M/s Northern Tannery, Kanpur V. DY. Commissioner of Income Tax, Kanpur

ITA 548/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1216 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 548/LKW/2016 ASSESSMENT YEAR: 2012 - 13 M/S NORTHERN TANNERY 150 FT. ROAD, JAJMAU KAN PUR V. DCIT - 1 KANPUR T AN /PAN : AAAFN6778L (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY: SHRI AJAY KUMAR, D.R. DATE OF HEARING: 08 01 201 8 DATE OF PRONOUNCEMENT: 10 01 201 8 O R D E R PER P ARTHA SARATHI CHAUDH URY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - I, KANPUR DATED 24/6/2016. 2 . GROUND NO.1 OF THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE RELATES TO THE AD - HOC DISALLOWANCE OUT OF VEHICLE RUNNING & MAINTENANCE AND DEP RECIATION ON MOTOR CAR OF RS.2,59,558/ - . 3 . THE FACTS WITH REGARD TO THIS GROUND AS APPEARING IN THE ORDER OF THE ASSESSING OFFICER ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF LEATHER AND LEATHER GOODS. MOST OF THE ASSESS EES BUSINESS IS FROM OVERSEAS CUSTOMERS AND DURING THE YEAR UNDER CONSIDERATION, ASSESSEE HAS CLAIMED EXPENSES OF RS.15,85,812/ - ON FOREIGN TRAVELLING AND HUGE AMOUNT OF COMMISSION HAS BEEN PAID TO AGENTS FOR SALE. THE ASSESSEE HAS INCURRED RS.1,63,916/ - ON STAFF ITA NO.548/LKW/2016 PAGE 2 OF 6 VEHICLE EXPENSES; RS.2,82,331/ - ON TRAVELLING EXPENSES; RS.1,67,732/ - ON TEMP O/ RICKSHAW CHARGES AND RS. 4,87,218/ - ON TELEPHONE EXPENSES. IT IS ALSO SEEN THAT THE ASSESSEE HAS CLAIMED EXPENSES ON RUNNING AND MAINTENANCE SEPARATELY AND INCURRED AN AGGREGATE AMOUNT OF RS.3,61,439/ - ON MAINTENANCE AND REPAIR OF THESE VEHICLES. THE ASSESSING OFFICER WAS OF THE OPINION THAT IN THE ERA OF ADVANCEMENT OF COMMUNICATION, MOST OF THE BUSINESS DEALS ARE DONE THROUGH TELEPHONES/MOBILES/EMAILS AND BUSINESSMEN VERY OFTEN GO DIRECTLY TO MEET THEIR CUSTOMERS/SELLERS. FOR REGULAR COURSE OF BUSINESS, THE EMPLOYEES DO MOVEMENT FOR VARIOUS WORKS AND THE ASSESSEE USED TO PAY CONVEYANCE, TRAVELLING EXPENSES FOR THAT PURPOSES. AS PER ASSESSING OFFICERS ORDER, ASSESSE E HAS NOT FURNISHED ANY DETAIL OF OTHER PERSONAL VEHICLES USED BY THE PARTNERS. BECAUSE OF THESE REASONS, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PARTNERS OF THE ASSESSEE FIRM HAD CERTAINLY USED VEHICLES FOR PERSONAL PURPOSES AND ACCORDINGLY 15% OF THE TOTAL EXPENDITURE ON VEHICLE MAINTENANCE AS WELL AS PROPORTIONATE DEPRECIATION CLAIMED ON MOTOR CAR WAS DISALLOWED AND RS.2,59,558/ - WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . A GGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, ASSESSEE PREFERRED APP EAL BEFORE THE LD. CIT(A). FROM THE ORDER OF THE LD. CIT(A), IT APPEARS THAT THIS GROUND WAS NOT PRESSED AND IT WAS DISMISSED BY THE LD. CIT(A) AS NOT PRESSED BY THE ASSESSEE. 5 . HOWEVER, AT THE TIME OF HEARING BEFORE US, THE LD. A.R. OF THE ASSESSEE CONTE NDED THAT NO SUBMISSION FOR NOT PRESSING THE GROUND WAS MADE BEFORE THE LD. CIT(A) AND TH E ASSESSEE IS AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER AND, THEREFORE, IT WAS WRONGLY OBSERVED BY THE LD. CIT(A) THAT THIS GROUND WAS NOT PRESSED. ITA NO.548/LKW/2016 PAGE 3 OF 6 6 . THE LD. D.R. , ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7 . WE HAVE HEARD THE RIVAL CONTENTIONS , PERUSED THE CASE RECORD AND WE FIND THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE ON THE BASIS THAT ACCORDING TO HIM MOST OF THE BUSINESS TRANSACT IONS ARE DONE THROUGH WIRELESS COMMUNICATIONS/EMAILS, ETC. HOWEVER, IT IS UPTO THE ASSESSEE , WHICH IS CONDUCTING THE BUSINESS , TO DECIDE THE MODUS OPERANDI OF THE BUSINESS AND IT I S ALWAYS THE PREROGATIVE OF THE BUSINESSMAN TO CONDUCT THE AFFAIRS OF THE B USINESS. IF THE ASSESSEE HAS CLAIMED THAT PHYSICAL MEETING WITH THE CLIENTS WAS ESSENTIAL, IT WAS THE DUTY OF THE ASSESSING OFFICER TO VERIFY SUCH CLAIM USING THE PARAPHERNALIA AVAILABLE WITH THE DEPARTMENT. THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY SPECIFIC REASON FOR SUCH DISALLOWANCE. THE LAW PROVIDES THAT IF THE CLAIM IS NOT VALID, THEN ASSESSING OFFICER CAN DISALLOW THE EXPENSE, BUT DISALLOWANCE ON AD - HOC BASIS AND SUMMARILY A RE NOT VALID IN LAW. THE ASSESSING OFFICER WAS UNABLE TO ESTABLISH IN A FOOLPROOF MANNER THAT THESE EXPENSES WERE NOT INCURRED SOLELY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THE LD. CIT(A) HAS NOT DELIBERATED UPON THIS ISSUE AND HAS STATED THAT THIS GROUND WAS NOT PRESSED. THE FACTS ON RECORD SHOWS THAT THESE WERE A D HOC DISALLOWANCES AND EVEN THE LD. A.R. OF THE ASSESSEE STATED BEFORE THE LD. CIT(A) THAT THEY HAVE NOT ACCEPTED THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED VIEW THAT TH E AD - HOC DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VEHICLE RUNNING/MAINTENANCE AND DEPRECIATION ON MOTOR CAR EXPENSES, CANNOT BE SUSTAINED AND ACCORDINGLY WE DIRECT DELETION OF RS.2,59,558/ - . ACCORDINGLY, GROUND NO.1 OF THE APPEAL IS ALLOWED. 8 . NEXT GROUND RELATES TO T HE AD - HOC DISALLOWANCE OUT OF MISCELLANEOUS EXPENSES OF RS.1,70,067/ - . ITA NO.548/LKW/2016 PAGE 4 OF 6 9 . IT IS SEEN FROM THE PROFIT & LOSS ACCOUNT THAT AN AMOUNT OF RS.17,06,783/ - HAS BEEN CLAIMED BY THE ASSESSEE AS MISCELLANEOUS EXPENSES. FURTHER , DURING THE COURSE OF VERIFICATION OF BOO KS OF ACCOUNT, ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF AFORESAID CLAIM OF EXPENSES AND TO JUSTIFY THESE WITH BILLS AND VOUCHERS. THE ASSESSEE COULD NOT PRODUCE ALL BILLS AND VOUCHERS. DURING THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER, ASSESSE E SUBMITTED THAT THESE EXPENSES HAVE BEEN INCURRED FOR BUSINESS PURPOSES BUT SUPPORTING DOCUMENTARY EVIDENCE S HAVE NOT BEEN MAINTAINED FULLY . AS THESE EXPENSES WERE PETTY EXPENSES, MAINTENANCE OF ALL BILLS AND VOUCHERS W ERE, THEREFORE , NOT POSSIBLE. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND ACCORDINGLY RS.1,70,067/ - , WHICH IS EQUAL TO 1/10 OF THE TOTAL AMOUNT CLAIMED AS MISCELLANEOUS EXPENSES , WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 10 . THE LD. CIT(A) DI SMISSED THIS GROUND ALSO BY OBSERVING THAT ASSESSEE DID NOT PRESS THIS GROUND . 11 . THE LD. A.R. OF THE ASSESSEE AT THE TIME OF HEARING CATEGORICALLY STATED BEFORE US THAT THEY HAVE PRESSED THIS GROUND BEFORE THE LD. CIT(A) AND THEY ARE OPPOSING THE ASSESSMEN T FRAMED BY THE ASSESSING OFFICER ON THIS ISSUE AS WELL. 12 . THE LD. D.R., ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 13 . WE HAVE PERUSED THE CASE RECORD, ANALYSED THE FACTS AND CIRCUMSTANCES OF THE CASE, HEARD THE RIVAL SUBMISSIONS AND WE FIND THAT REASON FOR DISALLOWANCE OF THESE EXPENSES ARE THAT CERTAIN SUPPORTING DOCUMENTS WERE NOT FILED BY THE ASSESSEE. THE ASSESSEE HAS CATEGORICALLY STATED THAT THESE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES BUT SINCE IN SOME CASES THE EXPENSES A RE SO PETTY , ITA NO.548/LKW/2016 PAGE 5 OF 6 MAINTENANCE OF BILLS AND VOUCHERS BECOMES IMPRACTICABLE . T HE ASSESSING OFFICER HAS NOT ACCEPTED THIS SUBMISSION ON BEHALF OF THE ASSESSEE AND NOTED THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE EXPENSES EVE RY TIME CLAIMED BY IT . WE OBSERVE HERE THAT THE QUASI JUDICIAL AUTHORITY I.E. THE ASSESSING OFFICER WHILE FRAMING ASSESSMENT SHOULD TAKE INTO ACCOUNT THE PRACTICAL ASPECTS INVOLVED IN CONDUCTING THE BUSINESS AND THAT INCLUDES VARIOUS SMALL AND PETTY EXPEN SES , WHICH CANNOT BE VOUCHED OR FOR WHICH BILLS CANNOT BE OBTAINED EVERY TIME. T AKING INTO ACCOUNT THE PRACTICAB ILITY, ASSESSMENT SHOULD HAVE BEEN FRAMED BY THE ASSESSING OFFICER. AT THE SAME TIME, THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY SPECIFIC D OUBT OR REASON SO AS TO SAY THAT THESE EXPENSES CLAIMED BY THE ASSESSEE WERE NOT GENUINE OR THAT THESE EXPENSES WERE NOT RELATING TO THE BUSINESS OF THE ASSESSEE. SINCE SOME OF THE VOUCHERS W ERE NOT PRESENT, DISALLOWANCE OF EXPENSES ON AD HOC BASIS IS NOT JUSTIFIED . WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT THIS AD HOC DISALLOWANCE SHOULD BE DELETED AND WE DIRECT THE SAME. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEE IS ALSO ALLOWED. 14 . GROUNDS NO.3 AND 4 ARE GENERAL IN NATURE, HENCE NEED NO ADJUDICATION. 15 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 / 01 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH JANUARY , 201 8 JJ: 0801 ITA NO.548/LKW/2016 PAGE 6 OF 6 COPY FORWARDED TO: 1 . APPEL LANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR