The ACIT, Circle-6, Surat V. Shri Ajay P.Ijardar, Dist.Surat

ITA 4102/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5902 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-05-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRI H P MEENA
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Unexplained expenditure; Gift; Depreciation
• Section: 133(6)

Judgement Text

ITA.NO.4102/AHD/07 A.Y. 2004-05. 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHMDABAD . BEFORE SHRI T.K. SHARMA AND SHRI D.C.AGRAWAL. SURAT CAMP . ITA NO. 4102/AHD/200 7 (ASSESSMENT YEAR : 2004-2005) ASSISTANT COMMISSIONER OF INCOME TAX, CCIRCLE-6, ROOM NO.623, AAYAKAR BHAVAN, MAJURA GATE, SURAT. SHRI AJAY P. IJARDAR, NEAR POST OFFICE, DUMAS, DIST. SURAT. (APPELLANT) VERSUS (RESPONDENT) FOR THE APPELLANT: SHRI SHRI H.P. MEENA, SR.D.R. FOR THE RESPONDENT SHRI SAPNESH SHETH. PAN NO. AAHP 11680 H ORDER SHRI D. C. AGRAWAL : THIS IS AN APPEAL FILED BY THE REVENUE RAISING FO LLOWING GROUND :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE A ND IN LAW, THE LD. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS.13,00,000/ - MADE BY THE A.O. ON ACCOUNT OF UNEXPLAINED EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. C.I.T.(A), SURAT HAS ERRED IN DELETING THE ADDITION OF RS. 2,42,438/- MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF DEPRECIAT ION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. C.I.T. (A) HAS ERRED IN DELETING THE ADDITION OF RS .6,80,000/- MADE BY THE A.O. ON ACCOUNT OF PAYMENT RECEIVED FROM M/S. SPAN ENTERPRISE TREATING AS REVENUE RECEIPT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT (A), SURAT OUGHT TO HAVE UPHELD THE ORDER OF THE AS SESSING OFFICER. ITA.NO.4102/AHD/07 A.Y. 2004-05. 2 2 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS DOING BUSINESS OF TRADING IN GIFT ARTICLES AND AUDIO-VIDEO C.DS. THE FIRST ISSUE RELATES TO A DDITION REGARDING UNEXPLAINED EXPENDITURE. DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE A.O. NOTICED THAT ASSESSEE HAS CLAIMED TO HAVE MADE PURCHASES AND RE-FURNISHED HIS SHOP AND COMPLEX THROUGH M/S. SPAN ENTERPRISE, SULTANABAD, DUMAS, SURAT. IN THIS WORK THE ASSESSEE SEEMS TO HAVE MADE PAYMENT OF RS.13 LACS TO M/S. SPAN ENTERPRISE. THE A.O. ISSUED NOTICE U/S. 133(6) TO THE ALLEGED M/S. SPAN ENTERPRISE WHICH WAS RETURNED UN- SERVED WITH THE REMARKS THAT NO ONE IS KNOWN WITH THIS NAME. THE A.O. THEN REQUIRED TH E ASSESSEE TO PRODUCE ABOVE MENTIONED PARTY ALONG WITH ITS BANK ACCOUNTS, STATE MENT, PASS-BOOK SHOWING THE RECEIPT OF PAYMENT FROM THE ASSESSEE AND ALSO THE ACKNOWLED GEMENT OF THE RETURN FILED FOR THE ASSESSMENT YEAR 2004-05. THE ONLY EVIDENCE WHICH WA S SUBMITTED BY THE ASSESSEE BEFORE THE A.O. WAS AN ESTIMATE OF EXPENDITURE ON R E-FURNISHING WORK RAISED BY M/S. SPAN ENTERPRISES. THE ASSESSEE CLAIMED THAT PAYMENT S WERE MADE TO THE CONTRACTOR I.E. M/S. SPAN ENTERPRISES THROUGH ACCOUNT PAYEE CHEQUES . WHEN A.O. EXAMINED BANK STATEMENTS OF THE ASSESSEE HE FOUND THAT NO PAYMENT OF RS.13 LACS HAS BEEN MADE TO ANY CONCERN BY THE NAME M/S. SPAN ENTERPRISES. ACCORDIN GLY, THE A.O. CAME TO THE FOLLOWING CONCLUSION :- 1. THERE HAS BEEN NO PROOF ESTABLISHING THE CLAIMED PAYMENTS TO THE ALLEGED SPAN ENTERPRISES. 2. THE ASSESSEE HAS FAILED TO FURNISH THE GENUINE A ND ACCEPTABLE CONFIRMATIONS OF THE ALLEGED SPAN ENTERPRISES. 3. NO PROOF REGARDING THE PAYMENT TO THE ALLEGED SP AN ENTERPRISES HAS BEEN ADVANCED BY THE ASSESSEE. 4. THE ASSESSEE HAS ALSO FAILED TO ADVANCE ANY EVID ENCE OF TRANSFER OF THE CLAIMED AMOUNT FROM HIS BANK ACCOUNT TO THE ACCOUNT OF THE ALLEGED SPAN ENTERPRISES. 5. THE BANK ACCOUNT STATEMENT SUBMITTED BY THE ASSE SSEE DOES NOT SHOW ANY PAYMENTS MADE TO THE ALLEGED SPAN ENTERPRISES. 3. HE THEREAFTER, PROPOSED AN ADDITION OF RS.13 LAC S AS UNPAID EXPENDITURE. HE CONCLUDED THAT NO PURCHASE OF FURNITURE OR FIXTURES WAS MADE AND THERE WAS NO ADDITION TO ITA.NO.4102/AHD/07 A.Y. 2004-05. 3 3 THE FIXED ASSETS. EVEN THE DEPRECIATION SO CLAIMED WAS DISALLOWED AS ACCORDING TO THE A.O. NO WORK IN REALITY TOOK PLACE. 4. THE LD. C.I.T.(A) DELETED THE ADDITION ON THE BA SIS OF INQUIRIES CARRIED OUT BY HIM THROUGH THE A.O. AND THROUGH THE BANK WHEREIN IT WA S REPORTED TO HIM THAT BANKERS CHEQUE FOR RS.13 LACS IN THE NAME M/S. SPAN ENTERPR ISES WAS ISSUED WHICH WAS FINALLY PAID TO M/S. SPAN ENTERPRISES. 5. BEFORE US THE LEARNED D.R. SUBMITTED THAT THERE IS NO EVIDENCE OR EXISTENCE OF SPAN ENTERPRISES. NOBODY KNOWS TO WHOM THE PAYMENT HAS BEEN ACTUALLY MADE AND FOR WHAT PURPOSE. THEREFORE, EXPENDITURE SO CLAIMED IS NOT GENUINE. 6. ON THE OTHER HAND, LD. A.R. SUBMITTED THAT A TE RM LOAN WAS GRANTED BY THE BANK TO THE ASSESSEE, OUT OF WHICH BANKERS CHEQUE OF RS .13 LACS WAS GIVEN TO M/S. SPAN ENTERPRISES FOR PURCHASE OF INTERIORS AND FURNISHIN G OF THE SHOP. AS THE MONEY WAS NOT DIRECTLY WITHDRAWN FROM THE BANK, IT DID NOT FIGURE IN THE REGULAR BANK ACCOUNT BUT MONEY WAS ACTUALLY PAID DIRECTLY BY THE BANK THROUGH BANK ERS CHEQUE THROUGH A TERM OF LOAN OF RS.31,50,000/-. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. EVEN THOUGH THE BANK MIGHT HAVE ISSUED BANKERS CHE QUE IN FAVOUR OF M/S. SPAN ENTERPRISES BUT IT IS SURPRISING THAT THERE IS NO C ONTRACTOR OR PARTY BY THIS NAME. EVEN THE EXTENT OF WORK DONE BY THE ASSESSEE IN FURNISHING O R INTERIOR OF THE SHOP HAS NOT BEEN PROVIDED. THEREFORE, VALUE OF THE SERVICES, EVEN IF RENDERED, TO THE ASSESSEE CANNOT BE KNOWN. AS A RESULT WE ARE NOT SATISFIED THAT ASSESS EE HAS WHOLLY AND EXCLUSIVELY ACTUALLY INCURRED THE EXPENDITURE FOR THE SERVICES RENDERED TO THE EXTENT FOR WHICH PAYMENT IS MADE. WE ACCORDINGLY, CONFIRM THE DISALLOWANCE TO T HE EXTENT OF 20% OF RS.13 LACS, FOLLOWING THE PRINCIPLES LAID DOWN IN THE CASE OF V IJAY PROTEINS LTD., VS. ACIT (1996) 58 ITD-428 (AHD.). THIS GROUND OF THE REVENUE IS PARTL Y ALLOWED. ITA.NO.4102/AHD/07 A.Y. 2004-05. 4 4 8. THE NEXT GROUND IS REGARDING CLAIM OF DEPRECIATI ON. SINCE WE HAVE HELD ABOVE THAT SOME FURNISHING AND RENOVATION OF SHOP HAS BEEN DON E AT BEST TO THE EXTENT OF 80% OF THE SUM OF RS.13 LACS. AS THIS MUCH SUM HAS BEEN TREATE D AS INCURRED ON SUCH WORK, THE DEPRECIATION WILL BE ALLOWED ONLY ON SUCH REDUCED S UM. AS A CONSEQUENCE PART OF THE DEPRECIATION IS DISALLOWED. NECESSARY CALCULATION W ILL BE DONE BY THE A.O. THIS GROUND OF THE REVENUE IS ALSO ALLOWED IN PART. 9. THE NEXT GROUND IS ABOUT ADDITION OF RS.6,80,000 /- ON ACCOUNT OF ALLEGED PAYMENT RECEIVED FROM M/S. SPAN ENTERPRISES TREATING AS REV ENUE RECEIPT. IT WAS CLAIMED BY THE ASSESSEE THAT THIS PAYMENT WAS MADE TO SOME MATERIA L SUPPLIER ON BEHALF OF M/S. SPAN ENTERPRISES DURING THE CONTINUATION OF CONTRACT. TH E SAID PAYMENT WAS RETURNED BY THE PARTY BY CHEQUE WHICH WAS DEPOSITED IN THE BANK ACC OUNT AS REFLECTED IN THE BANK STATEMENT. AS THIS PAYMENT WAS REIMBURSEMENT OF CA PITAL EXPENDITURE, IT CAN NOT BECOME INCOME OF THE ASSESSEE. THE A.O. DID NOT ACCEPT THE EXPLANATION ON THE GROUND THAT EXISTENCE OF EXISTENCE OF M/S. SPAN ENTERPRISES IS NOT ESTABLISHED AND IT IS ALSO NOT KNOWN THAT THIS EXPENDITURE WAS INCURRED FOR CAPITAL PURP OSES. NO DOCUMENTARY EVIDENCE HAS BEEN FURNISHED. THE LD. C.I.T.(A) HOWEVER, DELETED THE ADDITION ON THE GROUND THAT M/S. SPAN ENTERPRISES HAS RETURNED THIS MONEY TO THE ASS ESSEE OUT OF RS.13 LACS. 10. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT T HIS PAYMENT OF RS.6,80,000/- IS NO WHERE LINKED OR RELATED TO M/S.SPAN ENTERPRISES AND IS ONLY A CREDIT ENTRY IN THE ACCOUNT OF THE ASSESSEE WHICH REMAINED UNEXPLAINED. THERE I S NO NEXUS BETWEEN RS.13 LACS AND THIS RS.6,80,000/-. THE LD. A.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT(A). 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. TO GIVE AN OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS BETWEEN MONEY PAID TO M/S. SPAN ENTERPRISES A ND RETURN OF RS.6,80,000/-. THE PARTY FROM WHOM THE MONEY WAS RECEIVED WILL BE IDEN TIFIED. IT WILL ALSO BE CLARIFIED WHETHER RS.6,80,000/- WAS IN ADDITION OF RS.13 LACS OR INCLUDED IN RS.13 LACS. FURTHER, THE DETAILS OF THE PAYMENT OF RS.6,80,000/- WILL BE SUBMITTED BEFORE THE A.O. THE A.O. MAY CARRY OUT NECESSARY INQUIRIES TO SATISFY HIMSEL F ABOUT THE ALLEGED NEXUS BETWEEN ITA.NO.4102/AHD/07 A.Y. 2004-05. 5 5 RS.6,80,000/- AND EXPENDITURE CLAIMED TO BE INCURRE D ON FURNISHING OF THE SHOP. IN CASE IT IS FINALLY FOUND THAT RS.6.80 LAKHS WAS PART OF RS. 13 LAKHS THEN THIS ADDITION OF RS.6.80 LAKHS WILL NOT BE MADE AND OUT OF RS.13 LAKHS, COVE RED IN FIRST GROUND, RS.6.80 LAKHS WILL BE REDUCED AND 20% OF THE BALANCE WILL BE DISALLOWE D AS HELD ABOVE. BUT WHERE IT IS FOUND THAT RS.6.80 LAKHS WAS PAID, IN ADDITION TO R S.13 LAKHS AND WAS PART OF EXPENDITURE ON FURNISHING OF THE SHOP THEN THIS ADDITION OF RS. 6.80 LAKHS WILL NOT BE MADE. IN CASE NO SATISFACTORY EXPLANATION IS FORTH COMING FROM THE A SSESSEE AS TO THE NATURE OF THIS RECEIPT, ADDITION OF RS.6.80 LAKHS IS CONFIRMED WITHOUT DIST URBING OUR FINDING RELATING TO RS.13 LAKHS. 12. AS A RESULT, THIS GROUND OF THE REVENUE IS ALLOWED BUT FOR STATISTICAL PURPOSES. AS A RESULT APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 -06 -20 10. SD/- SD/- (T. K. SHARMA) (D.C. AGRA WAL) JUDICIAL MEMBER. ACCOUNTANT MEMBER AHMEDABAD S.A. PATKI. DATE :- 18 - 06 -2010. COPY OF THE ORDER FORWARDED TO : THE ASSESSEE THE ASSESSING OFFICER THE CIT CONCERNED. THE CIT(A) CONCERNED. THE DR, AHMEDABAD GUARD FILE (IN DUPLICATE) BY ORDER, DEPUTY.REGISTRAR, ITAT. AHMEDABAD.