VINODKUMAR JAIN (HUF), MUMBAI V. ACIT - 19(3), MUMBAI

ITA 4286/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9012 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 22-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SAMATHA MULLAMUDI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , HON'BLE ACCOUNTANT MEMBER ITA NO . 4286 / MUM/ 2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) GW 4010, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 PAN: AABHV7626Q V. ASST . COMMISSIONER OF INCOME - TAX CIRCLE 19(3) ROOM NO. 206, 2 ND FLOOR MATRU MANDIR, TARDEV ROAD MUMBAI 400 007 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : MS. SAMATHA MULLAMUDI DATE OF HEARING : 25.02.2020 DATE OF PRONOUNCEMENT : 31 . 07 .2020 O R D E R PER C. N. PRASAD (JM) 1. T HIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 2, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 07.02.2018 FOR THE A.Y. 2012 - 13. 2. ASSESSEE IN ITS APPEAL HAS RAISED FOLLOWING GROUNDS: - 1. ON FACTS AND IN LAW, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) [HEREINAFTER REFERRED TO AS 'LD. CIT(A)'] HAD ERRED IN CONFIRMING THE ADHOC ADDITION RS.38,029/ - BEING 10% OF DEPRECIATION 2 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) ON MOTOR CAR OF RS.3,80,285/ - WITHOUT APPRECIATING THE CORRECT F ACT S OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE LEARNED ASSESSING OFFICER (HEREINAFTER REFERRED TO AS 'THE LAO') TO DELETE THE SAID ADDITION. 2. ON FACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN CONFIRMING THE ADHOC ADDITION RS.32,438/ - BEING 10% OF MOTOR CAR EXPENSES OF RS.3,24,384/ - WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAV E DIRECTED THE LAO TO DELETE THE SAID ADDITION. 3. ON F ACTS AND IN LAW, THE LD. CIT(A) HAD ERRED IN CONFIRMING THE ADHOC ADDITION RS.2, 33, 864/ - BEING 10% OF TRAVELLING EXPENSES OF RS.23,38,637/ - WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. UNDER THE FACTS AND CIRCUMSTANCES OF THE MATTER, HE OUGHT TO HAVE DIRECTED THE LAO TO DELETE THE SAID ADDITION. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT, THE TIME OF HEARING O F THE APPEAL, SO, AS TO ENABLE THE HON. ITAT TO DECIDE THIS APPEAL ACCORDING TO LAW . 3. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE . THE NOTICE SENT THROUGH RPAD RETURNED UNSERVED WITH AN ENDORSEMENT BY THE POSTAL AUTHORITIES THAT ASSESSEE LEFT. THEREFORE, WE PROCEED TO DISPOSE OFF TH IS APPEAL ON HEARING THE LD. DR ON MERITS. 4. LD. DR REFERRING TO THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT SUBMITS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT D ISALLOWED 10% OF D EPRECIATION ON CA R, TRAVELLING EXPENSES AND MOTOR CAR EXPENSES TOTALING TO . 3,04,331/ - TREATING IT AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PURPOSE SINCE ACCORDING TO ASSESSING OFFICER 3 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) SOME PERSONAL ELEMENT CANNOT BE RULED OUT . LD.CIT(A) SUSTAINED THE DISALLOWANCES. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW . 5. HEARD LD. DR ON MERITS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE TO THE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS IN THE ASSESSMENT ORDER AND UPHELD THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING 10% OF THE EXPENSES. WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 6. 1 THE GROUND NO. 1 IS ON THE ISSU E OF ADDITION OF RS.3,04,331/ - APPELLANT, HUF FILED ITS RETURN ON 30.09.2012 DECLARING INCOME OF RS.96,20,226/ - . AS SEEN FROM THE RECORDS, THE AO HAS IDENTIFIED AN AMOUNT OF RS.3.04 LAKHS WHICH IS BEING 10% OF THE EXPEN DITURE IDENTIFIED TO THE TUNE OF RS.30,43,306/ - TOWARDS DEPRECIATION ON CAR, TRAVELLING EXPENSES AND MOTOR CAR EXPENSES. THIS AMOUNT TREATED AS PERSONA L IN N ATURE OUT OF THE TOTAL DEDUCTIONS / EXPENSES BOOKED BY THE APPELLANT TO THE TUNE OF RS.62.58 C RORES (APPROX.) TOWARDS PURCHASES OR FOR EXPENSES. THE ELEMENT OF PERSONAL NATURE AS IDENTIFIED BY THE AO IS NOT VERY SIGNIFICANT WHEN COMPARED WITH THE EXPENSES / PURCHASES BOOKED. 6.1.1 DURING THE ASSESSMENT PROCEEDINGS, AO HAS IDENTIFIED THREE HEADS OF INCOM E WHICH ARE AS UNDER: DEPRECIATION ON CAR: RS.3,80,285/ - TRAVELLING EXPENSES: RS.23,38,637/ - MOTOR CAR EXPENSES: RS.3,24,3847 - TOTAL: RS.30,43,306/ - 6.1.2 . UNDER T HE ABOVE HEADS, IN THE CONSIDERED OPINION OF THE AO WAS THAT THERE IS PERSONAL ELEMENT AND THE AO ARRIVED AT 10% OF THE 4 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) EXPENSES CLAIMED AS PERSONAL IN NATURE, HENCE DISALLOWED AN AMOUNT OF RS.3.04 LAKHS @ 10% OF SUCH EXPENSES CLAIMED. 6.1.3. DURING THE APPELLATE PROCEEDINGS, THE AR HAS SUBMITTED ITS ARGUME NTS WHICH MAINLY EMPHASIZED AS UNDER: (A) TURNOVER HAS INCREASED COMPARED TO LAST YEAR. (B) AO HAS STATED THAT EXPENSES MAY NOT BE VERIFIABLE. (C) FOREIGN TRAVELLING ARE ESSENTIAL PART OF OUR BUSINESS (D) CITED CERTAIN CASES LAWS IN SUPPORT OF ITS CLAIM. 6.14 HOWEVER, THE APPELLANT HAD NOT PRODUCED SUCH BILLS OR ANY ANALYSIS OF EXPENDITURE BIFURCATION NEITHER BEFORE THE AO NOR DURING THE APPELLATE PROCEEDINGS. APPELLANT HAS CLAIMED RS.23,38,637/ - TOWARDS TRAVELING WHICH IS QUIET SUBSTANTIAL. AS STATED IN ITS ARGUMENT THAT TRAVELING HAD TAKEN PLACE FOR FOREIGN. A PPELLANT HAD NOT SUBMITTED, WHO ARE THE PERSONS UNDERTAKEN FOREIGN TRIP AND HOW MUCH AMOUNT HAS BEEN SPENT FOR EACH HEAD SUCH AS FLIGHT TICKETS, FOOD EXPENSES, HOTEL ACCOMMODATION AND TRAVELING EXP ENSES ETC. EVEN FOR TRAVELING WITHIN COUNTRY ALSO APPELLANT HAD NOT PRODUCED LOG BOOK DETAILS OF VEHICLE, WHICH ESSENTIALLY OUTLINES HOW MANY TIMES THE VEHICLE HAS MOVED FROM HOME TO OFFICE OR FOR ANY OTHER PERSONAL WORK. THE LOG BOOK ALONGWITH THE SIGNATU RES OF THE PERSONS USED FOR SUCH VEHICLE IS A MANDATORY DOCUMENT FOR FURTHER ANALYSIS. TRAVELLING WITHIN THE COUNTRY TOO, NEED TO BE ANALYZED, WHO ARE THE PERSONS TRAVELED AND PURPOSE OF THEIR TRAVELS. 6.1.5. AS A HUF TRADER, NEEDS A CAR FOR THE PURPOSES OF ITS BUSINESS AND WHO ALSO NEEDS A CAR FOR PERSONAL USE. CLEARLY, IT WOULD BE SLIGHTLY DIFFICULT TO MAINTAIN FOR THE VEHICLE FOR BUSINESS TO HAVE A CAR SOLELY FOR BUSINESS USE AND ANOTHER FOR PRIVATE USE IN ORDER TO CLAIM A DEDUCTION FOR THE COSTS INCURR ED IN RELATION TO A BUSINESS, 6.1.6. ACCORDING TO AO, THE WHOLLY AND EXCLUSIVELY TEST DOES NOT HAVE TO BE APPLIED TO THE EXPENSE AS A WHOLE. IF THE EXPENSE CAN SPLIT INTO 'BUSINESS AND /PRIVATE' ELEMENTS AND THE WHOLLY AND EXCLUSIVEL Y CONDITION IS MET IN RELATION TO THE BUSINESS PART, A DEDUCTION WILL BE ALLOWED FOR THAT PART. THE SPLIT BETWEEN BUSINESS AND PRIVATE CAN BE MADE USING ANY REASONABLE BASIS FOR APPORTIONMENT. WHAT IS APPROPRIATE WILL DEPEND ON THE NATURE OF THE EXPENSE. 6.1.7 . WHEN A VEHICLE IS UNDER USE, THE SAME CAN ALWAYS BE USED FOR BUSINESS AS WELL AS PERSONAL ELEMENT. AS A BUSINESS ENTITY SUCH BIFURCATION IS DIFFICULT. WHILE ATTENDING BUSINESS WORK, ONE CAN PERFORM PERSONAL WORKS AND VICE VERSA, THIS BASKET CAN ONLY BE DISTINGUISHED WHEN THE APPELLANT SUBMITS COMPLETE ANALYSIS OF SUCH EXPENDITURE AND ALL THE BILLS & VOUCHERS OF THE EXPENSES CLAIMED. IN ALL PRUDENCE, IT IS THE DUTY OF THE APPELLANT TO SUO - MOTO WORK OUT THE 5 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) ELEMENT OF PERSONAL NATURE IN ITS RETURN OF INCOME AND SHOWN AS DIS ALLOWABLE. 6.1.8. AS DISCUSSED ABOVE, THE APPELLANT HAD FAILED ON MAINLY TWO COUNTS: (I) IT HAD NOT DISALLOWED THE ELEMENT OF PERSONAL NATURE IN ITS RETURN SUO - MOTO. (II) IT HAD NOT PRODUCED ANY ANALYSIS OF EXPENDITURE NOR MADE A FACTUAL PRESENTATION WITH BILLS, VOUCHERS, TICKET DETAILS, HOTEL OR OTHER TRAVEL DETAILS ETC. LOG BOOK FOR VEHICLE USE WITH THE SIGNATURES OF THE TRAVELERS ALSO HAS NOT BEEN PRODUCED. 6.1.9 IN THE ABSENCE OF THESE VITAL ACID TESTS, IT IS DIFFICULT TO TAKE ANY CONTRARIAN VIEW ON TH E ORDER PASSED BY THE AO. NEED TO KEEP DETAILED RECORDS AND PERFORM AN APPORTIONMENT CALCULATION, SIMPLIFIED EXPENSES RULES CAN INSTEAD BY USED TO DETERMINE THE PERMITTED BUSINESS DEDUCTION. SIMPLIFIED EXPENSES CAN BE USED TO CLAIM A DEDUCTION FOR MOTOR EX PENSES BASED ON THE NUMBER OF BUSINESS TRAVELS OR KMS OR FOR OFFICE USE OF HOME BY REFERENCE TO THE NUMBER OF HOURS WORKED ON THE BUSINESS EACH MONTH ETC. SIMPLIFIED EXPENSES CAN ALSO BE USED TO DISALLOW THE PRIVATE ELEMENT WHERE BUSINESS PREMISES ARE ALSO USED AS HOME. ALL THESE INGREDIENTS ARE MISSING AND WHEN FACTUAL PRESENTATIONS ARE NEEDED TO PRESENT THE BONAFIDE OF THE APPELLANT, IT HAD THE RESORTED TO PRESENT JUDICIAL PRONOUNCEMENTS INSTEAD OF FACTUAL SUPPLEMENTATION OF THE INFORMATION. FROM THE ABOV E ANALYSIS I AM CONSTRAINED TO TAKE A VIEW IN FAVOUR OF THE AO, THEREFORE, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ADDITION MADE. THEREFORE, THIS GROUND ARE THE APPELLANT IS DISPOSED OFF AND DISMISSED. 6. LD.CIT(A) HAS ELABORATELY DISCUSSED THE ISSUES OF ADDITIONS /DISALLOWANCES MADE BY THE ASSESSING OFFICER. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A). NONE OF THE FINDINGS AND OBSERVATIONS OF THE LD.CIT(A) HAVE BEEN REBUTTED WITH EVIDENCES BY THE ASSESSEE AND THUS WE DO NOT SEE ANY INFIRMITY IN THE 6 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) ORDER PASSED BY THE LD.CIT(A) IN SUSTAINING THE ACTION OF THE ASSESSING OFFICER. GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 7. IN THE RESULT, APPE AL OF THE ASSESSEE IS DISMISSED. 8. BEFORE PARTING , WE NOTICED THAT THIS APPEAL WAS HEARD ON 25.02.2020 AND THE PRONOUNCEMENT IS DELAYED DUE TO LOCKDOWN IN VIEW OF COVID - 19 PANDEMIC. THE PRONOUNCEMENT IS AS PER RULE 34(5) OF INCOME TAX APPELLATE TRIBUNAL RUL ES, 1963 AND HON'BLE BOMBAY HIGH COURT DECISION VIDE ORDERS DATED 15.04.2020 AND 15.06.2020 EXTENDING THE TIME BOUND PERIODS SPECIFIED BY HON'BLE HIGH COURT BY REMOVING THE PERIOD UNDER LOCKDOWN. THIS ASPECT WAS ALSO DEALT WITH IN DETAIL BY THE MUMBAI BEN CH OF THE TRIBUNAL IN CASE OF DCIT V. JSW STEEL VIDE ORDER DATED 15.05.2020. ORDER PRONOUNCED ON 31 ST JULY, 2020 AS PER RULE 34(4) OF ITAT RULES BY PLACING THE PRONOUNCEMENT LIST IN THE NOTICE BOARD. SD/ - SD/ - ( S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 31 / 07 / 2020 GIRIDHAR, SR.PS 7 ITA NO. 4286/MUM/2018 (A.Y: 2012 - 13) VINOD KUMAR JAIN (HUF) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM