYABLE PERTAINS TO ASSESSMENT YEAR 2004-05. THE ASSESSING OFFICER ADDED SUM OF RS.2,32,289/- AS INC OME OF THE ASSESSEE UNDER SECTION 41(1) OF THE ACT. 6. BEFORE THE CIT (APPEALS) THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED UNDER PARA 4.2 AT PAGES 4 AND 5 UNDER WHICH IT WAS EXPLAINED THAT THE ASSESSEE HAD PURCHASED GOODS FROM M/S K.S. MUNJAL INDUSTRIES TOTALING RS.6,80,20 0/- AND THE SAME AMOUNT WAS OUTSTANDING FOR THREE YEARS. THE ASSESS EE FURNISHED PURCHASE BILLS AND ALSO POINTED OUT THAT THE SAID H AVE BEEN INCORPORATED AND REPORTED IN VAT/SALES TAX RETURN F ILED BY THE ASSESSEE, THE COPIES OF WHICH ARE FILED BEFORE THE CIT (APPEALS). THE ASSESSEE IN THE SUBSEQUENT YEARS HAD SOLD GOODS TO THE SAID PARTIES. WITH REGARD TO M/S NEW ERA ENTERPRISES AG AINST WHOM SUM OF RS.4,08,825/- WAS OUTSTANDING, IT WAS POINTED OU T THAT THE ASSESSEE HAD PURCHASED THE GOODS FROM THE SAID PART Y AND THE AMOUNT WAS OUTSTANDING AS ON THE CLOSE OF THE YEAR. SIMIL AR EXPLANATION WAS GIVEN IN RESPECT OF THE OUTSTANDING BALANCE OF RS.5,,58,425/- IN THE ACCOUNT OF M/S G.K. ENTERPRISES AND RS.5,65,000 /- IN THE ACCOUNT OF M/S LUDHIANA METALS AND SUPPORTING BILLS AND COP IES OF ACCOUNT WERE FILED. THE ASSESSEE FURNISHED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE WHICH IN TURN WAS FORWARDED TO THE ASSESSING OFFICER WHO SUBMITTED HIS REMAND REPORT 22.11.2012 IN WHICH IT WAS ALLEGED THAT THE SUMMONS ISSUED TO SOME OF THE PARTIES WERE RETURNED BACK AND IN THE OTHER CASES NONE APPEARED ON BEHALF OF THE RESPECTIVE PERSONS. 7. THE ASSESSEE FURNISHED REJOINDER TO THE REMAND R EPORT FILED BY THE ASSESSING OFFICER WHICH IS REPRODUCED AT PAGE 4 .5 OF THE 5 APPELLATE ORDER. THE CIT (APPEALS) HAD NOTED THAT THE ADVANCES WERE RECEIVED IN THE EARLIER YEARS. HOWEVER, ADDIT IONS MADE BY THE ASSESSING OFFICER TOTALING TO RS.22,12,450/- WERE C ONFIRMED. FURTHER ADDITION OF RS.2,32,289/- ON ACCOUNT OF COM MISSION PAYABLE WAS ALSO CONFIRMED. THE PLEA OF THE ASSESSEE THAT THE OUTSTANDING AMOUNT HAD BEEN PAID IN THE LATER YEARS, WAS REJECT ED AND ADDITION WAS CONFIRMED BY THE CIT (APPEALS). 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT (APPEALS) VIDE GROUND OF APPEAL. 9. SHRI HARI OM ARORA APPEARED FOR THE ASSESSEE AND SHRI MANJIT SINGH PUT APPEARANCE ON BEHALF OF THE REVENUE AND P UT FORWARD THEIR CONTENTIONS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FIRST ADDITION TO BE ADJUDICATED IN THE PRESENT APPEAL IS AGAINST THE ADDITION OF RS.22,12,450/- AND VIDE GROUND NO.3 AGAINST THE COMMISSION TOTALING RS.2,32,289/-. ADMITTEDLY, TH E OUTSTANDING AMOUNTS AND COMMISSION PAYABLE DID NOT RELATE TO TH E TRANSACTIONS OF THE YEAR UNDER CONSIDERATION AND WERE BROUGHT FO RWARD FROM THE EARLIER YEARS AS THE AMOUNTS OUTSTANDING IN THE NAM E OF THE CREDITOR OR AGAINST COMMISSION PAYABLE RELATED TO THE EARLIE R YEARS AND ADDITION UNDER SECTION 41(1) OF THE ACT WAS CONFIRM ED BY THE CIT (APPEALS). THE ISSUE ARISING IN THE PRESENT APPEAL IS WHETHER IN SUCH CIRCUMSTANCES WHERE THE AMOUNT HAD BEEN OUTSTA NDING FOR A NUMBER OF YEARS, THE SAID AMOUNTS SHOULD BE TREATED AS INCOME OF THE ASSESSEE EITHER UNDER SECTION 41(1) OF THE ACT OR A S HELD BY THE ASSESSING OFFICER UNDER SECTION 68 OF THE ACT. 6 11. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. GP INTERNATIONAL LTD. (2010) 325 ITR 25 (P&H). THE HON'BLE HIGH COURT HELD AS UNDE R: AS FAR AS THE ADDITION OF RS.3,30,000 IS CONCERNED , IT HAS BEEN HELD THAT DURING THE PROVISIONS UNDER SECTION 143(3) READ WITH SECTION 250 OF THE ACT, THE ASSESSEE FURNISHED A CONFIRMATION CERTIFICATE FROM M/S AXIS CHEMICAL AND PHARMACEUTICALS LTD., FARIDABAD ALONG WITH PAN NUMB ER. ON ASKING OF THE ASSESSING OFFICER, THE ASSESSEE HAS C ONFIRMED THAT THE SAID LIABILITY IS STILL OUTSTANDING. IN S PITE OF THAT MATERIAL, THE ASSESSING OFFICER MADE THE ADDITION O F THE AMOUNT ON THE BASIS THAT THIS LIABILITY HAS CEASED TO EXIST AND THE SAME IS NOT PAYABLE BY THE ASSESSEE, AND TREATE D THE SAID LIABILITY AS INCOME BY INVOKING PROVISION OF SECTIO N 41(1) OF THE ACT. THE COMMISSIONER OF INCOME-TAX(APPEALS), WHILE DELETING THE SAID ADDITION, HAS OBSERVED THAT THE S IMILAR ADDITION WAS MADE IN THE CASE OF FEBON CON, FARIDAB AD, WHERE THE SIMILAR LIABILITY WAS SHOWN TO BE PAYABLE TO TH E SAME PARTY, I.E., M/S AXIS CHEMICALS AND PHARMACEUTICALS LTD., FARIDABAD. IN THAT CASE THE SAID ADDITION WAS DELE TED BY THE INCOME-TAX APPELLATE TRIBUNAL. IT IS THE ADMITTED POSITION THAT THE SAID ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL PASSED IN I.T.A.NO.114 TO 116/CDL/2004 HAS BECOME FINAL. IN VIEW OF THESE FACTS, IN OUR OPINION, THE INCOME-TAX APPELLA TE TRIBUNAL HAS RIGHTLY COME TO THE CONCLUSION THAT THE AFORESA ID LIABILITY OF THE ASSESSEE CANNOT BE SAID TO HAVE CEASED TO EX IST AND THE PROVISIONS OF SECTION 41(1) AND THE EXPLANATION TO THIS PROVISION ARE NOT APPLICABLE, BECAUSE THE ASSESSEE IS STILL SHOWING IT AS A LIABILITY IN ITS BOOKS AND HAS NOT WRITTEN OFF THE SAME. 12. THE AMOUNTS OUTSTANDING AGAINST THE ASSESSEE AR E RELATABLE TO THE TRANSACTIONS CONDUCTED IN THE EARLIER YEAR AND WERE BROUGHT FORWARDED FROM YEAR TO YEAR IN THE HANDS OF THE ASS ESSEE AND THE SAID AMOUNT HAD NOT BEEN PAID BY THE ASSESSEE AND T HE SAME ARE OUTSTANDING AND THE ASSESSEE ACKNOWLEDGES THE SAME. IN SUCH CIRCUMSTANCES WHERE THE ASSESSEE CONTINUES TO RECOG NIZE THE CASH CREDITS AS PAYABLE BY HIM AND ALSO ON ACCOUNT OF TH E AMOUNT NOT BEING DISBURSED TILL DATE ON ACCOUNT OF COMMISSION PAYABLE, DOES NOT JUSTIFY THE INVOKING OF PROVISIONS OF SECTION 41(1) OF THE ACT AGAINST THE ASSESSEE ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION UNDER SECTION 41(1) OF THE ACT AT RS.2 2,12,450/- AND 7 RS.2,32,289/-. THE GROUND OF APPEAL NOS.2 AND 3 RA ISED BY THE ASSESSEE ARE THUS ALLOWED. 13. THE ISSUE IN GROUND NO.4 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.4,05,638/-. THE ASSESSEE CLAIMED TO HAVE RECEIVED ADVANCES OF RS.8,638/- FROM M/S INDUSTRIAL MACHINER Y CORP. AND RS.3,97,000/- FROM M/S M.K. INDUSTRIES. DESPITE SEV ERAL OPPORTUNITIES THE ASSESSEE FAILED TO PRODUCE THE EV IDENCE IN RESPECT OF THE SAID ADVANCES AND THE SAID WERE TREATED AS I NCOME OF THE ASSESSEE. 14. EVEN BEFORE THE CIT (APPEALS) THE ASSESSEE FURN ISHED COPIES OF ACCOUNT OF THE SAID PARTY AND STATED THAT THE OUTST ANDING BALANCES IN THE ACCOUNTS OF THE SAID PARTY WERE ON ACCOUNT OF P URCHASES. THE SECOND ADVANCE OF RS.3,97,000/- OUTSTANDING IN THE ACCOUNT OF M/S M.K. INDUSTRIES WAS CLAIMED TO HAVE INADVERTENTLY S HOWN AS ADVANCE FROM CUSTOMERS. ALTHOUGH THE SAID AMOUNT OUTSTANDI NG WAS ON ACCOUNT OF PURCHASES, HOWEVER THE ASSESSEE FAILED T O FURNISH ANY EVIDENCE IN RESPECT OF THE SAME AND THE ADDITION WA S CONFIRMED IN THE HANDS OF THE ASSESSEE. THE ASSESSEE HAD FILED TO FURNISH ANY FURTHER EVIDENCE BEFORE US AND IN VIEW THEREOF WE F IND NO MERIT IN THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE AN D THE SAME IS DISMISSED. 15. THE GROUND NO.5 IS NOT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 16. THE ISSUE IN GROUND NO.6 RAISED BY THE ASSESSEE IS AGAINST THE ADDITION OF RS.50,000/- UPHELD BY THE ASSESSING OFF ICER ON ACCOUNT OF DISALLOWANCE OUT OF VARIOUS EXPENSES. THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD NOT ED THE ASSESSEE 8 TO HAVE INCURRED EXPENSES ON REPAIR AND MAINTENANCE , ADVERTISEMENT, POSTAGE & COURIER, PRINTING & STATIONERY, TRAVELING EXPENSES AND DIWALI EXPENSES AND DISALLOWED SUM OF RS.96,100/-. 17. THE CIT (APPEALS) RESTRICTED THE SAME TO RS.50, 000/-. THE SAID DISALLOWANCES WERE MADE IN THE HANDS OF THE AS SESSEE AS THE ASSESSEE HAD FAILED TO PRODUCE THE BILLS AND BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. IN THE TOTALITY OF THE FACT S AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE DISALLOWANCE IN THE HAND S OF THE ASSESSEE. HOWEVER, WE RESTRICT THE SAME TO RS.25,000/-. THE GROUND OF APPEAL NO.6 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 18. THE GROUND OF APPEAL NO.7 RAISED BY THE ASSESSE E IS AGAINST DISALLOWANCE OF 1/5 TH OUT OF CAR EXPENSES AND DEPRECIATION ON CAR FOR PERSONAL USE OF CAR. 19. WE RESTRICT THE SAID DISALLOWANCE FOR PERSONAL USE OF THE VEHICLE BY THE ASSESSEE TO THE EXTENT TO 1/10 TH OF THE TOTAL EXPENDITURE. THE GROUND OF APPEAL NO.7 RAISED BY T HE ASSESSEE IS THUS PARTLY ALLOWED. 20. THE GROUND OF APPEAL NOS.8 TO 10 ARE GENERAL IN NATURE AND THE SAME ARE DISMISSED. 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 25 TH MARCH, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9