M/s A.B. Motors Pvt. Ltd., Patiala V. ACIT, Patiala

ITA 536/CHANDI/2011

• Counselvise Citation: 53621514 RSA 2011
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: I V VERMA
• Keywords: Reopening of assessment
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 536/CHD/2011 ASSESSMENT YEAR: 2004-05 M/S A.B.MOTORS PVT LTD., VS. THE ACIT, PATIALA CIRCLE, PATIALA PAN NO. AABCA 5528 M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI I.V.VERMA RESPONDENT BY : SHRI N.K.SAINI DATE OF HEARING : 26.09.2011 DATE OF PRONOUNCEMENT : 26.09.2011 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), PATIALA DATED 11.3.2011 RELATING TO ASSESSM ENT YEAR 2004-05. 2. GROUND NO.3 OF THE APPEAL READS AS UNDER:- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD.CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF R S. 1,50,000/- OUT OF ADHOC DISALLOWANCE OF RS. 3,50,00 0/- MADE BY THE ASSESSING OFFICER FROM CERTAIN EXPENSES INCLUDING THE EXPENDITURE ON PROVIDING FREE INSURAN CE AND BUSINESS PROMOTION ETC. ON MERE CONJECTURES AND SURMISES. 2 3. THE BRIEF FACTS OF THE CASE ARE THAT ORIGINAL AS SESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT) ON TOTAL INCOME OF RS. 42,02,280/- AGAINST DECLARED INCOME OF RS. 35,52,280/- BY MAKING AN ADDITION OF RS. 6,50,000/- AFTER EXAMINING THE BOOKS OF ACCOUNT. SUBSEQUENTLY, NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE AND THE RE-ASSESSMENT WAS MADE ON TOTA L INCOME OF RS. 45,52,280/- AFTER MAKING AN ADHOC DISALLOWANCE OF R S. 3,50,000/- OUT OF EXPENSES ALREADY CONSIDERED AND ALLOWED IN THE ORIG INALS ASSESSMENT. IN THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSING OFFIC ER MADE ADDITION OF RS. 3,50,000/- OUT OF EXPENSES CLAIMED BY THE ASSES SEE UNDER THE HEAD FREE INSURANCE SCHEME EXPENSES AND BUSINESS PROMOTI ON EXPENSES ON ACCOUNT OF DISCREPANCIES AND FOR THE REASONS GIVEN IN PARAS 3 & 4 OF THE ASSESSMENT ORDER. 4. ON APPEAL, THE CIT(A) RESTRICTED THE DISALLOWANC E TO RS. 1,50,000/- AS AGAINST RS. 3,50,000/- MADE BY THE ASSESSING OFF ICER. THE RELEVANT FINDINGS OF THE CIT(A) ON THIS ISSUE ARE AS UNDER:- 5.4 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RIVAL SUBMISSIONS OF BOTH THE ASSESSING OFFICER IN HIS REMAND REPORT AND CONTENTIONS OF THE COUNSEL, IT IS SEEN THAT THE ASSESSING OFFICER HAS RIGHTLY MADE ADDITION OF VARI OUS INADMISSIBLE EXPENDITURE IN BOTH THE ACCOUNTS MENTI ONED. HOWEVER, IT WOULD BE REASONABLE IT THE DISALLOWANCE OF THIS EXPENDITURE IS RESTRICTED TO RS. 1,50,000/- AGAINST RS. 3,50,000/- DONE BY THE ASSESSING OFFICER. THE ASSE SSING OFFICER IS DIRECTED TO GIVE RELIEF ACCORDINGLY. 5. BEFORE US, SHRI I.C. VERMA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENSES UNDER BOTH THESE HEADS RELATED TO SALES / SERVICES AND 3 ESPECIALLY THOSE INCURRED ON SPECIAL INSURANCE SCHE ME DIRECTLY RELATED TO THE NUMBER OF VEHICLES SOLD. OTHERWISE TOO, THESE EXPENSES WHOLLY AND EXCLUSIVELY RELATE TO THE BUSINESS OF THE ASSESSEE AND WERE CORRECTLY CLAIMED / ALLOWED IN ORIGINAL ASSESSMENT. IN VIE W OF THE ABOVE, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN SUSTAINING THE DISALLOWANCE OF RS. 1,50,000/- UNDER THE ABOVE HEADS. 6. SHRI N.K. SAINI, LD. DR FOR THE REVENUE STRONGLY SUPPORTED THE ORDER OF CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS HELD THAT WHI LE FRAMING THE ORIGINAL ASSESSMENT, NO DISALLOWANCE UNDER THE ABOVE HEADS W AS MADE. EVEN IN THE RE-ASSESSMENT ORDER, THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC INSTANCE OF INADMISSIBLE EXPENDITURE OR IN FLATION THEREOF WHICH CAN JUSTIFY HIS ACTION IN MAKING A DISALLOWANCE OF RS. 3,50,000/- ON ADHOC BASIS OF THESE TWO TYPE OF EXPENSES. IN OUR VIEW, IT WAS INCUMBENT UPON THE ASSESSING OFFICER WHILE FRAMING THE RE-ASSESSME NT IN WHICH SUCH DISALLOWANCE HAS BEEN MADE TO BRING ON RECORD SOME POSITIVE MATERIAL TO SUPPORT HIS CONCLUSION ALONG WITH EXTENT OF DISALLO WANCE REQUIRED. IN FACT HE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL O N RECORD WHILE MAKING THE DISALLOWANCE IN THE RE-ASSESSMENT ORDER. IN OU R VIEW, THE CIT(A) SHOULD HAVE DELETED THE ENTIRE DISALLOWANCE OF THIS EXPENDITURE INSTEAD OF RESTRICTING THE SAME TO RS. 1,50,000/-. WE HOLD TH AT LD. CIT(A) HAS NOT GIVEN ANY COGENT REASONS WHILE RESTRICTING THE DISA LLOWANCE TO RS. 1,50,000/-. AS WE HAVE ALREADY NOTED HEREINABOVE T HAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ON ADHOC BASIS AN D THERE IS NO MATERIAL ON RECORD TO SUPPORT THE ACTION OF ASSESSING OFFICE R. CONSIDERING THE 4 ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE DELETE THE DISALLOWANCE OF RS. 1,50,000/- SUSTAINED BY THE CIT (A). THUS, GROUND NO.3 OF THE APPEAL STANDS ALLOWED. 8. VIDE GROUND NOS. 1 & 2 OF THE APPEAL, THE ASSESS EE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT U/S 147 / 1 48 OF THE ACT. SINCE, WE HAVE DELETED THE DISALLOWANCE OF RS. 1,50,000/- ON MERITS, AND THEREFORE, WE DO NOT THINK IT NECESSARY TO DECIDE GROUND NOS. 1 & 2 OF THE APPEAL BECAUSE NATURE OF THE SAME IS ACADEMIC. 9. GROUND NO.5 OF THE APPEAL RELATES TO CHARGING OF INTEREST U/S 234B, 234C AND 234D OF THE ACT. AT THE TIME OF HEARING, SHRI I.C. VERMA, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS GROUND OF APPEAL IS CONSEQUENTIAL IN NATURE, AND WE HOLD ACCORDINGLY. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 10. IN THE ABOVE TERMS, THE APPEAL IS TREATED TO BE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (MEHAR SINGH) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : SEPTEMBER, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 5