M/S F.C SONDHI & COMPANY (INDIA) PRIVATE LIMITED, JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, JALANDHAR

ITA 760/ASR/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 4017 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 05-09-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 18-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Salary income; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 760/(ASR)/2017 ASSES SMENT YEAR: 2014-15 F.C. SONDHI & CO. (INDIA) PVT. LTD., G.T.ROAD, SURANASSI, JALANDHAR [PAN:AAACF 2771Q ] VS. DY. CIT, CIRCLE-1, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SANDEEP VIJH (C. A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 05.09.2018 DATE OF PRONOUNCEMENT: 09.10.2018 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, JALANDHAR ( CIT (A) FOR SHORT) DATED 05.10.2017, PARTLY ALLOWING THE ASSESSEES APPEAL C ONTESTING ITS ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, ('THE A CT' HEREINAFTER) DATED 09.12.2016 FOR ASSESSMENT YEAR (AY) 2014-15. 2. THE APPEAL RAISES THREE GROUNDS WHICH WE SHALL T AKE UP IN SERIATIM. THE FIRST IS IN RELATION TO DISALLOWANCE OF EXPENDITURE ON FO REIGN TRAVELING IN THE SUM OF RS.1,75,390/-. EXAMINING THE SAID EXPENDITURE, CLAI MED AT A TOTAL OF RS.24.68 LACS, THE SAME WAS FOUND TO BE AT A QUANTUM INCREASE (OF RS.9.77 LACS) FROM THAT FOR THE IMMEDIATELY PRECEDING YEAR, EVEN AS THERE WAS HARDL Y ANY INCREASE IN THE TURNOVER. ITA NO. 760/ASR/2017 (AY 2014-15) F. C .SONDHI & CO. (INDIA) PVT. LTD. V. DY. CIT 2 DEDUCTING THE TICKET EXPENSES (RS.7.15 LACS), THE B ALANCE RS.17.53 LACS WAS FOUND BY THE ASSESSING OFFICER (AO) TO BE NOT SUPPORTED B Y ACTUAL BILLS, BUT BY SELF-MADE VOUCHERS. HE, ACCORDINGLY, INFERRING THE SAME TO BE ON A HIGHER SIDE, EFFECTED A DISALLOWANCE AT 10% THEREOF. IN APPEAL, IT WAS EXPL AINED THAT BILLS FOR MOST EXPENSES WERE AVAILABLE, AND ONLY THE EXPENDITURE F OR WHICH THE BILLS ARE NOT GENERATED IN THE NORMAL COURSE OF EVENTS, VIZ. TIPS , EATING ITEMS PURCHASED FROM VENDING MACHINES, ETC, OR WHICH ARE OTHERWISE NOT A VAILABLE FOR BEING PRODUCED, AS THE LOCAL TRAIN TICKETS (WHEREIN THE JOURNEY TICKET IS INSERTED TO OPEN THE EXIT GATE AFTER THE COMPLETION OF THE JOURNEY), WERE NOT PROD UCED. REFERENCE WAS MADE TO THE ASSESSMENT FOR A.Y.2006-07, WHERE A DISALLOWANC E FOR RS.40,000/-, WORKING TO 2% (TWO PERCENT.) OF THE TOTAL EXPENSE, WAS MADE. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE LD. COUNSEL, SH. VIJH, ON BEING QUESTIONED BY T HE BENCH DURING HEARING AS TO THE QUANTUM OF THE EXPENDITURE FOR WHICH THE DETAILS/VOUCHERS WERE THUS NOT AVAILABLE, FINDING NO MENTION OF THE SAME IN THE AS SESSEES EXPLANATION OR SUBMISSIONS AND, THUS, NO FINDING THEREON BY THE RE VENUE AUTHORITIES, CONCEDED TO IT HAVING BEEN NOT QUANTIFIED. ON THE SECOND QUERY BY THE BENCH AS TO HOW COULD IT BE THAT NO PERSONAL EXPENDITURE ATTENDS OR IS INCID ENT TO THE FOREIGN TRAVELING, HE WOULD MERELY STATE THAT THE DIRECTORS UNDERTAKE PER SONAL FOREIGN TRAVELING SEPARATELY AN ANSWER WHICH, EVEN ACCEPTING IT AS FACTUALLY CORRECT, DOES NOT ADDRESS THE QUESTION ASKED. THE MATTER, PRIMARILY F ACTUAL, I.E., THE EXTENT TO WHICH THE ASESSEE HAS NOT BEEN ABLE TO PROVE THE EXPENDIT URE CLAIMED AS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS, HA S THUS NOT RECEIVED PROPER CONSIDERATION. THE DEFAULT, IN OUR VIEW, IS CONTRIB UTORY; THE ASSESSEE NOT STATING ITS CASE PROPERLY, EVEN AS WE ALSO OBSERVE A LACK OF PR OPER APPRECIATION BY THE REVENUE OF WHAT THE ASESSEE SAYS. MERELY, THEREFORE , RESORTING TO ANOTHER DECISION ITA NO. 760/ASR/2017 (AY 2014-15) F. C .SONDHI & CO. (INDIA) PVT. LTD. V. DY. CIT 3 (M/S. AAREN EXPORTS FOR AY 2005-06), WHEREIN A DISA LLOWANCE OF 10% WAS UPHELD BY THE TRIBUNAL, WOULD NOT BE APPROPRIATE. WE ARE, UNDER THE CIRCUMSTANCES, INCLINED TO GO BY THE ASSESSEES OWN PAST HISTORY, WHEREAT A DISALLOWANCE OF 2% OF THE TOTAL EXPENDITURE WAS MADE. THE EXPENDITURE ON JOURNEY TICKETS STANDS ALREADY EXCLUDED. THE LD. COUNSEL STATING OF UNVOUCHED EXPE NDITURE TO BE IN THE RANGE OF 2- 3% FOR THE CURRENT YEAR, WE CONFIRM THE DISALLOWANC E AT 2.5% OF THE BALANCE EXPENDITURE OF RS.17.53 LACS. WE DECIDE ACCORDINGLY . 4. VIDE THE SECOND GROUND, THE ASSESSEE AGITATES TH E CARRY FORWARD OF BROUGHT FORWARD CAPITAL LOSS. THE SAME WAS DULY CLAIMED PER THE RETURN OF INCOME FOR THE RELEVANT YEAR, AS EVIDENT FROM THE COMPUTATION OF I NCOME (PB PGS. 38-41). WHY THEN, WE WONDER, SHOULD NOT THE SAME BE ALLOWED TO BE CARRY FORWARD? WHILE THE SAME COULD BE PRESUMED TO BE THROUGH AN OMISSION BY THE AO IN-AS-SUCH AS HIS ORDER IS SILENT ON THIS ASPECT, THE FIRST APPELLATE AUTHORITY OUGHT TO HAVE ANSWERED THE ASSESSEES GRIEVANCE ON MERITS, RATHER THAN STA TING THAT THE SAME DOES NOT ARISE OUT OF THE ASSESSMENT ORDER. RATHER, THE DENIAL OF THE ASSESSEES CLAIM, WITHOUT ALLOWING PROPER OPPORTUNITY TO DEFEND ITS CLAIM, I S ITSELF A BREACH OF THE PRINCIPLE OF NATURAL JUSTICE. WE, ACCORDINGLY, SETTING ASIDE THE IMPUGNED ORDER, RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR ADJUDICATING THE SAME ON MERITS. WITHOUT DOUBT, SET OFF AND CARRY FORWARD OF BROUGHT FORWARD CAPITAL LOSS IS A RIGHT, STATUTORILY GRANTED, SO THAT IT HAS TO BE ALLOWED I N TERMS OF THE RELEVANT PROVISIONS. THE AO SHALL VERIFY AND DECIDE ON THE ASSESSEES CL AIM IN ACCORDANCE WITH LAW PER A SPEAKING ORDER AFTER ALLOWING IT REASONABLE OPPOR TUNITY OF BEING HEARD IN THE MATTER, I.E., WHERE AND TO THE EXTENT IN DISAGREEME NT. WE DECIDE ACCORDINGLY. 5. THE THIRD AND THE LAST GROUND IS QUA DISALLOWANCE OF 10% OF THE EXPENDITURE ON CAR EXPENSES, RESTRICTED BY THE LD. CIT(A) TO 5% , I.E., AT RS.38,886/-. THE BASIS FOR THE DISALLOWANCE IS THAT THE EXPENDITURE IS, AG AIN, NOT FULLY VOUCHED, INFERRING, ITA NO. 760/ASR/2017 (AY 2014-15) F. C .SONDHI & CO. (INDIA) PVT. LTD. V. DY. CIT 4 THEREFORE, AN INFLATION TO THAT EXTENT. IT STANDS E XPLAINED FOR AND ON THE ASSESSEES BEHALF THAT WHILE EXPENDITURE IN RESPECT OF THE DIR ECTORS CARS GETS DULY BILLED, I.E., ON A MONTHLY BASIS, THAT IN RESPECT OF VEHICLES OF STAFF MEMBERS IS WHOLLY AS PER CASH MEMOS WHICH, BEING COMPUTER GENERATED RECEIPTS , DO NOT PROVIDE FOR REGISTRATION NUMBER OF THE VEHICLE OR THE COMPANYS NAME. THIS EXPLAINS THEIR UNVOUCHED STATUS, BESIDES THE FACTUM OF BEING ALLOW ED BY THE ASSESSEE, AS ALSO OBSERVED BY THE AO, ON A LUMPSUM BASIS (PARA 2(A) O F THE ASSESSMENT ORDER). WE, AGAIN, CONSIDER THE MATTER TO HAVE NOT RECEIVED DUE AND PROPER CONSIDERATION. THE EXPENDITURE ON VEHICLES OF, OR P ROVIDED TO, STAFF MEMBERS, COULD BE THAT ALLOWED TO THOSE ON FIELD DUTY OR AS A MONT HLY ALLOWANCE, EVEN AS CONCEDED TO BY THE LD. COUNSEL, OR PARTLY AS ONE AND PARTLY AS THE OTHER. WHILE THAT TO THE FIELD DUTY STAFF IS LIABLE FOR DEDUCTION IN FULL, FOR THE OTHER, I.E., ALLOWED AS A FIXED, MONTHLY ALLOWANCE, THE SAME WOULD FORM PART OF THE REMUNERATION ALLOWED TO THE CONCERNED STAFF MEMBER/S. WHY, THE VEHICLE/S OF THE FIELD STAFF MAY ALSO STAND TO BE USED, IN PART, FOR PERSONAL PURPOSE, TO WHICH EXTEN T THEREFORE IT IS A PREREQUISITE IN HIS HANDS. THE SAME WOULD, ACCORDINGLY, FIND INCLUS ION IN HIS SALARY INCOME, LIABLE FOR TAX DEDUCTION AT SOURCE, FAILURE QUA WHICH MAY ATTRACT DISALLOWANCE U/S. 40(A)(IA). THE SAME IN FACT ALSO GOES FOR THE VEHIC LES OF THE DIRECTORS. THE MATTER, ACCORDINGLY, FOR FRESH AND PROPER DETER MINATION, IS, SETTING ASIDE THE IMPUGNED ORDER, RESTORED TO THE FILE OF THE AO FOR ADJUDICATION ON MERITS AFTER ALLOWING THE ASSESSEE A REASONABLE OPPORTUNITY OF B EING HEARD IN THE MATTER. CONSIDERING THE QUANTUM OF THE DISALLOWANCE, WHICH IS NOMINAL, AND THE TEDIUM INVOLVED, WE, THOUGH, EXTEND A LIBERTY TO THE ASSES SEE TO, AT ITS OPTION, CONCEDE THE IMPUGNED DISALLOWANCE, WITHOUT OF COURSE THE SAME H AVING ANY PRECEDENT VALUE. WE DECIDE ACCORDINGLY. ITA NO. 760/ASR/2017 (AY 2014-15) F. C .SONDHI & CO. (INDIA) PVT. LTD. V. DY. CIT 5 6. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY ALL OWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON OCTOBER 09, 2 018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 09.10.2018 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: F.C. SONDHI & CO. (INDIA) PV T. LTD., G.T.ROAD, SURANASSI, JALANDHAR (2) THE RESPONDENT: DY. CIT, CIRCLE-1, JALANDHA R (3) THE CIT(APPEALS)-1, JALANDHAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER