K.Natarajan, Salem V. DCIT, Salem

ITA 967/CHNY/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8561 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-07-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: T S LAKSHMI VENKATRAMAN
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts
• Section: 143(3); 234B; 80G

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' # . $ , & ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICI AL MEMBER ./ I.T.A.NO.967/MDS/2015 ( / ASSESSMENT YEAR: 2005-06) MR. K.NATARAJAN, PROP. SRI GANESH TRANSPORT, 68, KARUPPANNAN STREET, S.P.PUDUR, NAMAKKAL-637 001. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, SALEM. PAN: ABLPN0829N ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.T.S.LAKSHMI VENKATRAMAN, CA /RESPONDENT BY : MR. SUPRIYO PAL, JCIT /DATE OF HEARING : 12 TH JULY, 2016 /DATE OF PRONOUNCEMENT : 15 TH SEPTEMBER, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)- 18, CHENNAI DATED 27.02.2015 IN ITA NO.287/14-15 PA SSED UNDER SECTION 143(3) R.W.S. 250(6) OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS IN ITS A PPEAL, HOWEVER, THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- (I) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF ` 3,59,000/- MADE BY THE LEARNED ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS. (II) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN SUSTAINING THE ADDITION OF ` 8,80,931/- 2 ITA NO.967/MDS/2015 MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 41(1)OF THE ACT. (III) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF ` 10,000/- MADE BY THE LEARNED ASSESSING OFFICER BEIN G DONATION GIVEN FOR TSUNAMI. (IV) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF 20% OF CAR MAINTENANCE EXPENSES AMOUNTING TO ` 39,620/- BY ESTIMATING THE SAME TO BE FOR PERSONAL USE. (V) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF ` 23,790/- MADE BY THE LEARNED ASSESSING OFFICER BEING 20% OF TELEPHONE EXPENSES/- BY ESTIMATING THE SAME TO BE F OR PERSONAL USE. (VI) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE INTEREST AMOU NT OF ` 86,503/- LEVIED BY THE LEARNED ASSESSING OFFICER UN DER SECTION 234B OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF TRANSPORT CO NTRACT AND ALSO EARNING INCOME FROM OTHER SOURCES FILED HIS RE TURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 DISCLOSING H IS INCOME OF RS.6,63,230/- AND AGRICULTURAL INCOME OF RS.1,12,700/-. AFTER THE ASSESSMENT BEING INITIALL Y PROCESSED UNDER SECTION 143(1) OF THE ACT, THE CASE WAS TAKEN UP FOR 3 ITA NO.967/MDS/2015 SCRUTINY WHEREIN THE LEARNED ASSESSING OFFICER MADE VARIOUS DISALLOWANCES. GROUND NO.1: BAD DEBTS:- 4.1 THE ASSESSEE HAD CLAIMED BAD DEBTS AMOUNTING TO RS.3,59,000/- BEING THE BANK GUARANTEE FURNISHED BY THE ASSESSEE IN FAVOUR OF ONGC WHICH WAS INVOKED DUE TO NON- PERFORMANCE OF CONTRACT. THE LEARNED ASSESSING OFFI CER DISALLOWED THE SAME BECAUSE THE ASSESSEE HAD CLAIME D IT AS BAD DEBTS AND THE AFORESAID LOSS OF THE ASSESSEE CA NNOT BE CONSTRUED AS BAD DEBTS. THE LEARNED ASSESSING OFFIC ER ALSO REJECTED THE CLAIM OF THE ASSESSEE FOR GRANTING DED UCTION AS BUSINESS EXPENDITURE. ON APPEAL, THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER BY AGREEING WITH THE VIEW OF THE LEARNED ASSESSING OFFICER. 4.2 AFTER HEARING BOTH THE SIDES, WE ARE OF THE CON SIDERED VIEW THAT THE ASSESSEE HAD GENUINELY INCURRED LOSS OF RS.3,59,000/- DURING THE COURSE OF BUSINESS. THEREF ORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE WOULD BE 4 ITA NO.967/MDS/2015 ENTITLED FOR DEDUCTION OF RS.3,59,000/- AS BUSINESS LOSS. HENCE, WE HEREBY DIRECT THE LEARNED ASSESSING OFFIC ER TO DELETE THE ADDITION MADE FOR RS.3,59,000/-. GROUND NO.2: ADDITION OF RS.8,80,931/- UNDER SECTI ON 41(1) OF THE ACT 5.1 THE ASSESSEE HAD CREDITED A SUM OF RS.8,80,931/ - TO HIS CAPITAL ACCOUNT DURING THE RELEVANT ASSESSMENT YEAR. IT WAS OBSERVED BY THE LEARNED ASSESSING OFFICER THAT THE ASSESSEE HAD BUILD UP THE CREDIT OF RS.8,80,931/- O VER THE PERIOD 1.4.1999 TO 08.12.2001 BY CLAIMING THE SAME AS HIRE CHARGES PAYABLE BY HIM TO HIS FATHER SHRI V. KALIAP PAN IN RESPECT OF FOUR LORRIES OWNED BY SHRI KALIAPPAN. IT WAS FURTHER OBSERVED THAT MR.KALIAPPAN EXPIRED ON 11.2.1997 AND THE ASSESSEE WAS OPERATING ALL THE FOUR LORRIES OWNED B Y HIS FATHER. WHEN QUERIED, THE ASSESSEE EXPLAINED THAT SINCE THE LORRIES BELONG TO HIS LATE FATHER THE REVENUE FROM THE SAME HAS TO BE CREDITED IN HIS FATHERS HUF ACCOUNT AND BY MISTAKE IT WAS CREDITED TO HIS FATHERS ACCOUNT. THE LEARNE D ASSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE BY TREAT ING IT TO BE 5 ITA NO.967/MDS/2015 BOGUS AND FURTHER INVOKING THE PROVISIONS OF SECTIO N 41(1) OF THE ACT AND BROUGHT THE AMOUNT OF RS.8,80,931/- TO TAX. 5.2 ON APPEAL, THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) BY AGREEING TO THE VIEW OF THE LEARNED AS SESSING OFFICER CONFIRMED HIS ORDER ON THIS ISSUE. 5.3 AFTER HEARING BOTH THE SIDES, WE FIND MERIT IN THE CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE . THE ACCUMULATED REVENUE RECEIPTS OF HIS LATE FATHER AND THE INCOME GENERATED FROM THE LORRIES OWNED BY HIS LATE FATHER WILL DEVOLVE TO HIS FATHERS HUF AND IF THE SAME IS GIVEN TO THE ASSESSEE, IT CANNOT BE CONSTRUED AS HIS INCOME, NEE DLESS TO MENTION THAT THE INCOME GENERATED BY THE LORRIES OF THE ASSESSEES LATE FATHER WILL BE TAXABLE ONLY IN THE HANDS OF THE ASSESSEES FATHERS HUF. THEREFORE, WE HEREBY DIRE CT THE LEARNED ASSESSING OFFICER TO DELETE THE ADDITION OF RS.8,80,931/- MADE IN THE HANDS OF THE ASSESSEE. GROUND NO.3: DONATION GIVEN FOR TSUNAMI: 6 ITA NO.967/MDS/2015 6. THE ASSESSEE HAD PAID A SUM OF RS.10,000/- AS DONATION TO THE CHIEF MINISTERS TSUNAMI FUND. THE LEARNED ASSESSING OFFICER DENIED GRANTING THE BENEFIT UNDER SECTION 80G OF THE ACT BECAUSE IT WAS NOT SUPPORTED BY VALI D RECEIPT OR CERTIFICATE. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEA RNED ASSESSING OFFICER ACCEPTING WITH HIS VIEW. AFTER PE RUSING THE ORDERS OF THE REVENUE WE FIND THAT THE ASSESSEE HAD FURNISHED THE XEROX COPY OF THE DEMAND DRAFT DRAWN IN FAVOUR OF THE CHIEF MINISTERS TSUNAMI FUND IN SUPPORT OF HIS CLAIM. THE REVENUE COULD HAVE VERIFIED THE CLAIM OF THE AS SESSEE FROM THE BANK FROM WHICH THE ASSESSEE HAS OBTAINED THE DEMAND DRAFT. WE ARE OF THE CONSIDERED VIEW THAT TH IS GENEROUS DONATION OF THE ASSESSEE SHOULD NOT BE DISCOURAGED WHEN GENUINELY HE HAS MADE DONATION TO THE CHIEF MINISTERS FUND TOWARDS TSUNAMI. THEREFORE, W E HEREBY DIRECT THE LEARNED ASSESSING OFFICER TO GRANT THE B ENEFIT OF SECTION 80G OF THE ACT TOWARDS THE DONATION OF RS 1 0,000/- MADE TO CHIEF MINISTERS FUND. 7 ITA NO.967/MDS/2015 GROUND NO.4: DISALLOWANCE OF 20% OF CAR MAINTENANCE EXPENSES: 7. THE ASSESSEE HAD INCURRED EXPENSES OF RS, 1,98,107/- TOWARDS THE MAINTENANCE OF HIS CAR, FUEL EXPENSES, DRIVERS SALARY AND DEPRECIATION. SINCE THE ASSESSEE HAS GIV EN IN WRITING FOR DISALLOWING OF 20% OF SUCH EXPENDITURE BEING RS.39,620/- TOWARDS PERSONAL USE, THE LEARNED ASSE SSING OFFICER HAS DISALLOWED THE SAME. ON APPEAL, THE LEA RNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER. ON PERUSING THE M ATTER, WE DO NOT FIND ANY MERIT IN THE CLAIM OF THE ASSESSEE ON THIS ISSUE AT THIS STAGE. SINCE THE ASSESSEE HAS NOT MAI NTAINED THE DETAILS OF THE USAGE OF HIS VEHICLE, THERE IS E VERY POSSIBILITY THAT HE WOULD HAVE USED HIS CAR FOR PER SONAL PURPOSES WHICH IS CLAIMED AS DEDUCTION. ACCEPTING T HE SAME, THE ASSESSEE HIMSELF HAS AGREED FOR DISALLOWANCE OF 20% OF SUCH EXPENDITURE WHICH WAS ACCEPTED BY THE LEARNED ASSESSING OFFICER. IN THIS SITUATION, WE DO NOT UN DERSTAND THE REASON FOR THE ASSESSEE TO CARRY THE MATTER ON APPE AL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OR BEFORE US. THEREFORE, WE DO NOT FIND ANY MERIT IN THE CLAI M OF THE 8 ITA NO.967/MDS/2015 ASSESSEE AND ACCORDINGLY CONFIRM THE ORDERS OF THE REVENUE ON THIS ISSUE. GROUND NO.5 : DISALLOWANCE OF TELEPHONE EXPENSES:- 8. THE ASSESSEE HAD DEBITED A SUM OF RS.1,18,970/- TOWARDS TELEPHONE EXPENSES FOR WHICH HE HAS NOT MAI NTAINED ANY DETAILS. THEREFORE, THE LEARNED ASSESSING OFFIC ER MADE DISALLOWANCE OF 20% OF SUCH EXPENDITURE AMOUNTING T O RS.23,790/- AS THERE IS POSSIBILITY OF THE ASSESSEE USING THE TELEPHONE FOR PERSONAL USE. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ORDER OF THE LEARNED ASSESSING OFFICER. SINCE THE APPREH ENSIONS OF THE REVENUE FOR PERSONAL USE CANNOT BE DENIED, WE D O NOT FIND IT NECESSARY TO INTERFERE WITH THEIR ORDERS ON THIS ISSUE. GROUND NO.6: INTEREST UNDER SECTION 234B OF THE ACT .: 9. THE ASSESSEE HAS AGITATED AGAINST THE LEVY OF IN TEREST UNDER SECTION 234B OF THE ACT BY CITING THE DECISI ON OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DATA MA TRIX LTD. VS. ACIT REPORTED IN 110 ITD 24 . SINCE THE DECISIO N OF THIS 9 ITA NO.967/MDS/2015 CASE WAS NOT BROUGHT TO THE NOTICE OF THE LEARNED A SSESSING OFFICER, WE REMIT BACK THIS ISSUE TO THE FILE OF TH E LEARNED ASSESSING OFFICER TO CONSIDER THE ABOVE MENTIONED D ECISION AND DECIDE THE ISSUE THEREAFTER AFRESH. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREI N ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15 TH SEPTEMBER, 2016 SD/- SD/- ( ' # . $ ) ( . ) ( DUVVURU RL REDDY ) ( A. MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 15 TH SEPTEMBER, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF