Kingsway Service Station, Delhi V. ACIT, Circle- 35(1), New Delhi

ITA 6918/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8013 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 17-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRINALINI SAPRA
• Assessee Lawyers: V K AGGARWAL
• Keywords: Business income; Depreciation; Principle of natural justice; Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 6917/DEL/2017 : ASSTT. YEAR : 2013-14 ITA NO. 6918/DEL/2017 : ASSTT. YEAR : 2014-15 KINGSWAY SERVICE STATION, 47, MALL ROAD, OPP. INTERNATIONAL STUDENT SCHOOL, NEW DELHI-110054 VS ACIT, CIRCLE-35(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA AFK4613K ASSESSEE BY : SH. V. K. AGGARWAL, AR REVENUE BY : MS. MRINALINI SAPRA, SR. DR DATE OF HEAR ING: 23 . 0 8 .20 2 1 DATE OF PRONOUNCEMENT: 25 .0 8 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEALS HAVE BEEN FILED BY THE ASSESSE E AGAINST THE ORDERS OF LD. CIT(A)-12, NEW DELHI DATE D 10.08.2017 AND 15.09.2017. 2. SINCE, THE ISSUES INVOLVED IN BOTH THE APPEALS A RE IDENTICAL WHICH WERE HEARD TOGETHER. 3. IN ITA NO. 6917/DEL/2017, FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESSEE: 1. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING THE ASSESSMENT ORDER ITA NOS. 6917 & 6918/DEL/2017 KINGSWAY SERVICE STATION 2 WHICH WAS BAD IN LAW BEING AGAINST THE PROVISIONS O F THE IT AC, 1961 AND PRINCIPLES OF NATURAL JUSTICE. 2. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WEL L AS IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.88,8 56/- BEING 1/10TH OF THE VEHICLE EXPENSES INCLUDING DEPRECIATION. 3. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WEL L AS IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.11,792/ - BEING 1/10TH OF THE TELEPHONE EXPENSES. 4. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WEL L AS IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.7,90,89 4/- ON ACCOUNT OF PROPORTIONATE INTEREST. 5. THE LD. CIT(A) HAS GROSSLY ERRED ON FACTS AS WEL L AS IN LAW IN CONFIRMING THE ADDITION OF RS.1,37,00,132 /- ON ACCOUNT OF ALLEGED UNREPORTED SALES. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PETROL PUMP OF INDIAN OIL CORPORATI ON AND FILED RETURN OF INCOME ON 27.09.2013 DECLARING TOTAL INCO ME AT RS.15,47,950/-. TELEPHONE & VEHICLE EXPENSES: 5. THE AO DISALLOWED 1/10 TH OF THE TELEPHONE & VEHICLE EXPENSES CLAIMED BY THE ASSESSEE ON AD-HOC BASIS ON ACCOUNT OF ALLEGED PERSONAL EXPENDITURE. THE SIMILAR DISALLOWA NCES MADE BY THE AO HAVE BEEN DELETED BY THE LD. CIT (A) DURI NG THE EARLIER YEARS. WE ALSO FIND THAT THE AO HAS NOT PI NPOINTED ANY EXPENSES THAT ARE PERSONAL IN NATURE. HENCE, THE DI SALLOWANCES MADE WITHOUT ANY BASIS IS HEREBY DIRECTED TO BE DEL ETED. ITA NOS. 6917 & 6918/DEL/2017 KINGSWAY SERVICE STATION 3 PROPORTIONATE INTEREST: 6. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD GIVEN INTEREST FREE ADVANCES TO VARIOU S PARTIES AS UNDER: S. NO. NAME AMOUNT AS ON 31.03.2013 1. ARUN KUMAR (HUF) RS.10,000/- 2. BHARAT DHAWAN RS.19,00,000/- 3. KINGSWAY ENTERPRISES PVT. LTD. RS.12,852/- 4. RAVI INVESTMENT PVT. LTD. RS.11,000/- 5. SIDDHARTHA SAMNATH RS.49,06,749/- 6. VIAY DHAWAN RS.18,00,000/- 7. MR. M. P. GULATI RS.11,45,382/- TOTAL RS.97,85,983/- 7. THE AO DISALLOWED INTEREST PAID OF RS.7,90,894/- ON THE GROUNDS THAT THE ASSESSEE FAILED TO CHARGE INTEREST FROM THE LOAN PARTY WHEREAS INTEREST PAID HAS BEEN DEBITED T O P&L ACCOUNT. 8. BEFORE US, IT WAS SUBMITTED THAT THE ASSESSEE HA S OWN FUNDS IN THE FORM OF CAPITAL TO THE TUNE OF RS.1,34 ,04,800/- WHICH IS MORE THAN THE INTEREST FREE LOAN GIVEN OF RS.97,85,900/-, THUS, UNDISPUTEDLY PROVING THAT SUF FICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSE E WHICH LEADS TO THE PRESUMPTION THAT THE INVESTMENT WERE MADE OU T OF OWN FUND BUT NOT FROM INTEREST BEARING FUNDS. HENCE, NO DISALLOWANCES ON ACCOUNT OF INTEREST CALLED FOR. ITA NOS. 6917 & 6918/DEL/2017 KINGSWAY SERVICE STATION 4 UNREPORTED SALES: 9. THE ASSESSING OFFICER MADE THE ADDITION OF RS. 1,37,00,132/- ON ACCOUNT OF UNREPORTED SALES. THE A O HELD THAT FROM THE AUDITED BOOKS OF ACCOUNT, IT IS DECIPHERED THAT THE HANDING LOSS OF UNLEADED PETROL AS SHOWN IN CLOSING STOCK WAS 2,81,892.38 LITERS WHICH COMES TO BE 6.3% OF THE TO TAL VALUE SOLD BY THE ASSESSEE. THE AO HELD THAT ACCORDING TO THE ESSENTIAL COMMODITIES ACT, THE UPPER LIMIT OF ALLOW ABLE HANDLING LOSS IS 0.75% ONLY. THEREFORE, THE AO DISALLOWED TH E DIFFERENTIAL QUANTITY ON ACCOUNT OF UNREPORTED SALES. THE LD. CI T(A) CONFIRMED THE SAME ON THE GROUND THAT THE ASSESSEE HAS NOT BROUGHT ANY NEW FACTS ON RECORD TO JUSTIFY THE HIGH ER HANDLING LOSS. 10. DURING THE COURSE OF HEARING BEFORE US, THE LD. AR REITERATED THE ARGUMENT TAKEN UP BEFORE THE AO AS W ELL AS LD. CIT(A). THE ASSESSEE FILED A CHART SHOWING DETAILS OF STOCK. FROM PERUSAL OF THE CHART IT IS FOUND THAT THERE AR E TWO TYPES OF SALES IN ULP, I.E., NORMAL SALES AND PREMIX SALES. THE QUANTITY SOLD IN NORMAL SALE IS 44,69,534.68 LTRS. AND QUANT ITY SOLD IN PREMIX SALES IS 2,49,685.98 LTRS AND THE HANDLING L OSS IS JUST 32206.31 LTRS. THE SAME FACT IS ALSO EVIDENT FROM T HE TRADING ACCOUNT ITSELF WHEREIN PREMIX SALES OF 2,49,685.98 LTRS (RS. 1,50,59,240.37 + RS. 3,63,373.90) IS INCLUDED IN TH E TOTAL SALES OF RS. 41,80,46,015.62. A CHART SHOWING QUANTITY WI SE TRADING ACCOUNT IS ALSO SUBMITTED. 11. IT WAS ARGUED THAT THE HANDLING LOSS OF THE ASS ESSEE DURING THE YEAR WAS JUST 0.68% [32206.31/(4469534.68 + 249685.98)*100], I.E., WITHIN THE PRESCRIBED UPPER LIMIT OF ITA NOS. 6917 & 6918/DEL/2017 KINGSWAY SERVICE STATION 5 0.75% AND THE AMOUNT APPEARING IN TAX AUDIT REPORT IS JUST A CLERICAL MISTAKE WHICH IS ADMITTED BY THE AUDITOR H IMSELF. HENCE, IN THE INTEREST OF JUSTICE, WE DEEM IT PROPE R TO REMAND THE MATTER TO THE FILE OF AO TO RECONCILE THE CLOSI NG STOCK WITH THAT OF THE OPENING STOCK OF THE NEXT YEAR AND ALLO W THE HANDLING LOSSES ON RE-COMPUTATION AND RECONCILIATIO N AFTER AFFORDING AN OPPORTUNITY TO THE ASSESSEE. 12. THE APPEAL OF THE ASSESSEE ON THIS GROUND IS AL LOWED FOR STATISTICAL PURPOSES. 13. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 25/08/2021. SD/- SD/- (KUL BHARAT) (DR. B. R. R. KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 25/08/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR