M/s. Ralhan Construction Company, New Delhi V. ACIT, New Delhi

ITA 3928/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8594 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 05-07-2016
• Court: TRIBUNAL

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3928/DEL/2016 ASSESSMENT YEAR: 2012-13 RALHAN CONSTRUCTION COMPANY, S - 44, GREATER KAILASH-II, NEW DELHI. PAN- AAAFR4038H (APPELLANT) VS. ACIT, CIRCLE 62(1), NEW DELHI. (RESPONDENT) APPELLANT BY S/SH. SALIL AGARWAL & SHAILESH GUPTA, ADV. RESPONDENT BY SH. SURENDER PAL, SR. DR ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD.CIT(A)-XX, NEW DELHI DATED 29.04.2016 FOR THE ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS : 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING AN ADHOC DISALLOW ANCE OF A SUM OF RS.5,00,000/- ON ACCOUNT OF PURCHASE OF MATERIAL AN D THAT TOO, WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUN TS SO MAINTAINED BY THE ASSESSEE - APPELLANT AND AS SUCH, THE SAID DISA LLOWANCE NEEDS TO BE DELETED. 1.1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS FAILED TO APPRECIATE THE BASIC FACT THAT ALL THE PURCHASES WERE DULY BACKED BY DATE OF HEARING 21.02.2019 DATE OF PRONOUNCEMENT 09 .04.2019 ITA NO. 3928/DEL/2016 2 MATERIALS/ EVIDENCES, WHICH HAVE BEEN ARBITRARILY B RUSHED ASIDE AND THAT TOO WITHOUT REBUTTING THE DOCUMENTARY EVIDENCES SO FURNISHED BY THE ASSESSEE - APPELLANT AND THUS, THE ADDITION SO MADE NEEDS TO BE DELETED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING A DISALLOWANCE OF RS. 1,03,295/- AND RS. 13,521/- OUT OF TOTAL DISALLOWANCES OF RS. 2,06,589 /- AND 27,042/- ON ACCOUNT OF VEHICLE RUNNING, MAINTENANCE, DEPRECIATI ON AND TELEPHONE EXPENSES AND THE SAID DISALLOWANCE BEING MADE ON AC COUNT OF ALLEGED PERSONAL ELEMENT INVOLVED NEEDS TO BE DELETED, AS S UCH. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS) HAS GROSSLY ERRED IN SUSTAINING THE PART DISALLOWANCE AND THAT TOO, WITHOUT PROVIDING TO THE ASSESSEE, A FAIR, PROPER AND MEANINGFUL OPPO RTUNITY OF BEING HEARD, THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE AND THUS, SUCH AN ORDER OF IS VITIATED BOTH ON FACT AND IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ITS RETURN OF INCOME ON 30.09.2012 DECLARING INCOME OF RS.72,89,670/-. T HE RETURN WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICES WERE ISSUED TO T HE ASSESSEE. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONTRACTOR FOR MAHANAGAR TELEPHONE NIGAM LIMITED, CENTRAL PUBLIC WORKS DEPARTMENT ETC. THE N ET PROFIT WAS DECLARED @ 5.13% ON THE GROSS RECEIPT OF RS.14,19,88,700/-. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ASKED TO PRODUCE ORIGINAL BOOKS OF ACCOUNTS, BILLS, VOUCHERS, MUSTER-ROLLS, WAGE SHEET S ETC. WHICH WERE PRODUCED AND CHECKED ON TEST CHECK BASIS. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD DEBITED A SUM OF RS.7,93,70,407/- ON A CCOUNT OF PURCHASE OF MATERIAL. THE ASSESSEE WAS ASKED TO PRODUCE BILLS/V OUCHERS FOR THE SAME. ON VERIFICATION, THE ASSESSING OFFICER NOTICED THAT SO ME BILLS/VOUCHERS ARE MISSING AND THE ASSESSEE ALSO EXPLAINED THAT THESE MIGHT HAVE BEEN MISPLACED DUE TO WORK AT VARIOUS SITES OR MANY A TIME, THEY A RE INCURRED OUT OF IMPREST ITA NO. 3928/DEL/2016 3 ACCOUNT. THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.5 LACS ON ACCOUNT OF UNVERIFIABLE PURCHASE TO PLUG THE LEAKAGE OF REVENU E. 3. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE HAD CLAIMED EXPENSES OF RS.5,42,015/- AND ON ACCOUNT OF DEPRECIATION OF RS.4,90,928/-. THE ASSESSING OFFICE R FOR WANT OF LOGBOOK MADE DISALLOWANCE OF 1/5 TH OF THE SAID EXPENSES TO PREVENT THE REVENUE LEAKAG E AGAINST PERSONAL USE OF VEHICLE AND ACCORDINGLY MAD E AN ADDITION OF RS.2,06,589/-. 4. FURTHER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED TELEPHONE EXPENSES TO THE EXTENT OF RS.1,35,211/- I N THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE DID NOT MAINTAIN ANY PERSONAL TELEPHONE CALL REGISTER FOR PARTNERS/EMPLOYEES. THEREFORE, IN ORDER TO PREV ENT LEAKAGE OF REVENUE ON ACCOUNT OF PERSONAL USE, HE DISALLOWED 1/5 TH OF THESE EXPENDITURES, AMOUNTING TO RS.27042/- U/S. 37(1) OF THE ACT. THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE SU BMISSIONS OF THE ASSESSEE UPHELD THE ADDITION OF RS.5 LACS ON ACCOUNT OF PURC HASE OF MATERIAL AND REDUCED THE DISALLOWANCE OF VEHICLE EXPENSES AND TE LEPHONE EXPENSES BY 50%. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE TH E TRIBUNAL. 5. THE LD. AR OF THE ASSESSEE, REITERATING THE SUBM ISSIONS MADE BEFORE THE LD. CIT(A), SUBMITTED THAT ALL THE BILLS AND VOUCHE RS WERE PRODUCED BEFORE THE ITA NO. 3928/DEL/2016 4 ASSESSING OFFICER AND WITHOUT POINTING OUT ANY SPEC IFIC VOUCHERS, THE ASSESSING OFFICER HAS MADE LUMP SUM DISALLOWANCE TO PLUG THE LEAKAGE OF REVENUE OF RS.5,00,000/- WHEREAS TOTAL PURCHASES OF THE ASSESSEE HAVE BEEN ACCEPTED. HE ALSO PLACED RELIANCE BEFORE US ON THE ASSESSMENT ORDER FOR THE A.Y. 2014-15 IN WHICH NO SUCH ADDITION HAS BEEN MAD E ON THESE COUNTS WHEREAS THE FACTS WERE SIMILAR. IT WAS FURTHER SUBM ITTED THAT THE MOTOR CAR AND TELEPHONE HAVE BEEN USED EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS. THEREFORE, THE ADDITIONS MADE BY ASSESSING OFFICER AND REDUCED BY LD. CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW. 6. ON THE OTHER HAND, THE LD. DR SUPPORTED THE IMPU GNED ORDER. HE SUBMITTED THAT COMPLETE BILLS/VOUCHERS WERE NOT PRO DUCED BEFORE THE ASSESSING OFFICER AND PERSONAL USE OF VEHICLE AND T ELEPHONE CANNOT BE DENIED. THEREFORE, THE LD. CIT(A) WAS JUSTIFIED TO SUSTAIN THE IMPUGNED ADDITIONS. 7. AFTER HEARING BOTH THE PARTIES AND GOING THROUGH THE ENTIRE MATERIAL ON RECORD WE FIND THAT THE AO HAS NOTICED THAT SOME BI LLS/VOUCHERS WERE MISSING AND THE ASSESSEE HAS ALSO ACCEPTED THAT VOUCHERS MI GHT HAVE BEEN MISPLACED DUE TO WORK AT VARIOUS SITES OR MANY A TIMES, THESE WOULD HAVE BEEN INCURRED OUT OF IMPREST ACCOUNT. HOWEVER, THE FINDINGS OF TH E ASSESSING OFFICER COULD NOT BE REBUTTED PROPERLY. THEREFORE, THE LOWER AUTH ORITIES ARE JUSTIFIED IN MAKING ADDITION OF RS.5,00,000/-. THE PRIMARY ONUS LIES UPON THE ASSESSEE TO PROVE THE EXPENSES CLAIMED IN THE PROFIT AND LOSS A CCOUNT. THE ASSESSEE HAS SUBMITTED BEFORE THE LD. CIT(A) THAT ALL PAYMENTS W ERE MADE BY ACCOUNT ITA NO. 3928/DEL/2016 5 PAYEE CHEQUES, BUT HE HAD NOT PRODUCED COMPLETE BIL LS AND VOUCHERS BEFORE THE ASSESSING OFFICER. WE, THEREFORE, DO NOT FIND A NY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ADDITION. 8. REGARDING DISALLOWANCE OUT OF VEHICLE EXPENSES O F RS.1,03,295/-, IT IS OBSERVED THAT THE DEPRECIATION OF RS.49093/- IS INC LUDED IN IT. THE DEPRECIATION IS FIXED EXPENDITURE IN NATURE WHETHER IT IS USED EXCLUSIVELY FOR THE BUSINESS OR PARTIALLY FOR PERSONAL USE. THUS, T HE ELEMENT OF SOME PERSONAL USE HAS NO ROLE TO PLAY WHILE GRANTING DEPRECIATION ON VEHICLE. THEREFORE, THE ASSESSEE DESERVES DEDUCTION OF DEPRECIATION OF RS.4 9,093/- AND REST OF THE ADDITION DESERVES TO BE SUSTAINED FOR WANT OF PROPE R VERIFICATION. IN RESPECT OF TELEPHONE EXPENDITURE, WE ARE OF THE OPINION, THAT THE LD. CIT(A) HAS RIGHTLY DEALT WITH THIS ISSUE AND WE DO NOT FIND ANY JUSTIF ICATION TO INTERFERE WITH THE SAME. IT IS ALSO MENTIONED THAT PRINCIPLE OF RES J UDI CATA IS NOT APPLICABLE IN THE INCOME-TAX PROCEEDINGS AND THE INCOME OF THE AS SESSEE IS ASSESSED ON THE BASIS OF FACTS AND CIRCUMSTANCES ATTENDING TO A PAR TICULAR YEAR. ACCORDINGLY, THE APPEAL OF THE ASSESSEE DESERVES TO BE PARTLY AL LOWED. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.04.2019. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09.04.2019 *AKS*