M/S BIJAY KUMAR SANTOSH KUMAR , DHANBAD V. ITO WARD-1(2), DHANBAD

ITA 78/RAN/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1755 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 03-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K MONDAL ACIT
• Keywords: Depreciation; Question of law
• Section: 142(1); 234B; 201

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH , RANCHI , BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER ./ ITA NO. 78 / RAN /20 1 8 ( / ASSE SSMENT YEAR : 20 1 0 - 20 1 1 ) M/S BIJAY K UMAR SANTOSH K UMAR BATA MORE, JHARIA, DHANBAD - 828111 VS. ITO, WARD - (1)2, DHANBAD ./ ./ PAN/GIR NO. : A A CFB 1219 L ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI DEVESH PODDAR, ADVOCATE /REVENUE BY : SHRI P.K.MONDAL , ACIT( DR ) / DATE OF HEARING : 20 / 0 5 /201 9 / DATE OF PRONOUNCEMENT 21 / 0 5 /201 9 / O R D E R THIS APPEAL HAS BEEN FILED BY THE ASSES SEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), DHANBAD , JHARKHAND, DATED 24.01 .2018 PASSED IN FIRST APPEAL NO. 16/DHN/2013 - 14 FOR THE ASSESSMENT YEAR 201 0 - 201 1 . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1 . FOR THAT THE L D. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING DISALLOWANCE OF REMUNERATION/COMMISSION PAID TO THE PARTNERS SMT. MANJU DEVI DROLIA AND SMT. SANGEETA DROLIA. REMUNERATION WAS PAID AS PER DEED OF PARTNERSHIP AND IS AN ALLO W ABLE EXPENDITURE. DISALLOWANCE AS CONFIR M BY LD. CIT(A) IS ILLEGAL AND INCORRECT. BOTH WERE WORKING PARTNERS OF THE FIRM. NOTHING ON RECORD WAS BOUGHT BY LD. A.O. TO CONTRADICT THIS FACT. AS SUCH. DISALLOWANCE MADE IS UNJUSTIFIED AND ILLEGAL. 2. FOR THAT THE CONSULTANCY CHARGES WERE PAID, TO M /S H . K. DROLIA AND COMPANY (CHARTERED ACCOUNTANT) FOR PROVIDING CONSULTANCY CHARGES DURING THE YEAR UNDER CONSIDERATION. THE SAME HAS BEEN PAID IN PAST & FUTURE AND NO DISALLOWANCE WAS MADE. ITA N O. 7 8 / R AN /201 8 2 3. FOR THAT THE DISALLOWANCE OUT OF VARIOUS EXPENSES CLAIMED ON ADHOC BASIS IS UNJUSTIFIED AND ILLEGAL. EXPENSES CLAIMED WERE REASONABLE AND COMPARES WELL WITH PAST RECORDS, TRADING RESULTS WERE ACCEPTED. AS SUCH, DISALLOWANCE IS NOT CALLED FOR. 4. FOR THAT DISALLOWANCE OUT OF TELEPHONE. CAR AND SCOOTER EXPENSES F OR ALLEGED PERSONAL USE IS UNJUSTIFIED, ILLEGAL AND ARBITRARY. THERE IS NO ELEMENT OF PERSONAL USE AND THE TELEPHONE AND SCOOTER MAINTAINED BY THE APPELLANT FOR THE PURPOSES OF BUSINESS. 5. FOR THAT DEPRECIATION @ 60% IS ALLOWABLE ON UPS. LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME @ 15%. 6. FOR THAT LD. CIT(A) PASSED AN ORDER IN AN ARBITRARY MANNER WITHOUT CONSIDERING THE FACTS AND POINTS RAISED BEFORE HIM. OBSERVATION OF THE LD. CIT(A) THAT THE DISALLOWA NCES MADE BY I D. A.O. WERE REASONABLE DOES NOT CONVEY ANY CONSIDERATION OF THE SUBMISSION MADE. THE ADDITION SUSTAINED BY LD. CIT(A) WERE THEREFORE NOT JUSTIFIED. ARBITRARY AND WITHOUT ANY BASIS. 7. FOR THAT LD. A.O. WAS NOT JUSTIFIED IN CHARGING INTEREST U/S 234A AND 234B ON THE ASSESSED I NCOME. INTEREST SHOULD BE CHARGED ON THE RETURNED INCOME FOLLOWING THE DECISION OF HONBLE JHARKHAND HIGH COURT. 8. FOR THAT OTHER GROUNDS IN DETAIL WILL BE ARGUED AT THE TIME OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETUR N OF INCOME ON 15.10.2010 SHOWING TOTAL INCOME AT RS.1,22,050/ - , WHICH WAS PROCESSED AND SELECTED FOR SCRUTINY AND NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ISSUED BY THE ASSESSING OFFICER TO THE ASSESSEE. ACCORDINGLY, THE AUTHORISED REPRESENTATIVE OF TH E ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND THE ASSESSING OFFICER AFTER VERIFICATION OF NECESSARY DETAILS, ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS. 6,56,530/ - MAKING FOLLOWING ADDITIONS : - I) RS.1,38,709/ - ON ACCOUNT OF REMUNERATION PAID TO PARTNERS; II) RS.48,000/ - ON ACCOUNT OF CONSULTANCY CHARGES; III) RS.35,926/ - ON ACCOUNT OF VARIOUS EXPENSES; IV) RS. 9,447/ - ON ACCOUNT OF PERSONAL USE EXPENSES; V) RS.8,085/ - ON ACCOUNT OF EXCESS DEPRECIATION; ITA N O. 7 8 / R AN /201 8 3 VI) RS.1,745/ - ON ACCOUNT OF INTEREST ON LAT E PAYMENT OF SALES TAX; AND VII) RS.1,53,853/ - ON ACCOUNT OF INTEREST ON BANK CREDIT. AND FRAMED THE ASSESSMENT U/S.143(3) OF THE ACT, DATED 18.03.2013. AGAINST WHICH THE ASSESSEE CARRIED THE MATTER TO THE CIT(A). 4. IN THE APPELLATE PROCEEDINGS THE CIT (A) DELETED THE DISALLOWANCES MADE ON ACCOUNT OF INTEREST ON LATE PAYMENT OF SALES TAX AND ON ACCOUNT OF INTEREST ON BANK CREDIT AND SUSTAINED THE REMAINING ADDITIONS SO MADE BY THE ASSESSING OFFICER. 5 . AGGRIEVED BY THE ORDER OF CIT(A), NOW THE ASSESSEE I S IN FURTHER APPEAL BEFORE THE TRIBUNAL. 6 . LD. AR SUBMITTED THAT REMUNERATION PAID TO THE PARTNERS NAMELY, SMT. MANJU DEVI DROLIA AND SMT. SANGEETA DROLIA WAS AS PER DEED OF PARTNERSHIP AND IS AN ALLOWABLE EXPENDITURE AS BOTH WERE WORKING PARTNERS OF THE FIRM. WITH REGARD TO THE CONSULTANCY CHARGES, LD. AR SUBMITTED THAT THE SAME WERE PAID TO M/S H. K. DROLIA AND COMPANY (CHARTERED ACCOUNTANT) FOR PROVIDING CONSULTANCY CHARGES DURING THE YEAR UNDER CONSIDERATION AND THE SAME HAS BEEN PAID IN PAST & FUTURE AND NO DISALLOWANCE WAS MADE. WITH REGARD TO VARIOUS E XPENSES CLAIMED WERE REASONABLE AND COMPARES WELL WITH PAST RECORDS AND TRADING RESULTS WERE ACCEPTED. SIMILARLY, DISALLOWANCE ON ACCOUNT OF T ELEPHONE , C AR AND S COOTER EXPENSES FOR ALLEGED PERSONAL USE IS UNJUSTIFIED . THERE IS NO ELEMENT OF PERSONAL USE AND THE TELEPHONE AND SCOOTER MAINTAINED BY THE APPELLANT FOR THE PURPOSES OF BUSINESS. WITH REGARD TO DEPRECIATION , LD. AR SUBMITTED THAT 60% OF THE TOTAL EXPENSES IS ALLOWABLE ON UPS. LASTLY, LD ITA N O. 7 8 / R AN /201 8 4 AR SUB MITTED THAT T HE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LD. CIT(A) , ARE, THEREFORE NOT JUSTIFIED AND THE SAME DESERVE TO BE DELETED . 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. I HAVE HEARD THE RIVAL SUBMISSIO NS OF BOTH THE PARTIES AND PERUSED THE RELEVANT MATERIAL PLACED IN THE RECORD OF THE TRIBUNAL . ON THE FIRST ISSUE OF DISALLOWANCE ON ACCOUNT OF COMMISSION PAID TO PARTNERS OF RS.2,77,418/ - , LD. AR PRODUCED A COPY OF SUPPLEMENTARY PARTNERSHIP DEED EXECUTED ON 01.04.2019 AND ON PERUSAL OF THE SAME, I FIND THAT BOTH THE AUTHORITIES HAVE FAILED TO TAKE COGNIZANCE OF THE SUPPLEMENTARY PARTNERSHIP DEED EXECUTED ON 01.04.2009 BY WHICH ALL THE PARTNERS WERE ENTITLED TO COMMISSION. I AM, THEREFORE, OF THE OPINION TH AT THE REMUNERATION/COMMISSION PAID TO THE PARTNERS, AS CLAIMED BY THE ASSESSEE, IS ALLOWABLE TO THE ASSESSEE AND THE SAME IS DIRECTED TO BE DELETED. 9. WITH REGARD TO SECOND ISSUE OF DISALLOWANCE MADE ON ACCOUNT OF CONSULTANCY CHARGES, LD. AR SUBMITTED T HAT THE PAYMENT WAS MADE THROUGH BANKING CHANNEL AND DULY DISCLOSED IN THE BOOKS OF ACCOUNTS. I FIND THAT BOTH THE AUTHORITIES BELOW HAVE NOT POINTED OUT ANY SPECIFIC DEFECT OR PROVED THE SAME TO BE ON EXCESSIVE SIDE AS COMPARED IN THE FAIR MARKET, THEREFO RE, THE SAME IS ALLOWED IN FAVOUR OF THE ASSESSEE. 10. WITH REGARD TO THE THIRD ISSUE OF DISALLOWANCE BEING MADE ON ACCOUNT OF EXPENDITURES CLAIMED ON DIFFERENT HEADS AND ALSO THE EXPENSES CLAIMED FOR PERSONAL USE OF TELEPHONE, CAR AND SCOOTER , LD.AR ITA N O. 7 8 / R AN /201 8 5 SUBMI TTED THAT NO SUCH ADDITION HAS EVER BEEN MADE IN PAST OR SUBSEQUENT YEAR AND THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS ON ADHOC BASIS. I FIND THAT BOTH THE AUTHORITIES BELOW HAVE DISALLOWED THE ABOVE EXPENSES @10% ON THE TOTAL EXPENSES CLA IMED BY THE ASSESSEE, WHICH IS REASONABLE AND, THEREFORE, NO INTERFERENCE IS CALLED FOR TO DEVIATE FROM THE FINDINGS OF THE CIT(A). ACCORDINGLY, I UPHELD THE SAME AND DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 11. WITH REGARD TO THE ISSUE OF DISALLOWA NCE MADE ON ACCOUNT OF CLAIMING EXCESS DEPRECIATION, LD. AR SUBMITTED THAT THE ASSESSEE CLAIMED DEPRECIATION @60% ON UPS BEING PART OF COMPUTER SYSTEM, HOWEVER, THE AUTHORITIES BELOW WERE OF THE VIEW THAT DEPRECIATION @15% CAN ONLY BE ALLOWED, WHICH IS NOT JUSTIFIED. TO SUPPORT HIS CLAIM, LD. AR RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PCIT PANJI VS. GOA TOURISM DEVELOPMENT LTD.[2019] 102 TAXMANN.COM 437. I HAVE GONE THROUGH THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT AND FOU ND THAT THE ASSESSEE IS ENTITLED 60% DEPRECIATION. THE OBSERVATIONS OF THE HONBLE HIGH COURT READ AS UNDER : - 12. IN SO FAR AS THE SECOND ISSUE IS CONCERNED, BOTH, THE CIT APPEALS, AS WELL AS THE ITAT HAVE RELIED UPON THE DECISIONS IN THE CASE OF CIT V. BSES YAMUNA POWERS LTD. [2013] 40 TAXMANN.COM 108/[2014] 220 TAXMAN 51 (DELHI) (MAG.) PENTAIR WATER INDIA (P) LTD. V. ADDL. CIT [2014] 47 TAXMANN.COM 132 (PANAJI) AND MACAWBER ENGG. SYSTEM (I) (P) LTD. V. ASSTT. CIT [2013] 33 TAXMANN.COM 587 (MUM - TRIB) IN WHICH IT IS CLEARLY HELD THAT THE UPS IS THE COMPONENT/EQUIPMENT CONNECTED WITH THE COMPUTERS AND IS, THEREFORE, ENTITLED FOR THE DEPRECIATION @60%. AGAIN, THE CONTENTION, AS RAISED, DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. RESPECTFULLY, FO LLOWING THE ABOVE JUDICIAL DECISION OF HONBLE BOMBAY HIGH COURT, I HOLD THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ITA N O. 7 8 / R AN /201 8 6 @60% ON THE TOTAL EXPENSES ON UPS AS AGAINST 15% SUSTAINED BY THE CIT(A). ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALL OWED. 12. WITH REGARD TO CHARGING OF INTEREST U/S.234B OF THE I.T.ACT, LD. AR RELIED ON THE ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHRI AJAY PRAKASH VERMA IN TA NO.38 OF 2010 REPORTED IN 2013(1) TMI 140, WHEREIN IT IS HELD THAT THE INTE REST CANNOT BE LEVIED OVER THE ASSESSED INCOME AND IT CAN BE LEVIED ONLY ON THE INCOME DECLARED IN THE RETURN. AGAINST WHICH THE REVENUE FILED A CIVIL REVIEW PETITION IN CIVIL REVIEW NO.66/2013 AND THE SAME IS ALSO DISMISSED BY THE HONBLE HIGH COURT VIDE ITS ORDER DATED 01/09/2015. I FIND THAT THE HON'BLE JHARKHAND HIGH COURT IN THE CASE OF AJAY PRAKASH VERMA (SUPRA) HELD AS UNDER: - 23. LEARNED COUNSEL FOR THE APPELLANT SUBMITTED THAT IT HAS BEEN ORDERED BY THE A.O. THAT INTEREST BE CHARGED AS PER RULE. INTEREST CAN BE LEVIED UNDER SECTIONS 234A & 234B OF THE ACT. IT IS SUBMITTED THAT IN VIEW OF THE JUDGMENT OF FULL BENCH OF RANCHI BENCH OF PATNA HIGH COURT DELIVERED IN THE CASE OF SMT. TEJ KUMARI VS. CIT REPORTED IN (2001) 114 TAXMAN 404 (PAT) (FB), THE INTEREST CANNOT BE LEVIED OVER THE ASSESSED INCOME AND IT CAN BE LEVIED ONLY ON THE INCOME DECLARED IN THE RETURN. THE REVENUE PREFERRED S.L.P. BEFORE THE HON'BLE SUPREME COURT AGAINST THE SAID JUDGMENT OF THE FULL BENCH OF PATNA HIGH COURT WHICH WAS DIS MISSED BY THE HON'BLE SUPREME COURT ON MERITS VIDE ORDER DATED 01/08/2000 BY SAYING THAT THERE IS NO MERIT IN THE APPEAL. 24. LEARNED COUNSEL FOR THE REVENUE COULD NOT DISPUTE THIS LEGAL POSITION. THEREFORE, SO FAR AS QUESTION OF LAW INVOLVED IN THIS AP PEAL THAT WHETHER THE INTEREST COULD HAVE BEEN LEVIED AGAINST THE ASSESSED INCOME OF THE ASSESSEE UNDER SECTION 234A & 234B IS CONCERNED, IN VIEW OF THE FULL BENCH JUDGMENT OF RANCHI BENCH OF PATNA HIGH COURT DELIVERED IN THE CASE OF SMT. TEJ KUMARI, THE R EVENUE CAN LEVY THE INTEREST ONLY ON THE TOTAL INCOME DECLARED IN THE RETURNS AND NOT ON THE INCOME ASSESSED AND DETERMINED BY THE A.O. TO THAT EXTENT. THE ORDERS PASSED BY THE AUTHORITIES BELOW ARE ACCORDINGLY MODIFIED AND INTEREST SHALL BE CHARGEABLE IN THE LIGHT OF THE FULL BENCH JUDGMENT REFERRED ABOVE. ITA N O. 7 8 / R AN /201 8 7 RESPECTFULLY, FOLLOWING THE ABOVE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, I DIRECT THE AO TO DELETE THE INTEREST AS CHARGED U/S.234B OF THE ACT. THIS GROUND OF APPEAL OF THE ASSESSEE IS A LLOWED. 13 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 21 / 05 / 201 9 . SD/ - ( CHANDRA MOHAN GARG ) / JUDICIAL MEMBER / RANCHI ; DATED 21 / 05 /201 9 PRAKASH KUMAR MISHRA , S R.P.S. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( SENIOR PRIVATE SECRETARY ) , / ITAT, RANCHI 1. / THE APPELLANT - . M/S BIJAY KUMAR SANTOSH KUMAR BATA MORE, JHARIA, DHANBAD - 828111 2. / THE RESPONDENT - ITO, WARD - (1)2, DHANBAD 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, RANCHI 6. / GUARD FILE. //TRUE COPY//