Shri Sanjay Hiralal Thakkar, Ahmedabad V. The ACIT.,Cent.Circle-1(1), Ahmedabad

ITSSA 851/AHD/2010

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2767 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 31-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAGADISH
• Keywords: Unexplained expenditure; Depreciation; Loose papers
• Section: 69C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ( ) ./ IT(SS)A NO. 851/AHD/2010 / A.Y. : 2005-2006 SHRI SANJAY HIRALAL THAKKAR, DEVNANDAN PALACE, AMBLI BOPAL ROAD, AHMEDABAD PAN: AARPT 3337 Q VS ACIT, CENTRAL CIRCLE 1(1), AHMEDABAD ! / (APPELLANT) '# ! / (RESPONDENT) BY ASSESSEE : SMT. URVASHI SHODHAN, AR BY REVENUE : SHRI JAGADISH, CIT-DR / DATE OF HEARING : 08/12/2016 /DATE OF PRONOUNCEMENT: 23/12/2016 / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-06, ARISES AGAINST THE CIT(A)-I, AHMEDABADS ORDER DATED 18.10 .2010, PASSED IN CASE NO. CIT(A)-I, CC.1(1)/325/2009-10, IN PROCEEDI NGS U/S 153A(B) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. WE COME TO ASSESSEES PLEADINGS. HIS FIRST SUBS TANTIVE GROUND IS THAT THE CIT(A) HAS ERRED IN CONFIRMING ASSESSIN G OFFICERS ACTION DISALLOWING 20% OF TELEPHONE EXPENSES OF RS.16,180/ - ALLEGING PERSONAL USE. LEARNED COUNSEL STATES VERY FAIRLY T HAT A CO-ORDINATE BENCH IN ITS ORDER DATED 18.01.2016 HAS DECIDED VER Y ISSUE AGAINST ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 2 - ASSESSEE IN ASSESSMENT YEAR 2003-04. WE APPRECIATE THIS FAIR STAND TO DECLINE THIS FIRST SUBSTANTIVE GROUND. 3. THE ASSESSEES SECOND SUBSTANTIVE GROUND PLEADS THAT BOTH THE LOWER AUTHORITIES HAVE WRONGLY DISALLOWED A SUM OF RS.1,26,387/- OUT OF MOTOR CAR EXPENSES AND DEPRECIATION ON ACCOU NT OF PERSONAL USE. HIS ONLY ARGUMENT IS THAT THE AUTHORITIES BEL OW HAVE NOT PROPERLY APPRECIATED THE SETTLED LAW IN DISALLOWING DEPRECIATION OF RS.4,98,010/- PERTAINING TO THE MOTOR CAR IN QUESTI ON SINCE THE SAME IS VERY MUCH ALLOWABLE AFTER FORMING PART OF THE RELEV ANT BLOCK OF ASSETS. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE THIS LEGAL POSITION. WE THUS ACCEPT ASSESSEES ABOVE AR GUMENT AND DIRECT THE ASSESSING OFFICER TO DELETE DEPRECIATION DISALL OWANCE OF RS.4,98,010/- AS INDICATED HEREINABOVE. THIS SUBS TANTIVE GROUND IS PARTLY ACCEPTED. 4. ASSESSEES THIRD SUBSTANTIVE GROUND ASSAILS CORR ECTNESS OF BOTH THE LOWER AUTHORITIES ORDER MAKING ADDITION OF ALLE GED UNEXPLAINED EXPENDITURE OF RS.62,816/-. WE NOTICE THAT THE CIT (A) DISCUSSES THE ISSUE AS UNDER:- 9. NEXT DISPUTED ADDITION IS FOR RS.62,816/- MADE BY THE AO ON THE BASIS OF SEIZED PAGES 19 TO 24 OF ANNEXURE A-2. TH IS REPRESENTS FOLLOWING PAYMENTS:- PAGE NO. DESCRIPTION AMOUNT 19 BILL DATED 25.01.2005 OF J.K. WORLD TRAVELS 9622 20 BILL DATED 25.01.2005 OF J.K. WORLD TRAVELS 1229 4 21 DONATION TO GRAM SEVA TRUST ON 16.01.05 31000 24 PURCHASE OF DIAMOND BRACELET 9900 TOTAL 62816 ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 3 - IT IS STATED BY THE AO THAT THE APPELLANT WAS ASKED TO EXPLAIN THE SOURCE FOR THIS PAYMENT AND IT WAS EXPLAINED BY THE APPELLANT THAT THESE PAYMENTS WERE OUT OF THE WITHDRAWALS AND OUT O F PERSONAL SAVINGS OF HIS FAMILY. THIS EXPLANATION HAS NOT BE EN ACCEPTED BY THE AO STATING THAT THE SAME IS NOT SATISFACTORY. IT I S STATED THAT SPECIFIC EXPLANATION WITH REGARD TO THE SOURCE OF EXPENDITURE HAS NOT BEEN FURNISHED. ACCORDINGLY, HE HAD MADE THE ADDITION U /S 69C FOR THE ABOVE AMOUNT. 9.1 BEFORE ME, AGAIN THE APPELLANTS CONTENTIONS AR E SAME I.E. EXPENDITURE WERE INCURRED FROM OUT OF WITHDRAWAL OR FROM CASH BALANCES OF THE PROPRIETARY CONCERNS AND OUT OF PER SONAL SAVINGS. HOWEVER, NO SUCH DEBITS IN THE PROPRIETARY CONCERN A RE FOUND AND IT IS ALSO NOT SHOWN AS TO HOW WITHDRAWALS ARE ADEQUATE TO INCUR SUCH EXPENDITURE. IN THE ABSENCE OF ANY DETAILS, THE AD DITION MADE IS CONFIRMED. 5. LEARNED COUNSELS ONLY ARGUMENT RAISED IN THE CO URSE OF HEARING IS THAT THE ABOVE EXTRACTED FORMER TWO BILL S ARE IN ASSESSEES WIFES NAME WHICH COULD NOT HAVE BEEN ADDED IN HIS HANDS. HE FURTHER SUBMITS THAT THESE PAYMENTS HAVE BEEN MADE FROM PART SAVINGS AND ACCUMULATION OF THE EARLIER WITHDRAWALS . LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO DISPUTE ASSESS EES ARGUMENTS REGARDING FIRST TWO BILLS DATED 25.01.2005 IN THE N AME OF M/S. J.K. WORLD TRAVELS. WE NOTICE FROM THE LOWER AUTHORITIE S FINDINGS THAT THE AUTHORITIES BELOW HAVE NOWHERE TAKEN INTO ACCOU NT THE FACT OF ASSESSEES WIFE HAVING ISSUED IN THE ABOVE TWO BILL S. NOR IS ANY SPECIFIC CONCLUSION THEREIN AS TO HOW AND IN WHAT C IRCUMSTANCE ABOVE TWO BILLS MADE IN THE NAME OF ASSESSEES WIFE STAND ADDED IN HIS NAME. WE THUS FIND NO REASON TO SUSTAIN THE IMPUGNE D ADDITION ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 4 - PERTAINING TO THE TWO BILLS HEREINABOVE. THE SAME STANDS DELETED. THIS SUBSTANTIVE GROUND IS PARTLY ACCEPTED. 6. THE ASSESSEES NEXT SUBSTANTIVE GROUND IS THAT T HE CIT(A) HAS ERRED IN ADDING UNEXPLAINED EXPENDITURE AMOUNT OF R S.12,35,838/- ON THE BASIS OF NOTINGS SEIZED IN THE COURSE OF SEA RCH. THE CIT(A)S ORDER ELABORATELY DISCUSSES ASSESSING OFFICERS FIN DINGS AND ASSESSEES SUBMISSIONS AS FOLLOWS:- 10. THE NEXT DISPUTED ADDITION IS FOR RS. 12,35,83 8/- MADE BY THE A.O. FOR THE UNEXPLAINED EXPENDITURE ON ELECTRIC WO RK IN PROPRIETARY CONCERN ON THE BASIS OF SEIZED PAPERS. HE HAS STATE D THAT PAGE 1 TO 5 OF ANNEXURE A-20 SEIZED FROM THE OFFICE OF DHARMADEV F INANCE PVT. LTD. IN THE COURSE OF SEARCH CONTAINS DETAILS OF BILLS R AISED BY M/S. AVKAR ELECTRICALS AMOUNTING TO RS.6,37,568/- ON 19-8-2004 , OUT OF WHICH BALANCE AMOUNT OF RS.5,37,568/- IS SHOWN AS OUTSTAND ING, DEDUCTING RS.50,000/- PAID AS ADVANCE. FURTHER DETAILS CONTAI NS BILLS OF SAME AVKAR ELECTRICALS DATED 1-11-2004 FOR RS.5,98,270/- . THE APPELLANT HAD BEFORE THE A.O. EXPLAINED THAT AG AINST THE WORK BEING CARRIED OUT BY AVKAR ELECTRICAL, RS.2,00, 000/- WAS PAID THROUGH CHEQUE. THE BALANCE PAYMENT WAS YET TO BE M ADE. FOR THIS LEDGER ACCOUNT OF SMT. SHANTABEN GOVINDBHAI CHAVDA WAS FURNISHED. IT WAS ALSO STATED THAT THE BILL PERTAINED TO THE S CHEME OF SAHJANAND MARKET. THE APPELLANT HAD GIVEN OFFICE FOR TEMPORAR Y USE IN SAHJANAND MARKET TO AVKAR ELECTRICAL AGAINST THE PA YMENT TO BE MADE FOR THE WORK DONE AND ACCORDINGLY BALANCE AMOUNT WAS NOT PAID. FOR THIS PURPOSE, THE APPELLANT HAD FURNISHED CONFIRMAT ION OF THE SAID PARTY. THIS REPLY OF THE ASSESSEE HAS NOT BEEN ACCEPTED B Y THE A.O. AND IT IS STATED THAT THE SAME WAS NOT CONVINCING. HE HA S STATED THAT THE PAYMENT OF RS.2 LAKH WAS MADE IN THE ACCOUNT OF SHAN TABEN G. CHAVDA ON DIFFERENT DATES, WHEREAS, THE CONFIRMATION LETTER IS SIGNED BY GOVINDBHAI S. CHAVDA AS PROPRIETARY OF AVKAR ELEC TRICALS IS GIVEN. HE HAS STATED THAT IF GOVINDBHAI CHAVDA IS THE PROP RIETORY OF AVKAR ELECTRICALS, WHY PAYMENT WAS MADE TO SMT. SHANTABEN GOVINDBHAI ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 5 - CHAVDA. THE PAYMENT OF RS.2 LAKH WAS ADVANCES MADE ON DIFFERENT DATES AND THE ACCOUNT DID NOT CLARIFY THAT THEY HAD CARRIED OUT ANY ELECTRIC WORK AND RAISED BILLS FOR THE SAME. AS REGA RDS THE PROVIDING OF OFFICE FOR TEMPORARY USE TO THE SAID PARTY, THE A.O . STATES THAT ON PERUSAL OF THE BOOKS, HE FOUND THAT THE APPELLANT H AD NOT ACCOUNTED FOR SUCH TRANSACTION. ACCORDING TO HIM, THE BILL AMOUNT SHOULD BE CREDITED TO PARTY ACCOUNT AND PARTY ACCOUNT SHOULD BE DEBITE D AT THE TIME OF EACH PAYMENT. THUS, HE HAS NOT ACCEPTED THE EXPLANA TION. HE HAS ALSO STATED THAT NO EVIDENCE THAT SHOP WAS PART OF STOCK REMAINING UNSOLD WAS GIVEN. CONSIDERING THE ABOVE DISCUSSION, HE HAS MADE ADDITION OF RS.12,35,838/- TREATING IT AS UNEXPLAINED EXPENDITU RE TOWARDS ELECTRIC WORK CARRIED OUT BY AVKAR ELECTRICALS FOR SAHAJANAND MARKET. 10.1 THE APPELLANT IN THIS CONNECTION SUBMITTED THA T THE ASSESSING OFFICER HAS SIMPLY MADE THE ADDITION ON THE BASIS O F PRESUMPTION IGNORING THE ACTUAL FACTS THAT THERE WAS EVIDENCE TH AT THE EXPENSE AS PER NOTINGS ARE ALREADY INCURRED BY THE APPELLANT A ND NOT ACCOUNTED. AGAINST THIS PRESUMPTION WITH EVIDENCE IN FORM OF CO NFIRMATION IT WAS EXPLAINED BY THE APPELLANT THAT THE WORK CARRIED OUT BY AVKAR ELECTRICALS WAS IN LIEU OF RENT FREE SHOP GIVEN TO I T AND THE PAYMENT AMOUNT WAS NOT DECIDED. ONLY WORK DONE WAS NOTED. ON ACCOUNT CHEQUES FOR RS.200000 WERE GIVEN SHANTABEN G. CHAVDA ON BEHALF OF AVKAR ELECTRICALS. THE ASSESSING OFFICER REJECTED T HIS EXPLANATION BY SAYING THAT THE CHEQUE WAS NOT IN THE NAME OF THE P ROPRIETOR OF AVKAR ELECTRICALS. ONCE CHEQUE ISSUED IS CONFIRMED BY THE PARTY, IT IS IRRELEVANT IN WHOSE NAME THE PARTY HAS TAKEN THE CHE QUE. APART FROM ABOVE, IT IS A FACT THAT APPELLANT IS CARRYING ON D EVELOPMENT WORK OF THE BUILDING ON BEHALF OF NTC, SO WHATEVER EXPENSE IS INCURRED IS ON BEHALF OF THE NTC. THE APPELLANT IS ONLY GETTING DE VELOPMENT CHARGES FOR THE WORK DONE. SO ONLY FOR THE REASON APPELLANT IS NOT INCURRING EXPENSE TOWARDS THE CONSTRUCTION IN HIS BOOKS, NO QU ESTION OF UNACCOUNTED EXPENSE SHOULD ARISE IN THE CASE OF THE APPELLANT. HENCE FROM THE ABOVE FACTS, IT IS CLEAR THAT THE ASSESSIN G OFFICER HAD MADE THE ADDITION TOWARDS THE PRESUMED UNACCOUNTED EXPENSE WH ICH HAS LITERALLY NOT INCURRED DURING RECENT YEAR BY THE AP PELLANT AND HENCE RS.12,35,838 ADDED TO THE INCOME DESERVES TO BE DEL ETED. 10.2 THE A.O. HAS IN THE REMAND REPORT STATED THAT THE ADDITION WAS MADE ON THE BASIS OF LOOSE PAPERS. THE EXPLANATION OF THE ASSESSEE WAS DEALT WITH IN THE ASSESSMENT ORDER AND THEREFORE, TH E CONTENTIONS OF THE ASSESSEE MAY BE REJECTED. ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 6 - 10.3 ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCE S OF THE APPELLANT'S CASE, IT IS FOUND THAT THE ADDITION HAS BEEN MADE AS DURING THE COURSE OF SEARCH, LOOSE PAPERS WERE FOUND, WHICH IS IN THE FORM OF BILL OF AVKAR ELECTRICALS. THE APPELLANT'S CLAIM IS THAT THEY HAD PAID RS.2,00,000/- AS ADVANCE TO THE WIFE OF THE PROPRIET OR OF AVKAR ELECTRICALS AND BALANCE AMOUNT WAS NOT PAID AS THE A PPELLANT'S PREMISES IN SAHAJANAND MARKET WERE MADE AVAILABLE FO R THE TEMPORARY USE FOR WHICH NO CONSIDERATION WAS RECEIVED. THEREFO RE, NO PAYMENT WAS MADE TOWARDS THIS ACCOUNT AND HENCE NO ADDITION SHOULD BE MADE. IT IS THE CLAIM OF THE ASSESSEE THAT ONCE CONFIRMAT ION OF THE PARTY WAS FILED THE SAME SHOULD NOT BE REJECTED. THE APPELLAN T HAS ALSO STATED THAT IN THE SUBSEQUENT YEAR, THE CHEQUE WAS ISSUED FOR RS .10 LAKH TO AVKAR ELECTRICALS FROM THE BOOKS OF DHARMANAND BUILDERS. COPY OF THIS CHEQUE WAS GIVEN AS PART 17 OF THE PAPER BOOK. THERE FORE, IT IS SUBMITTED THAT THERE WAS NO QUESTION OF TREATING TH E EXPENDITURE AS UNEXPLAINED. CONSIDERING THIS EVIDENCE FOR WHICH NO COMMENT IS MADE BY THE A.O. IN THE REMAND REPORT, THE ADDITION WAS R EQUESTED TO BE DELETED. 10.4 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE ABOVE SUBMISSIONS. IT IS FOUND THAT AS PER THE SEIZED PAP ERS, THE APPELLANT HAD INCURRED EXPENDITURE OF RS. 12.39 LAKH FOR WHIC H BILLS WERE ISSUED BY M/S. AVKAR ELECTRICALS. THE APPELLANT HAS CLAIME D THAT THEY HAD PAID RS.2 LAKH AS ADVANCE, THEY HAD GIVEN THE SHOP PREMISES FOR USE BY AVKAR ELECTRICAL AND THAT HENCE NO PAYMENT TOWARDS T HEIR BILLS WAS MADE. IN THE FURTHER SUBMISSIONS, IT IS ALSO STATED THAT THE APPELLANT FURTHER PAID RS. 10 LAKH TO AVKAR ELECTRICALS IN TH E SUBSEQUENT YEAR FOR WHICH COPY OF CHEQUE ISSUED WAS GIVEN IN THE PAPE R BOOK. THE APPELLANT HAD ALSO FILED CONFIRMATION FROM AVKAR EL ECTRICALS ABOUT USE OF APPELLANT'S SHOP BY THEM AND NONPAYMENT OF ANY A MOUNT BY THE APPELLANT TOWARDS THEIR BILL. HOWEVER, IN MY VIEW TH E EXPLANATION OF THE ASSESSEE IS NOT ACCEPTABLE FOR THE REASON THAT IT IS AN ACCEPTED FACT THAT AVKAR ELECTRICALS HAD CARRIED OUT THE WORK FOR THE APPELLANT'S SCHEME DEVELOPED FOR THE COMMERCIAL PURPOSE. THEREF ORE, EVEN IF THE AMOUNT IS NOT PAID BY GIVING SHOP FOR THEIR USE, TH E BILL REMAINS UNACCOUNTED FOR THE WORK CARRIED OUT BY THEM. ACCORD INGLY, THE ADDITION MADE IS CONFIRMED. 7. WE HAVE HEARD BOTH THE PARTIES REITERATING THEIR RESPECTIVE STANDS. WE NOTICE FIRST OF ALL THAT THE ASSESSEE HAS ALREADY PLACED ON ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 7 - RECORD A COPY OF CHEQUE PAYMENT OF RS.10,00,000/- ALLEGEDLY MADE TO M/S. AVKAR ELECTRICALS IN SUCCEEDING ASSESSMENT YEA R. LEARNED CIT(A) HAS NEITHER ADVERTED TO THE SAID PLEA NOR RE JECTED THE SAME IN HIS ABOVE EXTRACTED FINDINGS. IT THUS EMERGES THA T THE VERY SUM STANDS ADDED IN THE IMPUGNED ASSESSMENT YEAR BUT PA ID IN THE SUCCEEDING ASSESSMENT YEAR. THE PAYEE SIDE HAS FUR THER CONFIRMED THAT IT HAD RECEIVED RS.2 LAKHS PAYMENT FROM THE AS SESSEE. ALL THIS GOES UNREBUTTED IN THE COURSE OF HEARING. WE THUS FIND MERIT IN ASSESSEES ARGUMENTS SO FAR AS THE ABOVE AMOUNT OF RS.12 LAKHS INVOLVED OUT OF RS.12,35,838/- IS CONCERNED. THE B ALANCE ADDITION OF RS.35,838/- IS CONFIRMED. THIS SUBSTANTIVE GROUND IS PARTLY ALLOWED. 8. THE ASSESSEES LAST SUBSTANTIVE GROUND PLEADS TH AT BOTH THE LOWER AUTHORITIES HAVE ERRED IN MAKING ADDITION OF RS.24,31,000/- ARISING OUT OF DIFFERENCE BETWEEN CONSTRUCTION COST OF HIS RESIDENTIAL HOUSE AS RECORDED IN BOOKS OF ACCOUNT AND IN DVOS C OST ESTIMATION AS SPREAD OVER IN THE CORRESPONDING ASSESSMENT YEAR . THE CIT(A) RELIES UPON HIS ORDER IN ASSESSEES CASE ITSELF FOR ASSESSMENT YEAR 2001-02 ON THE VERY ISSUE. LEARNED COUNSEL FILES B EFORE US TRIBUNALS ORDER DATED 18.01.2016 IN ASSESSEES CASE ITSELF IN EARLIER ASSESSMENT YEAR DELETING THE VERY ADDITION AFTER HOLDING THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE MADE SECTION 142A REFEREN CE TO THE DVO WITHOUT REJECTING THE ABOVE BOOKS OF ACCOUNT. LEAR NED DEPARTMENTAL REPRESENTATIVE DOES NOT REBUT THIS FACTUAL POSITION . WE THUS DRAW SUPPORT FROM THE SAID EARLIER DECISION TO ACCEPT TH E INSTANT SUBSTANTIVE GROUND IN ASSESSEES FAVOUR. THE IMPUG NED ADDITION OF RS.24.31 LAKHS STANDS DELETED. ITSSA NO. 851/AHD/2010 SHRI SANJAY HIRALAL THAKKAR VS, ACIT A.Y. : 2005-2006 - 8 - 9. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 23 RD DECEMBER , 2016 AT AHMEDABAD SD/- SD/- (PRAMOD KUMAR) (S .S. GODARA) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD, DATED 23/12/2016 *BT & '() *) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' $ / CONCERNED CIT 4. $ ( ) / THE CIT(A) 5. ' **' , ' , / DR, ITAT, AHMEDABAD 6. / / GUARD FILE. TRUE COPY / BY ORDER, TRUE COPY / (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD