Navnitlal & Co., Ahmedabad V. The ITO (OSD-II), Range-11, Ahmedabad

ITA 886/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1498 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D K PARIKH
• Keywords: Business expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 886/AHD/2013 (ASSESSMENT YEAR: 2009-10) M/S. NAVNITLAL & CO. VIGNYAPAN BHAVAN, 7- GANDHIKUNJ SOCIETY, BHD. KOCHRAB ASHRAM, ELLISBRIDGE, AHMEDABAD V/S INCOME TAX OFFICER (OSD)- II, RANGE-11, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAAFN7215L APPELLANT BY : SHRI D.K. PARIKH, A.R. RESPONDENT BY : SHRI RAJDEEP SINGH, SR. D.R. ( )/ ORDER DATE OF HEARING : 30 -05-201 6 DATE OF PRONOUNCEMENT : 31 -05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF LD. CIT(A)-XVI, AHMEDABAD DATED 04.02.2013 PERTAINING T O A.Y. 2009-10. ITA NO. 886/ AHD/2013 . A.Y. 2009-10 2 2. THE ASSESSEE HAS RAISED FOUR SUBSTANTIVE GROUNDS OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE STATE D THAT HE IS NOT PRESSING GROUND NO.2 AND THE SAME IS DISMISSED AS N OT PRESSED. THE SURVIVING GROUNDS READ AS UNDER:- 1. THE LD. CIT(APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING ADDITION OF RS. 1,64,956/- BEING COMMISSION PAID TO B.J. GAN DHI HUF ON THE GROUND THAT HUF IS A NON LIVING ENTITY IGNORING THE FACT T HAT IT WAS KARTA OF HUF WHO RENDERED SERVICES AND SO FAR AS THE APPELLANT WAS C ONCERNED, THE PAYMENT OF COMMISSION WAS A GENUINE BUSINESS EXPENDITURE. BOTH THE LOWER AUTHORITIES FAILED TO APPRECIATE THE FACT THAT CUSTOMERS WERE R EFERRED BY THE PAYEE TO WHOM COMMISSION IS PAID AND TDS WAS ALSO MADE FROM THE PAYMENT AND THERE WAS NO ACCEPTANCE OF DISALLOWANCE. THE DISALL OWANCE OUGHT TO HAVE BEEN DELETED. IT BE DELETED NOW. 3. THE LD. CIT( APPEALS) ERRED BOTH IN LAW AND O N FACTS IN CONFIRMING DISALLOWANCE OF RS. 42,564 OUT OF FURNITURE REPAIRI NG EXPENSES OUT OF RS. 4,25,642/- AT AD HOC 10% WITHOUT APPRECIATING THAT NO NEW ASSET WAS CREATED AND MERELY ON THE BASIS OF WDV VALUE, NO PART OF AC TUAL EXPENDITURE CAN BE DISALLOWED. BOTH THE LOWER AUTHORITIES FAILED TO PO INT OUT SPECIFIC ITEM WHERE THE VOUCHERS WERE NOT COMPLETE. THE EXPENSES BEING GENUINE AND INCURRED FOR BUSINESS PURPOSES BE ALLOWED IN FULL. 4. THE LD. CIT (APPEALS) ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 55,566 AT AD HOC 10% OF RS. 5,5 5,666/- OUT OF OFFICE REPAIRING EXPENSES WITHOUT APPRECIATING THAT NO NEW ASSET WAS CREATED AND MERELY ON THE BASIS OF WDV VALUE, NO PART OF ACTUAL EXPENDITURE CAN BE DISALLOWED. BOTH THE LOWER AUTHORITIES FAILED TO PO INT OUT SPECIFIC ITEM WHERE THE VOUCHERS WERE NOT COMPLETE. THE EXPENSES BEING GENUINE AND INCURRED FOR BUSINESS PURPOSES BE ALLOWED IN FULL. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O FOUND THAT THE ASSESSEE HAS DEBITED COMMISSION PAYMENT OF RS. 1,64,956/- PAID TO M/S. B.G. GANDHI (HUF). THE A.O. WAS OF THE FIRM BELIEF THAT SINCE ITA NO. 886/ AHD/2013 . A.Y. 2009-10 3 THE HUF IS NOT A LIVING ENTITY, THEREFORE, PAYMENT OF COMMISSION IS UNWARRANTED. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM. 4. ASSESSEE FILED A DETAILED REPLY EXPLAINING THAT THE KARTA OF THE HUF REFERRED TO CERTAIN CUSTOMERS TO THE ASSESSEE FOR W HICH COMMISSION HAS BEEN PAID AFTER DULY DEDUCTING TAX AT SOURCE AS PER THE PROVISIONS OF THE LAW. IT WAS FURTHER EXPLAINED THAT SINCE THE COMMISSION WAS PAID TO SHRI B.G. GANDHI, IT WAS IRRELEVANT FOR THE ASSESSEE TO KNOW THE CONSTITUTION OF THE PAYEES FIRM. MOREOVER, THE PAY EE IS NOT RELATED TO THE ASSESSEE. THE SUBMISSION OF THE ASSESSEE DID NO T FIND FAVOUR WITH THE A.O. AND ACCORDINGLY HE MADE THE ADDITION OF RS . 1,64,956/-. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. BEFORE US, THE LD. COUNSEL FOR THE ASSESSE E REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES AND IN SUPPORT OF HIS CONTENTION; RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL, DELHI BENCH IN THE CASE OF MITTAL INVESTMENT & CO. IN ITA NO. 1951/DEL/2012. 6. PER CONTRA, THE LD. D.R. RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES BUT COULD NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. THE ONLY REASON FOR DISALLOWING THE COMMISSION GIVEN BY THE A.O. IS THAT THE HUF CANNOT RENDER ANY SERVICES. HOWEVER, WE FIN D FORCE IN THE CONTENTION OF THE LD. COUNSEL THAT THE ASSESSEE IS NOT RESPONSIBLE FOR THE CONSTITUTION OF THE PAYEE. THERE IS NO DENYING THAT SHRI B.G. GANDHI REFERRED CERTAIN CUSTOMERS TO THE ASSESSEE A ND IF SHRI B.G. GANDHI IS SHOWING THE RECEIPT OF COMMISSION IN HIS RETURN OF INCOME IN ITA NO. 886/ AHD/2013 . A.Y. 2009-10 4 THE CAPACITY OF HUF THEN THAT CANNOT BE THE SOLE GR OUND FOR MAKING THE DISALLOWANCE. 8. NOWHERE, THE A.O. HAS BROUGHT ANYTHING ON RECO RD WHICH COULD SHOW THAT NO SERVICES WERE RENDERED BY THE PAYEE. C ONSIDERING THE FACTS IN TOTALITY AND FINDING SUPPORT FROM THE DECI SION OF CO-ORDINATE BENCH OF THE TRIBUNAL (SUPRA), WE SET ASIDE THE FIN DINGS OF THE LD. CIT(A) AND DIRECT THE A.O TO DELETE THE ADDITION OF RS. 1,64,956/-. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 9. GROUND NOS. 3 & 4 TAKEN TOGETHER RELATES TO T HE AD HOC DISALLOWANCE @ 10% ON FURNITURE REPAIRING AND OFFIC E REPAIRING EXPENSES. 10. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE AS SESSEE WAS SPECIFICALLY ASKED BY THE A.O AS TO EXPLAIN WHY 10% OF TOTAL EXPENSES CLAIMED UNDER THE HEADS FURNITURE REPAIRING AND OFF ICE REPAIRING SHOULD NOT BE DISALLOWED. 11. IN SO FAR AS REPAIRING OF FURNITURE IS CONCERNED, T HE ASSESSEE DID NOT OFFER ANY EXPLANATION NOR HAS RAISED ANY OBJECT ION FOR THE PROPOSED DISALLOWANCE. WE, THEREFORE, DO NOT FIND A NY INFIRMITY IN SO FAR AS DISALLOWANCE OF RS. 42,564/- IS CONCERNED. A DDITION OF RS. 42,564/- IS UPHELD. GROUND NO. 3 IS ACCORDINGLY DIS MISSED. 12. IN SO FAR AS OFFICE REPAIRING EXPENSES ARE CONCERNE D, WE FIND THAT THE ASSESSEE HAS FILED COMPLETE DETAILS OF THE EXPENDITURE INCURRED WITH SUPPORTING VOUCHERS/BILLS. THE A.O FO UND THAT CERTAIN BILLS/VOUCHERS ARE NOT SIGNED NOR THERE IS ANY MENT ION OF THE NAME OF ITA NO. 886/ AHD/2013 . A.Y. 2009-10 5 THE RECEIVER AND THE DATE IS ALSO NOT MENTIONED. TH EREFORE, OUT OF TOTAL EXPENDITURE OF RS. 5,55,666/- 10% AMOUNTING TO RS. 55,566/- WAS DISALLOWED. BEFORE US, THE LD. COUNSEL COULD NOT PO INT OUT ANY FLAW OR ERROR IN THE ASSESSMENT ORDER. WE, THEREFORE, DO NO T FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE FIRST APPELLA TE AUTHORITY; GROUND NO. 4 IS ALSO DISMISSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 - 05 - 2016. SD/- SD/- (S.K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD