Ved Prakash Lohia, Kolkata V. ITO, Ward - 36(4), Kolkata, Kolkata

ITA 373/KOL/2012

• Counselvise Citation: 37323514 RSA 2012
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 09-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SARNATH GHOSH
• Keywords: Gift; Depreciation; Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C, KOLKATA (BEFORE SHRI M. BALAGANESH, A.M. & SHRI S.S.VISWANE THRA RAVI, J.M.) ITA NO. 373/KOL/2012 : ASSTT. YEAR : 2007-2008 VED PRAKASH LOHIA PAN: ABBPL 8803G VS I.T.O., WARD-36(4), KOLKATA (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI SANJAY MUKHERJEE, JC IT ASSESSEE BY : S/SHRI SOMNATH GHOSH & SARNATH GHOSH, ADVOCATES DATE OF HEARING : 13.10.2015 DATE OF PRONOUNCEMENT : 04-12-2015 ORDER PER SHRI S.S.VISWANETHRA RAVI, J.M. THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 15.11.2011 PASSED BY THE CIT(APPEALS)-XX, KOLKATA I N APPEAL NO. 144/CIT(A)-XX/WD-36(4)/09-10/KOL FOR THE ASSESSMENT YEAR 2007-08 FRAMED UNDER SECTION 143(3) OF THE I.T.ACT. 2. THE ASSESSEE PREFERRED THE ABOVE-SAID APPEAL ON THE FOLLOWING GROUNDS OF APPEAL. 1. THAT THE LD. C.I.T.(A) ERRED IN CONFIRMING ADD ITION U/S 69A RS.4,44,295/- REPRESENTING REALIZATION OF ASSET S INHERITED FROM MOTHER PURSUANT TO HER WILL. 2. THAT THE LD. C.I.T.(A) ERRED IN SUSTAINING DISALLOWANCES CAR EXP. RS.10,993/-, DEPRECIATION ON CAR RS.6,328/- + TELEPHONE EXPENSES RS.7,523/- ALTHOUGH THE 2 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 EXPENSES RELATED WHOLLY AND EXCLUSIVELY TO BUSINESS ACTIVITIES. WITHOUT PREJUDICE THE DISALLOWANCES ARE EXCESSIVE. 3. THE ASSESSEE IS THE PROPRIETOR OF M/S. LOHIA ISP AT UDYOG. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR WAS FILED ON 12.10.2007 DECLARING A TOTAL INCOME OF RS.1,39,760/-. THE CASE WAS TAKEN UP FOR SCRUTINY ASSESSMENT UNDER SECTION 143(3) AND NOTICE S UNDER SECTION 143(2) WERE ISSUED. DURING THE SCRUTINY ASSESSMENT, THE A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED B OOKS OF ACCOUNTS, BILLS/VOUCHERS WHICH WERE EXAMINED BY THE AO. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FOUND A FRESH CAPITA L SAID TO HAVE BEEN INTRODUCED BY THE ASSESSEE TO AN EXTENT OF RS.4,30, 000/- INTO HIS BUSINESS. THE AO TREATED THE SAME AS UNDISCLOSED SO URCE OF INCOME AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. APART FROM THAT, THE AO ALSO DISALLOWED MOTOR CAR EXPENSES, DEPRECIATION ON MOTOR CAR AND BUSINESS EXPENDITURE ON ACCOUNT OF TELEPHONE USAGE. 3.1 THE MOTHER OF THE ASSESSEE, I.E. SMT. KAUSHALAY A DEVI LOHIA DURING HER LIFE TIME, PURCHASED IMMOVABLE AND MOVAB LE PROPERTIES OUT OF HER OWN FUNDS. SHE ALSO CLAIMED TO HAVE RECEIVED BY WAY OF GIFTS FROM HER ANCESTORS AS WELL AS HER RELATIVES ON SOME CEREMONIAL OCCASIONS. IN THE YEAR 2005, SHE EXECUTED A WILL WH EREIN SHE BEQUEATHED HER CURRENT ASSETS TO THE ASSESSEE IN TH E FORM OF SHARES AND OTHERS AND BALANCE THEREON I.E., JEWELLERY AND ORNA MENTS WERE GIVEN TO HER DAUGHTER-IN-LAW I.E. WIFE OF THE ASSESSEE. THE ASSESSEE SOLD ALL HIS CURRENT ASSETS AND THE PROCEEDS THEREON TO AN EXTEN T OF RS.4,28,795/- WAS RECEIVED AND DEPOSITED IN PERSONAL BANK ACCOUNT OF THE ASSESSEE. LATER A SUM OF RS.4,30,000/- WAS TRANSFERRED PERIOD ICALLY FROM THE SAID BANK ACCOUNT TO BUSINESS ACCOUNT OF THE ASSESSEE. 3 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 3.2 REGARDING THE GENUINENESS OF THE WILL, THE AO W AS OF THE VIEW THAT THE WILL HAS BEEN EXECUTED ON A PLAIN WHITE PA PER AND ALL THE REQUISITE CONDITIONS WHICH ARE SAID TO BE FOLLOWED WHILE EXECUTING THE SAME ARE NOT COMPLIED. AO WAS FURTHER OF THE VIEW T HAT THE WILL HAS NOT BEEN CERTIFIED BY ANY ADVOCATE AND NOT BEEN ATT ESTED BY AN INDEPENDENT WITNESS AND FOUND THE SIGNATURE OF THE ASSESSEE AS A WITNESS WHEREBY, THE AO DISBELIEVED THE SAID WILL A ND THE AMOUNTS TRANSFERRED TO BUSINESS ACCOUNT WERE ADDED TO THE I NCOME OF ASSESSEE. 3.3 THE ASSESSEE CLAIMED EXPENDITURE OF MOTOR CAR T O AN EXTENT OF RS.1,09,933/- BUT THE AO DISALLOWED THE SAME TO THE EXTENT OF RS.21,987/- BEING 20% AGAINST RS.1,09,933/-. THE AS SESSEE CLAIMED DEPRECIATION ON MOTOR CAR FOR RS.63,280/-. THE AO D ISALLOWED THE SAME TO THE EXTENT OF RS.12,656/- BEING 20% OF THE CLAIM AND THE AO DISALLOWED THE TELEPHONE EXPENSES AT RS.15,046/- AS AGAINST THE CLAIM OF RS.75,229/-. THEREBY, THE AO ASSESSED THE TAXABLE I NCOME AT RS.6,33,744/-. AGAINST THE SAME, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE LD. CIT(A). 4. THE LD. CIT(A) IN THE APPELLATE PROCEEDINGS ALSO TOOK THE SAME VIEW AS THAT OF THE AO WITH REFERENCE TO THE WILL E XECUTED BY THE MOTHER OF THE ASSESSEE. THE LD. CIT(A) REITERATED T HE SAME GROUNDS ON WHICH THE AO TOOK THE VIEW WITH REFERENCE TO THE WI LL. THE LD. CIT(A) FOUND THAT 20% DISALLOWANCE IS TOO HIGH FOR THE EXPENDITURE ON MOTOR CAR, DEPRECIATION ON MOTOR CAR AND TELEPHONE EXPENSES AND HOWEVER RESTRICTED THE SAME TO 10%. LD. CIT(A) ALLO WED THE APPEAL OF THE ASSESSEE PARTLY, AGAINST WHICH THE ASSESSEE IS BEFORE US. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONT ENDED THAT THE ASSESSEE PRODUCED ALL THE RELEVANT MATERIALS INCLUD ING THE BOOKS OF 4 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 ACCOUNTS OF THE ASSESSEE AND HIS MOTHER, HIS PERSON AL BANK ACCOUNT AND THE BANK ACCOUNT RELATING TO HIS BUSINESS CONCERN A ND EXPLAINED IN DETAIL THAT HE GOT SHARES FROM HIS MOTHER THROUGH A WILL. THE SAME WERE SOLD AND PROCEEDS THEREON TRANSFERRED TO THE P ERSONAL SAVINGS BANK ACCOUNT MAINTAINED WITH ORIENTAL BANK OF COMMERCE, LILUAH BRANCH, HOWRAH, AND THEREAFTER, PERIODICALLY TO HIS BUSINES S ACCOUNT OF M/S. LOHIA ISPAT UDYOG MAINTAINED WITH ING VYSYA BANK, L ILUAH BRANCH, HOWRAH. IN THIS REGARD, THE LD. COUNSEL DREW OUR AT TENTION TO THE PAGE NO.13 OF PAPER BOOK TO PARA 4 OF THE WILL WHEREIN H E POINTED THAT THE MOTHER OF THE ASSESSEE EXPRESSED HER INTENTION TO G RANT ALL HER CURRENT ASSETS TO A TUNE OF RS.4,28,795/- TO THE ASSESSEE. SUPPORTING THE SAME, THE LD. COUNSEL FOR THE ASSESSEE ALSO POINTED TO TH E BALANCE-SHEET OF HIS MOTHER AT PAGE NO.16 OF THE PAPER BOOK WHERE ALL HE R INVESTMENTS IN SHARES TOTALING TO RS.4,28,795/- AND THE SAME WERE TRANSFERRED TO THE ASSESSEES BUSINESS CONCERN FROM HIS PERSONAL ACCOU NT AND ACCORDINGLY PLEADED TO ALLOW GROUND NO.1 IN FAVOUR OF THE ASSES SEE. THE LD. DR VEHEMENTLY CONTENDED THAT THE AO IS RIGHT IN OBSERV ING THAT THE CONTENTS OF THE WILL ARE NOTHING BUT A CONCOCTED ST ORY, WHICH, BY NO MEANS, CAN BE ACCEPTABLE AND RELIED ON THE ORDERS O F THE LD. CIT(A) AND THE AO AND PRAYED TO CONFIRM THE ADDITION MADE BY T HE AO AND DISMISS THE GROUND OF THE ASSESSEE. 6. HEARD AND PERUSED THE ORDERS OF THE LOWER AUTHOR ITIES AND CONSIDERED THE ARGUMENTS OF BOTH THE REPRESENTATIVE S. NOW THE QUESTION BEFORE US WHETHER THE AO AND THE LD. CIT(A) ARE RIG HT IN NOT ACCEPTING THE WILL AS IT DOES NOT MEASURE UPTO A REQUISITE ST ANDARD OF VALID WILL. 6.1 IT IS PERTINENT TO MENTION THAT THERE IS NO SPE CIFIC FORMAT FOR WILL AND IN ORDER TO DECLARE A WILL AS A VALID WILL, THE RE ARE GENERAL 5 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 PROCEDURES WHICH SHOULD BE ADOPTED WHILE WRITING A WILL BY THE TESTATOR WHICH INCLUDES DECLARATION IN THE BEGINNIN G, DETAILS OF PROPERTY AND DOCUMENT, THE DETAILS OF OWNERSHIP BY THE TESTA TOR, ATTESTATION AND THE EXECUTION THEREON. IN THE PRESENT CASE, THE AO DOUBTED ONLY THE ATTESTATION PART OF THE SAID WILL BUT WHEREAS IT IS NOTICED EXCEPT ATTESTATION, ALL OTHER INGREDIENTS, WHICH ARE NECES SARY TO PROVE A WILL VALID, ARE CONTEMPLATED IN THE SAID WILL. IN RESPEC T OF ATTESTATION, NO DOUBT, IT IS OBSERVED THE ASSESSEE HIMSELF SIGNED H AS BEEN NOTICED IN COMPARISON WITH A SIGNATURE OF THE ASSESSEE BUT IF A WILL DOES NOT SPECIFY THAT REQUIREMENTS, ANY PERSON WHO WOULD HAV E A FINANCIAL INTEREST IN THE ESTATE UNDER THE LAWS OF DESCENT AN D DISTRIBUTION CAN START AN ACTION IN THE COURT OF LAW TO CHALLENGE THE VALI DITY OF THE WILL. IT IS ALSO NOTICED IN THE SAID WILL THAT THE EXECUTOR, I. E. THE MOTHER OF THE ASSESSEE STATED THAT SHE HAS THREE CHILDREN I.E., T WO SONS AND ONE DAUGHTER. AMONGST THEM IS THE ASSESSEE BEFORE US BU T NONE CHALLENGED THE SAID WILL BEFORE THE COURT OF LAW. IN FACT, NO CONTRARY EVIDENCE HAS BEEN BROUGHT TO OUR NOTICE. THEREFORE, IT CAN B E SAFELY CONCLUDED THAT THE SAID WILL IS A VALID WILL AND THE SAME REG ULATED THE SUCCESSION AS DECLARED BY THE TESTATOR, I.E. THE MO THER OF THE ASSESSEE. IN RESPECT OF PAGE NO.16, WHERE THE PROFIT & LOSS ACCO UNT BELONGING TO THE MOTHER OF THE ASSESSEE IS PRODUCED, WHEREIN IT SHOW S THAT SHE HAS INVESTED IN SHARES, PARTICULARLY, IN MKJ DEVELOPMEN T LTD., STARLIGHT CREDIT (I) LTD. AND KHERAPATI VANIJYA LTD. WHICH AL TOGETHER COME TO RS.4,28,795/-. THEREFORE, IN OUR VIEW, THE AMOUNT T O AN EXTENT OF RS.4,28,795/- IS VALIDLY PROVED TO HAVE BEEN INVEST ED BY THE ASSESSEE IN HIS BUSINESS CONCERN FROM HIS PERSONAL ACCOUNT WHIC H IS THE SALE PROCEEDS OF SUCH SHARES WHICH HE GOT FROM WILL. THE REFORE, THE NATURE AND SOURCE OF THE FUND WAS RECEIVED FROM THE MOTHER OF THE ASSESSEE IS PROVED. AS REGARDS THE BALANCE SUM OF RS.16,000/- ( RS.4,44,795/- - 6 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 RS.4,28,795/-), NO ARGUMENTS WERE ADVANCED BY THE A SSESSEE BEFORE US. HENCE, WE DISMISS THE CLAIM OF THE ASSESSEE IN THIS REGARD. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 7. IN RESPECT OF GROUND NO.2 RELATING TO THE AD HOC DISALLOWANCE @ 20% OUT OF CAR EXPENSES, DEPRECIATION ON CAR AND TE LEPHONE EXPENSES TREATING THE EXPENSES INCURRED FOR PERSONAL USE. WH EN THE MATTER WENT BEFORE THE LD. CIT(A), THE LD. CIT(A) RESTRICTED TO ALL THE EXPENSES INCURRED BY THE ASSESSEE TO 10%, I.E. RS.10,993/- O UT OF CAR EXPENSES, RS.6,328/- REGARDING DEPRECIATION ON CAR AND RS.7,5 23/- OUT OF TELEPHONE EXPENSES ON THE GROUND THAT THE PERSONAL USE IN THE ABOVE EXPENSES CANNOT BE RULED OUT. 8. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ARGU ED THAT THE EXPENSES WERE INCURRED IN THE NORMAL COURSE OF THE BUSINESS AND NO AD HOC DISALLOWANCE IS JUSTIFIED. THE LD. COUNSEL SUBMITT ED THAT THE ASSESSEE MAINTAINED A MOTOR CAR FOR FACILITATING TR AVELLING FOR HIS BUSINESS PURPOSES AND INCURRED THE EXPENDITURE ON A CCOUNT OF CAR RUNNING EXPENSES. THE LD. COUNSEL FURTHER STATED TH AT THE ASSESSEE AND HIS EMPLOYEES HAD TO UNDERTAKE EXTENSIVE TRAVEL FOR THE BUSINESS AND USED THE CAR FOR BUSINESS PURPOSE ONLY. THE LD. COU NSEL FURTHER SUBMITTED THAT THOUGH THE ASSESSEE APPEARED FROM TI ME TO TIME AND FILED THE REQUIRED DETAILS BUT THE AO, WITHOUT ANY REASON WHATSOEVER, DISALLOWED ONE-FIFTH OF THE CAR EXPENSES AND DEPREC IATION ON CAR AND TELEPHONE EXPENSES ON AD HOC BASIS. THEREFORE, THE LD. COUNSEL PRAYED FOR DELETION OF THE ABOVE DISALLOWANCES. IN REPLY, THE LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES AND ARGUED THAT THE LD. CIT(A) IS JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 10% OF THE EXPENSES. AFTER HEARING THE SUBMISSIONS OF BOTH THE REPRESENTATIVES , WE ARE OF THE VIEW 7 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08 THAT ON MERE PRESUMPTION THE AO JUST MADE THE ADDIT IONS ON AD HOC BASIS WITHOUT ANY BASIS. THE AO HIMSELF OPINED THAT THE EXPENSES OF PERSONAL USE COULD NOT BE ASCERTAINED IN THE ABSENC E OF LOG BOOK. THE LD. CIT(A) HIMSELF HAS ADMITTED THAT THE AO HAS NOT IDENTIFIED ANY SPECIFIC ITEM OF PERSONAL EXPENSES. THE LD. CIT(A), WITHOUT GOING INTO THE DETAILS OF THE EXPENSES AND THE BASIS OF DISALL OWANCE, RESTRICTED TO 10% OF THE EXPENSES ON AD HOC BASIS. AD HOC DISALLOWANCE IS ALWAYS MADE WITHOUT HAVING ANY CONCRETE EVIDENCE THAT THE ASSESSEE HAS INCURRED THE EXPENSES FOR PERSONAL USE. WE, THEREFO RE, FIND NO REASON TO DISALLOW THE ABOVE EXPENSES INCURRED BY THE ASSESSE E. HENCE, WE DELETE THE SAME. THUS, THE GROUND NO.2 OF THE ASSESSEE IS ALLOWED AND AGAINST THE REVENUE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH DECEMBER, 2015. SD/- SD/- ( M. BALAGANESH) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 04 /12/2015 TALUKDAR/SR.PS COPY OF ORDER FORWARDED TO: 1 VED PRAKASH LOHIA, 14, N.S. ROAD, KOLKATA 700 001 2 ITO, WARD-36(4), KOLKATA 3 THE CIT(A), 4 5 CIT, 5. D.R. TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA 8 ITA NO.373/KOL/12 VED P RAKASH LOHIA ASSESSMENT YEAR: 2007-08