ACIT, Ambala V. Sh. Mohinder Singh, Ambala Cantt.

ITA 484/CHANDI/2011

• Counselvise Citation: 48421514 RSA 2011
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2011
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Depreciation; Question of law; Set aside
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH; CHANDIGARH. BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SH. MEHAR SINGH, ACCOUNTANT MEMBER I.T.A. NO. 492/CHD/2011 ASSESSMENT YEAR:2008-09 SH. MOHINDER SINGH, VS. JOINT COMMISSIONER OF INCO ME-TAX, S/O SH. DARSHAN SINGH, AMBALA. 65, GOBIND NAGAR, AMBALA CANTT. (APPELLANT) (RESPONDENT) I.T.A. NO.484/CHD/2011 ASSESSMENT YEAR: 2008-09 ASSTT. COMMISSIONER OF INCOME-TAX, VS. SH. MOHINDE R SINGH, AMBALA. S/O SH. DARSHAN SINGH, 65, GOBIND NAGAR, AMBALA CANTT. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. N.K. SAINI, DR ASSESSEE BY: SH. VINEET KRISHAN, ADV. DATE OF HEARING : 04.08.2011 DATE OF PRONOUNCEMENT : 24.8.2011 ORDER PER MEHAR SINGH, AM, THESE CROSS APPEALS ONE BY THE ASSESSEE AND ANO THER BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A), PANCH KULA, DATED 25.02.2011, PASSED UNDER SECTION 250(6) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO IN SHORT THE ACT), FOR THE ASSESSMENT YEAR 2008-09. 2 2. FIRST OF ALL, WE WILL DEAL WITH THE APPEAL FILED BY THE ASSESSEE, WHERE THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE RE ADS AS UNDER : 1. THAT THE ADDITION BEING MADE ON ACCOUNT OF LOAD ING AND UNLOADING EXPENSES PAID IS MADE BY THE LEARNED ASSE SSING OFFICER ON ARBITRARY BASIS I.E. 20% OF THE NET AMOU NT PAID. IT IS TO BE TREATED AS BONAFIDE EXPENSES, SINCE THE ASSES SEE DO NOT HAVE ANY OTHER OPTION OF PAYING THIS EXPENSES OTHER THAN CASH BECAUSE THE LABOUR ENGAGED IN THE LOADING AND UNLO ADING OF THE COKE IS NOT A PERMANENT LABOUR OF THE ASSESSEE AND IS ENGAGED FROM THE PLACE OF DELIVERY ON TEMPORARY BASIS. SINC E THESE ARE BONAFIDE PAYMENTS AND NO QUESTION OF LAW ARISE. 3. THE BRIEF AND NEAT FACTS OF THE CASE, AS CULLED OUT, FROM THE RELEVANT RECORDS ARE THAT THE ASSESSEE FILED ITS RETURN OF I NCOME DECLARING INCOME OF RS.15,20,810/- ON 03.10.2008. THE A.O. FRAMED ASSES SMENT U/S 143(3) AT AN INCOME OF RS.37,99,780/- AFTER MAKING CERTAIN DISAL LOWANCES. THE ASSESSEE IS DEALING IN TRADING OF PETROLEUM COKE BEING PRODU CED BY RELIANCE INDUSTRIES LIMITED FROM ITS REFINERY SITUATED AT JA M NAGAR, GUJRAT. THE ASSESSEE IS HAVING ITS SALE ON ALL INDIA LEVEL. THE ASSESSEE CHARGES LOADING AND UNLOADING EXPENSES FROM ITS CUSTOMERS AS WELL AS PAYS LOADING AND UNLOADING EXPENSES TO THE LABOUR. THIS PAYMENT DIFF ERS FROM PARTY TO PARTY AS PER ITS LOCATION AND MANPOWER AVAILABLE IN THAT AREA. DURING THE YEAR 2008-09, AN AMOUNT OF RS.15,88,407/- HAVE BEEN CHAR GED FROM THE PARTIES AS LOADING AND UNLOADING CHARGES AND AN AMOUNT OF RS.5 3,64,025/- HAVE BEEN PAID OFF TO THE LABOUR. THE NET DEBIT HAVE BEEN CHA RGED IN THE PROFIT & LOSS A/C AMOUNTING TO RS.37,75,618/-. SINCE THE NATURE O F EXPENSES IS SUCH THAT IT CAN ONLY BE PAID IN CASH, THE ASSESSEE GETS CASH VO UCHERS SIGNED FROM THE LABOUR AS AND WHEN PAYMENT IS MADE. THE ASSESSING O FFICER HAS MADE AN ADDITION OF 50% OF THE NET DEBITED AMOUNT OF RS.37, 75,618/- AMOUNTING TO RS.18,87,809/- BEING EXPENSES INCURRED IN CASH. ON APPEAL, THE LD. CIT(A), 3 RESTRICTED THE DISALLOWANCE OF EXPENSES TO 20% INST EAD OF 50%. NOW AGGRIEVED WITH THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE THIS BENCH. 4. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THAT THE LOADING AND UNLOADING CHARGES DEBITED IN THE BOOKS OF ACCOUNT A RE DIRECTLY RELATED TO THE SUPPLIES MADE BY THE ASSESSEE, WHICH CAN BE VERIFI ED FROM THE BOOKS OF ACCOUNT. HE FURTHER STATED THAT ALL THE BILLS AND V OUCHERS ARE DULY MAINTAINED AND ENTERED IN THE BOOKS OF ACCOUNT. NO DOUBT, THE EXPENSES HAVE BEEN INCURRED IN CASH, AS THE ASSESSEE GETS CASH VOUCHER S SIGNED FROM THE LABOUR AS AND WHEN PAYMENT IS MADE. HE REFERRED TO PARA 3. 4 AT PAGE 4 OF THE CIT(A) ORDER AND ALSO PAGE 32 OF THE PAPER BOOK FIL ED BY HIM. IT WAS CONTENDED THAT EARLIER CASES WERE DECIDED IN SUMMAR Y ASSESSMENT SCHEME. HE FURTHER SUBMITTED THAT IN ANY CASE, THERE IS NO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE, FURTHER, SUBMITTED THAT THE DISALLOWANCE RESTRICTED TO 20% O F SUCH EXPENSES BY THE CIT(A), IS EXCESSIVE AND THE SAME BE DELETED. 5. THE LD. DR, ON THE OTHER HAND, RELIED ON THE O RDER OF THE ASSESSING OFFICER. HE SUBMITTED THAT NO PROPER VOUCHERS IN RE SPECT OF SUCH EXPENSES WERE FILED. HE ALSO DREW OUR ATTENTION TO PAGE 6 OF THE ORDER OF THE CIT(A), WHERE THE CIT(A) OBSERVED THAT THE POSSIBILITY OF ARTIFICIAL INFLATION OF EXPENSES UNDER THIS HEAD CANNOT BE RULED OUT. 6. WE HAVE CAREFULLY PERUSED AND CONSIDERED THE REL EVANT RECORDS, RIVAL SUBMISSIONS AND THE IMPUGNED ASSESSMENT ORDER AS W ELL AS IMPUGNED APPELLATE ORDER PASSED BY THE CIT(A). THE LD. CIT(A ), HAVING DISCUSSED THE ISSUE IN DETAIL IN PARA 3.5 & 3.6 OF HIS IMPUGNED ORDER, RESTRICTED THE 4 DISALLOWANCE OF EXPENSES INCURRED TO 20%, AS THE PO SSIBILITY OF ARTIFICIAL INFLATION OF EXPENSES CANNOT BE RULED OUT. THE AO M ADE THE ADDITION ON THE BASIS OF NON-VERIFIABLE NATURE OF THE BILLS PERTAIN ING TO THE EXPENSES INCURRED ON LOADING AND UNLOADING. THE ASSESSING OFFICER REC ORDED A FINDING IN PARA 3 OF THE ASSESSMENT ORDER THAT ONLY THREE BILLS PERTA INING TO SUCH EXPENSES WERE ATTACHED BY THE ASSESSEE AS EVIDENCES TO JUSTIFY S UCH EXPENSES. THE AO WAS NOT SATISFIED WITH THE PRODUCTION OF ONLY THREE BIL LS, HENCE, HE OBSERVED THAT NO VOUCHERS WERE PRODUCED AND PAYMENTS WERE MADE ON LY IN CASH. HE WAS OF THE OPINION THAT SUCH EXPENSES REMAINS UNVERIFI ABLE AND ESTIMATED THE ADDITION. THE FINDINGS OF THE A.O., PERTAINING TO N ON-PRODUCTION AND NON- VERIFIABLE NATURE OF SUCH EXPENSES CANNOT BE TAKEN LIGHTLY, AS THE ONUS OF PROVING ADMISSIBILITY AND GENUINENESS OF SUCH EXP ENSES CLEARLY LIES ON THE ASSESSEE. HOWEVER, IN THE INTEREST OF JUSTICE, WE C ONSIDER IT FAIR AND APPROPRIATE TO RESTRICT THE DISALLOWANCE TO 15% OF THE TOTAL EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT.. ACCORDINGLY, THE ASSESS EE PARTLY SUCCEEDS ON THIS GROUND. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. NOW, WE TAKE UP APPEAL OF THE REVENUE IN ITA NO. 484/CHD/2011 FOR THE ASSESSMENT YEAR 2008-09, WHERE THE REVENUE RAIS ED FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) IS RIGHT IN RESTRICTING THE DISALLOWANCE MADE OUT OF LOADING AND HANDLING CHARGES @ 50% AT RS.18,87,809 /- TO 20% AT RS.7,55,124/- BY IGNORING THE FACT THAT THE EXPENSES DEBITED ARE NOT PROPERLY VOUCHED AND MOST OF THE EX PENSES ARE PAID IN CASH AND ACCORDINGLY THE SAME ARE NOT VERIF IABLE. THE DISALLOWANCES OF 50% WAS GENUINELY MADE TO PLUG ANY POSSIBLE LEAKAGE ON THIS ACCOUNT. 2. WHETHER ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS RIGHT IN RESTRICTING THE DISALLOWANCE MADE OUT OF CAR EXPENSES @ 25% AT RS.1,63,485/- TO 10% AT RS.65 ,394/- BY 5 IGNORING THE FACT THAT THE USE OF CARS BY THE ASSE SSEE AND HIS FAMILY MEMBERS CANNOT BE RULED OUT. THE DISALLOWANC ES OF 50% WAS GENUINELY MADE TO PLUG ANY POSSIBLE LEAKAGE ON THIS ACCOUNT. 3. THE APPELLANT CRAVES FOR LEAVE TO ADD OR AMEND T HE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD AND DISPOSED OFF . 4. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A), B E SET ASIDE AND THAT OF THE A.O. BE RESTORED. 8. IN THE FIRST GROUND OF APPEAL, THE REVENUE CONTE NDED THAT THE LD. CIT(A), WAS NOT JUSTIFIED IN RESTRICTING THE DISALL OWANCE FROM 50% TO 20% ON ACCOUNT OF LOADING AND HANDLING CHARGES. THIS IS SUE, WE HAVE ALREADY DISCUSSED AND ADJUDICATED WHILE DECIDING THE APPEA L OF THE ASSESSEE IN ITA NO.492/CHD/2011 (SUPRA), WHERE A FURTHER RELIEF HAS BEEN ALLOWED TO THE ASSESSEE BY RESTRICTING THE DISALLOWANCE TO 15% INS TEAD OF 20% RESTRICTED BY THE CIT(A), IN THE INTEREST OF JUSTICE. ACCORDINGLY , THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE NEXT GROUND OF APPEAL, THE REVENUE CONTEN DED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLO WANCE TO 10% OUT OF CAR EXPENSES @ 20%. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. DR STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRING THE DI SALLOWANCE TO 10% 9.1 THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. HE FURTHER SUBMITTED THAT THE ISSUE, IN QUESTION, IS S QUARELY COVERED BY THE DECISION OF THE ITAT, CHANDIGARH BENCH, IN THE CAS E OF SHRI SIRI GOPAL SINGHAL, AMBALA CANTT. VS. JCIT, AMBALA, IN ITA NO. 550/CHD/2008 FOR THE 6 ASSESSMENT YEAR 2004-05, WHERE THE TRIBUNAL ADJUDIC ATED THE ISSUE VIDE ORDER DATED 27.02.2009, BY RECORDING FOLLOWING FIND ING: 10. CONSIDERING OUR DECISION ON GROUND NOS. 1 TO 4 HEREIN ALSO WE SET ASIDE THE ORDER OF THE CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 1/10 TH OF THE TOTAL CAR EXPENSES AND DEPRECIATION. ACCORDINGLY, THE ASSESSEE PARTLY SUCCEEDS ON THIS GROUND. 10. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE ORDE R OF ITAT, CHANDIGARH BENCH, IN THE CASE OF SHRI SIRI GOPAL SINGHAL, AMBA LA CANTT. VS. JCIT, AMBALA,(SUPRA) RELIED UPON BY THE ASSESSEE . A CARE FUL PERUSAL OF THE IMPUGNED APPELLATE ORDER, CLEARLY REVEALS THAT THE LD. CIT(A), HAS DISCUSSED THE ISSUE IN QUESTION IN DETAIL AFTER APPRECIATION OF THE EVIDENCES AND MATERIAL ON RECORDS AS ALSO THE FACTUAL POSITION OF THE CASE. IT IS IMPERATIVE AND ESSENTIAL TO REPRODUCE THE FINDINGS OF THE CIT( A) ON THE ISSUE IN DISPUTE HEREUNDER: 4.4. HOWEVER, IN SUCH CASES OF ADHOC DISALLOWANCE ON ACCOUNT OF PERSONAL USE OF BUSINESS ASSETS, FOLLOWING THE DECI SION OF HONBLE ITAT, CHANDIGARH BENCH IN THE CASE OF DEEPAK KUMAR PROP. R.D. WOOD PRODUCTS, YAMUNA NAGAR, IN ITA NO.517/CHD/2009 , I HAVE TAKEN A CONSISTENT VIEW THAT 1/10 TH OF THE DISALLOWANCE IS JUSTIFIED. THEREFORE, FOLLOWING THE DECISION OF HONBLE ITAT CHANDIGARH AND MY CONSISTENT VIEW THE DISALLOWANCE IS RESTRICTED T O 1/10 TH . THIS GROUND OF APPEAL IS PARTLY ALLOWED. 10.1 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY INFI RMITY IN THE FINDINGS OF THE CIT(A), AS THE SAME HAVE BEEN ARRIVED AT AFTER PROPER APPRECIATION OF THE 7 LEGAL AND FACTUAL POSITION OF THE CASE. ACCORDINGLY , THE SAME ARE UPHELD AND THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 11. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE, HENCE , WE DO NOT CONSIDER IT ESSENTIAL TO ADJUDICATE THE SAME. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 24 AUGUST, 2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 AUGUST , 2011 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. MOHINDER SINGH, AMBALA CANTT. 2. THE ACIT/JCIT, AMBALA. 3. THE CIT(A),PANCHKULA 4. THE CIT, PANCHKULA. 5. THE SR DR, CHANDIGARH TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.