M/s Singh Automobiles, Kanpur Dehat V. Income Tax Officer-3(4), Kanpur

ITA 389/LKW/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5369 (ITAT-LUCKNOW)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 13-06-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Corroborative evidences
• Section: 143(3)

Judgement Text

I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 M/S SINGH AUTOMOBILES, NH-2, BARA AKBARPUR, KANPUR DEHAT. PAN:ABBFS7397G VS. INCOME TAX OFFICER, WARD-3(4), KANPUR. (APPELLANT) (RESPONDENT) O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-I, KANPUR DATED 29/03/2019 PERTAININ G TO ASSESSMENT YEAR 2010-11. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THAT THE LEARNED C.I.T.(APPEALS) HAS ERRED IN L AW AND ON FACTS IN CONFIRMING THE FOLLOWING ADDITIONS MADE BY THE A.O. ON ERRONEOUS GROUNDS CONTRARY TO THE FACTS ON RECORD : - S.NO. PARTICULARS OF ADDITIONS AMOUNT (IN RS.) I. 25% DISALLOWANCE OUT OF EXPENSES UNDER THE HEAD CASUAL LABOUR ON ACCOUNT OF UNVERIFIABLE NATURE. 12,185/- II. DISALLOWANCE OF 25% OUT OF CONVEYANCE EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE 18,561/- III. 25% OUT OF EXPENSES UNDER THE HEAD EMPLOYEES REFRESHMENT EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 34,538/- APPELLANT BY SHRI PRADEEP SETH, F.C.A. RESPONDENT BY S HRI JAI NATH VERMA, D.R. DATE OF HEARING 04/11/2019 DATE OF PRONOUNCEMENT 04/11/2019 I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 2 IV. 25% OUT OF GENERATOR REPAIRS EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 29,351/- V. 25% OUT OF MISCELLANEOUS EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 7,700/- VI. 25% OUT OF EXPENSES UNDER THE HEAD OTHE R EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 12,803/- VII. 25% OUT OF REPAIRS AND MAINTENANCE EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 18,007/- VIII. 25% OUT OF SALES PROMOTION EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 14,553/- IX. 25% OUT OF TELEPHONE EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 13,795/- X. 25% OUT OF TRAVELLING EXPENSES ON ACCOUNT OF UNVERIFIABLE NATURE. 24,335/- XI. ENTIRE EXPENSES CLAIMED UNDER THE HEAD VEHICLE REPA IRS, VEHICLE RUNNING AND VEHICLE INSURANCE ON ACCOUNT OF UNVERIFIABLE NATURE 4,47,443/- 2. THAT THE LEARNED C.I.T.(A) HAS FURTHER ERRED IN LAW AND ON FACTS IN HOLDING THAT NO BILLS AND VOUCHERS RELATIN G TO VARIOUS EXPENSES WERE PRODUCED BEFORE THE A.O. WHICH IS CON TRARY TO THE FACTS STATED IN ASSESSEE'S WRITTEN REPLY DATED 30.01.2013 PARA 30 IN REPLY TO THE CORRESPONDING QUERY IN THE QUESTIONNAIRE ISSUED BY THE A.O. ON 14.01.2013 REQUIRING PRODUCTI ON OF BOOKS OF ACCOUNTS, BILLS, VOUCHERS AND CHALLAN ETC. WHICH AS PER THE ABOVE REPLY WERE DULY PRODUCED AND THE FACTS STATED IN THE ABOVE REPLY WERE NOT CONTRADICTED BY A.O. 3. THAT THE LEARNED C.I.T.(APPEALS) HAS FURTHER ERR ED IN LAW AND ON FACTS IN HOLDING THAT THE A.R. OF THE APPELL ANT SHOWED HIS INABILITY TO PRODUCE THE SAME BEFORE HIM WHICH IS TOTALLY CONTRARY TO THE FACTS ON RECORD SINCE THE LEARNED C .I.T. (APPEALS) NEVER REQUIRED THE AUTHORIZED REPRESENTAT IVE TO PRODUCE THE BILLS & VOUCHERS AS THE COUNSEL NEVER A PPEARED BEFORE HIM IN PERSON BUT ONLY FILED WRITTEN ARGUMEN TS, WHICH HAVE BEEN REPRODUCED IN HIS ORDER, AND REQUESTED TH AT THE APPEAL MAY BE DECIDED ON THE BASIS OF THE WRITTEN A RGUMENTS I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 3 WHICH HE HAS ACTUALLY DONE AND THE LEARNED C.I.T.(A PPEALS) ALSO DID NOT ISSUE ANY NOTICE FOR PRODUCTION OF BILLS. T HE COUNSEL'S AFFIDAVIT UNDER RULE 10 OF THE INCOME TAX (APPELLAT E TRIBUNAL) RULES 1963 IS BEING FILED IN SUPPORT OF THE ABOVE G ROUND. 4. THAT THE LEARNED C.I.T. (APPEALS) HAS FURTHER ER RED IN LAW AND ON FACTS IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT AND REJECTING BOOKS FOR THE FIRST TIME, FO R CONFIRMING ADDITIONS MADE BY A.O. OUT OF VARIOUS EXPENSES TO T HE EXTENT OF 25% WHICH WAS NEVER INVOKED BY THE A.O. AND NO OPPO RTUNITY WAS ALLOWED TO THE ASSESSEE BEFORE INVOKING THE SAM E, WHILE AT THE SAME TIME CONFIRMING ALLOWANCE BY A.O. OF 75% O F EXPENSES WHICH IS UNTENABLE IN LAW. 5. THAT THE LEARNED C.I.T. (APPEALS) HAS FURTHER FA ILED TO APPRECIATE THAT THE PROPER BOOKS OF ACCOUNTS AND VO UCHERS WERE MAINTAINED AND WERE DULY AUDITED U/S 44AB. 6. THAT THE ORDER PASSED BY THE LEARNED C.I.T.(APPE ALS) IS ARBITRARY, UNJUST, EXCESSIVE, BAD IN LAW AND AGAINS T THE PRINCIPLES OF NATURAL JUSTICE. 2. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT ASSE SSING OFFICER MADE AD HOC DISALLOWANCE OUT OF VARIOUS EXPENSES DEBITED IN THE PROFIT & LOSS ACCOUNT AND FURTHER DISALLOWED ENTIRE EXPENSES CLAI MED UNDER THE HEAD VEHICLE REPAIRS, VEHICLE RUNNING AND VEHICLE INSURA NCE. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND NO DISCREPANCY IN THE BOOKS OF ACCOUNT WAS FOUN D AND NEITHER BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED, THEREFORE, T HE ADDITIONS SUSTAINED BY LEARNED CIT(A), EQUIVALENT TO 25% OF SUCH EXPENSES, IS NOT JUSTIFIED. RELIANCE IN THIS RESPECT WAS PLACED ON A JUDGMENT O F HON'BLE ALLAHABAD BENCH OF THE TRIBUNAL IN CASE OF SHRI SANJEEV VAISH VS. ACIT IN I.T.A. NO.184/ALLD/2018 AND ON KOLKATA BENCH OF THE TRIBUN AL IN THE CASE OF ACIT VS. SHRI DEBDAS DUTTA IN I.T.A. NO.1595/KOL/2014. AS REGARDS THE VEHICLE RUNNING EXPENSES, LEARNED A. R. SUBMITTED THAT THE ENTIRE EXPENSES RELATING TO VEHICLE WERE DISALLOWED BY HOLDING THAT THE VEHI CLES WERE NOT APPEARING IN THE FIXED ASSETS CHART OF THE ASSESSEE. IN THIS RESPECT LEARNED A. R. I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 4 SUBMITTED THAT THE SUBMISSIONS WERE MADE BEFORE THE ASSESSING OFFICER AND LEARNED CIT(A) EXPLAINING THE FACT THAT THE VEHICLE S BELONGED TO PARTNERS OF THE FIRM AND WERE USED FOR THE PURPOSE OF BUSINESS AND ONLY 75% OF THE TOTAL EXPENSES WERE CLAIMED IN THE PROFIT & LOSS AC COUNT. IT WAS ARGUED THAT THE ARBITRARY DISALLOWANCE OF ENTIRE VEHICLE EXPENS ES IS NOT JUSTIFIED. AS REGARDS THE FINDINGS OF LEARNED CIT(A) THAT NO BOOK S OF ACCOUNT WERE PRODUCED BEFORE THE ASSESSING OFFICER, LEARNED A. R . TOOK ME TO PAGES 18 & 19 OF THE PAPER BOOK WHERE COPY OF QUESTIONNAIRE, I SSUED BY THE ASSESSING OFFICER, WAS PLACED AND I WAS ALSO TAKEN TO REPLY T O THE QUESTIONNAIRE, PLACED AT PAGES 20 & 21 OF THE PAPER BOOK, AND MY S PECIFIC ATTENTION WAS INVITED TO PARA 30 PAGE 21 OF THE PAPER BOOK WHERE THE ASSESSEE HAD SUBMITTED BOOKS OF ACCOUNT, BILLS, VOUCHERS AND CHA LLANS ETC. FOR THE VERIFICATION PURPOSE. THEREFORE, IT WAS ARGUED THA T THE FINDING OF LEARNED CIT(A) AND ASSESSING OFFICER ARE CONTRARY TO THE FA CTS. 3. LEARNED D. R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 4. I HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE FIRST ISSUE OF AD HOC DISALLOWANCE, TAKEN BY THE ASSESSEE VIDE GROUND NOS. 1 TO 5, I FIND THA T THE CRUX OF GROUNDS OF APPEAL IS THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS DISALLOWED 25% OF EXPENSES BOOKED BY THE ASSESSEE UNDER VARIOUS HEADS OF EXPENSES AND THE DISALLOWANCE OF ENTIRE EXPENSES CLAIMED UNDER THE H EAD VEHICLE REPAIRS, VEHICLE RUNNING AND VEHICLE INSURANCE. I FIND THAT 25% DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON AD HOC BASIS WITHO UT PIN POINTING ANY DISCREPANCY IN THE PROFIT & LOSS ACCOUNT AND WITHOU T REJECTING THE BOOKS OF ACCOUNT. AS REGARDS THE FINDINGS OF LEARNED CIT(A) THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE DID NOT PRODUCE BOOK S OF ACCOUNT, BILLS AND VOUCHERS, I FIND THAT VIDE QUESTIONNAIRE DATED 14./ 01/2013, THE ASSESSEE I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 5 WAS REQUIRED VIDE PARA 30 TO PRODUCE BOOKS OF ACCOU NT, BILLS, VOUCHERS, CHALLANS ETC. AND VIDE LETTER DATED 30/01/2013 THE ASSESSEE HAD SUBMITTED BOOKS OF ACCOUNT, BILLS, VOUCHERS, CHALLANS ETC. WH ICH IS APPARENT FROM PAGE 21 PARA 30 OF THE PAPER BOOK. THEREFORE, THE FINDI NGS OF LEARNED CIT(A) THAT ASSESSEE DID NOT PROVIDE BOOKS OF ACCOUNT, BIL LS, VOUCHERS, CHALLANS ETC. TO THE ASSESSING OFFICER IS CONTRARY TO THE FACTS A ND MOREOVER, NO SPECIFIC DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT OR BILLS AND VOUCHERS. THE ASSESSING OFFICER SIMPLY MADE THE AD HOC DISALL OWANCE BY HOLDING THAT NO SUPPORTING EVIDENCE IN THE FORM OF BILLS OR VOUC HERS COULD BE PRODUCED. SUCH DISALLOWANCE, WITHOUT REJECTION OF BOOKS OF AC COUNT AND WITHOUT POINTING OUT ANY DISCREPANCY, IS AGAINST THE SETTLE D LAW AS PER THE ORDER OF ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SANJEEV VAISH VS. ACIT IN I.T.A. NO.184/ALLAHABAD/2018, ORDER DATED 19/12/ 2018 WHEREIN IT HAS HELD THAT NO SUCH AD HOC DISALLOWANCE CAN BE MADE W ITHOUT REJECTION OF BOOKS OF ACCOUNT AND HAS HELD AS UNDER: 6. THE FACTS ARE NOT DISPUTED. IT IS SETTLED LAW THAT WHERE THE TAXING AUTHORITIES DO NOT POINT OUT ANY DEFECT IN THE CLAIM OF THE ASSESSEE, NOR ARE THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE REJECTED, NO SUCH AD HOC DISALLOWANCE AT A WHIMISICAL FIGURE CAN BE MADE AND THE CLAIM OF THE ASSESSEE RE QUIRED TO BE ACCEPTED AS SUCH. IN THIS REGARD, REFERENCE CAN BE MADE TO THE FOLLOWING DECISIONS: 1. ACIT VS. ALLIED CONSTRUCTION [2007] 106 TTJ 616 (I.T.A.T. DELHI BENCH. 2. SEASONS CATERING SERVICES (P) LTD. VS. DCIT [2010] 43 DTR 397 (I.T.A.T. DELHI BENCH) 3. M/S KANHA VANASPATI LTD. VS. JCIT [2006] 7 MTC 339 (I.T.A.T. LUCKNOW BENCH) 4. CIT VS. SUBHASH CHAND AGARWAL [2013] 58 SOT 122 (I.T.A.T. ALLAHABAD BENCH) 7. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSES SEE IS FOUND TO BE JUSTIFIED. IT IS ACCEPTED AS SUCH. TH E ADDITIONS MADE ARE, HENCE, DELETED IN THEIR ENTIRETY. I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 6 5. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSES SEE, AS REGARDS AD HOC DISALLOWANCE, IS JUSTIFIED AND ORDER OF LEARNED CIT(A) IN THIS RESPECT IS REVERSED. 6. AS REGARDS THE DISALLOWANCE OF ENTIRE VEHICLE EX PENSES AMOUNTING TO RS.4,47,443/-, I FIND THAT ASSESSING OFFICER, ON TH E BASIS THAT THE ASSESSEE WAS NOT OWNING ANY VEHICLE, DISALLOWED THE ENTIRE E XPENSES RELATING TO VEHICLE, WHICH THE LEARNED CIT(A) HAS UPHELD. THE ASSESSEE, BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE VEHICLES BELO NGED TO THE PARTNERS OF THE FIRM AND ONLY 75% OF THE VEHICLE RUNNING EXPENS ES HAVE BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT. HOWEVER, THE AUTHORITIE S BELOW HELD THAT NO SUPPORTING EXPLANATION COULD BE GIVEN AS TO HOW 75% OF EXPENSES WERE CALCULATED. I OBSERVE THAT NO SUCH EVIDENCE IS FIL ED BEFORE ME ALSO. I ALSO FIND FROM PAGE 7 OF THE PAPER BOOK THAT VEHICLE RUN NING EXPENSES AMOUNTING TO RS.2,98,731/- HAS BEEN CLAIMED BY PASS ING A JOURNAL ENTRY ON 31/03/2010 AND NO BREAK-UP IS AVAILABLE. THEREFORE , I DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE FILE OF THE ASSESSI NG OFFICER TO READJUDICATE THE ISSUE OF DISALLOWANCE OF VEHICLE EXPENSES. ACC ORDINGLY, GROUND NOS. 1 TO 5 ARE PARTLY ALLOWED AND PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 7. GROUND NO. 6 IS GENERAL AND DO NOT REQUIRE ANY A DJUDICATION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 04/11 /2019) SD/. ( T. S. KAPOOR ) ACCOUNTANT MEMBER DATED:04/11/2019 *SINGH I.T.A. NO.389/LKW/2019 ASSESSMENT YEAR:2010-11 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW