Sh. Naresh Kumar Arora, Delhi V. ACIT, New Delhi

ITA 3683/DEL/2013

• Counselvise Citation: 368320114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 14-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Assessee Lawyers: DEVESH PAREKH
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R. S . SYAL, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV , JUDICIAL MEMBER ITA NO . 3683 / DEL / 201 3 ASSESSMENT YEAR : 200 8 - 0 9 SH. NARESH KUMAR ARORA 36, GROUND FLOOR, SREE NAGAR COLO NY ASHOK VIHAR ROAD, NR, BHARAT NAGAR, DELHI - 52 VS . ACIT, CIRCLE - 20(1) PRATYAKASH KAR BHAWAN, CIVIC CENTRE, NEW DELHI - 110002 (APPEL LANT) (RESPONDENT) A PPELLANT BY : SHRI DEVESH PAREKH, C.A. RESPONDENT BY : SHRI J.P. CHANDRAKAR, SR. D.R. ORDER PER SHRI RAJPAL YADAV , J M : 1. THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. CIT(A) - XXII, DATED 2 8 .02.201 3 PASSED FOR A.Y. 20 0 8 - 0 9 . 2. IN SUB GROUND A & B OF GROUND NO.1, ASSESSEE HAS CHALLENGED ADHOC DISALLOWANCE OUT OF TELEPHONE EXPENSES AND VEHICLE RUNNING & MAINTENANCE EXPENSES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND RUNNING A PROPRIETORS HIP CONCERN IN THE NAME AND STYLE OF M/S PRAKASH DYE ITA NO.3683/DEL /2013 ASSESSMENT YEAR : 2008 - 09 2 CHEM. HE HAS FILED HIS RETURN OF INCOME ON 01.10.2008 , DECLARING AN INCOME OF RS.89,43,420/ - . THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE I.T. ACT WAS ISSUE D AND SERVED UPON THE ASSESSEE. ON AN ANALYSIS OF THE RECORD, LD. ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT BEEN MAINTAINING PROPER LOG BOOK EXHIBITING VEHICLE RUNNING AND CALL REGISTER EXHIBITING THE TELEPHONE CALLS MADE FOR THE PURPOSE OF BUSINES S. HE ACCORDINGLY, DISALLOWED 20% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE UNDER THESE HEADS. THE BRIEF FINDINGS RECORDED BY THE ASSESSING OFFICER READ AS UNDER: - 1. THE ASSESSEE HAS ALSO DEBITED TELEPHONE EXPENSES AT RS.3,96,415/ - THE DETAILS OF THE SE EXPENSES WERE CALLED FOR EXAMINED AND NOTICED THAT THE USE OF TELEPHONE/MOBILE FOR PERSONAL AND NON BUSINESS PURPOSES CANNOT BE DENIED. AFTER CONSIDERING ALL THE FACTS OF THE CASE 1/5 TH OF THE TOTAL EXPENSES WHICH COMES TO RS.79,283/ - IS HEREBY DISALLOW ED AND ADDED BACK IN THE TOTAL INCOME OF THE ASSESSEE. (ADDITION OF RS.79,283/ - ) 2. DURING THE YEAR, THE ASSESSEE HAS ALSO DEBITED RS.2,72,417/ - ON ACCOUNT OF VEHICLE RUNNING & MAINTENANCE, RS.6,42,564/ - ON ACCOUNT OF DEPRECIATION, RS.20956/ - ON ACCOUNT OF CAR INSURANCE. THE ASSESSEE IS NOT HAVING ANY SEPARATE VEHICLE FOR PERSONAL USE. THE USE OF VEHICLE FOR PERSONAL AND NON - BUSINESS PURPOSES CANNOT BE DENIED. AFTER CONSIDERING ALL THE FACTS OF THE CASE 1/5 TH OF THE TOTAL VEHICLE EXPENSES WHICH CO MES TO RS.1,82,996/ - IS HEREBY DISALLOWED AND ADDED BACK IN THE TOTAL INCOME OF THE ASSESSEE. (ADDITION OF RS.1,87,187/ - ) 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE, WE HAV E GONE THROUGH THE RECORD CAREFULLY. LD. COUNSEL FOR THE ASSESSEE ADMITTED THE FACT THAT LOG BOOK AS WELL AS CALL REGISTER ARE NOT BEING MAINTAINED BY THE ASSESSEE. ADHOC ITA NO.3683/DEL /2013 ASSESSMENT YEAR : 2008 - 09 3 DISALLOWANCE HAS TO BE MADE , BUT THE DISALLOWANCE MADE AT THE RATE OF 20% OF THE TOTA L EXPENDITURE IS ON THE HIGHER SIDE. HE ALSO POINTED OUT THAT IN A.Y. 2006 - 07 ASSESSMENT WAS MADE U/S 143(3) OF THE ACT, BUT NO DISALLOWANCE WAS MADE. 6. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT DISALLOWANCE AT THE RATE OF 20% IS ON THE HIGHER SIDE. WE FIND THAT IN A.Y. 2006 - 07 , THE NET PROFIT RATE SHOWN BY THE ASSESSEE IS OF 4.93%. THE ASSESSING OFFICER NOTICED THE ENTERTAINMENT EXPENDITURE OF RS.4,39,484/ - H E MADE AN ADHOC DISALLOWANCE OF RS.40,000/ - WHICH IS ALMOST 1 0% OF THE TOTAL EXPENDITURE. SIMILARLY , THE ASSESSEE HAS DEBITED CONVE YANCE EXPENSES OF RS. 1,91,981/ - . THE ASSESSING OFFICER MADE ADHOC DISALLOWANCE OF RS.20,000/ - WHICH IS AGAIN 10% OF THE TOTAL EXPENDITURE. THESE DISALLOWANCES HAVE BEEN MADE ON ESTIMATE BASIS. IN THIS YEAR, THE ASSESSING OFFICER HAS NOT GIVEN ANY SPECIFIC JUSTIFICATION AS TO WHY THE DISALLOWANCE IS TO BE MADE AT THE RATE OF 20%. NET PROFIT OF THE ASSESSEE IN THIS YEAR IS BETTER THAN A.Y. 2006 - 07 , THE NET PROFIT SHOWN BY THE ASSESSEE IS 5. 62%. SIMILARLY, G.P. OF THE ASSESSEE AS NOTICED BY THE ASSESSING OFFICER AT PAGE 1 OF THE ASSESSMENT ORDER IS BETTER THEN IMMEDIATELY PRECEDING YEAR. FOR THE LAST YEAR, G.P. WAS 7.71% THIS YEAR IT IS 8.44% ADHODC DISALLOWANCE WAS NOT MADE IN THE IMMEDIATEL Y PRECEDING YEAR. APART FROM THESE FACTORS, WE ALSO FIND THAT THE ASSESSEE HAS SHOWN AN INCOME OF MORE THAN OF RS.89.00 LAKH. HE IS AN INDIVIDUAL DOING BUSINESS OF TRADING IN DYE & CHEMICALS THERE COULD NOT BE STRONG REASON FOR THE ASSESSEE TO INFLATE SMAL L EXPENDITURE OF RS.79,000/ - AND ITA NO.3683/DEL /2013 ASSESSMENT YEAR : 2008 - 09 4 RS.1,89,000/ - ON TELEPHONE AND CAR. LD. ASSESSING OFFICER OUGHT TO HAVE LOOKED INTO THE VOLUME OF INCOME SHOWN BY THE ASSESSEE AND WITH THAT ANGLE HE OUGHT TO HAVE EXAMINED THE ACCOUNTS OF THE ASSESSEE. IF THERE ARE VERY ST RONG REASON FOR DOUBTING THE DETAILS OF THE ASSESSEE ONLY THEN SOME REASONABLE DISALLOWANCE SHOULD HAVE BEEN MADE. THEREFORE, TAKING INTO CONSIDERATION ALL THESE FACTS AND CIRCUMSTANCES, WE FEEL THAT ENDS OF THE JUSTICE WOULD MEET IF WE RESTRICT THE DISALL OWANCE OUT OF TELEPHONE EXPENSES , VEHICLE RUNNING AND MAINTENANCE EXPENSES, DEPRECIATION AND CAR INSURANCE AT 10% OF THE TOTAL EXPENDITURE. THE ASSESSING OFFICER IS PROVIDE D TO RE - COMPUTE THE DISALLOWANCE. 7. THE ASSESSEE HAS CHALLENGED ADDITION OF RS.15, 656/ - . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD MADE PURCHASES , THE SUPPLIER HAS ISSUED A DEBIT NOTE FOR NON ISSUE OF CENTRAL STATUTORY FORM , WHICH IS BEING ISSUED TO AVAIL CONCESSIONAL RATE OF CST AGAINST PURCHASE FROM OUTSIDE THE STATE. LD. COUN SEL FOR THE ASSESSEE POINTED OUT THAT IF FORM - C WAS ISSUED TO THE ASSESSEE THEN CST WOULD BE PAID AT 4% NON ISSUANCE OF FORM - C FORCED TO ASSESSEE TO PAY THE SALES TAX AT THE RATE OF 10%. THE ASSESSING OFFICER HAS HELD THAT THIS ADDITIONAL PAYMENT OF TAX IS A PENALTY HENCE IT IS NOT ALLOWABLE. ON APPEAL, LD. CIT(A) HAS CONFIRMED DISALLOWANCE. 8. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE LD. ASSESSING OFFICER HAS MISERABLY FAILED TO APPRECIATE THE TRUE NATURE OF THE AMO UNTS PAID BY THE ASSESSEE THERE CANNOT BE ANY DISTINCTION BETWEEN THE ITA NO.3683/DEL /2013 ASSESSMENT YEAR : 2008 - 09 5 AMOUNT PAID AT LOWER RATE OF SALES TAX IF FORM - C WAS SUBMITTED BY THE ASSESSEE VIS - - VIS THE PAYMENT PAID AT A HIGHER RATE O N NON SUBMISSION OF FORM - C. IT IS NOT A PENALTY OR AMOUNT PAI D FOR INFRINGEMENT OF ANY LAW. I N OTHER WORD, IT IS JUST NON AVAILMENT OF BENEFITS UNDER THE SCHEME. THEREFORE, WE ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. TH E DECISION WAS PRONOU NCED IN THE OPEN COURT ON 14 TH OCTO BER, 201 4 . SD/ - SD/ - ( R.S. SYAL ) ( RAJPAL YADAV ) A CCOUNTANT MEMBE R J UDICIAL MEMBER DATED: 14 TH OCTOBER , 201 4 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI