DCIT, BIKANER V. Smt. Santosh Gill, HANUMANGARH TOWN

ITA 94/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78178 (ITAT-JODHPUR)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Keywords: Depreciation
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N. K. SAINI, ACCOUNTANT MEMBER I.T.A. NO. 94/JODH/2014 ASSESSMENT YEAR: 2008-09 PAN NO. ABIPG 0574 G DEPUTY COMMISSIONER OF INCOME TAX, VS. SMT. SANTOS H GILL, CIRCLE-2, BIKANER. PROFESSOR COLONY, HANUMANGARH TOWN. (APPELLANT) (RESPONDENT) RESPONDENT BY : SHRI N.A. JOSHI, D.R. ASSESSEE BY : NONE. DATE OF HEARING : 05/05/2014 DATE OF PRONOUNCEMENT : 16/05/2014 ORDER PER N. K. SAINI: THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 20/12/2013 OF THE LD. CIT(A), BIKANER. FIRST ISSUE IN THIS APP EAL RELATES TO DELETION OF ADDITION OF RS. 4,77,400/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF INSURANCE RECEIPTS. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE CARRIED ON THE BUSINESS OF TRANSPORTATION FOR CARRYING CAR AND OIL TANKERS FROM ONE PLACE TO ANOTHER. THE BOOKS OF ACCOUNT WERE AUDITED U/S 44AB OF THE I .T. ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE ASSESSING OFFICER, HOWEVE R, REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND APPLIED THE NET P ROFIT RATE OF 7% SUBJECT TO INTEREST AND DEPRECIATION. THE ASSESSING OFFICER AL SO MADE THE SEPARATE 2 ADDITION OF RS. 4,77,400/- BY OBSERVING THAT IT PER TAINS TO THE INSURANCE RECEIPTS, WHICH WAS SHOWN BY THE ASSESSEE IN THE PR OFIT AND LOSS ACCOUNT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R TO THE LD. CIT(A) AND SUBMITTED THAT THIS AMOUNT WAS NOT IN THE NATURE OF A REVENUE RECEIPT BUT WAS RECEIVED FROM THE INSURANCE COMPANY AS A CLAIM AGAI NST THE REPAIRS TO VARIOUS TRUCKS AND CARRIERS. IT WAS FURTHER STATED THAT A SUM OF OVER RS. 24 LACS HAD BEEN DEBITED TO THE P&L ACCOUNT AS REPAIRS AND INSTEAD OF CREDITING THIS AMOUNT TO THE P&L ACCOUNT IT SHOULD HAVE BEEN REDUC ED FROM THE CLAIM OF REPAIRS AND THERE WOULD HAVE BEEN NO VARIATION IN T HE AMOUNT OF NET PROFIT SHOWN BY THE ASSESSEE. 4. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER DID NOT CONFRON T THE ASSESSEE REGARDING THIS AMOUNT AND HAD MADE THE ADDITION ONLY BECAUSE THIS AMOUNT HAD BEEN SHOWN ON THE CREDIT SIDE OF P&L ACCOUNT AS INSURANC E CLAIM. HE FURTHER OBSERVED THAT THE SAID AMOUNT WAS COMPENSATORY AND IT WAS NOT A SEPARATE INCOME FOR WHICH ADDITION COULD HAVE BEEN MADE. ACC ORDINGLY, THE ADDITION OF RS. 4,77,400/- WAS DELETED. NOW THE DEPARTMENT IS I N APPEAL. 5. WE HAVE PERUSED THE MATERIAL AVAILABLE ON THE RE CORD AND CONSIDERED THE SUBMISSIONS OF THE LEARNED D.R., NO BODY WAS PRESENT ON BEHALF OF THE ASSESSEE. IN THE PRESE NT CASE, THE FINDING OF THE LD. CIT(A) THAT THE SAID AMOUNT WAS COMPENSATORY IN THE NATURE AND IT WAS NOT A SEPARATE INCOME, WAS NOT REBUTTED. THE ASSESS EE ALSO EXPLAINED BEFORE THE LD. CIT(A) THAT THIS AMOUNT RE CEIVED AS CLAIM WAS TO 3 BE REDUCED FROM THE EXPENSES RELATING TO REPAIRS IN STEAD OF CREDITING IN THE P&L ACCOUNT AND THAT THERE WOULD HAVE BEEN NO VARIA TION IN THE AMOUNT OF NET PROFIT SHOWN BY THE ASSESSEE AS THE AMOUNT WAS COMP ENSATORY IN NATURE. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, A RE OF THE VIEW THAT THE LD. CIT(A) RIGHTLY DELETED THE IMPUGNED ADDITION. 6. THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE DELETION OF ADDITION OF RS. 6,84,514/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF PENALTY CHARGES. 7. FACTS RELATED TO THIS ISSUE IN BRIEF ARE THAT TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 10,62,550/- ON ACCOUNT OF PENALTY CHARGES, HE THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THE SAME WA S ALLOWABLE AS AN EXPENDITURE. THE ASSESSEE SUBMITTED THAT IT WAS NO T A PENALTY BUT HAD BEEN WRONGLY MENTIONED AS PENALTY BY THE AUDITOR IN THE AUDIT REPORT. IT WAS STATED THAT THE AMOUNT WAS RELATING TO THE DELAY CHARGES R ECOVERED BY M/S RELIANCE INDUSTRIES ON ACCOUNT OF TRANSIT DELAY AND DELAY IN DELIVERY OF CARS AS PER AGREEMENT, THEREFORE, THE NOMENCLATURE OF PENALTY G IVEN IN THE P&L ACCOUNT WAS MISLEADING AND WAS ALLOWABLE BEING INCIDENTAL T O THE BUSINESS. IT WAS FURTHER STATED THAT THERE WAS NO OFFENCE OR ILLEGAL ACT AND AS SUCH THE AMOUNT WAS ALLOWABLE IN FULL. THE ASSESSEE ALSO FURNISHED DETAILS OF THE AMOUNT VIS-A- VIS THE INVOICE NUMBER, DATE, TRUCK NUMBER, PERIOD OF DELAY AND THE AMOUNT RECOVERED BUT THE ASSESSING OFFICER DID NOT FIND ME RIT IN THE SUBMISSIONS OF THE ASSESSEE AND DISALLOWED A SUM OF RS. 6,84,514/- BECAUSE A COPY OF THE AGREEMENT WITH RELIANCE INDUSTRIES WAS NOT FILED. 4 8. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE AMOUNT OF RS. 10,62,550/- WAS ON LY A LEGITIMATE EXPENSE ON ACCOUNT OF DELAY IN DELIVERY AND IN THE PERFORMA NCE OF CONTRACT, SUCH DELAY WAS NOT UNUSUAL. IT WAS FURTHER STATED THAT NON FIL ING OF AGREEMENT DID NOT CHANGE THE CHARACTER OF PAYMENT, WHICH WAS CLEAR FR OM THE STATEMENT FILED, THEREFORE, NO FURTHER PROOF WAS NECESSARY AS THE AM OUNT WAS NOT IN THE NATURE OF PENALTY TO ATTRACT EXPLANATION TO SECTION 37(1) OF THE ACT. IT WAS FURTHER STATED THAT EVEN OTHERWISE THIS ADDITION TANTAMOUNT TO DOUBLE ADDITION AS THE AMOUNT OF RS. 10,62,550/- DEBITED TO THE P&L ACCOUN T WAS ALREADY COVERED BY THE APPLICATION OF NET PROFIT RATE. 9. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ADDITION HAD BEEN WRONGLY MADE A S THE EXPLANATION TO SECTION 37(1) OF THE ACT WAS NOT ATTRACTED AND THE AMOUNT HAD ALREADY BEEN COVERED WHILE APPLYING A NET PROFIT RATE AFTER WHIC H NO FURTHER ADDITION FOR DISALLOWANCE OF INADMISSIBLE EXPENSES WAS CALLED FO R. HE FURTHER OBSERVED THAT THE PAYMENT TO RELIANCE INDUSTRIES FOR THE PER IOD OF DELAY IN DELIVERY OF CARS WITHIN THE STIPULATED TIME WAS AN ALLOWABLE EX PENDITURE BEING INCIDENTAL TO THE BUSINESS OF TRANSPORT OF CAR FROM ONE PLACE TO ANOTHER PLACE AND THE ASSESSING OFFICER HIMSELF ACCEPTED IN THE ASSESSMEN T ORDER THAT THE PAYMENT WAS NOT IN THE NATURE OF ANY PENALTY. ACCORDINGLY, THE ADDITION OF RS. 6,84,514/- WAS DELETED. NOW THE DEPARTMENT IS IN AP PEAL. 10. THE LEARNED D.R. SUPPORTED THE ORDER OF THE ASS ESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER. 5 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARN ED D.R. AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESEN T CASE, IT APPEARS THAT THE ASSESSEE MADE THE PAYMENT TO M/S RELIANCE INDUSTRIE S ON ACCOUNT OF DELAY IN DELIVERY OF CARS IN PERFORMANCE OF THE CONTRACT. SU CH DELAY WAS NOT UNUSUAL, SO IT WAS NOT PENAL IN NATURE BUT INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. THEREFORE, THE EXPENSES WERE ALLOWABLE AND THE PROV ISIONS OF EXPLANATION TO SECTION 37(1) WERE NOT ATTRACTED. MOREOVER, IN THIS CASE, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE PRO FIT BY APPLYING THE NET PROFIT RATE, ON THAT SCORE ALSO THE SEPARATE ADDITI ON MADE BY THE ASSESSING OFFICER BY DISALLOWING THE EXPENSES, WAS NOT JUSTIF IED. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS, DO NOT SEE A NY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 12. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2014) . SD/- SD/- (HARI OM MARATHA) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 TH MAY, 2014 *RANJAN COPY FORWARDED TO: 1. APPELLANT- 2. RESPONDENT- 3. CIT(A) 4. CIT 5. D.R. BY ORDER ASSISTANT REGISTRAR ITAT, JODHPUR.