Shivalaya Const. Co. Pvt. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 4883/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5597 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 30-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGIDSR
• Keywords: Opportunity of being heard; Corroborative evidences
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH : G NEW DELHI) BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ITA NO.4883/DEL./2009 (ASSESSMENT YEAR : 2006-07) SHIVALAYA CONST. CO. PVT. LTD., VS. ADDL.CIT, RAN GE 8, C/O SAJJAN JINDAL & CO., NEW DELHI. 9-10/3, 3 RD FLOOR, LAXMAN HOUSE, ASAF ALI ROAD, NEW DELHI. (PAN/GIR NO.AACCS2475A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, CA REVENUE BY : SHRI J.P. JANGID,SR.DR ORDER PER A.K. GARODIA, AM THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, NEW DELHI FOR AY 2006-07. GROUND NO.1 OF THE APPEAL READS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF RS.38,330/- ON THE ALLEG ED GROUND OF VIOLATION OF SECTION 40A(3) OF THE I.T. ACT, 1961. THAT FINDING AND CONCLUSION OF LOWER AUTHORITIES IS BASED ON WRONG APPRECIATION OF FACTS AND THERE IS NO CASE OF ANY PAYMENT IN EXC ESS OF RS.20,000/- IN RESPECT OF WHICH ANY DISALLOWANCE IS CALLED FOR. 2. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO ON PA GE 2 OF THE ASSESSMENT ORDER THAT ON FIVE DATES I.E. ON 21.10.2005, 24.10.2005, 25.10.20 05, 26.10.2005 & 27.10.2005, THERE ARE CASH PAYMENTS IN EXCESS OF RS.20,000/-. THE TO TAL AMOUNT OF SUCH CASH PAYMENTS IS NOTED BY THE AO AT RS.1,91,650/-. THE AO MADE DISA LLOWANCE U/S 40A(3) OF THE ACT TO THE EXTENT OF 20% THEREOF AND IN THIS MANNER, HE DI SALLOWED RS.38,330/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE THE CIT(A), BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL B EFORE US. ITA NO.4883/DEL./2009 (AY : 2006-07) 2 3. IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE THA T SUPPORTING VOUCHERS AND BILLS REGARDING ALL THESE PAYMENTS ARE AVAILABLE ON PAGES 3-24 OF THE PAPER BOOK ALONG WITH COPY OF LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE I.E. HIRE CHARGES. IT IS POINTED OUT THAT ON ALL THESE FIVE DATES, PAYMENTS ARE MADE TO TWO D IFFERENT PARTIES ON EACH DATE AND EACH PAYMENT IS NOT EXCEEDING RS.20,000/- ON ANY DATE A ND HENCE THE DISALLOWANCE MADE BY THE AO U/S 40A(3) IS NOT JUSTIFIED. LD.DR OF THE R EVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW. AS PER THE VOUCHERS AND BILLS AVAILABLE IN PAPER BOOK, WE FIND THAT ON 21.10.2005, A SUM OF RS.19,500/- WAS PAID TO SHRI SURESH CHAND JAIN AND ON THE SAME DATE , ANOTHER AMOUNT OF RS.19,500/- WAS PAID TO SHRI JAGAN LAL. HENCE, WE FIND THAT ON THI S DATE, THERE IS NO CASH PAYMENT EXCEEDING RS.20,000/- TO A SINGLE PARTY. SIMILAR I S THE CASE ON 24.10.2005. ON THIS DATE ALSO, A SUM OF RS.19,000/- WAS PAID TO ANAND CONTRA CTOR & ANOTHER AMOUNT OF RS.19,650/- WAS PAID TO SHRI ARVIND KUMAR AND HENCE ON THIS DATE ALSO, THERE IS NO SINGLE CASH PAYMENT IN EXCESS OF RS.20,000/-. SIMILAR ARE THE FACTS ON THE REMAINING THREE DATES ALSO AND HENCE WE ARE OF THE CONSIDERED OPINION THA T THE DISALLOWANCE MADE BY THE AO U/S 40A(3) CANNOT BE SUSTAINED UNDER THESE FACTS. WE, THEREFORE, DELETE THE SAME. GROUND NO.1 IS ALLOWED. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LOWER LAUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING RS.52,000/- IN RESPECT OF CLAIM OF RATES AND TAXES WHICH IS RELATING TO PAYMENT OF TOLL TAX AND ROAD TAX. THAT DISALLOWANCE IS BASED ON MECHANICAL BASIS AS T HE CLAIM IS OF A GENUINE LIABILITY PERMISSIBLE DEDUCTION UNDER THE LAW. 6. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO ON PA GE 3 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.152020/- UNDER THE HEAD RATES AND TAXES. THE AO ASKED THE ASSESSEE TO PRODUCE THE SUPPORTING EVI DENCE IN SUPPORT OF HIS CLAIM. IT IS FURTHER NOTED BY THE AO THAT IN SPITE OF SEVERAL OP PORTUNITIES, THE ASSESSEE COULD NOT FURNISH THE SUPPORTING EVIDENCE AGAINST RS.52,000/- CLAIMED UNDER THIS HEAD. THE AO ITA NO.4883/DEL./2009 (AY : 2006-07) 3 DISALLOWED THE SAME. BEING AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE CIT(A), BUT WITHOUT SUCCESS. NOW THE ASSESSEE IS I N FURTHER APPEAL BEFORE US. 7. IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE THA T THE COPY OF LEDGER ACCOUNT IN THE BOOKS OF THE ASSESSEE IS AVAILABLE ON PAGES 25 & 26 OF THE PAPER BOOK AND IT IS POINTED OUT THAT THE DISPUTED AMOUNT OF RS.52,000/- WAS PAI D BY CHEQUES TO THE EXTENT OF RS.13,000/- ON 17.5.2005, RS.26,000/- ON 24.11.2005 AND RS.13,000/- ON 2.11.2005. IT IS ALSO SUBMITTED THAT ALL THESE THREE PAYMENTS ARE ON ACCOUNT OF ROAD PERMIT AND HENCE THE SAME SHOULD BE ALLOWED. 8. LD.DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT IS SUBMITTED BY HIM THAT THE DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF NON- FURNISHING OF EVIDENCE REGARDING THESE PAYMENTS AND HENCE THE ORDER OF CIT(A) ON THIS ISSUE SHOULD BE UPHELD. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE DISALLOWANCE WAS MADE BY THE AO FOR THE REASON THAT THE ASSESSEE COULD NOT FURNISH THE SUPPORTING EVIDENCE AGAINST THESE THREE PAYMENTS OF RS.52,000/-. BEFORE CIT(A) AND BEFORE US ALSO, THE ASSESSEE HAD NOT FURNISHED ANY SUPPORTING EVIDENCE AGAINST THIS PAYMENT OF RS.52,0 00/-. AS PER THE COPY OF LEDGER ACCOUNT AVAILABLE ON PAGES 25 & 26 OF THE PAPER BOO KS, WE FIND THAT SIMILAR PAYMENT OF RS.27,200/- WAS MADE BY THE ASSESSEE ON 31.1.2006 O N ACCOUNT OF ROAD PERMIT AND FOR THE SAME, THE ASSESSEE HAS FURNISHED THE SUPPORTING EVIDENCE BEFORE AO AND HENCE NO DISALLOWANCE WAS MADE BY THE AO ON ACCOUNT OF THIS PAYMENT OF RS.27,200/-. WHEN THE ASSESSEE COULD PRODUCE THE SUPPORTING EVIDENCE REGA RDING PAYMENT OF RS.27,200/- ON ACCOUNT OF ROAD PERMIT, WE FIND NO REASON AS TO WHY THE ASSESSEE COULD NOT FURNISH SUPPORTING EVIDENCE IN SUPPORT OF REMAINING THREE P AYMENTS TOTALING TO RS.52,000/-. SINCE PAYMENTS WERE MADE BY THE ASSESSEE BY WAY O F CHEQUE WE FEEL IT PROPER THAT IN THE INTEREST OF JUSTICE, THE ASSESSEE SHOULD BE PRO VIDED ONE MORE OPPORTUNITY TO PRODUCE NECESSARY EVIDENCE IN SUPPORT OF THESE THREE PAYMEN TS. HENCE, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR FRESH DECISION. IF THE ASSESSEE CAN PRODUCE EVIDENCES IN SUPPORT OF THESE THREE PAYMENTS, NO DISALLOWANCE SHOULD BE MADE. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVIDING ADEQUATE ITA NO.4883/DEL./2009 (AY : 2006-07) 4 OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS G ROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 10. GROUND NO.3 OF THE ASSESSEE READS AS UNDER: 3(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING 1/4 TH OF THE CLAIM IN RESPECT OF VEHICLE RUNNING AND MAINTENANCE EXPENSES. (II) THAT THE CLAIM IS IN RESPECT OF COMMERCIAL VEH ICLE AND THE ENTIRE CLAIM IS FOR THE PURPOSE OF BUSINESS AND AS SUCH THE PRESUMP TION OF PERSONAL USE IS HIGHLY ARBITRARY AND MISCONCEIVED. (III) THAT IN ANY CASE, THERE IS NO LEGAL BASIS FO R ANY DISALLOWANCE IN THE CASE OF LTD. COMPANY ON THE ALLEGED GROUND OF PERSONAL U SE AND DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS IN DISREGARD TO VA RIOUS CASE LAWS REFERRED TO IN OUR WRITTEN SUBMISSION. 11. BRIEF FACTS ARE THAT IT IS NOTED BY THE AO ON P AGE 3 OF THE ASSESSMENT ORDER THAT DURING THIS YEAR, THE ASSESSEE HAS DEBITED AN AMOUN T OF RS.23,45,307/- ON ACCOUNT OF VEHICLE RUNNING AND MAINTENANCE WHEREAS IN THE PREC EDING YEAR, THE EXPENSES ON THIS ACCOUNT WAS ONLY OF RS.9,10,724/-. THE AO ASKED T HE ASSESSEE TO SUBMIT THE DETAILS OF EXPENSES SPECIFICALLY WITH REGARD TO THE INCREASE I N THE EXPENDITURE. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE AO THAT THERE IS ALWAYS SOME REPAIR OF THE MACHINERY AND THE AMOUNT PAID TOWARDS THE REPAIR AN D MAINTENANCE IS JUSTIFIED AFTER CONSIDERING THE COST OF THE MACHINERY. IT IS HELD BY THE AO THAT THE REPLY OF THE ASSESSEE IS NOT CONVINCING WHEN COMPARED TO THE EXPENDITURE OF THE LAST YEAR. BY MAKING THESE OBSERVATIONS, THE AO DISALLOWED 1/4 TH OF THE EXPENDITURE AND IN THIS MANNER, HE MADE DISALLOWANCE OF RS.586330/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 12. IT IS SUBMITTED BY THE LD.AR OF THE ASSESSEE TH AT DURING THE PRESENT YEAR, THE ASSESSEE WAS HAVING 27 VEHICLES AS PER THE DETAILS AVAILABLE ON PAGE 27 OF THE PAPER BOOK. IT IS POINTED OUT THAT EIGHT VEHICLES ARE OF 2006 M ODEL, THREE VEHICLES ARE OF 2005 MODEL AND FIVE VEHICLES ARE OF 2004 MODEL. IT IS SUBMITT ED THAT IT GOES TO SHOW THAT OUT OF TOTAL 27 VEHICLES, 11 VEHICLES ARE ACQUIRED IN THE PRESEN T YEAR AND OUT OF THE REMAINING 16 VEHICLES, 5 VEHICLES ARE OF 2004 MODEL AND HENCE TH ESE FIVE VEHICLES WERE NEW IN THE ITA NO.4883/DEL./2009 (AY : 2006-07) 5 PRECEDING YEAR AND HENCE EXPENDITURE ON THESE VEHIC LES WAS VERY LOW IN THAT YEAR AND HENCE THE INCREASE IN THE EXPENDITURE IN THE PRESEN T YEAR IS JUSTIFIED. IT IS ALSO SUBMITTED THAT THIS EXPENDITURE OF RS.23.45 LAKHS IN THE PRES ENT YEAR ALSO INCLUDES EXPENSES ON FUEL AND IT IS NOT ONLY ON REPAIRS. LD.DR OF THE REVENU E SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND WE FIND THAT SOME NEW ARGUMENTS ARE RAISED BEFORE US. THESE ARGUMENTS WERE EITHER NOT RAISED BEFORE THE AUTHORITIES BELOW OR WERE NOT CONSIDERED BY THE AUTHORITIES BLOW. TH E FIRST NEW ARGUMENT RAISED BEFORE US IS THAT NUMBER OF VEHICLES IN THE PRESENT YEAR IS H IGHER THAN THE NUMBER OF VEHICLES IN THE PRECEDING YEAR. THE SECOND NEW CONTENTION BEFORE U S IS THAT THE EXPENSES OF RS.23.45 LAKHS INCLUDES EXPENDITURE ON FUEL ALSO, BUT THE CO RRECTNESS OF THESE CONTENTIONS HAS TO BE VERIFIED AND HENCE WE FEEL THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR FRESH DECISION AFTER VERIFYING THE CORRECTNESS OF THESE C ONTENTIONS. IF THE EXPENSES OF RS.23.45 LAKHS IN THE PRESENT YEAR AND RS.9.10 LAKHS IN THE PRECEDING YEAR INCLUDES COST OF FUEL ALSO, THE SAME SHOULD BE BIFURCATED INTO COST OF FU EL AND COST OF REPAIRS IN BOTH YEARS. NUMBER OF VEHICLES OWNED BY THE ASSESSEE IN THE PRE SENT YEAR AS WELL AS IN THE PRECEDING YEAR SHOULD BE COMPARED AFTER TAKING INTO ACCOUNT T HE PERIOD OF HOLDING OF THESE VEHICLES PURCHASED IN THE PRESENT YEAR AND IN THE PRECEDING YEAR AND THEN THE EXPENSES SHOULD BE COMPARED. THIS IS SO BECAUSE IF THE NEWLY PURCHASE D VEHICLE IS USED FOR ONE MONTH IN THE PRECEDING YEAR AND FOR FULL YEAR IN THE CURRENT YEA R, THEN THE EXPENSES ON THAT VEHICLE IN THE CURRENT YEAR WILL BE 12 TIMES OF THE EXPENSES I N THE PRECEDING YEAR. THE ASSESSEE SHOULD FURNISH THE DETAILS OF VEHICLES IN THE PRECE DING YEAR ALSO AS OF THE PRESENT YEAR GIVEN ON PAGE 27 OF THE PAPER BOOK. IN ADDITION TO THIS, DATE OF PURCHASE OF VEHICLES AND DATE OF PUT TO USE SHOULD ALSO BE PROVIDED FOR BOTH YEARS. FROM THAT DETAIL, IT CAN BE WORKED OUT AS TO FOR HOW MANY MONTHS, ONE VEHICLE W AS USED, WHICH CAN BE CALLED VEHICLE MONTHS. SUCH VEHICLE MONTHS OF EACH VE HICLE CAN BE ADDED FOR BOTH YEARS AND THEN THE EXPENSES CAN BE COMPARED. WITH THESE OBSERVATIONS, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR FRESH DECISION AS PER ABOVE DISCUSSION AFTER PROVIDING AD EQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALSO ALLOWED FOR STAT ISTICAL PURPOSE. ITA NO.4883/DEL./2009 (AY : 2006-07) 6 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED AS ABOVE. 15. ORDER PRONOUNCED IN OPEN COURT ON 05.03.2010. SD/- SD/- (GEORGE MATHAN) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: MARCH 05, 2010. *SKB* COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A)-XI, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. AR/ITAT