M/S. Bajaj Auto Centre, Kanpur V. I.T.O.-2(1), Kanpur

ITA 722/LKW/2017

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 9766 (ITAT-LUCKNOW)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 08-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAY NATH VERMA
• Assessee Lawyers: P K KAPOOR
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH SMC , LUCKNOW BEFORE SHRI. T.S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 722/LKW/2017 ASSESSMENT YEAR: 2014 - 15 M/S BAJAJ AUTO CENTRE 73/24, COLLECTORGANJ KANPUR V. INCOME TAX OFFICER 2(1) KANPUR T AN /PAN : AAEFB8517D (APP ELL ANT) (RESPONDENT) APPELLANT BY: SHRI P. K. KAPOOR, C.A. RESPONDENT BY: SHRI JAY NATH VERMA, D.R. DATE OF HEARING: 05 09 201 8 DATE OF PRONOUNCEMENT: 19 0 9 201 8 O R D E R PER P A RTHA SARATHI CHAUDHURY, J.M : THIS APPEAL PREFERRED BY THE ASSESSEE EMANATES FROM THE ORDER OF THE LD. CIT(A) - I, KANPUR DATED 18/8/2017 AS PER FOLLOWING GROUNDS OF APPEAL: - (1) THE LEARNED CIT(A) - I, KANPUR WAS WRONG IN LAW AND ON FACTS IN CONFIRMING THE FO LLOWING ADDITIONS/DISALLOWANCES MADE BY THE A.O IN THE ASSESSMENT ORDER FOR A.Y. 2014 - 15: - (I) RS. 83225 / - 1/5TH DISALLOWED OUT OF CONVEYANCE & VEHICLE RUNNING EXPENSES, TRAVELLING EXPENSES, DEPRECIATION ON CAR & TELEPHONE & MOBILE EXPENSES. (II) RS. 100 00/ - DISALLOWANCE OUT OF GENERAL EXPENSES & STAFF WELFARE EXPENSES ON ADHOC BASIS. ITA NO.722/LKW/2017 PAGE 2 OF 6 (III) RS. 10000/ - DISALLOWED OUT OF SALES PROMOTION EXPENSES & FREIGHT EXPENSES ON ADHOC BASIS. (2) THE LEARNED ASSESSING OFFICER WHILE CONFIRMING THE DISALLOWANCES HAS NOT P ROPERLY APPRECIATED THE FACTS OF THE CASE & NATURE OF SUCH EXPENSES. (3) IN ANY CASE & WITHOUT PREJUDICE THE DISALLOWANCE MADE & CONFIRMED ARE VERY HIGH & EXCESSIVE. (4) THAT THE ORDER OF THE LEARNED ASSESSING OFFICER IS AGAINST LAW, FACTS & PRINCIPLES OF NATURAL JUSTICE. 2 . BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF TRADING OF HSD & MOB IL OIL. RETURN FOR THE RELEVANT YEAR WAS FILED SHOWING AN INCOME OF RS.178280/. DURING THE COURSE OF ASS ESSMENT PR OCEEDINGS, IN RESPONSE TO STATUTORY NOTICES ISSUED ON THE ASSESSEE BY THE ASSESSING OFFICER UNDER SECTION 142(1) AND 143(2) OF THE ACT, ASSESSEE ATTENDED FROM TIME TO TIM E AND FURNISHED REPLIES AND NECESSARY DETAILS TO THE QUERIES RAISED BY THE ASSESSING O FFICER IN THE QUESTIONNAIRE AND SUBSEQUENT QUERIES DURING THE ASSESSMENT PROCEEDINGS AND ALSO PRODUCED BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHERS WHICH WERE TEST CHECKED. ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) WITH AN ASSESSED INCOME OF RS.2815 10/ - WHEREIN FOLLOWING ADDITIONS/DISALLOWANCES WERE MADE, WHICH ESSENTIALLY ARE THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL : - (1) THE ASSESSING OFFICER IN THE ASSESSMENT ORDER OBSERVES THAT DETAILS OF EXPENSES AS SUBMITTED BY THE ASSESSEE HAVE BEEN EXAMI NED AND IT IS FOUND THAT THE LOG BOOK FOR THE USE OF VEHICLES AND TELEPHONE WERE NOT MAINTAINED BY THE ASSESSEE AND HENCE PERSONAL USE OF VEHICLES AND TELE PHONES CANNOT BE RUL ED OUT. ITA NO.722/LKW/2017 PAGE 3 OF 6 THEREFORE, A SUM OF RS. 83,253 / - (20% OF TOTAL EXPENSES OF RS.4,16 ,267 / - ) ON ACCOUNT OF PERSONAL USE OF TELEPHONE AND MOBILES, WA S DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE A SSESSEE. (2) IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE HAS DEBITED A SUM OF RS.55,319 / - TOWARDS 'GENERAL EXPENSES' AND RS. 26,297 / - ON ACCOUNT OF 'ST AFF WELFARE EXPENSES' . ON VERIFICATION OF THESE EXPENSES WITH RELEVANT BILLS AND VOUCHERS IT WA S FOUND BY THE ASSESSING OFFICER THAT ASSESSEE HAS INCURRED MOST OF THESE EXPENSE! IN CASH WHICH ARE NOT FULLY VERIFIABLE, THEREFORE, ADDITION OF RS.10,000 / - WA S MADE ON AD - HOC BASIS OUT OF THESE EXPENSES AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. (3) FURTHER , ASSESSEE HAS DEBITED RS.42,943 / - AND RS.19,260 / - TOWARDS SALES PROMOTION AND FREIGHT EXPENSES RESPECTIVELY. SINCE MOST OF THE VOUCHERS ARE HANDMADE W HICH ARE NOT FULLY VERIFIAB LE, THEREFORE, AN AMOUNT OF RS. 10,000 / - ON AD - HOC BASIS IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE - FIRM. 3 . THE LD. CIT(A) HAD ASKED FOR PRODUCTION OF BOOKS OF ACCOUNT AND VOUCHERS FOR RE - VERIFICATION AND RE - ESTIMATION OF VARIOUS DISALLOWANCES AND ASSESSEE HAS NOT PRODUCED THEM BEFORE THE LD. CIT(A) AND EVEN LD. CIT(A) ON OTHER EXPENSES HAD CALLED FOR LEDGERS OF VARIOUS EXPENSES, RECORDS, CALL REGISTERS, CAR LOGBOOK AND SINCE THEY WERE NOT PRODUCED BEFORE HIM, LD. CIT(A) CONFIRMED ALL THE ADDITIONS MADE BY THE ASSESSING OFFICER. 4 . THE LD. A.R. OF THE ASSESSEE AT THE TIME OF HEARING VEHEMENTLY ARGUED THAT ALL THE DISALLOWANCES MADE BY THE ASSESSING OFFICER ARE ON ADHOC BASIS AS THE ASSESSING OFFICER HAS NOT SPECIFICALLY POINTED OUT TH E ITA NO.722/LKW/2017 PAGE 4 OF 6 EXPENSES WHICH ARE NOT VERIFIABLE AND IN THE ABSENCE OF CONDUCTING ANY SPECIFIC ENQUIRY BEFORE MAKING ADDITION, THESE DISALLOWANCES ACQUIRES THE CHARACTER AND NATURE OF AD - HOC DISALLOWANCES , WHICH ARE NOT PERMISSIBLE WITHIN THE SCOPE AND REALM OF TAXATIO N LAWS. IN SUPPORT OF THIS CONTENTION, LD. A.R. OF THE ASSESSEE RELIED ON FOLLOWING JUDICIAL DECISIONS: - ( 1 ) J.J. ENTERPRISES VS. CIT, 254 ITR 216 (SC) ( 2 ) KULDEEP SINGH SETHI VS. INCOME TAX OFFICER, WARD 1(2), LUCKNOW IN ITA NO.1446/ALLD/1997 OF ITAT LUCKNOW BEN CH. ( 3 ) MUKESH KUMAR MAHAWAR, SITPUAR VS. INCOME TAX OFFICER, SITAPUR IN ITA NO.615/LKW/2014 OF ITAT LUCKNOW BENCH. ( 4 ) M/S BHULLAR OXYGEN PVT. LTD., AMRITSAR VS. INCOME TAX OFFICER, WARD 4(1), AMRITSAR IN ITA NO.663/ASR/2015 OF ITAT AMRTISAR BENCH. 5 . THE LD. D.R., ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE PERUSED THE CASE RECORD AND HEARD THE RIVAL CONTENTIONS AND CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED BEFORE US. ON A PERUSAL OF THE ASSESSMENT ORDER WITH REGARD TO THE DISALLOW ANCES MADE ON GENERAL EXPENSES AND STAFF WELFARE EXPENSES OF RS.10,000/ - AND DISALLOWANCES ON ACCOUNT OF SALES PROMOTION EXPENSES AND FREIGHT EXPENSES, BOTH AT RS.10,000/ - EACH, ASSESSING OFFICER HIMSELF IN HIS ORDER HAS MENTIONED THAT THESE ADDITIONS ARE MADE ON ADHOC BASIS AND ADDED TO THE INCOME OF THE ASSESSEE. WITH REGARD TO THE DISALLOWANCES ON ACCOUNT OF TRAVELLING EXPENSES, TELEPHONE, ETC . , ASSESSING OFFICER HAS ADDED AN AMOUNT OF RS.83,253/ - NOT ON THE BASIS ITA NO.722/LKW/2017 PAGE 5 OF 6 OF ANY SPECIFIC ENQUIRY CONDUCTED BY HI M OR BY PROVIDING ANY EVIDENCE TO THE FACT THAT HOW THESE EXPENSES ARE BORNE OUT OF PERSONAL USE AND ON THE BASIS OF GUESS WORK HAS ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. THE LD. CIT(A), ON THE OTHER HAND, HAS CONFIRMED THESE ADDITIONS MADE BY T HE ASSESSING OFFICER SIMPLY ON THE GROUND THAT BOOKS OF ACCOUNT AND VOUCHERS WERE NOT PRODUCED BEFORE HIM. WE HAVE EXAMINED THE CASE RECORDS AND WE FIND, AS COMING OUT FROM ASSESSMENT ORDER ITSELF , THAT FROM TIME TO TIME ASSESSEE HAS PROVIDED ANSWER TO TH E QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER AND HAS ALSO PRODUCED BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHERS , WHICH WERE TEST CHECKED. WHEN ALL THESE DOCUMENTS W ERE THERE BEFORE THE DEPARTMENT, ASKING FOR FURTHER PRESENTATION OF THESE DOCUMENTS BE FORE THE LD. CIT(A) SEEMS TO BE A MEANINGLESS EXERCISE. THE POWER OF THE LD. CIT(A) BEING CO - TERMINUS WITH THAT OF THE ASSESSING OFFICER HAS ALSO NOT GONE INTO THE MERITS OF THE CASE REGARDING DISALLOWANCES AND HAS SUMMARILY DISPOSED OF THE APPEAL CONFIRM ING THE ADDITIONS MADE BY THE ASSESSING OFFICER. WE TAKE GUIDANCE FROM THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF J.J. ENTERPRISES VS. CIT (SUPRA) WHEREIN IT HAS BEEN CATEGORICALLY HELD THAT ADDITION TO THE INCOME OF THE ASSESSEE MADE ON THE BA SIS OF PURE GUESS WORK WAS UNSUSTAINABLE. SAME VIEW HAS BEEN REITERATED BY THE CO - ORDINATE ITAT ALLAHABAD BENCH IN ITA NO.1419/ALLD/1997 FOR ASSESSMENT YEAR 1994 - 95 RELYING ON ANOTHER APEX COURT DECISION IN THE CASE OF J.K. ENTERPRISES, 254 ITR 216. SIMI LAR ADHOC DISALLOWANCES WERE ALSO DELETED BY RESPECTIVE CO - ORDINATE ITAT BENCHES OF LUCKNOW AND AMRITSAR IN THE RESPECT CASES REFERRED TO HEREINABOVE IN THIS ORDER. IN THE INSTANT CASE, AS WE HAVE EXAMINED , ALL THE DISALLOWANCES WERE MADE ON ADHOC BASIS A ND ON THE BASIS OF PURE GUESS WORK, THEREFORE, RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS ON ITA NO.722/LKW/2017 PAGE 6 OF 6 THE ISSUE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT DELETION OF THESE ADHOC DISALLOWANCES THEREBY ALLOWING THE APPEAL OF THE ASSESSEE. 7 . IN THE RESULT, AP PEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 / 0 9 / 201 8 . SD/ - SD/ - [ T.S. KAPOOR ] [PARTHA SARATHI CHAUDHURY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 TH SEPTEMBER , 201 8 JJ: 0509 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CI T(A) 4 . CIT 5 . DR