M/s Numark Sales, Kanpur V. Income Tax Officer-2(3), Kanpur

ITA 457/LKW/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1872 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 17-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Commercial expediency
• Section: 143(3)

Judgement Text

I.T.A. NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 M/S NUMARK SALES, 7/196-A, SWAROOP NAGAR, KANPUR. PAN:AADEN 7266 N VS. INCOME TAX OFFICER-2(3), KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-I, KANPUR DATED 25/05/2017. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS THE ACTI ON OF LEARNED CIT(A) BY WHICH HE HAS CONFIRMED AD HOC DISALLOWANCE OF RS.86 ,688/- OUT OF DEPRECIATION ON VEHICLE, CONVEYANCE EXPENSES AND VE HICLE REPAIRS AND ALSO THE ACTION OF LEARNED CIT(A) BY WHICH HE HAS CONFIR MED THE AD HOC DISALLOWANCE OF RS.1,37,524/- OUT OF FREIGHT & FORW ARDING CHARGES, GENERAL EXPENSES, COMPUTER REPAIRS, SALARY AND TRAVELLING E XPENSES. 3. AT THE OUTSET, LEARNED A. R. INVITED OUR ATTENTI ON TO THE ASSESSMENT ORDER AND SUBMITTED THAT THE ORDER HAS BEEN PASSED U/S 143(3) OF THE ACT AND BOOKS OF ACCOUNT HAVE BEEN ACCEPTED AS THESE HA VE NOT BEEN REJECTED APPELLANT BY SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY SHRI AMIT NIGAM, D.R. DATE OF HEARING 31/08/2018 DATE OF PRONOUNCEMENT 07 / 0 9 /201 8 I.T.A. NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 2 AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS NEC ESSARY BOOKS OF ACCOUNT AND VOUCHERS WERE FURNISHED. LEARNED A. R. SUBMITTED THAT THE ONLY REASON FOR MAKING AD HOC DISALLOWANCE WAS THAT THE ASSESSEE HAD MADE CERTAIN EXPENSES IN CASH AND ALSO THE DOUBT OF THE ASSESSING OFFICER THAT THE ASSESSEE MIGHT HAVE USED THE CAR FOR HIS P ERSONAL PURPOSES. LEARNED A. R. SUBMITTED THAT NOWHERE IN THE ASSESSM ENT ORDER THE ASSESSING OFFICER POINTED OUT ANY DEFICIENCY IN ANY OF THE VOUCHERS OR BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT THE NATURE OF EX PENSES ITSELF SUGGEST THAT THESE HAS TO BE NECESSARILY INCURRED IN CASH AS THE PAYMENTS INCLUDED PAYMENTS TO LABOURERS FOR FREIGHT & CARTAGE AND ROU TINE DAILY EXPENSES LIKE TEA EXPENSES OF STAFF, CLEANING EXPENSES, GENERAL W EAR AND TEAR EXPENSES ETC. IT WAS SUBMITTED THAT THESE EXPENSES WERE MEA NT FOR BUSINESS PURPOSES ONLY HAVING COMMERCIAL EXPEDIENCY AND NOWH ERE COMMERCIAL EXPEDIENCY HAS BEEN DISPUTED. RELIANCE IN THIS RES PECT WAS PLACED ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CO MMISSIONER OF EXCESS PROFITS TAX VS. S.R.V.G. PRESS CO. [1961] 42 ITR 21 9 (SC) WHEREIN HON'BLE COURT HAS HELD THAT PAYMENT MUST BE ASCERTAINED IN THE LIGHT OF WHAT MAY BE REGARDED AS COMMERCIAL EXPEDIENCY AND NOT ON ANY LOGISTIC CONSIDERATION. FURTHER RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS FOR THE PROPOSITION THAT WHERE ASSESSING OFFICER HAS NO T POINTED OUT ANY PARTICULAR ITEM OF EXPENDITURE WHICH WAS INADMISSIB LE, NO AD HOC DISALLOWANCE CAN BE MADE: (I) CIT VS. S.S.P. )P.) LTD. [2011] 202 TAXMAN 386 (P&H ) (II) INCOME TAX OFFICER VS. KULDEEP SINGH SETHI [2005] ( 6) MTC 479 (TRIB.)M I.T.A. NO.1499/ALL/1997 (III) ACIT VS. GANPATI ENTERPRISES LTD., IT APPEAL NO. 61 12(DELHI) OF 2012 (IV) TRIPAT KAUR VS. ACIT, I.T.A. NO.3244/DEL/2012] (V) ACIT VS. UP NATIONAL MANUFACTURERS LIMITED 2004 (4) MTC 126 (TRIB.) (VI) J. J. ENTERPRISES VS. CIT [2002] 254 ITR 216 (SC) I.T.A. NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 3 (VII) DHAKESWARI COMMON MILLS LIMITED VS. CIT 26 ITR 775 [1954] (SC) (VIII) CIT VS. NUCHEM LIMITED [2012] 20 TAXMAN.COM 814 (IX) MITSUI & CO. INDIA PVT. LTD. VS. ADDL CIT, I.T.A. N O.1362/DEL/ 2011 4. LEARNED D. R., ON THE OTHER HAND, PLACED HIS REL IANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE ACT. THE ASSESSING OFFICER HIMSELF H AS NOTED IN HIS ORDER THAT THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNT AND H AD GOT HIS ACCOUNTS AUDITED. NOWHERE IN THE ASSESSMENT ORDER THE ASSES SING OFFICER POINTED OUT ANY DEFICIENCY IN THE VOUCHERS EXCEPT HIS OBSERVATI ONS THAT SINCE THE PAYMENTS WERE MADE IN CASH AND WERE SUPPORTED BY HA ND MADE VOUCHERS, THEREFORE, THEY WERE NOT OPEN FOR 100% VERIFICATION . WE FURTHER FIND THAT DISALLOWANCE OUT OF CAR EXPENSES INCLUDING DEPRECIA TION WAS MADE BY HOLDING THAT THE ASSESSEE MUST HAVE UTILIZED THE CA R FOR PERSONAL PURPOSES. SUCH TYPE OF DISALLOWANCES, WITHOUT POINTING OUT AN Y DEFECT IN THE BOOKS OF ACCOUNT, IS NOT SUSTAINABLE IN LAW ESPECIALLY IN VI EW OF THE FACT WHERE THE NATURE OF SUCH EXPENSES SUGGEST THAT THESE CAN BE I NCURRED IN CASH ONLY. IN THE CASE UNDER HAND WE FIND THAT THE MAJORITY OF TH E PAYMENTS WERE MADE TO THE LABOURERS FOR FREIGHT & CARTAGE AND STAFF WE LFARE EXPENSES IN THE FORM OF TEA EXPENSES. FURTHER THE EXPENSES INCLUDE SALA RY, TRAVELLING EXPENSES, VEHICLE EXPENSES AND COMPUTER REPAIRS ETC. THESE AR E SMALL EXPENSES WHICH WERE INCURRED IN CASH. THE COPY OF ACCOUNT OF THES E EXPENSES IS PLACED AT PAGES 1 TO 17 OF THE PAPER BOOK. A NUMBER OF CASE LAWS RELIED ON BY LEARNED A. R. HOLD THAT WITHOUT POINTING OUT ANY DE FICIENCY IN THE BOOKS OF ACCOUNT OR VOUCHERS, THE AD HOC DISALLOWANCE IS NOT WARRANTED. HON'BLE I.T.A. NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 4 PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. S.S.P. (P) LTD. 2011 202 TAXMAN 386 (PUNJAB & HARYANA) HAS HELD AS UNDER: IT WAS NOTED THAT THE DISALLOWANCE WAS MADE ON AD HOC BASIS WITHOUT THERE BEING ANY MATERIAL TO JUSTIFY SUCH DI SALLOWANCE. NO SPECIFIC INSTANCES OF EXPENDITURE HAD BEEN POINT ED OUT WHICH MAY DISENTITLE THE ASSESSEE'S CLAIM FOR SITE EXPENSES. THE FINDINGS ON APPEAL WERE AFFIRMED BY THE TRIBUNAL. N O ERROR OF LAW OR PERVERSITY COULD BE SHOWN BY THE REVENUE IN THE AFORESAID FINDING WHICH MAY WARRANT INTERFERENCE. [ PARA 9] AS REGARDS TO DISALLOWANCE TELEPHONE AND MAIN EXPEN SES, THE COMMISSIONER (APPEALS) HAD CONCLUDED THAT THE AUDIT ED BOOKS OF ACCOUNT ALONG WITH VOUCHERS WERE PRODUCED BY THE ASSESSES AND THEREAFTER THE ASSESSING OFFICER HAD FAILED TO- SHOW THAT THE SAID EXPENDITURE WAS NOT FOR BUSINESS PURPOSES. FUR THER, THP DISALLOWANCE WAS MADE ON AD HOC BASIS WITHOUT THERE BEING ANY MATERIAL WHICH WOULD JUSTIFY THAT THE AMOUNT HA D BEEN SPENT FOR PERSONAL USE OF THE DIRECTORS,. THE AFORE SAID FINDINGS WERE CONFIRMED BY THE TRIBUNAL. [PARA 11] THE FINDINGS OF THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAVE NOT BEEN SHOWN TO BE PERVERSE OR ILLEGAL IN A NY MANNER. SIMILAR FINDINGS HAVE BEEN MADE IN THE OTHER CASES RELIED ON BY THE LEARNED A. R. THEREFORE, FOLLOWING THE ABOVE PRECEDENTS AND KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ALLOW THE A PPEAL FILED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/09/2 018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:07/09/2018 *SINGH I.T.A. NO.457/LKW/2017 ASSESSMENT YEAR:2013-14 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW