M/s. ABC Leathers, New Delhi V. ACIT, New Delhi

ITA 5210/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3762 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 23-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F: NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5210/DEL /2014 ASSESSMENT YEAR: 2011-12 ABC LEATHERS, B-65, MAYAPURI INDL. AREA, PHASE-I, NEW DELHI-64 (PAN: AAAFA4258Q) VS ACIT, CIRCLE-27(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.V.S.R. KRISHNA, CA RESPONDENT BY : SHRI ATIQ AHMAD, SR. DR DATE OF HEARING : 06.09.2017 DATE OF PRONOUNCEMENT: 31.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) XXIV, NEW DELHI FOR ASSESSMENT YEAR 2011 12 WHERE IN, VIDE ORDER DATED 21 ST OF AUGUST 2014, THE ASSESSEES APPEAL WAS PARTLY ALLOWED. 2. THE FACTS OF THE CASE ARE THAT THE RETURN OF INC OME WAS FILED DECLARING NIL INCOME AFTER CLAIMING BROUGHT FORWARD LOSSES SET OFF I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 2 TO THE TUNE OF RS. 1,06,90,690/-. THE CASE WAS LATE R SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED UNDER SEC TION 143 (3) OF THE INCOME TAX ACT, 1961 AFTER MAKING DISALLOWANCES/ADDITIONS TO THE FOLLOWING HEADS OF E XPENDITURE -COMMUNICATION EXPENSES DISALLOWANCE AT THE RATE OF 20% OF TOTAL EXPENDITURE DISALLOWANCE AMOUNTING TO RS. 1 ,71,978/- -VEHICLE EXPENSES AND DEPRECIATION DISALLOWANCE A T THE RATE OF 20% OF EXPENDITURE DISALLOWANCE AMOUNTING TO RS. 3,28,937/- -SHORTAGE AND EXCESS DISALLOWANCE AT THE RATE OF HUNDRED PERCENT DISALLOWANCE AMOUNTING TO RS. 20,906/- _ BUSINESS PROMOTION EXPENSES, DEBATE AND DISCOUNT DISALLOWANCE AT THE RATE OF 20% OF EXPENDITURE DI SALLOWANCE AMOUNTING TO RS. 3,51,943/- 2.1 THE TOTAL INCOME WAS COMPUTED AT RUPEES 1,13,39 ,586/- AND AFTER ALLOWING THE BROUGHT FORWARD LOSSES OF EA RLIER YEARS OF RUPEES 1,13,39,586/-, THE ASSESSMENT WAS COMPLETED AT NIL INCOME. 2.2 AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE LD. FIRST APPELLATE AUTHORITY WHO CONFIRMED THE DISALLO WANCE I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 3 PERTAINING TO COMMUNICATION EXPENSES AND SHORTAGE A ND EXCESS BUT GAVE RELIEF BY DIRECTING DELETION OF ADDITION P ERTAINING TO DISALLOWANCE AT THE RATE OF 20% OF DEPRECIATION ON CAR. THE LD. CIT (APPEALS), HOWEVER, CONFIRMED THE DISALLOWANCE PERTAINING TO VEHICLE RUNNING EXPENSES. THE LD. CIT (APPEALS) ALS O DIRECTED THE DELETION OF ADDITION OF RS. 3,51,943/- MADE ON ACC OUNT OF BUSINESS PROMOTION EXPENSES AND REBATE AND DISCOUNT . 2.3 NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HA S CHALLENGED THE SUSTENANCE OF VARIOUS DISALLOWANCES BY THE LD. CIT (APPEALS) BY RAISING THE FOLLOWING GROUNDS OF A PPEAL 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS GROSSLY ERRED IN CONFIRMING THE FOLLOWING AGGREGATE DISALLOWANCE OF RS. 4,78,199/- OUT OF TOTAL DISALLOWANCE OF RS.8,73,763/- , WHICH WERE MA DE BY THE LEARNED AO ON ARBITRARY BASIS,UNJUSTIFIED AND A GAINST LAW: (I) COMMUNICATION EXP. @20% RS.1,71,978/- (II) VEHICLE RUNNING & MAINTENANCE CAR DEPRECIATION ETC.@20% RS.3, 28,936/- (III) SHORT & EXCESS @ 100% RS. 20,906/- (IV) BUSINESS PROMOTION/ DIWALI EXPENDITURE. & STAFF WELFARE RS. 3,51,943/- @20% ------------------ TOTAL RS.8,73,763/- 2. THAT THE LD. ASSESSING OFFICER HAS ASSESSED T OTAL INCOME AT RS. 1,13,39,586/- AS PER HIS ASSESSMENT ORDER, BUT WRONGLY ADJUSTED AN AMOUNT OF RS. 1,15,64,453/- AGAINST BRO UGHT FORWARD I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 4 LOSS OF EARLIER YEARS IN HIS INCOME TAX COMPUTATION FORM. THUS THE ASSESSING OFFICER HAS ERRED IN ADJUSTING EXCESS AMOUNT BY RS. 2,24,867/- AGAINST BROUGHT FORWARD LOSSES OF EARLIE R YEARS. 3. APPELLANT CRAVES TO ADD, FILE AND MODIFY ANY OTHER GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE DISALLOWANCES AT THE RATE OF 20% FROM TELEPHONE EXP ENSES, VEHICLE RUNNING AND MAINTENANCE EXPENSES AND SHORTAGE AND E XCESS WAS ARBITRARY AND UNJUSTIFIED AS THESE DISALLOWANCES HA D BEEN MADE ON AN AD HOC BASIS AND WERE MADE WITHOUT POINTING OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNTS OF THE AS SESSEE. IT WAS SUBMITTED THAT THE ACCOUNTS OF THE ASSESSEE WERE DU LY AUDITED AND ALL THE RELEVANT DETAILS HAD BEEN FURNISHED BOT H BEFORE THE ASSESSING OFFICER AS WELL AS THE FIRST APPELLATE AU THORITY. IT WAS ALSO SUBMITTED THAT NO DISALLOWANCES HAD BEEN MADE IN ASSESSMENT YEARS 2009 10, 2010 11 AND 2012 13 AND, THEREFORE, EVEN ON THE PRINCIPLE OF CONSISTENCY, SU CH DISALLOWANCES WERE UNWARRANTED. IT WAS SUBMITTED TH AT THE ADDITIONS SUSTAINED BY THE LD. CIT (APPEALS) BE DEL ETED. 4. IN RESPONSE, THE LD. SENIOR DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT AS FAR AS THE TELEPHONE/ COMMUNICATI ON EXPENSES WERE CONCERNED, PERSONAL ELEMENT COULD NOT BE RULED OUT AND I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 5 PART OF SUCH EXPENSES MAY NOT BE FULLY ATTRIBUTABLE TO THE BUSINESS OF THE ASSESSEE AND, THEREFORE, DISALLOWAN CE ON THIS ACCOUNT WAS JUSTIFIED. ON THE ISSUE OF DISALLOWANCE OF VEHICLE EXPENSES, IT WAS SUBMITTED THAT THE AO HAS GIVEN A FINDING THAT THE ASSESSEE HAD NOT MAINTAINED ANY LOGBOOK SHOWING THE USE OF CAR AND, THEREFORE, IT COULD NOT BE SAID THAT THE E NTIRE EXPENSES HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF BUSINESS OF THE ASSESSEE AND THE USE OF VEHICLE FOR PERSONAL PURPOSES COULD NOT BE RULED OUT AND, ACCORDINGLY, E VEN THIS DISALLOWANCE WAS JUSTIFIED. ON THE DISALLOWANCES RE LATING TO SHORTAGE AND EXCESS IT WAS SUBMITTED THAT THE ASSES SEE HAD FAILED TO SUBSTANTIATE THE AMOUNTS WHICH HAD BEEN DEBITED AS SHORT AND EXCESS AND, ACCORDINGLY, THE SAME WAS CORRECTLY DISALLOWED. IT WAS SUBMITTED THAT THE DISALLOWANCES SUSTAINED B Y THE LD. CIT (APPEALS) BE SUSTAINED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PER USED THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT THE ASSES SEES BOOKS OF ACCOUNTS HAVE BEEN DULY AUDITED AND THE ASSESSEE HA S ALSO FILED VOLUMINOUS DETAILS OF THE VARIOUS EXPENSES UNDER WH ICH THE IMPUGNED DISALLOWANCES HAVE BEEN MADE. THE PERUSAL OF THE DETAILS WITH RESPECT TO TELEPHONE, TRUNK AND TELEX CHARGES SHOWS I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 6 THAT MOST OF THE PAYMENTS, ALTHOUGH, HAVE BEEN MADE BY CHEQUES, THERE ARE INSTANCES WHERE PAYMENTS HAVE BE EN MADE IN CASH OR HAVE BEEN REIMBURSED IN CASH. FURTHER, ALTH OUGH THESE EXPENSES HAVE BEEN DULY SUPPORTED BY BILLS AND VOUC HERS, THE PLEA OF THE ASSESSEE THAT THE ENTIRE EXPENSES RELAT E TO BUSINESS PURPOSES CANNOT BE ACCEPTED IN TOTALITY. HOWEVER, L OOKING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF T HE CONSIDERED OPINION THAT INTEREST OF JUSTICE WOULD BE MET IF SU CH DISALLOWANCE IS RESTRICTED TO 10% OF THE TOTAL EXPENSES BOOKED U NDER COMMUNICATION EXPENSES. ACCORDINGLY, THE AO IS DIRE CTED TO RESTRICT THE DISALLOWANCE TO 10% OF THE TOTAL COMMU NICATION EXPENSES. 5.1 SIMILARLY, PERSONAL ELEMENT IN EXPENDITURE INCU RRED ON VEHICLE RUNNING AND MAINTENANCE CANNOT BE RULED OUT COMPLETELY AS IT IS AN ADMITTED FACT THAT NO LOGBOOK HAS BEEN MAINTAINED AND THE PURPOSE FOR WHICH PAYMENTS HAD BEEN MADE TO WARDS TAXI HIRING CHARGES IS NOT DISCERNIBLE FROM THAT DETAILS FILED IN THIS REGARD. THEREFORE, IN RESPECT OF VEHICLE RUNNING EX PENSES ALSO, IT IS OUR CONSIDERED OPINION THAT INTEREST OF JUSTICE WOULD BE MET IF THE DISALLOWANCE IN RESPECT THEREOF IS RESTRICTED T O 10% OF THE TOTAL EXPENSES UNDER THE SAID HEAD. ACCORDINGLY, TH E AO IS I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 7 DIRECTED TO RESTRICT THE DISALLOWANCE TO 10% OF THE TOTAL VEHICLE RUNNING AND MAINTENANCE EXPENSES. 5.2 AS FAR AS THE ISSUE OF DISALLOWANCE OF SHORTAGE AND EXCESS IS CONCERNED, BOTH THE LOWER AUTHORITIES HAVE HELD THA T NO DETAILS HAD BEEN FILED IN THIS REGARD. ALTHOUGH THE ASSESSE E HAS PROVIDED VOLUMINOUS DETAILS IN THE PAPER BOOK FILED BEFORE U S, THE SAME NEEDS TO BE VERIFIED BY THE LOWER AUTHORITIES. THER EFORE, IT IS OUR CONSIDERED OPINION THAT THIS ISSUE NEEDS TO BE REST ORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION. ACCORDINGLY, THE ISSUE OF SHORTAGE AND EXCESS IS RESTORED TO THE FILE OF THE AO FOR EXAMINING THE ISSUE AFRESH AFTER GIVING PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT THE RELEVANT DETAILS AND EXPLANATIONS. 6. IN THE FINAL RESULT, THE ASSESSEES APPEAL STAND S PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31.10. 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 31ST OCTOBER, 2017 GS I.T.A. NO. 5210/DEL/2014 ASSESSMENT YEAR 2011-12 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR