Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 9520 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 year(s) 11 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-02-2016
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
07-12-2015
Assessment Year
2007-2008
Appeal Filed On
15-02-2011
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 3513/AHD/2010 / ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE-12, AHMEDABAD .. APPELLANT VS SHRI PURSHOTTAM B. PITRODA, PROP: J.P. FABRICATORS, OPP. AMBALAL ESTATE, NH NO.8, GHODASAR, AHMEDABAD .. RESPONDENT PAN : ABWPM 6274 B ./ ITA NO. 428/AHD/2011 / ASSESSMENT YEAR: 2007-08 SHRI PURSHOTTAM B. PITRODA, PROP: J.P. FABRICATORS, OPP. AMBALAL ESTATE, NH NO.8, GHODASAR, AHMEDABAD .. APPELLANT PAN : ABWPM 6274 B VS ACIT, CIRCLE-12, AHMEDABAD .. RESPONDENT REVENUE BY : SHRI A.K. PANDAY, SR-DR ASSESSEE(S) BY : SHRI TUSHAR P HEMANI, AR / DATE OF HEARING 07/12/2015 /DATE OF PRONOUNCEMENT 12/02/2016 / O R D E R PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER: ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 2 THESE CROSS APPEALS BY THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-XX, AHMEDABAD DATED 08.10.2010 FOR ASSESS MENT YEAR 2007-08. ITA NO. 3513/AHD/2010 : AY 2007-08 APPEAL BY REVE NUE 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL READS AS UNDER:- THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN ACCEPTING THE BOOK RESULTS OF THE ASSESSEE AND IN DELETING THE ADDITION OF RS.1,76,91,830/- MADE BY T HE ASSESSING OFFICER, WITHOUT CONSIDERING THE FACTS AN D CIRCUMSTANCES OF THE CASE AS BROUGHT ON RECORD IN T HE ASSESSMENT ORDER. ITA NO. 428/AHD/2011 : AY 2007-08 APPEAL BY ASSES SEE 2.1 IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWI NG GROUNDS OF APPEAL:- 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN ESTIMATI NG AGRICULTURE EXPENDITURE @ 40% INSTEAD OF 17% ACTUAL LY INCURRED BY THE APPELLANT AND ACCORDINGLY ERRED IN MAKING ADDITION OF RS. 1,20,232/-AS UNDISCLOSED INCOME BEI NG AGRICULTURE EXPENDITURE INCURRED BUT NOT DISCLOSED BY THE APPELLANT. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS OF THE CASE IN PARTLY CONFIRMING THE ACTION OF LD. AO IN DISALLOWING INTEREST EXPENDITURE U/S 36(L)(III) OF THE ACT OUT OF TOTAL DISALLOWANCE OF RS.74,36,118/- MADE U/S 36 (1)(III) OF THE ACT BY THE LD. AO. 3. THE LD. CIT(A) HAS RIGHTLY QUASHED THE ACTION O F AO IN REJECTING THE BOOKS OF ACCOUNTS U/S 145 OF THE ACT AND ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 3 FURTHER RIGHTLY DELETED ESTIMATED GROSS PROFIT ADDI TION MADE BY THE AO. HOWEVER, HAVING ALLOWING THE SAID GROUND OF APPEAL, ID. CIT(A) OUGHT TO HAVE ALLOWED THE ALTERNATE GROUND IN RESPECT OF DISALLOWANCE OF DIES EL EXPENDITURE OF RS.3,29,25,850/- OUT OF TOTAL DIESEL EXPENDITURE OF RS.14,06,78,823/- WHICH WAS ONE OF T HE GROUNDS FOR REJECTING THE BOOKS OF ACCOUNT RATHER T HAN NOT ADJUDICATING THE SAID GROUND OF APPEAL AT ALL. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS OF THE CASE IN CONFIRMING THE ACTION OF ID. AO IN MAKING A DDITION OF RS.5,05,432/- AS INCOME FROM HOUSE PROPERTY CHARGEABLE TO TAX U/S 22 OF THE ACT. 5. THE ID. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS OF THE CASE IN CONFIRMING THE ACTION OF LD. AO IN DISALLOW ING RS.1,48,866/- BEING L/5TH OF THE DEPRECIATION CLAIM ED ON CARS AFTER HOLDING THAT SUCH ENTIRE EXPENDITURE HAS NOT BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. THE ID. CIT(A) FURTHER ERRED IN CONFIRMI NG THE ACTION OF ID. AO IN DISALLOWING AD HOC DISALLOWANCE OF RS.1,48,866/- IN RESPECT OF OTHER VEHICLE EXPENDITU RE ON THE SAME GROUND. 6. BOTH THE LOWER AUTHORITIES HAVE PASSED THE ORDE RS WITHOUT PROPERLY APPRECIATING THE FACT AND THAT THE Y FURTHER ERRED IN GROSSLY IGNORING VARIOUS SUBMISSIO NS, EXPLANATIONS AND INFORMATION SUBMITTED BY THE APPEL LANT FROM TIME TO TIME WHICH OUGHT TO HAVE BEEN CONSIDER ED BEFORE PASSING THE IMPUGNED ORDER. 7. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN CHARGING INTERES T U/S 234B/C/D OF THE ACT. 8. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF LD.AO IN INITIATING PENALT Y PROCEEDINGS U/S 271(1)(C) OF THE ACT. 3. THE ONLY ISSUE IN THE REVENUES APPEAL IS WITH R EGARD TO THE DELETION OF ADDITION OF RS.1,76,91,830/- MADE B Y THE ASSESSING OFFICER BY ADOPTING GP RATIO @ 53.32%. TH E ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 4 ASSESSING OFFICER MADE THE ADDITION OF RS.1,76,91,8 30/-, BY OBSERVING AS UNDER:- '5. FURTHER THE AUDITORS HAVE ALSO REMARKED IN PA RA 2(1) OF NOTES ON ACCOUNTS THAT 'PREVIOUS YEARS FIGURES HAVE- B EEN RE- GROUPED TO THE POSSIBLE EXTENT WHEREVER NECESSARY TO MA KE THEM COMPARABLE WITH THE FIGURES OF THE CURRENT YEAR. P REVIOUS YEARS FIGURES GIVEN OF AHMEDABAD OFFICE. DURING F.Y . NO SEPARATE BOOKS OF ACCOUNT MAINTAINED AT SITES. CONSOLI DATED TRANSACTIONS IN BOOKS OF AHMEDABAD OFFICE MAINTAINED. CONSOLIDATED FIGURES OF PREVIOUS YEAR GIVEN TO MAKE TH EM COMPARABLE WITH THE FIGURES OF THE CURRENT YEAR. PARA2 (2) A/I BALANCES EXCLUDING BANK BALANCES IS SUBJECT TO CONFIR MATION. PARA2(3) PHYSICAL VERIFICATION OF STOCK TAKEN AND VAL UED BY THE PROPRIETOR IS TAKEN. PARA 2(4) IT IS INFORMED TO US BY THE PROPRIETOR THAT, THERE ARE NO EXPENSES OF PERSONAL NATU RE WHICH ARE DEBITED TO THE PROFIT & LOSS A/C. PARA2(5) WHENEVER SUPPORTING VOUCHERS ARE NOT AVAILABLE PROPRIETOR HAVE CERTIFIED THAT ALL THE EXPENSES ARE PERTAINING TO THE BUSINESS OF FIRM. IN HIS REPLY DATED 20/4/2009 THE ASSESSEE HAS STATED THAT 'BOOKS OF ACCOUNTS OF DIFFERENT SITE WERE MAINTAINED SITE-WISE UP TO 31/3/2006. AFTER 01/04/2006 I.E. FROM THE COMMENCEME NT OF THIS FINANCIAL YEAR 2006-07, WE HAVE NOT MAINTAINED SI TE WISE BOOKS OF ACCOUNTS AND KEPT THE BOOKS ON SINGLE SETS OF BOOKS OF ACCOUNTS'. FURTHER IN THIS VERY SAME LETTER THE ASSESS EE ALSO ADMITTED THAT NO SEPARATE ACCOUNTS WERE MAINTAINED FOR PERSONAL INVESTMENTS MADE BY HIM AND THE SAME WERE REFLECTED IN THE BOOKS OF THE BUSINESS. FURTHER IN PAR A 11 THE ASSESSEE HAS STATED 'DETAILS OF SITE AND NATURE OF WORK UNDERTAKEN DURING THE YEAR ARE AS UNDER: NAME OF SITE NATURE OF WORK UNDERTAKEN NIRMA LTD. BHAVNAGAR SALT HARVESTING AND EARTH EXCAVATION GMDC - PANANDHRO LIGNITE MINING WORK GMDC - TADKESHWAR LIGNITE MINING WORK DHOLU KCL JPF JV GIPCL LIGNITE MINING WORK AS STATED IN PARA 8-2. WE HAVE NOT KEPT SEPARATE BOOKS OF ACCOUNTS FOR SITES. 6. THE LIST OF BOOKS OF ACCOUNTS MAINTAINED BY THE ASS ESSEE CLEARLY SHOW-THAT NO STOCK REGISTER, SITE REGISTER, WO RK IN PROGRESS REGISTER WERE MAINTAINED AT ANY OF THE SITES OF THE ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 5 ASSESSEE. IT IS ALSO CLEAR THAT NO BOOKS FOR RECORDING THE QUANTITATIVE DETAILS WERE ALSO MAINTAINED BY THE ASSESS EE. THUS THE VITAL CONNECTING LINKS OF THE BOOKS OF ACCOUN TS ARE TOTALLY MISSING AND THE LEAKAGE IN GROSS PROFIT CAN NOT BE RULED OUT. IT IS AN ADMITTED POSITION THAT IN CONTRACTS GIVEN BY GOVERNMENT BODIES THE PROFIT MARGINS ARE QUITE ATTRACTIVE AND THE ASSESSEE ALWAYS QUOTES PRICES WHICH ALWAYS RESULT S IN SUBSTANTIAL PROFITS AND IN CASE OF ADVERSE CONDITIONS THE PRICE ESCALATION CLAUSE IN THE AGREEMENTS ALWAYS TAKES CARE OF THE PRICE INCREASE. DETAILED RECORDS OF WORK DONE AND C OST INCURRED ARE THE PREREQUISITES FOR PREPARATION OF THE RUNNING B ILLS AND FOR THIS PURPOSE DETAILED RECORDS HAVE TO BE MAINTAINED . BUT THE ASSESSEE HAS ONLY MAINTAINED THE ABOVE BOOKS FROM WHICH VERIFICATION OF THE WORK DONE AND THE COSTS INCURRED C AN NOT BE EASILY BE DONE AND ASCERTAINED. 7. EVEN CLOSING STOCK DETAILS FILED BY THE ASSESSEE SHOWS THAT IT IS NOT PREPARED OR EXTRACTED FROM ANY REGISTER MAINTAI NED IN THE COURSE OF CARRYING ON OF BUSINESS BUT PREPARED ON THE BASIS OF ESTIMATION AFTER PHYSICAL EXAMINATIONS OF THE MATER IAL FOUND ON THE VALUATION DATE I.E. AT THE END OF THE ACCOUNTING Y EAR. THIS CLEARLY INDICATES THAT THE BALANCE MATERIAL IS TO BE ASSUMED AS CONSUMED AS ONLY THE RESIDUE IS REFLECTED IN THE CLOSING STOCK. THE CONSUMPTION OF MATERIAL IS NOT DED UCED FROM ANY RECORDS. DAY TO DAY CONSUMPTION OF MATERIAL HAS NOT BEEN RECORDED BY THE ASSESSEE AND IN THE CONTRACT BUSIN ESS THIS IS A VITAL DEFECT. MOREOVER WHEN THE ASSESSEE FILL S IN THE TENDER APPLICATION HE HAS TAKEN NOTE OF ALL THE COST FAC TORS AND HENCE AT THE TIME OF EXECUTION OF THE CONTRACT HE WILL STRI CTLY ENSURE THAT THE COSTS ARE CONTROLLED AND KEPT IN CHECK SO THAT HIS ESTIMATES DO NOT GO HAYWIRE AND RUIN HIS PROFITS. FOR THIS PURPOSE AND TO ACHIEVE HIS OBJECTIVE BASIC PRIMARY RE CORD WOULD BE SCRUPULOUSLY BE MAINTAINED AND CONSTANTLY MONITORED TO PREVENT ESCALATION IN COSTS, PILFERAGE, WAS TAGE AND INCURRING OF UNNECESSARY EXPENDITURE. THUS HE W ILL TAKE ALL MEASURES TO OBTAIN THE DESIRED PROFITS AS ENVISAGED BY HIM IN HIS TENDERING PROCESS. THE COMPARATIVE GROSS PROFIT CHART IS AS UNDER: A.Y.2005- 06 A.Y.2006-07 A.Y. 20O7-08 TURNOVER 24590653 247697501 3591 76574 CLOSING STOCK 3243300 4144388 4600000 ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 6 TOTAL 249203953 251841889 363776574 DIRECT EXPENSES OPENING STOCK 2342045 3243300 4144388 DIRECT EXPENSES 106727268 121384805 185811067 TOTAL 109069313 1 24628105 189955455 GROSS PROFIT 140134640 127213783 173821119 GP% 56. 97% 51.35% 48.39% NET PROFIT 13338467 -8379765 8992825 NP% 5.32% -3.38% 2.50% THE COMPARATIVE GROSS PROFIT CHART OF LAST 4 YEARS IS AS UNDER: A.Y. 2007-08 2006-07 2005-06 2004-05 G.P. RATE 48.39 51.35 56.97 56.60 8. THE ASSESSEE HAS DECLARED A GROSS PROFIT RATE OF 48.39% FOR THE YEAR UNDER CONSIDERATION WHICH IS MUCH LOWER THAN THE GROSS PROFIT RATES DECLARED BY HIM IN THE EARLIER YE ARS. AS MENTIONED BY THE AUDITORS THERE IS NO CHANGE IN THE BU SINESS OF THE ASSESSEE FROM EARLIER YEARS, HENCE THERE ARE N O REASONS FOR THE G.P. RATE TO DECLINE CONSIDERABLY FROM EARLIE R YEARS. THERE OUGHT TO BE SPECIFIC VALID REASONS FOR THE GROS S PROFIT RATE TO FALL FROM THE RATES ACHIEVED IN PREVIOUS YEARS. AN ANALYSIS OF THE EXPENSES INCURRED BY THE ASSESSEE SHOWS THAT THE A SSESSEE HAS INCURRED DIESEL EXPENSES OF RS.14,06,78,823/- W HICH WORKS OUT TO BE 39.16% OF HIS CONTRACT RECEIPTS AMOUNTIN G TO RS. 35,91,76,574/-. THE ASSESSEE HAS FILED COPY OF AGREEMENT ENTERED INTO GUJARAT MINERAL DEVELOPMENT CORPORATION LTD . ON GOING THROUGH THE TERMS OF THE AGREEMENT IT IS SEEN THAT A S PER ARTICLE 4.3, THE GMDC HAS CONSIDERED THE DIESEL COST COMPONENT AT 30% OF THE AGREED CONTRACT RATE. THIS FACTOR OF 30% HAS BEEN IMPLEMENTED BY THE GMDC IN RA BILL NO 1 4 AND 15 FOR THE MONTH OF SEPTEMBER AND OCTOBER 2006 (COPY OF BILL PLACED ON RECORD BY THE ASSESSEE). IN THE BILL FROM TH E GROSS BILL AMOUNT OF RS. 58,98,149/- RAISED BY THE ASSESSEE ON G MDC, GMDC HAS MADE RECOVERY OF EXCESS DIESEL COST RS. ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 7 27,35,337'/- AND IN VIEW OF THIS IN RA BILL NO. 14 A ND 15 NET AMOUNT RECOVERABLE HAS BEEN DETERMINED AT RS, 8,27,41 0/-. SIMILAR FACT IS ALSO OBSERVED IN RA BILL NO. 29 & 30 A WHERE THE JVC HAS ALSO DEDUCTED THE EXCESS DIESEL CONSUMPTION O F THE ASSESSEE. THUS IT BECOMES AN ACCEPTED FACT THAT THE DIES EL COST SHOULD NOT EXCEED 30% OF THE AGREED CONTRACT RATE, WHER EAS THE DIESEL COST INCURRED BY THE ASSESSEE AND DEBITED TO THE PROFIT AND LOSS ACCOUNT IS 39.16% OF THE CONTRACT RECEIP TS. MOREOVER AS ALREADY MENTIONED ABOVE AND ADMITTED BY TH E ASSESSEE, THE ASSESSEE HAS NOT MAINTAINED SITE WISE ACC OUNTS FOR WORKING OUT THE PROFITS EARNED FROM EACH SITE. KEEP ING IN VIEW THE ABOVE FACTUAL POSITION THE DIESEL COST IS REQ UIRED TO BE RESTRICTED AT 30% OF THE CONTRACT RECEIPTS. TAKING THE ABO VE FACTOR IN TO CONSIDERATION THE ALLOWABLE DIESEL EXPENSE S WORKS OUT TO RS.10,77,52,972/-. THE ASSESSEE HAS CLAIMED DI ESEL EXPENSES OF RS.14,06,78,823/- AND SO THE EXCESS CLAI M OF DIESEL EXPENSES TO THE TUNE OF RS.3,29,25,850/- IS DIS ALLOWABLE. 9. THE SITE WISE DIESEL EXPENSES INCURRED BY THE ASS ESSEE AS SUBMITTED DURING THE COURSE OF HEARING ARE AS UNDER: SITE RECEIPT DIESEL EXPENSE % TO RECEIPT BHAVNAGAR (NRMA) 5,75,64,201 1,83,74,401 31.91% GIPCL 16,58,86,794 9,05,03,219 54.55% PANANDHRO 7,37,42,109 3,14,87,909 42. 70% TADKESHWAR 5,43,21,542 - - TOTAL 35,15,14,646 14,03,65,529 39. 93% THE ABOVE FACTS ALSO INDICATE THAT THE PROVISIONS OF SE CTION 145 ARE SQUARELY APPLICABLE. THE SAME IS THEREFORE INVO KED AND THE INCOME OF THE ASSESSEE IS ESTIMATED BY ADOPTING THE AVE RAGE G.P RATE DECLARED BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEARS. THE BUSINESS RESULTS DECLARED BY THE ASSESSEE IN THE PAST ARE TAKEN AS A BASE IN ESTIMATING THE INCOME OF THE ASSESSEE AS IT IS THE SUREST GUIDE. THIS IS THE SETTLED PRINCIPLE. THE AVERAGE G.P. RATE FOR A.Y 2004-05 TO A. Y. 2007- 08 WORKS OUT TO 53.32%. [THE AVERAGE G.P. RATE FOR A. Y 2004-0 5 TO A. Y. 2006-07 WORKS OUT TO 54.97% WHICH IS DEFINITELY MORE THAN THE AVERAGE G.P. RATE FOR A.Y. 2004-05 TO A.Y. 2007-08 WORKED OUT AT 53.32%.]THOUGH THE G P RATE OF 51.3 5% HAS BEEN ACCEPTED IN A.Y. 2006-07 THE GP RATE OF 53.32% [WHICH IS THE AVERAGE G.P. RATE FOR A.Y. 2004-05 TO A. Y. 2007- 08] IS ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 8 ADOPTED FOR COMPUTING THE GROSS PROFITS EARNED BY THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION AS EACH YEAR IS A SE PARATE YEAR AND THE CONTRACT IS A CONTINUING CONTRACT AND MOREOVER THERE IS NO CHANGE IN THE CIRCUMSTANCES/CONDI TIONS OF THE BUSINESS CONDUCTED BY THE ASSESSEE FROM EAR LIER YEARS. THE ADOPTION OF THE AVERAGE GROSS PROFIT RATE S MOOTHENS OUT ALL FLUCTUATING FACTORS AND THE CONDITIONS THAT THE BU SINESS ENCOUNTERS. THE G.P. AT THE RATE OF 53.32% OF RS.35,91,76,574/- WORKS OUT TO RS. 19,15,12,949/- RESULTING IN ADDITION OF RS.1,76,91,830/- (19,15,12,949- 17, 38,21,119). ADDITION OF RS. 1,76,91,830/- IS MADE ON ACCOUNT OF L OW GROSS PROFIT DECLARED BY THE ASSESSEE. THIS ADDITION IS ALSO JUSTIFIED AS THE OTHER EXPENSES LIKE MACHINERY OILS, MACHINERY REPAIRS, SITE EXPENSES, VEHICLE REPAIRS, OVER TIME EXPENSES ARE ALSO NOT TOTALLY AND FULLY VERIFIABLE. THE EXPENSES UNDE R THESE HEADS ARE ALSO QUITE SUBSTANTIAL. LIKE VEHICLE REPAIR S IS RS. 1,25,02,363/- WHERE AS DEPRECIATION CLAIM ON VEHICLE IS RS. 3,29,40,654/-. SITE EXPENSES ARE RS. 33,55,714/-, S ALARY EXPENSES RS. 73,45,127/-, OVERTIME EXPENSES RS. 12 ,07,526/, MISCELLANEOUS EXPENSES RS.12,58,156/-, MINING EXPEN SES RS.20,55,169/- AND SO ON. FURTHER IT IS A/SO NOTICE D THAT RTO EXPENSES CLAIMED BY THE ASSESSEE ALSO CONTAINS EXPENSES PERTAINING TO EARLIER YEARS BUT THE ASSESSEE IS UNABLE TO SEGREGATE THE FIGURES. HOWEVER IT IS STATED THAT IT MAY BE APPROXIMATELY BE AROUND RS.1,00,000/-. THE SITE WISE EXPENSES AVAILABLE ON RECORD ARE REPRODUCED HERE UN DER FOR READY REFERENCE. PARTICULAR HEAD OFFICE BHAVNAGAR GIPCL TADKESHWAR PANANDHRO RECEIPTS - 5,75,64,201 16,58,86,794 5,43,21,542 7,37,42,109 MACHINE REPAIRS 9,13,471 80,75,482 33, 740 4,85,022 OVER TIME 8,73,816 3,33,710 MACHINERY OIL 5,53,797 69,28,169 14,11,656 SITE EXPENSES 6,47,577 9,88,532 9,11,845 8,07,760 SALARY 18,37,178 6,60,423 26,81,135 14,47,161 7,19,230 VEHICLE REPAIRS 2,45,376 11,31,078 1,01,89,842 1,77,721 7,58,344 ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 9 THOUGH THE DISALLOWANCE OF DIESEL EXPENSES HAS BEEN WORKED OUT TO RS.3,15,45,851/-. THE ADDITION IS RESTRICTED TO THE G.P ADDITION AS COMPUTED ABOVE AT RS.1,76,91,830/-. ADDIT ION OF RS.1,76,91,830/- IS THEREFORE MADE ON APPLICATION OF SECTION 145 OF THE IT ACT WHICH IS SQUARELY APPLICABLE TO THE F ACTS OF THE INSTANT CASE.' 3.1 THE MATTER WAS CARRIED BEFORE THE FIRST APPELLA TE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CI T(A) HAS DELETED THE ADDITION IN QUESTION. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF THE REVENUE, INTER ALIA, SUBMITTING THAT ON THE FACTS AND IN THE CIRCUMSTANCES THE CIT(A) ER RED IN ACCEPTING THE BOOK RESULT OF THE ASSESSEE AND IN DE LETING THE ADDITION OF RS.1,76,91,830/- MADE BY THE ASSESSING OFFICER. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITT ED THAT THE CIT(A) ERRED IN RELYING SOLELY ON THE BRIEF SUBMISS ION OF THE ASSESSEES REPRESENTATIVE WHILE IGNORING THE DETAIL ED FINDINGS AND ARGUMENTS OF THE ASSESSING OFFICER WHICH CLEARL Y SHOWED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE NEIT HER FULLY VERIFIABLE NOR RELIABLE. THE LD. DEPARTMENTAL REPRE SENTATIVE, THUS, SUBMITTED THAT THE ORDER OF THE CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ON THE O THER HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF TH E CIT(A). 3.2 HAVING CONSIDERED THE RIVAL CONTENTIONS OF BOTH THE SIDES AND MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF SALT HARVESTING, MATIKAM, TRANSPORT ATION AND EXCAVATION WORK, MANUFACTURE OF STRUCTURE FABRICATI ON AND COLD STORAGE. THE ASSESSING OFFICER REJECTED THE ASSESS EES BOOK OF ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 10 ACCOUNTS BY INVOKING SECTION 145 OF THE ACT BY ADOP TING AVERAGE GP RATE OF ASSESSMENT YEAR 2004-05 TO 2007- 08 @ 53.32% AND DISCARDED GP OF THE YEAR UNDER CONSIDERA TION BEING 48.39%. ACCORDINGLY, THE IMPUGNED ADDITION OF RS.1,76,91,830/- WAS MADE ON ACCOUNT OF LOW GP. TH E ASSESSING OFFICER REJECTED ASSESSEES BOOKS MAINLY VIZ. (I) NOT ACCEPTING CLOSING STOCK DETAILS SUBMITTED BY ASSESS EE, (II) THE GP @ 48.39% OF AY 07-08 IS LESS THAN GP @ 51.35% OF AY 06- 07 AND (III) THE ASSESSEE HAS CLAIMED DIESEL EXPEN SES OF RS.14,03,65,529/- WHICH WORKS OUT TO 39.93% WHICH O UGHT TO HAVE BEEN RESTRICTED TO 30%. REGARDING CLOSING STO CK, ASSESSEE HAS CARRIED OUT VALUATION OF STOCK AS PER ACCOUNTIN G STANDARDS AND ACCEPTED PRINCIPLES. THE ASSESSING OFFICER MERE LY GOT CARRIED AWAY BY THE FACT THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER. MERELY NON-MAINTENANCE OF STOCK REG ISTER CANNOT BE A GROUND FOR REJECTION OF BOOKS. REGARDING LOW G P, THE ASSESSING OFFICER HAS NOT APPRECIATED THAT ASSESSEE 'S TURNOVER HAS INCREASED FROM RS.24,76,97,501/- IN EARLIER YEA R TO RS.35,91,76,573/-, WHICH IS SUBSTANTIAL INCREASE IN THE TURNOVER. MERE DECREASE IN GP CANNOT BE A GROUND FO R REJECTION OF BOOKS OF ACCOUNTS. 3.3 WITH REGARD TO THE DIESEL EXPENSES @ 39.93% OF TOTAL RECEIPTS, THE ASSESSING OFFICER ANALYZED THE PROVIS IONS OF ARTICLE 4.3 OF AGREEMENT WITH GMDC W.R.T. 'PANANDHRO' PROJECT, WHEREIN DIESEL COMPONENT WAS SPECIFIED @ 3 0%. AS PER THE AGREEMENT, THE GMDC SHALL PROVIDE DIESEL COST T O THE EXTENT OF 30% AND ANY COST BEYOND 30% SHALL BE BORNE BY AS SESSEE. IT DOES NOT MEAN THAT DIESEL COST WILL NOT EXCEED 30% SINCE ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 11 CONSUMPTION OF DIESEL DEPENDS ON VARIETY OF FACTORS VIZ. EFFICIENCY OF EARTH MOVING MACHINERY LIKE HYDRAULI C EXCAVATORS, DUMPERS AND OTHER VEHICLES, SURFACE OF LAND, THICKN ESS OF LIME AND SUCH OTHER UNANTICIPATED FACTORS. THERE IS NO C HANGE IN THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY ASSESSEE . THE ASSESSEE HAS DULY FOLLOWED ACCOUNTING STANDARDS AS APPLICABLE AND THE ASSESSEE'S BOOKS OF ACCOUNTS ARE DULY AUDIT ED. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANYTHIN G TO THE EFFECT THAT ASSESSEE' S BOOKS ARE INCORRECT OR INCO MPLETE. IN LIGHT OF THE ABOVE, THE CIT(A) RIGHTLY OBSERVED THAT THE ACTION OF ASSESSING OFFICER IN REJECTING ASSESSEE'S BOOKS OF ACCOUNTS AND ADOPTING AVERAGE GP RATE OF AY 04-05 TO AY 07-08 FO R MAKING THE IMPUGNED ADDITION ON ACCOUNT OF LOW GP WAS NOT TENABLE IN THE EYES OF LAW AND ACCORDINGLY, THE CIT(A) HAS RIG HTLY DELETED THE IMPUGNED ADDITION ON THIS COUNT. THIS REASONED FINDING OF THE CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE, WHI CH IS CONFIRMED. WE UPHOLD THE SAME. THIS ALSO TAKES CA RE OF CORRESPONDING ISSUE IN ASSESSEES APPEAL. 4. COMING TO THE ASSESSEES APPEAL, THE FIRST ISSUE IS WITH REGARD TO THE ESTIMATION OF AGRICULTURAL EXPENDITUR E @ 40% INSTEAD OF 17% ACTUALLY INCURRED AND ACCORDINGLY MA KING ADDITION OF RS.1,20,232/-. THE ASSESSING OFFICER ESTIMATED AGRICULTURAL EXPENDITURE @ 40% INSTEAD OF 17% CLAIM ED TO BE INCURRED BY THE ASSESSEE. THE ASSESSEE HAS EARNED GROSS AGRICULTURAL INCOME OF RS.5,40,251/- AND HAS INCURR ED AGRICULTURAL EXPENDITURE OF RS.95,686/-, WHICH WAS WORKED OUT @ 17%. ACCORDINGLY, NET AGRICULTURAL INCOME OF RS. 4,44,565/- WAS CLAIMED. THE ASSESSING OFFICER HELD THAT THE TR IBUNAL HAS ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 12 CONSISTENTLY TAKEN A VIEW THAT EXPENDITURE TO EARN AGRICULTURAL INCOME SHOULD BE AROUND 40-41%; ACCORDINGLY, THE A SSESSING OFFICER ESTIMATED SUCH EXPENDITURE @ RS.2,16,100/- BEING 40% AND MADE THE IMPUGNED ADDITION ON THE GROUND THAT T HE ASSESSEE HAS SHOWN LESS AGRICULTURAL EXPENDITURE AN D THE SAME HAS BEEN CONFIRMED BY THE CIT(A) IN APPEAL. 4.1 IN THIS REGARD, THE STAND OF THE ASSESSEE HAS B EEN THAT THE LOWER AUTHORITIES OUGHT TO HAVE APPRECIATED THAT NO PRESUMPTION COULD BE MADE FOR TAXING AGRICULTURAL I NCOME ESPECIALLY WHEN NO DEFECTS HAVE BEEN POINTED OUT EI THER IN AGRICULTURAL INCOME OR IN EXPENDITURE CLAIMED BY TH E ASSESSEE. MOREOVER, THE ASSESSEE HAD EARNED 'NET AGRICULTURAL INCOME' OF RS. 7,26,760/- IN AY 2005-06 AND RS.6,38,120/- IN A Y 2006-07 AND THE HAS BEEN ACCEPTED BY THE REVENUE IN THE PAS T, WHICH HAS BEEN NOT DISPUTED BY THE REVENUE. 4.2 IN THESE FACTS AND CIRCUMSTANCES, THE ESTIMATIO N OF AGRICULTURAL EXPENDITURE @ 40% BY THE ASSESSING OFF ICER IS NOT JUSTIFIED. ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS ALLOWED AND THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 5. NEXT ISSUE IS WITH REGARD TO THE PARTIAL CONFIRM ATION OF ACTION OF ASSESSING OFFICER IN DISALLOWING INTEREST EXPENDITURE U/S 36(1)(III) OUT OF TOTAL DISALLOWANCE OF RS.74,3 6,118/-. THE ASSESSING OFFICER HAS MADE THIS ADDITION BY OBSERVI NG AS UNDER:- THE ASSESSEE HAS CLAIMED THE INTEREST EXPENDITURE OF RS.3,51,12,087/- PAID TO BANK AND RS.43,58,684/- PA ID TO OTHERS AND RS.21,37,580/- PAID TO BANK (GEC). ON A N ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 13 ANALYSIS OF THE BALANCE SHEET IT IS SEEN THAT THE A SSESSEE HAD MADE HUGE PERSONAL INVESTMENT IN LANDS AND OTHE R PERSONAL ASSETS. THE INVESTMENT TOTAL RS.3,81,23,67 0/-. FURTHER THE ASSESSEE HAS MADE LOANS AND ADVANCES TOTALING RS.8,10,47,890/-. ON GOING THROUGH THE LI ST OF ADVANCES MADE IT IS SEEN THAT NO INTEREST WAS CHARG ED ON ADVANCES TOTALING RS.3,62,37,518/-. THE FIXED ASSET S WORTH RS 38,95,50,105/-, CLOSING STOCK OF RS.46,00, 000/- AND CASH AND BANK BALANCES AND SUNDRY DEBTORS OF RS.8,44,54,566/- ENTIRELY GOBBLED UP TO THE UNSECUR ED LOANS AND CAPITAL OF THE ASSESSEE THAT IS THE INTER EST FREE FUNDS AVAILABLE WITH THE ASSESSEE. THUS IT IS APPAR ENT THAT THE INTEREST-BEARING BORROWINGS TAKEN BY THE ASSESS EE HAVE BEEN USED UP FOR MAKING PERSONAL AND NOT BUSIN ESS INVESTMENT AND INTEREST FREE ADVANCES BY THE ASSESS EE. THUS THE BORROWINGS HAVE BEEN PUT TO NOT BUSINESS PURPOSES PRODUCED. THUS RUPEES SEVEN,43,61,188 OF T HE INTEREST BEARING BORROWINGS HAVE BEEN PUT TO NOT BU SINESS PURPOSES. THE ABOVE AMOUNT ALSO INCLUDES THE INTERE ST FREE ADVANCES MADE TO M/S. KETAN CONSTRUCTION COMPA NY. THE INTEREST FREE ADVANCES MADE TO M/S. KETAN CONSTRUCTION COMPANY CANNOT EFFECTIVELY GUIDED BY COMMERCIAL EXPEDIENCY AS M/S. KETAN CONSTRUCTION CO . IS ONE OF THE MEMBERS OF THE JVC I.E. A PART OF THE AS SESSEE HIMSELF AND HENCE IT CAN CONCLUSIVELY BE HELD THAT NO COMMERCIAL EXPEDIENCY IS INVOLVED. THE ASSESSEE HAS NOT FILED ANY EVIDENCE ON RECORD TO PROVE THAT THE INTE REST FREE ADVANCES WERE MADE BY HIM FOR THE BUSINESS PURPOSES AND AS A MATTER OF COMMERCIAL EXPEDIENCY. THUS IT C AN BE INFERRED FROM THE FACT OF THE CASE THAT THE BORROWI NGS HAVE NOT BEEN USED FOR THE PURPOSES OF BUSINESS OF THE A SSESSEE AND HENCE THE CLAIM OF INTEREST ON THESE BORROWINGS HAVE TO BE REGULATED IN TERMS OF SECTION 36(1) (III) OF THE ACT. SINCE THE INTEREST PAID ON THIS AMOUNT IS NOT FOR T HE PURPOSES OF BUSINESS, THE SAME IS DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT AS THE CAPITAL BORROW ED TO THIS EXTENT IS NOT CAPITAL BORROWED FOR THE PURPOSES OF BUSINESS OF THE ASSESSEE. THE ASSESSEE HAS PAID INTEREST AT THE RATE OF 8 TO 12%. THUS THE AVERAGE RATE OF INTEREST AT W HICH INTEREST HAS BEEN PAID BY THE ASSESSEE IS 10%. THUS THE INTEREST DISALLOWANCE UNDER SECTION 36(1) (III) OF THE IT ACT IS MADE AT THE RATE OF 10%. HENCE INTEREST AT THE R ATE OF ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 14 10% ON THE ADVANCES GIVEN BY THE ASSESSEE WORK OUT TO RS.74,36,118/-. THEREFORE, DISALLOWANCE UNDER SECTI ON 36(1) (III) OF RS.74,36,118/- IS MADE AND INCLUDED IN THE TOTAL INCOME COMPUTATION. SUPPORT FOR PICKING THIS DISALLOWANCE UNDER SECTION 36(1) (III) IS DERIVED F ROM THE DECISION OF THE HONORABLE SUPREME COURT GIVEN IN TH E CASE OF SA BUILDERS LTD. REPORTED IN 288 ITR 1( SC). FUR THER RELIANCE IS ALSO PLACED ON THE DECISIONS REPORTED I N 254 ITR 248 (KER) AND 318 ITR 210 (KER.) AND ON 25 TTJ (COCH.) 131. THE ASSESSEE HAS NOT RAISED ANY MATERI AL TO FULFILL THE CRITERIA OF COMMERCIAL EXPEDIENCY.' 5.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) GRANTED PARTIAL RELIEF, WHICH HAS BEEN OPPOSED BEFORE US BY THE ASSESSEE BY RAISING VARIOUS LEGAL AND FACTUAL ARGUMENTS. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AUTHORITIES BELOW. 5.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ASSESSING OFFICE R OBSERVED THAT ASSESSEE HAS MADE 'LOANS AND ADVANCES' OF RS.8,10,47,890/-, WHEREAS THE ASSESSEE HAS INCURRED SUBSTANTIAL INTEREST EXPENDITURE @ 8% TO 12% DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER HAS CONC LUDED THAT RS.7,43,61,188/- OUT OF INTEREST BEARING FUNDS HAVE BEEN PUT TO NON-BUSINESS PURPOSES; HENCE, BY APPLYING AVERAGE I NTEREST OF 10%, THE ASSESSING OFFICER DISALLOWED INTEREST OF RS.74,36,118/- U/S 36(1)(III) OF THE ACT. ACCORDIN G THE LD. AUTHORIZED REPRESENTATIVE, THE ASSESSING OFFICER OU GHT TO HAVE APPRECIATED THE FACT THAT THE TOTAL LOANS AND ADVA NCES OF RS.8,10,47,890/- COULD BE DIVIDED INTO THREE CATEGO RIES; I.E, (I) ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 15 LOAN ON WHICH INTEREST HAS BEEN CHARGED AMOUNTING T O RS.4,39,34,142/-, (II) ADVANCE INCOME-TAX/TDS/OTHER S AMOUNTING TO RS.1,14,21,350/- AND (III) BUSINESS AD VANCES AMOUNTING TO RS.2,56,92,398/-. WITH REGARD TO ADVA NCES OF RS.4,39,34,142/-, THE ASSESSEE SUBMITTED THAT ON TH IS AMOUNT THE INTEREST WAS CHARGED; THEREFORE, QUESTION OF DI SALLOWING INTEREST WOULD NOT ARISE. TO SUBSTANTIATE THIS CLAI M OF THE ASSESSEE, LEDGERS OF THE PARTIES WERE PLACED AT PAG E NO.209 TO 212 OF THE PAPER-BOOK. THE CIT(A) IN HIS ORDER ST ATED THAT THE DETAILS CALLED FOR IN RESPECT OF INTEREST CHARGED F ROM SUCH PARTIES HAVE NOT BEEN FURNISHED WHICH IS FACTUALLY INCORRECT, WHICH THE DETAILS OF THE SAME WAS PROVIDED IN PAGE NO.125 OF THE PAPER-BOOK. WITH REGARD TO THE ADVANCE INCOME-T AX/ TDS/OTHERS AGGREGATING TO RS.1,14,21,350/-, THE AUT HORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE S AME DO NOT FALL WITHIN THE AMBIT OF ADVANCES FOR NON-BUSINESS PURPOSES. REGARDING BUSINESS ADVANCES OF RS.2,56,92,398/-, TH E BUSINESS PURPOSES FOR WHICH THE SAME HAVE BEEN ADVANCED WERE CLARIFIED AS PER THE DETAILS GIVEN IN PAGE NO.248 TO 266 OF T HE PAPER- BOOK. NO INTEREST CAN BE DISALLOWED IN RESPECT OF FUNDS ADVANCED FOR BUSINESS PURPOSES OUT OF COMMERCIAL EX PEDIENCY. OUT OF THE TOTAL BUSINESS ADVANCES OF RS.2,56,92,39 8/-, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO DISALL OW INTEREST ON THE ADVANCES OF RS.1,72,98,112/- ON THE GROUND THAT SUCH ADVANCES ARE FOR NON-BUSINESS PURPOSES. IN THIS REG ARD, THE STAND OF THE ASSESSEE HAS BEEN THAT THE DETAILS OF INTEREST FREE FUNDS HAD ALREADY BEEN FURNISHED BEFORE THE LOWER A UTHORITIES VIDE LETTER DATED 11.12.2009, WHICH WAS PLACED AT P AGE NO.129 ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 16 & 130 OF THE PAPER-BOOK. IN VIEW OF AFORESAID FAC TS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDER O F THE CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSES SING OFFICER WITH THE DIRECTION TO DECIDE THE SAME AS PER FACTS AND LAW, AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSE E. 6. NEXT ISSUE IS WITH REGARD TO THE REJECTION OF BO OKS OF ACCOUNTS AND ESTIMATION OF GROSS PROFIT. THIS GROU ND GOES ACADEMIC IN VIEW OF OUR FINDING IN REVENUES APPEAL (SUPRA). 7. NEXT ISSUE IS WITH REGARD TO THE ADDITION OF RS. 5,05,432/- AS INCOME FROM HOUSE PROPERTY CHARGEABLE TO TAX U/S 22 OF THE ACT. THE ASSESSING OFFICER MADE THE ADDITION OF RS .5,05,432/- U/S 22 OF THE ACT, BY OBSERVING AS UNDER:- 13. ON VERIFICATION OF THE BALANCE SHEET IT IS SE EN THAT THE ASSESSEE IS IN POSSESSION OF RESIDENTIAL PROPERTIES / COMMERCIAL PROPERTIES WHICH ARE AS UNDER:- BUILDING A/C - DEV KUTIR 2877345 BUILDING A /C - HARIOM 2002523 BUILDING A/C - LUWARA 288115 BUILDING A/C - SAMRPAN 2252751 BUILDING A/C - SHILAJ 602000 NEW VAISHALI SOCIETY (LAND) 650908 NEW VAISHALI SOCIETY (BUILDING) 5110232 THE ASSESSEE IS OCCUPYING THE VAISHALI SOCIETY BUNG LOW AND USING THE SAME AS HIS RESIDENTIAL PREMISES. THU S THE VAISHALI SOCIETY BUNGLOW IS HIS SELF OCCUPIED PROPE RTY ALL OTHER PROPERTIES ARE BEING USED BY OTHER PERSONS. N O PROPERTY INCOME HAS BEEN DECLARED BY THE ASSESSEE F ROM THESE PROPERTIES. BOTH SECTION 23 (2)(A) AND SECTION 23(2)(B) ARE NOT APPLICABLE TO THE FACTS OF THE CASE OF THE ASSESSEE . THE ANNUAL VALUE OF THE PROPERTY IS THEREFORE TO BE DET ERMINED ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 17 AS PER THE PROVISIONS OF SECTION 23(1)(A) OF THE IT ACT. THE INVESTMENT MADE IN THE PROPERTY IS RS.80,22,734/- A ND APPLYING THE INTEREST PERCENTAGE OF 9% THE YIELD OF THE PROPERTY WORKS OUT TO RS.7,22,046/-. THE ANNUAL VA LUE OF THE PROPERTY IS THEREFORE ADOPTED AT RS.7,22,046/-. THE ASSESSEE IS ENTITLED TO DEDUCTION/S 24 OF RS.2,16,6 13/-. THE TAXABLE ANNUAL VALUE THEREFORE WORKS OUT TO RS.5,05,432/-. ACCORDINGLY PROPERTY INCOME OF THE ASSESSEE IN RESPECT OF THE ABOVE PROPERTIES IS COMP UTED AT RS.5,05,432/-. 7.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF O F THE ASSESSEE AND HAVING CONSIDERED THE SAME, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 7.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSING OFFIC ER HAS MADE OUT A CLEAR CASE, AS INDICATED ABOVE, AS TO WHY THE INCOME OF THE UNOCCUPIED HOUSE PROPERTIES OF THE ASSESSEE ARE CHARGEABLE TO TAX AND THE CIT(A) HAS ALSO RIGHTLY UPHELD THE O RDER OF THE ASSESSING OFFICER, WHICH NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 8. NEXT ISSUE IS WITH REGARD TO THE DISALLOWANCE OF RS.1,48,866/- BEING 1/5 TH OF DEPRECIATION CLAIMED ON CARS AND RS.1,48,866/- BEING AD-HOC DISALLOWANCE IN RESPECT OF OTHER VEHICLE EXPENDITURE. THE ASSESSING OFFICER FOUND THAT ASSESSEE OWNED 12 CARS AND CONCLUDED THAT FIVE CARS MUST BE USED BY FAMILY MEMBERS OF THE ASSESSEE FOR PERSONAL USE. TH E ASSESSING OFFICER DISALLOWED RS.1,48,866/- BEING 1/5 TH OF DEPRECIATION ON SUCH FIVE VEHICLE. THE ASSESSING OFFICER FURTHER D ISALLOWED AN EQUIVALENT AMOUNT OF RS.1,48,866/- ON AD-HOC BASIS ON ITA NOS. 3513/AHD/2013 & 428/AHD/2011 ASSESSEE: SHRI PURSHOTTAM B. PITRODA CROSS-APPEALS: AY : 2007-08 18 ACCOUNT OF FUEL AND REPAIRING EXPENSES SINCE NO MAT ERIAL WAS AVAILABLE FOR DETERMINING THE SAME. THESE ADDITIONS WERE CONFIRMED BY CIT(A) IN APPEAL. 8.1 HAVING CONSIDERED THE RIVAL CONTENTIONS AND MAT ERIAL ON RECORD, WE FIND THAT THESE ADDITIONS HAVE BEEN BE M ADE MERELY ON THE BASIS OF ASSUMPTION OF INVOLVEMENT OF PERSON AL ELEMENT IN MOTOR CAR; WHEREAS THE ASSESSEES CLAIM WAS THAT SUCH EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE BUSINESS OF THE ASSESSEE. UNDER THESE FACTS AND CIRCUMSTANCES, IN OUR CONSIDERED VIEW, IT WOULD MEE T THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO 1/8 TH ON BOTH THE COUNTS. WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED WHILE THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 12TH FEBRUARY 2016 AT AHMEDABAD. SD/- SD/- (RAJESH KUMAR) ACCOUNTANT MEMBER (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 12/02/2016 BIJU T., PS !' #'$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ! ' ' # / CONCERNED CIT 4. ' ' # ( ) / THE CIT(A) 5. &'( ! , ' ! , / D R, ITAT, AHMEDABAD 6. (- . / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on FEMA Compliance
₹1
Tax Holiday Secrets for Startups
₹0
1:1 Consultation on Salary Structuring
₹1
Sales Forecasting Sheet
₹100
Declaration of Gift
Mehul₹500
Budget 2026: 5 Major Personal Tax Changes Every Taxpayer Must Know
Team Counselvise - February 05, 2026
Finance Bill, 2026: Key GST Reforms that will Reshape Compliance and Cash Flows
Team Counselvise - February 03, 2026
Why Meesho got ₹1,500 Crore Tax Demand ?
Team Counselvise - March 09, 2026