M/s. Hindustan Refrigeration Stores, New Delhi V. ACIT, New Delhi

ITA 5870/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3793 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 29-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINOD VINDHAL
• Keywords: Depreciation

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5870/DEL/2015 (ASSESSMENT YEAR: 2011 - 12 ) HINDUSTAN REFRIGERATION STORES, 2&4, NETAJI SUBHASH MARG, DARYA GANJ, NEW DELHI PAN:AAAFH4633E VS. ACIT, CIRCLE - 30(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VINOD VINDHAL, CA REVENUE BY: SHRI ARUN KUMAR YADAV, SR. DR DATE OF HEARING 13/11 /2017 DATE OF PRONOUNCEMENT 0 7 / 0 2 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 16, NEW DELHI DATED 27.08.2015 FOR THE ASSESSMENT YEAR 2011 - 12. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING 10% OF THE EXPENSES UNDER THE HEAD TELEPHONE EXPENSES AMOUNTING TO RS. 85918/ - CLAIMED BY THE ASSESSEE AND THE DISALLOWANCE IS EXCESSIVE. 2. THE LD CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING A SUM OF RS. 264694/ - BEING 20% OF EXPENSES OF RS. 1323648/ - CLAIMED UNDER THE HEADS CAR PETROL, CAR MAINTENANCE AND CAR DEPRECATION AND THE DISALLOWANCE IS ARBITRARY AND EXCESSIVE. THUS, THE DISALLOWAN CE SO MADE IGNORING THE FACTS AND LAW SHOULD BE DELETED. 3. ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF TRADING IN VARIOUS REFRIGERATION ITEMS AND INDUSTRIAL GASES AS WELL AS OTHER ELECTRIC APPLIANCES. FOR THE IMPUGNED ASSESSMENT YEAR ASSESSEE FILED ITS RETURN OF INCOME SHOWING INCOME OF RS. 5650560/ ON 26/9/2011. THE CASE OF THE ASSESSEE WAS SELECTED FOR THE SCRUTINY AND THE LD. AO PASSED AN ASSESSMENT ORDER UNDER SECTION 143 (3) OF THE INCOME TAX ACT ON 25/3/2014 AT THE TOTAL INCOME OF RS. 6 499725/ . THE LD. AO DISALLOWED RS. 1 71837/ OUT OF TELEPHONE EXPENSES ON ACCOUNT OF PERSONAL USE OF PAGE | 2 PARTNERS AT THE RATE OF 20% OF TOTAL EXPENDITURE OF RS. 859184/ . THE FURTHER DISALLOWANCE OF RS 661734/ - WAS ALSO MADE AT THE RATE OF 50% OF TOTAL EXPENDIT URE ON MOTOR CAR OF RS. 1323468/ OUT OF CAR PETROL EXPENSES, MAINTENANCE EXPENSES AND DEPRECIATION. THE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD. AO PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO VIED ORDER DATED 27/8/2015 WHO REDUCED THE EXTENT OF DIS ALLOWANCE OF CAR EXPENSES FROM 50% TO 20%. HE FURTHER RESTRICTED THE DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES TO 10% FROM 20%. THEREFORE ASSESSEE AGGRIEVED WITH THE ORDER OF THE LD. CIT (A) HAS PREFERRED AN APPEAL BEFORE US. 4. ASSESSEE CHALLENGED DISALL OWANCE OF 10% ON ACCOUNT OF TELEPHONE EXPENSES VIDE GROUND NO. 1 AND 20% OF MOTOR CAR EXPENSES AMOUNTING TO RS. 264694/ VIDE GROUND NO. 2 OF THE APPEAL. FOR BOTH THE DISALLOWANCES THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LD. AO HAS NOT FOUND A NY EXPENDITURE WHICH IS INCURRED FOR THE PURPOSE OF PERSONAL USE OF THE PARTNERS OF THE ASSESSEE THEREFORE BOTH THE DISALLOWANCES MADE BY THE LD. AO AND CONFIRMED BY THE LD. CIT (A) ARE MERELY AN ESTIMATE WITHOUT ANY BASIS. 5. THE LD. DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY SUPPORTED THE ORDERS OF THE LOWER AUTHORITY HAS EYES AND SUBMITTED THAT LD. CIT (A) HAS RESTRICTED THE DISALLOWANCE TO THE MARGINAL EXTENT AGAINST WHICH THE ASSESSEE SHOULD NOT BE AGGRIEVED. HE THEREFORE SUBMITTED THAT THE ORDER OF THE LD. C IT (A) MAY BE UPHELD. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND NOTED THE REASONS FOR WHICH DISALLOWANCES BEEN MADE AND CONFIRMED PARTLY BY THE LD. CIT (A). WE FIND THAT WITH RESPECT TO THE MOTOR CAR EXPENDITURE ASSESSEE HAS INCURRED AN EXPEND ITURE OF RS. 1323468/ ON 8 MOTOR CARS AND CLAIMED VARIOUS EXPENDITURE SUCH AS PETROL EXPENDITURE, MAINTENANCE EXPENDITURE AND DEPRECIATION. THE LD. AO HAS DISALLOWED 50% OF THOSE EXPENDITURE AND THE LD. CIT (A) HAS RESTRICTED IT TO 20%. WHEREAS IN THE CAS E OF TELEPHONE EXPENDITURE THE LD. ASSESSING OFFICER OUT OF THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE OF RS. 8 59184/ DISALLOWED 20% THEREOF AMOUNTING TO RS. 1 71837/ WHICH WAS REDUCED BY THE LD. CIT PAGE | 3 (A) TO 10%. DURING THE COURSE OF ASSESSMENT PROCE EDINGS THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS AS WELL AS NECESSARY DETAILS REQUIRED BY THE LD. AO WHICH WERE EXAMINED AND VERIFIED BY HIM. THE LD. AO ON EXAMINATION OF SUCH DETAIL COULD NOT POINT OUT ANY INSTANCES OF USE OF PERSONAL EXPENDITURE ON ACCOUNT OF MOTOR CAR OR AS WELL AS TELEPHONE. MERELY BECAUSE THE ASSESSEE HAS 8 MOTOR CARS IT CANNOT BE INFERRED BY THE ASSESSING OFFICER WITHOUT POINTING OUT ANY SUCH INSTANCES THAT ASSESSEE HAS USED THE MOTOR CAR FOR THE PERSONAL USE OF PARTNERS. SIMILA RLY IS THE CASE WITH RESPECT TO THE TELEPHONES. THEREFORE, ACCORDING TO US BOTH THE DISALLOWANCES MADE BY THE LD. ASSESSING OFFICER AND CONFIRMED BY THE LD. FIRST APPELLATE AUTHORITY ARE MERELY ON ESTIMATE WITHOUT ANY INSTANCES SUPPORTING THOSE ESTIMATES. THE LD. DEPARTMENTAL REPRESENTATIVE ALSO DID NOT MENTION ANY HISTORY OF SUCH EXPENDITURE BEEN DISALLOWED IN THE HANDS OF THE ASSESSEE AND SUSTAINED BY THE APPELLATE AUTHORITIES. THEREFORE, IT IS APPARENT THAT SUCH DISALLOWANCES HAVE BEEN MADE BY THE REVENU E FOR THE FIRST TIME IN THE HANDS OF THE ASSESSEE. AS NOTED BY THE LD. AO IN PARA NO. 2 OF HIS ASSESSMENT ORDER ABOUT THE BUSINESS RESULTS OF THE ASSESSEE IT IS APPARENT THAT THIS YEAR THE ASSESSEE HAS SHOWN HIGHER GROSS PROFIT COMPARED TO THE EARLIER YEAR S AS WELL AS ALSO SHOWN HIGHER NET PROFITS. IN VIEW OF THE ABOVE COMBINED FACTS READ TOGETHER , WE DO NOT FIND ANY REASON TO SUSTAIN THE DISALLOWANCE CONFIRMED BY THE LD. CIT (A). IN VIEW OF THIS, WE DIRECT THE LD. AO TO DELETE DISALLOWANCES ON ACCOUNT OF P ERSONAL USE IN THE HANDS OF THE ASSESSEE. IN THE RESULT GROUND NO. 1 AND 2 OF THE APPEAL OF THE ASSESSEE ARE ALLOWED. 7. CONSEQUENTLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 / 0 2 / 2018 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 / 02 / 2018 A K KEOT COPY FORWARDED TO 1. APPLICANT PAGE | 4 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI