SHRI RAJESH KUMAR GUPTA, Alwar V. ITO, Alwar

ITA 875/JPR/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1534 (ITAT-JAIPUR)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 21-12-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 21-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA
• Assessee Lawyers: SHAILENDRA VIJAY
• Keywords: Wrong claim; Condonation of delay

Judgement Text

1 ITA 875-12 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH SMC JAIPUR BEFORE SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO. 875/JP/2012 ASSTT. YEAR : 2008-09. SHRI RAJESH KUMAR GUPTA, VS. THE INCOME-TAX OFFIC ER, PROP. M/S. RAM PRASAD VIJAY KUMAR, WARD 2(3), MALAKHERA, ALWAR. ALWAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAILENDRA VIJAY RESPONDENT BY : MS ROSHANTA MEENA DATE OF HEARING : 06.02.2013. DATE OF PRONOUNCEMENT : 08.02.2013. ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 19 .07.2012 OF LD. CIT (APPEALS), ALWAR RAISES THE FOLLOWING GROUNDS :- 1. THE ASSESSEE HAS ADVANCED DEPOSIT RECEIVED FRO M SHRI. ROHITASH YADAV AGAINST THE SALE OF LAND. THERE WAS AN AGREEM ENT BETWEEN THE PARTY THAT INTEREST IS PAYABLE ON SUCH DEPOSIT. ACCORDINGLY THE ASSESSEE HAS MADE PROVISION IN HIS BOOKS, AS THE BOOKS OF ACCOUNTS ARE MAINTAINED ON MERCANTILE SYST EM OF ACCOUNTING. THE ASSESSING OFFICER HAS DISALLOWED RS. 2,18,868/- DEN YING THE PROVISION ENTRY. AS SUCH THE ASSESSING OFFICER AS WELL AS CIT APPEALS HAS ERRED AS PER LAW. 2. THE ASSESSEE HAS USED SUCH DEPOSIT IN HIS BUSINE SS AND ADVANCED TO THE PERSONS, FOR WHICH A PROVISION WAS MADE AS INCO ME IN HIS BOOKS. BUT THE SAME PROVISION OF INCOME WAS ACCEPTED BY THE AS SESSING OFFICER, 2 HENCE HOW IT IS POSSIBLE AS PER LAW THAT INTEREST I NCOME MAY BE ACCEPTED BUT INTEREST EXPENSE. CAN NOT ACCEPTED, HENCE IT IS NOT JUSTIFIED AS PER LAW OF AS 22 (MATCHING PRINCIPLES). 3. THE A.O. HAS DISALLOWED 10% (RS. 7982/-) OF JEEP EXPENSES AS PERSONAL USE ON THE GROUNDS THAT NO LOG BOOK IS MAI NTAINED. WHEREAS ASSESSEE USE THE VEHICLE ONLY FOR BUSINESS PURPOSE IN RESPECT OF RECOVERY OF LOAN AMOUNT. THE A.O. COULD NOT PROVE THAT THERE WAS PERSONAL USE FOR ASSESSEE HIMSELF AND HIS FAMILY. THIS IS NOT PRACT ICALLY LOGICAL THAT LOG BOOK IS REQUIRED TO BE MAINTAINED BY THE ASSESSEE, NOW A DAYS BUSINESS PATTERN HAS CHANGED. THIS WILL BE AS SUCH TO KEEP T HE RECORDS OF EACH CALL ON TELEPHONE BILL OR TO USE THE ELECTRICITY UNIT FO R CUSTOMER AND FOR HIMSELF. YOUR HONORS THIS IS UNJUSTIFIED, HENCE WE PRAY TO D ELETE THE SAID ADDITION. 2. THERE IS A DELAY IN FILING THE APPEAL. ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY AND HAS EXPLAINED THE REASON F OR NOT FILING THE APPEAL IN TIME DUE TO SEVERE ILLNESS OF HIS FATHER. THE LD. D/R DOES NOT OPPOSE THE PETITION. THERE BEING SUFFICIENT REASON FOR NOT FILING THE APPEAL IN TIME , THE DELAY OF 40 DAYS IS, THEREFORE, CONDONED. 3. IN GROUND NOS. 1 & 2, BRIEFLY THE FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING OF AGRICULTURAL PRODUCE ON WHOLESALE BASIS AND RETURNED INCOME OF RS. 2,12,500/-. THE ASSESSEE MAINTAINS ACCOUNTS ON MERCANTILE BASIS . THE ASSESSEE HAS CLAIMED DEDUCTION FOR INTEREST AMOUNTING TO RS. 2,18,868/- PAYABLE TO SHRI ROHITASH YADAV ON DEPOSITS OF RS. 14,67,300/- AS ADVANCE AGAINST PURC HASE OF LAND ON THE BASIS OF AGREEMENT TO SELL BETWEEN THE PARTIES. THE ASSESSI NG OFFICER AFTER MAKING DISCRETE ENQUIRIES FOUND THAT THE AGREEMENT STOOD CANCELLED BETWEEN THE PARTIES ONLY ON 30.6.2009 AND ACCORDINGLY THE CLAIM OF INTEREST WAS NOT FOUND TENABLE. HE, THEREFORE, DISALLOWED THE CLAIM OF INTEREST OF RS. 2,18,868/- SO CLAIMED BY T HE ASSESSEE. 4. THE LD. CIT (A) AFTER CONSIDERING ASSESSEES ARG UMENTS AND APPRAISING THE ENTIRE MATERIAL ON RECORD FOUND THAT THE AGREEMENT DATED 1 5.4.2006 BETWEEN THE ASSESSEE AND 3 SHRI ROHITASH YADAV SPELLS OUT THAT THE SAID SHRI R OHITASH YADAV WAS TO PAY THE FULL AMOUNT OF SALE CONSIDERATION OF RS. 50.00 LACS UPTO 15.4.2009. IN THE EVENT THE FULL AMOUNT IS NOT PAID BY 15.4.2009, THEN THE ASSESSEE SHALL RETURN THE AMOUNT ALONG WITH INTEREST @ 10.5% PER ANNUM ON WHICH DATE SUCH AGREE MENT SHALL BE DEEMED TO HAVE BEEN CANCELLED. THE LD. CIT (A), THEREFORE, WAS OF THE OPINION THAT EVEN THOUGH THE ASSESSEE MAINTAINED ACCOUNTS ON MERCANTILE BASIS, YET THE LI ABILITY WAS NOT LEGALLY DUE. HE, THEREFORE, RELYING ON THE JUDGMENT BY APEX COURT IN CIT VS. A. GAJAPATHY NAIDU (1964) 53 ITR 114 (SC) HELD THAT THERE WAS NO DEFINITE LIA BILITY OF RS. 2,18,868/- ON ACCOUNT OF INTEREST AS ON 31.3.2008. THE DEDUCTION ON THE BAS IS OF MERE PROVISION COULD NOT BE ALLOWED. HE, THEREFORE, UPHELD THE DISALLOWANCE MA DE BY THE ASSESSING AUTHORITY. 5. IN APPEAL, ASSESSEES COUNSEL SHRI SHAILENDRA VI JAY CONTENDS THAT THE ASSESSEE MAINTAINS ACCOUNTS ON MERCANTILE BASIS AND THE AMOU NT OF ADVANCE RECEIVED FROM 15.4.2006 TO 3.10.2006 WAS DULY CREDITED TO THE ACC OUNT OF SHRI ROHITASH YADAV (FOR LAND) AS PER COPY OF LEDGER ACCOUNT PLACED ON RECOR D, REVEALING DETAILS AS UNDER :- DATE PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT 15.4.2006 BY CASH CASH RECEIVED RECEIPT 4 2,50,000.00 22.4.2006 BY CASH CASH RECEIVED BY CASH RECEIPT RECEIPT 7 8 3,50,000.00 1,00,000.00 18.5.2006 BY CASH CASH RECEIVED RECEIPT 16 2,10,000.00 22.8.2006 BY CASH CASH RECEIVED RECEIPT 56 1,51,000.00 3.10.2006 BY CASH CASH RECEIVED RECEIPT 65 1,00,000.00 31.3.2007 BY INTEREST BEING INTEREST JOURNAL 268 1,91,300.00 13,52,300.00 TO CLOSING BALANCE 13,52,300.00 13,52,300.00 13,52,300.00 4 ON THIS AMOUNT THE ASSESSEE HAD PROVIDED INTEREST O F RS. 1,91,300/- AS ON 31.03.2007 AND CLAIMED DEDUCTION WHICH WAS ALLOWED IN SUMMARY ASSE SSMENT MADE UNDER SECTION 143(1) OF THE IT ACT FOR ASSESSMENT YEAR 2007-08. THE ASS ESSEE HAS ALSO RECEIVED FURTHER ADVANCE AMOUNT OF RS. 1,15,000/- ON 5 TH APRIL, 2007. IT HAD MADE A PROVISION OF INTEREST PAYABLE FOR RS. 2,18,868/- AS ON 31.3.2008. THE DE DUCTION WAS CLAIMED AS THE ASSESSEE HAS A LIABILITY TO PAY INTEREST @ 10.5% IN TERMS OF AGREEMENT DATED 15.4.2006 PLACED ON RECORD. THIS AGREEMENT WAS CANCELLED ON 30.6.2009 BY MAKING FULL AND FINAL PAYMENT OF INTEREST ALONGWITH THE AMOUNT OF ADVANCE RECEIVED F ROM SHRI ROHITASH YADAV. THE ASSESSEE USED THESE FUNDS IN HIS BUSINESS AND EARNE D INTEREST THEREON. THE DEDUCTION FOR INTEREST PAID ON BORROWED FUNDS, THEREFORE, ALSO IS REQUIRED TO BE GIVEN. 6. ON THE OTHER HAND, THE LD. D/R SUPPORTS THE FIND INGS AND CONCLUSION REACHED BY THE AUTHORITIES BELOW AND THERE IS NO MERIT IN THE GROUND NOS. 1 & 2 RAISED IN THE APPEAL AND SAME REQUIRE TO BE REJECTED. 7. I HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND CASE LAWS BROUGHT TO MY NOTICE. ADMITTEDLY, THE ASSESSEE MAINTAINS ACCO UNTS ON MERCANTILE BASIS. THROUGH AN AGREEMENT DATED 15.4.2006 THE ASSESSEE HAD AGREED T O SELL AGRICULTURAL LAND BELONGING TO HIM AT A TOTAL CONSIDERATION OF RS. 50.00 LACS. AT THE TIME OF EXECUTING THE AGREEMENT, THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS. 2,50,000/- O NLY ON 15.4.2006 IN CASH. THEREAFTER THE SUBSEQUENT AMOUNTS ARE ALSO SHOWN TO HAVE BEEN RECEIVED IN CASH. THE AGREEMENT CLEARLY SPELLS OUT AND REQUIRES THE TRANSFEREE SHRI ROHITASH YADAV TO MAKE THE PAYMENT OF ENTIRE AGREED SUM OF RS. 50.00 LACS UPTO 15.04.2009 . IN THE EVENT SUCH PAYMENT IS NOT 5 MADE, THEN THE AGREEMENT SHALL BE DEEMED TO HAVE BE EN CANCELLED AND ASSESSEE, THE TRANSFEROR SHALL HAVE TO REFUND THE ENTIRE AMOUNT R ECEIVED ALONG WITH INTEREST @ 10.5% PER ANNUM. THE PARTIES, HOWEVER, CANCELLED THE DEA L ON 30.6.2009 WHEREBY THE REFUND OF AMOUNT ALONG WITH INTEREST HAS BEEN ACKNOWLEDGED BY SAID SHRI ROHITASH YADAV AT THE BACK OF THE AGREEMENT. FROM THE AFORESAID TERMS AN D UPON PERUSAL OF COVENANTS CONTAINED IN THIS AGREEMENT, IT THUS IS EVIDENT THA T THE CONTRACTUAL LIABILITY THAT HAS ARISEN TO MAKE PAYMENT OF INTEREST ON OR AFTER 15.4.2009 I S FROM THE AGREEMENT EXECUTED BETWEEN THE APPELLANT AND SHRI ROHITASH YADAV. AS PER THIS AGREEMENT, THE LIABILITY TO PAY INTEREST WAS DEPENDENT UPON HAPPENING OF THE EV ENT ON 15.4.2009 AND THAT TOO WHEN THE TRANSFEROR SHRI ROHITASH YADAV WAS UNABLE TO MA KE PAYMENT OF ENTIRE AGREED SUM OF RS. 50.00 LACS TOWARDS SALE OF LAND BELONGING TO TH E APPELLANT. PRIOR TO THAT DATE I.E. BEFORE 15.4.2009, THERE WAS NO LIABILITY TO PAY ANY CERTAIN SUM OF MONEY NOR INTEREST THEREON. THE AMOUNT OF ADVANCE THEREFORE, COULD NO T BE TERMED AS BORROWED MONEY. THE APPELLANT HAD NEITHER ACTUALLY PAID NOR INCURRED AN Y LIABILITY IN RESPECT OF INTEREST IN THE YEAR UNDER CONSIDERATION. THE PAYMENT WAS ALSO NOT DUE IN THE IMPUGNED YEAR. THE LIABILITY AS IS BEING CONTENDED AND CLAIMED TO BE A N AMOUNT DUE AND PAYABLE ON THE BASIS OF MERCANTILE SYSTEM OF ACCOUNTING IS, IN FACT, A C ONTINGENT LIABILITY AND NOT A LEGAL LIABILITY INCURRED BY THE ASSESSEE. 7.1 THE MERCANTILE SYSTEM OF ACCOUNTING WAS EXPLAIN ED IN A JUDGMENT BY APEX COURT IN CASE OF KESHAV MILLS LTD. VS. CIT (1953) 23 ITR 230 AT PAGE 239 (SC) AS UNDER :- THAT SYSTEM BRINGS INTO CREDIT WHAT IS DUE, IMMEDI ATELY IT BECOMES LEGALLY DUE AND BEFORE IT IS ACTUALLY RECEI VED AND IT BRINGS INTO DEBIT EXPENDITURE THE AMOUNT FOR WHICH A LEGAL LIABILITY HAS BEEN INCURRED BEFORE IT IS ACTUALLY DISBURSED. 6 THE SAME PRINCIPLE HAS BEEN APPROVED AND CONSIDERED BY APEX COURT IN THE CASE OF CIT VS. SWADESHI COTTON & FLOUR MILLS PVT. LTD. 53 ITR 134 (SC). THE APEX COURT HAS AGAIN IN THE CASE OF CIT VS. CHUNI LAL V. MEHTA & SONS PV T. LTD. (1971) 82 ITR 54 AT PAGE 59 HAS STATED AS UNDER :- IN THE MATTER OF PAYMENTS, THERE ARE TWO ASPECTS, VIZ., (1) PAYMENTS DUE, AND (2) PAYMENTS RECEIVED. THE MERCANTILE SYSTEM O F ACCOUNTANCY TAKES NOTE OF PAYMENTS DUE WHEREAS THE CASH SYSTEM OF A CCOUNTANCY RECOGNIZES ONLY PAYMENTS RECEIVED. MERCANTILE SYST EM OF ACCOUNTANCY, A DOUBLE ENTRY SYSTEM, IS MAINTAINED ON THE BASIS OF ACCRUAL OF RIGHTS TO RECEIVE OR LIABILITY TO PAY A CERTAIN SUM OF MONEY, UNLIKE IN THE CASE OF CASH SYSTEM OF ACCOUNTANCY WHICH MERELY TAKES NOTE OF ACTUAL RECEIPTS OR DISBURSEMENTS. 7.2. CONSIDERING THE ENTIRE CONSPECTUS OF THE CASE, I FIND MYSELF IN AGREEMENT WITH THE LD. CIT (A) THAT THERE WAS NO LEGAL LIABILITY ON TH E ASSESSEE TO PAY INTEREST AS ON 31.3.2008 WHICH IN FACT IS FOUND TO BE A CONTINGENT LIABILITY. MERELY BECAUSE THE ASSESSEE HAD MADE A PROVISION OF INTEREST PAYABLE AS ON 31.3 .2007 RELEVANT TO ASSESSMENT YEAR 2007-08 AND CLAIMED DEDUCTION IN ASSESSMENT FOR THA T YEAR AND THE RETURN OF INCOME STOOD ACCEPTED IN A SUMMARY MANNER UNDER SECTION 143(1) O F THE IT ACT, THAT FACT ALONE DOES NOT GIVE RIGHT TO GET THE SIMILAR DEDUCTION ALLOWED IN THE YEAR UNDER CONSIDERATION. HAD THE ISSUE BEEN SCRUTINIZED AND CLAIM AS SUCH WAS EX AMINED, THEN THE SAME WAS LIABLE TO BE HELD A CASE OF WRONG CLAIM OF DEDUCTION BY THE A PPELLANT IN ASSESSMENT YEAR 2007-08. NO PERSON HAS A RIGHT IN THE WRONG. I, THEREFORE, FIND NO INFIRMITY IN THE WELL REASONED ORDER PASSED BY LD. CIT (A). THE GROUND NOS. 1 & 2 BEING BEREFT OF ANY MERIT, THE SAME STAND REJECTED. 7 8. IN GROUND NO. 3 THE ASSESSEE HAS ASSAILED DISALL OWANCE OF RS. 7982/- BEING 10% OF JEEP EXPENSES FOR PERSONAL USE. THIS ALSO DOES N OT CALL FOR ANY INDULGENCE OF, PARTICULARLY WHEN THE HON'BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF KANHIYA LAL JANGID VS. ACIT, 217 CTR (RAJ.) 354 HAS UPHELD THAT REASON ABLE ESTIMATE IS PERMISSIBLE IN MAKING DISALLOWANCE OF EXPENSES. I, THEREFORE, REJE CT THE GROUND RAISED IN APPEAL BEING DEVOID OF ANY MERIT. 9. IN THE RESULT, APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8.2.2013. SD/- ( B.R. JAIN ) ACCOUNTANT MEMBER JAIPUR, DATED : 08/02/2013. D/- COPY FORWARDED TO :- SHRI RAJESH KUMAR GUPTA, ALWAR. THE ITO WARD 2(3), ALWAR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 875/JP/2012) BY ORDER, AR ITAT JAIPUR.