Diamond Infosystems Ltd., Baroda V. The ACIT.,Circle-1(2), Baroda

ITA 702/AHD/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6284 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-04-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 26-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRADIPKUMAR MAJUMDAR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Corroborative evidences
• Section: 234B; 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NOS: 700 & 702/AHD/2012 (ASSESSMENT YEARS: 2003-04 & 2005-06) DIAMOND INFOSYSTEMS LTD. (PREVIOUSLY ENTERPRISE INTELLIGENT SYSTEMS LTD) 5/12, BIDC, GORWA, BARODA-16 V/S ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-1(2), BARODA (APPELLANT) (RESPONDENT) PAN: AAPPT0319Q APPELLANT BY : SHRI M. K. PATEL, AR RESPONDENT BY: SHRI PRADIP KUMAR MAJUMDAR, SR.D.R ( )/ ORDER DATE OF HEARING : 03 -04-201 7 DATE OF PRONOUNCEMENT : 10 -04-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 700 & 702/AHD/2012 ARE APPEALS BY THE ASSE SSEE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CIT(A)-I, BA RODA DATED 23.02.2011 PERTAINING TO A.YS. 2003-04 & 2005-06 RESPECTIVELY . ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 2 2. SINCE COMMON GRIEVANCES ARE RAISED IN THE IMPUGNED APPEALS, THEY WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 3. BOTH THE APPEALS ARE BARRED BY 324 DAYS. THE ASSESS EE HAS FILED AFFIDAVIT GIVING FACTS CAUSING THE DELAY IN FILING THE IMPUGN ED APPEALS IS ALONG WITH AN APPLICATION FOR THE CONDONATION OF THE DELAY. WE HA VE GONE THROUGH THE CONTENTS OF THE AFFIDAVIT QUA THE APPLICATION FOR T HE CONDONATION OF THE DELAY. IN OUR CONSIDERED OPINION, THE ASSESSEE WAS PREVENTED BY REASONABLE AND SUFFICIENT CAUSE IN NOT FILING THE A PPEAL ON TIME. THEREFORE, THE DELAY IS CONDONED. ITA NO. 700/AHD/2012 FOR A.Y. 2003- 04 4. THE FIRST GROUND CHALLENGES THE RE-OPENING OF THE A SSESSMENT U/S. 147 OF THE ACT. THE LD. COUNSEL DID NOT PRESS THIS GROUND AND, THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 5. GROUND NO. 2- THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN LAW AND IN FACTS AND HAS SET ASIDE THE DISALLOWANCE MADE OUT OF PRELIMINARY EXPENSES WITH A DIRECTION THAT SUCH EXPENDITURE BEI NG IN THE NATURE OF PRE- COMMENCEMENT EXPENSES SHOULD BE CAPITALIZED AND DEP RECIATION BE ALLOWED ON THE SAME. ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 3 6. A SIMPLE PERUSAL OF THE AFOREMENTIONED GROUND SHOWS THAT THERE IS NEITHER ANY FACTUAL ERROR NOR ANY ERROR IN LAW IN THE DIREC TIONS GIVEN BY THE LD. CIT(A). THEREFORE, NO INTERFERENCE IS CALLED FOR. G ROUND NO. 2 IS DISMISSED. 7. GROUND NO. 3 -THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN LAW AND IN FACTS AND HAS CONFIRMED THE DISALLOWANCE OUT OF JOB-WORK EXPENSES FOR DATA-ENTRY WORK TO THE EXTENT OF ?20,0 00/- ON ESTIMATED BASIS. 8. THE ASSESSEE HAS DEBITED RS. 4,00,151/- UNDER THE H EAD JOB WORK EXPENDITURE. THE A.O. NOTICED THAT IN THE IMMEDIAT ELY PRECEDING FINANCIAL YEAR, SUCH EXPENDITURE WERE AT RS. 994/- ONLY. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS. THE ASSESSEE FURNISHED THE LED GER ACCOUNT BUT NO SUPPORTING EVIDENCES WERE FILED WHICH PROMPTED THE A.O. TO DISALLOW 10% OF THE SAID EXPENSES AND THE A.O. MADE ADDITION OF RS. 4,00,151/-. 9. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE COULD NOT ADDUCE ANY SUPPORTING EVIDENCES. THE LD. CIT(A) OBSERVED THAT THE JOB WORK EXPENSES WERE PAID IN CASH FOR DATA-ENTRY WORK THROUGH SELF VOUCHERS. CONSIDERING THE NATURE OF THE EXPENDITURE, THE LD. CIT(A) RESTR ICTED THE DISALLOWANCE TO RS. 20,000/-. 10. BEFORE US, ALSO NO SUPPORTING EVIDENCES HAVE BEEN B ROUGHT ON RECORD. THEREFORE, WE DECLINE TO INTERFERE WITH THE FINDING S OF THE LD. CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 4 11. GROUND NO. 4- THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN LAW AND ON FACTS AND HAS CONFIRMED THE ADDITIONS TO THE EXTENT OF RS. 2,00,000/- MADE ON ACCOUNT OF EXPENSES ATTRIBUTABLE TO TRADING TURNOVER WITHOUT ANY BASE WHATSOEVER. 12. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THE ASSESSEE HAS MADE SALES AS WELL AS PURCHASES FROM T HE FOLLOWING PARTIES:- 1. M/S. UNITECH MARKETING, AHMEDABAD RS. 14359430 2. LYONS INDUS ENTERPRISE LTD., AHMEDABAD RS. 17608751 3. AMIT MARKETING, AHMEDABAD RS. 12830444 4. KINCHAL ENTERPRISE, AHMEDABAD RS. 14236875 5. THE A.O. FOUND THAT THE SALES WERE ADJUSTED AGAINST PURCHASES OR HAVE BEEN ADJUSTED ON OTHER PARTIES ACCOUNT WITHOUT ANY MOVEMENT OF FUNDS. THE A.O. FURTHER FOUND THAT UNDER SIMILAR CIRCUMSTA NCES IN A.Y. 2004-05, ADDITION ON ACCOUNT OF EXPENDITURE ON SUCH TRANSACT ION WAS MADE @ 1% OF TOTAL TURNOVER. THE TOTAL TURNOVER SHOWN BY THE ASS ESSEE WAS AT RS. 5,90,35,500/- AND THE A.O., TAKING A LEAF OUT OF TH E FINDINGS GIVEN IN A.Y. 2004-05 ADDED 1% AMOUNTING TO RS. 5,90,355/-. 6. BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED THAT NO DOUBT ALL THE ACCOUNTS WERE SETTLED BY WAY OF BOOK ENTRIES AND TH E BOOK TRANSACTIONS RESULTED IN TRADING PROFIT OF RS. 25,94,500/- WHICH WAS OFFERED FOR TAXATION. IT WAS STRONGLY PLEADED THAT THERE WAS NO REASON FO R THE A.O. TO ESTIMATE ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 5 THE EXPENDITURE @ 1%. AFTER CONSIDERING THE FACTS A ND THE SUBMISSIONS, THE LD. CIT(A) RESTRICTED THE ADDITION OF RS. 2 LAKHS. 7. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE REITERAT ED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 8. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FAC T EMANATING FROM THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FAC T IS THAT THE ASSESSEE HAS SHOWN TRADING PROFIT OF RS. 25,94,500/- FROM TH E ALLEGED TRANSACTIONS SETTLED THROUGH BOOK ENTRIES. WE DO NOT FIND ANY RE ASON WHY EXPENDITURE HAS TO BE ESTIMATED ON SUCH TRANSACTION. BY NOT DEB ITING THE ALLEGED EXPENDITURE, NO PRUDENT BUSINESSMEN WOULD EXPOSE IT SELF TO A HIGHER RATE OF TAX. WE, THEREFORE, SET ASIDE THE FINDINGS OF TH E LD. CIT(A) AND DIRECT THE A.O. TO DELETE THE ADDITION OF RS. 2 LAKHS. GROUND NO. 4 IS ALLOWED. 9. GROUND NO. 5 RELATES TO THE DISALLOWANCE MADE ON AC COUNT OF LATE PAYMENT OF PF AND ESIC U/S.36(1)(VA) R.W.S. 2(24)(X). 10. THIS ISSUE IS NO MORE RES INTEGRA AS IT HAS BEEN DE CIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE BY THE HONBLE JURISDI CTIONAL HIGH COURT OF GUJARAT IN THE CASE OF GSRTC 366 ITR 170. RESPECTFU LLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F GUJARAT (SUPRA), GROUND NO. 5 IS DISMISSED. ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 6 11. GROUND NO. 6 RELATES TO THE ADDITION OF RS. 32,066/ - MADE ON ACCOUNT OF DEPRECIATION ON ELECTRICAL INSTALLATIONS CLAIMED BY THE ASSESSEE. 12. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED DEPR ECIATION ON ELECTRICAL INSTALLATION @ 25%. THE A.O. WAS OF THE FIRM BELIEF THAT THE APPLICABLE RATE IS 15% AS PER I.T. RULES. THE A.O. ACCORDINGLY ALLO WED THE DEPRECIATION AS PER I.T. RULES AND DISALLOWED THE EXCESS DEPRECIATI ON OF RS. 32,066/-. 13. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 14. BEFORE US, THE LD. COUNSEL COULD NOT JUSTIFY THE CL AIM OF HIGHER RATE OF DEPRECIATION WHEN THE ELIGIBLE RATE OF DEPRECIATION IS 15% ONLY AS PER I.T. RULES. THEREFORE, NO INTERFERENCE IS CALLED FOR. GR OUND NO. 6 IS DISMISSED. 15. GROUND NO. 7 IS PREMATURE AND IS ACCORDINGLY DISMIS SED. 16. GROUND NO. 8 RELATES TO THE CHARGING OF INTEREST U/ S. 234B & 234C OF THE ACT. CHARGING OF INTEREST IS MANDATORY, THOUGH CONS EQUENTIAL. WE, ACCORDINGLY, DIRECT THE A.O. TO CHARGE INTEREST AS PER THE PROVISIONS OF THE LAW. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 702/AHD/2012 FOR A.Y. 2005-06 ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 7 18. GROUND NO. 1- THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN LAW AND IN FACTS HAS SET ASIDE THE DISALLOWANCE MAD E OUT OF PRELIMINARY EXPENSES WITH A DIRECTION THAT SUCH EXPENDITURE BEI NG IN THE NATURE OF PRE- COMMENCEMENT EXPENSES SHOULD BE CAPITALIZED AND DEP RECIATION BE ALLOWED ON THE SAME. 19. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 700/AHD/2012 (SUPRA) QUA GROUND NO. 2 OF THAT APPEAL. FOR OUR DE TAILED DISCUSSION THEREIN, THIS GROUND IS DISMISSED. 20. GROUND NO. 2 RELATES TO THE ADDITION OF ON ACCOUNT OF DISALLOWANCE OF EXCESS DEPRECIATION CLAIMED ON ELECTRICAL INSTALLAT ION. 21. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 700/AHD/2012 QUA GROUND NO. 6 OF THAT APPEAL. FOR OUR DETAILED DISCU SSION THEREIN, GROUND NO. 2 IS DISMISSED. 22. GROUND NO. 3 RELATES TO THE ADDITION OF RS. 1.65 LA CS MADE U/S. 68 OF THE ACT. 23. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT IN THE LEDGER ACCOUNT OF UMIA DIESEL SUPPLIERS FOLLOWING CREDIT ENTRIES WERE SHOWN: DATE AMOUNT (RS.) MODE OF RECEIPT 25.06.2004 20,000 CASH ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 8 26.06.2004 15,000 CASH 28.06.2004 15,000 CASH 02.10.2004 17,500 CASH 04.10.2004 17,500 CASH 07.10.2004 80,000 CASH TOTAL 1,65,000/- 24. THE ASSESSEE FILED COPY OF LEDGER ACCOUNT CLAIMING THAT THE ASSESSEE HAD RECEIVED PAYMENT ON ACCOUNT OF SOME WORK DONE FOR T HE SAID PARTY. THE A.O. WAS OF THE OPINION THAT THE ASSESSEE HAS NOT F URNISHED ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM. THE A .O. ACCORDINGLY MADE ADDITION U/S. 68 OF THE ACT FOR RS. 1.65 LACS. 25. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND SUBMITTED THAT IT HAS RECEIVED 2,50,000/- FROM THE SAID PARTY FOR JOB WOR K OUT OF WHICH RS. 40,000/- WAS RECEIVED BY CHEQUE AND THE BALANCE WAS RECEIVED IN CASH AND THE TRANSACTIONS ARE DULY REFLECTED IN THE BOOKS. T HE LD. CIT (A) WAS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE AND CONFIRMED THE ADDITIONS MADE BY THE A.O. 26. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. PER CONTRA, THE LD. D .R. SUPPORTED THE FINDINGS OF THE A.O. ITA NOS. 700 & 702/AHD/2012 . A.YS. 2003-0 4 & 2005-06 9 27. IT IS TRUE THAT THE ASSESSEE HAS NOT ADDUCED ANY EV IDENCE IN SUPPORT OF ITS CLAIM. THE CLAIM OF THE ASSESSEE IS THAT THE MONEY HAS BEEN RECEIVED FROM SOME JOB WORK DONE FROM THE SAID PARTY BUT AT THE S AME TIME THE ASSESSEE COULD NOT SUPPORT HIS CONTENTION BY BRINGING ANY CO GENT EVIDENCE MATERIAL ON RECORD. SINCE, THE AMOUNTS HAVE BEEN FOUND CREDI TED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, PROVISIONS OF SECTION 68 SQUARELY APPLY. IF THE SAID AMOUNT PERTAINS TO SOME JOB WORK DONE BY THE ASSESS EE THEN THE SAME SHOULD HAVE BEEN MADE WITH THE SALES MADE BY THE AS SESSEE DURING THE YEAR UNDER CONSIDERATION. FAILING ON ALL COUNTS, NO INTERFERENCE IS CALLED FOR. GROUND NO. 3 IS ACCORDINGLY DISMISSED. 28. GROUND NO. 4 IS PREMATURE AND IS ACCORDINGLY DISMIS SED. 29. GROUND NO. 5 RELATES TO THE CHARGING OF INTEREST U/ S. 234B & 234C OF THE ACT. CHARGING OF INTEREST IS MANDATORY, THOUGH CONS EQUENTIAL. WE, ACCORDINGLY DIRECT THE A.O. TO CHARGE INTEREST AS P ER THE PROVISIONS OF THE LAW. 30. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 10 - 04- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 10 /04/2017