Sh. Krishan Kumar Budhwar, Haryana V. ITO, Rewari

ITA 723/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6489 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-03-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 10-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BEDOBINA CHAUDHURI
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO.723/DEL/2016 ASSESSMENT YEAR : 2011-12 KRISHAN KUMAR BUDHWAR, PROP. M/S BUDHWAR ENGG. WORKS, VILL. MALPURA, DHARUHERA, REWARI, HARYANA. VS. ITO, WARD- 2, REWARI. PAN : ADAPB 0071 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR, CA RESPONDENT BY : MS. BEDOBINA CHAUDHURI, SR.DR DATE OF HEARING : 01-03-2017 DATE OF PRONOUNCEMENT : 09-03-2017 O R D E R PER S.V. MEHROTRA, A.M : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 26.11.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON, U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), RELATING TO ASSESSMENT YEAR 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A JOB WORK CONTRACTOR, IN THE RELEVANT ASSESSMENT YEAR, WAS ENGAGED IN THE JO B WORK OF OMAX GROUP OF COMPANIES UNDER THE TWO PROPRIETORSHIP FIRM M/S BUDHWAR ENGG. AND M/S BUDHWAR AUTO INDUSTRIES AT VILLAGE MALPURA OF R EWARI. RETURN 2 ITA NO.723/DEL/2016 DECLARING AN INCOME OF RS.2,11,020/- WAS FILED. TH E ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.17,37,100/-, INTER-ALIA, MAKING ADDITION OF RS.3,58,090/- TREATING THE EXPENSES INCURRED FOR BU ILDING REPAIRS AND MAINTENANCE AS CAPITAL EXPENDITURE AND ALSO AN ADDI TION OF RS.1,71,354/- U/S 40A(3) OF THE ACT. THE ASSESSEES CLAIM OF LOSS ON SALE OF FIXED ASSETS AMOUNTING TO RS.9,19,756/- WAS DISALLOWED BY THE AS SESSING OFFICER. LD. CIT(A), WHILE PARTLY ALLOWING THE ASSESSEES APPEAL , CONFIRMED ALL THE THREE ADDITIONS EXCEPT REDUCING THE DISALLOWANCE U/S 40A( 3) FROM RS.1,71,354/- TO RS.1,38,821/-. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- (1) THAT THE ORDER DATED 26.11.2015 PASSED U/S 250 (6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS)- 2, GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED INCOME TAX OFFICER, WARD 2, R EWARI IN DISALLOWING LOSS ON SALE OF FIXED ASSETS OF RS. 9,19,756/- AS A BUSINES S LOSS. (2) THAT THE ORDER DATED 26.11.2015 PASSED U/S 250( 6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME-TAX (APP EALS)- 2, GURGAON IS AGAINST THE LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE: ACTION OF THE LEARNED INCOME TAX OFFICER, WARD 2, R EWARI IN DISALLOWING AN AMOUNT OF RS. 3,58,090/- OUT OF BUILDING REPAIR EXP ENSES ON THE GROUND THAT THE EXPENSES WERE NOT TOWARDS REPAIR AND MAINTENANCE BU T ALLEGEDLY IN THE NATURE CAPITAL EXPENSES. (3) THAT THE ORDER DATED 26.11.2015 PASSED U/S 250( 6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)- 2, GURGAON IS AGAINST THE LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE LEARNED INCOME TAX OFFICER, WARD 2, REWARI IN DISALLOWING A SUM OF RS. 1,38,821/- OUT OF RS. 1,71,354/- IN RESP ECT OF PAYMENTS MADE M/S HARSH AUTO CARE ALLEGEDLY IN VIOLATION OF SECTION 4 0A(3) OF THE IT ACT. 3 ITA NO.723/DEL/2016 3. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE DID NOT PRESS GROUND NO.1 AND, ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. 4. BRIEF FACTS APROPOS GROUND NO.2 ARE THAT THE ASS ESSING OFFICER NOTICED FROM PROFIT & LOSS ACCOUNT OF M/S BUDHWAR ENGINEERI NG WORKS THAT ASSESSEE HAD INCURRED EXPENSES OF RS.8,55,908/- ON ACCOUNT OF REPAIR AND MAINTENANCE, DURING THE YEAR UNDER CONSIDERATION. FROM REPLY FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT THE EX PENSES INCLUDED EXPENSES ON ACCOUNT OF BUILDING REPAIR AND MAINTENANCE OF RS .3,97,878/-. HE NOTED FROM THE BALANCE SHEET THAT THE VALUE OF BUILDING I N THE SCHEDULE OF FIXED ASSETS WAS SHOWN AT RS.2,46,672/-. KEEPING IN VIEW THE VALUE OF BUILDING VIS--VIS QUANTUM OF EXPENSES CLAIMED AS REPAIR AND MAINTENANCE, HE REQUIRED THE ASSESSEE TO JUSTIFY THE EXPENSES INCUR RED ALONG WITH SUPPORTING DOCUMENTS AND ASKED TO SHOW-CAUSE AS TO WHY THE SAM E SHOULD NOT BE CAPITALIZED. AFTER CONSIDERING THE ASSESSEES SUBM ISSIONS ALONG WITH WHICH THE ASSESSEE HAD SUBMITTED COPY OF LEDGER ACCOUNT O NLY, HE OBSERVED AS UNDER :- A PERUSAL OF THIS LEDGER ACCOUNT REVEALS THAT THES E EXPENSES WERE INCURRED ON PURCHASE OF CEMENT, BRICKS, RODI, ETC.. ALL THESE EXPENSES WERE INCURRED IN CASH AND ASSESSEE HAS NOT SUBMITTED ANY JUSTIFICATION AB OUT THE NATURE OF THESE EXPENSES NOR BILL/VOUCHERS WERE PRODUCED. ASSESSEE ALSO DID NOT EXPLAINED AS TO HOW THESE WERE CLAIMED AS REVENUE EXPENSES. IN VIE W OF THE FACTS AVAILABLE ON RECORD, I HOLD THESE EXPENSES TO BE OF CAPITAL NATU RE AND ACCORDINGLY CAPITALIZED UNDER THE HEAD BUILDING AND DEPRECIATION OF 10% IS ALLOWED. 4 ITA NO.723/DEL/2016 5. LD. CIT(A) CONFIRMED THE ASSESSING OFFICERS ACT ION, INTER-ALIA, OBSERVING THAT KEEPING IN VIEW THE FACTS OF THE CAS E, THE NATURE OF EXPENSES, THE QUANTUM OF EXPENSES AND THE VALUE OF ASSETS SHO WN IN THE BALANCE SHEET, IT WAS EVIDENT THAT THE EXPENSES OF RS.3,58, 090/- (WRONGLY MENTIONED AS RS.39,78,978/- IN LD. CIT(A)S ORDER) WERE NOT T OWARDS REPAIR AND MAINTENANCE BUT IN THE NAME OF CAPITAL EXPENSES. L D. COUNSEL SUBMITTED THAT GENUINENESS OF EXPENSES HAS NOT BEEN DOUBTED B ECAUSE THE ASSESSING OFFICER HAS ALLOWED DEPRECIATION AFTER CAPITALIZING THESE EXPENSES. HE PRODUCED COPY OF LEDGER ACCOUNT OF REPAIRS AND MAIN TENANCE (BUILDING) FROM WHICH IT IS EVIDENT THAT THE PAYMENTS WERE MADE FOR PURCHASE OF CEMENT, TILES ETC.. THE ASSESSING OFFICER CONCLUDED THAT T HE EXPENSES WERE IN CAPITAL FILED PRIMARILY BECAUSE IN THE FIXED ASSETS SCHEDUL E THE VALUE OF BUILDING WAS SHOWN AT RS.2,46,672/-. I DO NOT FIND ANY JUST IFICATION IN THE REASONING OF ASSESSING OFFICER CONFIRMED BY LD. CIT(A) BECAUS E VALUE OF BUILDING AS PER BOOKS PRIMARILY REPRESENTED WRITTEN DOWN VALUE OF BUILDING. THE ASSESSEE HAD EXPLAINED THAT THE BUILDING WAS MORE 1 0-15 YEARS OLD. THE ASSESSEE HAD INCURRED THESE EXPENSES THROUGHOUT THE YEAR AND SINCE THE BUILDING WAS OLD, THEREFORE, IT REQUIRED REGULAR RE PAIRS. UNDER THESE CIRCUMSTANCES, I AM OF THE CONSIDERED OPINION THAT THE EXPENSES INCURRED BY ASSESSEE WERE ONLY FOR THE PURPOSES OF REPAIR AND M AINTENANCE OF BUILDING 5 ITA NO.723/DEL/2016 AND, THEREFORE, ALLOWABLE AS REVENUE EXPENDITURE. IN THE RESULT, THIS GROUND IS ALLOWED. 6. BRIEF FACTS APROPOS GROUND NO.3 ARE THAT THE ASS ESSEE HAD CLAIMED EXPENSES ON ACCOUNT OF VEHICLE RUNNING AND MAINTENA NCE OF RS.2,20,891/-. FROM THE DETAILS FURNISHED BY ASSESSEE, THE ASSESSI NG OFFICER NOTICED THAT ASSESSEE HAD INCURRED EXPENSES ON 22.01.2011 OF RS. 1,71,354/- (83519+87835) TO M/S HARSH AUTO CARE FOR CAR REPAIR . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN THE PAYME NTS IN CASH FOR LESS THAN RS.20,000/- FROM 22.01.2011 TO 10.03.2011 IN ITS LE DGER ACCOUNT ON DIFFERENT DATES. KEEPING IN VIEW THE DETAILS OF M/S HARSH AU TO CARE AND VOUCHERS OF THE SAME AMOUNT AND SAME BILL, HE CONCLUDED THAT WH OLE PAYMENT WAS MADE IN ONE GO AND THIS WAS AN AFTERTHOUGHT TO BIFURCATE THE PAYMENTS BELOW RS.20,000/-. HE, ACCORDINGLY, HELD THAT ASSESSEE H AD VIOLATED THE PROVISIONS OF SECTION 40A(3) AND DISALLOWED THE SUM OF RS.1,71 ,354/-. LD. CIT(A) CONFIRMED THE ASSESSING OFFICERS ACTION AFTER ALLO WING THE CLAIM OF RS.32,533/- WHICH WAS PAYABLE AS ON 31.03.2011. 7. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE RECORD OF THE CASE. IN THE PRESENT SET OF FACTS, T HE ASSESSING OFFICER PRIMARILY DOUBTED THAT THE PAYMENT WAS MADE IN ONE GO BUT WAS SPLIT OVER DIFFERENT DATES BECAUSE PAYMENT HAD BEEN MADE AGAIN ST TWO BILLS OF M/S 6 ITA NO.723/DEL/2016 HARSH AUTO CARE OF RS.83,519/- PLUS RS.87,835/-. THE CREDIBILITY OF ASSESSEES REGULAR BOOKS OF ACCOUNT COULD BE REJECT ED ONLY BY BRING ON RECORD A CONCRETE EVIDENCE FROM M/S HARSH AUTO CARE BY ASSESSING OFFICER. IT IS TRUE THAT THE ONUS LIES ON ASSESSEE TO SUBSTA NTIATE ITS CLAIM BUT AT THE SAME TIME IF ASSESSEE HAS DISCHARGED ITS PRIMARY ON US THEN IT IS FOR THE ASSESSING OFFICER TO BRING EVIDENCE ON RECORD TO CO NTRADICT THE ASSESSEES CLAIM. IT IS WELL SETTLED LAW THAT SUSPICION, HOWS OEVER STRONG, CANNOT REPLACE THE EVIDENCE. I, THEREFORE, DO NOT FIND ANY REASON FOR REJECTING THE ASSESSEES CLAIM OF PAYMENT BEING MADE FOR LESS THAN RS.20,000 /- OVER THE PERIOD AS PER LEDGER ACCOUNT. IN THE RESULT, THIS GROUND IS ALSO ALLOWED. 8. RESULTANTLY, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MARCH, 2017. SD/- (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED : 09-03-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI