Income tax Officer Ward 1(2), RAIPUR (CG) V. M/s A.S.Advertiser, RAIPUR (CG)

ITA 94/BIL/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2431 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 11-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Fair market value; Corroborative evidences; Capital expenditure
• Section: 133A; 263

Judgement Text

, RA IPUR IN THE INCOME TA X A PPELLA TE TRIBUNA L, RA IPUR BEFORE S/SHRI MUKUL SHRAW AT (JM) SHAMIM YAHYA (AM) , , ./ I.T.A. NO.94/BIL/2012 ( / ASSESSMENT YEAR :2009 - 2010 ) INCOME TAX OFFICER, WA RD 1(2), CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. / VS. A.S.ADVERTISER, GURUNANAK CHOWK, STATION ROAD, RAIPUR ./ ./ PAN/GIR NO. : AAFFA 2190 Q ( / AP PELLANT ) .. ( / RESPONDENT ) C.O.NO.18/BIL/2012(ARISING OUT OF ./ I.T.A. NO.94/BIL/2012 ( / ASSESSMENT YEAR :2009 - 2010 ) A.S.ADVERTISER, GURUNANAK CHOWK, STATION ROAD,RAIPUR / VS. INCOME TAX OFFICER, WA RD 1(2), CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR ./ ./ PAN/GIR NO. : AAFFA 2190 Q CROSS OBJECTOR .. APPELLANT) / APPELLANT BY : SMT ANUBHA TAH GOEL CROSS OBJECTOR BY : MS SHOBHA AGARWAL / DATE OF HEARING : 08 - 02 - 2016 / DATE OF PRONOUNCEMENT : 19 - 02 - 2016 / O R D E R 2 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 PER MUKUL SHRAWAT, JM THE APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 10.05.2012 OF THE LD CIT(A), RAIPUR, PERTAINING TO THE ASSESSMENT YEAR 2009 - 2010. 2. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWING GROUNDS: 1. WH ETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.44,01,172/ - MADE BY THE AO OUT OF EXPENSES INCURRED FOR REPAIRING RESTRUCTURING, ERECTION THE HOARDINGS AND UNIPOLES. T HE LD CIT(A) HAS FURTHER ERRED IN DE LETING THE DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.30,40,996/ - MADE BY THE AO BY TREATING THE ABOVE EXPENSES AS CAPITAL EXPENDITURE. 2. WH ETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.34 ,32,317/ - MADE BY THE AO ON ACCOUNT OF PAYMENT TO PRIVATE PARTIES. 3. WH ETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.26,65,000/ - MADE BY THE AO ON ACCOUNT OF COMMISSION PAID TO PERSONS SPECIFI ED U/S.40A(2)(B) OF THE I.T.ACT, 1961.: 3. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE I.T.ACT, 1961 DATED 30/12/2011 WERE THAT THE ASSESSEE IS A PARTNERSHIP FIRM DERIVING INCOME F ROM HOARDING RENT AND PRINTING OF ADVERTISING MATERIAL. THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.9.2009 DECLARING TOTAL INCOME AT RS.9,03,130/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) OF THE ACT, INTER ALIA, MAKING VARIOUS ADDITIONS /DISALLOWANCES. B EING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN 3 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 APPEAL BEFORE THE LD CIT(A), WHO ALLOWED THE APPEAL IN PART. HENCE, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 4. APROPOS GROUND NO.1 OF APPEAL, THE OBSERVATION OF THE ASSESSING OFFIC ER WAS THAT THE EXPENDITURE TOWARDS PURCHASE OF SCREWS, BOLTS, CLAMPS, WOODEN AND IRON AND SETTLE PANELS, G.I.SHEETS, ETC. WERE HAVING A LIFE SPAN OF ABOUT 3 TO 5 YEARS. I N HIS OPINION, BECAUSE OF THIS REASON, THE EXPENDITUR E IN QUESTION WAS CAPITAL IN N AT URE. O UT OF TOTAL EXPANSES CLA I MED OF RS.88,02,371/, HE HAS DISALLOWED RS.44,01,172/ - BEING 50% OF THE TOTAL CLAIM. I N HIS OPINION, 50% OF THE CLAIM WAS NOT ADMISSIBLE U/S.37(1) OF THE INCOME TAX ACT, 1961 AND BALANCE 50% WAS CAPITAL EXPENDITURE ON WHI CH HE HAS GRANTED DEPRECIATION @ 15%. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. L D CIT(A) HAS GRANTE D RELIEF AFTER ASSIGNING CERTAIN REASON SUCH AS THAT THE AO HAD NOT POINTED OUT ANY DISCREPANCY IN T HE BOOKS OF ACCOUNT, THEREFORE, IN THE ABSENCE OF REJECTION OF ACCOUNTS, THE ADDITION WAS NOT JUSTIFIABLE. ACCORDING TO LD CIT(A), THE BILLS AND VOUCHERS WERE PRODUCED AND THE AO HAD NOT RAISED ANY OBJECTION. F URTHER, LD CIT(A) HAS HELD THAT WITHOUT ANY BASIS, THE AO HAS MADE AN OBSERVATION THAT THE AVERAGE LIFE OF PIPE, PLATES, STEEL ANGLES, ETC WAS ABOUT 5 YEARS. I N HIS OPINION, THE AO HAS NOT CONSIDERED THE NATURE OF BUSINESS AND MERELY PRESUMED THAT THE LIFE SPAN OF SUCH MATERIALS IS ABOUT 5 YEARS. HE HAS ALSO MENTIONED THAT IN THE PAST, THE EXPENDITURE IN QUESTION WAS CONSISTENTLY ALLOWED. O NE MORE OBSERVATION OF THE LD CIT(A) WAS THAT IN THE PAST THE PROCEEDINGS UNDER SECTION 263 WE R E ALTHOUGH INVOKED BY THE COMMISSIONER, 4 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 HOWEVER, VIDE ORDER DATED 22.4.23009 THOSE PROCEEDINGS WERE DROPPED. H E HAS CONCLUDED THAT THE ADHOC DISALLOWANCE W AS MADE MERELY ON AN ESTIMATION AND SUCH AN ESTIMATION THAT TO O BASED UP ON PRESUMPTION SHOULD NOT HAVE BEEN MADE B Y THE AO. AGAINST THE RELIEF GRANTED, NOW THE REV ENUE IS IN APPEAL BEFORE US. 5. LD D.R. MS. ANUBHA TA H GOYAL, APPEARED AND SUPPORTED THE ACTION OF THE AO AND ARGUED THAT THE ASSESSEE HAD NOT MAINTAINED ANY STOCK REGISTERS, HENCE, THE AO HAD NO OPTION BUT TO ESTIMATE THE DISALLOWANCE. IT HAS ALSO BEEN PLEADED THAT A SURVEY UNDER SECTION 133A WAS CONDUCTED ON 2.11.2011 AND AT THAT TIME IT WAS FOUND THAT THE ASSESSEE WAS NOT HAVING SUPPORTING RECORDS IN RESPECT OF EXPENDITURE ON HOARDINGS. S HE PLEADED BEFORE US THAT THE ACTION OF THE AO MAY BE CONFIRMED. 6. FROM THE SIDE OF THE RESPONDENT - ASSESSEE, MS SHOBH A AGARWAL APPEARED AND PLACED ARGUMENTS IN SUPPORT OF THE RELIEF GRANTED BY THE LD CIT(A). 7. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE CONSIDERED OPINION THAT THE RELIEF WAS RIGHTLY GRANTED B Y THE LD CIT(A) MAINLY BECAUSE OF THE REASO N THAT NO SPECIFIC DEFECT IN RESPECT OF THE CLAIM OF EXPENDITURE WAS MENTIONED IN THE ASSESSMENT ORDER BY THE AO. H E HAS SIMPLY PRESUMED THAT 50% OF THE EXPENDITURE WAS NOT DULY SUBSTANTIATED BY THE ASSESSEE BUT HE HAS NOT SPECIFIED THAT WHAT WAS THE DEFE CT FOUND ON THE BASIS OF WHICH HE HAS GIVEN THESE FINDINGS. O N THE CONTRARY, WE HAVE BEEN INFORMED THAT FOR A.Y. 2008 - 09, 5 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 (IMMEDIATE PRECEDING YEAR) AN ORDER WAS PASSED BY THE AO U/S.143(3) DATED 30.12.2010, WHEREIN, AFTER A SCRUTINY, NO SUCH DISALLOWANC E WAS PROPOSED OR ADDED BY THE AO. LIKE - WISE, OUR ATTENTION HAS ALSO BEEN DRAWN ON A SUBSEQUENT ORDER PASSED U/S.143(3) FOR A.Y. 2012 - 13 DT.30.3.2015 AND EVEN IN THAT ASSESSMENT YEAR ALTHOUGH DUE SCRUTINY WAS MADE AND THE AO HAD NOTICED THAT THE ASSESSEE HAS CLAIMED HOARDING EXPENSES OF RS.80,44,075/ - BUT OU T OF THIS, A NOMINAL DISALLOWANCE OF RS.2,00,000/ - WAS MADE THAT TO O TO COVER UP POSSIBLE LEAKAGE OF THE REVENUE. O NE MORE FACT HAS ALSO BEEN BROUGHT TO OUR NOTICE, AS ALSO NOTICED BY THE LD CIT(A), TH AT THE COMMISSIONER HA D DROPPED THE PROCEEDINGS U/S.263 VIDE ORDER DATED 22.4.2009 AFTER RECORDING A SATISFACTION ABOUT THE NATURE OF BUSINESS AS WELL AS THE SUPPORTING EVIDENCE S FOUND TO BE MAINTAINED BY THE ASSESSEE . F EW CASE LAWS HAVE ALSO BEEN CITED IN SUPPORT OF GENERAL ARGUMENTS THAT THE EXPENDITURE BEING WHOLLY AND EXCLUSIVELY RELATED TO THE ADVERTISEMENT BUSINESS, HENCE, ADMISSIBLE U/S.37(1) OF THE ACT. K EEPING IN VIEW THE STAND ALREADY TAKEN BY THE REVENUE DEPARTMENT IN SOME OF THE YEARS AND CO NSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE NOT INCLINED TO DISTURB THE FINDINGS OF THE LD CIT(A). T HE SAME ARE HEREBY CONFIRMED. WE DO NOT FIND ANY FORCE IN GROUND NO.1 OF THE REVENUE , HENCE REJECTED. 8. APROPOS GROUND NO.2, T HE OBSERVATION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD NOT JUSTIFIED THE CLAIM OF HOARDING - R ENT EXPENSES OF R S.1,13,39,305. T HE EXPLANA TION OF THE ASSESSEE WAS THAT MAINLY THE HOARDING - RENT WAS PAID TO GOVERNMENT, SEMI - GOVERNMENT ORGANISAT ION, SUCH AS AIRPORT 6 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 AUTHORITY OF INDIA, NAGAR NIGAM, NAGAR PALIKA NIGAM, SEC RAILWAY, N AGAR PALIKA PARISHAD, ETC. T HE AO HAS HELD THAT HOARDING RENT AMOUNTING TO RS.61,92,829/ - PAID TO SUCH ORGANIZATION S WAS GENUINE IN NATURE, HENCE, ALLOWED THE SAME . BUT IN RESPECT OF REMAINING AMOUNT OF HOARDING RENT PAID TO PRIVATE PARTIES, HE HAS HELD THAT SIMPLY MAKING THE PAYMENT TO THOSE PARTIES BY CHEQUE WAS NOT SUFFICIENT AND THE ASSESSEE HAS NOT PLACED ANY DOCUMENTARY EV IDENCES, HENCE, 2/3 RD OF THE EXPENDITUR E WAS DISALLOWED. BEING AGGRIEVED, THE MA TTER WAS CARRIED B EFORE THE FIRST APPELLATE A UTHORITY. L D CIT(A) HAS NOTICED THAT COMPLETE DETAILS WERE FURNISHED BEFORE THE AO EXPLAINING THE MODE OF PAYMENT , STATED TO BE BY CHEQUE A S WELL AS DEDUCTION OF TDS AS PER LAW, THEREFORE, IT WAS WRONG ON THE PART OF THE ASSESSING OFFICER TO DISALLOW THE GENUINE EXPENDITURE. H E HAS CONCLUDED THAT M ERELY ON PRESUMPTION, THE AO HAD MADE THE DISALLOWANCE, HENCE N OT SUSTAINABLE IN THE EYES OF LAW. 9. ` ON THIS ISSUE , WE HAVE HEARD BOTH TH E SIDES IN THE LIGHT OF COMPILA TION FILED. AS FAR AS THE MODE OF PAYMENT IS CONCERNED, THERE WAS NO DISPUTE THAT THE ASSESSEE HAD ISSUED ACCOUNT PAYEE CHEQUE TO THOSE PARTIES. B ECAUSE OF THIS REASON, IT IS RIGHTLY ARG UED BEFORE US THAT THE IDENTITY AND THE EXISTENCE OF THOSE PARTIES WERE VERIFIABLE. F URTHER, OUR ATTENTION HAS ALSO BEEN DRAWN ON THE FACT THAT TD S WAS DEDUCTED AT THE TIME OF MAKING PAYMENT. T O CORROBORATE THIS FACT , OUR ATTENTION HAS BEEN DRAWN THAT TH OSE PARTIES TO WHO M THE HOARDING RENT WAS PAID WERE SUBJECTED TO TAX AS THEY WERE RESPECTIVELY FILING THEIR INCOME TAX 7 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 RETURNS INDEPENDENTLY.. W E ARE ALSO NOT IN AGREEMENT WITH THE OBSERVATION OF THE AO THAT ALTHOUGH SUCH EXPENDITURE WAS ALLOWED IN THE PA ST BUT EACH YEAR IS AN INDEPENDENT YEAR, HENCE, PRINCIPLE OF RES - ADJUDICATA DO NOT APPLY ON THE INCOME TAX PROCEEDINGS. A FTER CONSIDERING THE PECULIARITY OF THE BUSINESS OF THE ASSESSEE I.E. ADVERTISING , WE ARE OF THE VIEW THAT YEAR WISE CONSISTENCY IS REQUIRED TO BE MAINTAINED SO THAT A TAX PAYER SHOULD HAVE CONFIDENCE IN THE TAX PROCEEDINGS THAT THE VIEW TAKEN IN ANY OF THE YEAR SHALL BE CONSISTENTLY FOLLOWED IN REST OF THE YEAR. D EFI NITELY, IT SHALL CREATE A CONFUSION IN THE MIND OF T HE TAXPAYER IF THE REVENUE AUTHORITIES SHALL KEEP ON CHANGING THEIR VIEWS YEAR AFTER YEAR. W E, THEREFORE, HOLD THAT IN THE ABSENCE OF ANY CONTRARY MATERIAL AGAINST THE ASSESSEE, THERE WAS NO FALLACY IN THE FINDINGS OF THE LD CIT(A). T HE SAME ARE HEREBY B Y CONFIRMED. GROUND NO.2 IS ACCORDINGLY DISMISSED. 10. APROPOS GROUND NO.3 , THE ASSESSING OFFICER HAS NOTICED THAT A SUM OF RS.26,65,000/ - WAS PAID AS COMMISSION EXPENSES TO CERTAIN PARTIES WHO WERE RELATED TO THE ASSESSEE. THE AO HAD INVOKED THE PROV ISIONS OF SECTION 40A(B)(2) OF THE ACT AND H ELD THAT IN THE ABSENCE OF ANY PROOF OF SERVICE RENDERED, THE COMMISSION WAS NOT ADMISSIBLE IN THE EYES OF LAW. A CCORDING TO THE AO, THE PARTIES WERE RELATED TO THE ASSESSEE, HENCE, THE COMMISSION WAS PAID TO R EDUCE THE TAX LIABILITY. I N HIS OPINION, THE TRANSACTION WAS BOGUS, HENCE, ADDED THE SAME IN THE TAXABLE INCOME OF THE ASSESSEE. WH EN THE MATTER WAS CARRIED B EFORE THE FIRST APPELLATE AUTHORITY, LD CIT(A) HAS GIVEN CERTAIN FINDINGS ON FACTS , THAT ALL THE PARTIES TO WHOM THE 8 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 COMMISSION WAS PAID WERE RESPECTIVELY ASSESSED TO TAX, HENCE, THEIR IDENTITY WAS VERIFIABLE FR OM THE REVENUE RECORDS. O NE MORE FACT HAS BEEN NOTICED THAT IN THE IMMEDIATELY PRECEDING YEAR, SUCH CLAIM WAS ALLOWED BY THE A O AFTER SCRUTINIZING THE ASSESSMENT. L D CIT(A) HAS ALSO RECORDED THAT BETTER TURNOVER WAS SHOWN BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, AS WELL AS THE NET PROFIT RATIO HAD ALSO IMPROVED FROM THE IMMEDIATE PAST YEAR. I N HIS OPINION, THE AO HAS NO T DEMONSTRATED THAT EITHER PAYMENT WAS EXCESSIVE OR UNREASONABLE, HENCE, THE PROVISIONS OF SECTION 40A(2)(A) WERE WRONGLY INVOKED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THIS ISSUE. 11. ON ONE HAND, LD D.R. SUPPORTED THE ACTION OF THE AO AND ON THE OTHER HAND, LD A.R. HAS SUPPORTED THE RELIEF GRANTED BY THE LD CIT(A). 12. OUR FIRST OBSERVATION IS THAT THE PROVISIONS OF SECTION 40A REQUIRES THAT THE AO SHOULD FORM AN OPINION THAT THE EXPENDITURE IN QUESTION WAS EITHER EXCESSIVE OR UNREAS ONABLE HAVING REGARD TO THE FAIR MARKET VALUE. I N THIS CASE, THE AO HAS NOT DISCHARGED THIS PRELIMINARY ONUS. T HE AO HAS MERELY PROCEEDED ON THE GROUND THAT THE PAYMENT WAS MADE TO THE RELATED PARTIES. THE ARGUMENTS BEFORE US IS THAT EVEN IF THE PAYMENT WAS MADE TO THE RELATED PARTIES BUT IT WAS NEITHER EXCESSIVE NOR UNREASONABLE BUT IT WAS A BUSINESS NECESSITY, HENCE, DULY ADMISSIBLE U/S.37(1) OF THE ACT. I T HAS ALSO BEEN PLEADED THAT PAYMENT OF COMMISSION WAS WHOLLY AND EXCLUSIVELY INCURRED TO EARN TH E HOARDING INCOME. FACTS ALSO HAVE REVEALED THAT EXPENDITURE WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND NO DEFECTS WERE FOUND ESPECIALLY WHEN IT WAS PAID THROUGH ACCOUNT 9 I.T.A. NO.94/BIL/2012 CO NO.18/BIL.2012 ASSESSMENT YEAR :2009 - 2010 PAYEE CHEQUE. T HUS, CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, EVEN THIS GROUND IS HEREBY DISMISSED. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. 14. LD A.R. DID NOT PRESS CROSS OBJECTION FILED BEFORE THE TRIBUNAL, HENCE, SAME IS DISMISSED AS NOT PRESSED. 15. TO CONCLUDE, APPEAL FI LED BY T HE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 /2/2016 . S D/ - SD/ - ( , ) ( , ) SHAMIM Y AHY A , ACCOUNT ANT MEMBER MUKUL SHRA WA T , JUDICIAL M EM BER RAIPUR , DATED 19 / 02/2016 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : INCOME TAX OFFICER, W ARD 1(2), CENTRAL REVENUE BUILDING, CIVIL LINES,RAIPUR. 2. / THE RESPONDENT: A.S.ADVERTISER, GURUNANAK CHOW, STATION ROAD, RAIPUR 3. ( ) / THE CIT(A) - RAIPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR