SMITA K. SHAH, MUMBAI V. ADDL CIT RG 19(1), MUMBAI

ITA 7879/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1697 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 05-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 15-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: AJAY C GOSALIA
• Keywords: Capital asset; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI P M JAGTAP, AM & SHRI VIJAY PAL RAO, JM ITA NO.7879/MUM/2010 (ASST YEAR 2006-07 ) SMITA K SHAH VIJAY RAJ BLDG, GD FLOOR PLOT NO. 288 9THROAD, KHAR (W) MUMBAI 400 052 VS THE ADDL COMMR OF INCOME TAX RANGE 19(1) (APPELLANT) (RESPONDENT) PAN NO. AAKPS3041F ASSESSEE BY SH AJAY C GOSALIA REVENUE BY SH O P MEENA DT.OF HEARING 5 TH FEB 2013 DT OF PRONOUNCEMENT 8 TH MARCH 2013 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 25.8.2010 OF THE CIT(A) FOR THE AY 2006-07. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: I)) THE ID. CIT(A) ERRED IN UPHOLDING THE ORDER OF L D. ASSESSING OFFICER TREATING PROFIT OF RS. 49,92,000, EARNED BY THE APPE LLANT ON SURRENDER OF SHOP TO THE BUILDER, AS AN ADVENTURE IN THE NATURE OF TRAD E AND CHARGING IT TO TAX UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROF ESSION. II) THE ID. CIT(A) ERRED IN UPHOLDING THE ORDER OF T HE ID. ASSESSING OFFICER CHARGING TO TAX DURING THE YEAR UNDER CONSIDERATION, THE ADVANCE FEES OF RS.8,18,000 RECEIVED BY THE APPELLANT. III) THE ID. CIT(A) ERRED IN UPHOLDING ORDER OF THE LD. ASSESSING OFFICER DISALLOWING RS.3 1,250 BEING 25% OF DRIVERS SALARIE S ON THE GROUND THAT THE SAME WERE NOT INCIDENTAL TO BUSINESS. IV) THE LD. CIT(A) ERRED IN UPHOLDING THE ORDER OF TH E ID. ASSESSING OFFICER DISALLOWING A SUM OF RS.12,264 OUT OF TELEPHONE EXP ENSES ON AD HOE BASIS . ITA NO.7879/M/2010 . 2 3 GROUND NO. 1 IS REGARDING SHORT TERM CAPITAL GAIN S ON SALE OF SHOP WAS TREATED AS BUSINESS INCOME. 3.1 THE ASSESSEE IS RUNNING A PLAY SCHOOL (NURSERY) UNDER THE NAME OF KIDS CONCEPT. THE ASSESSEE HAS OFFERED NET PROFIT OF ` 8,89,039/- FROM THE SAME. THE ASSESSEE HAS ALSO SHOWN LONG TERM CAPITAL GAINS OF ` 40,56,401/- ON SALE OF SHOP, APART FROM INCOME FROM OTHER SOURCES OF ` 33,27,734/-. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE BOOKED A SHOP NO.9 IN TH E BUILDING KNOWN AS SILVER SPRING FOR ` 28,08,000/- VIDE LETTER OF ALLOTMENT DATED 27.3.2 000. THE ASSESSEE MADE THE PAYMENT OF THE SHOP AS PER FOLLOWING DETAILS: S.NO. DATE AMOUNT 1 20.03.2000 50,000/- 2 15.09.2001 27,08,000/- 3 03.10.2001 25,000/- TOTAL 27,83,000/- 3.2 THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS MADE THE ENTIRE PAYMENT EXCEPT ` 25,000/- AND THEREAFTER DECIDED TO SELL THE SHOP F OR ` 78,000/- BY EXECUTING A LETTER OF CANCELLATION DATED 8.4.2005 WITH THE BU ILDER. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE ENTERED INTO A SIMILAR TRAN SACTION IN THE FINANCIAL YEAR 2003- 04 ALSO WHEN THE ASSESSEE BOOKED A FLAT AND THEN CA NCELLED THE SAME WITHOUT TAKING POSSESSION; THOUGH THE SAME WAS TREATED AS I NVESTMENT AND WAS ACCEPTED AS SUCH. BESIDES, IT WAS FOUND THAT THE ASSESSEES HUSBAND SHRI KASHYAP SHAH HAS ALSO CONDUCTED A SIMILAR TRANSACTION DURING THE FIN ANCIAL YEAR 2003-04 AND HE HAS ALSO INDULGED IN A SIMILAR TRANSACTION OF SALE OF S HOP NOS. 10 & 11 , SILVER SPRING WITHOUT TAKING POSSESSION IN THE FINANCIAL YEAR 200 5-06. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE HUF OF THE ASSESSEES HUSBAND H AS ALSO CONDUCTED SIMILAR TRANSACTIONS OF SALE OF SHOPS NO. 1 & 8 SILVER SPRI NG & FLAT NOS. C-502 AND C-503 SILVER SPRING WITHOUT TAKING POSSESSION IN THE FINANCIAL Y EAR 2004-05. KEEPING IN VIEW THE ITA NO.7879/M/2010 . 3 PATTERN OF THESE TRANSACTIONS, THE ASSESSING OFFICE R ASKED THE ASSESSEE AS TO WHY THE TRANSACTION OF SALE OF SHOP SHOULD NOT BE TREATED A S ADVENTURE IN THE NATURE OF TRADE. 3.3 THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFF ICER THAT THE SHOP WAS HELD FOR MORE THAN 5 YEARS AND MAJORITY OF THE AMOUNTS W ERE PAID. IT WAS SUBMITTED THAT NO PERSON WILL INVEST AND HOLD PROPERTY FOR SUCH A LONG TIME UNLESS HIS/HER INTENTION IS TO TREAT IT AS CAPITAL INVESTMENT. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE HOLDIN G OF THE SHOP FOR A LONG TIME IS NOT THE ONLY CRITERIA FOR DETERMINING WHETHER THE T RANSACTION IS THE NATURE OF INVESTMENT OR TRADE. HE HAS FURTHER OBSERVED THAT IT IS ALSO TRUE THAT A SIMILAR TRANSACTION HAS BEEN TREATED AS INVESTMENT IN AY 20 04-05, HOWEVER, AT THAT TIME, THERE WAS NO SUCH PATTERN AND HISTORY OF TRANSACTIO NS WHICH HAVE BEEN NOTED IN THIS YEAR. BY FOLLOWING THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF G VENKATASWAMI NAIDU & CO VS CIT REPORTED IN 35 IT 59 4 AND TAKING INTO CONSIDERATION THE MODUS OPERANDI IN ORDER TO AVOID THE PAYMENT OF STAMP DUTY, THE ASSESSING OFFICER HELD THAT THE SHOP WAS PURCHASED WITH AN IN TENTION TO RESELL AND THE TRANSACTION WAS TREATED AS ADVENTURE IN THE NATURE OF TRADE. CONSEQUENTLY, THE PROFIT OF ` 49,92,000/- WAS ASSESSED AND TAXED UNDER THE HEAD BUSINESS INCOME. 3.4 ON APPEAL, THE CIT(A) HAS OBSERVED THAT THE ASS ESSEE AND HER FAMILY IS DOING THIS TYPE OF ACTIVITY WHEREIN SHOP/FLAT ARE BOOKE D BUT POSSESSION IS NOT TAKEN. NO INCOME FROM THE PROPERTY IS SHOWN AND THE INTENTION IS TO SELL THE PROPERTY. ACCORDINGLY, THE CIT(A) HAS UPHELD THE ACTION OF TH E ASSESSING OFFICER. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE HAS DECLARED THE SHOP IN THE WEALTH TAX RETURN AND NOT CLAIMED AS EXEMPTION BEING ITA NO.7879/M/2010 . 4 STOCK-IN-TRADE. HE HAS FURTHER SUBMITTED THAT SINCE BEGINNING THE ASSESSEE IS SHOWING THE SHOP AS INVESTMENT IN THE BALANCE SHEET AND THE REFORE, IT CANNOT BE TREATED AS STOCK-IN-TRADE. HE HAS SUBMITTED THAT AN IDENTICAL TRANSACTION HAS BEEN TREATED BY THE ASSESSING OFFICER AS INVESTMENT AND ACCEPTED TH E CAPITAL GAINS OFFERED BY THE ASSESSEE FOR THE AY 2004-05. HE HAS REFERRED THE BALANCE SHEET AND SUBMITTED THAT THIS IS NOT THE ONLY INVESTMENT BY THE ASSESSEE; BU T THE ASSESSEE HAD OTHER INVESTMENTS AS SHOWN IN THE BALANCE SHEET AND THE A SSESSING OFFICER HAS NOT DISTURBED THE THREE INVESTMENTS IN THE PROPERTY AT KUKUL KUNG, FLAT AT MANGAL MILAN AND GARAGE AT MANGAL MILAN AS WELL AS THE INVESTMEN T IN FLAT NO. 10 AT ANAND KUNG. THE LD AR HAS THEN REFERRED THE WEALTH TAX RETURN A ND STATEMENT OF WEALTH FOR THE AY 2003-04 AND SUBMITTED THAT APART FROM THE OTHER PRO PERTY, THE ASSESSEE HAS SHOWN THE SHOP NO.9. THEREFORE, THE INTENTION OF THE ASS ESSEE RIGHT FROM THE BEGINNING IS INVESTMENT AND NOT TRADING OF SALE AND PURCHASE OF PROPERTY. 4.1 THE LD AR HAS FURTHER SUBMITTED THAT FOR THE AY 2000-01 THERE WERE TOTAL 11 TRANSACTIONS OF PURCHASES BY THE ASSESSEE AS WELL A S HER FAMILY MEMBERS. SIMILARLY, FOR THE AY 2004-05 AND 2005-06, THERE WERE THREE TR ANSACTIONS EACH OF SALE (INITIALLY PURCHASE) AND FINALLY FOR THE AY 2006-07 FIVE TRANS ACTIONS OF SALE. THUS, IT IS CLEAR THAT OUT OF 11 TRANSACTIONS OF SALE, THE ASSESSING OFFIC ER HAS ACCEPTED 8 AS CAPITAL GAINS AND ONLY FOR THE YEAR UNDER CONSIDERATION, FOR THE FIRST TIME, THE ASSESSING OFFICER HAS TREATED THE INCOME FROM SALE OF THESE UNITS AS BUSI NESS INCOME. HE HAS FURTHER SUBMITTED THAT THE ASSESSEE PURCHASED THESE UNITS O F SHOPS AND FLATS WITHOUT CARRIED OUT ANY IMPROVEMENT OR CHANGES SOLD THE SAME AFTER RETAINING SUBSTANTIALLY LONGER TIME. NO BORROWED FUND WAS USED FOR THE PURCHASED OF THESE SHOPS AND FLATS. THEREFORE, THE INTENTION OF THE ASSESSEE WAS TO INV EST THE FUNDS IN THESE PROPERTIES AND NOT TO TRADE IN THE PURCHASE AND SALE OF THESE PROPERTIES. HE HAS RELIED UPON ITA NO.7879/M/2010 . 5 THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF DEEP CHAND & CO VS CIT REPORTED IN 107 ITR 716 AS WELL AS THE DECIS ION OF THE HONBLE RAJASHTAN HIGH COURT IN THE CASE OF CIT VS SOHAN KHAN REPORTED IN 304 ITR 194. THUS, THE LD AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS NOT MADE ANY C HANGES OR IMPROVEMENT IN THE ASSET IN QUESTION, THEN THE TRANSACTION OF PURC HASE AND SALE CANNOT BE TREATED AS TRADE. FURTHER, THERE IS A GAP OF MORE THAN 5 T O 6 YEARS IN PURCHASE AND SALE, WHICH SHOWS THE INTENTION OF THE ASSESSEE TO KEEP T HESE ASSETS AS INVESTMENT. THE DEPARTMENT HAS ACCEPTED THESE PROPERTIES AS CAPITAL ASSETS IN THE EARLIER YEAR AS WELL AS IN THE WEALTH TAX ASSESSMENT. THEREFORE, TH E ASSESSING OFFICER CANNOT TAKE A DIFFERENT VIEW FOR THE YEAR UNDER CONSIDERATION. 4.2 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT AS PER THE ALLOTMENT LETTER, THE PAYMENT OF PURCHASE CONSIDERATION WAS TO BE MA DE UPTO 31.5.2001 EXCEPT ` 8000/- WHICH WAS TO BE PAID AT THE TIME OF POSSESS ION. THE BUILDER HAS PROMISED TO HANDOVER THE POSSESSION UPTO 31.12.2001. WHEN THERE IS NO REASON FOR ANY DELAY ON THE PART OF THE BUILDER, THEN THE ASSESSEE DELIBERA TELY AVOIDED TO TAKE THE POSSESSION OF THE SHOP IN QUESTION BY KEEPING A SMALL AMOUNT O F PAYMENT OF CONSIDERATION AS OUTSTANDING. THE LD DR HAS POINTED OUT THAT THE A SSESSEE HAS NOT EXPLAINED ANY REASON AS TO WHY THE POSSESSION WAS NOT TAKEN. 4.3 AS FAR AS THE WEALTH TAX ASSESSMENT IS CONCERN ED, THE LD DR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS NOT PAID ANY TAX ON THES E ASSETS AND CLAIMED THE EXEMPTION U/S 2(EA)(V) BEING COMMERCIAL ESTABLISHME NT THEN MERELY SHOWING THESE PROPERTIES IN THE WEALTH TAX RETURN WITHOUT PAYING THE TAX WOULD NOT HELP THE CASE OF THE ASSESSEE. THE LD DR HAS FURTHER CONTENDED THAT THERE IS NO DEED OF PURCHASE IN RESPECT OF THE SHOP IN QUESTION. THE ASSESSEE HAS NOT SHOWN ANY INCOME FROM RENT FROM THESE PROPERTIES; THEREFORE, THE INTENTION OF THE ASSESSEE WAS TO SELL THE PROPERTY ITA NO.7879/M/2010 . 6 AND NOT TO RETAIN. FURTHER, IT IS CLEAR THAT WHEN THERE WAS NO INTENTION TO TAKE THE POSSESSION OF THE PROPERTY, THEN THE PROPERTY IN QU ESTION CANNOT BE TREATED AS INVESTMENT. 4.4 SIMILAR MODUS OPERANDI ADOPTED BY THE FAMILY ME MBERS OF THE ASSESSEE WHICH CLEARLY SHOWS THAT THE ASSESSEE AND HER FAMIL Y MEMBERS ARE REGULARLY CARRYING OUT THE PURCHASE AND SALE OF THESE PROPERTIES WITHO UT TAKING POSSESSION AND THEREFORE, THE INTENTION OF THE ASSESSEE WAS NOT TO INVESTMENT BUT TO PURCHASE THE PROPERTY FOR RESALE AND EARN THE PROFIT. THE LD DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF G VENKATASWAMI NAIDU & CO (SUPRA) AND ALSO THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DCIT VS GOIPAL RAMNARAYAN KASAT REPORTED IN 9 TAXMANN.COM.236(BOM). 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE AS FAR AS THE FACTS RE LATING TO THE PURCHASE OF THE SHOPS AND FLATS BY THE ASSESSEE, HER HUSBAND AND HUF IN T HE NAME OF ASSESSEES FATHER-IN- LAW SHRI LALBHAI V DALAL. IN ALL THREE CASES, THE PROPERTIES WERE PURCHASED IN THE FINANCIAL YEAR 1999-00, CONSISTING OF 3 UNITS BY T HE ASSESSEE, 4 UNITS BY THE HUSBAND OF THE ASSESSEE AND 4 UNITS IN THE NAME OF HUF. THU S, THE ASSESSEE AND HER FAMILY MEMBERS PURCHASED TOTAL 11 UNITS. THE MODUS-OPERAND I IS IDENTICAL AS FAR AS MAKING ALMOST THE ENTIRE PAYMENTS AS PER SCHEDULE OF ALLOT MENT AND KEEPING A NORMAL/SMALL AMOUNT OF OUTSTANDING TO AVOID THE PAY MENT OF STAMP DUTY ON EXECUTION OF TRANSFER DEED BY THE BUILDER IN THE NA ME OF THE ASSESSEE. THUS, THE ASSESSEE AS WELL AS THE FAMILY MEMBERS OF THE ASSES SEE USED TO KEEP THESE PROPERTIES AND THE ALLOTMENT LETTER WITHOUT EXECUTI ON OF THE TRANSFER DEED WITH A VIEW TO TRANSFER THE SAME BY CANCELLING OF THE ALLO TMENT. THE MOTIVE OF THE ASSESSEE ITA NO.7879/M/2010 . 7 AND THE FAMILY MEMBERS FOR NOT MAKING THE ENTIRE PA YMENT AND TO AVOID THE PAYMENT OF STAMP DUTY ON EXECUTION OF TRANSFER DEED IN THEIR NAME IS THAT THE PROPERTIES IN QUESTION WERE TO BE RESOLD. IN ORDER TO DETERMINE THE NATURE OF A TRANSACTION WHETHER INVESTMENT OR BUSINESS ACTIVITY , THE PRIMARY DECISIVE FACTOR IS THE INTENTION OF THE PARTY. THE INTENTION OF RE-SELLING OF THE PROPERTIES DO CLEARLY EXHIBIT FROM THE CONDUCT AND THE MANNER IN WHICH THE PROPER TIES WERE ACQUIRED AND PAYMENTS WERE MADE. THOUGH THE ASSESSEE SOLD THE PR OPERTIES AFTER A GAP OF 5 TO 6 YEARS; HOWEVER, THE INTENTION OF THE ASSESSEE WAS C LEAR AT THE TIME OF PURCHASING THE PROPERTIES THAT THE SAME WERE TO BE RESOLD AND NOT TO BE KEPT BY THE ASSESSEE. FURTHER, THE ASSESSEE NEVER ACQUIRED THE CAPITAL AS SET BECAUSE THE TRANSFER OF THE PROPERTIES IN QUESTION WAS NOT COMPLETE AS THE ASSE SSEE DID NOT FULFIL THE CONDITIONS SUBJECT TO WHICH THE ALLOTMENT WAS MADE IN THE NAME OF THE ASSESSEE. THEREFORE, NOT ACQUIRING THE FULL RIGHT BY THE ASSESSEE DELIBE RATELY AND WITH THE INTENTION THAT THE PROPERTIES WAS NOT TO BE RETAINED BUT IT HAS TO BE RESOLD, CLEARLY A TRANSACTION OF ADVENTURE OF TRADE. 5.1 UNDISPUTEDLY, THE ASSESSEE DID NOT TAKE THE POS SESSION OF THE SHOP IN QUESTION AND THEREFORE THERE WAS NO INTENTION OF ENJOYING TH E POSSESSION OR ITS INCOME OR EVEN THE OWNERSHIP OF THE PROPERTIES IN QUESTION. WHEN ALL THESE ELEMENTS OF HOLDING THE ASSETS TO ENJOY THE POSSESSION, INCOME OR OWNERSHIP ARE ABSENT, THEN IT CANNOT BE SAID THAT THE ASSESSEE HAS PURCHASED THE SHOP IN QU ESTION FOR CAPITAL ACCRETION; BUT IT WAS SOLELY FOR THE PURPOSE OF RESALE AND THEREFO RE, THE ACTIVITY OF PURCHASE AND RESALE IS CLEARLY IN THE NATURE OF TRADE OR BUSINES S. THE AUTHORITIES BELOW HAVE RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF G VENKATASWAMI NAIDU & CO (SUPRA). IN OUR VIEW, THE SAID DECISION OF THE HONBLE SUPREME COURT IS SQUARELY APPLICABLE IN THE FACTS OF THE CASE IN HAN D. ITA NO.7879/M/2010 . 8 5.2 AS FAR AS THE PRINCIPLES OF RES-JUDICATE/CONSIS TENCY IS CONCERNED, SINCE THE CONDUCT OF THE ASSESSEE HAS TO BE TESTED BY PASSAG E OF TIME AND THEREFORE, IN THE INITIAL YEAR WHEN THE ASSESSEE INDULGING IN SIMIL AR KIND OF TRANSACTION AND ACCEPTANCE OF THE SAME BY DEBT AS CAPITAL GAIN DUE TO ISOLATED TRANSACTION WOULD NOT OPERATE AS RES-JUDICATE WHEN THE FACTS AND DETAILS WERE COME TO THE LIGHT REGARDING THE REPEATED TRANSACTION OF SIMILAR NAT URE BY THE ASSESSEE AND THE SAME MODUS OPERANDI BY THE FAMILY MEMBERS WERE DETECTED BY THE ASSESSING OFFICER. 5.3 IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE AUTHORI TIES BELOW, QUA THIS ISSUE. 6 GROUND NO. 2 IS REGARDING DISALLOWANCE OF ADVANCE D FEES. 6.1 THE ASSESSING OFFICER NOTED FROM THE P&L ACCOUN T OF THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED ADVANCE FEE OF ` 8,18,000/- APART FROM FEE RECEIVED OF ` 37,28,500/-. HOWEVER, THE ADVANCE FEES RECEIVED HAS BEEN DEDUCTED FROM THE FIGURE OF NET PROFIT BEFORE OFFERING THE BUSINESS I NCOME. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF STUDENT-WISE , PERIOD-WISE RECEIPTS. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS NOT FURNISH ED THE REQUISITE DETAILS AND ACCORDINGLY TREATED THE ALLEGED ADVANCE FEES TAXABL E IN THE YEAR UNDER CONSIDERATION. 6.2 ON APPEAL, THE CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSEE FURNISHED THE DETAILS OF THE ADVANCE FEES AS PER THE LEDGER F ROM 1.10.2005 TO 31.3.2006 WHICH PERTAINS TO THE NEXT YEAR. HE HAS REFERRED THE COP Y OF THE LEDGER AT PAGE 28 TO 35 OF THE PAPER BOOK AND SUBMITTED THAT WHEN THE ASSESSEE HAS FURNISHED THE ENTIRE DETAILS, THEN THE OBSERVATIONS OF THE ASSESSING OFF ICER THAT THE ASSESSEE HAS NOT FILED ITA NO.7879/M/2010 . 9 THE REQUISITE DETAILS IS CONTRARY TO THE RECORDS. THE LD AR HAS FURTHER SUBMITTED THAT THE ASSESSEES PRACTICE RIGHT FROM THE BEGINNING TO SHOW THE ADVANCE FEE RECEIVED AS THE LIABILITY IN THE BALANCE SHEET. HOWEVER, FO R THE YEAR UNDER CONSIDERATION, THERE WAS A MISTAKE IN SHOWING THESE RECEIPTS IN TH E P&L ACCOUNT; BUT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS TREATED THE ADVANCE RECEIVED AS LIABILITY AND NOT AS REVENUE IN THE YEAR UNDER CONSIDERATION. HE HAS REFERRED THE BALANCE SHEET FOR THE AY 2005-06 AND SUBMITTED THAT THE A SSESSEE HAS SHOWN ` 33,93,000/- AS ADVANCE FEE RECEIVED WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE EARLIER YEAR. THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEMS OF ACCOUNTING AND THEREFORE, WHEN THESE FEE WAS NOT DUE FOR THE YEA R UNDER CONSIDERATION, THEN IT CANNOT BE TREATED AS THE INCOME OF THE YEAR UNDER C ONSIDERATION AND ACCORDINGLY, CANNOT BE TAXED FOR THIS YEAR. 7.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT DESPITE SPECIFIC QUERY FROM THE ASSESSING OFFICER, THE ASSESSEE FAILED TO FILE THE PERIOD WISE, STUDENT WISE RECEIPTS AND THE ASSESSING OFFICER HAS ALSO ISSUED SHOW CAUS E NOTICE FOR WHICH THE ASSESSEE HAS SUBMITTED THAT ACADEMIC PERIOD STARTS FROM MAY TO JUNE AND SOME OCCASION, ADVANCE FEE IS RECEIVED BEFORE MARCH AND SOME CASES , THE ADVANCES ARE RECEIVED AFTER MARCH. BUT REQUISITE DETAILS HAVE BEEN FILED EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) OR EVEN BEFORE THE TRIBUNAL. ACCORDINGLY, THE FEE RECEIVED BY THE ASSESSEE HAS BEEN RIGHTLY TAXED AS INCOME FOR THE YEAR UNDER CONSIDERATION. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BE LOW AND SUBMITTED THAT THE CIT(A) HAS NOTED THAT NO DOCUMENTARY EVIDENCE HAS BEEN FUR NISHED TO SHOW AS TO HOW THESE AMOUNTS REPRESENT ADVANCE FEE NOT TAXED IN T HE YEAR UNDER CONSIDERATION. 8 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND RELE VANT MATERIAL ON RECORD. THE ASSESSEE HAS CREDITED THE ENTIRE FEE RECEIVED D URING THE YEAR IN THE P&L ITA NO.7879/M/2010 . 10 ACCOUNT; HOWEVER, IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS REDUCED A SUM OF ` 8,18,000/- ON ACCOUNT OF ADVANCE FEE RECEIVED. TH E MAIN CONTENTION OF THE ASSESSEE IS THAT DUE TO MISTAKE, THE ASSESSEE SHOWN THE ADVANCE FEE RECEIPT IN THE P&L; BUT IN THE COMPUTATION OF INCOME, IT HAS BEEN TREATED AS LIABILITY AND NOT AS REVENUE IN THE YEAR UNDER CONSIDERATION. THE ASSESS EE HAS FORCEFULLY CONTENDED THAT IN THE EARLIER YEAR, THE ASSESSEE HAS BEEN SHOWING THE ADVANCE FEE AS LIABILITY IN THE BALANCE SHEET. THE ASSESSING OFFICER DISALLOWANCE THE CLAIM OF THE ASSESSEE ON GROUND THAT THE ASSESSEE FAILED TO FURNISH THE DE TAILS OF STUDENT WISE, PERIOD WISE RECEIPTS AND THEREFORE, IN THE ABSENCE OF THE SUPP ORTING EVIDENCE THE FEE RECEIPT BY THE ASSESSEE WAS TREATED AS INCOME OF THE YEAR U NDER CONSIDERATION. 8.1 IT IS PERTINENT TO NOTE THAT IN ORDER TO VERIFY THE FACT WHETHER THE FEE RECEIVED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION OR AS ADVANCE FEE RELEVANT FEE RECEIPTS ARE MATERIAL EVIDENCE. THE ASSESSEE FAIL ED TO PRODUCE SUCH A RECORD EVEN THE REQUITE DETAILS AS ASKED BY THE ASSESSING OFFIC ER TO SHOW THAT THE SAID AMOUNT RECEIVED BY THE ASSESSEE PERTAINS TO THE ADVANCE FE E AND NOT THE FEE FOR THE EAR UNDER CONSIDERATION. 8.2 IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN THE ASSESSEE FAILED TO PRODUCE THE RELEVANT MATERIAL AND THE REQUITE DETAI LS IN SUPPORT OF THE CLAIM, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF TH E AUTHORITIES BELOW, QUA THIS ISSUE. 9 GROUND NO.3 IS REGARDING DISALLOWANCE OF 25% DRIV ER SALARY. 9.1 THE ASSESSEE HAS DEBITED THE SALARY OF TWO DRIV ERS AT ` 62,500/- EACH. THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF VEHICLE EXPENSE ALONG WITH THE LOG BOOK TO JUSTIFY THAT THE EXPENDITURE H AS BEEN INCURRED FOR BUSINESS. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE DOES NOT MAINTAIN ANY LOG BOOK AND ITA NO.7879/M/2010 . 11 THEREFORE, IN THE ABSENCE OF THE SAME, THE EXTENT O F ITS USE FOR BUSINESS PURPOSE CANNOT BE ASCERTAINED. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED 25% OF DRIVERS SALARY BEING NON INCIDENTAL TO BUSINESS PURPOSE AMO UNTING TO ` 31,250/-. 9.2 ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALLO WANCE MADE BY THE ASSESSING OFFICER. 10 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSEE IS HAVING MINI BUS FOR CARRYING STUDENTS AND THEREFORE, SALAR Y OF THE DERIVERS IS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HE HAS FURTHER CONTEND ED THAT THE ASSESSING OFFICER HAS NOT DISPUTED THE FACT THAT THE USE OF BUS FOR THE BUSINESS OF THE ASSESSEE AND MADE THE ADHOC DISALLOWANCE BECAUSE OF THE ASSESSEE HAS NOT MAINTAINED ANY LOG BOOK. THE EXPENDITURE INCURRED BY THE ASSESSEE HAS NOT BE EN DOUBTED; THEREFORE, ADHOC DISALLOWANCE IS NOT CALLED FOR. 10.1 ON THE OTHER HAND, THE LD DR HAS SUBMITTED THA T THE ASSESSEE HAS SHOWN SALARY OF TWO DRIVERS WITH RESPECT TO ONE MINI-BUS AND ALSO HAS NOT MAINTAINED LOG BOOK TO SHOW THE ACTUAL USE OF BUS AND DRIVERS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. HE HAS, THUS SUBMITTED THAT THE PERSONAL USE OF THE BUSS AND DRIVER CANNOT BE RULED OUT. 11 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ASSESSEE IS NOT MAINTAINING ANY LO G BOOK OR OTHER RECORD TO SHOW THE USE OF THE VEHICLE IN QUESTION. THE ASSESSEE I S KEEPING TWO DRIVERS AND THE SALARIES OF BOTH THE DRIVERS ARE BOOKED AS EXPENSES AGAINST THE BUSINESS INCOME. THE ASSESSING OFFICER DISALLOWED 25% OF THE DIVERS SALA RY BEING NON INCIDENTAL TO BUSINESS PURPOSE. ITA NO.7879/M/2010 . 12 11.1 IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS S HOWING TWO DRIVERS FOR ONE MINI BUS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. SINC E THE ASSESSEE HAS NOT MADE OUT A CLAIM THAT SHE IS KEEPING SEPARATE AND PRIVATE DRIV ER; THEREFORE, THE PERSONAL USE OF THE DRIVER CANNOT BE RULED OUT. ACCORDINGLY, WE ARE OF THE VIEW THAT 25% OF THE DISALLOWANCE ON ACCOUNT OF PERSONA USE IS PROPER AN D JUSTIFIED. 12 GROUND NO.4 IS REGARDING DISALLOWANCE OF TELEPHO NE EXPENSES. 13 AT THE TIME OF HEARING, THE LD AR OF THE ASSESSE E HAS SUBMITTED THAT THE ASSESSEE DOES NOT PRESS GROUND NO.4 AND THE SAME MA Y BE DISMISSED AS NOT PRESSED. THE LD DR HAS NO OBJECTION, IF THE GROUND NO.4 IS D ISMISSED AS NOT PRESSED. ACCORDINGLY, THE GROUND NO.4 IS DISMISSED, BEING NO T PRESSED. 14 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCEMENT IN THE OPEN COURT ON THIS 8 TH , DAY OF MARCH 2013 SD/- SD/- ( P M JAGTAP ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 8 TH , MARCH 2013 RAJ* ITA NO.7879/M/2010 . 13 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI