Sh. Jaini Lal Prop., Jalandhar city V. The Income Tax Officer, Jalandhar

ITA 463/ASR/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5825 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 06-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: Y P MOHINDURCA
• Keywords: Depreciation; Income from undisclosed sources; Peak credit

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.L. KARWA, VICE PRESIDENT AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO. 463(ASR)/2010 ASSESSMENT YEAR:2006-07 PAN :AAWPL7650D SH. JAINI LAL PROP. VS. THE INCOME-TAX OFFICER, M/S. JAINI AUTOMOTIVES, WARD II(2), JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY: SH. Y.P. MOHINDUR,CA DEPARTMENT BY: SH. TARSEM LAL, DR ORDER PER MEHAR SINGH, AM, THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF THE CIT(A), JALANDHAR, DATED 22.09.2010, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO I N SHORT THE ACT), FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE RAISED FOLLOWING GROUNDS OF APPEAL: (I) THAT THE CREDITS IN IMPREST A/C ARE OUT OF DEBITS IN CAPITAL A/C AND AS SUCH THE ADDITION OF RS.59,000/- IS SUST AINED BY THE LD. CIT(A) BE DELETED. (II) THAT ANY RATE THE ADDITION ON ACCOUNT OF PEAK CREDI TS IN IMPREST A/C WORKS OUT TO RS.27,500/- )BEING PEAK CR EDITS IN IMPREST A/C). 2 (III) THAT THE DISALLOWANCE OF 1/10 TH TELEPHONE EXPENSES AND 1/6 TH CAR EXPENSES & CAR DEPRECIATION AS SUSTAINED BY THE CIT(A) IS UNDER DISPUTE.. 3. GROUND NO. 1 & 2 RAISED BY THE ASSESSEE ARE INTE R-CONNECTED. THE BRIEF AND NEAT FACTS OF THE CASE, AS CULLED OUT, FR OM THE RELEVANT RECORDS ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING OF M ETAL SCRAP ON CONSIGNMENT BASIS. IN THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS FOUND THAT THE ASSESSEE WAS DEBITING THE CASH BOOK AND C REDITING THE PROPRIETORS IMPREST A/C. THE IMPREST A/C SHOWED THAT IT WAS CRE DITED WITH VARYING AMOUNTS ON SIX OCCASIONS TILL 14.9.2004 WHICH TOTAL ED RS.1,04,000/-.FROM 9.10.2005, THE IMPREST ACCOUNT SHOWED THAT ON SIX D ATES THE AMOUNTS WERE DEBITED TO THE IMPREST ACCOUNT SO AS TO REDUCE THE BALANCE IN THE ACCOUNT TO NIL ON 31.3.2006. THE AO PROPOSED TO ADD THE PEAK C REDIT OF RS.1,04,2000/- AS THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AND IN RESPONSE TO THAT THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE HIM THAT THE CREDITS IN T HE IMPREST A/C WERE OUT OF WITHDRAWALS IN THE JAINI LAL DRAWINGS A/C THOUGH HE ACCEPTED THAT AT TIMES THE CREDIT IN THE IMPREST A/C WAS MORE THAN THE WIT HDRAWALS. THIS WAS STATED TO BE ON ACCOUNT OF THE CASH RECEIVED OUT OF PAST S AVINGS. ACCORDING TO THE ASSESSEE, THE PEAK CREDIT AFTER CONSIDERING THE DRA WINGS WAS RS.27,500/- AS ON 1.6.2005, WHICH WAS CLAIMED TO BE OUT OF CASH LY ING WITH THE ASSESSEE AT HOME OUT OF HIS PAST SAVINGS. THE ASSESSEE OFFERED THE SUM OF RS.27,500/- TO TAX AS INCOME FROM OTHER SOURCES SUBJECT TO NO PENA LTY. IT WAS ALSO SUBMITTED THAT THERE WAS NO INTENTION TO INTRODUCE CASH IN TH E IMPREST A/C, AS THE ASSESSEE HAD SUFFICIENT BANK BALANCE ON THE DATES W HEN THE CASH WAS INTRODUCED IN THE IMPREST A/C. THE AO BEING NOT SAT ISFIED WITH THE EXPLANATION OF THE ASSESSEE, HELD THAT THE WITHDRAW ALS FROM THE CAPITAL 3 ACCOUNT BY THE ASSESSEE WERE FOR ROUTINE HOUSEHOLD EXPENSES AND DID NOT ALLOW CREDIT FOR THE SAME AGAINST THE CREDIT IN AS SESSEES IMPREST A/C. CONSEQUENTLY, HE MADE AN ADDITION OF RS.1,04,000/-. ON APPEAL, THE LD. CIT(A), GAVE RELIEF OF RS.45,000/- AND BALANCE ADDI TION OF RS.59,000/- WAS CONFIRMED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CREDITS WERE OUT OF WITHDRAWALS IN THE ACCOUNT OF JAINI LAL DRAWINGS A/C. HOWEVER, AT SOME TIMES THE CREDIT IN IMPREST ACCOUNT IS MORE THAN TH E WITHDRAWAL AND THE SAME IS ON ACCOUNT OF CASH RECEIVED FROM HOME OUT OF PAS T SAVINGS. HOWEVER, THE STATEMENT SHOWING PEAK CREDITS IN THE ACCOUNT OF JA INI LAL, SHOWS MAXIMUM PEAK CREDIT OF RS.27,500/-, AS ON 01.06.2005. THIS CREDIT IS OUT OF CASH LYING WITH THE ASSESSEE AT HOME OUT OF HAS PAST SAVINGS. HOWEVER, IN ORDER TO BUY PEACE OF MIND AND TO SAVE LITIGATION THE ASSESSEE SURRENDERED THE SAID SUM OF RS.27,500/-, ON ACCOUNT OF PEAK CREDITS AS INCOM E FROM OTHER SOURCES SUBJECT TO NO PENALTY. HE, FURTHER, SUBMITTED THAT THERE WAS NO INTENTION TO INTRODUCE CASH IN IMPREST ACCOUNT AS THE ASSESSEE W AS HAVING SUFFICIENT BANK BALANCE WHEN THE CASH WAS INTRODUCED IN IMPREST A/C . HE FURTHER REQUESTED THAT THE ADDITION CONFIRMED BY THE LD. CIT(A) MAY B E DELETED, AS THE SAME HAS BEEN MADE ON SUSPICION AND GUESS-WORK.. 5. THE LD.DR, ON THE OTHER HAND, RELIED ON THE OR DERS OF THE AUTHORITIES BELLOW. 6. HAVING REGARD TO THE FACT SITUATION OF THE CASE AND SUBMISSION FILED BY THE ASSESSEE, INCLUDING THE FINDINGS GIVEN BY THE L D. CIT(A), IT IS EVIDENT 4 THAT NO COGENT AND CREDIBLE EVIDENCE/MATERIAL HAS B EEN BROUGHT ON RECORD BY THE LD. CIT(A), FOR SUSTAINING THE ADDITION. IT IS LEGALLY A WELL SETTLED PROPOSITION THAT ADDITION CANNOT BE MADE OR SUSTAIN ED MERELY ON THE BASIS OF SURMISES AND CONJECTURES, AS HELD BY THE HONBLE CO URTS IN A PLETHORA OF DECISIONS. IT IS PERTINENT TO MENTION HERE THAT THE ESTIMATE OF INCOME OR EXPENSES MUST BE FOUNDED, ON RATIONAL BASIS AND OB JECTIVE MATERIAL BROUGHT ON RECORD. IN THE PRESENT CASE, NO SUCH MATERIAL HA S BEEN BROUGHT ON RECORD. THUS, THE ADDITION CONFIRMED BY THE CIT(A) ON THE B ASIS OF SURMISES AND CONJECTURES IS DELETED. ACCORDINGLY, GROUND NO. 1 & 2 OF THE ASSESSEE ARE ALLOWED. 3. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE CONTE NDED THAT THE LD. CIT(A), WAS NOT JUSTIFIED IN SUSTAINING THE DISALLO WANCE OF 1/10 TH OUT OF TELEPHONE EXPENSES AND 1/6 TH OUT OF CAR EXPENSES & CAR DEPRECIATION. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAD DISALLOWED THE EXPENSES WITHOUT ASSIGNING ANY REASON AS TO HOW THESE WERE NOT ALLOWABLE. HE, FURT HER, STATED THAT THE DISALLOWANCE MADE AND SUSTAINED BY THE CIT(A), IS A RBITRARY, EXCESSIVE AND UNREASONABLE. 4. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPOR TED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING HEARD BOTH THE PARTIES AND PERUSING THE M ATERIAL AVAILABLE ON RECORD, INCLUDING THE ORDERS OF THE AUTHORITIES BE LOW, WE FIND THAT THE AO MADE DISALLOWANCE IN RESPECT OF TELEPHONE AND CAR E XPENSES. HOWEVER, THE LD. CIT(A) RESTRICTED THE SAME TO A REASONABLE LIMI T. THE ASSESSEE MERELY 5 ASSERTED THAT THE EXPENSES ON TELEPHONE AND CAR BE REDUCED OR DELETED WITHOUT BRINGING ANY EVIDENCE/MATERIAL ON RECORD TO ESTABLISH HIS CASE, THAT THE TELEPHONE AND CAR WERE WHOLLY AND EXCLUSIVELY U SED FOR THE PURPOSE OF BUSINESS. HOWEVER, FROM THE ORDERS OF THE AUTHORITI ES BELOW, IT IS SEEN THAT THE AO MADE CERTAIN ADDITIONS ON THESE TWO ISSUES A ND THE LD. CIT(A) WAS REASONABLE ENOUGH TO REDUCE THE SAME, IN THEIR OWN WISDOM AND TO MEET THE ENDS OF JUSTICE. IN SUCH A FACT SITUATION OF THE CA SE, THE ASSESSEE DOES NOT DESERVE, FURTHER, RELIEF, IN THE FACE OF NON-PRODUC TION OF COGENT AND CORROBORATIVE EVIDENCE, IN THE MATTER. ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 7TH JUNE, 2011. SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 7TH JUNE, 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. JAINI LAL PROP. M/S. JAINI AUTOM OTIVES, JALANDHAR. 2. THE ITO WARD II(2), JALANDHAR. 3. THE CIT(A), JALANDHAR 4. THE CIT, JALANDHAR 5. THE SR DR TRUE COPY BY ORDER 6 (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.