Sh. Rakesh Kumar Ahlawat, Muzaffarnagar V. ITO, Muzaffarnagar

ITA 6986/DEL/2014

• Counselvise Citation: 698620114 RSA 2014
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 13-08-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS RAKHI VIMAL
• Assessee Lawyers: A K JAIN
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-II : NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.6986/DEL/2014 ASSESSMENT YEAR : 2010-11 RAKESH KUMAR AHLAWAT, 2209, CIVIL LINES SOUTH, CIRCULAR ROAD, MUZAFFARNAGAR, PAN: ADUPA2669Q VS. ITO, WARD-2(2), MUZAFFARNAGAR. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.K. JAIN, ADVOCATE DEPARTMENT BY : MRS. RAKHI VIMAL, JCIT DATE OF HEARING : 13. 08.2015 DATE OF PRONOUNCEMENT : 04.11.2015 ORDER THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A), MUZAFFARNAGAR, DATED 19.9.2014 FOR THE ASSE SSMENT YEAR 2010- 11. ITA NO.6986/DEL/2014 2 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A DO CTOR. HE HAS INCOME FROM PROFESSION, BANK INTEREST AND AGRICULTURAL INC OME. HE FILED HIS RETURN OF INCOME ON 29.3.2011 DECLARING TOTAL INCOM E OF RS.2,51,259/-. ASSESSMENT WAS COMPLETED U/S 143(3) BY THE AO ON 22 .3.2013 DETERMINING THE TOTAL INCOME AT RS.4,03,690/-. AGG RIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL WITHOUT SUCCESS. FURT HER AGGRIEVED, THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS:- 1. THAT THE PREJUDICIAL OBSERVATIONS CONTAINED IN THE BODY OF APPELLATE ORDER U/S 250 ARE EITHER UNFOUNDED OR THE SAME ARE NOT SUSCEPTIBLE OF GIVING RISE TO ANY ADVERSE CONCLUSIO N. 2. THAT THE LEARNED C.L.T.(A) HAS ERRED IN CONFIRMI NG THE ADDITION OF RS. 22180/- FOR DISALLOWANCE OUT OF ACTUALLY INCURR ED & SHOWN PROFESSIONAL EXPENSES (CLINIC EXPENSES) TOWARDS ELE CTRICITY, TELEPHONE, CONVEYANCE VISITING OTHER NURSING HOMES & MISC. EXP . TOTALLING TO RS. 88714/- IN WHOLE OF THE YEAR, BY SIMPLY MENTIONING POSSIBJE LEAKAGE, WHILE PROFESSIONAL RECEIPTS REMAINED AT RS. 841500/ = AGAINST RS.624250/- OF THE PRECEDING YEAR. 3. THAT THE ADDITION OF RS. 29689/- STATING U/S 40 A (III) HAS BEEN WRONGLY CONFIRMED, IN SPITE OF CAPITAL EXPENDITURE FOR WHICH PAYMENTS WERE MADE AT RS.20000/- OR BELOW IN A DAY AFTER PU RCHASING GOODS THROUGH TWO SALES INVOICES & NOT CASH MEMOES. 4. THAT CONFIRMATION OF ADDITION MADE FOR BANK INTE REST PAID AT RS 64563/- FOR CLINIC PURPOSES IS TOTALLY UNCALLED FOR , SPECIALLY BEING THE AMOUNT PAID TO BANK AGAINST LOAN OBTAINED FOR CONVE RTING GROUND FLOOR OF HOUSE IN TO NURSING HOME, ITA NO.6986/DEL/2014 3 5. THAT ADDITION CONFIRMED AT RS.36000/- IS NOT MA INTAINABLE AT ALL, TOWARDS HOUSE HOLD EXPENSES SHOWN AT RS. 168000/- BEING A SMALL FAMILY WITH TWO MINOR CHILDREN STUDYING LOCALLY, LI VING IN OWN HOUSE, MAINTAINING ORDINARY LIVING STANDARD & NO VEHICLE. 6. THAT APPELLATE ORDER IS AGAINST LAW & FACTS OF T HE CASE. 3. WE HAVE HEARD SHRI A.K. JAIN, THE LD. COUNSEL FO R THE ASSESSEE AND MRS. RAKHI VIMAL, LD. DR ON BEHALF OF THE REVENUE. GROUND NO.1 IS AGAINST THE DISALLOWANCE OF RS.22,180/- OUT OF FIVE DIFFERENT HEADS OF EXPENDITURE, I.E., ELECTRICITY, TELEPHONE, MOBILE, CONVEYANCE AND MISCELLANEOUS EXPENDITURE. THE DISALLOWANCE WAS MA DE ON THE GROUND THAT THERE WOULD BE POSSIBLE LEAKAGES. IN MY VIEW, SUCH AD HOC DISALLOWANCE OF 25% IS NOT CALLED FOR. THUS, THIS D ISALLOWANCE IS DELETED. 4. THE SECOND ADDITION IS OF RS.29,689/- MADE U/S 4 0A(III). THE ASSESSEE HAD PURCHASED MEDICAL INSTRUMENTS WORTH RS .25,000/- IN CASH. HE FURTHER PURCHASED MEDICAL INSTRUMENTS, BEDS, ETC ., FOR RS.1,23,445/-. AS THIS PURCHASES WERE MADE IN CASH, DISALLOWANCE W AS MADE U/S 40A(III). THE ASSESSEE CLAIMS THAT THE AMOUNTS WER E ACTUALLY PAID ON ITA NO.6986/DEL/2014 4 DIFFERENT DATES IN CASH, BELOW RS.20,000/- AND, HEN CE, THE PROVISIONS OF SECTION 40A(III) WILL NOT APPLY. 5. AS THE ASSESSEE DOES NOT DENY THE FACT OF HAVING INCURRED EXPENDITURE FOR PURCHASES BY WAY OF CASH ABOVE RS.2 0,000/-, IN MY VIEW, THE FIRST APPELLATE AUTHORITY WAS RIGHT IN UPHOLDIN G THIS DISALLOWANCE. THE FINDINGS ON PAGE 5 OF THE ORDER OF THE LD.CIT(A) AR E CONFIRMED. 6. THE NEXT ADDITION IS DISALLOWANCE OF BANK INTERE ST. THE DISALLOWANCE AS MADE ON THE GROUND THAT THE LOAN AV AILED FROM BANK IS NOT FOR BUSINESS OR PROFESSIONAL PURPOSES. THE LD.C IT(A) RECORDED AS FOLLOWS:- 3. ADDITION OF RS. 64,563/= PAID AS BANK INTEREST :- THE ASSESSEE HAS CONSTRUCTED A HOUSE UP TO THE YEAR 2006 AND STARED LIVING SINCE THEN FOR WHICH A HOUSE LOAN OF RS. 15 LACS WAS OBTAINED FROM PNB ON 03.04.2006 A SUM OF RS. 1,45,133/= WAS PAID TOWARDS HOUSE LOAN INTEREST ON SAID LOAN OF RS. 15 LAC. IN THE YEAR 2007, IT WAS DECIDED TO CONVER T GROUND FLOOR OF RESIDENTIAL HOUSE INTO NURSING HOME/CLINIC SO THAT A FRESH SECOND LOAN OF RS. 7 LAC WAS OBTAINED IN 2007 AGAINST SAME BUILDIN G FROM THE SAME BANK FOR NURSING HOME PURPOSES IN VESTING IN TO OXY GEN PIPE LINE IN WALLS, NURSING HOME FURNITURE AND SOME ALTERATIONS ETC AND PAID INTEREST RS. 64 563/= ON IT DEBITING INCOME & EXPENDITURE AC COUNT A COPY OF ITA NO.6986/DEL/2014 5 LOAN SANCTION LETTER DATED 07.02.2007 IS BEING ENCL OSED AS ANNEXURE-(B). SINCE THE SAID LOAN INTEREST REMAINED EXCLU SIVELY FOR NURSING HOME/PROFESSIONAL PURPOSE, IT MERITS TO BE ALLOWED COMPLETELY, BEING EXCLUSIVELY INCIDENTAL TO PROFESSIONAL WORK AND INC OME & SPECIALLY WHEN NO CLINIC RENT WAS PAID IN ANY WAY. THE FACTS OF THE CASE AS WELL AS SUBMISSION S MADE BY THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. IT IS OBSERVED THAT THE AO HAD MADE ADDITION OF RS.64,563/- BEING DISALLOWANCE OF INTER EST PAID TO BANK ON HOUSING LOAN ON THE GROUND THAT THE APPELLANT ON ON E HAND, IN THE INCOME & EXPENDITURE ACCOUNT HAD DEBITED BANK INTEREST AT RS.64,563/- ON ACCOUNT OF HOUSING LOAN INTEREST WHEREAS ON THE OTH ER HAND, HE HAD ALREADY DEBITED THE INTEREST OF RS.L,45,133/- ON AC COUNT OF HOUSING LOAN. ON THE OTHER HAND THE APPELLANT HAS CONTEND ED LOAN OF RS.15,00,000/- WAS OBTAINED ON 03-04-2006 FROM PUNJ AB NATIONAL BANK FOR CONSTRUCTION OF HOUSE UP TO THE YEAR 2006 AND I NTEREST OF RS.L,45,133/- WAS PAID TOWARDS INTEREST ON HOUSING LOAN. AS PER THE APPELLANT IN THE YEAR 2007 FRESH LOAN WAS RAISED FO R NURSING HOME PURPOSES AND INTEREST WAS PAID TO BANK AT RS.64,563 /-. THE APPELLANT HAS FURNISHED COPY OF LOAN PROPOSAL/SANCTION LETTER DAT ED 07-02-2007 ISSUED BY PUNJAB NATIONAL BANK IN SUPPORT OF HIS CL AIM. IT IS OBSERVED THAT THE APPELLANT HAS ONLY F URNISHED COPY OF LOAN PROPOSAL/SANCTION LETTER DATED 07-02-2007 ISSUED BY PUNJAB NATIONAL BANK IN SUPPORT OF HIS CLAIM. HOWEVER, NO DETAILS A ND EVIDENCE VIZ. COPY OF BANK ACCOUNT ESTABLISHING THAT LOAN OF RS.64,563 /- WAS PAID DURING THE YEAR, HAS BEEN FURNISHED. THUS IN THE ABSENCE OF TH E SAME IT IS HELD THAT THE AO WAS JUSTIFIED IN MAKING ADDITION OF RS.64,56 3/-. THE SAME IS HEREBY CONFIRMED. GROUND OF APPEAL NO.4 IS DISMISSE D. 7. THE DISALLOWANCE WAS CONFIRMED BY THE LD.CIT(A) ON THE GROUND THAT NO DETAILS AND EVIDENCE WAS FILED. IN MY VIEW , THE DISALLOWANCE IS ITA NO.6986/DEL/2014 6 NOT SUSTAINABLE FOR THE REASON THAT THE AO HAS NOT MADE ANY SUCH ALLEGATION. THERE IS NO BASIS FOR THE REVENUE TO R EJECT THIS CLAIM OF THE ASSESSEE. 8. IN THE RESULT, WE ALLOW GROUND NO.4 9. GROUND NO.5 IS AGAINST THE OF ADDITION OF RS.36, 000/- TOWARDS HOUSEHOLD EXPENSES. THE ASSESSEE SUBMITS THAT THE TOTAL HOUSEHOLD EXPENSES ACTUALLY INCURRED AND SHOWN ARE FOR RS.1,6 8,000/- WHICH IS VERY REASONABLE. THE AO ESTIMATED THE HOUSEHOLD EXPENSE S AT RS.2,04,000/- AND MADE AN ADDITION OF RS.36,000/-. IN MY VIEW, S UCH AN ADDITION CANNOT BE SUSTAINED AS IT IS BASED ON SURMISES AND CONJECTURES. THUS, THIS ADDITION IS DELETED AND GROUND NO.5 IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED IN PART. THE ORDER PRONOUNCED IN THE OPEN COURT ON 04.11.201 5. SD/- [J.SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED, 4 TH NOVEMBER, 2015. DK ITA NO.6986/DEL/2014 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.