Sh. Subahash Arora, New Delhi V. DCIT, New Delhi

ITA 4405/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7401 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 13-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 01-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V K TULSIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU : JUDICIAL MEMBER ITA NO. 4405/DEL/2010 ASSTT. YR: 2006-07 SUBHASH ARORA, VS. DCIT, CENTRAL CIRCLE, B-10, GREATER KAILASH ENCLAVE-II, NEW DELHI. NEW DELHI. PAN: ADHPA 5661 P AND ITA NO. 4099/DEL/2010 ASSTT. YR: 2006-07 DCIT, CENTRAL CIRCLE, VS. SUBHASH ARORA, NEW DELHI. B-10, GREATER KAILASH ENCLAVE-II, NEW DELHI. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI V.K. TULSIAN FCA REVENUE BY : SHRI RAKESH KUMAR SR. DR DATE OF HEARING : 20-08-2014 DATE OF ORDER : ______-08-2014. O R D E R PER S.V. MEHROTRA, A.M:- THESE CROSS APPEALS, BY THE ASSESSEE AS WELL AS THE REVENUE, ARE DIRECTED AGAINST THE ORDER DATED 28-6-2010 PASSED B Y THE LD. CIT(A)-II, NEW DELHI, IN APPEAL NO. 248/08-09, RELATING TO A.Y. 20 06-07. RESPECTIVE GROUNDS OF APPEAL ARE AS UNDER: ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 2 ASSESSEES APPEAL (ITA NO. 4405/DEL/2010) WHETHER THE LD. CIT(A) WAS JUSTIFIED BY RESTRICTIN G THE DISALLOWANCE FROM 25% TO 10% UNDER THE HEAD RENOVA TION/ UP GRADATION OF PROPERTY JUST ON CONJECTURES AND S URMISES EVEN WITHOUT BRINGING ANY ADVERSE MATERIAL/ EVIDENC E. REVENUES APPEAL (ITA NO. 4099/DEL/2010) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION MADE BY THE AO FR OM 25% TO 10% OF EXPENSES OF RS. 5,68,69,893/- FOR RENOVATION OF PROPERTIES. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D FILED HIS RETURN OF INCOME DECLARING INCOME OF RS. 10,25,710/-. THE ASS ESSING OFFICER NOTICED THAT DURING THE YEAR ASSESSEE HAD SHOWN SALE AND PU RCHASE OF BUILDINGS AND CLAIMED EXPENSES OF RS. 5,68,69,893/- FOR RENOVATIO N OF PROPERTIES WHICH WERE EITHER SOLD OFF OR WERE IN THE CLOSING STOCK. HE OBSERVED THAT ASSESSEE ALL ALONG WAS NOT SUBMITTING THE DETAILS OF RENOVAT ION EXPENSES DESPITE REPEATED REMINDERS. THE ASSESSING OFFICER OBSERVED THAT AFTER MANY OPPORTUNITIES THE ASSESSEE FILED COPIES OF BILLS EV IDENCING THE PAYMENT MADE FOR THE RENOVATION AND UPGRADATION OF PROPERTIES. H E POINTED OUT THAT SUCH DETAILS RUN INTO ABOUT 200 PAGES. THE ASSESSING OFF ICER OBSERVED THAT THE BILLS FILED BY THE ASSESSEE SHOWED FOLLOWING DEFECTS: 1. MOST OF THE BILLS ARE MERELY INDICATING NAME A RORA DEVELOPERS. NO ADDRESS IS INDICATED ON BILLS. SOME OF SUCH BILLS DO NOT EVEN INDICATE FOR WHICH PROPERTIE S THE EXPENSES IS INCURRED BY THE ASSESSEE. 2. GOODS NUMBER OF BILLS HAVING DEFECT AS IN S.NO. 1 ALSO PAID CASH, THUS LACKING VERIFIABILITY. ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 3 3. EVIDENCE OF PAYMENT IS NOT EVIDENT FROM THE BILL S. NO MENTION ON THE BILL ABOUT PAYMENT EITHER BY CHEUQE OR BY CASH, NOR ANY CORRELATION ESTABLISHED BY THE ASSESS EE. HE, ACCORDINGLY, DISALLOWED 25% OUT OF SUCH EXPENS ES. 2.1. BEFORE LD. CIT(A) THE ASSESSEE POINTED OUT THA T THE NATURE OF THE BUSINESS OF THE ASSESSEE REMAINED THE SAME AS IN E ARLIER YEARS. THE ASSESSEE EXPLAINED THAT THE EXPENDITURE HAD BEEN INCURRED ON DIFFERENT PROPERTIES AND EXPENDITURE INCURRED PROPERTY-WISE HAD BEEN SUBMITT ED DURING ASSESSMENT PROCEEDINGS. BEFORE ASSESSING OFFICER ASSESSEE FURN ISHED COPIES OF LEDGER ACCOUNT OF THREE DIFFERENT PROPERTIES SHOWING THE F ULL DETAILS I.E. OPENING BALANCE, EXPENDITURE INCURRED DATE-WISE ETC. HE ALS O FILED COPIES OF LEDGER ACCOUNTS OF ALL THE PROPERTIES SHOWING FULL DETAILS . SOME COPIES OF SAMPLE MAJOR BILLS HAD ALSO BEEN PRODUCED FOR VERIFICATION BEFORE ASSESSING OFFICER. IT WAS, THEREFORE, SUBMITTED THAT THE OBSERVATIONS TO THE CONTRARY WERE NOT CORRECT. 2.2. AS REGARDS THE DEFECTS POINTED OUT BY THE ASSE SSING OFFICER IN THE BILLS, THE ASSESSEE SUBMITTED AS UNDER: 3.2.1. AS REGARDS DEFECTS POINTED OUT BY THE AD. IN THE BILLS, THE SUBMISSION OF THE APPELLANT IS AS UNDER: - '(I). THE ASSESSEE IS DOING THE BUSINESS UNDER THE NAME AND STYLE OF 'ARORA DEVELOPERS'. THE ASSESSEE IS DEALIN G WITH UNEDUCATED, UNORGANIZED AND LABOUR CLASS AND THEREF ORE THESE PEOPLE WRITE MOSTLY THE BUSINESS NAME OF THE ASSESS EE. BILLS HAVE BEEN LINKED TO EXPENSES OF PROPERTY-WISE. (II). COPIES OF LEDGER ACCOUNTS OF ALL THE PROPERTI ES HAVE BEEN FURNISHED DURING THE ASSESSMENT PROCEEDINGS HAVING THE DETAILS OF ALL THE EXPENSES INCLUDING PAYMENT DETAILS OF CH EQUE NO. ETC AND THE SAME IS VERIFIABLE WITH THE BILLS. FURTHER, THE COPIES OF ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 4 BILLS ARE ARRANGED AS PER COPY OF LEDGER SUBMITTED FOR EXPENSES FOR EACH PROPERTY. AND THE SAME ARE DATE WISE TOO. THESE BILLS HAVE BEEN CHECKED BY THE LD. DY. CIT HIMSELF. THERE IS A FULL CORRELATION ESTABLISHED BY THE ASSESSEE BY LINKING ALL THE BILLS WITH THE LEDGER ACCOUNTS AND FURTHER BY GETTING IT CHECKED BY THE LD. ASSESSING OFFICER. (III). ALL THESE EXPENSES ARE INCURRED FOR DIFFEREN T PROPERTIES ON WHICH THE WORK IS CARRIED OUT. FULL DETAILS ALONG W ITH COPIES OF THE BILLS WITH LINKING TO THE DIFFERENT PROPERTIES HAVE BEEN FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE LD . DY. CIT ERRED IN TREATING THAT THE PROPERTY EXPENSES HAVE B EEN INFLATED BY THE ASSESSEE. THE EXPENSE IS INCURRED BY THE ASS ESSEE FOR THE BUSINESS REQUIREMENTS AND ARE THUS FULLY ALLOWABLE. ' 2.3. LD. CIT(A) REQUIRED THE ASSESSEE TO FILE COPIE S OF BILLS AND VOUCHERS WHICH WERE SUBMITTED BEFORE THE ASSESSING OFFICER S O THAT OBSERVATIONS OF ASSESSING OFFICER OF DEFECTS IN THE BILLS ETC. COUL D BE VERIFIED. 2.4. LD. CIT(A) HAS, INTER ALIA, OBSERVED AS UNDER: 3.3. THE SAME WERE FILED BY THE LD. A.R. ON 24/6/2 010. ON GOING THROUGH THE DETAILS OF SUCH BILLS AND VOUCHER S, IT IS SEEN THAT SOME OF THE BILLS SO PRODUCED ARE NOT COMPLETE IN ALL RESPECTS. IN SOME OF THE BILLS WHEREAS APPELLANT'S NAME IS WRITTEN OR THE NAME OF PROPRIETARY CONCERN NAMELY ' ARORA DEVELOPERS' IS WRITTEN, IN SOME BILLS IT IS SIMPLY WRITTEN 'ARORAJI'. AT THE SAME TIME IN SOME BILLS IT IS WRI TTEN 'ARORA CONS' WHEREAS IN SOME BILLS IT IS WRITTEN AS 'ARORA DEV'. IN SOME OF THE BILLS IT IS WRITTEN AS 'ARORA'. WHEN TH E REASONS FOR THE SAME WERE ASKED FOR FROM THE LD. A.R., IT WAS S UBMITTED BY HIM THAT THE BILLS ARE COMING MOSTLY FROM UNORGANIZ ED SECTOR AND THEY ARE NOT CONVERSANT WITH THE EXACT NAME OF THE CONCERN IN WHOSE FAVOUR THE BILL HAS TO BE RAISED. IT WAS B ROUGHT TO MY NOTICE BY THE LD. A.R. THAT FULL NAMES OF THE APPEL LANT'S PROPRIETARY CONCERN I.E. M/S ARORA DEVELOPERS IS CL EARLY MENTIONED WHERE BILLS ARE COMING FROM THE ORGANIZED SECTOR. WHEN IT WAS ASKED THAT HOW THE POSTING OF THE BILLS IS BEING ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 5 MADE IN THE BOOKS OF ACCOUNTS WHEN PROPER NAME ITSE LF IS NOT WRITTEN, THE LD. A.R. WAS UNABLE TO GIVE ANY SPECIF IC REPLY. ON GOING THROUGH THE BILLS ONE INTERESTING FEATURE WAS NOTED THAT THOUGH THE BILLS ARE STATED TO BE COMING FROM VARIO US DIFFERENT PARTIES HAVING DIFFERENT ADDRESSES BUT SOME OF THE BILLS APPEAR TO BE PRINTED AT THE SAME PLACE AS THEY ARE HAVING EXACTLY THE SAME STYLE OF PRINTING ALSO. THE PATTERN OF THE BIL LS IS ALSO EXACTLY SAME. (TO NAME A FEW OF THEM ARE BILLS FROM 'SHIV SANITATION', 'S.S. HARDWARE AND PAINTS', 'LEENA ENT ERPRISES', 'VIVEK MARBLES AND GRANITE', 'LINK GLASS', 'NEW LIG HT MARBLES AND STONES', 'ROYAL MARBLES', 'SUJAN TIMBER TRADERS '.) THERE IS NO MENTION OF SALE TAX NUMBER ETC IN MOST OF SUCH B ILLS. THOUGH IN SOME OF THE BILLS TELEPHONE NUMBER IS MENTIONED, IN THE PRESENCE OF LD. AR. I MYSELF TRIED TO CONTACT SOME OF THE PARTIES FROM WHOM THE BILLS HAVE BEEN CLAIMED AS RECEIVED B ASED ON THE TELEPHONE NUMBERS MENTIONED IN THIS BILL. BUT I T WAS FOUND THAT THE TELEPHONE NUMBERS AS MENTIONED IN THESE BI LLS DO NOT EXIST. NOT ONLY THAT, MANY BILLS, WHICH ARE CLAIMED TO BE FROM DIFFERENT PARTIES HAVING DIFFERENT ADDRESSES, APPEA R TO BE WRITTEN IN THE SAME HANDWRITING ALSO. THERE ARE SOM E BILLS WHICH ARE PLAIN PRINTED WITHOUT NAME OF THE PARTIES WHICH IS WRITTEN BY HAND. FOR EXAMPLE THE BILLS FROM 'BRIJ P AL SINGH', 'RAJ KAMAL TIMBER', 'PAWAN ELECTRIC COMPANY' ETC. W HEN ATTENTION OF THE LD. AR. WAS DRAWN ON THESE FACTS D URING THE COURSE OF APPELLATE HEARING, EXCEPT SAYING THAT THE BILLS ARE COMING FROM UNORGANIZED SECTOR AND THEREFORE THESE DISCREPANCIES MAY OCCUR, NO SPECIFIC EXPLANATION CO ULD BE OFFERED BY HIM. 2.5. IN VIEW OF ABOVE FINDINGS LD. CIT(A) RESTRICTE D THE DISALLOWANCE TO 10%, INTER ALIA, OBSERVING THAT MAJOR EXPENSES WERE COMING FROM ORGANIZED SECTORS, NAMELY, ASSOCIATED CEMENT COMPANY LTD., AG GARWAL MARBLE INDIA PVT. LTD. ETC. HE POINTED OUT THAT WHEN DISALLOWANC E WAS MADE ON ACCOUNT OF NON VERIFIABLE NATURE OF EXPENSES, IT COULD NOT EXCEED THE EXPENDITURE ACTUALLY BEING NON VERIFIABLE IN NATURE. ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 6 2.6. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), BOTH THE ASSESSEE AND THE DEPARTMENT ARE IN APPEAL BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NATU RE OF ASSESSEES BUSINESS REQUIRED INCURRING OF EXPENSES FOR PROCURI NG OF MATERIAL FOR CONSTRUCTION PURPOSE FROM UNORGANIZED SECTOR. HE PO INTED OUT THAT ASSESSEE HAD GIVEN ALL THE DETAILS OF EXPENSES. AS REGARDS INQUIRIES MADE BY LD. CIT(A) FROM THE PARTIES, LD. COUNSEL POINTED OUT THAT THE INQUIRIES WERE MADE AFTER FOUR YEARS AFTER INCURRING OF EXPENSES B Y WHICH TIME MANY TELEPHONE NUMBER HAD ALSO BEEN CHANGED. THEREFORE, ON THIS BASIS THE DISALLOWANCE COULD NOT BE MADE. LD. COUNSEL FURTHER SUBMITTED THAT ASSESSING OFFICER HAD MADE THE DISALLOWANCE WITHOUT REJECTING THE BOOKS OF ACCOUNT. 4. LD. DR SUBMITTED THAT LD. CIT(A) HAS WRONGLY DEL ETED THE DISALLOWANCE MADE BY ASSESSING OFFICER, PARTICULARL Y WHEN ASSESSING OFFICER HAD SPECIFICALLY POINTED OUT THE DEFECT IN THE BILL S. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. CONSIDERING THE OBSERVATIONS M ADE BY LD. CIT(A), AS REPRODUCED EARLIER AND ALSO THE SUBMISSIONS MADE BY LD. COUNSEL FOR THE ASSESSEE, WE ARE OF THE OPINION THAT THERE IS FORCE IN THE SUBMISSIONS MADE BY LD. COUNSEL FOR THE ASSESSEE, CONSIDERING THE NATUR E OF ASSESSEES BUSINESS, AS ALSO THE PERIOD BETWEEN THE INCURRING OF EXPENDITUR E AND THE INQUIRIES MADE BY LD. CIT(A). HOWEVER, AT THE SAME TIME IN THE ABS ENCE OF CONCRETE EVIDENCE, IT CANNOT BE HELD THAT ENTIRE EXPENDITURE HAS TO BE ALLOWED. WE, THEREFORE, RESTRICT THE DISALLOWANCE TO 5% OF THE T OTAL EXPENDITURE CLAIMED BY THE ASSESSEE. ITA NOS. 4405 & 4449/D/10 SUBASH ARORA VS. DCIT 7 6. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED AND THE DEPARTMENTS APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 28-08-2014. SD/- SD/- ( H.S. SIDHU ) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28-08-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR