Shri Rajendra Kumar Chowdhary, Lucknow V. Income Tax Officer-II, Faizabad

ITA 474/LKW/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7329 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 19-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; TDS
• Section: 40(a)(ia)

Judgement Text

I.T.A. NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 SHRI RAJENDRA KUMAR CHOWDHARY 8/4/18A, JHARKHANDI COLONY, RAKABGANJ, FAIZABAD. PAN:ABWPC1482B VS. INCOME TAX OFFICER-II, FAIZABAD. (APPELLANT) (RESPONDENT) O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A)-I, LUCKNOW DATED 20/06/2019 PERTAINI NG TO ASSESSMENT YEAR 2014-15. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS: 1. THAT THE LEARNED AO ADDED RS.60,000/- TO THE IN COME OF THE APPELLANT IN RESPECT OF HIS PROPRIETORSHIP FIRM M/S CHOWDHARY FILLING STATION AND RS. 60,000/- TO THE I NCOME OF THE APPELLANT IN RESPECT OF HIS ANOTHER PROPRIETORSHIP FIRM M/S LAXMI TRADING COMPANY, TOTALING RS.1,20,000/- BY DI SALLOWING SALARY PAID TO EMPLOYEE TO MAINTAIN BOOKS OF THE AP PELLANT FOR WHICH CONFIRMATION WAS SUBMITTED THAT THE ABOVE EXP ENDITURE HAS BEEN INCURRED IN RESPECT OF HIS SALARY. HE DOES NOT POSSESSED ANY TECHNICAL QUALIFICATION AND WAS NOT A TECHNICIAN. HON'BLE CIT(A) DID NOT ACCEPT THE CONTENTION OF APP ELLANT IN THIS APPELLANT BY SHRI AKHILESH KUMAR SHAH, ADVOCATE RESPONDENT BY S MT. PINKI MAHAVAR, D.R. DATE OF HEARING 23/10/2019 DATE OF PRONOUNCEMENT 04/11/2019 I.T.A. NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 2 RESPECT AND CONFIRMED THE ABOVE ADDITION WHICH IS U NJUSTIFIED AND DESERVES DELETION IN FULL. 2. THAT THE LEARNED AO MADE ADDITION OF RS.88,357/- FOR POSSIBLE LEAKAGES AND IRREGULARITIES @10% OUT OF TO TAL EXPENSES CLAIMED OF RS.8,83,574/- IN RESPECT OF TANKER RUNNI NG EXPENSES OF THE PROPRIETORSHIP FIRM M/S CHOWDHARY FILLING ST ATION OF THE ASSESSEE ON ADHOC BASIS WHILE BOOKS OF ACCOUNT HAVE BEEN ACCEPTED AND WITHOUT GIVING ANY SPECIFIC REASON. HO N'BLE CIT(A) HAS DELETED ONLY 50% OF THE ABOVE ADDITION WHICH SH OULD BE DELETED IN FULL. 3. THAT THE LEARNED AO HAS MADE ADDITION OF RS.1,71 ,125/- ON ESTIMATE BASIS @20% OUT OF TOTAL EXPENSES CLAIME D OF RS.23,684/- ON TELEPHONE AND MOBILE CHARGES, VEHICL E RUNNING AND MAINTENANCE RS.2,96,359/- DEPRECIATION ON CAR O F RS.5,65,584/-, TOTALING RS.8,85,627/- ON ACCOUNT OF EXPENSES CLAIMED IN TELEPHONE, MOBILE CHARGES, VEHICLE RUNNI NG AND MAINTENANCE, DEPRECIATION ON CAR IN CASE OF APPELLA NT PROPRIETORSHIP FIRM M/S CHOWDHARY FILLING STATION. HON'BLE CIT(A) HAS DELETED ONLY 50% OF THE ABOVE ADDITION W HICH SHOULD BE DELETED IN FULL. 4. THAT THE LEARNED AO HAS MADE ADDITION OF RS. 24, 276 FOR POSSIBLE LEAKAGES @20% OUT OF TOTAL EXPENSES CLAIME D OF RS.28,563 ON TELEPHONE AND MOBILE CHARGES AND DEPRE CIATION ON CAR RS. 92.816, TOTALING RS. 1,21,379 IN RESPECT OF TELEPHONE AND MOBILE CHARGES IN RESPECT OF APPELLANT PROPRIET ORSHIP FIRM M/S LAXMI TRADING COMPANY. HON'BLE CIT(A) HAS DELET ED ONLY 50% OF THE ABOVE ADDITION WHICH SHOULD BE DELETED I N FULL. 2. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT THE ASSESSEE IS PROPRIETOR IN TWO FIRMS NAMELY M/S LAXMI TRADING COMPANY AND M /S CHAUDHARY FILLING STATION AND IN BOTH FIRMS THE ASSESSEE HAD DEBITED RS.60,000/- AS SALARY PAID TO THE ACCOUNTANT AND ASSESSING OFFICER INSTEA D OF TREATING THE SAME AS SALARY, HELD THE SAME TO BE IN THE NATURE OF ACCOUN TING CHARGES AND THEREFORE, HELD THAT SINCE THE ASSESSEE HAD NOT DED UCTED TDS AND AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, HE MADE THE ADDITION. IT WAS SUBMITTED THAT THE ASSESSING OFFICER ALSO DISALLOWE D 10% OF THE EXPENSES I.T.A. NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 3 OUT OF TANKER RUNNING EXPENSES WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT AND REJECTING THE BOOKS OF ACCOUNT . IT WAS SUBMITTED THAT SIMILARLY AD HOC ADDITIONS WERE MADE OUT OF VEHICLE RUNNING EXPENSES, DEPRECIATION ON CARS AND TELEPHONE & MOBILE EXPENSE S, WHICH AGAIN WERE DISALLOWED WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT MAKING DISALLOWANCE, WITHOUT REJ ECTION OF BOOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY DISCREPANCY IS AGAINST THE LAW AS HELD BY VARIOUS BENCHES OF THE TRIBUNAL AND SPECIFICALLY RELIANCE WAS PLACED ON A JUDGMENT OF HON'BLE ALLAHABAD BENCH OF THE TRIBUNAL IN CASE OF SHRI SANJEEV VAISH VS. ACIT IN I.T.A. NO.184/ALLAHABAD/2018 AND FURTHER RELIANCE WAS PLACED ON KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SHRI DEBDAS DUTTA IN I.T.A. NO.1595/KOL/2014. 3. LEARNED D. R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 4. I HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. I FIND THAT THE FIRST DISALLOWAN CE WAS OUT OF SALARY PAID TO THE ACCOUNTANT OF THE ASSESSEE FOR MAINTAINING BOOK S OF ACCOUNT OF TWO PROPRIETORSHIP CONCERNS. THE ASSESSEE HAD FILED CO NFIRMATION FROM THE ACCOUNTANT REGARDING THE FACT THAT THE ABOVE PAYMEN T WAS MADE AGAINST SALARY AND FURTHER I FIND THAT ASSESSING OFFICER HA S INVOKED SECTION 194J FOR HOLDING THAT THE ACCOUNTANT WAS PROVIDING PROFESSIO NAL AND TECHNICAL SERVICES AND THEREFORE, THE ASSESSEE WAS REQUIRED T O DEDUCTS TDS. HOWEVER, THE APPLICATION OF THE ABOVE SECTION TO TH E ASSESSEE IS CONTRARY TO THE FACTS AS THE ACCOUNTANT HIMSELF HAD CONFIRMED T HAT HE WAS BEING PAID AS AN EMPLOYEE. THE EMPLOYEE NEED NOT BE A FULL TIME EMPLOYEE AND HE CAN BE A PART TIME EMPLOYEE ALSO. SIMPLY BECAUSE THE A CCOUNTANT WAS WRITING BOOKS OF ACCOUNT OF TWO FIRMS, CANNOT BE SAID THAT HE WAS ACTING AS A I.T.A. NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 4 TECHNICAL PERSON. THEREFORE, THE PROVISIONS OF SEC TION 40(A)(IA) WERE NOT APPLICABLE AND THEREFORE, THE ASSESSEE WAS NOT LIAB LE TO DEDUCT TDS AND THEREFORE, THIS GROUND OF THE APPEAL IS ALLOWED. 4.1 AS REGARDS THE OTHER GROUNDS OF APPEAL, WHICH A RE AGAINST THE AD HOC DISALLOWANCE, I FIND THAT THE ASSESSING OFFICER HAS NOWHERE IN THE ASSESSMENT REJECTED THE BOOKS OF ACCOUNT AND HAS SI MPLY DISALLOWED CERTAIN EXPENSES TO COVER UP THE POSSIBLE LEAKAGE AND IRREG ULARITIES. THE MAKING OF AD HOC DISALLOWANCES, WITHOUT REJECTION OF BOOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUN T, IS CONTRARY TO LAW. THE LEARNED CIT(A) HIMSELF HAS DELETED 50% OF THE A D HOC DISALLOWANCES BUT IN MY VIEW THE ADDITIONS ITSELF ARE NOT SUSTAIN ABLE IN VIEW OF THE DECISION OF VARIOUS BENCHES OF THE TRIBUNAL WHEREIN IT HAS B EEN HELD THAT WITHOUT REJECTION OF BOOKS OF ACCOUNT AND WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT, THE AD HOC DISALLOWANCE CANNO T BE MADE. THE ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF SHRI SANJEEV VAISH VS. ACIT IN I.T.A. NO.184/ALLAHABAD/2018 VIDE ORDER DATED 19 /12/2018 HAS HELD THAT NO SUCH AD HOC DISALLOWANCE CAN BE MADE WITHOUT REJ ECTION OF BOOKS OF ACCOUNT AND HAS HELD AS UNDER: 6. THE FACTS ARE NOT DISPUTED. IT IS SETTLED LAW THAT WHERE THE TAXING AUTHORITIES DO NOT POINT OUT ANY DEFECT IN THE CLAIM OF THE ASSESSEE, NOR ARE THE BOOKS OF ACCOUNT MAINTAIN ED BY THE ASSESSEE REJECTED, NO SUCH AD HOC DISALLOWANCE AT A WHIMISICAL FIGURE CAN BE MADE AND THE CLAIM OF THE ASSESSEE RE QUIRED TO BE ACCEPTED AS SUCH. IN THIS REGARD, REFERENCE CAN BE MADE TO THE FOLLOWING DECISIONS: 1. ACIT VS. ALLIED CONSTRUCTION [2007] 106 TTJ 616 (I.T.A.T. DELHI BENCH. 2. SEASONS CATERING SERVICES (P) LTD. VS. DCIT [2010] 43 DTR 397 (I.T.A.T. DELHI BENCH) 3. M/S KANHA VANASPATI LTD. VS. JCIT [2006] 7 MTC 339 (I.T.A.T. LUCKNOW BENCH) I.T.A. NO.474/LKW/2019 ASSESSMENT YEAR:2014-15 5 4. CIT VS. SUBHASH CHAND AGARWAL [2013] 58 SOT 122 (I.T.A.T. ALLAHABAD BENCH) 7. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSES SEE IS FOUND TO BE JUSTIFIED. IT IS ACCEPTED AS SUCH. TH E ADDITIONS MADE ARE, HENCE, DELETED IN THEIR ENTIRETY. 5. IN VIEW OF THE ABOVE, THE AD HOC DISALLOWANCES S USTAINED BY CIT(A) ARE DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 04/11 /2019) SD/. ( T. S. KAPOOR ) ACCOUNTANT MEMBER DATED:04/11/2019 *SINGH 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