SHRI RAJENDRA PRASAD DUA, Indore V. THE ACIT 4(1), Indore

ITA 877/IND/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5996 (ITAT-INDORE)
• Duration Of Justice: 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 23-08-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Section: 145

Judgement Text

RAJENDRA PRASAD DUA ITA NO.877/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., ..!', #$ # !% BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER I.T.A. NO.877/IND/2016 ASSESSMENT YEAR: 2012-13 RAJENDRA PRASAD DUA INDORE PAN ABWPD 7489B :: APPELLANT VS ACIT 4(1) INDORE :: RESPONDENT ASSESSEE BY SHRI HITESH CHIMNANI REVENUE BY SHRI MOHD. JAVED ! ' #$ DATE OF HEARING 22.12.2016 %&'( #$ DATE OF PRONOUNCEMENT 6.1.2017 * O R D E R PER SHRI D.T. GARASIA, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-II, INDORE, DATED 31.5.2 016. RAJENDRA PRASAD DUA ITA NO.877/IND/2016 2 2. GROUND NO.1 OF THE APPEAL IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN MAINTAINING THE INTEREST EXPENSES AT 15% AS AGAINST THE AVERAGE RATE OF 17%. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE HAS TAKEN LOAN IN THE FIRM AT THE RATE RANGING BETWEEN 15% T O 18% WHEREAS IN PERSONAL CAPACITY THE LOANS WERE TAKEN @ 12% TO 13%. THE ASSESSING OFFICER, THEREFORE, DISALL OWED RS.4,47,000/- BEING THE DEFERENTIAL INTEREST. ON APP EAL, THE LEARNED CIT(A) RESTRICTED THE INTEREST AT 15% AS AGAINST THE AVERAGE RATE OF 17% WITH THE DIRECTION TO THE ASSESSIN G OFFICER TO DELETE THE RESULTANT ADDITION. BEING DISSAT ISFIED WITH THIS, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 4. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FUNDS BORROWED FOR THE BUSINESS PURPOSE WERE BORROWED WITH THE UNDERSTANDING THAT THE SAME WERE LONG TERM LOAN AND LENDERS WILL NOT PRESSURI SE THE ASSESSEE TO REPAY THE LOAN. THE LEARNED COUNSEL FO R THE RAJENDRA PRASAD DUA ITA NO.877/IND/2016 3 ASSESSEE ALSO SUBMITTED THAT THE SAME ASSESSING OFFICER HAS RESTRICTED THE INTEREST TO 15% IN THE ASSESSMENT OF PROPRIETORSHIP CONCERN. 5. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE O RDER OF THE LEARNED CIT(A) AND SUBMITTED THAT THE LEARNED CIT(A) HAS RIGHTLY RESTRICTED THE RATE OF INTEREST TO 15%. 6. HAVING HEARD BOTH THE SIDES, WE FIND THAT SINCE THE ASSESSING OFFICER HIMSELF HAS RESTRICTED THE ADDITION TO 15% IN THE PRECEDING ASSESSMENT YEAR, AS CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE HIMSELF, IN OUR OPIN ION, THE LEARNED CIT(A) HAS RIGHTLY RESTRICTED THE INTERES T TO 15%. IN THIS VIEW OF THE MATTER, THIS GROUND OF APP EAL OF THE ASSESSEE FAILS AND IS DISMISSED. 7. GROUND NO. 2 IS THAT THE LEARNED CIT(A) WAS NOT JUSTIFIED IN MAINTAINING PARTIAL ADDITION OF RS.2,00,000 /- AS RAJENDRA PRASAD DUA ITA NO.877/IND/2016 4 MADE BY THE ASSESSING OFFICER U/S 40A(2)(B) OF THE A CT ON ACCOUNT OF SALARY PAID TO RELATED PARTIES. 8. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSEE PAID HUGE SALARY AMOUNTING TO RS.8,16,000/- TO THREE RELATI VES, VIZ. KIRAN KUMAR DUA, RAJESH DUA AND RAKESH DUA. THE TOTAL PAYMENT MADE ON ACCOUNT OF SALARY WAS RS.28.98 LACS. THE ASSESSING OFFICER OBSERVED THAT THE HIGHES T AND LOWEST SALARY PAID TO NON-RELATIVE EMPLOYEES WERE RS. 1.32 LACS AND RS. 48,000/- RESPECTIVELY. THE ASSESSING OF FICER, THEREFORE, RESTRICTED THE SALARY OF THE ABOVE THREE P ERSONS AT RS. 1.32 LACS EACH AND THE BALANCE AMOUNT OF RS. 4.20 LACS WAS ADDED U/S 40A(2)(B) OF THE ACT. ON APPEAL, T HE LEARNED CIT(A) RESTRICTED THE ADDITION TO RS. 2 LACS AS AGAINST RS. 4.20 LACS AS MADE BY THE ASSESSING OFFICER. STILL BEING DIS-SATISFIED, THE ASSESSEE IS IN APPEAL BEFORE T HE TRIBUNAL. RAJENDRA PRASAD DUA ITA NO.877/IND/2016 5 9. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RELATIVES OF THE ASSESSEE WERE ACTIV ELY INVOLVED IN THE BUSINESS OF THE ASSESSEE AND THEY WE RE LOOKING AFTER DAY TO DAY ACTIVITIES OF THE BUSINESS. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT TH EY ARE ALSO ASSESSED TO INCOME TAX. THE LEARNED COUNSEL FO R THE ASSESSEE, THEREFORE, PRAYED THAT THE SALARY PAID TO RELATIVES MAY KINDLY BE ACCEPTED. 10. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDER OF THE LEARNED CIT(A) WITH THE SUBMISSION THAT THE LEARNED CIT(A) HAS RIGHTLY RESTRICTED THE ADDITION TO RS.2 LACS WHICH FINDING OF THE MAY KINDLY BE SUSTAINE D. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES. WE FIND THAT THE LEARNED CIT(A) HAS RIGHTLY P OINTED OUT THAT THE SALARY PAID TO THE RELATIVES WAS ON HIGHER S IDE. HOWEVER, TAKING INTO CONSIDERATION THE INVOLVEMENT OF RELATIVES IN DAY TO DAY ACTIVITIES IN THE BUSINESS OF THE RAJENDRA PRASAD DUA ITA NO.877/IND/2016 6 ASSESSEE, THE LEARNED CIT(A) HAS RESTRICTED THE ADDITI ON TO RS. 2 LACS BY GRANTING RELIEF OF RS.2.20 LACS TO THE AS SESSEE. IN OUR OPINION, SINCE THE LEARNED CIT(A) HAS DECIDED THE ISSUE ONLY AFTER CONSIDERING ALL THE ASPECTS OF THE MAT TER, WE SUSTAIN THE ORDER OF THE LEARNED CIT(A) AND DISMIS S THIS GROUND OF APPEAL OF THE ASSESSEE. 12. GROUND NO. 3 IS THAT THE LEARNED CIT(A) HAS ERRED IN MAINTAINING AD HOC DISALLOWANCE TO THE EXTENT OF RS.41,306/- OUT OF VARIOUS EXPENSES ON ACCOUNT OF SHO P RENT, CONVEYANCE EXPENSES, TELEPHONE EXPENSES AND TRAVELLING EXPENSES. 13. THE SHORT FACTS OF THE CASE ARE THAT ON PERUSAL OF T HE P&L ACCOUNT IT WAS SEEN BY THE ASSESSING OFFICER THAT THE FOLLOWING EXPENSES WERE NOT PROPERLY VOUCHED :- S.NO. HEAD AMOUNT (RS.) 1. SHOP EXPENSES 2,38,374 2. CONVEYANCE 1,99,756 3. TELEPHONE EXPENSES 1,05,293 RAJENDRA PRASAD DUA ITA NO.877/IND/2016 7 4. TRAVELLING EXPENSES 2,82,763 THE ASSESSING OFFICER ALSO HELD THAT THE ASSESSEE FAILE D TO ESTABLISH THAT THE ABOVE EXPENDITURE WAS INCURRED EXCLUSIVELY FOR THE PURPOSE OF BUSINESS ENTITY. THE ASSESSING OFFICER, THEREFORE, DISALLOWED 10% OF SUCH EXPENSES. ON APPEAL, THE LEARNED CIT(A) REDUCED THE DISALLOWANCE TO 5%. NOW THE ASSESSEE IS IN APPEAL BEFOR E THE TRIBUNAL. 14. HAVING HEARD BOTH THE SIDES, WE FIND THAT THE LEARN ED CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 5% O F THE ABOVE EXPENSES CLAIMED BY THE ASSESSEE. WE, THEREFORE, FIND NO INFIRMITY IN THE FINDING OF THE LEARNED CIT(A) AN D ACCORDINGLY DISMISS THIS GROUND OF APPEAL. 15. GROUND NO.4 RELATES TO MAINTAINING THE PARTIAL DISALLOWANCE OF RS. 5,78,845/- ON ACCOUNT OF COMMISSIO N PAID. RAJENDRA PRASAD DUA ITA NO.877/IND/2016 8 16. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS CLAIMED COMMISSION EXPENSES OF RS. 20,92,154/- AS AGAINST AN AMOUNT OF RS. 7,47,571/- FOR THE ASSESSMENT YEAR 2011- 12 WHICH MEANT INCREASE OF 280% WHEREAS THE TURNOVER DURING THE RELEVANT ASSESSMENT YEAR HAS GONE UP BY ONL Y 123%. THE ASSESSING OFFICER, THEREFORE, RESTRICTED THE COMMISSION EXPENSES TO 123% AND THE BALANCE EXPENDITUR E OF RS. 11,57,690/- WAS DISALLOWED. ON APPEAL, THE LEARNE D CIT(A) RESTRICTED THE ADDITION TO 50%. STILL DISSATI SFIED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 17. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE MAINTAINS DAY TO DAY FINANCI AL RECORD/BOOKS OF ACCOUNTS WHICH ARE AUDITED AND ALL THE RELEVANT BILLS/VOUCHERS AND DETAILS OF COMMISSION WERE MAINTAINED. THE LEARNED COUNSEL FOR THE ASSESSEE FURTH ER SUBMITTED THAT THE ASSESSING OFFICER DID NOT POINT O UT ANY RAJENDRA PRASAD DUA ITA NO.877/IND/2016 9 SPECIFIC DEFECT IN MAINTENANCE OF BOOKS OF ACCOUNTS NO R THE SAME WERE REJECTED U/S 145 OF THE ACT AND AS SUCH WITH OUT REJECTING THE BOOKS OF ACCOUNTS, NO DISALLOWANCE COULD BE MADE. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE , SUBMITTED THAT THE COMMISSION EXPENSES CLAIMED BY THE ASSESSEE MAY KINDLY BE ALLOWED. 18. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED CIT(A). 19. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE S IDES. WE FIND THAT THE ASSESSEE HAS NEITHER BEEN ABLE TO JUS TIFY THE COMMISSION EXPENSES BEFORE THE AUTHORITIES BELOW NOR THE SAME COULD BE EXPLAINED BEFORE US. THE ASSESSEE H AS ALSO NOT BEEN ABLE TO EXPLAIN STEEP INCREASE IN COMMISS ION EXPENDITURE AS COMPARED TO INCREASE IN THE TURNOVER. W E, THEREFORE, FIND NO INFIRMITY IN THE FINDING OF THE LEARNED CIT(A) AND ACCORDINGLY UPHOLD THE SAME. THIS GROUND IS , THEREFORE, DISMISSED. RAJENDRA PRASAD DUA ITA NO.877/IND/2016 10 20. GROUND NO. 5 RELATES TO MAINTAINING AD HOC DISALLOWANCE TO THE EXTENT OF RS.50,000/- OUT OF FREI GHT AND CARTAGE EXPENSES. 21. THE SHORT FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVE D THAT SOME OF THE BILLS/VOUCHERS WERE NOT TRACEABLE. H E ALSO FOUND THAT SOME OF THE EXPENSES WERE INCURRED IN CASH . HE, THEREFORE, DISALLOWED RS. 50,000/- TOWARDS FREIGHT AND CARTAGE EXPENSES. ON APPEAL, THE LEARNED CIT(A) CONFIRM ED THE ACTION OF THE ASSESSING OFFICER. 22. WE HAVE HEARD BOTH THE SIDES. WE FIND THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.50,000/- TOWARDS FREIGHT AND CARTAGE EXPENSES ONLY AFTER DISCUSSION WITH THE LEARNED COUNSEL FOR THE ASSE SSEE. SINCE THE ASSESSEE HIMSELF HAS AGREED TO THE ADDITION, WE DO NOT FIND ANY FLAW IN THE ORDERS OF THE AUTHORITIES BELOW. WE, THEREFORE, CONFIRM THE SAME. RAJENDRA PRASAD DUA ITA NO.877/IND/2016 11 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 6 TH JANUARY, 2017. SD/- SD/- ( ..!') (..) #$ (O.P.MEENA) (D.T.GARASIA) ACCOUNTANT MEMBER J UDICIAL MEMBER (') / DATED : 6 TH JANUARY, 2017 DN/