RAMSWAROOP SHARMA, Jaipur V. ITO, Jaipur

ITA 469/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99566 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 18-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Keywords: Depreciation; Business expenditure

Judgement Text

ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NO. 469/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 SHRI RAM SWAROOP SHARMA NEAR GOPAL PURA GOVT. SCHOOL TRIVENI NAGAR, JAIPUR CUKE VS. THE ITO WARD- 6() JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AKZPS 0163 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/11/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 23/12/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF THE LD. CIT(A)- II, JAIPUR DATED 24-04-2014 FOR THE ASSESSMENT YEA R 2009-10 WHEREIN FOLLOWING GROUND HAS BEEN RAISED BY THE ASSESSEE. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT-II, JAIPUR ERRED IN CONFIRMING THAT THAT M/S S.N. FINANCIAL SERVICES AND M/S SHRI KRISHNA FINANCE WER E OPERATING FROM SAME PREMISES AND THE RENT AND OTHER OFFICE EXPENSE S RELATING TO M/S S.N. FINANCIAL SERVICES ARE NOT ALLOWED . ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT-II, JAIPUR ERRED IN CONFIRMING THE ACTION OF AO REGARDING DISALLOWING THE FOLLOWING EXPENSES TOTALI NG TO RS. 8,10,279/-OUT OF TOTAL EXPENSES OF RS. 16,00,359/- DEBITED IN PROFIT AND LOSS ACCOUNT AND THEREBY ESTIMATING THE INCOME OF RS. 813,637/- AS AGAINST RS. 3,357/- SHOWN BY ASSESSEE. NAME OF EXPENSES CLAIMED EXPENSES CLAIMED BY ASSESSEE EXPENSES DISALLOWED BY AO DISALLOWANCE BY AO BANK CHARGES 3,050.74 3,050.74 00 COMMISSION 6,48,965 3,89,379 2,59,586.00 DEPRECIATION 7,904.00 0 7,904.00 INSURANCE PAYMENTS & RECEIPTS 27,901.00 27,901.00 0.00 PRINTING & STATIONERY 27,537.00 0 27,537.00 RENT A/C 1,20,000 0 120,000.00 SALARY 7,39,500 3,69,750 3,69,750.00 STAFF WELFARE 23,630.00 0 23,630.00 TELEPHONE & MOBILE EXP. 1,872.00 0 1,872.00 TOTAL 16,00,359.74 7,90,080.74 8,10,279.00 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT-II, JAIPUR ERRED IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS. 2,02,273/- BEING 20% OF TOTAL COMMI SSION OF RS. 10,11,365/- DEBITED IN FIRM M/S. SHREE KRISHNA FINA NCIAL SERVICE. 2.1 LD. COUNSEL ADVERTED TO THE FACTS CASE THAT AS SESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF ARRANGING VEHICLE FI NANCE FOR CUSTOMERS. IN EARLIER YEARS THIS ACTIVITY WAS CARRIED IN THE PROP RIETORSHIP CONCERN M/S SHRI KRISHNA FINANCE (IN SHORT SKF) WITH OFFICE AT A-1, GOPAL PURA, JAIPUR. ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 3 ASSESSEE WAS REGULARLY ASSESSED TO TAX. IN AY 2006- 07 VARIOUS EXPENSES WERE DISALLOWED IN VEHICLE FINANCE BUSINESS, HOWEVE R THE ITAT JAIPUR IN ITA NO. 760/JP/2012 DATED 24-7-15 DELETED SOME AND OTHERS WERE RESTRICTED TO 10%. 2.2 IN THE YEAR IN QUESTION, ASSESSEE DESIRED TO EX PAND VEHICLE FINANCE BUSINESS IN SODALA AREA THEREFORE ALONG WITH ONE SH RI MANOJ SHARMA A PARTNERSHIP FIRM WAS SET UP UNDER NAME AND STYLE M/ S. S.N. FINANCIAL SERVICES (REFERRED TO AS SNFS) HAVING A SEPARATE OF FICE AT G 22-23, GITANJALI TOWER, AJMER ROAD, SODALA, JAIPUR. THE VEHICLE FINA NCE COMMISSION IS EARNED FROM REPUTED COMPANIES WHO DEDUCT REGULAR TD S. SNFS STARTED ITS BUSINESS ACTIVITIES FROM GITANJALAI TOWERS, SODALA, HOWEVER TILL THE PAN, TAN NOS. ETC. WERE OBTAINED THE PAYEE COMPANIES DED UCTED TDS IN THE NAME OF M/S SHRI KRISHNA FINANCE. THE ASSESSEE SUBM ITTED HIS RETURN OF INCOME FOR THE A.Y.2009-10 ON 20-10-2009 DECLARING TOTAL INCOME OF RS.7,86,560/- FROM THE BUSINESS OF PROPRIETORSHIP C ONCERN M/S SHRI KRISHNA FINANCE. THE ASSESSING OFFICER RECEIVED SOME INFORM ATION AIR INFORMATION FROM M/S BAJAJ ALLIANZ INSURANCE CO, THE TDS PAYER, SINCE PART OF IT WAS ACCOUNTED FOR IN FIRM SNFS THERE WAS MISMATCH IN TH E COMMISSION SHOWN BY SKF. LD. AO ASSUMED IT TO BE SHORT DISCLOSURE OF COMMISSION AND RAISED ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 4 A QUESTION AS TO WHY THE DIFFERENCE SHOULD NOT IN B E ADDED ASSESSEE RETURN. ASSESSEE NARRATED ALL THESE FACTS ABOUT THAT NEW PA RTNERSHIP FIRM WAS CARRYING ON BUSINESS FROM SEPARATE PREMISES, ITS B OOKS OF ACCOUNTS WERE FURNISHED, REASONS DUE TO WHICH THOUGH THE COMMISSI ON WAS REFLECTED IN THE BOOKS OF SNFS BUT TDS RETURN REFLECTED NAME OF SKF. IT WAS FURTHER DEMONSTRATED HIS BONA FIDES BY SHOWING THAT TDS IN RESPECT OF BUSINESS OF FIRM SNFS WAS NOT CLAIMED BY ASSESSEE IN HIS INDIVI DUAL RETURN OF INCOME. DUE TO DISPUTES WITH SHRI MANOJ SHARMA THE BUSINESS COULD NOT GO AHEAD AND EARNED MEAGER INCOME. TO AVOID DISPUTES, ASSESS EE AGREED TO INCLUDE THE INCOME OF SNFS AS ANOTHER PROPRIETORSHIP CONCERN IN ACCORDANCE WITH LAW. LD. AO THOUGH ACCEPTED IT, HOWEVER WRONGLY INFERRED VARIOUS FACTS AND ISSUES AND HELD THAT THE CONCERNS WERE OPERATING FR OM SAME PREMISES, EXPENSES WERE INFLATED, LESS COMMISSION WAS DISCLOS ED. BESIDE THOUGH THE INCOME OF SNFS WAS INCLUDED IN INDIVIDUAL RETURN, C ORRESPONDING TDS CLAIM WAS NOT ALLOWED. LD. AO BY SUCH UNTENABLE INF ERENCE AND MISTAKEN FACTS FRAMED THE ASSESSMENT AT RS. 19,86,580/- AFTE R DISALLOWING THE EXPENSES DEBITED IN PROFIT & LOSS ACCOUNT AND ALLEGED SUPPRE SSION OF RECEIPTS/INCOME OF M/S. S.N. FINANCIAL SERVICES UNDER THE FOLLOWING HEADS:- 1. DISALLOWANCE OUT OF COMMISSION EXPENSES IN KRISH NA FINANCE. RS. 2,02,273/- 2. DISALLOWANCE OUT OF TELEPHONE EXPENSES. RS. 14,653/- 3. SUPPRESSION OF RECEIPTS/INCOME OF M/S. S.N. FIN ANCIAL SERVICES. RS. 8,13,637/- ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 5 4 DIFFERENCE IN COMMISSION INCOME IN THE FIRM RS . 1,69,460/- S.N. FINANCIAL SERVICES TOTAL ADDITIONS RS. 12,00,023/- 2.3 AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL WHERE LD CIT(A) UPHELD THE FINDINGS OF AO. AGGRIEVED ASSESSEE IS BEFORE US. 2.4 LD. COUNSEL CONTENDS THAT ASSESSEE FILED WRITTE N SUBMISSION AND INDICATED THE CHART OF DISALLOWANCES AND SUBMISSION S AS UNDER:- A) S.N. FINANCIAL SERVICES NAME OF EXPENSES CLAIMED EXPENSES CLAIMED BY ASSESSEE % OF EXPENSES DISALLOWED BY AO DISALLOWANCE BY AO COMMISSION 648965 40% 259,586.00 DEPRECIATION 7,904.00 100% 7,904.00 PRINTING & STATIONERY 27,537.00 100% 27,537.00 RENT A/C 120000 100% 120,000.00 SALARY 739500 50% 369,750.00 STAFF WELFARE 23,630.00 100% 23,630.00 TELEPHONE & MOBILE EXP. 1,872.00 100% 1,872.00 TOTAL 1,600,359.74 810,279.00 B) SHRI KRISHNA FINANCE NAME OF EXPENSES CLAIMED EXPENSES CLAIMED BY ASSESSEE % OF EXPENSES DISALLOWED BY AO DISALLOWANCE BY AO COMMISSION 10,11,365 20% 202273 ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 6 B) THE GROSS COMMISSION INCOME OF THE ASSESSEE WAS ALSO DETERMINED BY THE AO AS UNDER:- S.NO. NAME OF CONCERN GROSS COMMISSION 1 S.N. FINANCIAL SERVICES 1769890 2. SHRI KRISHNA FINANCE 3078147 TOTAL 4848037 C) BY MAKING DISALLOWANCE, THE LD AO ESTIMATED THE NET PROFIT AS UNDER:- S.NO. NAME OF CONCERN GROSS COMMISSION EXPENSES ALLOWED NET PROFIT ESTIMATED % OF GROSS RECEIPT 1 S.N. FINANCIAL SERVICES 1773177 790080 983097 55% 2. SHRI KRISHNA FINANCE 3104907 2007286 1097621 35% TOTAL 4878084 2797366 2080718 43% (I) FOR BUSINESS OF PROVIDING VEHICLE FINANCE FROM BANK S AND FINANCE COMPANIES ASSESSEE HAS NO ORGANIZED SETUP, THE CUSTOMERS ARE OBTAINED THROUGH SOME MIDDLEMEN. PART OF COMMISSION IS PASSED ON TO SUCH MIDDLEMEN WHO BRING THE CUSTOMERS AT HIS DOORS. THE LD AO DISALLOWED TH E COMMISSION PAID @50% IN CASE OF M/S S.N. FINANCIAL SERVICES AND @20% IN CASE COMMISSION PAID IN M/S SHRI KRISHNA FINANCE IN ARBITRARY MANNER. ITAT IN AY 2006-07 AT PARA 3 HAS DELETED SIMILAR DISALLOWANCE. II) THE PAST HISTORY OF DISALLOWANCE UNDER THE HEAD COMMISSION PAID WAS AS UNDER:- ASSESSMENT YEAR DISALLOWANCE MADE BY AO IN COMMISSION PAID DISALLOWANCE UPHELD BY CIT(A) DISALLOWANCE UPHELD BY ITAT REMARKS 2006-2007 50% 10% OF CASH PAYMENT 10% OF CASH PAYMENT ITAT UPHELD THE FINDINGS OF LD CIT(A) 2008-2009 20% 10% OF EXPENSES NO APPEAL BY DEPARTMENT III) THE LOWER AUTHORITIES HAS MADE DISALLOWANCE IN COMMISSION PAID ARBITRARILY. FURTHERMORE, THE DISALLOWANCE IN CASE OF M/S S.N. FINANCIAL SERVICES WERE MADE @50% WHEREAS IN CASE OF M/S KRISHNA FINANCE @20%. E) DISALLOWANCE OF SALARY @50% ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 7 THE LD AO MADE DISALLOWANCE OF SALARY @50% IN CASE OF M/S S.N. FINANCIAL SERVICES WHICH IS ARBITRARILY AND EXCESSIVE AND WIT HOUT CONSIDERING THE PAST HISTORY. HOWEVER, NO SUCH DISALLOWANCE WAS MADE IN CASE OF M/S SHRI KRISHNA FINANCE. F) DISALLOWANCE OF RENT AND OTHER EXPENSES THE LOWER AUTHORITIES DISALLOWED 100% RENT IN CAS E OF M/S S.N. FINANCIAL SERVICES. THE LD AO HIMSELF HAS MENTIONED THAT IN M OST OF THE CERTIFICATES SUBMITTED ADDRESSES ARE NOT THERE, HOWEVER THE TDS CERTIFICATE ISSUED BY RELIANCE CAPITAL LTD SHOWS THE ADDRESS AS G 22-23, GITANJALI TOWER, AJMER ROAD, JAIPUR. AS PER TDS CERTIFICATE ISSUED IN THE NAME OF M/S S HRI KRISHNA FINANCE ALSO THE ADDRESS SAME I.E. G 22-23, GITANJALI TOWER, AJMER R OAD, JAIPUR. THE ASSESSEE ALSO CLAIMS THAT M/S S.N. FINANCIAL SERVICES IS WOR KING FROM G-22-23 GITANJALI TOWER, AJMER ROAD, JAIPUR. THE EXPLANATION OF THE A SSESSEE BEFORE THE LD AO WAS AS UNDER:- BOTH THE CONCERNS WERE RUNNING FROM DIFFERENT PREM ISES. M/S SHRI KRISHNA FINANCE WAS DOING BUSINESS FROM A-1, GOPAL PURA, OP P. GOVT SCHOOL, GOPAL PURA BY PASS ROAD, TRIVENI NAGAR MOD, JAIPUR. THIS PREMISE WAS TAKEN ON RENT FROM SHRI JAGDISH NARAIN SHARMA RENT DEED OF WHICH IS ENCLOSED HEREWITH. M/S S. N, FINANCIAL SERVICES WAS DOING BUSINESS FROM G-22- 23, GEETANJALI TOWER, AJMER ROAD, SODALA, JAIPUR. THIS PREMISE WAS ALSO TAKEN O N RENT FROM SMT. SUNITA SHARMA RENT DEED OF WHICH IS READILY NOT AVAILABLE WITH THE ASSESSEE AND THE SAME WILL BE SUBMITTED AS SOON AS THE SAME WILL FIND TO THE ASSESSEE. THUS LD AO ON ONE HAND ACCEPTS THAT SNFS WAS WORKIN G FROM PREMISE G- 22-23, GEETANJALI TOWER AND SFS FROM A-1, GOPALPURA , ON OTHER HANDS DISALLOWS THE ENTIRE RENT FOR SNFS THUS MAKING CONT RADICTORY FINDINGS WHICH ARE UNTENABLE. THUS UNDER CLEAR MISCONCEPTION OF FA CTS LD AO DISALLOWED THESE EXPENSES IN FOLLOWING AD HOC MANNER AND DID N OT GIVE CREDIT OF TDS WHEN THE CORRESPONDING INCOME WAS ADDED IN ASSESSEE HANDS. IT IS CONTENDED THAT ALL THE ADDITIONS/ DISALLOWANCE MAY BE DELETED AND DUE CREDIT OF TDS MAY BE GIVEN. ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 8 2.5 LD. DR RELIED ON THE LOWER AUTHORITIES. 2.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS HAVE BEEN NARRATED I N DETAIL ABOVE. IN AY. 2006-07 THE ITAT AND IN AY 2008-09 LD. CIT(A) VIDE ORDER DTD. 28-08-13 HAVE UPHELD 10% OF ROUTINE BUSINESS EXPENDITURE. IT EMERGES FROM THE RECORD THAT REVENUE HAS ACCEPTED THE PROPOSITION TH AT INCOME OF BOTH THE CONCERNS SHOULD BE TAXED IN THE HANDS OF THE ASSESS EE. P&L A/C OF SNFS IS SUBMITTED BY ASSESSEE WHICH IS RELIED ON BY AO EXCE PT MAKING DISALLOWANCES. IT CLEARLY EMERGES FROM RECORD THAT BOTH CONCERNS I.E. SKF AND SNFS WERE OPERATING FROM SEPARATE PREMISES, CON SEQUENTLY ITS NOT JUSTIFIED TO TAKE A CONTRADICTORY STAND AND DISALLO W THE RENT AND SALARY EXPENSES IN THE CASE OF SNFS. CONSEQUENTLY WE HOLD THAT : I. IN THE CASE OF SNFS CLAIM OF EXPENDITURE QUA SALARY AND RENT SHALL BE ALLOWED. II. OTHER BUSINESS EXPENDITURE DISALLOWANCE SHALL BE RE STRICTED TO 10% IN BOTH CONCERNS FOLLOWING ITAT ORDER IN AY 200 6-07 AND LD. CIT(A) IN AY 2008-09. III. COMMISSION INCOME SHALL BE TAKEN AS PER TDS CERTIFI CATES AND NO FURTHER ESTIMATION OF ALLEGED SUPPRESSION IS WAR RANTED. IV. LD. AO SHOULD WORK OUT THE TDS AS PER CERTIFICATES FILED BY THE ASSESSEE AND ALLOW THE CREDIT THEREOF IN ACCORDANCE WITH LAW. ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 9 3.0 IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 /12/2 015. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23 /12/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RAM SWAROOP SHARMA, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 6(2), JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.469/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 10 ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 11 NAME OF EXPENSES CLAIMED EXPENSES CLAIMED BY ASSESSEE EXPENSES DISALLOWED BY AO DISALLOWANCE BY AO BANK CHARGES 3,050.74 3,050.74 00 COMMISSION 6,48,965 3,89,379 2,59,586.00 DEPRECIATION 7,904.00 0 7,904.00 INSURANCE PAYMENTS & RECEIPTS 27,901.00 27,901.00 0.00 PRINTING & STATIONERY 27,537.00 0 27,537.00 RENT A/C 1,20,000 0 120,000.00 SALARY 7,39,500 3,69,750 3,69,750.00 STAFF WELFARE 23,630.00 0 23,630.00 TELEPHONE & MOBILE EXP. 1,872.00 0 1,872.00 TOTAL 16,00,359.74 7,90,080.74 8,10,279.00 ITA NO. 469/JP/2014 SHRI RAM SWAROOP SHARMA VS. ITO, WARD- 6 (2), JA IPUR 12 NAME OF EXPENSES CLAIMED EXPENSES CLAIMED BY ASSESSEE % OF EXPENSES DISALLOWED BY AO DISALLOWANCE BY AO COMMISSION 648965 40% 259,586.00 DEPRECIATION 7,904.00 100% 7,904.00 PRINTING & STATIONERY 27,537.00 100% 27,537.00 RENT A/C 120000 100% 120,000.00 SALARY 739500 50% 369,750.00 STAFF WELFARE 23,630.00 100% 23,630.00 TELEPHONE & MOBILE EXP. 1,872.00 100% 1,872.00 TOTAL 1,600,359.74 810,279.00