The ITO,Vapi Ward-2, Vapi V. Shri Natversinh Ramsinh Chauhan, SILVASSA

ITA 543/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6648 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G D BALVADR
• Assessee Lawyers: S N L AGARWALAAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'D' BEFORE SHRI T K SHARMA,JM & SHRI A N PAHUJA,AM ITA NO.543/AHD/2011 (ASSESSMENT YEAR:-2005-06) INCOME-TAX OFFICER,WARD-2, VAPI V/S SHRI NATVERSINH RAMSINH CHAUHAN, PROP. OF HOTEL NATRAJ, NAROLI ROAD, SILVASSA (D. & N.H.) PAN: AAYPC 9183 G [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI G D BALVA,DR ASSESSEE BY:- SHRI S.N.L.AGARWALA,AR O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 23- 11-2010 OF THE LD. CIT(APPEALS), VALSAD, FOR THE AS SESSMENT YEAR 2005-06, RAISES THE FOLLOWING GROUNDS:- [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15,75,422/ - BY HOLDING THAT THE CREDIT BALANCES ARE OPENING BALANCES OF EARLIER YEARS AND CANNOT BE ADDED IN THE YEAR UNDER CONSIDERATION. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.96,026 /-. [3] IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE AO MAY BE RESTORED AND THAT OF THE LD. CIT(A) BE SET ASIDE. [4] THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUNDS OF APPEAL. 2. ADVERTING FIRST TO GROUND NO.1 IN THE APPEAL, F ACTS, IN BRIEF, AS PER RELEVANT ORDES ARE THAT RETURN DECLARING INCOME OF RS.2,34,100/- FILED ON 31-10-2005 BY THE ASSESSEE, AFTER BEING PR OCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REF ERRED TO AS THE ACT], WAS SELECTED FOR SCRUTINY WITH THE SERVICE OF A NOTICE U/S 143(2) OF THE ACT ON 11-06-2007.DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER[AO IN SHORT] ASK ED THE ASSESSEE ITA N O.543/AHD/2011 2 2 TO SUBMIT CONFIRMATIONS/ADDRESSES OF CREDITORS. HOW EVER, THE ASSESSEE DID NOT FURNISH THE SAME. THE AO FURTHER N OTICED THAT IN THE FOLLOWING CASES NO PAYMENT HAD BEEN MADE IN THE PRECEDING THREE YEARS I.E. FROM AY 2003-04 AND AMOUNT OF CRED IT REMAINED THE SAME DURING ALL THESE THREE YEARS:- SR. NO. NAME OF PARTY AMOUNT (RS.) 1 KRISHNA ENTERPRISES 73,223 2 LIVE TRADERS 1,37,944 3 MAHAVIR MARBLE 1,50,953 4 MAKATI PLYWOOD 45,057 5 M K ELECTRICALS 1,44,800 6 MONA AGENCIES 20,720 7 M & S COMPANY 14,241 8 NISA SECURITY 19,607 9 PAREKH REFRIGERATION 67,616 10 POPATLAL & SONS 49,657 11 PRUTHVI HARDWARE & STORES 37,425 12 PRUTHVI STEEL & CERAMICS 1,14,791 13 RAJESH NANDWANI 38,129 14 R P KANOJIA 23,609 15 SAI AGENCY 43,469 16 SANKET ELECTRICALS 1,30,185 17 SHYAM GLASS CORPORATION 10,392 18 SHREE ENTERPRISES 18,144 19 SHREENATH ENTERPRISES 12,038 20 SIDHESHWARI FABRICATORS 1,42,136 21 SINGH SECURITY SERVICES 42,886 22 SIMRAN ENTERPRISES 30,823 23 SUNLIGHT 61,750 24 SUPER ELECTRONICS 20,000 25 SURYA SECURITIES 58,925 26 TECNO ELEVATORS PVT. LTD. 66,902 TOTAL 15,75,422 IN THE ABSENCE OF ANY EXPLANATION AS TO WHY THESE PAYMENTS HAD NOT BEEN MADE, THE AO ADDED THE SAID AMOUNT OF RS.15,75,422 /- TO THE INCOME. 3. ON APPEAL, THE LEARNED CIT(A) DELETED THE ADDITI ON IN THE FOLLOWING TERMS:- 7.2 SUBMISSION OF THE AR :- THE AR OF THE APPELLANT FURNISHING THE COPY OF THE ORDER OF THE HON'BLE ITAT, AHMEDABAD DA TED 23-01-2009 STATED THAT SIMILAR ADDITION OF RS.7,46,734/-- WAS DELETED BY THE HON'BLE ITA N O.543/AHD/2011 3 3 ITAT, AHMEDABAD WITH AN OBSERVATION THAT IN VIEW OF THE FACT THAT SINCE THESE CREDITS REPRESENT OPENING BALANCE FROM EARLIE R YEARS AND ARE OUTSTANDING AT THE END OF THE YEAR CANNOT BE ADDED EITHER U/S. 68 OR 41(1) OF THE ACT. 7.3 DECISION :- I HAVE CONSIDERED THE OBSERVATIONS MADE BY THE A O IN HIS ASSESSMENT ORDER AS WELL AS THE CONTENTIONS RAI SED BY THE A.R. OF THE APPELLANT IN HIS WRITTEN SUBMISSION. THE APPELLANT HAS STATED THAT THE CREDITS BALANCE ARE ALL OPENING BALANCES OF EARLIER YEARS FOR WHICH THE ID. AR FILED COPIES OF LEDGER ABSTRACT OF THOSE PARTIES . THE LEDGER ABSTRACTS CLEARLY SHOWS THAT THE CREDIT BALANCES ARE THE OPEN ING BALANCES OF EARLIER YEARS. I HAVE ALSO CONSIDERED THE ITAT'S ORDER DATE D 23-01-2009. AS PER THE ORDER, THE HON'BLE ITAT, AHMEDABAD DELETED THE ADDITION OF RS.15,75,422/- WITH AN OBSERVATION THAT IN VIEW OF THE FACT THAT SINCE THESE CREDITS REPRESENT OPENING BALANCE FROM EARLIER YEAR S AND ARE OUTSTANDING AT THE END OF THE YEAR CANNOT BE ADDED EITHER U/S. 68 OR 41(1) OF THE ACT. THEREFORE, THE ADDITION MADE BY THE A.O. IS HEREBY DELETED. THUS, THE APPELLANT'S GROUND NO. 3 IS ALLOWED. 4. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR RELI ED UPON THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE AS SESSEE SUPPORTED THE FINDINGS OF THE LEARNED CIT(A) IN THE LIGHT OF DECISION DATED 23- 01-2009 OF THE ITAT, AHMEDABAD BENCH A IN THE ASS ESSEES OWN CASE FOR AYS 2001-02 TO 2004-05 IN ITA NOS.3072, 34 23, 3073 AND 3191/AHD/2007 AS ALSO THE DECISION IN THE CASE OF N ITIN S GARG VS. ACIT [2010] 40 SOT 253 (AHD). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THROUGH THE AFORESAID DECISIONS O F THE TRIBUNAL. WE FIND THAT THE TRIBUNAL WHILE ADJUDICATING A SIMI LAR ISSUE IN THEIR ORDER DATED 23-01-2009 IN ITA NOS.3072, 3423, 3073 AND 3191/AHD/2007 FOR THE AYS 2001-02 TO 2004-05 IN THE ASSESSEES OWN CASE CONCLUDED AS UNDER:- 8 WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE ASSESSMENT ORDER AS WELL AS ORDER OF CIT(A). 9 THE BRIEFLY STATED FACTS RELATING TO THIS ISSUE A RE THAT THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDING S FOUND THAT THERE ARE ITA N O.543/AHD/2011 4 4 CERTAIN CREDITS IN THE BALANCE-SHEET AND THE ASSESS ING OFFICER ENQUIRED ABOUT THE DETAILS OF THE FOLLOWING CASH CREDITORS A S UNDER:- 'BHAWANI PUBLICATION RS. 20,000/- SAWMILL RS.3,39,064/- SOUZA ENTERPRISES RS.3,87,670/- ----------------- RS.7,46,734/-' AS THE ASSESSEE COULD NOT FILE ANY DETAIL DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER TREATED THESE CR EDITORS AS NON-GENUINE AND ADDED U/S.68 OF THE ACT. AGGRIEVED, ASSESSEE PR EFERRED APPEAL BEFORE CIT(A). BUT CIT(A) CONFIRMED THE ADDITIONS ON DIFFE RENT PREMISES, THAT IF THE ADDITION IS NOT JUSTIFIED U/S.68 OF THE ACT THEN SA ME IS JUSTIFIED U/S.41(1) OF THE ACT AS THE ASSESSEE HIMSELF HAS SUBMITTED THAT LIABILITY IN RESPECT OF THESE CREDITORS IS DISPUTED AND HE HAS NOT TO PAY T O THESE CREDITORS AS PER THE EXPLANATION OFFERED BY HIM. IN VIEW OF THE FACT THE CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5 NOW BEFORE US THE LD. COUNSEL FOR THE ASSESSEE AR GUED THAT UNDISPUTEDLY THESE CREDITS DO NOT PERTAIN TO YEAR U NDER APPEAL AND THESE ARE IN RESPECT OF ADVERTISEMENT INCURRED IN YEAR 19 99 AMOUNTING TO RS.20,000/- FOR BAWANI PUBLICATION, AS WELL AS PURC HASE OF WOOD FOR THE FURNITURE OF HOTEL IN 1996 AMOUNTING TO RS.3,39,064 /- AND AS REGARDS TO CREDIT OF RS.3,87,670/- IN THE NAME OF SOUZA ENTERP RISES AS THE ASSESSEE HAS PURCHASED A SOLAR SYSTEM FOR THE HOTEL IN THE Y EAR 1995 AND WHICH IS DEFECTIVE AND THE PARTY DID NOT TURN UP FOR THE SET TLEMENT OF THE AMOUNT. THEREFORE THESE CREDITS AMOUNTING TO RS.7,46,734/- IS OUTSTANDING IN THE NAME OF THESE THREE PARTIES. THE LD. COUNSEL FOR TH E ASSESSEE SPECIFICALLY DRAWN OUR ATTENTION TO THE ACCOUNT COPIES AND STATE D THAT THESE ARE OUTSTANDING AS ON DATE AND THIS AMOUNT ARE NOT WRIT TEN OFF IN THE BOOKS OF ACCOUNT. ACCORDINGLY, THE SAME CANNOT BE ADDED U/S. 41(1) OF THE ACT AS THE LIABILITY IS OUTSTANDING AND THE PARTIES ARE IN EXISTENCE. WE ARE IN FULL AGREEMENT WITH THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE, AS IS SEEN FROM THE DOCUMENTS AND PAPERS FILED BEFORE US THAT THE PARTIES DO EXIST AND THESE AMOUNTS ARE OUTSTANDING IN THE BOOK S OF THE ASSESSEE AS PAYABLE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, WE FEEL THAT THESE AMOUNTS CANNOT BE ADDED EITHER U/S.68 OR 41(1) OF T HE ACT. WE DELETE THE ADDITION AND THIS ISSUE OF THE ASSESSEE'S APPEAL IS ALLOWED. 5.1 IN THE INSTANT CASE, INDISPUTABLY AND AS POINT ED OUT BY THE LD. CIT(A) AFTER PERUSING THE LEDGER ABSTRACTS THAT THE CREDIT BALANCES ARE THE OPENING BALANCES OF EARLIER YEARS. IN THESE CIRCUMS ATNCES, THE LD. CIT(A) FOLLOWING THE VIEW TAKEN IN THE AFORESAID DECISION OF THE ITAT CONCLUDED THAT THE AMOUNT OF RS.15,75,422/- CANNOT BE ADDED EITHER U/ S. 68 OR 41(1) OF THE ACT. MOREOVER, A CO-ORDINATE BENCH IN THEIR DECISION IN THE CASE OF NITIN S ITA N O.543/AHD/2011 5 5 GARG(SUPRA) CONCLUDED THAT THE LIABILITIES OUTSTAN DING FOR THE LAST MANY YEARS AND REFLECTED IN THE BALANCE SHEET COULD NOT BE TREATED AS CESSATION OF LIABILITIES AND THEREFORE ,THE PROVISIONS OF SEC. 4 1(1) ARE NOT ATTRACTED . IN THE LIGHT OF VIEW TAKEN BY THE ITAT IN THEIR AFORESAID DECISI ONS AND UNDISPUTED AFORESAID FINDINGS OF THE LD. CIT(A) ,ESPECIALLY WHEN THE REV ENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER ,WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.1 IN TH E APPEAL IS DISMISSED. 6. GROUND NO.2 IN THE APPEAL RELATES TO DISALLOWANC E OF RS.96,026/-. THE AO NOTICED THAT THE ASSESSEE CLAIM ED EXPENDITURE OF RS.9,60,265/- TOWARDS VARIOUS EXPENSES RELATING TO STONE QUARRY WHILE SHRI ASHOK RUNGHANI, SUPERVISOR, IN HIS STAT EMENT RECORDED ON OATH AT THE TIME OF SURVEY STATED THAT M/S. JAY BAJRANG STONE QUARRY WAS CLOSED FROM NOVEMBER. 2000 AND THAT THE SE EXPENSES WERE BOGUS AND INCLUDED IN THE P&L A/C., TO EVADE T AX ON THE RENT INCOME OF MACHINERY RECEIVED FROM M/S. MARUTI STONE WORKS. THE ASSESSEE WAS RUNNING TWO PROPRIETARY CONCERNS NAMEL Y, (1) JAY BAJRANG STONE QUARRY AND (2) HOTEL NATRAJ. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE REPRESENTATIVES OF THE ASSESSEE ALSO SUBMITTED A COPY OF INTIMATION DATED 01-09-2004 MAD E BY THE ASSESSEE TO THE CHIEF OF POLICE REGARDING LOSS OF B OOKS OF ACCOUNT FOR THE LAST 3 YEARS, DUE TO FLOOD IN DAMAN GANGA R IVER. TO A QUERY BY THE AO, THE AR OF THE ASSESSEE SUBMITTED IN THE IR LETTER DATED 10-11-2008 THAT THE EXPENSES RELATED TO PURCHASE OF DETONATOR, POWER GEL EXPLOSIVE AND AMMONIA NITRATE POWDER BESI DES LABOUR PAYMENT FOR BREAKING THE STONE AND FOR LOADING AND UNLOADING. REGARDING THE BILLS AND RELATED BOOKS, IT WAS SUBMI TTED THAT THESE HAD BEEN LOST IN FLOODS .IN THESE CIRCUMSTANCES, IN THE ABSENCE OF ANY EVIDENCE , THE AO DISALLOWED 10% OF THE EXPENS ES, RESULTING IN DISALLOWANCE OF RS.9,60,265/-. 7. ON APPEAL, THE LEARNED CIT(A) DELETED THE DISALL OWANCE IN THE FOLLOWING TERMS:- ITA N O.543/AHD/2011 6 6 6.3 SUBMISSION OF THE AR :- THE AR OF THE APPELLANT SUBMITTED THAT THE AO HAS ESCAPED THAT THE EXPENSES CLAIMED BY THE APPELLANT ARE GENUINE AND BY AN ESTIMATE, HE DISALLOWED 10% OF TH OSE EXPENSES FOR WANT OF PROOF ACCEPTING THE FACTS THAT BOOKS OF ACC OUNTS OF THE APPELLANT WERE WASHED AWAY IN FLOOD. FURNISHING THE COPY OF T HE DECISION OF THE HONBLE ITAT, AHMEDABAD DATED 23-01-2009, HE CONTEN DED THAT THE CLAIM OF THE APPELLANT FOR SUCH EXPENSES WERE ALLOWED FOR THE ASST. YEARS 2001- 02 TO 2003-04, HOLDING THAT THE APPELLANT HAS CONTI NUED THE BUSINESS AND INCURRED EXPENSES. 6.4 CONCLUSION :- I HAVE CONSIDERED THE OBSERVATIONS MADE BY THE A.O. IN HIS ASSESSMENT ORDER AS WELL AS THE CONTENT IONS RAISED BY THE A.R. OF THE APPELLANT IN THE WRITTEN SUBMISSION. THE ADD ITION MADE BY THE AO WAS PURELY ON ADHOC BASIS AND NOT SUSTAINABLE IN TH E EYES OF THE LAW. THE CONTENTION OF THE APPELLANT IS ALSO GET SUPPORT BY THE DECISION OF THE HON'BLE ITAT, AHMEDABAD, IN ITS OWN CASE ORDER DATE D 23-01-2009. IN THIS CIRCUMSTANCES, THE ADDITION MADE BY THE A.O. IS HER EBY DELETED. THUS, THE APPELLANT'S GROUND NO.2 IS ALLOWED. 8. THE REVENUE IS NOW IN APPEAL BEFORE US AGAI NST THE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPP ORTED THE ORDER OF THE AO WHILE THE LEARNED AR ON BEHALF OF THE AS SESSEE RELIED ON THE FINDINGS OF THE LD. CIT(A). 9. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUG H THE FACTS OF THE CASE. INDISPUTABLY AND AS POINTED OUT BY THE LD. CIT(A) , THE DISALLOWANCE HAS BEEN MADE ON ADHOC BASIS. SINCE THE AO HAS NOT IDENTIFIED ANY SPECIFIC ITEM OF EXPENDITURE, INCURRED FOR PERSONAL OR NON BUSINESS PURPOSES AND MERELY DISALLOWED AN ADHOC AMOUNT WHILE THE REVENUE HAVE NOT PLACED BEFORE US ANY MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERENT VIE W IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. THEREFORE, GROUND NO.2 IN THE APPEAL IS ALSO DISMISSED. 10. GROUND NOS. 3 & 4 BEING MERE PRAYER AND NO SE PARATE SUBMISSIONS HAVING BEEN MADE , THESE GROUNDS DO NO T REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED . ITA N O.543/AHD/2011 7 7 11. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT TODAY ON 13 -05-2011 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATED : 13 -05-2011 COPY OF THE ORDER FORWARDED TO: 1. SHRI NATVERSINH RAMSINH CHAUHAN, PROP. OF HOTEL NATRAJ, NAROLI ROAD, SILVASSA (D. & N.H.) 2. THE ITO, VAPI WARD-2, VAPI 3. CIT CONCERNED 4. CIT(A), VALSAD 5. DR, ITAT, AHMEDABAD BENCH-, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD