GHANSHYAM DAS MANOHARLAL, Gangapur City V. ITO, Sawai Madhopur

ITA 877/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5055 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DR DHK
• Keywords: Depreciation; Onus to prove

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 877/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 SHRI GHANSHYAM DAS MANOHARLAL NEW MANDI GANGAPUR CITY CUKE VS. ITO WARD- 3 SAWAI MADHOPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AADFG 9346 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY:SHRI S.L. JAIN, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY:SHRI R.A. VERMA, ADDL.CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20/09/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 7 /10/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A), KOTA DATED 19-10-2014 FOR THE ASSESSMENT YEAR 2010- 11 RAISING THEREIN FOLLOWING GROUNDS OF APPEAL. 1. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED IN LAW AND FACTS IN NOT DEDUCTING THE ADDITIONAL REMUNERAT ION IN REVISED PROFIT & LOSS ACCOUNT AND COMPUTATION OF INCOME PAY ABLE U/S 40(B) TO THE WORKING PARTNERS OF FIRM FROM THE ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE. ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 2 2. THE AUTHORITIES BELOW HAVE GROSSLY ERRED IN LAW AND FACTS IN THE DISALLOWANCE OF RS. 1.00 LAC ON AD HOC BASIS FROM THE SALARY EXPENSES IS UNWARRANTED, ARBITRARY, UNJU STIFIED AND WITHOUT CONSIDERING THE PAST HISTORY OF THE CASE AN D FURTHER WITHOUT POINTING OUT ANY SALARY PAYMENT OF INADMISSIBLE NAT URE AND AS SUCH THE SAME DISALLOWANCE SHOULD BE DELETED. 3. THAT THE AUTHORITIES BELOW HAVE GROSSLY ERRED IN LAW AND FACTS IN MAKING THE DISALLOWANCE ON ADHOC B ASIS FROM FOLLOWING EXPENSE ACCOUNTS:- EXPENSES HEAD TOTAL EXPENSES CLAIMED EXPENSES DISAL LOWED SHOP EXPENSES 14,878 2,976 STATIONARY & PRINTING 3,536 707 VEHICLE MAINTENANCE EXPENSES 52,210 10,442 TELEPHONE EXPENSES 16,027 3,205 DEPRECIATION 63,074 12,615 TOTAL 1,49,725 29,945 2.1 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS NOT PRESSED THE GROUND NO. 1. HENCE, THE SAME IS DISMIS SED BEING NOT PRESSED. 3.1 APROPOS GROUND NO. 2 OF THE ASSESSEE, THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAD SHOWN THE SALARY EXPENSES AMOUNTING TO OF RS. 4,66,031/- FOR WHICH THE AO REQUIRED THE ASS ESSEE VIDE HIS LETTER DATED 26-10-2012 THAT IT DID NOT SUBMIT THE DETAILS / VOUCHERS OF THE EXPENSES LIKE SALARY EXPENSES, VEHICLE MAINTENANCE, SHOP EXPENSES, LABOUR EXPENSES AND COMMISSION EXPENSES ETC AND AS TO WHY THE SAME SHOULD NOT BE DISALLOWED AND ADDED TO THE TOTAL INC OME OF THE ASSESSEE. ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 3 THE AO FURTHER REQUIRED THE ASSESSEE TO PRODUCE THE FOLLOWING EMPLOYEES FOR THEIR STATEMENT BEFORE HIM WHO HAD BEEN PAID SA LARY BY THE ASSESSEE. 1. SHRI SHYAM LAL 2. SHRI BABU LAL 3. SHRI RAM SWAROOP 4. SHRI PREM CHAND HOWEVER, THE ASSESSEE VIDE ITS LETTER DATED 15-03-2 013 SUBMITTED THAT THE SALARY OF THE EMPLOYEES IS PAID ACCORDING TO THE N EED OF THE BUSINESS/ TRADE OF THE ASSESSEE AND LAST YEAR THE SALARY WAS PAID AMOUNTING TO RS. 4,88,220/-. THUS THE SALARY PAID BY THE ASSESSE E IS NOT MORE THAN IT HAD ACTUALLY BEEN PAID TO THE EMPLOYEES. HOWEVER, T HE AO WAS NOT SATISFIED WITH THE SUBMISSIONS OF THE ASSESSEE AS T HE ASSESSEE DID NOT PRODUCE THE EMPLOYEES BEFORE THE AO FOR THEIR STATE MENT AND IT COULD NOT BE CONFIRMED BY THE AO ABOUT THE PAYMENT OF SALARY TO THE EMPLOYEES BY THE ASSESSEE. THUS THE AO MADE AN ADHOC ADDITION OF RS. 1.00 LAC AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 3.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CITA) WHO HAS CONFIRMED THE ACTION OF THE AO BY OBS ERVING AS UNDER:- 4.32 I HAVE GONE THROUGH THE ASSESSEE'S SUBMISSION AND AOS FINDINGS. THE BURDEN TO PROVE ANY FACT LIES ON THE PERSON WHO CLAIMS IT. THE BURDEN TO PROVE THAT ANY EXPENDITURE WAS ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 4 ACTUALLY INCURRED LIES ON THE ASSESSEE (AS HE IS TH E PERSON CLAIMS IT), WHEREAS THE ONUS KEEP ON SHIFTING. ONCE DETAILS/ VOUCHERS WERE PRODUCED BEFORE THE AO, THE ONUS SHIFTED TO AO. WHEN THE AO ASKED THE ASSES SEE TO PRODUCE THE EMPLOYEES FOR VERIFICATION, THE ONUS SH IFTED TO THE ASSESSEE. THE ASSESSEE FAILED TO PRODUCE THE EM PLOYEES FOR VERIFICATION. THEREFORE, HE FAILED TO DISCHARGE HIS ONUS. WHATEVER SUBMITTED, BEFORE ME BY ASSESSEE, WAS ONLY JUGGLERY OF WORDS, THE BASIC ISSUE THAT ASSESSEE FA ILED TO DISCHARGE ITS ONUS, WAS NOT DEALT WITH. IN SUCH CIRCUMSTANCES, THE AO CAN DISALLOW ENTIRE EXPENSES OR PART OF THE EXPENSES, WHICH DEPENDS ON FACTS AND CIRCUMSTANCES OF EACH CASE. IN MY OPINION, DISALLOWANCE OF RS. 1,00,000/- WAS REASONABLE AND THEREFORE, CONFIRMED.. 3.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF ADHOC ADDITION CONFIRMED BY THE LD. CIT (A) AND THE LD. AR ALSO FILED THE WRITTEN SUBMISSION WHICH HAS BEEN TA KEN INTO CONSIDERATION. 3.4 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 3.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT THE ASSESSEE HAD CLAIMED SALARY EXPENSES TO THE TUNE OF RS. 4,66,031 /-AND THE AO HAD MADE AN ADHOC DISALLOWANCE OF RS. 1.00 LAC ON ACCOU NT OF NON- PRODUCTION OF ABOVE EMPLOYEES FOR THEIR STATEMENTS BEFORE THE AO WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). IT IS NOTED F ROM THE SUBMISSIONS OF ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 5 THE ASSESSEE THAT THESE EMPLOYEES ARE NOT RELATIVE OF THE ASSESSEE. IT IS ALSO NOTED THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON R ECORD TO SHOW THAT THE ACTUAL SALARY PAID BY THE ASSESSEE TO THE EMPLOYEES WAS LESS THAN WHAT HAD BEEN MENTIONED IN THE BOOKS OF ACCOUNT OF THE A SSESSEE. THE LD. AR OF THE ASSESSEE FILED THE LEDGER BOOK PAGES 7 TO 13 OF THE PAPER BOOK IN WHICH IT IS MENTIONED THAT THE EMPLOYEES ENGAGED IN THE BUSINESS WERE PAID SALARY AND THEIR SIGNATURES WERE OBTAINED. TH E ACCOUNTS ARE AUDITED AND THERE ARE NO ADVERSE COMMENTS FROM THE AUDITOR. THE HON'BLE HON'BLE JURISDICTIONAL HIGH COURT MADE FOLLOWING OB SERVATION IN THE CASE OF LAXMI ENGINEERING INDUSTRY VS. ITO (2008) 298 IT R 203. MERELY ON THE BASIS OF SUSPICION ON EXPENDITURE CANNOT BE DISALLOWED. IN APPLYING COMMERCIAL EXPEDI ENCY FOR DETERMINING WHETHER THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF ASSESSEE BU SINESS, REASONABLE OF THE EXPENDITURE HAS TO BE JUDGED FROM THE POINT OF VIEW OF THE BUSINESSMAN AND NOT OF THE DEPARTMEN T. IN VIEW OF THE ABOVE DELIBERATION AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING AN ADHOC ADDITION OF RS. 1.00 LAC WHICH IS DIRECTED TO BE DELETED. THUS GROU ND NO. 2 OF THE ASSESSEE IS ALLOWED. ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 6 4.1 APROPOS GROUND NO. 3 OF THE ASSESSEE, THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE THAT THE ASSESSEE HAD SHOWN VARIOUS EX PENSES LIKE SHOP EXPENSES RS. 14,878/-, STATIONARY & PRINTING EXPENS ES RS. 3,536/-, VEHICLE MAINTENANCE EXPENSES RS. 52,210/-, TELEPHON E EXPENSES RS. 16,027/- AND DEPRECIATION ON VEHICLE RS.63,074/- . THE AO DURING THE ASSESSMENT PROCEEDINGS REQUIRED THE ASSESSEE TO PRO DUCE THE EVIDENCE LIKE BILLS AND VOUCHERS OF INCURRING SUCH EXPENSES AND A S TO WHY THE SAME SHOULD NOT BE ADDED TO THE TOTAL INCOME OF THE ASSE SSEE IN CASE OF NON- PRODUCTION OF THE SAME. THE AO DISALLOWED THE EXPEN SES TO THE EXTENT OF 20% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE. THE TABULATION OF DISALLOWANCES OF SUCH EXPENSES BY THE AO ARE AS UND ER:- EXPENSES HEAD TOTAL EXPENSES CLAMED BY THE ASSESSEE EXPENSES DISALLOWED BY THE AO SHOP EXPENSES 14,878.00 2,976.00 STATIONARY & PRINTING EXPENSES 3,536.00 707.00 VEHICLE MAINTENANCE EXPENSES 52,210.00 10,442.00 TELEPHONE EXPENSES 16,027.00 3,205.00 DEPRECIATION 63,074.00 12,615.00 TOTAL 1,49,725.00 29,945.00 IT IS NOTED THAT THE AO IN THE ASSESSMENT ORDER HA D MADE THE TOTAL DISALLOWANCE OF EXPENSES AT RS. 2,01,935/- AND DISA LLOWED RS. 40,387/- ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 7 ON ADHOC BASIS @ 20% OF THESE EXPENSES WHEREAS THE CORRECT TOTAL OF THESE EXPENSES WAS AT RS. 1,49,725/- AND ACCORDINGL Y THE CORRECT DISALLOWANCE @ 20% OF RS. 1,49,725/- COMES TO RS. 2 9,949/- AS AGAINST RS. 40,387/ SHOWN BY THE AO. IT APPEARS THAT THE AO HAD TAKEN THE VEHICLE MAINTENANCE OF RS. 52,210/- IN TWO TIMES. 4.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R BEFORE THE LD. CITA) FOR THE CORRECT ADDITION AMOUNT OF RS. 29,945 /- INSTEAD OF RS. 40,387/- SHOWN BY THE AO WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE LD. CIT(A) AND THE LD. CIT(A) ADOPTED THE PERCENTAG E OF 20% FOR DISALLOWANCE OF SUCH EXPENSES BY OBSERVING AS UNDER :- 4.42 CONSIDERING THE NON-VERIFIABLE NATURE AND PERSONAL ELEMENT INVOLVED IN THESE EXPENSES, SOME DISALLOWANCE WAS JUSTIFIED. THE ASSESSEE DID NOT PR ODUCE ANYTHING TO SHOW THAT THE PARTNERS WERE HAVING SEPA RATE VEHICLE AND/ OR TELEPHONE FOR THEIR PERSONAL USE. AS FAR AS DEPRECIATION IS CONCERNED, THE SAME IS A STATUTORY DISALLOWANCE, HOWEVER, THE SAME IS SUBJEC T TO SECTION 38(2) PROVIDES FOR DISALLOWANCE OF PROPORTI ONATE DEPRECIATION, IF ANY ASSET IS NOT EXCLUSIVELY USED FOR THE PURPOSE OF BUSINESS OR PROFESSION. CONSIDERING THE ABOVE, THE DISALLOWANCE OF RS. 29,945/- (20%) OF THE EXPENSES IS CONSIDERED REASON ABLE AND CONFIRMED. ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 8 4.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE PRAYED FOR DELETION OF DISALLOWANCE CONFIRMED BY THE LD. CIT(A ) AND LD. AR FURTHER SUBMITTED THAT THE ASSESSEE HAD PRODUCED COMPLETE LIST AND DETAILS OF VOUCHERS BEFORE THE AO AND THE SAME HAD BEEN TEST C HECKED BY THE AO. 4.4 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 4.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE ORDERS OF THE LOWER AUTHORITIES THAT THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE AS TO THE EXPENSES MENTIONED HEREINABOVE AND THE LD. AR OF THE DURING THE COURSE OF HEARING AND ITS WRITTEN SUBMISSION SUBMITTED THAT I T HAD PRODUCED THE COMPLETE LIST AND DETAILS OF VOUCHERS BEFORE THE AO DURING ASSESSMENT PROCEEDINGS AND THE SAME HAD BEEN TEST CHECKED BY T HE AO WITHOUT CONSIDERING THE FACT THAT THE BOOKS OF ACCOUNT WERE AUDITED. IN VIEW OF THE ABOVE DELIBERATIONS, IT CANNOT BE DENIED THAT THE E XPENSES WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HOWEVER, WITH A VIEW TO MAINTAIN EQUITY AND JUSTICE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, THE SAME IS REDUCED TO 10% OF THE TOTAL E XPENSES DISALLOWED BY THE LOWER AUTHORITIES. THUS GROUND NO. 3 OF THE ASS ESSEE IS PARTLY ALLOWED. ITA NO. 877/JP/2014 M/S. GHANSHYAM DAS MANOHAR LAL VS. ITO, WARD- 2, SA WAI MADHOPUR . 9 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7/10/ 2016. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 7/10/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THEAPPELLANT-M/S. GHANSHYAM DAS MANOHARLAL, GANGAPURCITY 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 2, SAWAI MADHOPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 877/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR