Guru Amarjit Singh (HUF), Kartarpur V. The Assistant Commissioner of Income Tax, Jalandhar

ITA 648/ASR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9560 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: Y K SUD
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDHAR) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.648(ASR)/2015 ASSESSMENT YEAR: 2009-10 GURU AMARJIT SINGH (HUF) THE FORT KARTARPUR. PAN: AADHG0559H VS. CIT, CIRCLE-IV JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. Y.K.SUD (CA) RESPONDENT BY: SH. BHAWANI SHANKAR (DR) DATE OF HEARING: 30.06.2016 DATE OF PRONOU NCEMENT:15.09.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LEARNED CIT(A), JALANDHAR DATED 09.10.2015 FOR ASST. YEAR: 2009-10. 2. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS DERIVING INCOME FROM BUSINESS/(RELIGIOU S), OF RUNNING A GURUDWARA AND FROM HOUSE PROPERTY AND FROM AGRICULT URAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER HAD MADE DISALLOWANCE U/S 40A(3) OF THE ACT FOR THE PAYMENTS MADE TO H.P. STATE CIVIL SUPPLIES CORP. LTD. FOR PURCHASE OF GAS CYLIN DERS TO THE TUNE OF RS.56,890/-. THE ASSESSING OFFICER FURTHER MADE A D ISALLOWANCE OF RS.3,80,000/- OUT OF TOTAL EXPENDITURE BOOKED UNDER THE VARIOUS HEADS REPRESENTING ABOUT 4% OF THE TOTAL EXPENDITURE. THE ASSESSING OFFICER FURTHER DISALLOWED EXPENSES INCURRED BY ASSESSEE ON PURCHASE OF LCD ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 2 MONITORS AND PURCHASE OF SOFTWARE AND CAPITALIZED T HE SAME AND ALLOWED DEPRECATION ON THEM AND FURTHER DISALLOWANCE OF RS. 12,500/- WAS MADE WHICH THE ASSESSEE HAD PAID ON ACCOUNT OF FILLING O F INCOME TAX RETURN. 3. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LEARN ED CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS AND RELIED UPON A NUM BER OF CASE LAWS, HOWEVER, THE LEARNED CIT(A) DID NOT AGREE WITH THE CONTENTION OF ASSESSEE AND UPHELD THE ADDITION BY HOLDING AS UNDER: 5.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSE SSING OFFICER AS MADE BY HER IN THE ASSESSMENT ORDER. I HAVE ALSO CONSIDE RED WRITTEN SUBMISSIONS FILED BY THE ASSESSEE VIDE LETTER DATED 10.01.2015. I HAVE FURTHER CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE AS WELL AS OTHER MATERIAL BROUGHT ON RECOR D IN CONNECTION WITH ALL THE ISSUES UNDER REFERENCE. 5.2.1 AS FAR AS THE ADDITION OF RS.56,890/- MADE BY THE ASSESSING OFFICER ON ACCOUNT DISALLOWANCE OF EXPENSES BY INVO KING PROVISIONS OF SECTION 40A(3) OF THE ACT CONCERNED, THE ASSESSE E HAS MADE ALMOST SIMILAR SUBMISSIONS AS MADE BY IT DURING ASS ESSMENT PROCEEDINGS. ON CAREFUL CONSIDERATION OF THE RIVAL CONTENTIONS ON THE ISSUE UNDER REFERENCE. I AM ALSO OF THE CONSIDERED OPINION THAT THE PAYMENTS OF RS.24,130/- RS.32,760/- BOTH TOTALING TO RS.56.890/- ARE NOT COVERED BY EXCEPTIONS PROVIDED UND RULE 6DD OF THE INCOME TAX RULES, 1962 AS THE PAYMENT MADE TO M/S H.P. STA TE SUPPLIES CORPORATION LIMITED CANNOT BE CONSIDERED TO BE A PA YMENT TO GOVERNMENT. 5.2.2. IN VIEW OF THE ABOVE STATED FACTS AND IN THE CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.56,890/- ON ACCO UNT OF DISALLOWANCE OF EXPENSES BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE ACT. THE ADDITION OF RS.56,890/- MADE BY THE AS SESSING OFFICER IS, THEREFORE, UPHELD. IN THE RESULT, GROUND NO. 1 OF APPEAL TAKEN BY THE ASSESSEE IS DISMISSED. 5.3 AS FOR AS ADDITION OF RS.3,80,000/- IS CONCERNE D, IT HAS BEEN NOTICED THAT THE ASSESSING OFFICER HAS MADE THE IMP UGNED ADDITION AS MAJORITY OF EXPENSES CLAIMED UNDER VARIOUS HEADS ARE SUPPORTED ONLY BY SELF PREPARED VOUCHERS WHICH ARE NOT FULLY VERIFIABLE WHEN ASKED DURING COURSE OF APPELLATE PROCEEDINGS THAT A S TO WHETHER MAJORITY OF THE EXPENSES CLAIMED UNDER VARIOUS HEAD S ARE SUPPORTED BY PROPER BILLS AND VOUCHERS, IT HAS BEEN SUBMITTED THAT ALTHOUGH SOME OF THE EXPENSES CLAIMED UNDER VARIOUS HEADS AR E SUPPORTED BY SELF PREPARED VOUCHERS BUT THE EXPENSES CLAIMED BY THE ASSESSEE ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 3 UNDER VARIOUS HEADS ARE THE GENUINE BUSINESS EXPENS ES. LOOKING TO THE FACT THAT MAJORITY OF THE EXPENSES ARE SUPPORTE D BY SELF PREPARED CASH VOUCHERS WHICH ARE ALSO NOT INDEPENDE NT!} VERIFIABLE, SOME DISALLOWANCE OUT OF THESE EXPENSES IS CERTAINL Y JUSTIFIED. HOWEVER, IT HAS BEEN NOTICED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS QUITE REASONABLE AND CANNOT BE SAID TO BE EXCESSIVE. THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS FROM THE FACTS OF THE CASE OF THE ASSESSEE HUF. 5.3.1 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OFFICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.3,80,000/- ON AC COUNT OF DISALLOWANCE OF EXPENSES OUT OF VARIOUS EXPENSES CL AIMED UNDER VARIOUS HEADS. THE ADDITION OF RS.3.80,000/- MADE B Y THE ASSESSING OFFICER IS, THEREFORE, UPHELD. IN THE RES ULT, GROUND NO. 2 OF APPEAL TAKEN BY THE ASSESSEE IS DISMISSED. 5.4. AS TAR AS CAPITALIZATION OF EXPENSES INCURR ED BY THE ASSESSEE ON THE PURCHASE OF MONITORS AND COMPUTER SOFTWARE I S CONCERNED, I DO NOT FIND ANY AMBIGUITY IN THE ORDER OF THE ASSES SING OFFICER. I AM ALSO OF THE OPINION THAT THE ASSETS PURCHASED BY TH E ASSESSEE NAMELY COMPUTER MONITORS AND COMPUTER SOFTWARE WILL GIVE ENDURING BENEFIT TO THE ASSESSEE AND AS SUCH IT IS CERTAINLY A CAPITAL EXPENDITURE AND THE ASSESSING OFFICER HAS CORRUPTLY CAPITALIZED IT AND ALLOWED DEPRECIATION THEREON. THE JUDICIAL PRON OUNCEMENTS RELIED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS FROM THE FACTS OF THE CASE OF THE ASSESSEE HUF. 5.4.1 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CIRCU MSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.30,044/- ON ACCO UNT OF CAPITALIZATION OF EXPENSES INCURRED BY THE ASSESSEE ON THE PURCHASE OF COMPUTER MONITORS AND COMPUTER SOFTWARE. THE ADD ITION OF RS.30,044/- MADE BY THE ASSESSING OFFICER IS, THERE FORE, UPHELD TOO. IN THE RESULT, GROUND NO. 3 OF APPEAL TAKEN BY THE ASSESSEE IS DISMISSED. 5.5. AS FAR AS ADDITION OF RS.12,500/- ON ACCOUNT O F DISALLOWANCE OF EXPENSES INCURRED BY THE ASSESSEE FOR FILING INCOME TAX RETURN IS CONCERNED, AGAIN I DO NOT FIND ANY AMBIGUITY IN THE ORDER OF THE ASSESSING OFFICER. I AM ALSO OF THE OPINION THAT TH E PROFESSIONAL CHARGES PAID BY THE ASSESSEE FOR FILING INCOME TAX RETURN ARE NOT ALLOWABLE EXPENSES. THE JUDICIAL PRONOUNCEMENTS REL IED UPON BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS FROM THE FACT S OF THE CASE OF THE ASSESSEE HUF. 5.51. IN VI8EW OF THE ABOVE STATED FACTS AND IN THE CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE ASSESSING OF FICER IS FULLY JUSTIFIED IN MAKING ADDITION OF RS.12,500/- ON ACCO UNT OF DISALLOWANCE OF PROFESSIONAL EXPENSES. THE ADDITION OF RS.12,500/- MADE BY THE ASSESSING OFFICER IS, THEREFORE, UPHELD TOO. IN THE ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 4 RESULT, GROUND NO.4 OF APPEAL TAKEN BY THE ASSESSEE IS ALSO DISMISSED. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT ASS ESSEE WAS MAINTAINING COMPLETE BOOKS OF ACCOUNTS IN RESPECT O F ITS BUSINESS OF RELIGIOUS PREACHING AND SAID BOOKS OF ACCOUNT WERE DULY AUDITED BY AUDITORS AND IN THIS RESPECT OUR ATTENTION WAS INVI TED TO (PB 1TO 23) WHERE A COPY OF AUDITED BALANCE SHEET ALONG WITH AU DITORS REPORT WAS PLACED. HE SUBMITTED THAT AUDITORS HAD NOT POINTED OUT ANY MISTAKE AND THEY WERE SATISFIED WITH THE CORRECTNESS OF BOOKS O F ACCOUNT WHICH WAS DULY SUPPORTED WITH VOUCHERS AND THEREFORE, AD HOC DISALLOWANCE OUT OF TOTAL EXPENSES WITHOUT POINTING OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT WAS NOT JUSTIFIED. THE LEARNED AR SUBMITTED THAT A NUMBER OF CASE LAWS WHICH HAS BEEN REPRODUCED BY LEARNED CIT( A) WERE RELIED BUT LEARNED CIT(A) WITHOUT COMMENTING UPON THOSE CASE L AWS DISTINGUISHED THEM AND UPHELD THE AD HOC ADDITION OF RS.3,80,000/-. 6. ARGUING UPON GROUND NO.2, THE LEARNED AR SUBMITT ED THAT THE ASSESSEE HAD REPLACED 4 LCD MONITORS OF THE COMPUTE RS AMOUNTING TO RS.55,280/- AND FURTHER RS.19,828/- WAS SPENT ON TH E COST OF XP SOFTWARE AND TELE SOFTWARE WHICH WERE CLAIMED AS RE PAIR & MAINTENANCE. HE SUBMITTED THAT THE LCD MONITORS WERE REPLACEMENT OF EXISTING LCD MONITORS WHICH HAD WORN OUT. HE SUBMITTED THAT LIFE OF LCD MONITORS IS NOT MORE THAN ONE YEAR OR ONE AND A HALF YEAR. SINC E IT WAS A REPLACEMENT THEREFORE, IT WAS CORRECTLY CLAIMED UND ER REPAIR & ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 5 MAINTENANCE. SIMILARLY, WITH RESPECT TO SOFTWARE TH E LEARNED AR SUBMITTED THAT IT WAS A CLEAR CUT REVENUE EXPENDITU RE, THEREFORE, THE ACTION OF THE AUTHORITIES BELOW WAS NOT JUSTIFIED. IT WAS SUBMITTED THAT BEFORE LEARNED CIT(A) VARIOUS SUBMISSIONS WERE FILE D AND VARIOUS JUDGMENTS WERE RELIED UPON, THOUGH HE NOTED IN HIS ORDER BUT DID NOT CONSIDER WHILE UPHOLDING THE ADDITION. 7. AS REGARDS THE DISALLOWANCE OUT OF PROFESSIONAL CHARGES, THE LEARNED AR SUBMITTED THAT EXPENSES WERE INCURRED FO R FILING OF INCOME TAX RETURN AND CONDUCTING PROCEEDINGS BEFORE INCOME TAX DEPARTMENT AND THEREFORE, THEY WERE CLEARLY ALLOWABLE AND LEAR NED CIT(A) HAS WRONGLY UPHELD THE SAME. 8. AS REGARDS THE DISALLOWANCE U/S. 40A(3), IT WAS SUBMITTED THAT THE ASSESSEE HAD PURCHASED GAS CYLINDERS REFILLS THROUG H H.P. STATE CIVIL SUPPLIES CORPORATION LTD.. IT WAS SUBMITTED THAT TH E PAYMENT FOR CYLINDERS WHICH ARE SUPPLIED AT DOOR STEPS CAN NOT BE MADE THROUGH CHEQUES AND MOREOVER, IT WAS ARGUED THAT THE H.P. S TATE CIVIL SUPPLY CORPORATION IS A GOVT. COMPANY AND THEREFORE, THE DISALLOWANCE U/S 40A(3) WAS NOT JUSTIFIED. 9. THE LEARNED DR, ON THE OTHER HAND, HEAVILY PLACE D HIS RELIANCE ON THE ORDER OF LEARNED CIT(A). 10. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT ASSESSING OFFICER HAS NOT PIN POINTED ANY EXPENDITURE WHICH WAS NOT SUPPORTED BY VOUCHER AND HER ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 6 ONLY OBJECTION IS THAT THE EXPENSES WERE MOSTLY SEL F MADE AND HAND WRITTEN VOUCHERS ON PLAIN PAPER. SHE FURTHER HELD THAT THESE VOUCHERS WERE SELF SERVING AND NOT ENTIRELY VERIFIABLE. HOWE VER, SHE DID NOT POINT OUT ANY EXPENDITURE WHICH IN HER OPINION WAS NOT SP ENT FOR THE PURPOSES OF THE BUSINESS OF ASSESSEE. THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF RELIGIOUS PREACHING AND IS RUNNING A FAMOUS GURUDWA RA NAMELY DERA WAD BHAG SINGH IN WHICH LANGER IS PREPARED 24 HOURS AND 365 DAYS REGULARLY FOR THE PILGRIMS. THE NATURE OF EXPENSES INCURRED BY ASSESSEE IN THE FORM OF HOLA FAIR EXPENSES, BAISAKHI FAIR EXPEN SES AND LANGER EXPENSES ARE SUCH THAT THEIR RECEIPTS SOME TIMES AR E DIFFICULT TO OBTAIN AND THEREFORE, THE PRACTICE OF BOOKING SUCH EXPENDI TURE ON PLAIN PAPER IS A JUSTIFIED PRACTICE. THE HONBLE DELHI TRIBUNAL IN THE CASE OF ACIT VS. ALLIED CONSTRUCTION, 106 TTJ 616 (DEL) HAS HELD THA T AD HOC DISALLOWANCE OUT OF LABOUR EXPENSES COULD NOT BE SIMPLY MADE ON THE BASIS THAT THE VOUCHERS WERE SELF MADE AND NOT RELIABLE WITHOUT MA KING ANY TEST AND PINPOINTING WHICH ITEM OF EXPENDITURE WAS NOT VERIF IABLE. SIMILAR DECISION HAS BEEN MADE BY VARIOUS BENCHES OF TRIBUNALS OF IT AT WHICH WERE RELIED BEFORE LEARNED CIT(A) AS NOTED BY HIM AT PAG E 12 OF HIS ORDER. WE FURTHER FIND THAT DURING ASSESSMENT PROCEEDINGS, TH E ASSESSEE IN REPLY TO QUERY RAISED BY ASSESSING OFFICER FOR VERIFICATION OF EXPENDITURE HAD SUBMITTED AS UNDER: REGARDING YOUR OBSERVATION FROM EXAMINATION OF VOU CHERS THAT EXPENSES UNDER THE VARIOUS HEADS ARE SUPPORTED MAINLY BY HAN D MADE BILLS/VOUCHERS ONLY SO NOT COMPLETELY VERIFIABLE, I T IS SUBMITTED THAT ALL THE ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 7 BILLS/VOUCHERS PROPERLY FLAGGED DEBITED THE VARIOUS HEADS OF EXPENSES POINTED OUT BY YOU ARE BEING AGAIN PRODUCED FOR YOU R VERIFICATION. THEREFORE, IN VIEW OF THE ABOVE FACTS AND CIRCUMSTA NCE AND IN VIEW OF THE JUDICIAL PRECEDENTS SUSTENANCE OF AD HOC DISALLOWANCE IS NOT JUSTIFIED. THEREFORE, GROUND NO.1 OF THE APPEAL IS ALLOWED. 11. AS REGARDS GROUND NO.2, WE FIND THAT ASSESSEE H AD REPLACED ONLY PARTS OF COMPUTER IN THE FORM OF REPLACEMENT OF LCD MONITORS WHICH NECESSARILY ARE IN THE FORM OF REVENUE EXPENDITURE. SIMILARLY THE PURCHASE OF SOFTWARE IS ALSO IN THE FORM OF REVENUE EXPENDITURE AND THEREFORE, ASSESSEE HAD RIGHTLY CLAIMED THE SAME AS REVENUE EXPENDITURE. IN VIEW OF THE ABOVE, GROUND NO.2 OF THE APPEAL IS ALSO ALLOWED. 12. AS REGARDS DISALLOWANCE OF RS.12,500/-, WE DO N OT FIND ANY REASON AS TO WHY THIS AMOUNT WHICH WAS PAID BY ASSESSEE AS PROFESSIONAL FEE FOR INCOME TAX PROCEEDINGS AND FILING OF INCOME TAX RET URN WAS DISALLOWED, THEREFORE, GROUND NO.3 IS ALSO ALLOWED. 13. AS REGARDS GROUND NO.4, WE FIND THAT PAYMENTS I N CASH WERE MADE TO H.P. STATE CIVIL SUPPLIES CO., THE CASH MEMOS FO R THE ABOVE PAYMENTS ARE AVAILABLE AT (PB 24 & 25). THE SAID PAYMENTS HA VE BEEN MADE FOR PURCHASE OF GAS CYLINDERS WHICH EXPENDITURE WAS NEC ESSARILY FOR THE PURPOSES OF BUSINESS OF ASSESSEE AS THE LANGER IS B EING PREPARED BY ASSESSEE REGULARLY. MOREOVER, WE FIND THAT THE PAYM ENT HAS BEEN MADE TO H.P. STATE CIVIL SUPPLIES CORPORATION WHICH IS THE GOVT. COMPANY, ITA NO.64 8 (ASR)/2015 ASST. YEA R: 2009-10 8 THEREFORE, DISALLOWANCE U/S 40A(3) WAS NOT WARRANTE D, THEREFORE, WE ALLOW GROUND NO. 4 OF THE APPEAL. 14. IN NUTSHELL, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 .09.2016. SD/- SD/- (A.D. JAIN) ( T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED: 15.09.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER