Dhavani Textile Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-1(4), Ahmedabad

ITA 873/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9046 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 10-09-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 20-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Depreciation; Reasonable cause; Non compliance
• Section: 234B; 191

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI H.L. KARWA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 10.09.09 DRAFTED ON: 10.09 .09 ITA NO.873/AHD/2009 ASSESSMENT YEAR : 2005-06 DHAVANI TEXTILE PVT. LTD. 52-A, MASKATI MARKET, REVDI BAZAR, KALUPUR, AHMEDABAD. VS. ITO, WARD-1(4), AHMEDABAD. PAN/GIR NO. : AABCD 9282 D (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI VIJAY RANJAN RESPONDENT BY: O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST T HE ORDER OF THE LD.CIT(APPEALS)-VI, AHMEDABAD, DATED 5.12.2008. 2. GROUND NO.1 OF THE APPEAL RELATES TO DISALLOWANC E OF DEPRECIATION ON VEHICLES PURCHASED IN THE NAME OF TWO DIRECTORS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS PURCHASED CAR FOR RS.96,000/- AND SCOOTER FOR RS.37,879/- DURING THE YEAR UNDER APPEAL AND CLAIMED DEPRECIATION OF RS.19,200/- ON CAR AND RS.9 ,470/- ON SCOOTER @ 20% AND 25% RESPECTIVELY TOTALING TO RS.28,670/-. THE A SSESSEE WAS REQUIRED TO PRODUCE THE PURCHASE BILLS. THE ASSESSEE FILED RECE IPT FOR PAYMENTS MADE AND SUBMITTED THAT AS THE ASSETS PURCHASED ARE OLD THER EFORE, NO BILLS ARE AVAILABLE FOR THE SAME. FROM THE RECEIPTS, THE LEARNED ASSESS ING OFFICER FOUND THAT THE ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 2 - CAR WAS PURCHASED IN THE NAME OF KANTILAL CHHAGANLA L SHAH AND SCOOTER WAS PURCHASED IN THE NAME OF DILIPKUMAR CHHAGANLAL. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED RTO BOOK AND THAT FOR ALLOWING DEPRECIATION, THE VEHICLE SHOULD BE OWNED BY THE ASSESSEE. HE THEREFORE, DISALLOWED DEPRECIATION TO THE ASSESSEE. IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE O RDER OF THE LEARNED ASSESSING OFFICER. 4. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT REGISTRATION OF THE VEHICLE IN THE NAME OF THE ASSE SSEE WAS NOT NECESSARY TO CLAIM DEPRECIATION ON THEM. THE ONLY REQUIREMENT IS THAT THE ASSETS SHOULD BE USED IN THE BUSINESS OF THE ASSESSEE. HE FILED COPY OF THE BALANCE SHEET AS AT 31.03.2005 AND ALSO POINTED OUT FROM THE DEPRECIATI ON CHART IN THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) THA T THE ASSETS WERE REFLECTED IN THE BALANCE SHEET OF THE ASSESSEE AND THAT THE PAYMENTS WERE MADE BY THE ASSESSEE FOR THEIR PURCHASE. HE RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MYSORE MINERAL LTD. VS . CIT (1999) 239 ITR 775(SC) AND DECISION OF HON'BLE DELHI HIGH COURT IN GOWERSONS PUBLISHER (P) LTD. VS. CIT (1999) 240 ITR 191 (DELHI) (FB). 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE ASSESSEE CLAIMED DEPRECIATION OF RS.28,670/- IN RES PECT OF PURCHASE OF CAR FOR RS.96,000/- AND PURCHASE OF SCOOTER FOR RS.37,879/- . THE LEARNED ASSESSING ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 3 - OFFICER DISALLOWED THE CLAIM OF DEPRECIATION AS HE FOUND THAT THE ABOVE CAR AND SCOOTER WERE PURCHASED IN THE NAME OF DIRECTORS AND NOT IN THE NAME OF THE COMPANY. FOR THE SAME REASON THE LEARNED COMMISSION ER OF INCOME TAX(APPEALS) ALSO HELD THAT THE ASSESSEE IS NOT THE OWNER OF THE ABOVE VEHICLES AND FOR ALLOWANCE OF DEPRECIATION CONDITION PRECEDE NT IS THAT THE RELEVANT ASSET MUST BE OWNED BY THE ASSESSEE. WE FIND THAT I T IS NOT IN DISPUTE THE ASSETS IN QUESTION WERE DULY REFLECTED IN THE SCHED ULE OF FIXED ASSETS IN THE AUDITED BALANCE SHEET OF THE ASSESSEE COMPANY. FUR THER IT IS ALSO NOT IN DISPUTE THAT THE ASSETS IN QUESTION ARE MOVEABLE PR OPERTIES WHOSE OWNERSHIP IS TRANSFERRED BY DELIVERY OF POSSESSION. SIMPLY BE CAUSE THE VEHICLES WERE IN THE NAME OF THE DIRECTORS IN THE RECORDS OF THE RTO IT CANNOT BE CONCLUDED THAT THE ASSETS WERE NOT OWNED BY THE ASSESSEE COMPANY. IT IS NOT IN DISPUTE THAT THE ASSETS WERE IN THE POSSESSION OF THE ASSESSEE C OMPANY, PURCHASE VALUE OF ASSETS WERE PAID BY THE ASSESSEE COMPANY AND THE VE HICLES WERE USED FOR BUSINESS PURPOSES OF THE ASSESSEE AS NO PART OF TH E EXPENSES INCURRED IN RESPECT OF THE ABOVE VEHICLES WERE DISALLOWED IN TH E ASSESSMENT. FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT THE REGISTERED OWN ER IN THE RTO RECORDS HAVE CLAIMED THAT THEY ARE OWNER OF THE VEHICLES AND NOT THE ASSESSEE COMPANY. IN THE ABOVE CIRCUMSTANCES AS WE FIND THAT THE VEHICLE S WERE PURCHASED OUT OF THE FUNDS OF THE ASSESSEE COMPANY AND THE SAME WERE USED IN THE BUSINESS OF THE ASSESSEE COMPANY, THE ASSESSEE COMPANY WAS THE OWNER OF THE VEHICLE, THUS IN OUR CONSIDERED VIEW THE LOWER AUTHORITIES W ERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEPRECIATION OF RS.28,670/ -. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF MYSORE MINERAL LTD. VS. CIT (1999) 239 ITR 775(SC) AND DEC ISION OF HON'BLE DELHI HIGH COURT IN GOWERSONS PUBLISHER (P) LTD. VS. CIT (1999 ) 240 ITR 191 (DELHI) (FB) ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 4 - WHEREIN IT WAS HELD THAT A NYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCU PY THE PROPERTY IN HIS OWN RIGHT WOULD BE THE OWNER OF BUILDING FOR THE PURPOS E OF S. 32(1) THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED, AND HE WOULD BE ENTITLED TO DEPRECIATION THEREON. WE THEREFORE D ELETE THE DISALLOWANCE OF RS.28,670/-. THUS THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED. 7. GROUND NO.2 OF THE APPEAL RELATES TO THE ORDER O F THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMING THE LEARNED ASSESSING OFFICER VIEW THAT THERE WAS NON COMPLIANCE OF STATU TORY NOTICES ISSUED BY THE LEARNED ASSESSING OFFICER WITHOUT REASONABLE CAUSE. 8. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE RELATE S TO THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRM ING THE VIEW OF THE LEARNED ASSESSING OFFICER THAT IT WAS A FIT CASE FO R ADDITION TO THE FIGURE OF BOOK PROFIT. 9. AT THE TIME OF THE HEARING, THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING THE ABOVE GROUNDS OF APPEAL. HENCE, THEY ARE DISMISSED AS NOT PRESSED. 10. GROUND NO.4 OF THE APPEAL RELATES TO ADDITION O F RS.7,52,743/- FOR INFLATION OF PURCHASES. 11. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNE D ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT PRODUCED BOOKS O F ACCOUNT PURCHASED BILLS SALE BILLS, BUT HAS PRODUCED COPY OF ACCOUNTS IN RE SPECT OF ELECTRICITY BILLS, ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 5 - FOLDING EXPENSES, SALARY EXPENSES, FREIGHT AND OCTR OI. DETAILS OF OPENING AND CLOSING STOCKS WERE PRODUCED. ACCORDINGLY TO THE LE ARNED ASSESSING OFFICER, ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT AND THEREFORE, IT WAS NOT POSSIBLE TO VERIFY THE GENUINENESS OF THE PURCHASES SHOWN BY THE ASSESSEE. THEREFORE, HE REJECTED THE ACCOUNT BY INVOKING PRO VISION OF SECTION 145(3) OF THE ACT. THEREAFTER, HE ESTIMATED THE INFLATION IN PURCHASE AT 10% OF TOTAL PURCHASES OF RS.75,27,433/- AND MADE ADDITION OF RS .7,52,743/- TO THE INCOME OF THE ASSESSEE. IN APPEAL, THE LEARNED COMMISSIONE R OF INCOME TAX(APPEALS) UPHELD THE ACTION OF THE LEARNED ASSESSING OFFICER. 12. THE LEARNED AUTHORISED REPRESENTATIVE OF THE AS SESSEE ARGUED THAT THE ASSESSEE IS IN THE BUSINESS OF CLOTHS ON WHOLESALE BASIS AND ON SALES OF RS.81.54 LACS IT HAS EARNED GROSS PROFIT OF RS.9.60 LACS WHI CH IS 11.78% AND IS BATTER THAN THE GROSS PROFIT OF 11.15% SHOWN IN THE IMMEDIATELY PROCEEDING YEAR. HENCE, HE SUBMITTED THAT THERE WAS NO BASIS FOR THE LEARNE D ASSESSING OFFICER TO MAKE ADDITION TO THE INCOME OF THE ASSESSEE ON ACCOUNT O F INFLATION OF PURCHASES. 13. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORT ED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 14. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE THE LEARNED ASSESSING OFFICER REJECTED BOOK RESULT OF T HE ASSESSEE AS THE ASSESSEE FAILED TO PRODUCE BOOKS OF ACCOUNT, PURCHASE BILLS AND SALE BILLS BEFORE HIM AT THE TIME OF HEARING. THE LEARNED ASSESSING OFFICER AFTER REJECTING THE BOOK RESULT DISALLOWED 10% OF TOTAL PURCHASES CLAIMED TO HAVE BEEN MADE BY THE ASSESSEE AT RS.75,27,433/- ON THE GROUND OF INFLATI ON IN PURCHASES AND THEREBY ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 6 - MADE ADDITION OF RS.7,52,743/-. THE LEARNED COMMISS IONER OF INCOME TAX(APPEALS) CONFIRMED THE ABOVE ACTION OF THE LEAR NED ASSESSING OFFICER ON THE GROUND THAT BOOKS OF ACCOUNT WERE NOT PRODUCED BY THE ASSESSEE. IN OUR CONSIDERED VIEW, ON THE ABOVE FACTS, THE LEARNED AS SESSING OFFICER WAS JUSTIFIED IN REJECTING THE BOOK RESULTS OF THE ASSE SSEE. HOWEVER, IN OUR CONSIDERED VIEW AFTER REJECTING THE BOOK RESULTS, T HE INCOME OF THE ASSESSEE IS REQUIRED TO BE ESTIMATED NOT ON THE WHIMS AND CAPRI CE OF THE LEARNED ASSESSING OFFICER BUT SHOULD BE ESTIMATED ON A FAIR AND REASONABLE BASIS. THE POWER TO MAKE BEST JUDGMENT ASSESSMENT IS A POWER T O MAKE ASSESSMENT TO THE BEST OF THE JUDGEMENT OF THE LEARNED ASSESSING OFFICER. ANY DISALLOWANCE CAN BE MADE IN THE ABOVE ASSESSMENT ONLY WHEN LEARN ED ASSESSING OFFICER COMES TO THE CONCLUSION THAT THE EXPENSES CLAIMED B Y THE ASSESSEE WAS UNREASONABLY EXCESSIVE ON SOME BASIS. IN THE INSTAN T CASE, WE FIND THAT THE ASSESSEE HAS CLAIMED THAT THE RATE OF THE GROSS PRO FIT DISCLOSED IN THE YEAR UNDER APPEAL IS 11.78% WHICH IS BETTER THAN THE RAT E OF GROSS PROFIT OF 11.15% ACCEPTED IN THE CASE OF THE ASSESSEE IN THE IMMEDIA TELY PRECEDING YEAR. WE FIND THAT ABOVE FACT SUBMITTED BY THE ASSESSEE WAS NOT DISPUTED BY THE REVENUE. IN THE ABOVE CIRCUMSTANCES, WE FIND THAT T HERE WAS NO REASON FOR MAKING ANY DISALLOWANCE OUT OF PURCHASES SHOWN BY T HE ASSESSEE AND THERE WAS NO REASON FOR INFERRING THAT THERE WAS INFLATIO N IN THE PURCHASES. WE FIND THAT NO MATERIAL WAS BROUGHT ON RECORD BY THE REVEN UE TO SHOW THAT THERE MAY BE INFLATION IN THE PURCHASES SHOWN BY THE ASSESSEE AND ABSOLUTELY NO BASIS WAS BROUGHT ON RECORD BY THE LOWER AUTHORITIES TO I NFER THAT INFLATION WAS MADE IN THE PURCHASES @ 10%. IN THE ABOVE FACTS AND CIRC UMSTANCES, IN OUR CONSIDERED VIEW, THE DISALLOWANCE MADE OUT OF PURCH ASES OF RS.7,52,743/- WAS WITHOUT ANY BASIS AND THE SAME CANNOT BE SUSTAINED IN LAW. WE THEREFORE, ITA NO.873/A HD/2009 M/S.DHAVANI TEXT ILE PVT. LTD. ASST.YEAR -2005-06 - 7 - DELETE THE ADDITION OF RS.7,52,743/-. THUS, THIS GR OUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 15. GROUND NO.5 OF THE APPEAL RELATES TO CHARGING O F INTEREST UNDER SECTION 234B OF THE ACT. THE LEARNED AUTHORISED REPRESENTAT IVE OF THE ASSESSEE DID NOT MAKE ANY SUBMISSION ON THIS GROUND OF APPEAL. H E HOLD THAT CHARGING OF INTEREST IS CONSEQUENTIAL AND ACCORDINGLY DISPOSE O F THIS GROUND OF APPEAL. 16. GROUND NO.6 OF APPEAL IS GENERAL IN NATURE AND REQUIRES NO ADJUDICATION BY US. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 11/09/2009. SD/- SD/- ( H.L. KARWA ) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 11/09/ 2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD