M/s Citicorp Maruti Finance Ltd., New Delhi V. ACIT, New Delhi

ITA 5506/DEL/2010

• Counselvise Citation: 550620114 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-09-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 07-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C S AGARWAL; R P MALL
• Keywords: Depreciation; Search and seizure; Corroborative evidences; Valuation report
• Section: 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SHRI KULBHARAT, JUDICIAL MEMBER I.T.A .NO.- 5515/DEL/2010 (ASSESSMENT YEAR-2005-06) DCIT VS. M/S CITICORP MARUTI FINANCE LT D. CIRCLE 3(1), 4 TH FLOOR, JEEVAN BHARTI BUILDING, NEW DELHI. 3, SANSAD MARG, NEW DELHI PAN-AAACC5029L (APPELLANT) (RESPONDE NT) I.T.A .NO.5506/DEL/2010 (ASSESSMENT YEAR-2005-06) M/S CITICORP MARUTI FINANCE LTD. VS. ACIT 4 TH FLOOR, JEEVAN BHARTI BUILDING, CIRCLE 3(1), 3 RD FLOOR, 3, SANSAD MARG, C.R.BUILDING, I.P.ESTATE , NEW DELHI. NEW DELHI PAN-AAACC5029L (APPELLANT) (RESPONDE NT) APPELLANT BY: SH. C.S.AGARWAL, SR. ADV. & SH. R.P.MALL, ADV. RESPONDENT BY: SH. AROOP KR SINHA, SR. DR APPEAL HEARD ON-03.09.2012 ORDER PRONOUNCED ON-14.09.2012 ORDER PER KULBHARAT, JM THESE TWO APPEALS, ONE BY THE REVENUE AND THE OTHER BY THE ASSESSEE IS FILED AGAINST THE ORDER OF LD. CIT(A), NEW DELHI-IV FOR AY 2005-06. I.T.A .NO.5506 & 5515/DEL/2010 2 1. FIRST, WE TAKE UP THE REVENUES APPEAL ITA NO. 5 515/DEL/2010. THE REVENUE HAS RAISED FOLLOWING GROUND OF APPEAL FROM THE ORDER OF LD. CIT(A):- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 1,89,47,950/- ON ACCOUNT OF LOSS ON SALE OF REPOSSESSED ASSETS IGNOR ING THAT SUCH A LOSS CANNOT BE TREATED AS REVENUE LOSS. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS. 72,418/- ON ACCOUNT OF DISALLOWANCE OF EXTRA DEPREC IATION ON COMPUTER PERIPHERALS/ACCESSORIES IGNORING THAT A S PER THE IT RULES 60% DEPRECIATION IS ALLOWABLE ONLY ON COMPUTER AND COMPUTER SOFTWARE AND NOT ON COMPUTER PERIPHERALS AND ACCESSORIES. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. BRIEFLY, STATED FACTS ARE THAT THE ASSESSEE FILE D RETURN OF INCOME ON 31.10.2005 DECLARING AN INCOME OF RS, 2,96,58,900/- . THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER RE FER TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 05.11.2008, WHILE FRAMING T HE ASSESSMENT ORDER, THE ASSESSING OFFICER MADE VARIOUS DISALLOWANCE ON ACCO UNT OF LOSS ON SALE OF REPOSSESSED ASSETS, FOREIGN EXCHANGE LOSS, SALES PR OMOTION EXPENSES AND DEPRECIATION ON COMPUTER PERIPHERALS. AGAINST THIS DISALLOWANCE, THE ASSESSEE FILED AN APPEAL BEFORE LD. CIT(A), WHO AFTER CONSID ERING THE SUBMISSIONS OF THE ASSESSEE PARTLY ALLOWED THE APPEAL, THEREBY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF REPOSSESSED ASSETS, DEPRECIATION ON COMP UTER PERIPHERALS AND DISALLOWANCE ON FOREIGN EXCHANGE LOSS. HOWEVER, TH E DISALLOWANCE MADE ON ACCOUNT OF SALE PROMOTION EXPENSES WAS CONFIRMED BY THE LD. CIT(A). I.T.A .NO.5506 & 5515/DEL/2010 3 GROUND NO. 1 IS AGAINST THE DELETION OF ADDITION O F RS. 1,89,47,950/- ON ACCOUNT OF SALE OF REPOSSESSED ASSETS. 3. LD. DR STRONGLY SUPPORTED THE ORDER OF ASSESSING OFFICER WHILE LD. SENIOR COUNSEL, SH. C.S.AGGARWAL POINTED OUT THAT T HIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF H ONBLE ITAT, IN ASSESSEES OWN CASE, LD. SENIOR COUNSEL SUBMITTED THAT THE HON BLE DELHI HIGH COURT HAS AFFIRMED THE DECISION OF THE LD. CIT(A) AS WELL AS THE HONBLE ITAT. 4. WE HAVE HEARD THE RIVAL CONTENTION PERUSED MATER IAL AVAILABLE ON RECORD AND THE JUDGEMENT CITED. WE FIND THAT THE ISSUE IN CONTROVERSY HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IN THIS CASE, T HE ASSESSING OFFICER HAS DISALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LOSS ON SALE OF REPOSSESSED ASSETS. THE ASSESSING OFFICER HAD DISALLOWED THE C LAIM APPLYING THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CA SE OF MOTOR & GENERAL SALES PVT. LTD. VS COMMISSIONER OF INCOME TAX 226 I TR 137. THE HONBLE HIGH COURT OF DELHI IN ITA NO. 1712/2010 AND ITA NO . 1714/2010 IN ASSESSEES OWN CASE, HAS HELD THAT THE LD. CIT(A) A S WELL AS THE HONBLE ITAT RIGHTLY HELD THAT THE JUDGEMENT OF HONBLE ALLAHABA D HIGH COURT IN MOTOR AND GENERAL SALES PVT. LTD. (SUPRA) WAS NOT APPLICABLE TO THE FACTS OF THE CASE. SINCE THE FACTS ARE IDENTICAL, THERE IS NO CHANGE I NTO THE FACTS AND CIRCUMSTANCES. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CI T(A), HENCE, THIS GROUND OF THE REVENUES APPEAL IS DISMISSED. I.T.A .NO.5506 & 5515/DEL/2010 4 5. NEXT GROUND OF THE REVENUES APPEAL IS AGAINST T HE DELETION OF ADDITION OF RS. 72,418/- MADE ON ACCOUNT OF EXTRA DEPRECIATION OF COMPUTER PERIPHERALS/ACCESSORIES. LD. DEPARTMENTAL REPRESEN TATIVE SUBMITTED THAT THE ORDER OF ASSESSING OFFICER IS PERFECTLY JUSTIFIED A ND HE SUBMITTED THAT THE COMPUTER PERIPHERALS/ACCESSORIES INCLUDED UPS AND O THER ITEMS ON WHICH EXTRA DEPRECIATION IS NOT ALLOWABLE. ON THE CONTRARY, LD . SENIOR COUNSEL FOR THE ASSESSEE SH. C.S.AGARWAL SUBMITTED THAT THE ISSUE I S COVERED BY THE DECISION OF THE HONBLE ITAT AND THE DECISION OF HONBLE DELHI HIGH COURT IN FAVOUR OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED MATE RIAL AVAILABLE ON RECORD AND THE JUDGEMENT CITED. 7. WE FIND THAT THE HONBLE DELHI HIGH COURT IN ITA NO. 1712/2010 AND 1714/2010 HAS DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THIS ISSUE IS NOW SETTLED BY JUDGEMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS BSES YAMUNA PVT. LTD. IN ITA NO. 1267/2010 DECIDED ON 31-08-2010 HOLDING THAT ON COM PUTER PERIPHERALS, DEPRECIATION AT THE RATE OF 60% IS ALLOWABLE. 8. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF LD. CIT(A). RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE HIGH COURT RENDERED IN ITA NO. 1712/2010 & ITA NO. 1714/2010 I N ASSESSEES OWN CASE, THIS GROUND OF THE REVENUES APPEAL IS REJECTED. I.T.A .NO.5506 & 5515/DEL/2010 5 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . NOW, WE TAKE UP ITA NO. 5506/DEL/2010 (ASSESSEES APPEAL). 10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE OR DER PASSED BY THE LD. CIT(A)-IV IS ERRONEOUS, BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), HAS NOT JUDICIALLY CONSIDERED THE REPLY AND SUBMISS IONS MADE BY THE APPELLANT IN THE RIGHT ERNEST, WHICH IS HIGH LY BIASED AND PRO REVENUE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), WITHOUT UNDERSTANDING THE WORKING OF THE BUSINESS M ODEL AND THE DETAILS FURNISHED PROPERLY, WENT ON DECIDING UN ILATERLY THAT SALES AGENTS HAVE NOT DONE ANY WORK AND HENCE THE REMUNERATION IS NOT JUSTIFIED. WHERE AS THE BUSINE SS PROMOTION EXPENSES NOT ONLY CONTAIN PAYMENTS TO RET AINERS BUT ALSO OTHER ACTUAL REIMBURSEMENTS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A, WENT WRONG IN CONFIRMING THE ADHOC DISALLOWANCE OF RS. 12,97,018, SIMPLY BECAUSE THE ASSESSING OFFICER HAS DISALLOWED ONLY 10% OF THE EXPENDITURE, WITHOUT APP RECIATING THAT THE COMPLETE DETAILS OF BUSINESS PROMOTION EXP ENSES ALONG WITH THE SUPPORTS WERE FURNISHED. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), WITHOUT GOING THROUGH THE DETAILS, ERRED IN DECIDIN G THAT THE ASSESSEE HAS MADE ONLY BALD ASSERTION WHICH REMAINS UNSUBSTANTIATED. 6. THE LD. CIT(A) FAILED TO APPRECIATED THAT SINCE THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE AND PROMOTION OF THE BUSINESS AND ARE AS PER THE AU DITED ANNUAL ACCOUNTS OF THE COMPANY, IT IS AN ADMISSIBLE DEDUCTION UNDER THE LAW. 7. THERE WAS NO DISPUTE ABOUT THE NATURE AND QUANTUM O F THE EXPENDITURE EITHER BY THE LD. ASSESSING OFFICER OR BY THE CIT(A), THE LD. CIT(A) OUGHT TO HAVE DELETED THE AD HOC ADDITION MADE BY THE ASSESSING OFFICER. 8. THE APPELLANT CRAVES THE LEAVE TO ADD, AMENDS, WITH DRAW, VARY, AND DELETE ALL OR ANY OF THE GROUNDS AS ABOVE ON OR BEFORE THE DATE OF HEARING. I.T.A .NO.5506 & 5515/DEL/2010 6 11. THE ONLY EFFECTIVE GROUND IN THIS APPEAL IS AGA INST THE CONFIRMATION OF ADHOC DISALLOWANCE OF RS. 2,97.018/-. LD. SENIOR C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WAS FORMED MAIN LY FOR FINANCING VEHICLES MANUFACTURED BY MARUTI PVT. LTD. HE SUBMITTED THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD SUBMITTED REPLIES ON VARIOUS ISSUES IN ADDITION TO ORAL SUBMISSION IN RESPONSE TO INQUIRY MADE AT THAT TIME. HE SUBMITTED THAT AT THE TIME OF THE ASSESSMENT, THE A SSESSEE HAD PRODUCED ITS BOOKS OF ACCOUNTS, VOUCHERS AND SUCH DETAILS AS WER E REQUIRED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER H AD MADE ADHOC DISALLOWANCE @ 10 % WHICH IS NOT PERMISSIBLE UNDER THE LAW. HE SUBMITTED THAT THE PAYMENTS WERE MADE TO VARIOUS DEALERS BY WAY OF REI MBURSEMENT OF SALARIES AND OTHER EXPENSES AND ALSO TO VALUER FOR OBTAINING THEIR VALUATION REPORT AND THE SUCH EXPENDITURE WAS INCURRED DURING THE COURSE OF BUSINESS AND FOR THE BUSINESS PURPOSES. HE SUBMITTED THAT THE ASSESSING OFFICER HAD ASKED FOR THE DETAILS ON 22.10.2008, WHEREAS THE ASSESSMENT ORDER WAS PASSED ON 31.10.2010. HE SUBMITTED THAT IN THE APPEAL PROCEEDINGS, LD. CI T(A) HAS NOTED THAT SUFFICIENT TIME WAS NOT GIVEN. HE SUBMITTED THAT, INTERESTINGLY, ON THE ONE HAND AUTHORITIES BELOW ARE RECORDING A FINDING THAT NO D ETAILS WERE FURNISHED AND ON THE OTHER THEY ARE MAKING DISALLOWANCE TO THE EXTEN T OF 10% ONLY. HE SUBMITTED THAT IN THIS CASE, BOOKS OF ACCOUNTS WERE NOT REJECTED AND BILLS & VOUCHERS PRODUCED BY THE ASSESSEE WERE VERIFIED BY AO. HE SUBMITTED THAT THE I.T.A .NO.5506 & 5515/DEL/2010 7 NO BASIS HAS BEEN GIVEN AS TO HOW 10% OF THE EXPEND ITURE IS DISALLOWABLE. HE SUBMITTED THAT IT IS BEYOND COMPREHENSION AS HOW AN D ON WHAT BASIS ASSESSING OFFICER/CIT(A) COULD HOLD THAT 90% OF THE EXPENSES ARE ALLOWABLE AND REMAINING 10% CAN NOT BE ALLOWED. HE SUBMITTED THA T SUCH EXPENDITURE WAS ALLOWED IN EARLIER YEARS. THERE IS NOTHING ON RECO RD AS TO HOW THE CONTRARY VIEW IS NOW BEING ADOPTED. 12. IN SUPPORT OF THE CONTENTION THAT WHEN THERE IS NO ADVERSE PAST HISTORY OR ANY OTHER MATERIALS SUCH DISALLOWANCE CANNOT BE MAD E; RELIANCE IS PLACED ON THE DECISION OF HON'BLE SUPREME COURT 76 ITR 690, WHERE IN THE HON'BLE SUPREME COURT HAS HELD THAT THE POWER TO LEVY ASSESSMENT ON THE BASIS OF BEST JUDGEMENT IS NOT AN ARBITRARY POWER. IT IS AN ASSESSMENT ON THE BASIS OF BEST JUDGEMENT, IN OTHER WORDS, THAT THE ASSESSMENT MUST BE BASED ON S OME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EXERCISED UNDER THE SWEET W ILL AND PLEASURE OF THE CONCERNED AUTHORITY. 13. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED MAT ERIAL AVAILABLE ON RECORD AND THE JUDGEMENT CITED. 14. WE FIND THAT THE ASSESSING OFFICER HAS DISALLO WED THE EXPENSES ON THE BASIS THAT THE ASSESSEE COULD NOT SUBMIT THE DETAIL S IN RESPECT OF PURPOSE OF PAYMENT WITH EVIDENCE. HOWEVER, THE ASSESSING OFFI CER HAS NOT GIVEN THE REASON AS TO HOW ONLY 10% EXPENSES ARE TO BE DISALL OWED. WHILE CONFIRMING THE ADDITION, LD. CIT(A) HAS OBSERVED THAT THE ISSU E WHICH NEEDS CONSIDERATION IS THAT WHETHER ANY SERVICE WAS RENDERED BY THE SAL ES AGENTS WHO HAD BEEN GIVEN A CERTAIN AMOUNT OF REMUNERATION. EVEN AFTER ADMISSION OF ADDITIONAL I.T.A .NO.5506 & 5515/DEL/2010 8 EVIDENCE, HE IS AFRAID THAT NO EVIDENCE HAS BEEN GI VEN WHICH WILL SATISFY HIM THAT THE SALE AGENT HAD INDEED RENDERED ANY SERVICE TO JUSTIFY ANY REMUNERATION. THUS, IT CANNOT BE STATED THAT THE MONEY HAS BEEN U TILISED FOR PURPOSE OF BUSINESS. THE ASSESSEE HAS ONLY MADE BALD ASSERTIO N THAT THE AGENTS HAVE RENDERED IN SERVICE WHICH REMAIN UNSUBSTANTIATED. IN ANY CASE, THE ASSESSING OFFICER HAS ONLY DISALLOWED 10% OF THE EXPENDITURE ON THE SALES PROMOTION EXPENSES. IN HIS OPINION, THIS DISALLOWANCE WAS RE ASONABLE. 15. THE CONTENTION OF THE LD. SENIOR COUNSEL FOR TH E ASSESSEE IS THAT BOTH THE AUTHORITIES HAD GIVEN A FINDING THAT NO DETAIL IN R ESPECT OF THE PAYMENT AND THE RENDERING OF SERVICE WAS FURNISHED. BUT BOTH OF TH EM HAVE NOT DISALLOWED THE ENTIRE EXPENDITURE AND RESTRICTED THE SAME AT 10%. HE SUBMITTED THAT SUCH ACT OF THE AUTHORITIES BELOW IS NOT APPROVED BY ANY LAW . 16. SINCE BOTH THE AUTHORITIES BELOW HAVE GIVEN A F INDING OF FACT THAT THE EVIDENCE IN SUPPORT OF CLAIM WAS NOT FURNISHED BY T HE ASSESSEE. WE FIND THAT NEITHER FROM THE RECORDS NOR FROM THE FINDING OF TH E AUTHORITIES BELOW IT IS COMING OUT WHAT KIND OF SERVICE WAS RENDERED BY THE AGENTS AND DEALERS. WE, ARE IN AGREEMENT WITH THE CONTENTION OF LD. SR. COU NSEL THAT THE ASSESSEE CANNOT BE PUT TO AN INFERIOR POSITION THAN THE ORIGINAL AS SESSMENT STAGE. BUT IT IS SETTLED POSITION OF LAW THAT IT IS INCUMBENT UPON THE ASSES SEE TO DEMONSTRATE WITH SUPPORTING EVIDENCE THAT THE EXPENDITURE AS CLAIMED WAS INCURRED FOR BUSINESS PURPOSE. IN THE PRESENT CASE, NEITHER THE ASSESSIN G OFFICER NOR LD. CIT(A), HAS GIVEN A FINDING AS TO HOW THE DETAILS FILED BY THE ASSESSEE ARE NOT COMPLETE TO ARRIVE AT A CONCLUSION THAT THE EXPENDITURE AS CLAI MED IS NOT ALLOWABLE. MOREOVER, THE ASSESSING OFFICER HAS NOT REJECTED TH E BOOKS OF ACCOUNTS AND INVOKED PROVISIONS OF SECTION 144 OF THE ACT FOR MA KING BEST JUDGEMENT ASSESSMENT. FURTHER, THE CONTENTION OF LD. DR THAT THE ASSESSING OFFICER HAS RESTRICTED THE DISALLOWANCE TO 10% AFTER HAVING CON SIDERED THE NATURE OF BUSINESS BEING CARRIED OUT BY THE ASSESSEE AND ON T HE BASIS OF BEST JUDGEMENT I.T.A .NO.5506 & 5515/DEL/2010 9 CAN NOT BE ACCEPTED IN VIEW OF THE FACT THAT FOR MA KING BEST JUDGEMENT THE ASSESSING OFFICER HAS TO FOLLOW THE PROCEDURE AS PR ESCRIBED UNDER ACT. SINCE NOTHING IS COMING OUT OF THE FINDINGS OF THE AUTHOR ITIES, WHY THE ENTIRE CLAIM OF EXPENDITURE IS NOT ALLOWABLE. THEREFORE, IN THE INTEREST OF JUSTICE, THIS ISSUE IS REMITTED BACK TO THE FILE OF ASSESSING OFFICER TO V ERIFY THE CLAIM OF ASSESSEE IN RESPECT OF SERVICE RENDERED BY THE AGENTS AND THE P AYMENTS MADE THEREOF BY THE ASSESSEE. IN CASE, THE ASSESSEE IS ABLE TO DEMONST RATE THAT THE EXPENDITURE WAS INCURRED TOWARDS SERVICE RENDERED BY THE AGENTS/DEA LERS FOR THE BUSINESS OF THE ASSESSEE. THE ASSESSING OFFICER WOULD ALLOW THE EN TIRE CLAIM OF THE ASSESSEE. HOWEVER, IN CASE, THE ASSESSEE IS UNABLE TO SUBSTAN TIATE HIS CLAIM THAN IN THAT EVENTUALITY THE DISALLOWANCE @ 10% AS MADE BY THE A SSESSING OFFICER, WOULD REMAIN CONFIRMED. 17. THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 18. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D AND APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14.09.2012. SD/- SD/- (S.V.MEHROTRA) (KULBHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14/09/2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI I.T.A .NO.5506 & 5515/DEL/2010 10