MESERS VISHAL AUTOMOBILE, BILASPUR V. PR.COMMISSIONER OF INCOME TAX, BILASPUR

ITA 85/RPR/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3718 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 26-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: RICHA KHATRI
• Keywords: Capital asset; Depreciation; TDS; Set aside
• Section: 143(3); 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI N. K. CHOUDHRY, JUDICIAL MEMBER ./ I.T.A. NO. 85/RPR/2019) ( ASSESSMENT YEAR : 2014-15) M/S. VISHAL AUTOMOBILE TIFRA, NEAR RAILWAY CROSSINGS, BILASPUR, CHHATTISGARH - 495001 / VS. PR. COMMISSIONER OF INCOME TAX AAYAKAR BHAWAN, MAHIMA COMPLEX, VYAPAR VIHAR, BILASPUR, CHHATTISGARH - 495001 ./ ./PAN/GIR NO. : AAFFV0333C ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SMT. RICHA KHATRI, C.A. / RESPONDENT BY : SHRI R. K. SINGH, CIT.DR DATE OF HEARING 29/07/2021 !'# / DATE OF PRONOUNCEMENT 12/10/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISS IONER OF INCOME TAX, BILASPUR (PCIT IN SHORT), DATED 28.03.2019 P ASSED UNDER S.263 OF THE INCOME TAX ACT, 1961 (THE ACT) WHEREBY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (AO) DATED 26 .12.2016 UNDER ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 2 - S. 143(3) OF THE ACT CONCERNING AY 2014-15 WAS SOUG HT TO BE SET ASIDE FOR REFRAMING ASSESSMENT IN TERMS OF SUPERVISORY DIRECTIONS. 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE REVISIONAL ACTION OF THE PCIT WHEREBY THE ASSESSING OFFICER (A.O.) WAS DIRECTED TO PASS THE ASSESSMENT ORDER DE NOVO AFTER MAKING ENQUIRIES ON THE POINTS SET OUT IN THE NOTICE WHICH HAS ALREADY EXAMINED AND CONSIDERED DURING THE ORIGINAL ASSESSM ENT PROCEEDINGS CONCERNING A.Y. 2014-15. THE ASSESSEE HAS CHALLENGE D THE ASSUMPTION OF JURISDICTION BY THE PCIT UNDER SECTIO N 263 OF THE ACT ON THE GROUND THAT THE ASSESSMENT ORDER UNDER REVIS ION IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN SELLI NG OF MOTOR BIKES OF HONDA COMPANY AND KAMAZ TRUCKS. THE RETUR N OF INCOME FILED BY THE ASSESSEE FOR AY 2014-15 DECLARING TOTA L INCOME AT RS.22,56,060/- WAS SUBJECTED TO SCRUTINY ASSESSMENT . IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE AO INTER ALIA MADE DISALLOWANCES UNDER VARIOUS HEADS OF EXPENSES AND ASSESSED THE IN COME AT RS.35,36,270/-. 4. THEREAFTER, THE PCIT IN EXERCISE OF ITS REVISION ARY POWERS ISSUED SHOW CAUSE NOTICE DATED 04.03.2019 UNDER S.2 63 OF THE ACT REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE IMPUGNED ASSESSMENT SO FRAMED UNDER S.143 OF THE ACT SHOULD NOT BE MODIFIED/SET ASIDE ON THE GROUND THAT SUCH ORDER IS ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE O N THE POINTS SET OUT IN THE SHOW CAUSE NOTICE. IT WAS ESSENTIALLY ALLEG ED THAT THE AO HAS FAILED TO PROPERLY EXAMINE THE RETURN OF INCOME TOW ARDS FALL IN GROSS PROFIT AND EXPENSES INCURRED VIZ. PDI EXPENSES, SALARY EXPENSES, REPAIR & MAINTENANCE EXPENSES, EXPENSES ON TIPPERS, INTEREST ON ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 3 - LOANS & ADVANCES ETC. THE ASSESSEE, IN RESPONSE TO THE SHOW CAUSE NOTICE, FILED A DETAILED SUBMISSION TO JUSTIFY ITS STAND ON VARIOUS ISSUES RAISED BY THE PCIT. THE PCIT, HOWEVER, DID NOT FIND THE DEFENSE OF THE ASSESSEE TO BE CONVINCING AND CONSEQ UENTLY SET ASIDE VARIOUS ISSUES FOR DE NOVO EXAMINATION AT THE END OF THE AO IN TERMS OF REVISIONAL ORDER DATED 28.03.2019 IN QUESTION. 5. AGGRIEVED BY THE REVISIONAL ORDER PASSED BY THE PCIT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGITATING THE SUPERVISORY JURISDICTION USURPED BY THE PCIT AND CONSEQUENTIAL REVISIONAL ORDER PASSED UNDER S.263 OF THE ACT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS ON VARIOUS P OINTS ON WHICH THE ASSESSMENT ORDER HAS BEEN SET ASIDE BY TH E REVISIONAL COMMISSIONER. 6.1 THE FIRST ISSUE CONCERNS NON VERIFICATION OF PD I EXPENSES AND SALARY EXPENSES. IN DEFENSE, IT IS CONTENDED ON BE HALF OF THE ASSESSEE THAT THE PRE-DELIVERY INSPECTION (PDI) IS THE FINAL CHECK CARRIED OUT BY THE DEALER OF CAR, VEHICLE, TIPPERS BEFORE THEY ARE HANDED OVER TO THE CUSTOMERS. THESE CHARGES/EXPENS ES ARE BORNE BY THE DEALER-ASSESSEE. DURING THE YEAR, THE ASSESSEE HAS DEALERSHIP OF KAMAZ VECTRA MOTORS PVT. LTD. FOR SELLING OF TIPPER S. THE TURNOVER HAS GONE UP SUBSTANTIALLY THIS YEAR QUA THE EARLIER YEARS AND THE PDI EXPENSES ARE MERELY 0.24% OF THE SALES. THE EXPENS ES IN THE SIMILAR RANGE HAVE BEEN INCURRED IN THE EARLIER YEARS AS WE LL BUT HOWEVER WERE CLUBBED WITH WORKSHOP EXPENSES. THUS, WHEN SE EN COMBINEDLY, NO MAJOR DIFFERENCE IN PERCENTAGE CAN B E OBSERVED. THE EXPENSES OF THIS YEAR IS ABOUT 0.24% OF SALES W HEREAS IN PREVIOUS TWO YEARS IT WAS IN THE RANGE OF 0.17% & 0 .23% IN F.Y. 2013-14 & 2012-13 RESPECTIVELY. THE BOOKS ARE NOT ONLY AUDITED ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 4 - BUT WERE ALSO PRODUCED BEFORE THE AO AND TEST CHECK ED AS PER THE ORDER SHEET AVAILABLE AT PAGE NO.40-41 OF THE PAPER BOOK. IT WAS THUS CONTENDED THAT WHERE THE BOOKS OF ACCOUNTS ARE AUDITED AND NO SERIOUS DEVIATION IN EXPENSES ARE REPORTED, THE ACT ION OF AO IN ADMITTING SUCH ROUTINE EXPENSES WITHOUT MINUTE VERI FICATIONS ON EACH ITEM IS NOT FATAL. IT IS FOR THE AO TO GAUGE THE SCOPE AND EXTENT OF ENQUIRY FOR SUCH ROUTINE EXPENSES. 6.2 AS REGARDS SALARY EXPENSES, THE ASSESSEE CONTEN DS THAT SUCH EXPENSE STANDS AT 0.89% AS AGAINST 1.22% OF SALES I N THE PRECEDING ASSESSMENT YEAR AND 1.76% IN THE YEAR BEFORE LAST. HENCE, WHERE THE ACCOUNTS WERE AUDITED AND THERE IS NO VISIBLE A BNORMALITY IN THE EXPENSE INCURRED, THERE WAS NO OCCASION OR NECESSIT Y FOR THE AO TO VERIFY SUCH FACTS OF ROUTINE NATURE IN A DETAILED M ANNER. THE BOOKS OF ACCOUNTS WERE PRODUCED AS POINTED OUT EARLIER. 6.3 WE FIND FORCE IN THE PLEA OF THE ASSESSEE. THE AO IN DISCHARGE OF QUASI JUDICIAL FUNCTION, IS ENTITLED TO EXERCISE HIS JUDICIAL DISCRETION FOR THE EXTENT OF ENQUIRY NEEDE D IN A PARTICULAR CASE. IT HAS BEEN DEMONSTRATED ON BEHALF OF THE AS SESSEE THAT BOOKS OF ACCOUNTS WERE AUDITED AND CERTIFIED BY THE TAX A UDITORS. THE AO HAS ALSO CALLED FOR THE BOOKS AND HAS ALSO TEST CHE CKED THE VERACITY OF EXPENSES. IN THE ABSENCE OF ANY SERIOUS DEVIAT ION POINTED OUT BY THE PCIT WHICH MAY INVITE THE ATTENTION OF A REASON ABLE PERSON FOR ENQUIRY, THE ACCEPTANCE OF SUCH ROUTINE EXPENSES CA NNOT BE DISLODGED IN A LIGHT HEARTED MANNER. IF THE APPROA CH ADOPTED BY THE PCIT IS ENDORSED, EVERY SINGLE CASE ASSESSED UNDER S.143(3) OF THE ACT WOULD BE SUSCEPTIBLE TO REVISIONAL PROCEEDINGS. WE ARE NOT INCLINED TO UPHOLD THE ACTION OF THE PCIT. THE DIR ECTIONS OF THE PCIT IN THIS REGARD ARE THUS SET ASIDE. ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 5 - 7. THE SECOND OBJECTION OF THE PCIT IS TOWARDS NON VERIFICATION OF SUNDRY CREDITORS. THE LEARNED COUNSEL CONTENDS THAT THE CREDIT ARISES ON ACCOUNT OF PURCHASES MADE FROM THE SUPPLI ERS OF THE VEHICLE TO WHOM THE PAYMENTS ARE MADE THROUGH BANKI NG CHANNEL IN THE REGULAR COURSE. THESE FACTS ARE EASILY DISCERN ABLE FROM THE ACCOUNTING RECORDS AND ARE CONSISTENT WITH THE ACCO UNTING POLICY FOLLOWED IN THIS REGARD. THE OPENING STOCK PURCHAS E SALES AND CLOSING STOCK AND OTHER ENTRIES IN THE BOOKS ARE NO T IN DISPUTE. THE CORRECTNESS AND GENUINENESS OF INCOME AND EXPENSES HAVE BEEN EXAMINED BY THE AO. THE AO HAS APPLIED HIS MIND TO THE STATE OF AFFAIRS OF THE ASSESSEE AND THERE ARE NOT PRESCRIBE D YARDSTICKS AS TO WHAT ENQUIRY OR WHAT KIND OF VERIFICATION IS EXPECT ED FROM THE AO. THE PCIT HAS NOT POINTED OUT ON WHAT BASIS THE SUND RY CREDITORS REFLECTED IN THE BOOKS ARE ABNORMAL. THE SUPPLIES ARE MADE BY THE MULTINATIONAL COMPANIES AND THE CREDITORS HAVE ARIS EN ON TOWARDS OUTSTANDING PAYMENTS. THE PAYMENTS ARE MADE IN ORD INARY COURSE AS AN ORDINARY BUSINESS AFFAIR. IT IS CLAIMED THAT HA VING REGARD TO THE SUBSTANTIAL TURNOVER OF THE ASSESSEE, THE OUTSTANDI NG CREDITORS IS A NORMAL INCIDENT OF BUSINESS. THE ASSESSEE CONTENDS THAT WITHOUT POINTING OUT WHAT ENQUIRY AND WHY ENQUIRY ARE NEEDE D, SETTING ASIDE OF THE ISSUE AFFECTS THE CIVIL RIGHTS ACCRUED TO TH E ASSESSEE ON ASSESSMENTS MADE UNDER S.143(3) OF THE ACT AND IT I S UNFAIR TO PUT THE ASSESSEE TO RIGOR ACTION AGAIN IN A PERFUNCTORY MANNER. IT WAS FURTHER CONTENDED THAT MERE NON-CONFIRMATION OF THE SUNDRY CREDITORS DOES NOT NECESSARILY RENDER THE ORDER ERR ONEOUS TO THE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7.1 WITHOUT PREJUDICE, IT IS ALSO POINTED OUT ON BE HALF OF THE ASSESSEE THAT IN THE POST REVISION, ASSESSMENT FRAM ED UNDER S.143(3) OF THE ACT R.W.S. 263 OF THE ACT, NO ADDITION HAS B EEN MADE ON THIS POINT AND THE AO FOUND THE EXPLANATION ON SUNDRY CR EDITORS ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 6 - SATISFACTORY AFTER ENQUIRIES AND VERIFICATIONS. IT WAS THUS SUBMITTED THAT THE ASSESSEE IS THUS NOT REALLY AGGRIEVED BY T HIS DIRECTION AND HENCE DOES NOT STRICTLY PRESS FOR ITS ADJUDICATION ON MERITS. 7.2 WE ARE NOT INCLINED TO INTERFERE WITH THE DIREC TIONS OF PCIT ON THIS SCORE, HAVING REGARD TO THE AVERMENTS MADE ON BEHALF OF THE ASSESSEE IN PARA 7.1 ABOVE. 8. THE THIRD ISSUE CONCERNS ENQUIRY ON RENTAL INCOM E AMOUNTING TO RS.14,22,635/-. THE ASSESSEE CONTENDS THAT THE PROPERTY HELD IN THE NAME OF THE PARTNER WAS LENT TO PUBLIC BANK/SBI / AND THE TENANT (SBI) HAS DEDUCTED TDS IN THE PAN OF THE ASSESSEE F IRM HEREIN. WE, AT THE OUTSET, DO NOT SEE WHAT PREJUDICE IS CAU SED TO THE REVENUE IN THE INSTANT CASE WHERE INCOME HAS BEEN D ECLARED ON THE PROPERTY HELD IN THE NAME OF THE PARTNER. WITHOUT GOING INTO ANY OTHER DISCUSSION, THE ISSUE REQUIRES TO BE SET ASID E AT THE THRESHOLD. 9. THE FOURTH ISSUE CONCERNS INTEREST EXPENSES OF R S.57.26 LAKHS RELATING TO CASH CREDIT TAKEN FROM THE BANK. THE A SSESSEE CONTENDS THAT THE BOOKS OF ACCOUNTS CLEARLY SHOWS THAT EXPEN DITURE HAS BEEN INCURRED FOR UTILIZATION OF CASH CREDIT FACILITY FR OM THE BANK TOWARDS CONSTRUCTION OF CAPITAL ASSET I.E. HOTEL BUILDING. THE IDENTICAL ISSUE CROPPED UP IN A.Y. 2015-16 WHERE RELIEF WAS GRANTED BY THE CIT(A) FOR WHICH THE ORDER HAS BEEN PLACED IN THE PAPER BO OK. IN THE LIGHT OF THE FACT THAT ISSUE STANDS SETTLED IN FAVOUR OF THE ASSESSEE, THE ACTION OF AO CAN BE SAID TO BE PLAUSIBLE AND THE OR DER UNDER REVIEW THUS CANNOT BE REGARDED AS ERRONEOUS. THE PRE-COND ITIONS FOR INVOCATION OF SECTION 263 OF THE ACT ON THIS POINT ARE THUS NOT SATISFIED. THE ACTION OF PCIT IS THUS SET ASIDE. ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 7 - 10. THE FIFTH ISSUE CONCERNS DISALLOWANCE OF EXPENS ES ON TIPPERS. THE ASSESSEE CONTENDS THAT THREE TIPPERS WERE PURCH ASED IN THE RELEVANT PREVIOUS YEAR IN FEBRUARY AND MARCH 2014. THE VEHICLES WERE PUT TO USE FOR TRANSPORTATION OF COAL AT LAKHA NPUR IN ODISHA STATE AND THE CORRESPONDING TRANSPORTATION RECEIPTS HAVE BEEN RECORDED IN F.Y. 2014-15 WHEN TRANSACTIONS WERE CON SUMMATED AND THEREFORE NO PREJUDICE IS CAUSED TO THE REVENUE PER SE IN THE LARGER CONTEXT . THE DIRECTION OF PCIT TOWARDS DISALLOWANCE OF DEPRECIATION ON SUCH TIPPERS AMOUNTING TO RS.2,25,0 00/- IS IN CONTROVERSY. WE OBSERVE THAT IT IS AN ADMITTED POS ITION THAT TIPPERS WERE PURCHASED IN THE F.Y. 2013-14 RELEVANT TO A.Y. 2014-15 IN QUESTION. THE VEHICLE HAVING BEEN PURCHASED ARE NA TURALLY READY FOR USE WHICH TANTAMOUNT TO PUTTING IT TO USE IN RESPEC T OF SUCH MOVABLE ASSETS/VEHICLES. THE CLAIM OF DEPRECIATION THUS BE ING PLAUSIBLE THUS CANNOT BE TERMED AS ERRONEOUS FOR THE PURPOSES OF S.263 OF THE ACT. THE ACTION OF THE PCIT IS SET ASIDE. 11. AS PER SIXTH ISSUE, THE PCIT HAS QUESTIONED THE ELIGIBILITY OF INTEREST EXPENDITURE OF RS.57.26 LAKHS ON THE GROUN D OF NON- BUSINESS USE. THE ASSESSEE IN THIS REGARD CONTENDS THAT THE AFORESAID INTEREST WAS PAID TO BANK OF BARODA AND ICICI BANKS FOR CASH CREDIT LOANS TAKEN FROM THESE BANKS AND UTILIZED AS WORKIN G CAPITAL OF THE BUSINESS OF THE ASSESSEE. THE LOANS & ADVANCES GIV EN IS NOT OUT OF THE BORROWED FUNDS BUT OUT OF OWN CAPITAL. WE OBSE RVE THAT UTILIZATION OF LOANS & ADVANCES OF THE PURPOSES OF BUSINESS IS EXTREMELY SUBJECTIVE AND DEPENDS ON EVALUATION OF V ARIETY OF ATTENDANT FACTORS. NO STRAIGHT JACKET FORMULA CAN BE ENVISAGED WITH MATHEMATICAL PRECESSION TO ASCERTAIN SUCH DISALLOWA NCE, IF ANY, AT THE REVISIONAL STAGE. THE RELEVANT FACTS WERE PLAC ED BEFORE THE AO. IN THE ABSENCE OF ANY COGENT EVIDENCE AVAILABLE BEF ORE THE PCIT TO ASSAIL THE CLAIM OF THE INTEREST EXPENDITURE INCURR ED ON WORKING ITA NO. 85/RPR/2019 (M/S. VISHAL AUTOMOBILE VS. PCIT) A.Y. 2014-15 - 8 - CAPITAL LOAN, THE REVISIONARY PROCEEDINGS TO EXPLOR E THE POSSIBILITY OF ERROR, IF ANY, IS NOT JUSTIFIED. WE THUS SET AS IDE THE DIRECTIONS OF THE PCIT IN THIS REGARD. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SD/- SD/- (N. K. CHOUDHRY) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 / DR, ITAT, RAIPUR 5. 267 8 / GUARD FILE. BY ORDER 4 SR. PRIVATE SECRETARY ITAT 4 RAIPUR (ON TOUR) ORDER PRONOUNCED ON 12 / 1 0/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(4 ) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE, 1963.