The ITO, Ward-2(1), Ahmedabad V. Shri Babulal Dhanraj Shah, Ahmedabad

ITA 672/AHD/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1996 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR RAJA RAM SAH
• Assessee Lawyers: S N DIVETIA
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.672/AHD/2009 [ASSTT. YEAR : 2005-2006] ITO, WARD-2(1) AHMEDABAD. VS. SHRI BABULAL DHANRAJ SHAH 1372, MAMUNAYAK NI POLE KALUPUR ROAD, AHMEDABAD. PAN : ACZPS 4108 A (APPELLANT) (RESPONDENT) REVENUE BY : DR. RAJA RAM SAH ASSESSEE BY : SHRI S.N. DIVETIA O R D E R PER MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED AT THE BEHEST OF THE REVENUE, WHICH HAS EMANATED FROM THE ORDER OF THE CIT(A)-VII, AHMEDABAD DATED 23.12.2008. TH E GROUNDS RAISED BY THE REVENUE ARE HEREBY DECIDED AS FOLLOWS: 2. GROUND NO.1 READS AS UNDER: 1. THE CIT(A) ERRED IN LAW AND FACTS DELETING THE ADDITION OF RS.2,74,597/- MADE AS INCOME FROM HOUSE PROPERTY UN DER SECTION 23(4)(B). 3. THE BARE MINIMUM FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 26-12-2007 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF TRADING OF PEN AND BALLPEN, TOOTH BRUSH ETC. ON WHOLE SALE BASIS. THE ASSESSEE HAS DECLARED RENTAL INCOME AT RS.61,838/-. ON PERUSAL OF THE BALANCE SHEET, T HE AO HAS NOTED THAT THE ASSESSEE HAS OWNED OTHER PROPERTIES AS WELL. HOWEV ER, NO RENTAL INCOME WAS DISCLOSED. IN COMPLIANCE TO THE SHOW CAUSE NOTICE, IT WAS EXPLAINED THAT THESE PROPERTIES BEING OLD AND IN BAD CONDITION, HENCE NO T LET OUT BY THE ASSESSEE. HOWEVER, THE AO WAS NOT CONVINCED AND CALCULATED TH E RENT AT THE RATE OF 12% ON THE AMOUNT OF INVESTMENT WHICH RESULTED INTO AN ADDITION OF RS.2,74,597/-. ITA NO.672/AHD/2009 -2- THIS ACTION OF THE AO WAS CHALLENGED BEFORE THE CIT (A). THE LEARNED CIT(A) HAS DISCUSSED THE ISSUE AT SOME LENGTH AND THEREAFT ER DECIDED AS FOLLOWS: 2.3 THE SUBMISSIONS MADE BY THE ARS. HAVE BEEN PER USED. THE PHOTOGRAPHS OF THE PROPERTIES PRODUCED FOR VERIFICA TION ARE ALSO EXAMINED. IT IS SEEN THAT PROPERTIES IN QUESTION D O NOT APPEAR TO BE FIT FOR LETTING OUT FOR THE RESIDENTIAL PURPOSE. T HEREFORE, THEY REMAIN VACANT. FURTHER, THE AO HAS NOT ASCERTAINED WHETHE R THE SAID PROPERTIES ARE SUITABLE FOR LETTING OUT THEREFORE I T CANNOT BE PRESUMED THAT THE APPELLANT WOULD HAVE RECEIVED ANY RENTAL INCOME. THEREFORE, HAVING CONSIDERED THE FACTS AND CIRCUMST ANCES OF THE CASE, I AM OF THE OPINION THAT THE ADDITION MADE TO WARDS HOUSE PROPERTY INCOME AT RS.2,74,597/- HAS TO BE DELETED. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED VIEW THAT ONCE ON VERIFICATION OF PHOTOGRAPHS OF TH E PROPERTIES IN QUESTION, IT WAS FOUND THAT THE PROPERTY BEING OLD AND STATED TO BE IN THE DILAPIDATED CONDITION HENCE NOT FIT FOR LET OUT. THEREFORE ADMI TTEDLY, NO RENTAL INCOME WAS SHOWN BY THE ASSESSEE. CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES, IN OUR OPINION THERE IS NO FALLACY IN THE VIEW TAKEN BY TH E LEARNED CIT(A). WE HEREBY CONFIRM THE JUDGMENT OF THE LEARNED CIT(A) IN RESPE CT OF THE ABOVE GROUND AND DISMISS THIS GROUND OF THE REVENUE. 5. GROUND NO.2 READS AS UNDER: 2. THE LD.CIT(A) ERRED IN LAW AND FACTS AND DELETI NG THE ADDITION OF RS.5,15,850/- AND RS.6,58,071/- MADE BY DISALLOW ANCE OF LOSSES OF M/S.GURU RAJENDRA AGENCY AND M/S.G.R. DISTRIBUTORS RESPECTIVELY. 6. THE ADMITTED FACTUAL POSITION IS THAT THE ASSESS EE HAS CARRIED OUT THE DISTRIBUTION BUSINESS AS PROPRIETOR IN THE NAME OF M/S.GURU RAJENDRA AGENCY AND M/S.G.R.DISTRIBUTORS. THERE WAS ONE MORE AGENC Y, NAMED AS M/S.TODAYS STRATEGIC MARKETING CO. (TSMC FOR SHORT). A REST RICTION WAS IMPOSED ON THE ASSESSEE TO CARRY OUT THE AGENCY BUSINESS AS A PROP RIETOR ONLY IN THE NAME OF TSMC. DURING THE PREVIOUS YEAR, THE ASSESSEE HAD GRADUALLY SHIFTED THE BUSINESS AS WELL AS THE GOODS TO TSMC. THE MAIN OBJECTION OF THE AO WAS ITA NO.672/AHD/2009 -3- THAT SINCE IN RESPECT OF THE OTHER TWO DISTRIBUTORS HIP NO BUSINESS WAS CARRIED OUT BY THE ASSESSEE AND ONLY THE EXPENDITURE WAS INCURR ED, THEREFORE, THE LOSS SUSTAINED THEREIN WAS NOT TO BE ALLOWED. AGAINST T HE SAID ADDITION, THE ASSESSEE HAD GONE IN APPEAL AND AFTER DETAILED DISCUSSION, T HE LEARNED CIT(A)HAS HELD AS UNDER: 3.2 .... AFTER VERIFYING THE FACTS OF THE CASE, I AM OF THE VIEW THAT THE APPELLANT IS HAVING SINGLE BUSINESS, EVEN THOUGH UNDER DIFFERENT NAMES. BUT FOR THE AY UNDER CONSIDERATIO N THE BUSINESS IS MAINLY CARRIED ON UNDER THE NAME OF M/S.TODAYS STR ATEGIC MARKETING CO. BUT OTHER TWO DIVISIONS ARE ALSO RELA TED TO APPELLANTS MAIN BUSINESS. THEREFORE, THE AO CANNOT TREAT THAT THE APPELLANT HAD NO CONTROL OF THE OTHER BUSINESS. SINCE THE AP PELLANT IS A SOLE PROPRIETOR OF ALL THE THREE BUSINESS DIVISIONS, IT CANNOT BE SAID THAT THE APPELLANT HAD NO BUSINESS IN OTHER TWO DIVISION S AND THEREFORE THE EXPENDITURE PERTAINING TO OTHER DIVISIONS CANNO T BE ALLOWED IN THE HANDS OF THE APPELLANT. HENCE, THE AO IS DIREC TED TO ALLOW THE BUSINESS EXPENDITURE AT RS.5,15,850/- AND RS.6,58,0 71/- AS CLAIMED BY THE APPELLANT PERTAINING TO M/S.GURU RAJENDRA AG ENCY AND M/S.G.R.DISTRIBUTORS. 7. AFTER HEARING THE SUBMISSIONS OF BOTH THE SIDES, WE FIND NO FALLACY IN THE AFORESAID JUDGMENT OF THE LEARNED CIT(A) BECAUSE TH E ASSESSEE BEING A SOLE PROPRIETOR OF ALL THE CONCERNS HAD TO MERGE ALL THE ACCOUNTS AND THEREUPON DISCLOSE THE PROFITS OF ALL THE BUSINESSES CARRIED OUT BY HIM. IT WAS WRONG ON THE PART OF THE AO TO TREAT PROPRIETARY CONCERN AS SEPARATE AND INDEPENDENT BUSINESS OF THE ASSESSEE. FURTHER, THE ASSESSEE HA S DEMONSTRATED THAT THERE WAS A BUSINESS REQUIREMENT TO CONSOLIDATE THE BUSINESS UNDER ONE TRADE NAME, HENCE, THE GOODS WERE SHIFTED FROM ONE PROPRIETORSH IP CONCERN TO ANOTHER. THEREFORE, THE LEARNED CIT(A) WAS RIGHT IN HOLDING THAT THE BUSINESS EXPENDITURE AS A WHOLE HAD TO BE TAKEN INTO ACCOUNT AND ALLOWABLE AS PER THE LAW. RESULTANTLY THIS GROUND OF THE REVENUE IS DISM ISSED. 8. GROUND NO.3 READS AS UNDER: 3. THE CIT(A) ERRED IN LAW AND FACTS AND DELETING THE ADDITION OF RS.122,22,066/- MADE U/S.40(A)(IA) OF THE IT ACT. ITA NO.672/AHD/2009 -4- 9. THE AO HAD MADE DISALLOWANCE UNDER SECTION 40(A) (IA) ON THE GROUND THAT THE ASSESSEE HAS NOT FOLLOWED THE PROVISION FO R DEDUCTION OF TDS. THE EXPLANATION OF THE ASSESSEE WAS THAT THE TDS WAS DE DUCTED IN RESPECT OF 25 PARTIES WHEREAS IN RESPECT OF 4 PARTIES NO TDS WAS DEDUCTED SINCE FORM NO.15G WAS NOT OBTAINED FROM THOSE PARTIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FURNISHED THE REQUISI TE INFORMATION WHICH HAD ALREADY BEEN SUBMITTED BEFORE THE ITO-TDS IN RESPEC T OF ALL THE PARTIES WHO HAS SUBMITTED FORM NO.15G FOR NON-DEDUCTION OF TDS ON PAYMENT. AS PER THE AO THE REQUISITE INFORMATION WAS NOT FURNISHED BEFO RE THE COMMISSIONER, STATED TO BE LOOKING AFTER THE TDS PROCEEDINGS, HEN CE, THE PAYMENT WAS DISALLOWED BY INVOKING PROVISIONS OF SECTION 40(A) OF THE IT ACT. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY WH O HAD VIDE PARA 4.1 HAS HELD AS UNDER: 4.1 IT MAY BE SEEM THAT THE AO HAS DISALLOWED TOTA L INTEREST EXPENDITURE AT RS.12,22,066/- ON THE GROUND THAT TH E APPELLANT HAD NOT MADE TDS AND NO PAYMENT HAS BEEN MADE TO THE GO VERNMENT. ACCOUNT. AS IT COULD BE SEEN THAT THE APPELLANT HA S MADE TDS WHEREVER IT IS APPLICABLE AND PAID BEFORE FILING TH E RETURN OF INCOME. THEREFORE, THE SAME HAS TO BE ALLOWED AS A BUSINESS EXPENDITURE. FURTHER, WHERE TDDS IS NOT APPLICABLE IN CERTAIN IN TEREST PAYMENTS THE APPELLANT HAS OBTAINED FORM NO.15G AND THE SAID INFORMATION HAS BEEN FURNISHED BEFORE ITO(TDS) WHICH IS ADDRESS ED TO THE CIT(TS). IT APPEARS THAT THE AO HAS DISALLOWED THE INTEREST PERTAINING TO FROM NO.125G ON THE GROUND THAT THE S AID FORM SHOULD HAVE BEEN FURNISHED BEFORE CIT(TDS) INSTEAD OF ITO( TDS). THEREFORE, IT IS PLEADED THAT BASED ON THE ABOVE TE CHNICAL GROUNDS THE AO IS NOT JUSTIFIED TO DISALLOW THE INTEREST PA YMENTS. AFTER VERIFYING THE FACTS OF THE CASE, I AM OF THT4E OPIN ION THAT THE DISALLOWANCE MADE U/S.40(A)(IA) OF THE IT ACT AT RS .12,22,066/- IS NOT WARRANTED, HENCE, THE SAME IS DELETED. 10. HAVING HEARD THE SUBMISSION OF BOTH SIDES, WE F IND NO IRREGULARITY IN THE JUDGMENT OF THE LEARNED CIT(A) BECAUSE HE HAS GIVEN A SPECIFIC FINDING THAT THE ASSESSEE HAS OBTAINED FORM NO.15G FROM THE CONCERNE D PARTIES AND GIVEN THAT INFORMATION TO ITO-TDS. MERELY BECAUSE THAT INFORM ATION WAS NOT FURNISHED ITA NO.672/AHD/2009 -5- TO CIT-TDS, IN OUR OPINION, THE AO HAS WRONGLY INVO KED THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT. RESULTANTLY, WE H EREBY CONFIRM THE FINDINGS OF THE LEARNED CIT(A) AND DISMISS THIS GROUND. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 TH FEBRUARY, 2011. SD/- SD/- (G.D. AGARWAL) VICE-PRESIDENT (MUKUL KR. SHRAWAT) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 11-02-2011 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD