M/s. Sangam Prints, Surat V. The Income tax Officer,Ward-2(1), Surat

ITA 445/AHD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63028 (ITAT-AHMEDABAD)
• Duration Of Justice: 42 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: PHAGU ORAM
• Keywords: Depreciation; Business expenditure; Corroborative evidences
• Section: 143(3)

Judgement Text

ITA NO445/A HD/2010 A.YR.. 2003 -04 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AH MEDABAD (BEFORE SHRI MUKUL KR.SHRAWAT JM & SHRI ANIL CHATUR VEDI A.M.) I.T.A. NO.445 /AHD/2010. (ASSESSMENT YEAR: 2003-04) M/S. SANGAM PRINTS 4035-36,J.J. A/C.MARKET, RING ROAD, SURAT. (APPELLANT) VS. INCOME TAX OFFICER, WARD 2(1), AAYAKAR BHAVAN, MAJURA GATE, SURAT. (RESPONDENT) PAN: AAJFS 9331 H APPELLANT BY : MR. MEHUL SHAH RESPONDENT BY : MR. PHAGU ORAM, SR. D.R. ( )/ ORDER DATE OF HEARING : 24-08-2012 DATE OF PRONOUNCEMENT : 19 -10-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT (A)-II, SURAT DATED 20-11-2009 FOR THE ASSESSMENT YEAR 2003 -04. 2. IN THIS APPEAL ASSESSEE HAS RAISED FOLLOWING GRO UNDS OF APPEAL. 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LD. CIT (A) HAS ERRED IN CONFIRMIN G THE ACTION OF THE A.O. IN DISALLOWING RS.1,04,880/- BEING 10% OF SALA RY. ITA NO445/A HD/2010 A.YR.. 2003 -04 2 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING RS.76,740/- OUT OF PACKING EXPE NSES. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LD. CIT (A) HAS ERRED IN CONFIRMIN G THE ACTION OF THE .A.O. IN DISALLOWING RS .65,302/- BEING 20% OF TELE PHONE EXPENSES, VEHICLE EXPENSES AND DEPRECIATION OF CAR. 3. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F DYEING, PRINTING AND FINISHING WORK OF GREY FABRICS ON JOB WORK BASI S. IT FILED ITS RETURN OF INCOME ON 27-11-2003 DECLARING TOTAL INCOME OF RS.8 ,49,632/-.THE CASE WAS SELECTED FOR SCRUTINY. ASSESSMENT WAS FRAMED U/ S. 143(3) VIDE ORDER DATED 29-3-2006 AND THE TOTAL INCOME WAS DETERMINED AT RS.17,07,790/- AFTER MAKING VARIOUS DISALLOWANCES. ASSESSEE CARRIE D THE MATTER BEFORE CIT (A) AND CIT (A) PARTLY ALLOWED THE APPEAL OF AS SESSEE. AGGRIEVED BY THE ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 4. GROUND NO.1 IS WITH RESPECT TO DISALLOWANCE OF R S.1,04,880/- BEING 10% OF THE SALARY. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON V ERIFICATION OF THE DETAILS FILED BY THE ASSESSEE IT WAS NOTICED BY THE A.O. THAT ASSESSEE HAS NOT FILED COMPLETE DETAILS IN RESPECT OF SALARY EXP ENSES OF RS.10,48,800/-. FROM THE SALARY REGISTER PRODUCED BEFORE A.O., A.O. CONCLUDED THAT THE REGISTER WAS MADE IN A SINGLE SITTING. HE ALSO OBSE RVED THAT THE REGISTER DID NOT HAVE ANY REVENUE STAMP AND IN SOME CASES, THERE WAS NO SIGNATURE OF THE RECIPIENT. REVENUE STAMP WAS AFFIXED ONLY IN C ASE OF FEW EMPLOYEES WHERE THE SALARY EXCEEDED RS.5,000/-. A.O. THEREFOR E, HELD THAT THE REGISTER PRODUCED BY THE ASSESSEE WAS NOT IN ORDER AND RELIA BLE. A.O. THUS, DISALLOWED 10% OF TOTAL SALARY FOR WANT OF DETAILS AND SUPPORTING EVIDENCE. ITA NO445/A HD/2010 A.YR.. 2003 -04 3 6. AGGRIEVED WITH THE ACTION OF A.O. THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT (A). 7. BEFORE THE CIT (A), ASSESSEE CONTENDED THAT COMP LETE EMPLOYEE- WISE DETAILS WERE FURNISHED ALONG WITH THE SALARY R EGISTER. THE DISALLOWANCE HAS BEEN MADE ONLY ON THE GROUND THAT THE REVENUE S TAMP HAS NOT BEEN USED EXCEPT IN FEW CASES. IT WAS FURTHER SUBMITTED THAT ABSENCE OF REVENUE STAMP DID NOT MEAN SALARY EXPENSES INCURRED WAS NOT GENUINE. CIT (A) DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE. HE UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE MATTER. THE A.O . MADE ONLY A VERY SMALL DISALLOWANCE @ 10%. THE ASSESSEE MAY HAV E PRODUCED EMPLOYEE-WISE DETAILS OF SALARY EXPENSES, BUT SUCH DETAILS OUGHT TO HAVE VERIFIABLE FROM THE BOOKS MAINTAINED BY THE AS SESSEE. THE SALARY REGISTER HOWEVER WAS NOT COMPLETE IN THE SEN SE THAT, MANY OF THE ENTRIES DID NOT HAVE SIGNATURES OF THE RECIPIEN TS WHILE IN SOME THERE WERE SIGNATURES BUT THERE WAS NOT REVENUE STA MP. IT MAY BE ARGUED THAT THE EMPLOYEES OFTEN BEING ILLITERATE CO ULD NOT PUT THE SIGNATURES PROPERLY, BUT IT COULD NOT BE DENIED THA T THEY COULD ALSO PUT THEIR THUMB IMPRESSIONS. GIVEN SUCH FACTS OF THE CA SE, I AM OF THE VIEW THAT THE A.O. WAS FULLY JUSTIFIED IN MAKING TH E DISALLOWANCE. THEREFORE, THE ADDITION OF RS.1,04,880/- WILL STAND CONFIRMED. 8. AGGRIEVED WITH THE ORDER OF THE CIT (A), THE ASS ESSEE IS NOW IN APPEAL BEFORE US. 9. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ASSE SSEE HAD FILED COMPLETE DETAILS RELATING TO SALARY EXPENSES. THE A .O. CONSIDERED THE SALARY REGISTER TO BE NOT RELIABLE ONLY FOR THE REA SON THAT REVENUE STAMPS WERE NOT USED IN ALL CASES WHILE MAKING PAYMENT OF SALARY. A.O. HAS NOT CITED ANY SPECIFIC INSTANCE OR WORKED OUT THE QUANT UM OF SALARY EXPENSES FOR WHICH SIGNATURE OF EMPLOYEE WAS NOT FOUND. THE A.O. HAD WRONGLY ITA NO445/A HD/2010 A.YR.. 2003 -04 4 CONCLUDED THAT REGISTER WAS MADE IN A SINGLE SITTIN G. HE THUS URGED THAT THE ADDITION MADE BY A.O. BE DELETED. THE LD. D. R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. AND CIT (A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. FROM THE ASSESSMENT ORDER WE FIND THAT A.O . HAS CONSIDERED THE SALARY REGISTER TO BE NOT IN ORDER ONLY FOR THE REA SON THAT REVENUE STAMPS WERE NOT AFFIXED IN ALL CASES BEFORE MAKING PAYMENT OF SALARY. APART FROM THE AFORESAID, THE A.O. HAS NOT POINTED OUT ANY DIS CREPANCY OR SHOWN ANY INSTANCE TO PROVE THAT SALARY EXPENSES ARE NOT GENU INE. HE HAS ALSO NOT DOUBTED THE PAYMENT OF SALARY BY ASSESSEE. THE A.O. HAS THUS DISALLOWED THE EXPENSES ON ADHOC BASIS WITHOUT BRINGING ANY TA NGIBLE EVIDENCE ON RECORD. IN VIEW OF THE TOTALITY OF FACTS, WE ARE OF THE VIEW THAT A.O. WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE. WE THUS DELET E THE DISALLOWANCE MADE. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 11. THE GROUND NO.2 IS REGARDING DISALLOWANCE OF P ACKING EXPENSES OF RS.76,740/-. 12. ON VERIFICATION OF DETAILS OF PACKING EXPENSES OF RS.17,90,771/- DEBITED TO PROFIT AND LOSS ACCOUNT, THE A.O. OBSERV ED THAT FOR EXPENSES OF RS.76,740/-, NO BILLS OR VOUCHERS WERE PRODUCED FOR VERIFICATION. IT WAS SUBMITTED THAT MOST OF THE PAYMENTS WERE BY CHEQUES AND DUE TO MISPLACEMENT OF BILLS, VOUCHERS; THE SAME COULD NOT BE PRODUCED. A.O. DID NOT AGREE WITH THE CONTENTION OF ASSESSEE FOR THE R EASON THAT THE PAYMENTS OF RS.76,740/- WERE MADE IN CASH AND NO SUPPORTING EVIDENCE WAS PRODUCED BEFORE HIM. HE ACCORDINGLY DISALLOWED RS.7 6,740/-. THE ASSESSEE CARRIED THE MATTER BEFORE CIT (A). ITA NO445/A HD/2010 A.YR.. 2003 -04 5 13. CIT (A) UPHELD THE ORDER OF A.O. AGGRIEVED BY T HE ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. 14. BEFORE US THE LD. A.R. SUBMITTED THAT THE PAYME NTS ARE MADE MOSTLY BY CHEQUES. HE ALSO SUBMITTED THAT THE EXPENSES ARE INCURRED ON DAILY BASIS. SOME OF THE BILLS WOULD NOT BE PRODUCED AS T HEY WERE MISPLACED. CONSIDERING THE NATURE OF EXPENSES HE URGED THAT TH E AMOUNT BE ALLOWED ON COMMERCIAL BASIS. ON THE OTHER HAND, THE LD. D. R. SUBMITTED THAT THE A.O. WAS FULLY JUSTIFIED IN DISALLOWED THE EXPENSES FOR THE REASON THAT THE EXPENSES DISALLOWED WERE THAT WERE INCURRED IN CASH AND THERE WAS NO SUPPORTING EVIDENCE. HE THUS SUPPORTED THE ORDER OF A.O. AND CIT (A). 15. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE TOTAL EXPENDITURE OF PACKI NG EXPENSES WAS TO THE TUNE OF RS.17,90,771/-. THE A.O. DISALLOWED THE EXP ENSES OF RS.76,740/- AS IT WAS INCURRED IN CASH AND NO SUPPORTING EVIDEN CE WAS PRODUCED BEFORE A.O. OR CIT (A). THE EXPENDITURE DISALLOWED BY A.O . REPRESENTS AROUND 4.3% OF THE TOTAL PACKING EXPENSES. IT IS A FACT TH AT IN THE ASSESSEES LINE OF BUSINESS, PACKING EXPENSES ARE REQUIRED TO BE INCUR RED AND THE EXPENSES ARE NOT DOUBTED. IT IS ALSO TRUE THAT ASSESSEE IS R EQUIRED TO FURNISH THE NECESSARY EVIDENCE CALLED FOR BY A.O. SINCE HE COU LD NOT PRODUCE THE NECESSARY EVIDENCE, CONSIDERING THE NATURE OF EXPEN SES AND THE TOTALITY OF FACTS, WE FEEL THAT IT WILL MEET THE ENDS OF JUSTIC E IF THE EXPENSES OF DISALLOWANCE IS ESTIMATED AT RS.30,000/-. WE THUS R ESTRICT THE DISALLOWANCE TO RS.30,000/- INSTEAD OF RS.76,740/- MADE BY A.O. THUS THIS GROUND OF ASSESSEE IS PARTLY ALLOWED. 16. GROUND NO. 3 RELATES TO DISALLOWANCE OUT OF TEL EPHONE, VEHICLE AND DEPRECIATION ON CAR. ITA NO445/A HD/2010 A.YR.. 2003 -04 6 17. A.O. NOTICED THAT ASSESSEE HAS DEBITED VEHICLE EXPENSES OF RS.30,200/-, TELEPHONE EXPENSES OF RS.1,52,703/- AN D DEPRECIATION ON CAR OF RS.1,43,605/-. ASSESSEE WAS ASKED TO BIFURCATE T HE BUSINESS AND NON BUSINESS EXPENSES AND SHOW CAUSE AS TO WHY 20% OF A FORESAID EXPENSES BE NOT DISALLOWED ON ACCOUNT OF PERSONAL USE. ASSES SEE DID NOT FURNISH THE DETAILS. A.O. THEREFORE, CONCLUDED THAT PERSONAL US E OF TELEPHONE, MOTOR CAR CANNOT BE RULED OUT. HE THEREFORE CONSIDERED 20% OF THE EXPENSES TO BE OF PERSONAL IN NATURE AND THEREFORE DISALLOWED AGGREGA TE AMOUNT OF RS.65,302/-. ASSESSEE CARRIED THE MATTER BEFORE CIT (A). CIT (A) UPHELD THE DISALLOWANCE. THE ASSESSEE IS THEREFORE NOW IN APPEAL BEFORE US. 18. BEFORE US THE LD. A.R. SUBMITTED THAT OUT OF TO TAL TELEPHONE EXPENSES OF RS.1,52,703/-, EXPENSES OF RS.1,32,972/- PERTAIN S TO SHOP AND ONLY RS.19,731/- PERTAINS TO TELEPHONE AT RESIDENCE. WIT H RESPECT TO VEHICLE EXPENSES HE SUBMITTED THAT VEHICLE IS USED BY PARTN ER FOR THE PURPOSE OF BUSINESS. HE THUS URGED THAT THE DISALLOWANCE BE DE LETED. LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O. 19. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT A.O. HAS DISALLOWED THE EXPENSES FOR T HE REASON THAT PERSONAL USE CANNOT BE RULED OUT. THE DISALLOWANCE HAS BEEN MADE ON ADHOC BASIS AT 20%. THE ASSESSEE HAS SUBMITTED THAT OUT OF TOTA L TELEPHONE EXPENSES OF RS.1,52,703/-, THE EXPENSES OF TELEPHONE INSTALL ED AT SHOP IS OF RS.1,32,972/-.THE REVENUE COULD NOT CONTROVERT THIS FACT. IT IS A FACT THAT THE A.O. HAS MADE AN ESTIMATION OF EXPENSES FOR DIS ALLOWANCE AT 20%. CONSIDERING ALL THE FACTS WE FEEL THAT DISALLOWANCE AT 20% IS ON HIGHER SIDE. WE FEEL THAT ENDS OF JUSTICE WILL BE MET IF DISALLO WANCE IS RESTRICTED TO 10%. WE THUS DIRECT THE DISALLOWANCE @ 10% INSTEAD OF 20 % MADE BY A.O. THUS THIS GROUND IS PARTLY ALLOWED. ITA NO445/A HD/2010 A.YR.. 2003 -04 7 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 19 -19 - 2012. SD/- SD/- (MUKUL KUMAR SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-II,SURAT. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. ITA NO445/A HD/2010 A.YR.. 2003 -04 8 1.DATE OF DICTATION 28 - 8 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 5 ,9 / 10 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..