George Tahngaiah, V. ACIT,

ITA 60/BANG/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7387 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 13-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Keywords: Business income; Depreciation; Business expenditure; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORESHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER AN D SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 60/ BANG/201 4 ASSESSMENT YEAR : 200 4 - 0 5 SHRI GEORGE THANGAIAH, NO. 21, 80 FT. ROAD, JEEVANBHIMANAGAR, INDIRANAGAR, BANGALORE-560 038. PAN: ACOPT 2665G VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 7(1), BANGALORE. APPELLANT RESPONDENT ITA NO. 1085 /BANG/201 6 ASSESSMENT YEAR : 200 5 - 0 6 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(2)(1), BANGALORE. VS. SHRI GEORGE THANGAIAH, M/S. DAKSHINA MUSICAL INDUSTRIES, HMV HOUSE & GEORGE THANGAIAH COMPLEX, 80 FEET ROAD,INDIRANAGAR, BANGALORE-560 038. PAN: ACOPT 2665G APPELLANT RESPONDENT ASSESSEE BY : SHRI RAGHAVENDRA CHAKRAVARTHY, CA REVENUE BY : SHRI B.R. RAMESH, JCIT (DR) DATE OF HEARING : 2 6 . 09 .201 7 DATE OF PRONOUNCEMENT : 27 .10 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER OUT OF THESE TWO APPEALS, ONE APPEAL FOR ASSESSMENT YEAR 2004-05 IS FILED BY ASSESSEE AND THE SECOND APPEAL FOR ASSESSMENT YEAR 2005-06 IS FILED BY REVENUE AND BOTH THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 2 OF 9 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004-05. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 3 OF 9 ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 4 OF 9 ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 5 OF 9 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT GROU ND NOS. 1, 2 AND 3 ARE GENERAL WHICH REQUIRE NO SEPARATE ADJUDICATION. THEREAFTER , HE SUBMITTED THAT THE REMAINING GROUNDS ARE IN RESPECT OF VARIOUS DISALLO WANCES ON AD HOC BASIS. IN THIS REGARD, HE DRAWN OUR ATTENTION TO PAGE NO. 3 P ARA NOS. 6 TO 8 OF THE ORDER OF CIT (A) AND POINTED OUT THAT IN THESE PARAS, IT IS NOTED BY CIT (A) THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNTS WITH SU PPORTING EVIDENCE IN THE FORM OF BILLS, VOUCHERS, INVOICES ETC. THEREAFTER, HE SUBMITTED THAT DIVISION-WISE COPY OF TRADING AND P & L ACCOUNT FOR YEAR ENDING 3 1.03.2004 IS AVAILABLE ON PAGES 228 TO 235 OF PAPER BOOK. HE DRAWN OUR ATTEN TION TO PAGE NO. 233 OF PAPER BOOK CONTAINING P & L ACCOUNT FOR THIS YEAR A ND POINTED OUT THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 37,02,198.78 UNDER THE HEAD TRAVELLING EXPENSES. HE SUBMITTED THAT THIS ISSUE IS NOT PRES SED BY HIM AND THIS DISALLOWANCE MAY BE UPHELD. HE ALSO SUBMITTED THAT IN THE INTEREST OF JUSTICE, THE MATTER MAYBE RESTORED BACK TO THE FILE OF AO FO R FRESH DECISION AND IF THIS IS ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 6 OF 9 DONE, THEN ASSESSEE WILL PRODUCE ALL RELEVANT MATER IALS AND EVIDENCE BEFORE THE AO. THE LD. DR OF REVENUE SUPPORTED THE ORDER OF A UTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE AO HAS COMPUTED THE INCOME BY MAKING DISALLOWANCE OF DEPRECIATION I N RESPECT OF TELEVISION, MOBILE, WALKER AND WATCH BY HOLDING THAT THESE ASSE TS WERE FOR THE PERSONAL USE OF THE ASSESSEE AND HIS FAMILY MEMBERS AND DEPR ECIATION CANNOT BE ALLOWED ON THESE ASSETS OUT OF BUSINESS INCOME. RE GARDING THIS DISALLOWANCE OF DEPRECIATION, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A). THE AO HAS MADE DISALLOWANCE OF RS. 4,510/- OUT OF CONVEYA NCE EXPENSES OF WHICH RS. 18,042/- ON THIS BASIS THAT MOST OF THE EXPENSE S WERE INCURRED IN CASH AND SUPPORTING BILLS / VOUCHERS WERE NOT MADE AVAILABLE AND ONLY EVIDENCE MADE AVAILABLE WAS IN THE FORM OF SELF MADE VOUCHERS. T HE SECOND DISALLOWANCE IS REGARDING THE CLAIM OF THE ASSESSEE FOR RS. 5,88,66 5/- UNDER THE HEAD MISCELLANEOUS EXPENDITURE. THE ENTIRE AMOUNT OF TH IS CLAIM WAS DISALLOWED BY THE AO ON THIS BASIS THAT ASSESSEE HAS NOT SUBSTANT IATED THE EXPENSES WITH SUPPORTING EVIDENCE AND ENTIRE EXPENSES IS INCURRED IN CASH AND BUSINESS RELEVANCE OF THE SAME IS NOT KNOWN. IN THE ABSENCE OF BUSINESS RELEVANCE, THE DISALLOWANCE WAS MADE BY THE AO. THE NEXT DISALLOW ANCE MADE BY HIM IS OF RS. 7,899/- OUT OF THE CLAIM OF ASSESSEE OF RS. 31, 577/- UNDER THE HEAD CAR MAINTENANCE EXPENDITURE. THE AO HELD THAT PERSONAL ELEMENT IN THE SAID EXPENDITURE CANNOT BE RULED OUT AND THEREFORE, HE D ISALLOWED 25% OF THE SAID EXPENSES. 5. THE NEXT DISALLOWANCE MADE BY HIM IS OF RS. 25,5 75/- @ 25% OF RS. 1,02,300/- INCURRED IN CASH AND DEBITED UNDER THE HEAD GARDENI NG EXPENSES IN ADDITION TO EXPENSES UNDER THE SAME HEAD FOR WHICH PAYMENT WAS MADE BY CHEQUE OF RS. 1 LAKH. THIS DISALLOWANCE WAS MADE FOR THIS REASON THAT NO SUPPORTING EVIDENCE WAS PRODUCED ON THE AMOUNT INCURRED IN CAS H. 6. THE NEXT DISALLOWANCE MADE BY THE AO IS OF RS. 1 .50 LAKHS OUT OF TOTAL CLAIM OF RS. 1,73,986/- UNDER THE HEAD MEDICAL EXPENDITURE. THE AO HAS NOTED THAT THE ASSESSEE HAS ADMITTED THAT OUT OF THESE, AN AMOUNT OF RS. 1.50 LAKHS RELATES TO ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 7 OF 9 MEDICAL EXPENDITURE OF PROPRIETOR AND HIS FAMILY AN D HE HELD THAT THIS AMOUNT CAN BE ALLOWED AS BUSINESS EXPENDITURE. 7. THE NEXT DISALLOWANCE MADE BY HIM IS OF RS. 28,5 63/- BEING 25% OF RS. 1,14,255/- UNDER THE HEAD CONSUMBALES ON THIS BASIS THAT THERE IS NO EVIDENCE BROUGHT ON RECORD TO SUBSTANTIATE THIS CLAIM. 8. THE NEXT DISALLOWANCE MADE BY HIM OF RS. 97,593/ - BEING 50% OF THE EXPENSES OF RS. 1,95,186/- CLAIMED UNDER THE HEAD SALES PROM OTION AND THIS DISALLOWANCE IS ALSO ON THE BASIS THAT NO SUPPORTING EVIDENCE IS PRODUCED. 9. THE NEXT DISALLOWANCE MADE BY HIM IS OF RS. 12,2 22/- BEING 25% OF EMPLOYEES WELFARE EXPENSES CLAIMED AT RS. 48,890/- AND THIS D ISALLOWANCE WAS ALSO MADE ON THE SAME BASIS THAT NO SUPPORTING EVIDENCE WAS P RODUCED. 10. REGARDING DISALLOWANCE OF TRAVELLING EXPENSES O F RS. 37,02,198/-, THE AR OF ASSESSEE HAS ALREADY CONCEDED THAT THIS ALLOWANCE M AY BE CONFIRMED. 11. THE NEXT DISALLOWANCE IS OF RS. 6,42,400/- BEIN G ENTIRE AMOUNT CLAIMED UNDER THE HEAD CONSULTANCY CHARGES. THIS DISALLOWANCE IS MADE ON THIS BASIS THAT LOOKING INTO THE NATURE OF THE BUSINESS AND THE INC OME UNDER WHICH THE ASSESSEE HAS CLAIMED THIS EXPENDITURE, IT IS CLEAR THAT THERE IS HARDLY ANY BUSINESS RELEVANCE OF THESE EXPENSES. 12. THE NEXT DISALLOWANCE IS OF RS. 4,06,570/- BEIN G 20% OF RS. 20,32,850/- CLAIMED UNDER THE HEAD SALARY AND WAGES. THIS DISA LLOWANCE IS MADE ON THE BASIS THAT THE ASSESSEE WAS ASKED TO FURNISH THE DE TAILS OF SALARY EXPENSES BUT THE ASSESSEE FAILED TO FURNISH ANY DETAILS IN RESPE CT OF SALARY AND WAGES EXPENDITURE AGAINST THE MAINTENANCE INCOME. THE AO HAS ALSO NOTED THAT AS PER THE AGREEMENT WITH THE TENANT, THE ASSESSEE HAS TO PROVIDE SECURITY OF THE COMPLEX, LIFTMAN AND CLEANING STAFF FOR THE BUILDIN G AND HE HAS HELD THAT EXPENSES OF RS. 20 LAKHS ON THESE HEADS FOR A SMALL COMPLEX IS VERY HIGH BECAUSE THE ENTIRE MAINTENANCE RECEIPTS ITSELF IS A BOUT RS. 39 LAKHS. IN THIS MANNER, AFTER MAKING THESE DISALLOWANCES, THE AO CO MPUTED THE INCOME OF ASSESSEE UNDER MAINTENANCE WORK AT RS. 42,313/- OUT OF GROSS RECEIPT OF RS. ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 8 OF 9 39,56,350/- AS AGAINST HUGE LOSS CLAIMED BY THE ASS ESSEE IN RESPECT OF THIS RECEIPT. NEITHER BEFORE THE CIT(A) NOR BEFORE US, T HE ASSESSEE HAS PRODUCED ANY EVIDENCE IN SUPPORT OF ASSESSEES CLAIM AND POI NTED OUT ANY DEFECT IN THE ASSESSMENT ORDER IN MAKING THESE DISALLOWANCES. HE NCE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF CIT(A) BECAUSE THE EXPENS ES ARE UNSUBSTANTIATED AND THE ASSESSEE HAS NOT ESTABLISHED THIS ALSO THAT THE EXPENSES ARE REASONABLE AND NOT EXCESSIVE AND THE A.O. HAS DISALLOWED ONLY A SMALL PART OF SUCH UNSUBSTANTIATED EXPENSES AND EVEN AFTER THE VARIOUS DISALLOWANCES, THE INCOME ASSESSED AT RS. 42,313/- IS ONLY ABOUT 1% OF THE GROSS RECEIPT OF RS. 39,56,350/-.. 13. IN THE RESULT THE ASSESSEES APPEAL IS DISMISSE D. 14. NOW WE TAKE UP THE APPEAL OF THE REVENUE. THE G ROUNDS RAISED BY THE REVENUE ARE AS UNDER. 15. THE LD. DR OF REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. AR OF ASSESSEE SUPPORTED THE ORDER OF CIT(A). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE DISALLOWANCE OF BUILDING DEPRECIATION OF RS. 20,97,877/- WAS DELETE D BY CIT(A) ON THIS BASIS ITA NOS.60/BANG/2014 & 1085/BANG/2016 PAGE 9 OF 9 THAT NO DEPRECIATION FROM THE LET OUT PROPERTY WAS CLAIMED AS STATED BY THE AO. THIS FINDING OF CIT(A) COULD NOT BE CONTROVERTED BY LD. DR OF REVENUE AND THEREFORE, ON THIS ASPECT, WE FIND NO REASON TO INT ERFERE IN THE ORDER OF CIT(A). 17. THE REMAINING DISALLOWANCES WERE MADE BY THE A. O. ON THIS BASIS THAT THE ASSESSEE COULD NOT ESTABLISH THE RELEVANCE OF THESE EXPENSES FOR THE ACTIVITIES OF THE ASSESSEE FOR EARNING INCOME BY BRINGING EVID ENCES ON RECORD. SOME OF THESE DISALLOWANCES ARE DELETED BY CIT (A) WITHOUT A CONCRETE FINDING ABOUT THE RELEVANCE OF THESE EXPENSES FOR THE ACTIVITIES OF THE ASSESSEE FOR EARNING INCOME ON THE BASIS OF ANY COGENT EVIDENCES AVAILAB LE ON RECORD. SIMILAR DISALLOWANCES ARE ALREADY CONFIRMED BY US IN A. Y. 2004 05 AND NO DIFFERENCE IN FACTS IS POINTED OUT BY THE LEARNED AR OF THE AS SESSEE. HENCE, WE REVERSE THE ORDER OF CIT (A) IN RESPECT OF THESE DISALLOWAN CES EXCEPT DEPRECIATION ON BUILDING AND RESTORE THE ORDER OF THE A. O. 18. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. 19. IN THE COMBINED RESULT, THE ASSESSEES APPEAL I S DISMISSED AND THE REVENUES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (VIJAY PAL RAO) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 27 TH OCTOBER, 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.