Dr. Harinder Mittra, Phagwara V. Assistant Commissioner of Income Tax, Phagwara

SA 4/ASR/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3260 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-04-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 10-03-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: UMESH TAKKYAR
• Assessee Lawyers: SH SANDEEP VIJH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (SMC). BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.116(ASR)/2016 ASSESSMENT YEAR:2009-10 PAN: AADPL3941 SHRI PARSHOTAM LAL PROP. VS. INCOME TAX OFFICER, PARSHOTAM LALA VISHWANATH, WARD III(3), JALANDHAR . MANDI ROAD, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH.SH. SANDEEP VIJH, CA RESPONDENT BY: SH.UMESH TAKKYAR, DR DATE OF HEARING: 17/05/2016 DATE OF PRONOUNCEMENT: 14/06/2016 ORDER THIS FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER, DATED 19.01.2016, PASSED BY THE LD. CIT(A), JALANDHAR, FO R THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUN DS OF APPEAL: 1. THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.337,000/- TOWARDS ALLEGED LOW HOUSEHOLD EXPENSE S. THE DETAILED SUBMISSIONS MADE HAVE NOT BEEN PROPERLY APPRECIATED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF COMMISSION AT RS.43,306/-. 3.(A) THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OUT OF SCOOTER AND MOTOR CYCLE EXPENSES AND DEPRECIATIO N OF RS.50,537/- AND RS.11,504/- RESPECTIVELY @ 1/6 TH OF THESE EXPENSES FOR ALLEGED PERSONAL USE. NO DISALLOWANCE OUT OF THESE EXPENSES WAS CALLED FOR. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 2 (B) THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING DISALLOWANCE OUT OF STAFF WELFARE EXPENSES OF RS.26,020/- @ 1/6 TH OF THE EXPENSES. (C) THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING D ISALLOWANCE OUT OF TELEPHONE EXPENSES AND DEPRECIATION ON TELEPHONE OF RS.85,367/- AND RS.977/- RESPECTIVELY @ 1/6 TH OF THESE EXPENSES. THE DISALLOWANCE SUSTAINED IS HIGHLY EXCE SSIVE. 2. THE FIRST GROUND IS THAT THE LD. CIT(A) HAS ERRE D IN SUSTAINING THE ADDITION OF RS.3,37,000/- TOWARDS ALLEGED LOW HOUSE HOLD EXPENSES. 3. THE AO WAS OF THE VIEW THAT THE WITHDRAWALS AVAI LABLE AFTER EXCLUDING ELECTRICITY AND EDUCATION EXPENSES WERE O NLY OF RS.2,03,000/- AND THAT FOR A FAMILY OF NINE PERSONS, THESE WERE I NADEQUATE. THE HOUSE- HOLD EXPENSES WERE ESTIMATED AT RS.45,000/- PER MON TH AND AFTER CONSIDERING THE ADJUSTED FIGURE OF WITHDRAWALS OF RS.2,03,000/-, I.E., THE AMOUNT AVAILABLE AFTER ELECTRICITY EXPENSES (R S.60,950/-) AND EDUCATION EXPENSES (RS.95,080/-), THE ADDITION OF R S.3,37,000/- WAS MADE TO THE RETURNED INCOME OF THE ASSESSEE. WHILE DOING SO, THE AO REFERRED TO THE DECISION IN THE CASE OF VIDYA SAGA R OSWAL 108 ITR 861 (P&H). 4. THE LD. CIT(A) CONFIRMED THE ADDITION. 5. THE LD. COUNSEL FOR THE ASSESSEE, AS BEFORE THE AUTHORITIES BELOW, CONTENDED THAT THE FAMILY OF THE ASSESSEE IS A JOIN T FAMILY, CONSISTING OF HIMSELF, HIS WIFE, TWO MARRIED SONS AND THEIR CHILD REN; THAT THE ELDER SON SH. VIPAN GUPTA, LIVING IN THE SAME HOUSE, WAS MARR IED TO SMT. SMT. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 3 KARUNA KANSAL AND HAD ONE CHILD; THAT HE WAS DOING HIS INDEPENDENT BUSINESS, THE YOUNGER SON, SH. VINAY GUPTA, WAS MAR RIED TO SMT. ANJALI GUPTA, AND HAD TWO CHILDREN; THAT SH. VINAY GUPTA W AS ALSO DOING HIS OWN INDEPENDENT BUSINESS; THAT BOTH THE SONS WERE F ILING THEIR INCOME TAX RETURNS INDEPENDENTLY; THAT THE HOUSEHOLD EXPEN SES CONTRIBUTED BY THEM AT RS.1,16,025/- AND RS.1,22,055/-, RESPECTIVE LY, FIND MENTION IN THE ASSESSMENT ORDER ITSELF; THAT THE FACTUM OF THE THREE FAMILIES LIVING TOGETHER ALSO FINDS MENTION IN THE ASSESSMENT ORDER ; THAT THE WRITTEN REPLY DATED 18.12.2015 WAS FILED BEFORE THE LD. CIT (A), WHICH HAS BEEN REPRODUCED IN THE IMPUGNED ORDER; AND THAT THE SAM E, HAS FURTHER, NOT BEEN CONSIDERED BY THE LD. CIT(A) PROPERLY. 6. THE LD. DR, ON THE OTHER HAND, HAS STRONGLY SUPP ORTED THE IMPUGNED ORDER. 7. WHILE CONFIRMING THE ADDITION MADE, THE LD. CIT( A) HAS OBSERVED THAT THE WITHDRAWALS SHOWN BY THE ASSESSEE AND HIS FAMILY WERE NOT SUFFICIENT TO MEET DAY TO DAY EXPENSES OF THE FAMIL Y AND RATHER, THE EXPENSES WERE RIDICULOUSLY LOW LOOKING AT THE STATU S OF THE FAMILY; THAT THE ESTIMATE MADE BY THE AO WAS VERY REASONABLE; TH AT THE DECISIONS RELIED ON BY THE ASSESSEE WERE DISTINGUISHABLE; THA T THE ASSESSEE HAD FAILED TO PROVE THAT THE HOUSEHOLD WITHDRAWALS MADE BY HIM WERE SUFFICIENT. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 4 8. IN THE REPLY/WRITTEN SUBMISSION FILED BY THE ASS ESSEE BEFORE THE LD. CIT(A), THE ASSESSEE STATED THAT THERE WAS NOTHING ABSURD WITH THE LEVEL OF HOUSEHOLD EXPENSES SHOWN. IN THIS REGARD, RELIAN CE WAS PLACED ON PARMOD SEHGAL VS. ACIT RENDERED BY THE AMRITSAR B ENCH OF THE TRIBUNAL IN ITA NO.1168(ASR)/1990, FOR THE ASSESSMENT YEAR 1 987-88, VIDE ORDER DATED 29.11.1991 (COPY OF ORDER AT APB 11-18). IT W AS SUBMITTED THAT BESIDES ELECTRICITY AND EDUCATION EXPENSES, WHICH W ERE EXCLUDED, THE ASSESSEE ALSO HAD THE BENEFIT OF CAR, FOR WHICH, PR OPORTIONATE DISALLOWANCE HAD BEEN MADE BY THE AO. RELIANCE WAS PLACED ON ROHITASH YADAV VS. ITO, 114 TTJ 973 (JP), HOLDING THAT IN THE ABSENCE OF EVIDENCE, NO ADDITION TOWARDS HOUSEHOLD EXPENSES COULD BE MADE ON THE BASIS OF SUSPICION. RELIANCE WAS ALSO PLACED ON ANIL KUMAR ANUP KUMAR VS. ACIT, 77 TTJ 560 (ASR), WHEREIN, IT WAS HELD THAT WHERE THE AO HAD NOT GIVEN ANY COGENT REASON ESTIMATING THE HOUSEHOLD EXPENSES AT A HIGHER FIGURE, THE ADDITION COULD NOT BE SUSTA INED. IT WAS SUBMITTED THAT IN THE PRESENT CASE TOO, THERE WAS NO BASIS F OR TREATING THE MONTHLY HOUSEHOLD EXPENSES AT RS.45,000/- PER MONTH. RELIAN CE BY THE AO ON VIDYA SAGAR OSWAL (SUPRA) WAS REPUDIATED CONTEND ING THAT THIS DECISION PERTAINS TO PENALTY PROCEEDINGS; AND THAT IN THAT CASE THE HOUSEHOLD EXPENSES SHOWN FOR THE ENTIRE YEAR WERE O F ONLY RS.2,000/- , AS AGAINST THE ANNUAL INCOME DECLARED AT RS.86,000/ -. THESE CONTENTIONS OF THE ASSESSEE, HOWEVER, WERE NOT TAKEN INTO CONSI DERATION BY THE LD. CIT(A). ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 5 9. FURTHER, IT REMAINS UNDISPUTED THAT THE HOUSEHOL D EXPENSES WERE BEING CONTRIBUTED BY VARIOUS FAMILY MEMBERS. THAT B EING SO, EVEN IF THE SAME ADDITION WAS TO BE MADE, THAT COULD NOT HAVE B EEN MADE IN THE HANDS OF THE ASSESSEE ONLY. IT HAS ALSO ESCAPED THE NOTICE OF THE AUTHORITIES BELOW THAT THE GROSS WITHDRAWALS MADE B Y THE ASSESSEE OF RS.1,20,950/-, WHICH WERE, IN ANY MANNER QUITE SUF FICIENT FOR THE ASSESSEE AND HIS WIFE. THE TWO SONS OF THE ASSESSEE WERE DOING THEIR OWN INDEPENDENT BUSINESS. THEY WERE MARRIED AND HAD THE IR OWN FAMILY. FOR THESE REASONS, THE SHORTFALL IN THE WITHDRAWAL ATT RIBUTABLE TO THEM COULD NOT HAVE BEEN ADDED IN THE HANDS OF THE ASSESSEE. 10. MOREOVER, IN THE IMMEDIATELY PRECEDING ASSESSME NT YEAR, THE TOTAL WITHDRAWALS OF THE ENTIRE FAMILY BEFORE MAKING ADJU STMENT FOR ELECTRICITY AND EDUCATION EXPENSES, WERE OF RS.2,81,900/-. AN A DDITION OF RS.37,000/- WAS MADE IN THE HANDS OF THE ASSESSEE. THE FACTS ARE SIMILAR IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE EXP ENSES ON EDUCATION OF THIS YEAR ARE OF RS.95,080/-. THEREFORE, THE COM PARABLE FIGURE COMES TO RS.2,98,080/-. THE ONLY DIFFERENCE IN THE FACT S FROM THE EARLIER YEAR WAS THAT DURING THE YEAR UNDER CONSIDERATION, THE N UMBER OF MEMBERS OF THE FAMILY STOOD AT NINE, AS AGAINST 10 IN THE EARL IER ASSESSMENT YEAR. 11. APROPOS THE LD. CIT(A)S OBSERVATION REGARDING STATUS OF THE FAMILY, NO ELABORATION HAS BEEN MADE IN THIS REGARD. THAT A PART, IT IS TRITE THAT THE ADDITION IS TO BE SEEN FROM THE POINT VIEW OF T HE ASSESSEE. THERE IS ALSO NO FORCE IN THE OBSERVATION THAT THE WITHDRAWA LS WERE RIDICULOUSLY ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 6 LOW. THERE IS NO BASIS FOR THIS OBSERVATION. IT CAN NOT BE DISPUTED THAT IT IS FOR THE ASSESSEE TO DECIDE AS TO HOW MUCH HE NEEDS TO SPEND. IN THE CASE OF VINOD KUMAR VS. ITO, DECIDED VIDE ORDER DATED 31.10.2014, IN ITA NO.467(ASR)/2014, FOR THE A.Y. 2010-11 (APB 50-55). THE ADDITION MADE TOWARDS HOUSEHOLD EXPENSES WAS DELETED, THEIR BEING NO BASIS FOR THE ESTIMATE MADE. 12. IN VIEW OF THE ABOVE, THE GRIEVANCE OF THE ASSE SSEE BY WAY OF GROUND NO.1 IS FOUND TO BE JUSTIFIED. ACCORDINGLY, GROUND NO.1 IS ACCEPTED. 13. SO FAR AS REGARDS GROUND NO.2, THE LD. CIT(A) U PHELD THE DISALLOWANCE OF COMMISSION CLAIMED AT RS.43,306/-. THE ASSESSEE BEING IN THE BUSINESS OF TRADING GHEE, REFINED OIL, ETC., HAD PAID COMMISSION TO VARIOUS PERSONS DURING THE YEAR. THE TURNOVER OF TH E ASSESSEE WAS OF RS.22.48 CRORES. 14. THE AO DISALLOWED THE ENTIRE CLAIM, OBSERVING T HAT SELF-MADE SLIPS, AS PRODUCED BY THE ASSESSEE, HAVE NO EVIDENTIARY VA LUE IN THE ABSENCE OF ANY SOLID EVIDENCE, LIKE COPY OF ACCOUNTS OF THE PA RTIES, PAN AND OTHER DOCUMENTARY EVIDENCE CONCERNING ASSESSABILITY TO T AX. THE AO RELIED ON MC.DOWELL & CO. VS. COMMERCIAL TAX OFFICER,154 IT R 118 (SC). 15. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE, OBSE RVING THAT THE ASSESSEE COULD NOT PROVE THROUGH DOCUMENTARY EVIDEN CE, THAT HE HAD ACTUALLY PAID THE COMMISSION. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 7 16. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE TURNOVER OF THE ASSESSEE BEING RS.22.48 CRORE, THE PAYMENT OF R S.43,306/- AS COMMISSION IS MINUSCULE; THAT THE PAYMENT MADE THR OUGH SELF-MADE VOUCHERS CANNOT BE IGNORED, PARTICULARLY WHEN THESE VOUCHERS WERE ALSO SIGNED BY THE RECIPIENTS; THAT THE TOTAL AMOUNT BEI NG RS.43,000/-, THE INDIVIDUAL PAYMENTS WERE SMALL PAYMENTS; AND THAT IN THE EARLIER AS WELL AS THE SUBSEQUENT ASSESSMENT YEAR, THE COMMISSION CLAIMED WAS ALLOWED. 17. THE LD. DR HAS, AGAIN, RELIED ON THE IMPUGNED O RDER. 18. HERE AGAIN, THE LD. CIT(A) HAS NOT TAKEN INTO C ONSIDERATION THE SUBMISSIONS MADE BY THE ASSESSEE TO THE EFFECT THA T IT IS NOT NECESSARY THAT PERSON TO WHOM COMMISSION IS PAID, SHOULD HAVE AN ACCOUNT IN THE BOOKS OF THE ASSESSEE, PARTICULARLY WHEN THE AMOUNT OF COMMISSION PAID IS A SMALL AMOUNT; THAT SIMILARLY, SUCH RECIPIENT OF COMMISSION NEED NOT NECESSARILY HAVE A PAN, OR BE AN INCOME TAX A SSESSEE; THAT WHERE THE INCOME OF THE ASSESSEE IS BELOW THE TAXABLE LIM IT, NEITHER THERE IS ANY NEED OF A PAN, NOR THE FILING OF THE RETURN IS A M UST. 19. FURTHER, A SIMILAR COMMISSION PAYMENT OF EVEN H IGHER AMOUNT HAS BEEN ALLOWED FOR THE ASSESSMENT YEARS 2008-09 AND 2 012-13. COPIES OF THE ASSESSMENT ORDERS OF BOTH THESE YEARS HAVING BE EN FILED. FURTHER STILL, RELIANCE ON MAC DOWELL & CO. (SUPRA) BY THE AO IS INAPPROPRIATE. THAT DECISION DEALS WITH COLOURABLE DEVICE, WHICH IS NOT THE CASE HEREIN. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 8 20. FOR THE ABOVE, GROUND NO.2 IS ALSO ACCEPTED. T HE DISALLOWANCE IS DELETED. 21. GROUND NO.3 PERTAINS TO THREE ISSUES. THE AO MA DE DISALLOWANCE OUT OF SCOOTER AND MOTOR CYCLE EXPENSES AND SCOOTER DEPRECIATION. THE ASSESSEE IS THE SOLE PROPRIETOR OF HIS FIRM. IT HAS BEEN CONTENDED THAT HE USES A CAR FOR OFFICIAL AS WELL AS SOME PERSONAL PU RPOSES. DISALLOWANCE OUT OF CAR EXPENSES AND DEPRECIATION WAS MADE BY TH E AO AT 1/5 TH OF THE EXPENSES. THE LD. CIT(A) RESTRICTED THE DISALLOWANC E TO 1/6 TH OF THE EXPENSES. THE SAME WAS DONE QUA THE DISALLOWANCE OU T OF SCOOTER/MOTOR CYCLE EXPENSES AND DEPRECIATION. THE CASE OF THE AS SESSEE IS THAT THE SCOOTER/MOTOR CYCLE WERE USED BY THE EMPLOYEES OF T HE ASSESSEE, WHO WERE TWELVE IN NUMBER. TO THESE EMPLOYEES, MOBILE P HONES HAD ALSO BEEN GIVEN. 22. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE FROM 1/5 TH TO 1/6 TH BY OBSERVING THAT THE PERSONAL USE OF VEHICLE INCLUDIN G SCOOTER/MOTOR CYCLE COULD NOT BE RULED OUT. 23. IN THIS REGARD, NOTHING HAS BEEN BROUGHT ON REC ORD BY THE ASSESSEE TO DISLODGE THE OBSERVATION OF THE LD. CIT(A). THE DISALLOWANCE AS RESTRICTED BY THE LD. CIT(A) IS THUS, SUSTAINED. TH US, GROUND NO. 3(A) IS ACCORDINGLY REJECTED. ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 9 24. THE LD. CIT(A) ALSO SUSTAINED THE DISALLOWANCE OUT OF STAFF WELFARE EXPENSES OF RS.26,060/- @ 1/6 TH OF THESE EXPENSES. THE DETAIL OF THESE EXPENSES, AS FILED AT APB-45 SHOWS THAT THESE ARE T EA EXPENSES AND DIWALI EXPENSES OF THE EMPLOYEES OF THE ASSESSEE. T HE AUTHORITIES BELOW HAVE REMARKED THAT HERE ALSO, PERSONAL EXPENDITURE CANNOT BE RULED OUT. THE ASSESSEE HAS PLACED RELIANCE ON SH.RAJIDNER MO HINDRU VS. ACIT, RENDERED BY THE AMRITSAR BENCH OF THE TRIBUNAL (SMC ), VIDE ORDER DATED 07.04.2005 IN ITA NO.91(ASR)/2001 AND 107(ASR)/1999 FOR THE ASSESSMENT YEARS 1994-95 & 1995-96 (COPY OF THE ORD ER AT APB 56-59). HOWEVER, AGAIN, NOTHING HAS BEEN BROUGHT TO COUNTER THE OBSERVATION THAT THE PERSONAL EXPENDITURE CANNOT BE RULED OUT. THAT BEING SO, THE DISALLOWANCE, AS RESTRICTED BY THE LD. CIT(A), IS S USTAINED. GROUND NO.3(B) IS REJECTED. 25. THE LD. CIT(A) ALSO SUSTAINED THE DISALLOWANCE OUT OF TELEPHONE EXPENSES OF RS.85,367/- AND DEPRECIATION ON TELEPH ONE OF RS.977/- @ 1/6 TH OF THESE EXPENSES. THIS GROUND, I.E., GROUND NO.3( C) ITSELF STATES THAT THE DISALLOWANCE IS HIGHLY EXCESSIVE. 26. IT HAS BEEN CONTENDED THAT TELEPHONE-WISE DETA ILS OF THE EXPENSES ALONGWITH THE DETAILS OF THE EXPENSES OF THE TELEPH ONE AT THE RESIDENCE OF THE ASSESSEE, WHICH WAS PAID BY THE ASSESSEES SON, WAS FILED BEFORE THE AO. A COPY HAS BEEN FILED AT APB 41-42. THERE WERE NUMEROUS PHONES ITA NO.116(ASR)/2016 ASSESSMENT YEAR: 2009-10 10 WHICH WERE USED BY TH ASSESSEES STAFF. ONLY ONE WA S USED BY THE ASSESSEE HIMSELF. THEN, THE BUSINESS OF THE ASSESSE E IS OF TRADING IN BASIC ITEMS SOLD THROUGH A NUMBER OF RETAILERS AND WHOLES ALERS. THAT BEING SO, THE EXPENSES ON TELEPHONE AT RS.85,367/- IS FOUND T O BE REASONABLE. AS SUCH, THE DISALLOWANCE IS DELETED. GROUND NO. 3 (C) IS ACCEPTED. 27. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/06/ 2016. SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 14/06/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. PARSHOTAM LAL PROP. PARSHOTAM LAL VISHWANATH, MANDI ROAD, JALANDHAR. 2. THE ITO, WARD III(3), JALANDHAR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY ` BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.