The Dt.CIT., Circle-4, Ahmedabad V. Khurana Engineering Ltd., Ahmedabad

ITA 571/AHD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2062 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-04-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 19-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.571/AHD/2010 [ASSTT.YEAR : 2005-2006] DCIT, CIR.4 AHMEDABAD. /VS. KHURANA ENGINEERING LTD. JAY/B-2 & 4 ANKUR COMMERCIAL CENTRE, NARANGPURA AHMEDABAD. PAN : AABCM 4514 F ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) + 1 2 )/ REVENUE BY : SHRI T. SANKAR, SR.DR 4& 1 2 )/ ASSESSEE BY : NONE 5 1 &(*/ DATE OF HEARING : 16 TH APRIL, 2013 678 1 &(*/ DATE OF PRONOUNCEMENT : 10-5-2013 )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-2006, IS DIREC TED AGAINST THE ORDER OF THE CIT(A). 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE ASSESSEE- RESPONDENT, NOR ANY APPLICATION FOR ADJOURNMENT WAS FILED BY THE ASSESSEE. IN THESE FACTS, WE ADJUDICATE THIS APPEA L FILED BY THE ITA NO.571/AHD/2010 -2- REVENUE EX PARTE QUA THE ASSESSEE-RESPONDENT ON MERITS AFTER HEARING THE LEARNED DR. 3. THE GROUND NO.1 OF THE REVENUES APPEAL IS AS UN DER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION OF RS.50,000/- AS AGAINST THE ADDITION MADE AT RS.4,26,053/- OUT OF STAFF WELFARE EXPENSES AND TRAVELING EXPENSES. 4. THE LEARNED DR RELINED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE EXPENSES UNDER THE HEAD STAFF WELFARE EXPE NSES AND TRAVELLING EXPENSES WERE NOT FULLY SUPPORTED BY THE VOUCHERS, AND THEREFORE DISALLOWANCE MADE WAS JUSTIFIED. 5. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FIND THAT THE SUBMISSIONS OF THE ASSESSEE HAS BEEN REPRODUCED BY THE CIT(A) IN T HE APPELLATE ORDER, STATING THAT THE TURNOVER OF THE ASSESSEE HAS CONSI DERABLY INCREASED IN COMPARISON WITH EARLIER YEAR, AND EXPENSES OF THE D IRECTORS WERE NOT DEBITED TO THE COMPANYS REVENUE ACCOUNT. WE FIND THAT THE CIT(A) HAS RESTRICTED THE DISALLOWANCE OUT OF STAFF WELFAR E AND TRAVELLING EXPENSES TO RS.50,000/- BY OBSERVING THAT THE AO HA S NOT POINTED OUT ANY ITEMS OF DISALLOWANCE OUT OF THESE HEADS OF THE EXPENSES. MOREOVER, SIMILAR ADDITIONS MADE IN THE EARLIER YEA RS HAVE EITHER BEEN DELETED OR SUBSTANTIALLY REDUCED IN THE APPELLATE P ROCEEDINGS OF THE EARLIER ASSESSMENT YEARS. THE ASSESSEES ACCOUNTS ARE AUDITED BY THE AUDITORS, WHO HAVE NOT PASSED ANY ADVERSE REMARKS I N THE TAX AUDIT REPORT. THESE FINDINGS OF THE CIT(A) COULD NOT BE CONTROVERTED BY THE REVENUE. IN THESE FACTS, WE HOLD THAT THERE IS NO MISTAKE IN THE ITA NO.571/AHD/2010 -3- ORDER OF THE CIT(A) ON THIS ISSUE, WHICH IS CONFIRM ED AND THE GROUND NO.1 OF THE REVENUE IS DISMISSED. 6. THE GROUND NO.2 OF THE REVENUES APPEAL READS AS UNDER: 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.2,11,895/- OUT OF TRUCK MAIN TENANCE CHARGES. 7. THE LEARNED DR HAS RELIED ON THE ORDER OF THE AO . HE SUBMITTED THAT THE AO DISALLOWED ONLY 5% OF THE TRU CK MAINTENANCE EXPENSES, WHICH COULD NOT BE SAID TO BE EXCESSIVE. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE DISALLOWANCE AT THE RATE OF 5% WAS MADE BY THE AO O N THE PLEA THAT THE PAYMENTS WERE MADE THROUGH SELF-MADE VOUCHERS W HICH COULD NOT BE RELIED TOTALLY AND IT IS NOT POSSIBLE FOR THE DE PARTMENT TO VERIFY THE GENUINENESS OF THE EXPENSES LOOKING TO THE VOLUMINO US TRANSACTIONS AND VOLUMINOUS NUMBER OF VOUCHERS. THE AO HAS FURT HER OBSERVED THAT THERE HAS BEEN NO CREDIT IN THIS ACCOUNT FOR S ALE OF DISCARDED TYRES. WE FIND THAT THE CIT(A) HAS RECORDED HIS FINDING TH AT THE AO HAS NOT POINTED OUT SPECIFIC ITEM OF EXPENSES FOR DISALLOWA NCE OUT OF TRUCK MAINTENANCE EXPENSES. THE CIT(A) HAS FURTHER RECOR DED THAT THE ASSESSEE IN ITS SUBMISSIONS HAS POINTED OUT THAT SA LE OF TYRES, EMPTY BAGS ETC. WERE ACCOUNTED FOR IN ITS BOOKS. THE ASS ESSEES BOOKS OF ACCOUNTS ARE SUBJECT TO AUDIT AND THE AUDITORS HAVE NOT MADE ANY SUCH ADVERSE REMARKS. THERE IS NO MATERIAL BEFORE US TO CONTROVERT THESE FINDINGS RECORDED BY THE CIT(A). IN THESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO MISTAKE IN THE ORDER OF THE CIT(A) IN DELETING THE ITA NO.571/AHD/2010 -4- DISALLOWANCE MADE OUT OF TRUCK MAINTENANCE EXPENSES , AND ACCORDINGLY ORDER OF THE CIT(A) IS CONFIRMED AND TH E GROUND NO.2 OF THE REVENUE IS DISMISSED. 9. THE GROUND NO.3 OF THE REVENUE IS AS UNDER: 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO ALLOW THE PRIOR EXPENSES AMOUNTING TO RS. 3,64,045/- 10. THE LEARNED DR HAS RELIED ON THE ORDER OF THE A O. HE SUBMITTED THAT THE AMOUNT PERTAINING TO PRIOR PERIOD EXPENSES COULD NOT BE CLAIMED DURING THE RELEVANT YEAR, AND WAS RIGHTLY D ISALLOWED BY THE AO. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED DR AND PERUSED THE ORDERS OF THE AO AND THE CIT(A). WE FI ND THAT THE CIT(A) HAS RECORDED THAT THE ASSESSEE HAS INCURRED TOTAL EXPENSES OF RS.40 CRORES AT VARIOUS SITES AND THE ASSESSEE IS F OLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE IS CONDUCTING B USINESS AS A GOING CONCERN. THE CIT(A) HAS RECORDED THAT THE AO HAS TAXED PRIOR PERIOD INCOME OF RS.64,217/-, THEN HE IS EXPE CTED TO ALLOW DEDUCTION OF EXPENSES IN CASE THESE EXPENSES HAVE C RYSTALIZED FOR PAYMENT IN THE PREVIOUS YEAR UNDER CONSIDERATION. THE CIT(A) HAS RECORDED THAT THE ASSESSEE IS RUNNING BUSINESS AS A GOING CONCERN, AND THEREFORE BILLS OF CERTAIN SITES ARE RECEIVED L ATE AND ARE CRYSTALIZED DURING THE PREVIOUS YEAR UNDER CONSIDERATION. WE F IND THAT WHEN THE DEPARTMENT IS TAXING PRIOR PERIOD INCOME, DEDUCTION OF EXPENSES, WHICH HAVE CRYSTALIZED DURING THE RELEVANT PREVIOUS YEAR, SHOULD ALSO BE ALLOWED TO THE ASSESSEE. IN A GOING CONCERN, CE RTAIN BILLS ARE RECEIVED LATE AND PERTAINED TO THE BUSINESS TRANSAC TION, AND ARE ITA NO.571/AHD/2010 -5- CRYSTALIZED DURING THE RELEVANT ACCOUNTING PERIOD. THESE TYPES OF EXPENSES ARE REVENUE IN NATURE AND ARE ALLOWABLE IN THE PREVIOUS YEAR IN WHICH THEY ARE CRYSTALIZED. ACCORDINGLY, THE CI T(A) WAS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE, AND THE GROU ND NO.3 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&' %&' %&' %&'( (( ( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD