SMT. VIJAYA SHRIVASTAVA, Kota V. ITO, Kota

ITA 754/JPR/2011

• Counselvise Citation: 75423114 RSA 2011
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 23-08-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Assessee Lawyers: C M BIRLA
• Keywords: Business income; Depreciation; Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.754/JP/2011 ASSESSMENT YEAR : 2004-2005 SMT. VIJAYA SHRIVASTAVA, W/O LATE SHRI KULDEEP VS. INCOME TAX OFFICER, SHRIVASTAVA, KOTA. WARD-2(1), KOTA. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.M. BIRLA RESPONDENT BY : SHRI D.K. MEENA DATE OF HEARING: 09.01.2012 DATE OF PRONOUNCEMENT: 13.01.2012 ORDER PER SHRI N.L. KALRA, A.M. 1. THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER O F LD. CIT (A) KOTA DATED 28.7.2011. 2. THE FIRST GROUND OF APPEAL IS IN RESPECT OF RELE TING THE CASE FOR SCRUTINY WAS NOT PRESSED AND IS DISMISSED. 3. THE SECOND GROUND OF APPEAL IS AS UNDER: THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING DISALLOWANCE OF A SUM OF RS.71,525/-, RS.18,000/-, RS.71760/- AND RS.39,929/- OUT OF IMPROVEMENT COST OF SHOPS SOLD, SALARIES, CAR MA INTENANCE EXPENSES AND DEPRECIATION, AND INTEREST TO PARTIES IN CASE OF AN AND PLAZA PROFIT & LOSS ACCOUNT IGNORING FACTS OF THE CASE, PAST HISTORY, O RDER OF HONBLE ITAT IN IMMEDIATELY PRECEDING YEAR AND SUBMISSIONS MADE BY THE APPELLANT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FU RTHER ERRED IN CONFIRMING DISALLOWANCE A SUM OF RS.16243/- OUT OF INTEREST PA YMENT. 2 4. THE A.O. NOTICED THAT ASSESSEE HAS CLAIMED BUSIN ESS INCOME FROM ANAND PLAZA AND SHRIRAM COMPLEX PROPERTIES. ACCORDING TO THE A.O., THE ASSESSEE HAS CLAIMED INCOME UNDER THE HEAD BUSINESS SO AS TO CLAIM HUGE EXPENSES UNDER TH E HEAD OF COST OF IMPROVEMENT, SALARIES, CAR MAINTAINCE, DEPRECIATION ON CAR AND INTEREST PAYMEN T TO PARTIES. THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE OF IMPROVEMENTS CARRIED OUT. THE ASSESSEE INSTEAD OF EXPLAINING THE NATURE OF EXPENSES, STATED THAT THERE ARE NO BILLS. BEFORE TH E A.O. VIDE REPLY DATED 29.11.2006 IT WAS SUBMITTED AS UNDER: THAT I DO NOT MAINTAIN REGULAR BOOKS OF ACCOUNT, H OWEVER I AM MAINTAINING MEMORANDUM BOOKS FOR ANAND PLAZA AND SHREERAM COMPL EX WHICH SHALL BE MADE AVAILABLE TO YOU FOR VERIFICATION. 5. NO MEMORANDUM BOOKS OF ACCOUNT WERE PRODUCED BEF ORE VERIFICATION. SIMILLARY IN RESPECT OF SALARY, IT WAS SUBMITTED THAT RS.2,000/- P.M. IS BEING PAID TO SUPERVISOR AND RS.1500/- P.M. FOR OFFICE BOY. THE NAMES OF THE EMPLOYEE WERE NOT DISCLOSED. THE A.O. DISALLOWED SALARY TO THE EXTENT OF RS.18,000/-. 6. IN RESPECT OF DISALLOWANCE OUT OF CAR DEPRECIATI ON & MAINTAINCE, THE A.O. IN HIS ORDER HAS OBSERVED AS UNDER: THE ASSESSEE HAS DEBITED RS.36,200/- AND 87,318/- A S CAR MAINTENANCE EXPENSES AND DEPRECIATION ON CAR RESPECTIVELY. ADMITTEDLY NO LOG BOOK FOR RUNNING OF CAR IS MAINTAINED. IN ABSENCE OF THE SAME IT IS HARDLY POS SIBLE TO ASCERTAIN AND BIFURCATE THE EXPENSES INCURRED FOR BUSINESS EXPEDIENCIES AND FOR PRIVATE PURPOSES. THE ASSESSEE VIDE WRITTEN REPLY DATED 21.12.2006 (PARA 5) SUBMITS. HOWEVER ITS DISALLOWANCES FOR PERSONAL USE CANNOT BE RULES OUT. THIS CLEARLY SHOWS THAT HE HIMSELF ADMITS THE FACT. THE ASSESSEE IS A WELL KNO WN POLITICIAN AND HIS MOST OF THE TIME IS PASSED IN ATTENDING HIS POLITICAL AFFAIRS F OR WHICH THE CAR IS USED EXTENSIVELY. NO OTHER VEHICLE IS OWNED BY THE ASSES SEE AND HIS FAMILY MEMBERS. HAD THERE BEEN ANY OTHER VEHICLE IN HIS POSSESSION THE SAME MIGHT HAVE BEEN REFLECTED IN THE BALANCE SHEET. THE USE OF CAR FOR ANAND PLAZA AND SHREERAM COMPLEX PROPERTIES, FROM WHICH BUSINESS INCOME SAID TO HAVE BEEN EARNED, IS NOR REQUIRED BECAUSE THERE WERE CONSTRUCTED IN PAST AND ARE READY FOR SALE AS SUCH THE CAR WAS EXTENSIVELY USED FOR POLITICAL AND PRIV ATE AFFAIRS OF THE ASSESSEE AND HIS FAMILY MEMBERS AS SUCH THE SAME IS DISALLOWED T O THE EXTENT OF 75% OF TOTAL 3 EXPENSES/DEPRECIATION CLAIM WHICH COMES TO RS.92639 /-. THE SAME IS HEREBY DISALLOWED AND ADDED TO THE TAXABLE INCOME OF THE A SSESSEE. 7. THE A.O. DISALLOWED INTEREST OF RS.39,929/- AFTE R OBSERVING AS UNDER: THE ASSESSEE HAS DEBITED RS.159714/- (76260+55489+5 267+22698) TOWARDS PAYMENT OF INTEREST TO PARTIES AGAINST THE INCOME O F ANAND PLAZA PROPERTY. AS PER ASSESSEE THE LOANS WERE RAISED FOR BUSINESS PURPOSE S AND THUS ALLOWING INTEREST THEREON. IT IS SEEN THAT THE ASSESSEE RAISED LOANS FROM SMT. CHANDRA KANTA AND SMT. KUSUM LATA AMOUNTING TO RS.754460/- (340000+41 4460) DURING THE YEAR AND PAID INTEREST @ 12%. DURING THE YEAR UNDER CONS IDERATION THE ASSESSEE SOLD ONLY FOUR SHOPS FOR WHICH THERE WAS NO NEED OF RAIS ING LOANS. FURTHER ACCORDING TO ASSESSEE THE IMPROVEMENT TO THESE SHOPS WAS CARR IED OUT FOR WHICH AN EXPENDITURE OF RS.112000/- WAS INCURRED (THOUGH THE ASSESSEE HAS NO EVIDENCE IN SUPPORT OF HIS CLAIM). THOUGHT NOT ADMITTING BUT IF IT BE TAKEN AS TRUE, EVEN THEN, THERE WAS NO NECESSITY TO RAISE HUGE LOANS OF RS.75 4460/- BECAUSE ONLY A PART OF SUCH AMOUNT WAS UTILIZED AS SUCH THE SAME CANNOT BE SAID FOR BUSINESS EXPEDIENCIES. IN HIS WRITTEN REPLY DATED 21.12.2006 , VIDE PARA 7 OF THE ASSESSEE HAS SUBMITTED THAT THE LOANS WERE UTILIZED FOR PURC HASE OF FDS. IF THIS THEORY IS APPLIED HERE, EVEN THEN IT WILL APPEAR FROM PERUSAL OF INTEREST A/C OF FDRS THAT THE ASSESSEE EARNED INTEREST ON FDFS @ 9% AND PAI D INTEREST @ 12% ON SUCH LOANS WHICH IS QUITE EXCESSIVE AND THUS RESTRICTED TO 9% BECAUSE NO PRUDENT BUSINESSMAN WOULD LIKE TO RAISE LOAN @ 12% FOR EARN ING INTEREST @ 9% ONLY. THE 1/4 TH OF THE INTEREST SO DEBITED IS DISALLOWED AND ADDED TO ASSESSEES TAXABLE INCOME. THE DISALLOWANCE WORKS OUT TO RS.39929/- WH ICH IS ADDED TO TAXABLE INCOME OF THE ASSESSEE. 8. BEFORE THE LD. CIT (A), THE ASSESSEE SUBMITTED A S UNDER: I AM ENCLOSING HEREWITH COPY OF ANAND PLAZA PROFIT & LOSS ACCOUNT & BALANCE SHEET FOR ASSTT. YEAR 2004-05 VIDE ANNEXURE-D WHERE FROM YOU WILL PLEASE FIND THAT IN PROFIT & LOSS ACCOUNT SKELTON COST OF 4 SHO PS RS.1,01,188/-, COST OF IMPROVEMENT OF 4 SHOPS RS. 112000/-, SALARIES OF SU PERVISOR AND OFFICE BOY RS.42,000/-, CAR MAINTENANCE EXPENSES RS.36,200/-, CAR DEPRECIATION RS.87,318/- AND INTEREST ON LOANS RS.1,59,714/- ARE CLAIMED. LO ANS ARE NOT DISPUTED BY LEARNED AO. EVEN SALARIES, CAR MAINTENANCE EXPENSES AND CAR DEPRECIATION HAS NOT BEEN DISPUTED BY HIM. THE HONBLE ITAT, JAIPUR BENCH WHILE DECIDING APPEAL FOR ASSTT. YEAR 2003-04 HAS ACCEPTED THAT THESE EXP ENSES ARE ALLOWABLE ONE. I THEREFORE REQUEST YOUR HONOUR TO PLEASE DELETE DISA LLOWANCES OF RS.90,000/-, RS.18,000/-, RS.92,639/- & RS.39,929/- FROM IMPROVE MENT COST OF SHOPS SOLD, SALARIES, CAR MAINTENANCE EXPENSES/DEPRECIATION AND INTEREST WHICH ARE ON FILMSY PRESUMPTIONS OF THE LEARNED AO AND ACCEPT THE DECLA RED RESULTS. I AM ENCLOSING SHRIRAM COMPLEX PROFIT & LOSS ACCOUN T & BALANCE SHEET FOR ASSTT. YEAR 2004-05 VIDE ANNEXURE-E WHERE FROM YOU WILL PL EASE FIND THAT INTEREST OF RS.40,145/- ARE APPEARING. IN SIMILAR CIRCUMSTANCES INTEREST EXPENSES OF 4 RS.38,737/- WHICH WERE DISALLOWED BY THE LEARNED AO WERE HELD ALLOWABLE BY HONBLE ITAT, JAIPUR BENCH IN ASSTT. YEAR 2003-04. I THEREFORE REQUEST YOUR HONOUR THAT FOLLOWING DECISION OF HONBLE ITAT DISA LLOWANCE OF RS.40,145/- BE DELETED. THAT GROUND NO.3(III) RELATES TO DISALLOWANCE OF RS .16,243/-. SIMILARLY ADDITIONS WERE MADE BY THE LEARNED AO IN ASSTT. YEAR 2003-04 WHICH WERE CONFIRMED BY HONBLE CIT (A) ALSO BUT THE HONBLE ITAT, JAIPUR B ENCH HAD REMITTED THIS ISSUE BACK TO THE LEARNED AO. I SUBMIT FOLLOWING RATIO OF DECISION OF HONBLE ITAT, JAIPUR BENCH THIS ISSUE MAY BE REMITTED BACK TO THE FILE OF AO FOR DECIDING IT AGAIN. 9. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE ALLOWED RELIEF AFTER OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSEES SUBMISSIUON AND AOS FINDINGS. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE BEFORE ME ALSO. THE S KELTON COST OF 4 SHOPS WAS RS.101188/- DURING THE YEAR. THE FACT THAT SKELTON SHOPS WERE SHOWN IN THE BALANCE SHEET AT THE STARTING OF THE YEAR AND FURNI SHED SHOPS WERE SHOWN AS SOLD PROVES THAT SOME EXPENDITURE MUST HAVE BEEN INCURRE D FOR IMPROVEMENT OF THESE SHOPS. IN ABSENCE OF ANY EVIDENCE FURNISHED BY THE ASSESSEE, THE AO WAS LEFT WITH NO OPTION BUT TO ESTIMATE THE SAME. CONSIDERING THE FACTS OF THE CASE, THE COST OF IMPR OVEMENT IS ESTIMATED AT 40% OF THE COST OF SKELTON AT RS.40,475/- AS AGAINST RS.22 ,000/- ESTIMATED BY AO. BEFORE ME ALSO NAMES OF THE EMPLOYEES/PERSONS TO WH OM THESE PAYMENTS WERE MADE, HAVE NOT BEEN FURNISHED. THEREFORE, THE GENUI NENESS OF PAYMENT ITSELF IS DOUBTFUL. CONSIDERING THE ABOVE DISALLOWANCE OF RS.18,000/- O UT OF SALARY EXPENSES IS CONFORMED. CONSIDERING THE FACTS OF THE CASE, AOS FINDING AND ASSESSEES STATEMENTS, I AM OF THE VIEW THAT 50% DISALLOWANCE OF CAR MAINTENANCE E XPENSES AND DEPRECIATION, AMOUNTING TO RS.61,760/- WOULD MEET THE ENDS OF JUS TICE. THE ASSESSEE GETS A RELIEF OF RS.30,879/-. I HAVE GONE THROUGH THE SAID ORDER AND FOUND THAT T HE FACTS ARE NOT SAME IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE HIMSELF HAS ADMITTED THAT THE LOANS WERE USED FOR PURCHASE OF FDS. THE ASSESSEE RECEIVED INT EREST @ 9% FROM THE BANK WHERE AS HE HAS PAID 12% INTEREST TO THE CREDITORS. ACCORDINGLY THE DISALLOWANCE OF INTEREST BY AO IS CONSIDERED REASONABLE AND CONF IRMED. THE AO MADE THE ADDITION OBSERVING AS UNDER: 5 IN THE INTEREST A/C THE ASSESSEE HAS SHOWN INTERES T INCOME OF RS.489832/- OF FDRS AND SB A/C (489050+782) AGAINST WHICH INTERES T PAYMENT TO SMT. SEEMA AGARWAL & KULDEEP SHRIVASTAVA & SONS AMOUNTING TO R S.64973/- (23493+41480) WAS MADE. ON PERUSAL OF THIS ACCOUNT IT IS NOTICED THAT THE ASSESSEE EARNED INTEREST @ 9% AND MADE PAYMENT @12% TO THE CREDITOR S. AS PER PARA 7 OF HIS REPLY DATED 21.12.2006 THE ASSESSEE SUBMITTED THAT FDR WERE MADE OUT LOANS TAKEN FROM SMT. SEEMA AGARWAL AND KULDEEP SHRIVASTA VA & SONS AND THUS CLAIMED PAYMENT OF INTEREST AS BUSINESS EXPENDITURE . IT IS WORTH MENTIONING THAT NO PRUDENT ASSESSEE WILL BORROW FUNDS @ 12% FOR EAR NING INTEREST INCOME @ 9% AS SUCH THE VERSION OF THE ASSESSEE DOES NOT APPEAR CORRECT. THE PAYMENT OF INTEREST TO THESE PERSONS IS, THEREFORE, RESTRICTED TO 9% AS AGAINST 12% CLAIMED. ACCORDINGLY 1/4 TH OF THE INTEREST SO PAID IS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE DISALLOWED AND ADDED TO THE INCOM E OF THE ASSESSEE. THE DISALLOWANCE AND ADDED TO THE INCOME OF THE ASSESSE E. THE DISALLOWANCE AND ADDED TO THE INCOME OF THE ASSESSEE. THE DISALLOWAN CE WORKS OUT OF RS.16243/-. THE SAME IS DISALLOWED AND ADDED TO ASSESSEES TAXA BLE INCOME. DURING THE COURSE OF HEARING THE ASSESSEE WAS ASKED TO FURNISH THE PURPOSE OF LOAN TAKEN. HOWEVER, NO DETAILS REGARDING UTILIZATI ON OF FUNDS WERE FURNISHED. IN VIEW OF THE ABOVE I AGREE WITH THE FINDINGS OF AO T HAT ON ONE HAND ASSESSEE IS RECEIVING INTEREST ON FDR @ 9% ONLY, WHERE AS HE IS PAYING INTEREST @ 12% TO THE CREDITORS. ACCORDINGLY, THE DISALLOWANCE OF INTEREST @ 1/4 TH OF INTEREST PAID, IS CONFIRMED. 10. WE HAVE HEARD BOTH THE PARTIES. IT IS NOTICED F ROM THE ORDERS OF LOWER AUTHORITIES THAT THE ASSESSEE HAS NEITHER PRODUCED THE BOOKS OF ACCOUNT NOR PRODUCED VOUCHERS. NO EVIDENCES WERE FILED. ARGUMENTS CAN NOT TAKE PLACE OF EVIDENCES. T HE LD. CIT (A) HAS ESTIMATED THE DISALLOWANCES NOTHING IS PLACED BEFORE US TO INDICA TE THAT DISALLOWANCE AS ESTIMATED BY LD. CIT (A) IS EXCESSIVE. THE ONUS WAS ON THE ASSESSEE TO E STABLISH THE EXPENSES. WE, THEREFORE, FEEL THAT LD. CIT(A) WAS JUSTIFIED IN RESTRICTING THE DISALLO WANCES TO THE EXTENT MENTIONED IN THE ORDER. 11. IT IS TRUE THAT TRIBUNAL VIDE ORDER DATED 30.10 .2009 RESTORED THE ISSUE OF DISALLOWANCE OF INTEREST ON THE GROUND THAT EXPLANATION OF THE ASSE SSEE WAS NOT CONSIDERED. HOWEVER, THE ORDER OF LD. CIT (A) AS AFTER ORDER OF TRIBUNAL AND HE HAS C ONSIDERED THE EXPLANATION, HENCE WE DO NOT FEEL TO SEND BACK THE MATTER. GROUND OF APPEAL NO.2 IS DISMISSED. 6 12. THE THIRD GROUND OF APPEAL IS THAT LD. CIT (A) HAS ERRED IN CONFIRMING ESTIMATION OF HOUSEHOLD EXPENSES AT RS.1,32,000/- AS AGAINST RS.9 6,000/- SHOWN AND HENCE CONFIRMED ADDITION OF RS.36,000/-. 13. THE LD. CIT (A) CONFIRMED THE ADDITION BUT ALLO WED RELIEF ON ACCOUNT OF BENEFIT OF TELESCOPING AFTER OBSERVING AS UNDER: IN VIEW OF THE ABOVE THE ACTION OF AO TO ESTIMATE T HE EXPENDITURE AND THEREBY MAKING ADDITION OF RS.36,000/- IS CONFIRMED ON MERI T. THE ASSESSEE DURING THE COURSE OF HEARING TOOK AN A LTERNATIVE PLEA THAT THE ASSESSEE MAY BE GIVEN BENEFIT OF TELESCOPING AGAINS T DISALLOWANCE OF EXPENDITURE OUT OF IMPROVEMENT COST OF SHOPS SOLD. THE ASSESSEES PLEA IS CONSIDERED REASONABLE AND TH EREFORE THE BENEFIT OF TELESCOPING IS ALLOWED. I HAVE ALREADY CONFIRMED, RS.71,525/- OUT OF IMPR OVEMENT COST OF SHOPS. AS THE ADDITION ON ACCOUNT OF IMPROVEMENT COST IS M ORE THAN THE ADDITION MADE ON ACCOUNT OF LOW HOUSE HOLD EXPENDITURE, GIVING TH E BENEFIT OF TELESCOPING, THIS ADDITION IS DELETED. THE ASSESSEE GETS A RELIEF OF RS.36,000/-. 14. HENCE THE LD. CIT (A) HAS ALLOWED RELIEF OF RS. 36,000/-. THE ASSESSEE CAN NOT BE AGGRIEVED AS BEFORE US THE LD. A/R STATED THAT TELE SCOPING BENEFIT BE GIVEN IN CASE HOUSEHOLD EXPENSES ARE ESTIMATED AT THE FIGURE DETERMINED BY A.O. HENCE THIRD GROUND OF APPEAL IS INFRACTUOUS. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. THE ORDER IS PRONOUNCED IN OPEN COURT ON 13.01.201 2 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER 7 DATED: 13.01.2012 *S.KUMAR* COPY FORWARDED TO:- 1. SMT. VIJAYA SHRIVASTAVA, W/O LATE SHRI KULDEEP S HRIVASTAVA, KOTA. 2. INCOME TAX OFFICER, WARD-2(1), KOTA. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.754/JP/2011 BY ORDER A.R., I.T.A.T., JAIPUR