DCIT, New Delhi V. M/s Aggarwal Law Associates, New Delhi

ITA 3906/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3363 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 19-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RC DANDEY
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3906/DEL /2013 ASSTT. YEAR: 2010-11 DCIT, CIRCLE 37(1), NEW DELHI. VS AGGARWAL LAW ASSOCIATES, 34, 1ST FLOOR, BENGALI MARKET, BABAR LANE, NEW DELHI.-110001 (PAN: AABFA1893L) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. DANDEY, SR. DR RESPONDENT BY : SHRI P.C. YADAV, ADV. ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE DEPARTMENT AG AINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (A)- XXVIII, NEW DELHI FOR ASSESSMENT YEAR 2010-11. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LAW FIRM AND THE RETURN OF INCOME WAS FILED DECLARING INCOME OF RS.5,95,41,270/-. THE CASE WAS FIXED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER MADE THE FOLLOWING DISALLOWANCES:- ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 2 I) ON RECONCILIATION OF TDS AS PER BOOKS WITH FORM 26AS, THE ASSESSING OFFICER OBSERVED THAT THE ASSES SEE HAD CLAIMED CREDIT OF TDS AMOUNTING TO RS. 8,19,286/- WHICH WAS NOT APPEARING IN FORM 26AS. SUBSEQUENTLY, THE ASSESSEE PRODUCED TDS CERTIFICATE S OF RS. 7,19,423/- ONLY AND THE ASSESSING OFFICER PROCEEDED TO DISALLOW TDS CREDIT OF RS. 99,683/-. II) THE ASSESSING OFFICER FURTHER OBSERVED THAT IN CERT AIN CASES OF PROFESSIONAL INCOME, THE ASSESSEE HAD CLAI MED TDS CREDIT WHICH WAS EQUAL TO THE PROFESSIONAL RECEIPTS OFFERED FOR TAXATION. THE ASSESSING OFFIC ER APPLIED RULE 37BA(III) OF THE INCOME TAX RULES, 196 2 AND PROCEEDED TO DISALLOW TDS CREDIT OF RS. 31,10,744/- ON THE GROUND THAT THE ASSESSEE HAD SHOWN PROFESSIONAL INCOME OF RS. 34,56,382/- ONLY AND, THEREFORE, ONLY TDS CREDIT @10% ON SUCH INCOME WAS ALLOWABLE. III) THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS.25,455/- ON ACCOUNT OF DIFFERENCE IN CREDIT CARD EXPENSES AS PER THE AIR AND BOOKS OF ACCOUNTS. ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 3 IV) FURTHER, THE ASSESSING OFFICER MADE AN AD HOC DISALLOWANCE OF RS. 90,000/- ON ACCOUNT OF UNVERIFIABLE EXPENSES DEBITED UNDER REPAIRS AND MAINTENANCE EXPENSES, GENERAL EXPENSES AND OFFICE EXPENSES; V) THE ASSESSING OFFICER ALSO DISALLOWED RS. 1,42,174/ - BEING 10% OF VEHICLE MAINTENANCE AND VEHICLE DEPRECIATION ON THE GROUND THAT PERSONAL USE OF CAR COULD NOT BE RULED OUT. VI) THE ASSESSING OFFICER ALSO DISALLOWED 10% OF TELEPH ONE EXPENSES AND DEPRECIATION ON MOBILE ON THE GROUND O F PERSONAL USE AND THE DISALLOWANCE WAS MADE AT RS. 86,755/-. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LD. FI RST APPELLATE AUTHORITY WHO DIRECTED THE ASSESSING OFFICER TO ALL OW THE ASSESSEE TDS CREDIT OF RS. 31,10,744/-. THE LD. COMMISSIONE R OF INCOME TAX (A) ALSO DELETED THE DISALLOWANCE OF RS. 90,000 /- OUT OF AGGREGATE EXPENSES OF REPAIRS AND MAINTENANCE, GENE RAL EXPENSES AND OFFICE EXPENSES. SIMILARLY, THE LD. COMMISSION ER OF INCOME TAX (A) ALSO DELETED A DISALLOWANCE MADE OUT OF VEH ICLE RUNNING AND MAINTENANCE AND VEHICLE DEPRECIATION. THE LD. ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 4 COMMISSIONER OF INCOME TAX (A) ALSO DELETED THE DIS ALLOWANCE OUT OF TELEPHONE EXPENSES AND MOBILE DEPRECIATION. THE LD. COMMISSIONER OF INCOME TAX (A), HOWEVER, CONFIRMED THE DISALLOWANCE OF RS. 25,455/- PERTAINING TO DIFFEREN CE IN CREDIT CARD EXPENSES AS PER THE AIR INFORMATION AND THE BO OKS OF ACCOUNTS. 2.2 NOW, THE AGGRIEVED DEPARTMENT HAS APPROACHED TH E ITAT AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN ALLOWING TDS CREDIT OF RS.31,10,744/- WHICH WAS WITHDRAWN BY THE A.O. AS P ER THE PROVISIONS OF SECTION 199 OF THE I.T. ACT, 1961 READ WITH RULE 37BA OF THE I.T. RULES, 1962. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS GROSSLY ERRED IN ALLOWING TDS CREDIT OF RS. 31,10,744/- WHICH WAS WITHDRAWN BY THE A.O. NOT APPRECIATING THE FACT THAT TDS CREDIT SHALL BE GIVE N IN THE ASSESSMENT YEAR IN WHICH THE CORRESPONDING RECEIPTS ARE ASSESSABLE AS PER THE PROVISIONS OF RULES 37BA OF T HE I.T. RULES, 1962. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. ON ACCOUNT OF EXPENSES UNDER THE HEAD REPAIR & MAINTENANCE, GENERAL AND OFFICE EXPENSES WITHOUT APPRECIATING THE FACTS THAT HE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM WITH EVIDENCE. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. ON ACCOUNT OF VEHICLE MAINTENANCE & DEPRECIATION ON VEHICLE APPRECIATING THE FACTS THAT THE ASSESSEE HA S FAILED TO PRODUCE DOCUMENTARY EVIDENCE TO PROVE THAT THE A BOVE ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 5 EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY T HE A.O. ON ACCOUNT OF TELEPHONE EXPENSES AND DEPRECIATION O N MOBILE WITHOUT APPRECIATING THE FACTS THAT THE ASSE SSEE FAILED TO PRODUCE DOCUMENTARY EVIDENCE TO PROVE THA T THE ABOVE EXPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. 6. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO EACH OTHER. 7. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR MO DIFY THE GROUND OF APPEAL AT ANY TIME. IT IS PRAYED THAT THE ORDER OF CIT (A) IS CONTRARY TO THE FACTS ON RECORD AND THE SETTLED POSITION OF LAW; AN D THE ORDER OF THE A.O. DESERVES TO BE RESTORED. 3. THE LD. SR. DR SUBMITTED THAT THE ASSESSEE WAS F OLLOWING THE CASH SYSTEM OF ACCOUNTING AND NOT MERCANTILE SY STEM OF ACCOUNTING AND, THEREFORE, THE CREDIT OF TDS CAN BE GIVEN ONLY IN THE YEAR IN WHICH THE PROFESSIONAL INCOME WAS OFFER ED FOR TAX. IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAD SHOWN PRO FESSIONAL INCOME OF RS. 34,56,382/-, ONLY 10% OF THE TDS WAS TO BE ALLOWED AS TAX CREDIT TO THE ASSESSEE. THE LD. SR. DR ALSO READ OUT THE PROVISIONS OF SECTION 199 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT') AND RULE 37BA(3)(I) OF THE INCOME TAX RULES AND SUBMITTED THAT THE ASSESSING OFFICER HAD FOLLOWED THE PROVISIONS AS PROVIDED IN THE INCOME TAX ACT AND TH E RULES AND, THEREFORE, THE ORDER OF THE ASSESSING OFFICER SHOUL D BE RESTORED. ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 6 3.1 ON THE OTHER GROUNDS BEING RAISED BY THE DEPART MENT, THE LD. SR. DR PLACED RELIANCE ON THE FINDINGS OF THE A SSESSING OFFICER AND VEHEMENTLY ARGUED THAT THE DISALLOWANCES HAD BE EN MADE AFTER DUE CONSIDERATION OF THE FACTS THAT IN RESPEC T OF VEHICLE RUNNING EXPENSES, LOG BOOK WAS NOT MAINTAINED. SIM ILARLY, IN RESPECT OF REPAIRS AND MAINTENANCE EXPENSES, GENERA L EXPENSES AND OFFICE EXPENSES, COMPLETE VOUCHERS WERE NOT AVA ILABLE. SIMILARLY, IN RESPECT OF TELEPHONE EXPENSES ALSO, U SE OF TELEPHONE FOR PERSONAL USE WAS NOT NEGATED BY THE ASSESSEE BY EVIDENCE. 4. IN RESPONSE, THE LD. AR SUBMITTED THAT AS FAR AS THE ISSUE OF TDS CREDIT WAS CONCERNED, THERE COULD NOT BE A DOUB LE TAXATION OF THE INCOME AND THE MISMATCH HAD OCCURRED DUE TO CASH SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE WHEREAS THE DEDUCTORS HAD ACCOUNTED FOR THE SAME ON ACCRUAL BAS IS. IT WAS ALSO SUBMITTED THAT THE TDS WAS DULY DEPOSITED BY T HE DEDUCTORS WITHIN TIME. RELIANCE WAS PLACED ON THE ORDER OF T HE ITAT DELHI BENCH IN THE CASE OF DCIT VS M/S LLOYD INSULATION ( INDIA) LTD. IN ITA NO. 2400/DEL/2011 WHEREIN THE ITAT DELHI BENCH HAD EXAMINED AND DISCUSSED THE PROVISIONS OF SECTION 19 9, SECTION 191, SECTION 190 AND RULE 37BA AND, THEREAFTER, HAD UPHELD THE ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 7 ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ALL OWING CREDIT OF TDS. 4.1 ON THE OTHER GROUNDS RAISED BY THE DEPARTMENT, THE LD. AR PLACED RELIANCE ON THE FINDINGS OF THE LD. COMMISSI ONER OF INCOME TAX (A) AND VEHEMENTLY ARGUED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS GROUND NOS. 1 AND 2 OF THE DEPARTMENTS APPEAL RELATING TO TDS CREDIT OF RS. 3 1,10,744/- ARE CONCERNED, THE ASSESSING OFFICER HAS OBSERVED THAT THE TDS CREDIT OF ONLY RS. 3,45,638/- WAS ALLOWABLE AS THE ASSESSEE HAD SHOWN PROFESSIONAL INCOME OF RS. 34,56,382/- ONLY. HOWEVER, WHILE DOING SO, THE ASSESSING OFFICER HAS NOT CONSI DERED THE RESPONSE OF THE ASSESSEE TO HIS SHOW CAUSE NOTICE W HEREIN THE ASSESSEE HAS STATED THAT IT HAS CLAIMED TDS OF RS. 34,56,382/- (AS HAS BEEN DEDUCTED UP TO 31.3.2010) AS THE PROFE SSIONAL INCOME AND THE REMAINING FEES HAVE BEEN CLAIMED WIT HOUT TDS IN SUBSEQUENT FINANCIAL YEARS AS AND WHEN THEY WERE RE CEIVED. THE ASSESSEE HAS ALSO CLARIFIED THAT THIS HAS BEEN DONE SO BECAUSE THE ASSESSEE WAS FOLLOWING THE CASH SYSTEM OF ACCOU NTING. THE LD. COMMISSIONER OF INCOME TAX(A), WHILE DIRECTING THE ASSESSING ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 8 OFFICER TO ALLOW THE CREDIT OF TDS, HAS NOTED THAT ORDERS OF ITAT DELHI BENCH IN DCIT VS M/S LLOYD INSULATION (INDIA) LTD. (SUPRA), ITO VS SIKKA INTERNATIONAL FREIGHT SERVICES PVT. LT D. IN ITA NO. 2617/DEL/2008, PRAVEEN KUMAR GUPTA VS ITO IN ITA NO . 1252/DEL/2012 AND THE HON'BLE DELHI HIGH COURT ON I TS OWN MOTION VS COMMISSIONER OF INCOME TAX IN WRIT PETITI ON (CIVIL) NO. 2659/2012 AND ALL INDIA FEDERATION OF TAX PRACTITIO NERS VS. UOI AND OTHERS IN WRIT PETITION (CIVIL) NO.5443/2012 HA VE DIRECTED THAT THE CREDIT BE ALLOWED. WE HAVE ALSO PERUSED T HE ORDERS CITED BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) AND D ULY NOTED BY HIM IN HIS APPELLATE ORDER WHILE ALLOWING RELIEF TO THE ASSESSEE. WE ARE OF THE CONSIDERED OPINION THAT THE RATIO OF THE JUDGMENTS AS MENTIONED IN THE ORDER HAS BEEN RIGHTLY APPLIED BY THE LD. CIT (A). THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE DIRECTIONS OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THIS R EGARD AND WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO. 1 & 2 OF THE DEPARTMENTS APPEAL ARE DISMISSED. 5.1 AS FAR AS GROUND NO. 3 REGARDING ADDITION ON AC COUNT OF REPAIRS AND MAINTENANCE, GENERAL AND OFFICE EXPENSE S IS CONCERNED, THE LD. COMMISSIONER OF INCOME TAX (A) H AS NOTED THAT THE DISALLOWANCE HAD BEEN MADE BY THE ASSESSIN G OFFICER ON ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 9 AN ESTIMATE WITHOUT PINPOINTING ANY SPECIFIC VOUCHE RS FOR DISALLOWANCE. THE LD. COMMISSIONER OF INCOME TAX ( A) HAS ALSO NOTED THAT A SIMILAR DISALLOWANCE HAS BEEN MADE IN ASSESSMENT YEAR 2007-08 AGAINST WHICH THE ASSESSEE HAD NOT FIL ED ANY APPEAL. A PERUSAL OF THE ASSESSMENT ORDER SHOWS TH AT THE LD. COMMISSIONER OF INCOME TAX (A) IS ABSOLUTELY CORREC T IN OBSERVING THAT THE DISALLOWANCE HAS BEEN MADE ON AN ESTIMATE AND WE ARE ALSO IN AGREEMENT WITH THE ADJUDICATION OF THE LD. COMMISSIONER OF INCOME TAX (A) THAT AD HOC DISALLOWANCE WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR LACUNA IS NOT SUSTAINABLE. THEREFORE, WE UPHOLD THE ADJUDICATION OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE ALSO AND DISMISS GROUND NO. 3 OF THE DEPARTMENTS APPEAL. 5.2 AS FAR AS THE DISALLOWANCE ON ACCOUNT OF PERSON AL USE OF VEHICLE MAINTENANCE IS CONCERNED, ALTHOUGH THE LD. COMMISSIONER OF INCOME TAX(A) HAS DELETED THE DISAL LOWANCE, IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS NOT BEEN MAI NTAINING ANY LOG BOOK AND, THEREFORE, WHILE WE UPHOLD THE ACTION OF THE LD. COMMISSIONER OF INCOME TAX(A) IN DELETING THE DISAL LOWANCE ON ACCOUNT OF DEPRECIATION, WE ARE OF THE CONSIDERED O PINION THAT 10% OF VEHICLE RUNNING AND MAINTENANCE EXPENSES IS A ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 10 REASONABLE ESTIMATE AND IN ABSENCE OF LOG BOOK, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(A) ON T HIS ISSUE AND RESTORE THE DISALLOWANCE. THUS, GROUND NO. 4 IS PA RTLY ALLOWED. 5.3 AS FAR AS GROUND NO. 5 PERTAINING TO DISALLOWAN CE OF 10% OUT OF TELEPHONE EXPENSES IS CONCERNED, WE ARE OF THE C ONSIDERED OPINION THAT IN ABSENCE OF DETAILS, THIS DISALLOWAN CE ALSO NEEDS TO BE UPHELD. HENCE, WE SET ASIDE THE ORDER OF THE LD . COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE AND RE STORE THE DISALLOWANCE. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS P ARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20 TH NOVEMBER, 2017. SD/- SD/- (R.K. PANDA ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20 TH NOVEMBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR ITA NO. 1068/DEL/2017 ASSESSMENT YEAR 2013-14 11