Sh. Rakesh Mohan, New Delhi V. ITO, New Delhi

ITA 4526/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8213 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Depreciation; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA, VICE PRESIDENT AND SHRI I.P. BANSAL, JUDICIAL MEMBER ITA NO.4526/DEL/2009 ASSESSMENT YEAR : 2006-07 SHRI RAKESH MOHAN, 5/102, SIKKA COMPLEX, PREET VIHAR, NEW DELHI. PAN : ACRPM9441J VS. ITO, WARD 38(3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SAURABH GUPTA,, ADVOCATE REVENUE BY : SHRI H.K. LAL, SR. DR ORDER PER : I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER OF THE CIT (A) DATED 25 TH SEPTEMBER, 2009 FOR ASSESSMENT YEAR 2006-07. GROUN D OF APPEAL READS AS UNDER:- THE LEARNED ASSESSING OFFICER, WARD 38(3), NEW DEL HI HAS ERRED IN MAKING ADDITIONS ON ACCOUNT OF EXPENSES CL AIMED IN PROFIT & LOSS ACCOUNT I.E., VEHICLE RUNNING AND MAI NTENANCE EXPENSES OF RS.3,35,968/-, CAR INSURANCE OF RS.37,2 51/-, CAR LOAN OF RS.23,558/- AND DEPRECIATION OF RS.172,353/ -, TELEPHONE EXPENSES OF RS.46,837/- ON ESTIMATED BASI S. THE A.O FURTHER MAKE ADDITION OF RS.60,000/- ON ACCOUNT OF LABOUR EXPENSES CLAIMED ON ESTIMATED BASIS. THESE ADDITIO NS ARE MADE WITHOUT GOING INTO THE FACTS AND DEPTH OF THE CASE WHICH IS TOTALLY UNJUSTIFIED AND UNFAIR. THE ABOVE SAID ADDITIONS MAY PLEASE BE ORDER TO BE DELETED. ITA NO.4526/DEL/2009 2 2. IT IS SEEN THAT ASSESSEE IS A CONTRACTOR, WHO RE CEIVED PAYMENTS TO THE EXTENT OF RS.92,38,32,000/- DURING THE YEAR ON WHIC H HE SHOWED AN INCOME OF RS.1,20,482/- GIVING A PERCENTAGE OF 1.30% AS AGAIN ST 1.91% FOR IMMEDIATE PRECEDING YEAR. THE AO NOTICED THAT IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.2,35,968/- TOWARDS VEHI CLE RUNNING AND MAINTENANCE, RS.37,251/- FOR CAR INSURANCE, RS.23,5 58/- TOWARDS CAR LOAN AND RS.1,72,353/- TOWARDS CAR DEPRECIATION. THE TOTAL EXPENSES INCURRED ON THESE ITEMS WAS AMOUNTING TO RS.4,69,130/-. THE AO DISAL LOWED 15% ON SUCH AGGREGATE AMOUNT ON THE GROUND OF PERSONAL USE OF V EHICLES. 3. THE AO NOTICED THAT ON ACCOUNT OF TELEPHONE EXPE NSES THE ASSESSEE CLAIMED A SUM OF RS.46,837/- AND ON ACCOUNT OF PERS ONAL USE 15% OF THE SAME WAS DISALLOWED. THE AO FURTHER NOTICED THAT THE AS SESSEE HAD CLAIMED RS.2 LAC AS LABOUR EXPENSES. IT IS MENTIONED BY THE AO THAT THOUGH THE ASSESSEE HAS PRODUCED VOUCHERS FOR LABOUR EXPENSES, THEY WERE NO T PRODUCED IN RESPECT OF THE ENTIRE EXPENSES ON THE GROUND THAT SOME TIMES C ASUAL LABOURERS WERE ENGAGED FROM WHOM NO PROPER RECEIPTS WERE TAKEN. T AKING NOTE OF THIS FACT, THE AO DISALLOWED RS.60,000/- OUT OF LABOUR EXPENSES. 4. LD. CIT (A) HAS SUSTAINED THE ADDITION ON ACCOUN T OF VEHICLES AND TELEPHONE EXPENSES ON THE GROUND THAT PERSONAL USER COULD NOT BE RULED OUT. 5. SO AS IT RELATES TO DISALLOWANCE OF LABOUR EXPEN SES, IT IS OBSERVED BY THE CIT (A) THAT IT WAS FOR THE ASSESSEE TO PRODUCE THE REQUIRED EVIDENCE TO JUSTIFY THE EXPENDITURE CLAIMED UNDER LABOUR EXPENSES. IT WAS FOR THE ASSESSEE TO PRODUCE THE REQUIRED EVIDENCE TO JUSTIFY THE EXPEND ITURE CLAIMED UNDER THIS HEAD. THEREFORE, THE AO DID NOT HAVE ANY ALTERNATIVE, BUT TO MAKE AN ESTIMATE. IT IS OBSERVED BY CIT (A) THAT IT WILL BE SIGNIFICANT TO NOTE THAT NET PROFIT RATE SHOWN BY THE ASSESSEE IS ONLY 1.3% AND ONLY A VAGUE AND GENE RAL EXPLANATION HAS BEEN GIVEN FOR THE EXTRAORDINARILY LOW RATE OF NET PROFI T. THEREFORE, THE ADDITION WAS ITA NO.4526/DEL/2009 3 MAINTAINABLE. THUS, THE CIT (A) HAS SUSTAINED ALL THE ADDITIONS MADE BY THE AO. THE ASSESSEE IS AGGRIEVED, HENCE, IN APPEAL. 6. LD. AR OF THE ASSESSEE SUBMITTED BEFORE US WRIT TEN SUBMISSIONS. IT IS SUBMITTED IN THE WRITTEN SUBMISSIONS THAT THE ASSES SEE IS A GOVERNMENT CONTRACTOR AND BECAUSE OF HIGH COMPETITION IN THE M ARKET AND RISING PRICES FOR STEEL, BRICKS AND OTHER CONSUMABLES, PROFIT MARGIN HAS GONE DOWN CONSIDERABLY AS COMPARED TO EARLIER YEARS. IT IS FURTHER SUBMITT ED THAT THE ASSESSEE DID NOT GET ANY CONTRACT DURING THE YEAR AND THEREFORE, HE TOOK A SUB CONTRACT OF M/S IOCL FROM JSM AND PAID RS.7 LACS AS TENDER MONEY, RESULT ING DOWNFALL IN THE NET PROFIT, AND, THUS, IT IS SUBMITTED THAT ADDITION OF RS.60,0 00/- MADE BY THE AO ON LABOUR ACCOUNT IS NOT JUSTIFIED. IT IS FURTHER SUBMITTED THAT THE ISSUE OF DISALLOWANCE OF LABOUR EXPENSES OF RS.60,000/- WAS ALSO CONSIDERED IN 2003-04 WHEREIN SIMILAR ADDITION WAS MADE OF RS.50,000/- ON AD HOC BASIS, B UT THE SAID ADDITION WAS DELETED BY THE CIT (A) VIDE HIS ORDER DATED 10 TH JANUARY, 2006. IT IS PLEADED THAT RULE OF CONSISTENCY SHOULD BE FOLLOWED BY THE DEPAR TMENT AS FOLLOWED IN THE CASE OF ITO VS. ELLORA SILK MILLS (P) LTD. BY ITAT, MUMB AI F BENCH IN ITA NOS.7263 TO 7267/MUM/2003 AND FOR RAISING SIMILAR PROPOSITION R ELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF C IT VS. NEO POLY PACK (P) LTD. (2000) 245 ITR 492 (DEL) TO CONTEND THAT WHERE THE REVENUE COULD NOT SPELL OUT ANY DISTINGUISHING FEATURE IN THE YEAR OF QUESTION, THEN THE RULE OF CONSISTENCY SHALL BE FOLLOWED. AND, THUS, IT WAS PLEADED BY LD. AR THAT THIS ADDITION OF RS.60,000/- DESERVES TO BE DELETED. WITH REGARD TO ADDITION MADE ON ACCOUNT OF VEHICLES IT IS SUBMITTED BY LD. AR THAT THERE IS NO ELEMENT OF PERSONAL USE AND THESE EXPENSES HAVE BEEN INCURRED EXCLUSIVELY FOR T HE BUSINESS PURPOSES AND SIMILARLY FOR TELEPHONE EXPENSES IT WAS SUBMITTED B Y LD. AR THAT THERE IS NO PERSONAL USE. 7. ON THE OTHER HAND, IT WAS PLEADED BY LD. DR THAT THE ASSESSEE WAS HAVING LOW NET PROFIT RATE AS COMPARED EARLIER YEA RS. IT WAS SUBMITTED THAT PERSONAL USER COULD NOT BE RULED OUT BY THE ASSESSE E BY PRODUCING ANY MATERIAL ITA NO.4526/DEL/2009 4 ON RECORD WITH REGARD TO VEHICLE AND TELEPHONE EXPE NSES. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT PRODUCE COMPLETE VOUCHERS WITH RESPECT TO THE EXPENSES AND, THEREFORE, THE AO WAS RIGHT IN MAKING SUCH ADD ITIONS AND THE CIT (A) HAS RIGHTLY UPHELD THE SAME. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED ON OUR RECORD. THE ASSESSEE IS AN INDIVIDUAL. PERSONAL USE OF VEHICLES AND TELEPHONE CANNOT BE RULED OUT. NO EVI DENCE HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THAT ALL THE EXPENS ES WERE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THEREFORE, WE DO NOT INTERFERE IN THE DISALLOWANCES SUSTAINED BY THE CIT (A) WITH REGARD TO VEHICLES AN D TELEPHONE EXPENSES. 9. NOW, COMING TO THE LABOUR EXPENSES, IT HAS BEEN CLEARLY STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE DID NOT PRODUCE FULL VOUCHERS WITH REGARD TO LABOUR WHO IS STATED TO HAVE BEEN EMPLOYED ON CASUA L BASIS. IF ASSESSEE IS CLAIMING CERTAIN EXPENDITURE, IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT SUCH EXPENSES WERE ACTUALLY INCURRED. NO MATERIAL HAS B EEN BROUGHT ON RECORD TO SUGGEST THAT THOSE EXPENSES WERE ACTUALLY INCURRED. NO MATERIAL IS BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT WHAT WAS DISALL OWED BY THE AO WAS NOT CORRECT AS THE EXPENSES RELATING TO CASUAL LABOUR W ERE LESS THAN THE AMOUNT DISALLOWED BY THE AO. THEREFORE, ON QUANTUM ALSO W E CANNOT TAKE A DIFFERENT VIEW UNLESS IT IS SHOWN BY THE ASSESSEE THAT THE AM OUNT DISALLOWED BY THE AO WAS FAR MORE THAN THE AMOUNT FOR WHICH THE VOUCHER WAS NOT RETAINED BY THE ASSESSEE. SO FAR AS IT RELATES TO CONSISTENCY, THE CLAIMING OF EXPENSES IS A QUESTION OF FACT AND IF THE ASSESSEE CLAIMED CERTAI N EXPENDITURE, THEY WILL HAVE TO BE EXAMINED ON THE BASIS OF FACTS OF THAT VERY YEAR . THEREFORE, IN OUR HUMBLE OPINION, RULE OF CONSISTENCY CANNOT APPLY IN SUCH C ASES AS CONTENDED BY LD. AR. WE FIND NO FORCE IN SUCH SUBMISSION OF LD. AR. THE REFORE, WE DECLINE TO INTERFERE IN THE DISALLOWANCES MADE ON ACCOUNT OF LABOUR EXPE NSES. ITA NO.4526/DEL/2009 5 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.02.201 0. SD/- SD/- [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED, 05.02.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES