Shwetal Vinodrai Budhdev,(Prop. of SOS Finance), Ahmedabad V. The ITO, Ward-5(2)(4), Ahmedabad

ITA 49/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7167 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 29-01-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 03-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Capital expenditure
• Section: 37(1); 143(2); 37

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, VICE-PRESIDENT ./ ITA NO. 49/AHD/2018 / ASSESSMENT YEAR: 2013-14 SHWETAL VINODRAI BUDHDEV PROP: OF SOS FINANCE 707, SAMEDH COMPLEX NR. ASSOCIATED PETROL PUMP C.G. ROAD, AHMEDABAD 380 006 PAN : ABSPB 3796 M VS ITO, WARD-5(2)(4) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL AR REVENUE BY : SHRI DILIPKUMAR SR.DR / DATE OF HEARING : 29/01/2020 /DATE OF PRONOUNCEMENT : 4/02/2020 O R D E R ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-5, AHMEDABAD DATED 15.9.2017 PASSED FOR T HE ASSTT.YEAR 2013- 14. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING ADDITION OF RS.3,22,326/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A T THE RELEVANT TIME, WAS A PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF SOS FINANCE. HE HAS FILED HIS RETURN OF INCOME ON 27.9.2013 DECL ARING TOTAL INCOME AT RS.4,38,230/-. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 143(2) WAS ISSU ED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVE ALED TO THE AO THAT THE ITA NO.49/AHD/2018 - 2 - ASSESSEE HAS DEBITED A SUM OF RS.16,84,547/- TOWARD S EMPLOYEE COST AND RS.15,38,717/- AS ADMINISTRATIVE AND GENERAL EXPENS ES. THE LD.AO SOUGHT EXPLANATION OF THE ASSESSEE AS TO WHY 20% OF THESE EXPENSES SHOULD NOT BE DISALLOWED. THE AO WAS OF THE VIEW T HAT THERE ARE FOUR PARTNERSHIP FIRMS AND PROPRIETORSHIP CONCERN ARE OP ERATING FROM THE SAME BUSINESS PREMISES. THE ASSESSEE IS A MAJOR ST AKE-HOLDER IN THE PARTNERSHIP FIRM ALSO. OTHER FIRMS HAVE ALSO CLAIM ED EXPENSES IN THEIR RESPECTIVE BOOKS OF ACCOUNTS, THEREFORE, HE WAS OF THE VIEW THAT THE EXPENSES CLAIMED IN THE PROPRIETARY CONCERN ARE ON THE HIGHER SIDE. IN RESPONSE TO THE QUERY OF THE LD.AO, THE ASSESSEE FI LED A DETAILED REPLY. HE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BU SINESS OF PROVIDING SERVICES FOR FACILITATING LOANS FROM THE BANK AND F INANCIAL INSTITUTIONS TO THE PARTIES FOR PURCHASING SECOND HAND CAR. THE AS SESSEE HAS EARNED COMMISSION INCOME OF RS.1,23,92,166/- IN THE PROPRI ETORSHIP CONCERN, AND EMPLOYEE COST AT RS.16,84,547/- IS JUST 13.59% OF THE TOTAL COMMISSION INCOME. HE ALSO POINTED OUT AS FAR AS O THER FIRMS ARE CONCERNED, I.E. M/S.AXIOM FINANCE, ACCUITY FINANCE AND ACCOLADE FINANCE, THE EMPLOYEE COST WAS 28.35%, 25.72% AND 1 9.56% TO THEIR RESPECTIVE TURNOVER. HENCE, THE EMPLOYEE COST IS L ESS IN THE PROPRIETORSHIP CONCERN, IN COMPARISON TO THE TURNOV ER ACHIEVED. SIMILARLY, EXPENSES INCURRED BY THE PROPRIETORSHIP FIRM IS CONCERNED, THE SAME IS FAR LESS THAN THE PARTNERSHIP CONCERNS. TH E ASSESSEE HAS SUBMITTED THE DATA. HOWEVER, WHILE CONSIDERING THI S REPLY, REPRODUCED AT PAGE NO.8-9 OF THE ASSESSMENT ORDER, THE LD.AO D ID NOT FIND ANY MERIT AND DISALLOWED 20% OF SUCH EXPENDITURE BY OBSERVING AS UNDER: 6.2 THE REPLY FILED BY THE ASSESSEE HAS BEEN PERUS ED AND FOUND TO BE NOT ACCEPTABLE. EVENTHOUGH, THE EXPENDITURES INCURRED B Y ALL THE PARTNERSHIP ITA NO.49/AHD/2018 - 3 - FIRMS HAVE BEEN DEBITED IN THE RESPECTIVE; BOOKS OF ACCOUNTS, THE OPERATIONAL COST-AND OTHER EXPENSES FOR RUNNING A B USINESS FROM THE SAME PREMISES WOULD DEFINITELY LESSEN THE BURDEN OF THE ASSESSEE. THE ASSESSEE HAS SUBMITTED COMPARATIVE FIGURE REGARDING THE EMPL OYEE COST ARID- GENERAL EXPENSES VIA-A-VIS COMMISSION INCOME EARNED BY THE PARTNERSHIP FIRMS. HOWEVER, THE COMPARISON OF SUCH PERCENTAGE O F EXPENSES WITH THE COMMISSION EARNED BY THE RESPECTIVE FIRMS DOES NOT SUBSTANTIATE THE REASONS FOR NOT DISALLOWING THE EXPENSES SINCE ALL THE FIRMS ARE OPERATED FROM THE SAME PREMISES. EMPLOYEE COST CLAIMED BY TH E ASSESSEE CONSISTS OF SALARY EXPENSES, INCENTIVE EXPENSES, STAFF WELFARE EXPENSES. THE ASSESSEE HAS NOT PROVIDED ANY DOCUMENTARY EVIDENCES TO PROVE THAT THE RESOURCES OF THE PROPRIETARY CONCERN ARE NOT SHARED BY THE SA ID PARTNERSHIP FIRMS. THE ASSESSEE HAS ILLUSTRATED THE PERCENTAGE OF VARI OUS EXPENSES, OF PARTNERSHIP FIRMS VIS-A-VIS PROPRIETARY CONCERN OF THE ASSESSEE AND THE SAME DOES NOT REFRAIN THE ASSESSEE FROM THE POOLING OF AVAILABLE RESOURCES AND OTHER FACTORS FROM THE SAME PREMISES. THE ASSES SEE EVEN FAILED TO PRODUCE ANY CORROBORATIVE EVIDENCE TO PROVE THAT TH E ALL THE ENTITIES INCURRED EXPENDITURES SEPARATELY EVENTHOUGH THEY RU N FROM THE SAME BUSINESS PREMISES. SINCE THE ASSESSEE FAILED TO EST ABLISH THE SAME, 20% OF EMPLOYEE COST OF RS.16,84,547/- AND ADMINISTRATIVE GENERAL EXPENSES OF RS. 15,38,717/- WHICH COMES TO RS. 6,44,653/- IS REQUIRED TO BE DISALLOWED AND THE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS OR SUPPORTING DOCUMEN TS TO PROVE THAT THE RESOURCES OF THE PREMISES ARE NOT POOLED AND INCURR ED SEPARATELY BY THE SAID FIRMS, THEREFORE 20 % OF EMPLOYEE COST OF RS. 16,84,547/- AND ADMINISTRATIVE GENERAL EXPENSES OF RS.15,38,717/- W HICH COMES TO RS. 6,44,653/- IS DISALLOWED AND ADDED TO THE TOTAL INC OME OF THE-ASSESSED. 4. ON APPEAL, THE LD.CIT(A) REDUCED THIS EXPENDITUR E BY 50%. IN OTHER WORDS, THE LD.CIT(A) CONFIRMED THE DISALLOWAN CE AT 10% OF THE EXPENDITURE DEBITED BY THE ASSESSEE UNDER THESE TWO HEADS. 5. I HAVE DULY CONSIDERED RIVAL SUBMISSIONS AND GON E THROUGH THE RECORD. IT IS PERTINENT TO OBSERVE THAT IN ORDER TO CLAIM E XPENDITURE UNDER SECTION 37(1) OF THE INCOME TAX ACT, THE ASSESSEE I S REQUIRED TO FULFILL CERTAIN CONDITIONS VIZ. (A) THERE MUST BE EXPENDITURE, (B) SUCH EXPENDITURE MUST NOT BE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36, (C) T HE EXPENDITURE MUST NOT BE IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPEN DITURE OF THE ASSESSEE, AND (D) ITA NO.49/AHD/2018 - 4 - EXPENDITURE MUST BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE EXPRESSION WHOLLY EMPLOYED IN SECTION 37 REFERS TO QUANTIFICATION OF EXPENDITURE WHILE EXPRESSION EXCLUSIVELY REFERS TO THE MOTIVE, OBJECTIVE AND PURPOSE OF THE EXPENDITURE. A PERUSAL OF THE FINDING OF THE AO WOULD REVEAL THAT HE HAS NOT POINT OUT ANY DEFECT IN THE DETAILS MAINTAINED BY THE ASSESSEE. HE HAS NOT CROSS-VERIFIED ANY BILLS OR VOUCHERS MAINTAINED BY THE ASSESSEE. ONE OF HIS OBSERVATIONS IS THAT THE ASSESSEE HAS NOT BROUGHT ANY DOCUMENTARY E VIDENCE TO PROVE THAT THE RESOURCES OF THE PROPRIETORSHIP CONCERN AR E NOT SHARED BY THE PARTNERSHIP FIRM. THERE IS AN IN-BUILT FALLACY IN SUCH OBSERVATION. HOW, THE ASSESSEE IS ABLE TO PROVE THAT HIS RESOURCE WAS NOT USED BY OTHER CONCERNS ? IT IS TOTALLY IMPOSSIBLE. IT IS FOR TH E AO TO PROVE THAT RESOURCES OF THE ASSESSEE HAVE BEEN USED FOR NON-BU SINESS PURPOSE ONLY THEN HE CAN MAKE OUT HIS CASE. CONSIDERING THIS MI SPLACED REASONING GIVEN BY THE AO, I AM OF THE VIEW THAT THERE SHOULD NOT BE ANY DISALLOWANCE OUT OF THIS EXPENDITURE. THE DISALLOW ANCE MADE WITHOUT ANY PLAUSIBLE REASONING IS ACCORDINGLY DELETED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 4 TH FEBRUARY, 2020. SD/- (RAJPAL YADAV) VICE-PRESIDENT AHMEDABAD; DATED, 4/02/2020