Shri Subodhbhai Ramanlal Desai, Baroda V. The DCIT, Circle-3(1), Baroda

ITA 403/AHD/2020

AI Insights

This case involves an appeal by Shri Subodhbhai Ramanlal Desai against the order of the Commissioner of Income Tax (Appeals)-1, Vadodara, which confirmed additions and disallowances made by the Assessing Officer for the assessment year 2012-13. The primary issues in the appeal included the addition of Rs. 35,01,000 under section 68 concerning the creditworthiness of loan creditors, disallowance of Rs. 46,982 out of site expenses, and disallowance of car expenses amounting to Rs. 53,056 on the grounds of non-business use. The Tribunal examined the evidences provided, including PAN numbers, bank statements, and income tax returns of the creditors, and considered judicial precedents before arriving at its decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131384 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 15-05-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 08-07-2020
• Other Referred Cases: Basir Ahmed Sisodia vs. ITO, PCIT vs. Ambe Trade Corp (P) Ltd., PCIT vs. Gopal Heritage, Swastik Industries v ITO, Parsoli Corporation Ltd. v ACIT, Shalom Charitable Ministries of India v. ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Tax effect; Additional evidence; Tax effect
• Section: 68; 133(6); 250

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Subod hbhai Ra man lal Desai, 1 25, Saik rupa Society , Opp . Gaytri Mandir, Nr. A mit Nagar Circle, Vadodara-39001 8 PAN: AC AP D385 5C (Appellant) Vs The DCIT, Circle-3(1), Baroda (Resp ondent) Asses see b y : M s. Arti N. Shah, A. R. Revenue by : Shri Rake sh J ha, Sr. D. R. Date of hearing : 16-05 -2 023 Date of pronouncement : 19-05 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax, Appeals-1, Vadodara, in proceeding u/s. 250 vide order dated 05/03/2020 passed for the assessment year 2012-13. ITA No. 403/Ahd/2020 Assessment Year 2012-13 I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 2 2. The assessee has taken the following grounds of appeal:- Grounds of Appeal Tax effect relating to each Ground of appeal (see note below) 1.1 The Learned CIT( Appeals) erred in law and on facts in confirming the addition of Rs.35,01,000/- made u/s.68 by the Assessing Officer in respect of Mr. Bhavesh Hiralal Balsara and Mrs. Mrudulaben Nandkumar Gandhi. It is submitted that it be so held now and the addition u/s.68 made by the learned Assessing Officer and confirmed by CIT( Appeals) be deleted. i j 1.2 The Learned CIT(Appeals) failed to appreciate that the Appellant is supposed to prove the source of deposit and not source of the source as has been mentioned by him. The Appellant has led all the evidences to prove the genuineness of the transaction, identity of the party and creditworthiness of the party and all the payments are received by cheques. It is submitted that in the facts and circumstances of the case, provisions of section 68 cannot be attracted and the addition of Rs.35,01,000/- made by the Learned Assessing Officer and confirmed by CIT( Appeals) be directed to be deleted. I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 3 2. The Learned CIT(Appeals) erred in law and on facts in confirming the disallowance of Rs.46,982/- out of site expenses on estimate basis. It is submitted that it be so held now and the disallowance confirmed by CIT( Appeals) be deleted. 3. The Learned CIT(Appeals) erred in law and on facts in confirming the disallowance of car expenses of Rs.53,056/- on the ground that there could be use of car for non-business purpose. It is submitted that the entire disallowance made by the learned Assessing Officer as well as confirmed by CIT(Appeals) is only on the basis of assumptions and presumptions, and hence, the same be directed to be deleted. 4. The Learned CIT(Appeals) erred in law and on facts in confirming interest of Rs.4,42,224/- charged u/s.234B of the I.T. Act, 1961 by the learned Assessing Officer. 5. Your Appellant prays to reserve the right to add, alter, amend and/or withdraw any of the above grounds of appeal. Total Tax Effect 749442/- Ground No. 1 (ld. CIT(A) erred in law and on facts in confirming the addition of Rs. 35,01,000/-) 3. The brief facts in relation to this ground of appeal are that the Assessing Officer made addition of Rs. 35,01,000/- with respect to two I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 4 parties as the assessee failed to prove the genuineness of the transaction and also the creditworthiness of the parties. 4. The assessee filed appeal before the ld. CIT(A). During the course of appellate proceedings, the assessee filed additional evidence like confirmation of the parties, PAN no, and bank statement. In the remand report proceedings, the Assessing Officer issued noticed u/s. 133(6) to the two parties, but the loan creditors did not respond to the letters issued by the Assessing Officer. Accordingly, the CIT(A) confirmed the addition with the following observations:- “I have carefully considered the material facts of the case and also verified the additional evidences submitted by the appellant. During the year under consideration, the appellant received Rs. 2,51,000/- and Rs.2,50,000/- by cheques on 22.06.2011 & 25.06.2011 from Shri Bhavesh Hiralal Balsara. The appellant filed confirmation and also bank account copy. The Axis Bank account provided by the appellant was a joint account standing in the name of Harilal Dullabhram Balsara and Mr. Bhayesh Hiralal Balsara. On 21.06.2011, Rs.2,00,000 was deposited by way of cash and on the same day there was transfer of Rs.54,000/- from the account of Balsara Harilal Dulbharam. On 23.06.2011, by cheque No.45366 Rs.2,51,000/- was transferred to Jay Gayatri Transport. Similarly, on 24.06.2011 Rs.2,00,000/- cash was deposited and Rs.50,000 was deposited by way of transfer from the same party i.e. Balsara Harilal Dulbharam and on 27.06.2011 vide cheque No. 45368 Rs.2,50,000/- was transferred to Jay Gayatri Transport. The appellant filed copy of the return of income for the AY 2012-13 in the case of Bhavesh Harilal Balsara, wherein it is found that the creditor was having the income of Rs.1,55,945/-only. In the light of these facts and also having regard to the comment of the AO, it is held that the loan creditor is not having means to advance substantial money to the appellant at the relevant point of time. The loan creditors not responded to the AO in time only to gain an opportunity and to file the papers as they wish without facing examination by the AO. The appellant stated that the reply to notice u/s. 133(6) of the Act was filed subsequent to the report of the AO but the evidence was furnished with regard to Shri. Bhavesh Hiralal Balsara only. The source of the cash deposit into the Axis bank account before transferring the funds to the appellant was not established. During the appellate proceedings, the Ld.AR was asked to submit the copy of the bank account from where transfer of Rs.54,000 and Rs. 50,000/- were effected to see I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 5 the genuineness of the transaction. In this regard the Ld.AR stated that the bank account is not available to explain the same. In factual matrix as discussed above which is clear that the appellant has not proved the genuineness of the transaction and also creditworthiness of Shri Bhavesh Hiralal Balsara and hence the addition made by the AO is hereby confirmed. The appellant filed confirmation, bank statement IT return with regard to Smt. Mrudalaben Nandkumar Gandhi as additional evidences. The same were examined by the AO and held that the loan creditor not responded to notice u/s. 133(6) of the Act to give evidence and hence the identity, creditworthiness of the loan creditor was not established. It was also stated that the genuineness of the transaction was not established by placing the full bank statement. The appellant in the rejoinder stated that the transaction was routed through the bank and loan creditor is having substantial income hence no addition should have been made by the AO. I have carefully considered the submissions and additional evidences filed by the appellant and also the report of the AO. During the course of appellant proceedings, the Ld.AR was asked to give the details of business activities of Smt. Mrudalaben Nandkumar Gandhi but the same was not furnished expressing his inability. The appellant filed confirmation, bank statement and I.T return in this connection. For the AY.2012-13 the loan creditor offered income of Rs. 4,96,855/- . The Kotak Mahinder Bank account of the loan creditor for the period 1.2.2012 to 11.02.2012 only filed as an additional evidence. On examination of the account, it was found that on 10.02.2012 Rs. 28,70,000/- and Rs. 1,20,000/- were credited by sweep and on the same day Rs. 30,00,000/- was transferred to Jay Gayatri Transport. Before the date of transfer i.e. upto 09-02-2012 the balance in the bank account was only Rs. 22719-64Ps. The Ld. A.R. was unable to explain where from the money was transferred to the said account so as to advance the money to the appellant. The loan creditor has not responded to the notice Issued by the AO even at the time of remand proceedings. The appellant has not proved the creditworthiness of the loan creditor with adequate evidences. Hence, it is held that the addition made by the AO is require confirmation and therefore confirmed. The argument of the appellant that the money was returned in the subsequent year is of no value as in the year under consideration the appellant failed to prove the ingredients required u/s 68 of the Act. In view of this, this ground of appeal is dismissed.” I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 6 5. The assessee is in appeal before us against the aforesaid additions confirmed by ld. CIT(A). Before us, the counsel for the assessee submitted that in the instant facts, the assessee had filed return of incomes, PAN No., letters of confirmations of the bank statements to show the identity, creditworthiness and genuineness of the transaction. The counsel for the assessee submitted that the amounts had been received through banking channel and in support thereof the bank statement of the parties had also been produced. It was further submitted that this being the assessment year 2012-13, once the assessee has shown the source of income, then, it is not the responsibility of the assessee to prove the “source of source” and if the Department had any issue, then necessary action may be taken against the parties, whose details have been filed by the assessee before the Department. Further, the counsel for the assessee submitted that the amount has also been repaid back by the assessee to both the parties and he placed reliance on the Gujarat High Court decision in support of the contention that once the loan taken has been repaid back to the parties, the genuineness of the transaction cannot be doubted. 6. In response, the ld. Departmental Representative placed reliance on the observations made by the ld. CIT(A) in the appeal order. 7. We have heard the rival contention and perused the material on record. In our considered view that assessee has given substantial documentation to prove the identity, creditworthiness and genuineness of the transaction viz. PAN No of the parties, confirmations with respect to both the parties, returns of income of both the parties, bank statements of the I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 7 parties and further the assessee has also repaid back the aforesaid amounts back to the parties. The Department has not challenged the validity/authenticity of any of the documents referred to above, which were furnished by the assessee before the revenue authorities. In the case of Basir Ahmed Sisodia vs. ITO (2020) 116 taxmann.com 375(SC), the Supreme Court held addition made by Assessing Officer towards cash credit amount shown against names of unregistered dealers was to be set aside as assessee during penalty proceedings had produced affidavits and statements of concerned unregistered dealers and Appellate Authority had accepted explanation offered by assessee. In the case of PCIT vs. Ambe Trade Corp (P) Ltd. (2022) 145 taxmann.com 27 (Gujarat), it was held that where assessee took loan from two parties and the assessee had furnished details such as copy of ledger account, bank statements, income tax return and balance sheet etc. of the loan givers and further the aforesaid loans taken by the assessee were repaid back by the assessee in the subsequent years, no addition u/s. 68 could be made on account of such loan. In the case of PCIT vs. Gopal Heritage 133 taxman.com 173 (Gujarat), it was held that where assessee had taken unsecured loans from some persons and Assessing Officer made addition under section 68 on ground that assessee had not been able to prove immediate source of cash-in-hands of party, since all ingredients contemplated under section 68 had been duly satisfied on aspect of identity of creditors, genuineness of transactions and their creditworthiness, said addition was to be deleted. 7.1 In view of the above, we are of the considered view that the assessee has been able to establish the identity, creditworthiness and the genuineness I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 8 of the transaction and respectfully following the decisions cited above, we are allowing the appeal of the assessee with respect to ground no. 1. 8. In the result, ground no. 1 of assessee’s appeal is allowed. Ground No. 2 ( disallowance of 46,982/- out of site expenses on estimate basis) 9. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer made disallowance of Rs. 46,982/- being 5% of the site expenses on the ground that the assessee failed to produce the bills and vouchers towards site expenses. 10. The assessee filed appeal before ld. CIT(A) who dismissed the appeal of the assessee with the following observations:- Ground No. 2: The appellant failed to produce the bills and vouchers towards Site Expenses and that led for disallowance of Rs.46,982/-. During the appellate proceedings, the appellant argued that full expenditure should have been allowed without resorting to adhoc disallowance. In this connection, it is noted that the appellant failed to prove the genuineness of the expenditure with all evidences as called for and as required by the AO. Hence, the AO reasonably disallowed a part of the amount and therefore it is felt that the addition made by the AO is justified. In the absence of evidence for the genuineness of the payment resorting to adhoc addition or estimated addition is an accepted principle. In view of this the addition made by the AO is hereby confirmed and the ground raised by the appellant is dismissed.” I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 9 11. The assessee is in appeal before us against the aforesaid order passed by ld. CIT(A). The contention of the counsel for the assessee is that these expenses have been regularly incurred by the assessee on year to year basis and the ld. Assessing Officer failed to appreciate that during the year consideration, the assessee had also offered to tax corresponding income with respect to these expenses amounting to Rs. 4.87 crores. Further, the Assessing Officer has made 5% disallowance on a purely adhoc basis which cannot be sustained. In response, the ld. Departmental Representative placed reliance on the observations made by ld. CIT(A) in the appellate order. 12. We have heard the rival contentions and perused the material on record. Before, deciding the issue, it would be useful to refer to some judicial precedents, to take a fair view in the matter. 12.1 In the case of Swastik Industries v ITO [2015] 61 taxmann.com 296 (Ahmedabad - Trib.), the Ahmedabad Tribunal held that where expenses claimed by assessee were not fully supported by vouchers and bills and some of bills/vouchers were self-made and not in chronological order, disallowance of one-fifth of expenses was proper. 12.2 The Mumbai Tribunal in the case of Parsoli Corporation Ltd. v ACIT [2019] 101 taxmann.com 121 (Mumbai - Trib.) observed as below: 13. We have deliberated on the issue under consideration and are unable to find any force in the contention of the Ld. A.R that the I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 10 lower authorities had erred in disallowing 10% of the aforesaid expenses. We are of the considered view that the aforementioned disallowance was carried out by the A.O not only for the reason that certain vouchers were not verifiable, but also for the reason that the assessee had failed to maintain any log book/record which could rule out incurring of any part of the aforementioned expenses for non business purposes. We are of the considered view that in the absence of irrefutable documentary evidence which could substantiate the claim of expense raised by an assessee, the assessing authority is left with no other option but in all fairness to disallow a part of such expenditure so claimed by the assessee. In the case before us, as the assessee had failed to maintain the log book/records, and had merely tried to support its claim of cash expenses on the basis of self made vouchers, thus we are of the considered view that the A.O not inspired by the said unsubstantiated claim of expenses by the assessee, had thus in all fairness disallowed 10% of such expenses leading to a consequential addition of Rs. 8,01,550/- in the hands of the assessee. We thus not finding any infirmity in the orders o the lower authorities, uphold the disallowed of 10% of the total expenses of Rs. 80,15,452/-. The Ground of Appeal No. 5 is dismissed. 12.3 The Cochin Tribunal in the case of Shalom Charitable Ministries of India v. ACIT [2018] 94 taxmann.com 266 (Cochin - Trib.) observed as below in respect of reasonable disallowance in respect of self- made vouchers: I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 11 23. We have heard the rival submissions and perused the record. The expenditure was disallowed on the basis of self made vouchers to the extent of Rs. 5 lakhs. In a normal trade practice, it is not possible to prove 100% bills and receipts from the recipients and there is every chance of making payments by way self made vouchers. However, there is every chance of inflating the expenditure by way of self- made vouchers. Hence, we direct the Assessing Officer to disallow only 20% of Rs. 5 lakhs, i.e. Rs. 1 lakh towards self made vouchers. Hence, this ground of appeal of the assessee is partly allowed. 12.4 In view of the facts in the instant case and the case laws cited in the preceding paragraphs, in our view in the absence of supporting evidences, genuineness of payment made in cash is not established and therefore disallowance upheld by the ld. CIT(A) at 5% of total cash expenses is found to be quite reasonable and justified. In our view the ld. CIT(A) has not erred in disallowing a sum of 5% of total cash expenses amounting to Rs. 46,982/- 13. In the result, ground no. 2 of assessee’s appeal is dismissed. Ground No. 3 (Disallowance of car expenses of Rs. 53,056/- on account of use of car for non-business purposes) 14. The brief facts in relation to this ground of appeal are that the Assessing Officer disallowed Rs. 2,65,282/- towards various expenses like depreciation on cars, petrol and diesel expenses, two and four wheelers expenses etc. The Assessing Officer was of the view that since it is not I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 12 possible to segregate the expenses incurred for business and non-business purposes and the assessee has failed to justify the said expenses were incurred wholly and exclusively for business purposes, he disallowed 20% i.e. 53,056/- out of total expenditure of Rs.2,65,282/- towards non-business purposes 15. In appeal, the ld. CIT(A) dismissed the appeal of the assessee with the following observations:- “Ground No.3: The AO disallowed Rs.2,65,282/- treating the same as not for the purpose of business considering the nature of expenditure being depreciation, oil and repairs etc. The appellant during the appellate proceedings stated that there is no personal benefit enjoyed by the appellant and hence disallowance should not have been made by the AO, Alternatively, the-appellant pleaded that the disallowance should have been made to the extent of 5 to 10% on total expenses towards personal usage. In this connection, it is to be noted that the appellant failed in producing the evidences to establish the expense. It was also a fact that the appellant not established the fact of not utilizing vehicles for personal use. In view of this a reasonable disallowance can be made for the purpose of personal usage of said vehicles. Sec. 38 of the Act also provides for such disallowance. Hence, there is no merit in argument and the addition made by the AO is hereby confirmed. This ground of appeal is dismissed.” 16. The assessee is in appeal before us with respect to addition sustained by the ld. CIT(A) with respect to this ground of appeal. We observe that in the instant facts, element of personal usages cannot be totally ruled out. Further, we observe that the assessee before ld. CIT(A) submitted that disallowance may be restricted to 5 to 10% of total expenses towards I.T.A No. 403/Ahd/2020 A.Y. 2012-13 Page No. Shri Subodhbhai Ramanlal Desai vs. DCIT 13 personal usages. Accordingly, looking into the facts in the instant case, in the interest of justice, the expenses are hereby restricted to 5% on account of personal usages by the assessee. 17. In the result, ground no. 3 of assessee’s appeal is partly allowed. 18. In the combined result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 19-05-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 19/05/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद