The Income Tax Officer, Amritsar. V. M/s Wazir Singh Enterprises, Amritsar.

ITA 399/ASR/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7797 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 02-08-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 20-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Keywords: Depreciation; Business expenditure; Proportionate interest; Commercial expediency
• Section: 133(6); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.399(ASR)/2016 ASSESSMENT YEAR: 2012-13 INCOME TAX OFFICER, WARD 5(4), AMRITSAR. VS. M/S. WAZIR SINGH ENTERPRISES, 68-A, MAQBOOL ROAD, AMRITSAR. PAN:AAAFW-4668A (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAHUL DHAWAN (LD. D.R.) RESPONDENT BY: SH. TARUN BANSAL (LD. ADV.) SH. NAVENDU KHANNA (LD.C.A ) DATE OF HEARING:02/08/2017 DATE OF PRONOUNCEMENTS: 25/09/2017 ORDER PER N. K. CHOUDHRY: THE INSTANT APPEAL HAS BEEN FILED BY THE REVENUE DEP ARTMENT, ON FEELING AGGRIEVED AGAINST THE ORDER DATED 28.04.201 6 PASSED BY THE LD. CIT(A), AMRITSAR, IN APPEAL NO. 103/2015-16 FOR ASST. YEAR: 2012-13. 2. THE REVENUE DEPARTMENT HAS RAISED THE FOLLOWING GROU NDS OF APPEAL: I) THE LD. CIT(A)-2 HAS ERRED IN DELETING THE ADDI TION OF RS. 49,64,412/- MADE BY THE AO ON A/C OF DISALLOWANCE OF PROPORTION ATE INTEREST U/S 36(1)(III) OF THE INCOME TAX ACT, 1961, WHICH HAVE BEEN AT THE RA TE 12% ON THE AMOUNT ADVANCED BY THE ASSESSEE TO VARIOUS PERSONS/PARTIES AND HAS CORRECTLY BEEN MADE AS THERE IS NO PROOF OF BUSINESS EXPEDIENCY OR BUSINESS PURPOSE INVOLVED IN GIVING THE ADVANCES TO THESE PARTIES AS THE ASSESSE E IS ENGAGED IN THE BUSINESS OF COMMISSION AGENT, TRADING OF FIBRE, CHEMICALS, P ILLLOWS, SALT, CEMENT AND FABRIC ETC. II) THE LD. CIT(A)-2 HAS ERRED IN DELETING THE ADDI TION OF RS.1,12,230/ WHICH HAVE ALSO BEEN MADE BY MAKING DISALLOWANCE @ 20% OF THE EXPENSES U/S 37(1) OF THE INCOME TAX ACT, 1961. THE LD. CIT(A)2 WHILE DELETING THE ADDITIONS HAS NOT ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 2 KEPT THE FACT OF SOME PERCENTAGE OF LEAKAGE INVOLVE D IN MAKING THE DAY TO EXPENDITURE FOR RUNNING OF BUSINESS. SECONDLY THE A PPELLANT HAS ALSO NOT MADE ANY ARGUMENT AGAINST THE DISALLOWANCE. III) THE LD. CIT(A)-2 HAS ERRED IN DELETING THE ADDITIONS OF RS.1,00,000/- WHICH HAVE ALSO BEEN MADE BY MAKING PROPORTIONATE DISALLO WANCE OF THE EXPENSES U/S 37(1) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF UNV ERIFIABLE TRAVELLING EXPENSES. THE LD. CIT(A)2 WHILE DELETING THE ADDITIONS HAS NO T KEPT THE FACT OF SOME PERCENTAGE OF LEAKAGE INVOLVED AS THERE IS ALSO INV OLVEMENT OF PERSONAL EXPENDITURE MADE BY THE PARTNERS DURING THE BUSINES S TOURS. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE DERIVED INCOME FROM COMMISSION AND AS TRADER OF FIBRE, CHEMICALS, PILLOWS, SALT AND CEMENT, FABRICS ETC. THE ASSESSEE DECLARED TAXABLE INCOME OF RS.4,03,542/- BY FILING IN COME TAX RETURN ON 29.09.2012 IN RESPECT OF ASST. YEAR:2012-13 AND THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT AND LATER ON T HE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CASS. STATUTOR Y NOTICES HAVE BEEN ISSUED AND AUDITED BALANCE SHEET ALONG WITH TRADING/P&L ACCOUNT AND OTHER RELEVANT DOCUMENTS WERE OBTAINED DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER RAISED A DEMAND OF RS.22.91,800/- BY DISALLOWING BANK INTEREST OF RS.49,64,412/- AND RS.1,12,230/- ON PRESUMPTIVE/ESTIMAT ED BASIS @ 20% OUT OF VARIOUS BUSINESS EXPENSES QUA SUCH AS CONVEYANCE, GENERAL EXPENSES, REPAIR AND MAINTENANCE, SALE PROMOTIO N AND STAFF WELFARE AND A SUM OF RS.1,00,000/- ON TRAVELING EXPEN SES OF RS.11,43,430/- WHICH WERE CLAIMED AS BUSINESS EXPENSES U/S 37 (1) OF THE I.T. ACT AND A SUM OF RS.2,83,320/- ON PRESUMPTIVE/ ESTIMATED ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 3 BASIS @ 20% OUT OF VARIOUS BUSINESS EXPENSES SUCH A TELEPHON E, CAR, PETROL AND MAINTENANCE CAR INSURANCE AND DEPRECIATION. 4. FEELING AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED TO FILE FIRST APPEAL BEFORE THE LD. CIT(A) , WHO ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITIONS MADE BY THE ASSESSIN G OFFICER. 5. THE REVENUE DEPARTMENT ON FEELING AGGRIEVED AGAINS T THE ORDER PASSED BY THE LD. CIT(A) PREFERRED TO FILE THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN D ELETING THE ADDITION OF RS.49,64,412/- MADE BY THE AO ON A/C OF DISALLOWANCE OF PROPORTIONATE INTEREST U/S 36(1)(III) OF THE INCOME TAX ACT, 1961, WH ICH HAVE BEEN @ 12% ON THE AMOUNT ADVANCED BY THE ASSESSEE TO VARIOUS PERSONS/ PARTIES AND HAS CORRECTLY BEEN MADE AS THERE IS NO PROOF OF BUSINESS EXPED IENCY OR BUSINESS PURPOSE INVOLVED IN GIVING THE ADVANCES TO THESE PARTIE S AS THE ASSESSEE IS ENGAGED IN THE BUSINESS OF COMMISSION AGENT, TRADING OF FIBRE, CHEMICALS, PILLLOWS, SALT, CEMENT AND FABRIC ETC. FURTHER, THE LD. CIT(A) HAS ERRED IN DELETING THE AD DITION OF RS.1,12,230/ WHICH HAVE ALSO BEEN MADE BY MAKING DISALL OWANCE @ 20% OF THE EXPENSES U/S 37(1) OF THE INCOME TAX ACT, 1961. THE LD. CIT(A) WHILE DELETING THE ADDITIONS DID NOT CONSIDER THE FACT THAT T HERE WOULD BE SOME PERCENTAGE OF LEAKAGE INVOLVED IN MAKING THE DAY TO DAY EXPENDITURE FOR ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 4 RUNNING OF BUSINESS. SECONDLY THE APPELLANT HAS ALSO NOT MADE ANY ARGUMENT AGAINST THE DISALLOWANCE. FURTHER THE LD. DR ARGUED THAT THE LD. CIT(A) HAS E RRED IN DELETING THE ADDITIONS OF RS.1,00,000/- WHICH HAVE ALSO BEEN MADE BY MAKING PROPORTIONATE DISALLOWANCE OF THE EXPENSES U/S 37(1) OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF UNVERIFIABLE TRAVELLING EXPENSES. TH E LD. CIT(A) WHILE DELETING THE ADDITIONS DID NOT CONSIDER THAT THERE CAN BE INVOLVEMENT OF PERSONAL EXPENDITURE MISCARRIED BY THE PARTNERS DURING THE BUSINESS TOURS. 6. ON THE CONTRARY, THE LD. AR SUBMITTED THAT THE LD. CIT(A) RIGHTLY DELETED ALL THE ADDITIONS BY PASSING LOGICAL AND REASONA BLE ORDER ALTHOUGH THE LD. A.O CALLED FOR THE DETAILS/STATUS OF 25 DEBT ORS/PARTIES WHICH WAS GIVEN BY THE ASSESSEE, HOWEVER, OUT OF WHICH, THE A.O L EFT THREE PARTIES SUO MOTO AND MADE THE ADDITION OF BALANCE 22 PARTIES BY C ALCULATING INTEREST AMOUNT @ 12% PER ANNUM AS CHARGED BY THE BANK ON THE OD LIMIT. THE LD. AR SUO MOTTO ADDED OTHER ACCOUNT OF SISTER CON CERN M/S WAZIR SINGH YARNS AT RS.60,49,106/- FOR WHICH NO EXPLANATION AS EVER ASKED FOR AND LD. A.O HAS NOT APPLIED HIS MIND NEITHER ISSUED AN Y NOTICE U/S 133(6) TO CALL FOR ANY INFORMATION FROM ANY OF THE DEBTORS /PAR TIES REGARDING THE PRESENT STATUS OF THE DEBTORS/PARTIES NOR TOOK ANY FUR THER EXPLANATION OR CLARIFICATION FROM THE ASSESSEE. ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 5 FURTHER THE LD. AR SUBMITTED THAT EVEN OTHERWISE FOR THE SAKE OF ARGUMENT, ALL THE 23 PARTIES FOR WHICH THE LD. AO MA DE THE ADDITIONS ARE TO BE TREATED AS SISTER CONCERNS OR NON-BUSINESS PARTIES EVEN THEN THE ASSESSEE INTEREST FREE FUNDS ARE MORE THAN THE TOTAL VAL UE OF DEBTS. FURTHER THE LD. AO ALSO IGNORED MOST OF THE BALANCES O F THE DEBTORS WERE OPENING BALANCES AND NO ADDITION HAS BEEN MADE BY THE LD. AO IN THE PRECEDING OR SUCCEEDING YEARS ON THIS ISSUE. THE LD. AR SUB MITTED THAT ON THE AFORESAID CONSIDERATION, THE LD. CIT(A) PASSED THE O RDER WHICH DOES NOT REQUIRE TO BE INTERFERED WITH. 7. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES O F THE CASE, AS IN THE INSTANT CASE, THE ASSESSEE HAD FURNISHED THE COPIE S OF LEDGER ACCOUNT OF SUCH DEBTORS DURING THE ASSESSMENT PROCEEDING, HOW EVER, THE AO DID NOT MAKE ANY ENQUIRY DIRECTLY FROM THE DEBTORS TO VERIFY THE NATURE OF DEBTS APPEARING THEIR NAMES IN THE BOOKS OF ACCOUNTS OF T HE ASSESSEE AS ON 31 ST MARCH, 2012, THEREFORE, THE ONUS WAS UPON THE DEPARTM ENT TO REJECT THE EVIDENCE/ARGUMENT OF THE ASSESSEE THAT THE AMOUNT OF SUND RY DEBTORS PERTAIN TO THOSE PARTIES WHO ARE EITHER TRADE DEBTORS HAVING OPENING BALANCES OR RUNNING BALANCES OR ADVANCES GIVEN DURING TH E YEAR WHICH HAVE BEEN PAID DURING THE REGULAR BUSINESS WHICH TANTAMOUNT TO THE COMMERCIAL EXPEDIENCY OF BUSINESS. IT IS NOT IN CONTROVERSY THAT THE AO WITHOUT MAKING ANY VERIFICATION FROM THE DEBTORS U/S 133(6)/133 OF TH E ACT AND WITHOUT ANY CORROBORATE EVIDENCE, ON HIS OWN IMAGINATION OBSERVED T HAT THE ASSESSEE ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 6 HAD MADE ADVANCES TO VARIOUS PARTIES/PERSONS WITH WHOM NO BUSINESS TRANSACTION WAS MADE DURING THE YEAR. FURTHER, THE LD. ASSESSING OFFICER HAS ALSO NOT CONSIDERED T HAT THE ASSESSEE FIRM HAD INTEREST FREE FUNDS AND SECURED AMOUNT OF RS.273.94 LACS FROM HIS FAMILY MEMBERS AS ON 31 ST MARCH, 2012, THEREFORE, THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS AVAILABLE AND WHICH IS UNDISPUTABLY HIGHER THAN THE DEBTS AMOUNT AND FINALLY AS THE LD. A SSESSING OFFICER RELIED UPON THE CASE OF DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LIMITED, 286 ITR 1, (20 06) FOR MAKING THE SAID DISALLOWANCE OF RS.49,64,412/- UNDER THE PROVISION OF SECTION 36(1)(III) OF THE ACT, IN FACT HAS BEEN OVERRULED BY THE APEX CO URT IN THE CASE OF HERO CYCLE PVT. LTD. VS. CIT(CENTRAL), LUDHIANA (SC) (2015 ) 379 ITR 347. ON THE AFORESAID ANALYZATION INTER ALIA OTHER REASONS, THE LD. CIT(A) DELETED THE SAID ALLOWANCE, HENCE, WE DO NOT FIND ANY INFIRMITY, IRREGULARITY, OR PERVERSITY IN THE CONCLUSION OF THE LD. CIT(A), THE REFORE, GROUND NO.(I) STANDS DISMISSED. REGARDING GROUND NO.2, THE LD. CIT(A) OBSERVED THAT THE DISALLOWANCE OF EXPENSES U/S 37(1) OF THE ACT QUA EXPENDITURE IN P& L ACCOUNT UNDER THE HEADS CONVEYANCE, GENERAL EXPENSES, REPAIR AND MAINTENAN CE (ELECT), REPAIR AND MAINTENANCE (GENERAL), SALES PROMOTION, AND STAFF WELFARE TOTALED TO RS.5,61,143/-. THE A.O DISALLOWED 20% OF THE EXPENSE W HICH COMES TO RS.1,12,230/-, HOWEVER, THE LD. CIT(A) DELETED THE SA ME BY HOLDING THAT ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 7 A.O HAS NOT POINTED OUT EVEN A SINGLE VOUCHER WHICH WAS UNVERIFIABLE IN NATURE BEING AN INTERNAL VOUCHER, THEREFORE, THE A.O WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF 20% OF THE TOTAL EXPENDITU RE CLAIMED UNDER THE RELEVANT HEADS AS MENTIONED ABOVE. WE DO NOT FIND AN Y INFIRMITY, PERVERSITY AND ILLEGALITY FOR THE DELETION OF THE AFORESAID ADD ITION UNDER THIS ISSUE. HENCE, THE GROUND NO.(II) STANDS DISMISSED. GROUND NO.3 RELATES TO THE ADDITION OF RS.1,00,000/- ON ACCOUNT OF UNVERIFIABLE TRAVELING EXPENSES. IN THIS RESPECT ALSO TH E LD. CIT(A) OBSERVED THAT THE AO HAS NOT POINTED OUT EVEN A SINGLE VOUCHER WHICH WAS OF UNVERIFIABLE NATURE BEING AN INTERNAL VOUCHER OR OF PERSONAL NATURE AND IT IS NOT THE CASE OF THE AO THAT THE SOURCE OF PAYMENT THROU GH CREDIT CARD REMAINED UNEXPLAINED. WE DO NOT FIND ANY INFIRMITY, PERVERSITY OR ILLEGALITY FOR THE DELETION OF SAID ADDITION OF RS.1,00,000/-. HENCE, THE GROUND NO.(III) STANDS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE DEPA RTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 .09.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY ) ACCOUNTANT MEMBER JUDIC IAL MEMBER DATED:25.09.2017. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: ITA NO.399/ASR/2016 ASS T. YEAR: 2012-13 8 (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER