THE ACIT 11(2), MUMBAI V. SHRI S. GANESH, MUMBAI

ITA 7115/MUM/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1570 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 02-03-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 30-11-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANT J LAL
• Assessee Lawyers: S GANESH
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SHRI R.S.PADVEKAR, JM ITA NO.7115/MUM/2007 : ASST.YEAR 2004-2005 THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE 11(2) MUMBAI. VS. SHRI S.GANESH 10, FAIRFIELD, 2 ND FLOOR 112, CHURCHGATE, MUMBAI 400 020. PA NO.AAGPS5047M. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HEMANT J.LAL RESPONDENT BY : SHRI S.GANESH O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 28.09.2007 IN RELATION TO THE ASSESSMENT YEAR 2004-2005. 2. FIRST GROUND IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A)-XI, MUMBAI, ERRED IN DELETING THE ADDITIO N OF RS.4,97,894/- OUT OF TOTAL ADDITION MADE BY A.O. OF RS.14,97,894/ - HOLDING THAT THE SAME SHOULD BE ALLOWED AS CURRENT REPAIRS. 3. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE CLAIMED DEDUCTION OF RS.14,97,894 TOWARDS OFFICE EXPENSES. THE ASSESS ING OFFICER REQUIRED THE SUBMISSION OF BILLS / VOUCHERS IN SUPPORT OF THE E XPENSES. NO DETAIL WAS FURNISHED EXCEPT FOR MAINTAINING THAT THESE EXPENSES WERE INC URRED ON NEWLY ACQUIRED OFFICE. IN THE ABSENCE OF ANY DETAIL FILED BY THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED THE ENTIRE SUM. IN THE FIRST APPEAL IT WAS CONTENDE D ON BEHALF OF THE ASSESSEE THAT THE REPAIR AND RENOVATION WERE MADE TO THE NEWLY ACQUIR ED OFFICE BY M/S.S.SODHI, CIVIL ENGINEER AND INTERIOR DESIGNER, TO WHOM ALL T HE PAYMENTS WERE MADE BY ITA NO.7115/MUM/2007 SHRI S.GANESH. 2 CHEQUES. THE LEARNED CIT(A) CALLED FOR THE REMAND R EPORT FROM THE A.O., FROM WHERE IT TRANSPIRED THAT THE ASSESSEE HAD OFFERED TO AGREE FOR ADDITION OF RS.5,00,00 SUBJECT TO DEPRECIATION, FOR AVOIDING ANY CONTROVE RSY. THE LEARNED CIT(A) OBSERVED THAT THERE WAS NOTHING IN THE ASSESSMENT O RDER TO DEMONSTRATE THAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS BOGUS. HOW EVER CONSIDERING THE FACT THAT THE ELEMENT OF CAPITAL EXPENDITURE COULD NOT BE RUL ED OUT, HE DIRECTED TO CAPITALIZE RS.10,00,000 AND ALLOW DEPRECIATION THEREON AND FUR THER SUM OF RS.4,97,894 BE ALLOWED AS CURRENT REPAIRS. THE REVENUE IS IN APPEA L AGAINST SUCH FINDING OF THE LEARNED CIT(A) IN THE TERMS SET OUT ABOVE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THE DEPARTMENT IS AGGRIEVE D ONLY AGAINST THE DELETION OF ADDITION OF RS.4,97,894 OUT OF TOTAL ADDITION MADE BY THE A.O. FOR RS.14.97 LAKHS, HOLDING THE SAME TO BE ALLOWED AS CURRENT REPAIRS. INSOFAR AS THE GENUINENESS OF THE EXPENDITURE IS CONCERNED, THE FINDING OF THE LEARNE D CIT(A) HAS REMAINED UNCHALLENGED. IT, THEREFORE, BOILS DOWN THAT AS A GAINST THE TOTAL ADDITION OF RS.14.97 LAKHS MADE BY THE ASSESSING OFFICER ON THI S COUNT, THE LEARNED CIT(A) HELD THE ENTIRE EXPENDITURE TO BE GENUINE BUT OF CA PITAL NATURE TO THE TUNE OF RS.10 LAKHS AND REVENUE TO THE TUNE OF RS.4.97 LAKHS. AS THE REVENUE HAS ONLY CHALLENGED THE TREATMENT OF RS.4.97 LAKHS GIVEN TO THE EXPENSE S AS REVENUE EXPENDITURE, IT IMPLIES THAT THE GENUINENESS OF THE EXPENDITURE IS NOT IN DOUBT. OUR SCOPE IS RESTRICTED ONLY IN DECIDING AS TO WHETHER SUCH AMOU NT OF RS.4.97 LAKHS BE CONSIDERED AS CURRENT REPAIRS OR CAPITAL EXPENDITUR E. THE ASSESSEE, WHO APPEARED IN PERSON, SUBMITTED THAT THE REPAIR WORK WAS UNDERTA KEN BY M/S.ARCON, THE CONCERN OF MR.S.SODHI, A CIVIL ENGINEER AND INTERIOR DESIGN ER. AS THE SAID WORK WORTH RS.14.97 LAKHS WAS CARRIED OUT TO A BUILDING NEWLY ACQUIRED BY THE ASSESSEE, THE ONUS WAS ON HIM TO PROVE THAT THE EXPENDITURE WAS N OT ON RENOVATION OF BUILDING. HAVING FAILED TO ADDUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM OF IT BEING A REVENUE EXPENDITURE, WE ARE OF THE CONSIDERED OPINION THAT THE AMOUNT OF RS. 4.97 LAKHS BE ITA NO.7115/MUM/2007 SHRI S.GANESH. 3 ALSO TREATED AS CAPITAL EXPENDITURE IN LINE WITH TH E VIEW TAKEN BY THE LEARNED CIT(A) FOR RS.10 LAKHS. ACCORDINGLY WE HOLD THAT NO DEDUCTION CAN BE ALLOWED FOR CURRENT REPAIRS BUT AT THE SAME TIME THE ENTIRE AM OUNT OF RS.14.97 LAKHS BE TREATED AS CAPITAL EXPENDITURE ELIGIBLE FOR DEPRECIATION. 5. GROUND NO.2 IS AGAINST THE DELETION OF ADDITION OF RS.1,92,27,000 MADE U/S.69 OF THE ACT AND FURTHER DISALLOWANCE OF DEPRE CIATION ON THE SAME AMOUNTING TO RS.19,44,750. THE AO NOTICED THAT THERE WAS ADDI TION TO THE ASSETS TO THE ABOVE EXTENT. ON BEING CALLED UPON TO EXPLAIN ABOUT IT, T HE ASSESSEE STATED HE HAS PURCHASED OFFICE PREMISES FOR RS.1,90,80,000 BY CHE QUE DRAWN ON OREINTAL BANK OF COMMERCE (HEREINAFTER CALLED OBC BANK) AND FURTHER NEW AIR CONDITIONERS WERE PURCHASED FOR A SUM OF RS.1,51,000 AGAIN BY CHEQUE DRAWN ON OBC BANK. THE A.O. DID NOT ACCEPT THE ASSESSEES CONTENTION FOR T HE REASON THAT AUDIT REPORT DID NOT INDICATE THE NAME OF OBC BANK. DURING THE COURSE O F FIRST APPELLATE PROCEEDINGS IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THAT HE HAD ACCOUNT WITH GLOBAL TRUST BANK (HEREINAFTER CALLED GTB) WHICH BANK WAS TAKEN OVER BY THE OBC BANK AFTER THE CLOSE OF THE YEAR I.E. ON 14.8.2005. THE LEARNE D CIT(A) CALLED FOR THE REMAND REPORT FROM A.O. ON THIS ISSUE, WHO REPLIED THAT S UCH DETAILS WERE NOT FILED BEFORE HIM AT THE ASSESSMENT STAGE BUT DURING THE REMAND P ROCEEDINGS A LETTER WAS GOT FILED FROM OBC BANK CERTIFYING THAT THE ASSESSEE HA D SAVING BANK ACCOUNT WITH GTB WHICH WAS TAKEN OVER BY OBC BANK. IN THE LIGHT OF THESE FACTS, THE LEARNED CIT(A) DELETED THE ADDITION. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSING OFFICER DI D NOT DOUBT THAT THE ASSESSEE, IN FACT, PURCHASED ONE BUILDING AS OFFICE PREMISES. H IS REASON FOR THIS ADDITION WAS THAT THE CLAIM OF THE ASSESSEE HAVING MADE THE PAY MENT THROUGH OBC BANK WAS NOT CORRECT INASMUCH AS NO SUCH BANK ACCOUNT WAS AP PEARING IN ASSESSEES BALANCE SHEET. THE REASON FOR SUCH MISMATCH OF THE NAME OF GTB WITH OBC BANK WAS ITA NO.7115/MUM/2007 SHRI S.GANESH. 4 THAT THE ASSESSEES HITHERTO BANKER GTB GOT MERGED WITH OBC BANK LATER ON AND ON THE BASIS OF THE STATEMENT MADE BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS, HE HAD BANK ACCOUNT WITH OBC BANK ONLY . PAGE 15 OF THE PAPER BOOK IS COPY OF CERTIFICATE ISSUED BY OBC BANK INDICATIN G THAT THE ASSESSEE HAD BANK ACCOUNT WITH GTB PRIOR TO ITS TAKEOVER BY OBC IN AU GUST 2005. IN VIEW OF THESE FACTS IT BECOMES CLEAR THAT THE DOUBT IN THE MIND O F THE ASSESSING OFFICER ABOUT THE NAME OF THE BANK BEING OBC OR GTB, A SOLE REASON FO R MAKING DISALLOWANCE, WAS GENUINELY REMOVED IN THE REMAND PROCEEDINGS WHEN A LETTER FROM OBC BANK WAS FILED BEFORE THE A.O. IT IS OBVIOUS THAT WHEN THE ASSESSEE MAKES PAYMENT OUT OF BANK ACCOUNT, WHICH IS DISCLOSED IN THE BOOKS OF A CCOUNT, THERE CANNOT BE ANY QUESTION OF MAKING ADDITION U/S.69 ON ACCOUNT OF UN EXPLAINED INVESTMENTS. FOR THESE REASONS WE APPROVE THE VIEW TAKEN BY THE LEAR NED CIT(A) AND HOLD THAT THE ADDITION OF RS.1.92 CRORE WAS RIGHTLY DELETED BY TH E LEARNED CIT(A). THE SECOND PART OF THIS GROUND, BEING THE DELETION OF DEPRECI ATION AMOUNTING TO RS.19.44 LAKHS, IS CONSEQUENTIAL IN NATURE AND HENCE ALLOWED ACCORDINGLY. THIS GROUND IS NOT ALLOWED. 7. LAST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.87,46,321. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE HAD SHOWN UNSECUR ED LOANS AMOUNTING TO RS.87.46 LAKHS IN HIS BALANCE SHEET. THE ASSESSEE WAS REQUES TED TO SUBMIT LOAN CONFIRMATION AND CREDITWORTHINESS OF THE CREDITORS. VIDE HIS LE TTER DATED 5.12.2006, THE ASSESSEE STATED THAT THERE WERE NO FRESH LOANS AND ONLY DEPO SIT OF DIVIDEND ETC. IN THE BANK ACCOUNT IN THE JOINT NAMES OF ASSESSEES FATHER, MO THER AND HIMSELF. NOT CONVINCED THE A.O. MADE ADDITION FOR THE SAID SUM, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THERE WAS A COMMON ACCOUNT IN HDFC BANK USED BY THE ASSESSEE, HIS FATHER AND MOTHER. BOTH THE PARENTS O F THE ASSESSEE ARE REGULARLY ITA NO.7115/MUM/2007 SHRI S.GANESH. 5 ASSESSED TO TAX. THEIR PERMANENT ACCOUNT NUMBERS WE RE ALSO INTIMATED TO THE DEPARTMENTAL AUTHORITIES. SINCE THE ASSESSEE HAS R ECORDED THIS COMMON ACCOUNT IN HIS BOOKS OF ACCOUNT, THE TRANSACTION RELATING TO T HE PARENTS WERE ACCORDINGLY DEBITED OR CREDITED IN THEIR RESPECTIVE PERSONAL AC COUNTS. FOR EXAMPLE, IF A DIVIDEND OF RS.100 IS RECEIVED BY THE ASSESSEES FATHER, WHI CH IS DEPOSITED IN THE COMMON BANK ACCOUNT, THE SAID AMOUNT WILL BE DEBITED IN TH E BANK ACCOUNT IN THE BOOKS OF ASSESSEE AND CREDITED TO THE FATHERS ACCOUNT. IN VIEW OF THE FACT THAT THE CREDIT AMOUNTS OF RS.87.46 LAKHS REPRESENT THE AMOUNTS DEB ITED TO THE COMMON BANK ACCOUNT IN ASSESSEES BOOKS OF ACCOUNT, WE ARE OF T HE CONSIDERED OPINION THAT THERE IS NO RECEIPT OF LOAN OR DEPOSIT BY THE ASSESSEE TH ROUGH SUCH TRANSACTIONS. WE, THEREFORE, UPHOLD THE VIEW TAKEN BY THE LEARNED CIT (A) ON THIS ISSUE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 4 TH DAY OF JUNE, 2010. SD/- SD/- ( R.S.PADVEKAR ) ( R.S.SYAL ) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI : 4 TH JUNE, 2010 . DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENTS. 3. THE CIT CONCERNED 4. THE CIT(A)-XI, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.