Assistant Commissioner of Income Tax, circle-2(2)(1), Bengaluru V. Shri. Munirathna, Bengaluru

ITA 749/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0177 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 12-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S T SESHADRI
• Assessee Lawyers: NARAYAN MURTHY
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO.749 (BANG) 2018 (ASSESSMENT YEAR : 2013 14) THE ACIT, CIRCLE 2 (2) (1), APPELLANT BANGALORE. VS SHRI MUNIRATHNA, RESPONDENT NO. 147, 11 TH A CROSS, VIYALIKAVAL, BANGALORE 560003. PAN. ACUPM2547E ASSESSEE BY : SHRI NARAYAN MURTHY, C. A. REVENUE BY : SHRI S. T. SESHADRI, JCIT DR DATE OF HEARING : 23 08 2018 DATE OF PRONOUNCEMENT : 20 09 2018 O R D E R PER A. K. GARODIA, A.M.: THIS APPEAL IS FILED BY THE REVENUE WHICH IS DIRECT ED AGAINST THE ORDER OF CIT (A) 2 BANGALORE DATED 28.11.2017 FOR A. Y. 20 13 14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. CIT(A) HAS INCORRECTLY BASED HIS DECISION ON WIT HDRAWAL OF CASH FROM BANK ACCOUNTS WHEREAS THE DISALLOWANCE WAS MAD E BY THE AO ON ACCOUNT OF NON-SUBMISSION OF THE LEDGER EXTRACTS OR ANY OTHER DOCUMENTS THAT COULD EXPLAIN THAT WHEN AND HOW MUCH SALARY WAS PAID TO DIFFERENT PERSONS BY THE ASSESSEE. 2. CIT (A) HAS INCORRECTLY STATED THAT THE PROVISIO NS OF SECTION 40A (3A) CANNOT BE APPLIED DURING THE YEAR BECAUSE NO S UCH EXPENDITURE INVOLVING CASH PAYMENT OF MORE THAN RS. 20,000/- WA S INCURRED DURING THE YEAR, IGNORING THE PROVISIONS OF SECTION 40A (3 A), WHICH ARE NOT IN THE NATURE OF DISALLOWANCE BUT IN THE NATURE OF DEE MED PROFIT RELATED TO EXPENDITURE DEBITED IN EARLIER YEARS. ITA NO. 749(BANG)2018 2 3. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSME NT ORDER. AS AGAINST THIS, LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF C IT (A). HE DRAWN OUR ATTENTION TO PARA 5.2 OF THE ORDER OF CIT (A) AND P OINTED OUT THAT IN THIS PARA, A CATEGORICAL FINDING IS GIVEN BY THE LEARNED CIT (A) THAT THE ASSESSEE HAD THE CLOSING WORK IN PROGRESS AS ON 31.03.2013 AND THE A O HAS SIMPLY LOOKING AT THE CASH WITHDRAWAL FROM THE BANK, INVOKED THE PROV ISIONS OF SECTION 40A (3A) WITHOUT ESTABLISHING THAT THE ASSESSEE HAS INCURRED THE EXPENDITURE IN CASH ABOVE RS. 20,000/-. HE POINTED OUT THAT THIS FINDIN G IS ALSO GIVEN BY CIT (A) THAT MAJOR AMOUNT OF DEDUCTION CLAIMED IS TOWARDS THE OP ENING WORK IN PROGRESS RS. 594,86,328/- B/F FROM PREVIOUS YEAR AND THE BALANCE EXPENSES OF RS. 69,08,835/- IS TOWARDS STATUTORY PAYMENTS SUCH AS B ANK CHARGES, VAT, PROFESSIONAL TAX, SALARIES AND DEPRECIATION ETC. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT THIS IS ADMITTED POSITION OF FACT THAT THE ASSESSEE HAS NOT MAINTAINED BOOKS OF ACCOUNT AND OFFERED INCOME ON ESTIMATE BASIS AT RS. 73,29,351/- AGAINST A TURNOVER OF RS. 731,33,914/-. THE AO ON PAGE 5 OF THE ASSESSMENT OR DER IN PARA 7 HAS HELD THAT SINCE BOOKS ARE NOT MAINTAINED, INCOME OF THE ASSESSEE IS ESTIMATED @ 20% OF TURNOVER LESS STATUTORY EXPENSES AND BENEFIT OF INCOME ALREADY OFFERED BY THE ASSESSEE IS ALSO GRANTED. IF INCOME IS ESTIM ATED @ 20% OF TURNOVER, THE SAME COMES TO RS. 146,26,783/- AND FROM THIS, DEDUC TION IS TO BE ALLOWED FOR STATUTORY EXPENSES OF RS. 69,08,835/-. IN THIS MANN ER, TAXABLE INCOME COMES TO RS. 77,17,948/-. BUT ON PAGE 8 OF THE ASSESSMENT OR DER, THE AO HAS WORKED OUT CASH EXPENSES AT RS. 588,95,728/- ON ARBITRARY BASIS BY DEDUCTING FROM TOTAL TURNOVER OF RS. 731,33,914/- TWO AMOUNTS BEIN G PROFIT DECLARED BY THE ASSESSEE RS. 73,29,351/- AND STATUTORY EXPENSES RS. 69,08,835/-. WE ARE SAYING THAT THIS COMPUTATION OF CASH EXPENSES IN VI OLATION OF SECTION 40A (3A) IS ON ARBITRARY BASIS BECAUSE NO BASIS FOR HOLDING SO IS INDICATED BY THE AO IN THE ASSESSMENT ORDER. WE ALSO FIND THAT ON PAGE 3 O F THE ASSESSMENT ORDER, THE AO HAS NOTED THAT THE ASSESSEE WITHDRAWN FROM B ANK AN AMOUNT OF RS. 520.18 LACS IN CASH DURING 7 TH MAY 2013 TON 9 TH MAY 2013 AND IN REPLY TO A QUERY OF THE AO ABOUT THE PURPOSE OF SUCH CASH WITH DRAWAL, IT IS SUBMITTED BY THE ASSESSEE BEFORE THE AO AS NOTED BY THE AO ON PA GE 4 OF THE ASSESSMENT ORDER THAT THIS CASH WAS UTILIZED FOR REPAYMENT OF THE PROPERTY ADVANCE RECEIVED IN EARLIER YEARS. THE AO HAS BRUSHED ASIDE THIS EXP LANATION AND JUMPED TO THIS ITA NO. 749(BANG)2018 3 CONCLUSION THAT THIS CASH WAS USED TO MAKE PAYMENTS IN VIOLATION OF SECTION 40A (3A). WE ALSO FIND THAT AS PER LETTER DATED 01 .12.2016 TO AO AS AVAILABLE ON PAGES 21 TO 23 OF THE PAPER BOOK, IT WAS EXPLAIN ED BY THE ASSESSEE THAT THERE WAS TOTAL LIABILITIES OF THE ASSESSEE AS ON 3 1.03.2013 OF RS. 14,26,74,000/- AND IT INCLUDED RS. 20.74 LACS BEING RENTAL ADVANCE AND RS. 1406 LACS BEING PROPERTY ADVANCE AND AS ON 31.03.20 14, SUCH LIABILITY WAS REDUCED TO RS. 778.15 LACS INCLUDING RS. 22.65 LACS BEING RENTAL ADVANCE AND RS. 765.50 LACS BEING PROPERTY ADVANCES. THE AO HAS NOT DOUBTED THIS SUBMISSION BECAUSE THERE IS NO ADVERSE COMMENT OF T HE AO IN THE ASSESSMENT ORDER. THESE FACTS SHOW THAT PROPERTY ADVANCES HAS BEEN REDUCED BY RS. 640.50 LACS AND IF THIS IS ACCEPTED AS DONE BY THE AO, THE CASH WITHDRAWAL FROM BANK STANDS EXPLAINED AND THERE IS NO CASH LEF T WITH THE ASSESSEE TO MAKE PAYMENTS IN VIOLATION TO THE PROVISIONS OF SECTION 40A (3A) AND THIS IS ALSO TRUE THAT THE AO HAS NOT POINTED OUT ANY SPECIFIC INSTAN CE OF SUCH PAYMENT IN VIOLATION OF SECTION 40A (3A) AND AS PER THE ASSESS MENT ORDER, THE CONCLUSION OF THE AO IS SIMPLY ON THIS BASIS THAT THERE IS HUG E CASH WITHDRAWAL PURPOSE OF WHICH IS NOT EXPLAINED ALTHOUGH THE PURPOSE IS EXPL AINED BY THE ASSESSEE IN HIS LETTER DATED 01.12.2016 AVAILABLE ON PAGES 21 TO 23 OF THE PAPER BOOK. HENCE, IN OUR CONSIDERED OPINION, IN VIEW OF THESE FACTS, THE ADDITION MADE BY THE AO WAS RIGHTLY DELETED BY CIT (A) AND WE DECLINE TO IN TERFERE IN THE ORDER OF CIT (A). 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE, DATED, THE 20 TH SEPTEMBER, 2018. /MS/ ITA NO. 749(BANG)2018 4 COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.