ACIT, New Delhi V. Shri Deepak Chadha, New Delhi

ITA 4375/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3064 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: JAGJIT SINGH; DR ANTHWAL
• Keywords: Business income; Depreciation; Salary income; Principle of natural justice; Additional evidence; Cost of acquisition
• Section: 142(1); 32

Judgement Text

1 ITA NO. 4375/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI R. S. SYAL, VICE PRES IDENT AND MS SUCHITRA KAMBLE, JUD ICIAL MEMBER ITA NO. 4375/DEL/201 2 ( A.Y 2009-10) ACIT CIRCLE-39(1) ROOM NO. 212, C. R. BUILDING NEW DELHI (APPELLANT) VS DEEPAK CHADHA 19/310/40, SHAHJADA BAGH, OLD ROHTAK ROAD NEW DELHI AADPC0360L (RESPONDENT) APPELLANT BY MS. ASHIMA NEB, SR. DR RESPONDENT BY SH. D. R. ANTHWAL, ADV & SH. JAGJIT SINGH, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 07/06/2012 PASSED BY CIT(A) XVIII, NEW DELHI FOR A SSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT THE LD .CIT (A) ERRED IN DELETING THE ADDITIO N OF RS.81,166/- ON ACCOUNT OF PERSONAL USE. 2. THAT THE LD. CIT (A) ERRED IN DELETING THE ADDITIO N OF RS.27,308/- MADE ON ACCOUNT OF DIWALI EXPENSES COMPLETELY IGNORING T HE FACT THAT THE ONUS WAS ON ASSESSEE TO ESTABLISH THAT IT WAS INCURRED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. DATE OF HEARING 21.03.2018 DATE OF PRONOUNCEMENT 27.03.2018 2 ITA NO. 4375/DEL/2012 3. THAT THE LD.CIT (A) ERRED IN DELETING THE ADDITION OF RS.50,000/- MADE ON ACCOUNT OF UNVERIFIED EXPENSES CLAIMED AS FREIGHT A ND VEHICLE RUNNING COMPLETELY IGNORING THE FACT THAT THE ONUS WAS ON A SSESSEE ADMITTED THE ADDITIONAL EVIDENCES WITHOUT PROVIDING AO ANY OPPOR TUNITY OF REBUTTAL UNDER RULE-46A. 4. THAT THE LD. CIT (A) ERRED IN DELETING THE ADDITIO N OF RS. 1,71,929/- MADE ON ACCOUNT OF INCORRECT CLAIM OF DEPRECIATION ON CO MMERCIAL VEHICLE WITHOUT VERIFYING THE CLAIM OF THE ASSESSEE THAT WH ETHER THESE VEHICLES WERE ACQUIRED BETWEEN 01.10.1998 AND 31.03.1999 AND PUT TO USE BEFORE 01.04.1999 AS PER THE PROVISION OF THIRD PRO VISION TO SECTION 31(1) OF THE IT ACT. 5. THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,71,929/- MADE ON ACCOUNT OF INCORRECT CLAIM OF DEPRECIATION ON TH E BASIS OF ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE WITHOUT PROVIDIN G OPPORTUNITY OF REBUTTAL TO THE AO UNDER THE RULE 46 A. 6. THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON OF RS.36,600/- MADE ON ACCOUNT OF INCORRECT CLAIM OF COST OF ACQUISITIO N OF SHARES WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF SHARES. 7. THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON OF RS.36,600/- MADE ON ACCOUNT OF INCORRECT CLAIM OF COST OF ACQUISITION O F SHARES WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF SHARES ON THE BAS IS OF ADDITIONAL EVIDENCE SUBMITTED BY THE J ASSESSEE WITHOUT PROVID ING OPPORTUNITY OF REBUTTAL TO THE AO UNDER RULE46A. 8. THAT THE LD. CIT (A) ERRED IN DELETING THE ADDIT ION OF RS.48,28,460/- MADE ON LONG TERM CAPITAL GAIN COMPLETELY ON THE BASIS O F SUBMISSION OF THE ASSESSEE | AND IGNORING THE REASONS MENTIONED IN TH E ASSESSMENT ORDER. 9. THAT THE LD. CIT(A) ERRED IN ADMITTING EVIDENCE IN CONTRAVENTION OF JUDGMENT 3 ITA NO. 4375/DEL/2012 OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. M ANISH BUILD WELL PVT. LTD. [2012] 204 TAXMAN 106 THAT ADDITIONAL EVIDENCE CAN BE PRODUCED AT FIRST APPELLATE STAGE ONLY WHEN CONDITIONS STIPULATED IN RULE 46 A ARE SATISFIED. 10. THAT THE ORDER OF THE LD.CIT(A) IS PERVERSE AN D FIT TO BE SET ASIDE AS SHE WAS COMPLETELY OVER LOOKED THE REASONS MENTIONED IN THE ASSESSMENT ORDER FOR MAKE IN ADDITIONS. 11. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE TO EACH OTHER. 3. THE ASSESSEE IS A PROPRIETOR OF THE BUSINESS KNO WN AS M/S CHOUDHARY RUBBER AND CHEMICAL COMPANY AND DEALS IN SALE/PURCH ASE OF CHEMICALS AND RAW RUBBER ON WHOLESALE BASIS. THE ASSESSEE CONVER TED THEIR BUSINESS FROM PROPRIETARY CONCERN TO PVT. LTD. COMPANY KNOWN AS M /S CHOUDHARY RUBBER AND CHEMICAL PVT. LTD. W.E.F. 1/1/2009 BY VIRTUE O F BUSINESS TRANSFER AGREEMENT EXECUTED ON 1/1/2009. THE ASSESSEE CLAIM ED BUSINESS INCOME FROM HIS PROPRIETARY CONCERN, SALARY INCOME FROM M/ S CHOUDHARY RUBBER AND CHEMICALS PVT. LTD IN WHICH HE IS A DIRECTOR, HOUS E PROPERTY INCOME AND LONG TERM CAPITAL GAIN ON SALE OF SHARES. RETURN OF INC OME FOR THE ASSESSMENT YEAR 2009-10 WAS FILED ON 30/09/2009 DECLARING TOTAL INC OME OF RS.1,02,65,210/-. THE ASSESSEE DISCLOSED TURNOVER OF RS.28,04,74,304/ - GROSS PROFIT OF RS.1,34,288/- (3.57%) AND NET PROFIT OF RS.46,21,89 2/- (1.65%) FOR THE ASSESSMENT YEAR 2009-10 AGAINST THE TOTAL TURNOVER OF RS.29,67,34,645/-, GROSS PROFIT OF RS.87,37,864/- (2.94%) AND NET PROF IT OF RS.36,18,239/-(1.21%). THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME T AX ACT, 1961, THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICE U/S 143(2) O F THE INCOME TAX ACT WAS SERVED UPON THE ASSESSEE WITHIN THE STIPULATED STAT UTORY TIME. AGAIN NOTICE U/S 143(2) AND 142(1) WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE STATUTORY NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED ON VARIOUS DATES AND FILED THE REQUISITE DETAILS WHICH WERE EXAMINED AND PLACED ON RECORD BY THE ASSESSING OFFICER. THE BOOKS OF A CCOUNTS WERE ALSO PRODUCED AND EXAMINED THE ASSESSING OFFICER. AFTER GOING THR OUGH ALL THE DETAILS THE 4 ITA NO. 4375/DEL/2012 ASSESSING OFFICER MADE VARIOUS ADDITIONS AND PASSED ASSESSMENT ORDER. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL O F THE ASSESSEE. 5. AS REGARDS GROUND NO. 1 OF THE REVENUES APPEAL, THE LD. DR SUBMITTED THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.81,166/- ON ACCOUNT OF PERSONAL USE. THE LD. DR SUBMITTED THAT THE ASSESSI NG OFFICER RIGHTLY DISALLOWED RS.1,62,332/- WHICH IS 10% OF EXPENSES O N VEHICLE MAINTENANCE, SALES PROMOTION, STAFF WELFARE, TRAVELLING AND CONV EYANCE AND TELEPHONE. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE CIT(A) HELD THAT THE ELEMENT OF PERSONAL USE CANNOT BE COMPLETE LY RULES OUT, THEREFORE, HE SUSTAIN THE DISALLOWANCE TO THE TUNE OF RS.81,166/- . IT CAN BE SEEN THAT THE ASSESSING OFFICER MADE DISALLOWANCE ONLY ON THE EST IMATED BASIS. THEREFORE, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED. 7. AS RELATES TO GROUND NO. 2, THE LD. DR SUBMITTED THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.27,308/- MADE ON ACC OUNT OF DIWALI EXPENSES COMPLETELY IGNORING THE FACT THAT THE ONUS WAS ON A SSESSEE TO ESTABLISH THAT IT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE CIT(A) HAS RIGHTLY HELD THAT ELEMENT OF PERSONAL USE CANNOT BE COMPLETELY RULED OUT AND SUSTAIN THE DISALLOWANCE TO THE TUNE OF RS.27,308/- . THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED. 9. AS RELATES TO GROUND NO. 3, THE LD. DR SUBMITTED THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.50,000/- MADE ON ACC OUNT OF UNVERIFIED EXPENSES 5 ITA NO. 4375/DEL/2012 CLAIMED AS FREIGHT AND VEHICLE RUNNING COMPLETELY I GNORING THE FACT THAT THE ONUS WAS ON ASSESSEE ADMITTED THE ADDITIONAL EVIDEN CES WITHOUT PROVIDING AO ANY OPPORTUNITY OF REBUTTAL UNDER RULE-46A. THE LD . AR RELIED UPON THE ORDER OF THE CIT(A). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE CIT(A) HAS CORRECTLY HELD THAT THE BOOKS OF ACCOUNTS OF THE AS SESSEE ARE AUDITED AND THE ASSESSEE IS MAINTAINING THE COMPUTERIZED ACCOUNTS B OOKS IN THE SHAPE OF CASH BOOK, LEDGER, STOCK REGISTER, SALARY REGISTER, SALE PURCHASE VOUCHER, BANK STATEMENT ETC. REGULARLY. THEREFORE, ANY DISALLOWAN CE ON ESTIMATED BASIS IS NOT TENABLE. THERE IS NO NEED TO INTERFERE WITH THE FIN DING OF THE CIT(A). GROUND NO. 3 IS DISMISSED. 11. AS RELATES TO GROUND NO. 4 AND 5, THE LD. DR SU BMITTED THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS. 1,71,929/- MA DE ON ACCOUNT OF INCORRECT CLAIM OF DEPRECIATION ON COMMERCIAL VEHICLE WITHOUT VERIFYING THE CLAIM OF THE ASSESSEE THAT WHETHER THESE VEHICLES WERE ACQUIRED BETWEEN 01.10.1998 AND 31.03.1999 AND PUT TO USE BEFORE 01.04.1999 AS PER THE PROVISION OF THIRD PROVISION TO SECTION 31(1) OF THE IT ACT. THE LD. D R SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,71,929/- MAD E ON ACCOUNT OF INCORRECT CLAIM OF DEPRECIATION ON THE BASIS OF ADDITIONAL EV IDENCE SUBMITTED BY THE ASSESSEE WITHOUT PROVIDING OPPORTUNITY OF REBUTTAL TO THE AO UNDER THE RULE 46A. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN ADMITTING EVIDENCE IN CONTRAVENTION OF JUDGMENT OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT V. MANISH BUILD WELL PVT. LTD. [2012] 204 TAXMAN 106 T HAT ADDITIONAL EVIDENCE CAN BE PRODUCED AT FIRST APPELLATE STAGE ONLY WHEN CONDITIONS STIPULATED IN RULE 46 A ARE SATISFIED. IN RESPECT OF GROUND NO. 4 & 5, THE LD. DR SUBMITTED THAT THE ISSUE OF DEPRECIATION WAS NOT PROPERLY DEA LT BY THE CIT(A) . 12. THE LD. AR RELIED UPON THE ORDER OF THE CIT (A) AND SUBMITTED THAT ALL THE DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OF FICER. 6 ITA NO. 4375/DEL/2012 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RECORDS. THE PERSULA OF THE RECORDS SHOW THAT THE ASSESSEE FURNISHED ALL THE RELEVANT DOCUMENTS BEFORE THE ASSESSING OFFICER. THEREFORE, THERE IS N O ADDITIONAL EVIDENCE GIVEN BY THE ASSESSEE BEFORE THE CIT(A). THE CIT(A) RIGHTLY HELD THAT THE ASSESSING OFFICER WRONGLY DISALLOWED A SUM OF RS.1,71,929/- D EPRECIATION ON COMMERCIAL VEHICLE. AS PER 3 RD PROVISO TO CLAUSE (II) OF SUB-SECTION (1) OF SECTI ON 32 OF THE ACT, THE ASSESSEE HAS RIGHTLY CLAIMED THE DEPRECIAT ION @40%. THUS, THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A). GROUND NO. 4 & 5 ARE DISMISSED. 14. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN D ELETING THE ADDITION OF RS.36,600/- MADE ON ACCOUNT OF INCORRECT CLAIM OF C OST OF ACQUISITION OF SHARES WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF S HARES. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DELETING THE ADD ITION OF RS.36,600/- MADE ON ACCOUNT OF INCORRECT CLAIM OF COST OF ACQUISITIO N OF SHARES WHILE COMPUTING LONG TERM CAPITAL GAIN ON SALE OF SHARES ON THE BAS IS OF ADDITIONAL EVIDENCE SUBMITTED BY THE ASSESSEE WITHOUT PROVIDING OPPORTU NITY OF REBUTTAL TO THE AO UNDER RULE 46A. THE LD. DR SUBMITTED THAT THE CIT(A ) ERRED IN ADMITTING EVIDENCE IN CONTRAVENTION OF JUDGMENT OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT V. MANISH BUILD WELL PVT. LTD. [2012] 204 TA XMAN 106 THAT ADDITIONAL EVIDENCE CAN BE PRODUCED AT FIRST APPELLATE STAGE O NLY WHEN CONDITIONS STIPULATED IN RULE 46 A ARE SATISFIED. THE LD. AR R ELIED UPON THE ORDER OF THE CIT (A) AND SUBMITTED THAT ALL THE DOCUMENTS WERE P RODUCED BEFORE THE ASSESSING OFFICER. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RECORDS. THE PERSULA OF THE RECORDS SHOW THAT THE ASSESSEE FURNISHED ALL THE RELEVANT DOCUMENTS BEFORE THE ASSESSING OFFICER. THEREFORE, THERE IS N O ADDITIONAL EVIDENCE GIVEN BY THE ASSESSEE BEFORE THE CIT(A). THE CIT(A) RIGHTLY HELD THAT COST OF ACQUISITION OF RS.36,600/- WHICH WAS DISCLOSED IN THE FINANCIAL YEAR 2003-04 AS PURCHASE AND THE SAME WAS ALLOWED BY THE CIT(A). THERE IS NO NEED TO INTERFERE WITH THE 7 ITA NO. 4375/DEL/2012 FINDINGS OF THE CIT(A). GROUND NO. 6 & 7 ARE DISMIS SED. 16. AS RELATES TO GROUND NO. 8, THE LD. DR SUBMITTE D THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.48,28,460/- MADE ON LONG TERM CAPITAL GAIN COMPLETELY ON THE BASIS OF SUBMISSION OF THE ASSESS EE SUBMISSION AND IGNORED THE REASONS MENTIONED IN THE ASSESSMENT ORDER. THE LD. DR SUBMITTED THAT THE LAND OWNED BY THE ASSESSEE STILL REGISTERED IN HIS NAME AND THERE IS ONLY A TRANSFER TO THE PRIVATE LIMITED COMPANY. THE LD. DR FOR GROUND NO. 8 SUBMITTED THAT THE PERIOD OF SHARE HOLDING SHOULD H AVE BEEN VERIFIED BY THE ASSESSING OFFICER OR BY THE CIT (A). THE SHARE HOL DING PATTERN WAS NOT BEFORE THE ASSESSING OFFICER. THEREFORE, THE SAME SHOULD BE VERIFIED. 17. THE LD. AR RELIED UPON THE ORDER OF THE CIT (A) AND SUBMITTED THAT ALL THE DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OF FICER. THE LD. AR SUBMITTED THAT SHARE POSITION HAS NOT AT ALL CHANGE AND THERE IS NO CHANGE IN THE PATTERN THROUGHOUT THE YEARS. 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT CAN BE SEEN THAT SHAREH OLDING PATTERN WAS NOT VERIFIED BY THE ASSESSING OFFICER AS WELL AS THE CI T(A). IN FACT, THE ASSESSEE HAS CONVERTED HIS BUSINESS FROM PROPRIETORSHIP TO PVT. LTD. COMPANY W.E.F. 01.01.2009 WITH ALLOTMENT OF 99.66% SHARE IN HIS NA ME. NEITHER THE ASSESSING OFFICER NOT THE CIT(A) HAS NOT TAKEN INTO ACCOUNT T HE EFFECT OF THE REVALUATION AFTER THE PROPRIETARY CONCERN IS CONVERTED INTO PRI VATE LIMITED COMPANY AS REGARDS TO THE SHARES ALLOTTED TO THE ASSESSEE AS A DIRECTOR OF THE SAID PRIVATE LIMITED COMPANY. THEREFORE, THIS NEEDS TO BE LOOKED INTO BY THE ASSESSING OFFICER. THE MATTER IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. THUS, GROUND NO. 8 I S PARTLY ALLOWED FOR STATISTICAL PURPOSE. 8 ITA NO. 4375/DEL/2012 19. IN RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MARCH, 2018 . SD/- SD/- (R. S. SYAL) (SUCHITRA KAMBLE) VICE PRESIDENT J UDICIAL MEMBER DATED: 27/03/2018 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO. 4375/DEL/2012 DATE 1. DRAFT DICTATED ON 21/03/2018 PS 2. DRAFT PLACED BEFORE AUTHOR 21/03/2018 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2018 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 27.03.2018 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 7 .03.2018 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.