M/s. Dhabriya Aggolomerates Private Limited, Jaipur V. Deputy Commissioner of Income Tax, Circle-6, Jaipur

ITA 861/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3715 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 26 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-07-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA JCIT DHK
• Assessee Lawyers: NIKHILESH KATARIA
• Keywords: Corroborative evidences; Validity of assessment
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 861/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13. M/S. DHABRIYA AGGOLOMERATES PVT. LTD. B-9 D(1), MALVIYA INDUSTRIAL AREA, JAIPUR. CUKE VS. THE DCIT, CIRCLE-6, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCD 5090 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI NIKHILESH KATARIA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI ASHOK KHANNA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.03.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 20/03/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 21 ST MAY, 2018 OF LD. CIT (A)-2, JAIPUR FOR THE ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE ASSESSMENT ORDER PASSED U/S 143(3) IS BAD IN LAW AS WELL AS ON FACTS AND HENCE THE SAME MAY PLEASE BE QUASHED. 2. RS. 7,71,633/- : THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE PRESENT CASE IN DISALLOWING EPF & ESI THOUGH THE SAME WAS DULY PAID BEFORE THE DUE DATE OF FILING OF RETU RN AND THE LD. CIT (A) ERRED IN SUSTAINING THE SAME. 2 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. 3. RS. 2,49,966/-: THE LD. AO ERRED IN LAW AS WELL AS ON THE FACTS OF THE PRESENT CASE IN MAKING DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE EXPENSES AND THE LD. CIT (A) ERRED IN SUSTAINING THE SAME. GROUND NO. 1 IS REGARDING VALIDITY OF ASSESSMENT OR DER PASSED UNDER SECTION 143(3) . 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 1 AND THE SA ME MAY BE DISMISSED AS NOT PRESSED. THE LD. D/R HAS RAISED NO OBJECTION IF GR OUND NO. 1 OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. ACCORDINGLY, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. GROUND NO. 2 IS REGARDING DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO EPF & ESI AS THE SAME WAS NOT PAID BEFORE THE DU E DATE OF THE RESPECTIVE ACTS BUT WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 3. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT ON CE THE ASSESSEE HAS PAID THE EMPLOYEES CONTRIBUTION TO ESI AND EPF BEFORE THE DU E DATE OF FILING OF RETURN UNDER SECTION 139(1), THEN THE SAME CANNOT BE DISALLOWED IN VIEW OF THE BINDING PRECEDENT OF HONBLE JURISDICTIONAL HIGH COURT INCLUDING THE DECISION IN CASE OF CIT VS. SBBJ, 99 DTR 131 (RAJ.). THE LD. CIT (APPEALS) HAS CONFIRME D THE DISALLOWANCE BY PURPORTEDLY FOLLOWING THE DECISION OF HONBLE JURIS DICTIONAL HIGH COURT DATED 13 TH MARCH, 2018 IN CASE OF RAJASTHAN RENEWABLE ENERGY C ORPORATION LTD. IN DBIT APPEAL NOS. 10-12/2018. IT IS PERTINENT TO NOTE THAT EVEN THE SAID DECISION IS NOT AGAINST THE ASSESSEE BUT THERE IS A TYPOGRAPHICAL MISTAKE I N THE CONCLUDING PARA OF THE 3 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. DECISION. THE LD. CIT (A) HAS MISUNDERSTOOD THE SA ID DECISION. FOR READY REFERENCE, WE REPRODUCE THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN PARA 6 AS UNDER :- 6. WITH REGARD TO ISSUE NO. 2 AND 3 THE CONTROVER SY IS PENDING BEFORE THE SUPREME COURT IN C.I.T., JAIPUR VS/ MS S TATE BANK OF BIKANER AND JAIPUR IN SLP (C) NO. 16249/2014, THERE FORE, SUBJECT TO DECISION OF SLP, FOR THE PRESENT, THESE ISSUES ARE DECIDED ON IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE. IT WILL BE OPEN FOR THE DEPARTMENT TO RECOVER THE AMOUNT IF THE DECISION IS IN THEIR FAVOUR. THUS IT IS CLEAR THAT THE HONBLE JURISDICTIONAL HI GH COURT HAS FOLLOWED THE EARLIER DECISION IN CASE OF CIT VS. SBBJ. HOWEVER, THERE I S AN APPARENT TYPOGRAPHICAL MISTAKE WHEREIN THE ISSUE IS STATED TO HAVE BEEN DE CIDED IN FAVOUR OF THE DEPARTMENT AND AGAINST THE ASSESSEE BUT IN THE LAST SENTENCE IT WAS AGAIN MADE CLEAR THAT IT WILL BE OPEN FOR THE DEPARTMENT TO RE COVER THE AMOUNT IF THE DECISION IS IN THEIR FAVOUR, WHICH CLEARLY SHOWS THAT THE ISSUE WAS IN FACT DECIDED IN FAVOUR OF THE ASSESSEE AND SINCE THE SLP WAS PENDING BEFORE T HE HONBLE SUPREME COURT AND IN THE EVENT THE ISSUE IS DECIDED IN FAVOUR OF THE REVENUE, THE REVENUE CAN RECOVER THE TAXES. WE FURTHER NOTE THAT IN CASE OF PR. CIT VS. RAJASTHAN EX-SERVICEMEN CORPORATION LTD. IN DBIT AOOEAL NO. 7/2018, THE HON BLE JURISDICTIONAL HIGH COURT HAS AGAIN CONSIDERED THIS ISSUE IN PARA 3 & 4 AS UN DER :- 3. THE FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) WAS FRAMED VIDE ORDER DATED 22/11/2016. WHILE FRAMING T HE ASSESSMENT 4 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEPOSITED EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI AFTER DUE DATE OF PAYMENT. THEREFORE, HE MADE DISALLOWANCE OF RS. 6,60,27,182/ -. AGGRIEVED BY THIS, THE ASSESSEE PREFERRED AN APPEAL BEFORE LD. C IT (A), WHO AFTER CONSIDERING THE SUBMISSIONS AND RELYING UPON THE JU DGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. STATE B ANK OF BIKANER & JAIPUR (2014) 99 DTR 131 (RAJ.) DELETED THE DISALLO WANCE. 4. REGARDING BOTH THE ISSUES RELATING TO PF & ESI, THE CONTROVERSY IS PENDING BEFORE THE SUPREME COURT IN SLP NO. 1624 9/2014 (THE STATE OF RAJASTHAN CIT, JAIPUR VS. M/S. STATE BANK OF BIKANER AND JAIPUR), HENCE THE ISSUES ARE DECIDED SUBJECT TO SL P. THEREFORE, IN VIEW OF THE EARLIER DECISION WHICH WA S FOLLOWED BY THE HONBLE HIGH COURT IN THESE TWO DECISIONS, THE ISSUE IS COVERED BY THE BINDING PRECEDENT OF HONBLE JURISDICTIONAL HIGH COURT, HENCE THE DISALL OWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) IS DELETED. GROUND NO. 3 IS REGARDING ADHOC DISALLOWANCE MADE B Y THE AO ON ACCOUNT OF UNVERIFIABLE EXPENSES . 4. THE AO WHILE PASSING THE SCRUTINY ASSESSMENT HAS MADE DISALLOWANCE OF 10% OF VARIOUS EXPENDITURES ON ACCOUNT OF UNVERIFIABLE VOUCHERS BEING SELF-MADE AS WELL AS THE ELEMENT OF PERSONAL USE. THE ASSESSEE CHALL ENGED THE ACTION OF THE LD. CIT (A), HOWEVER, THE LD. CIT (A) HAS CONFIRMED THE DIS ALLOWANCE MADE BY THE AO ON THE SIMILAR REASONING THAT MOST OF THE PAYMENTS WERE MA DE IN CASH AND FURTHER THE PERSONAL ELEMENT IN THIS EXPENDITURE COULD NOT BE R ULED OUT. 5. BEFORE US, THE LD. A/R HAS SUBMITTED THAT THE AS SESSEE HAS PRODUCED ALL THE RELEVANT BILLS AND VOUCHERS THOUGH DUE TO THE NATUR E OF EXPENDITURES, SOME OF THE EXPENDITURES WERE INCURRED IN CASH FOR WHICH SELF-M ADE VOUCHERS WERE PRODUCED BY 5 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. THE ASSESSEE. HOWEVER, WHEN THE EXPENDITURE IS NOT FOUND TO BE EXCESSIVE AND INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS THEN THE ADHOC DISALLOWANCE IS NOT PERMISSIBLE. THE LD. A/R HAS F URTHER CONTENDED THAT THE ASSESSEE IS A COMPANY AND, THEREFORE, DISALLOWANCE CANNOT BE MADE ON ACCOUNT OF PERSONAL ELEMENT OR USE. HE HAS RELIED UPON THE DECISION OF THIS TRIBUNAL DATED 31 ST MAY, 2017 IN CASE OF M/S. S.R. PROTEINS PVT. LTD. VS. DC IT IN ITA NO. 978/JP/2016 AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT ADHOC DIS ALLOWANCE MERELY ON SUSPICION IS NOT PERMISSIBLE IN ABSENCE OF ANY EVIDENCE OR MATER IAL TO SUPPORT THE REASON OF DISALLOWANCE. ALTERNATIVELY THE LD. A/R HAS PLEADE D THAT 10% ADHOC DISALLOWANCE IS ON HIGHER SIDE AND THE SAME MAY BE RESTRICTED TO 5% , IF AT ALL THE DISALLOWANCE IS CONFIRMED. 6. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS GIVEN THE REASO N THAT THE EXPENDITURE ON ACCOUNT VEHICLE REPAIR & MAINTENANCE, TELEPHONE EXP ENSES, OFFICE EXPENSES AND CONVEYANCE EXPENSES WERE NOT FULLY VERIFIABLE AS TH E ASSESSEE HAS MADE THE PAYMENT IN CASH AND SELF-MADE VOUCHERS WERE PRODUCE D. THUS 10% DISALLOWANCE MADE BY THE AO IS VERY REASONABLE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE AO HAS TAKEN UP THE FOUR ITEMS OF EXPE NDITURES FOR THE PURPOSE OF VERIFICATION, THE DETAILS OF WHICH ARE AS UNDER :- S.NO. ITEM EXPENSES CLAIMED 1. VEHICLE REPAIR & MAINTENANCE EXPENSES RS. 5,86,492.00 2. TELEPHONE EXPENSES RS. 9,67,451.00 3. OFFICE EXPENSES RS. 4,82,953.00 4. CONVEYANCE EXPENSES RS. 24,99,664.00 6 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. THUS THE AO PROPOSED TO MAKE DISALLOWANCE ON ACCOUN T OF VEHICLE REPAIR & MAINTENANCE EXPENSES, TELEPHONE EXPENSES, OFFICE EX PENSES AND CONVEYANCE EXPENSES. THE AO FINALLY MADE THE DISALLOWANCE OF 10% ON ACCOUNT OF LACK OF SUPPORTING VERIFIABLE EVIDENCE AS WELL AS ELEMENT O F PERSONAL USE. AT THE OUTSET, WE FIND THAT THE REASON OF DISALLOWANCE BEING ELEMENT OF PERSONAL USE IS NOT SUSTAINABLE WHEN THE ASSESSEE IS A COMPANY AND ALL THE EXPENDIT URES WERE INCURRED IN RESPECT OF THE BUSINESS OF THE ASSESSEE. EVEN IF THERE IS A U SE OTHER THAN THE BUSINESS, THE SAME HAS TO BE ESTABLISHED FROM THE RECORD AND NOT ON THE BASIS OF SURMISES AND CONJECTURES. THE SUSPICION AND DOUBT CANNOT BE A G ROUND FOR DISALLOWANCE OF EXPENDITURE WHEN THE AO HAS NOT FOUND THE CLAIM OF THE ASSESSEE EITHER EXCESSIVE OR BOGUS. FURTHER, SO FAR AS THE TELEPHONE EXPENSE S ARE CONCERNED, IT IS ALWAYS SUPPORTED BY BILLS RAISED BY THE SERVICE PROVIDER A ND, THEREFORE, IT CANNOT BE TREATED AS AN EXPENDITURE WITHOUT SUPPORTING EVIDENCE. THE TELEPHONE EXPENSES ARE OTHERWISE VERIFIABLE FROM INDEPENDENT SOURCE AS THE SAME ARE BASED ON THE BILLS RAISED BY THE SERVICE PROVIDER. THE AO HAS NOT RAI SED ANY OBJECTION ABOUT THE TELEPHONE EXPENSES BEYOND THE BILLS RAISED BY THE S ERVICE PROVIDER. THEREFORE, THE ADHOC DISALLOWANCE MADE BY THE AO OF TELEPHONE EXPE NSES IS NOT SUSTAINABLE AND THE SAME IS DELETED. 7.1. AS REGARDS THE OTHER EXPENDITURES ON ACCOUNT O F VEHICLE REPAIR & MAINTENANCE, OFFICE EXPENSES AND CONVEYANCE EXPENSE S, WE FIND THAT THE AO HAS SUPPORTED HIS DECISION ON TWO COUNTS ONE IS UNVERIF IABLE EVIDENCE AND SECOND IS PERSONAL USE. SINCE THE ASSESSEE IS A COMPANY AND THE EXPENDITURES ARE INCURRED FOR THE PURPOSE OF BUSINESS, THE SAME CANNOT BE DIS ALLOWED ON THE BASIS OF A DOUBT OF PERSONAL USE. THEREFORE, THE SAID GROUND OF DIS ALLOWANCE IS NOT SUSTAINABLE. AS 7 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR. REGARDS THE VERIFIABLE SUPPORTING EVIDENCE TO SUBST ANTIATE THE CLAIM, WE FIND THAT THE ASSESSEE HAS NOT DISPUTED THE FACT OF THE PAYMENTS MADE IN CASH AND PRODUCTION OF SELF-MADE VOUCHERS. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THE DISALLOWANCE TO 5% AS AGAINST 10% MADE BY THE AO IN RESPECT OF EXPENDITURES INCURRED ON ACCOUNT OF VEHICLE REPAIR & MAINTENANCE, OFFICE EXPENSES AND CONVEYANCE EXPENSES. THIS GROUND IS PARTLY ALL OWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20/03/2 019. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 20/03/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. DHABRIYA AGGOLOMERATES P. LT D., JAIPUR. 2. THE RESPONDENT THE DCIT, CIRCLE-6, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 861/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 8 ITA NO. 861/JP/2018 M/S. DHABRIYA AGGOLOMERATES PVT. LTD., JAIPUR.