Shri Janakkumar G.Shah, Surat v. The Income tax Officer, Ward-2(1),, Surat

ITA 114/AHD/2006 | 2002-2003
Pronouncement Date: 06-01-2010 | Result: Partly Allowed

Appeal Details

RSA Number 11420514 RSA 2006
Bench Ahmedabad
Appeal Number ITA 114/AHD/2006
Duration Of Justice 3 year(s) 11 month(s) 24 day(s)
Appellant Shri Janakkumar G.Shah, Surat
Respondent The Income tax Officer, Ward-2(1),, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 06-01-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 06-01-2010
Date Of Final Hearing 04-01-2010
Next Hearing Date 04-01-2010
Assessment Year 2002-2003
Appeal Filed On 12-01-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD - AHMEDABAD D BENCH (BEFORE DR.O.K. NARAYANAN VICE-PRESIDENT AND SHRI MAHAVIR SINGH JUDICIAL MEMBER) ITA NO.114/AHD/2006 AND ITA NO.1068/AHD/2008 [ASSTT.YEAR : 2002-2003] SHRI JANAKKUMAR G. SHAH J.P.CABLE VISION C-1/62 ALTHAN TENAMENT BHATAR ROAD SURAT. VS. ITO WARD-2(1) SURAT. ASSESSEE BY : SHRI TUSHAR P. HEMANI REVENUE BY : SHRI C.K.MISHRA DATE OF ORDER RESERVED : 04-01-2010 O R D E R PER DR. O.K. NARAYANAN VICE-PRESIDENT : THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND RELATE TO THE ASSESSMENT YEAR 2002- 2003. ONE IS QUANTUM APPEAL AND THE OTHER IS PENAL TY APPEAL. IN THE QUANTUM APPEAL THE FIRST GROUND RAISED BY THE ASSES SEE IS THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.1 61 237 /- MADE BY THE AO ON THE GROUND OF DIFFERENCE IN ROYALTY RECEIVED AND RO YALTY RECEIVABLE. THE CASE OF THE ASSESSEE IS THAT IN THE MATTER OF ROYAL TY THE ASSESSEE WAS FOLLOWING CASH SYSTEM AND THEREFORE ROYALTY RECEIPT S CANNOT BE ADOPTED ON ACCRUAL BASIS. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AS CERTIF IED BY THE AUDITORS AND IN SUCH CIRCUMSTANCES INCOME ACCRUED EVEN THOUGH NOT RECEIVED MUST BE CONSIDERED FOR THE ASSESSMENT. ON GOING THROUGH THE DETAILS AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE IS FOLLOWING M ERCANTILE SYSTEM OF ACCOUNTING. THIS FACT HAS BEEN CERTIFIED BY THE TA X AUDITORS OF THE ASSESSEE. THE AUDITOR HAS NOT MENTIONED ANYTHING T O SHOW THAT IN RESPECT PAGE - 2 ITA NO.114/AHD/2006 AND ITA NO.1068/AHD/2008 -2- OF ROYALTY RECEIPTS THE ASSESSEE WAS FOLLOWING CAS H SYSTEM OF ACCOUNTING. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY WE FIND THAT THE VIEW TAKEN BY THE ASSESSING AUTHORITY IS JUSTIFIED. THE ADDITION OF RS.1 61 237/- IS CONFIRMED. 2. THE SECOND GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF SALARY OF RS .47 200/- PAID TO PARULBEN. THE TOTAL AMOUNT OF SALARY PAID TO PARUL BEN WAS RS.1 80 000/-. THE AMOUNT ALLOWED BY THE ASSESSING AUTHORITY AS DE DUCTION WAS RS.60 800/- SIMILAR TO THE AMOUNT ALLOWED AS DEDUCT ION FOR THE EARLIER ASSESSMENT YEAR. INCREMENTAL AMOUNT OF RS.47 200/ - WAS DISALLOWED. THE DISALLOWANCE WAS MADE UNDER SECTION 40A(2)(B) O F THE ACT AS PARULBEN IS THE WIFE OF THE ASSESSEE. THE DISALLOW ANCE HAS BEEN CONFIRMED IN THE FIRST APPEAL. WE ARE NOT IN AGREE MENT WITH THE ORDER OF THE AO IN ALLOWING EVEN A DEDUCTION OF RS.60 800/- AT PAR WITH THE EARLIER ASSESSMENT YEAR. THERE IS NO JUSTIFICATION IN GIVI NG DEDUCTION TOWARDS SALARY PAID TO THE WIFE OF THE ASSESSEE. BUT AS TH ERE IS NO CROSS-OBJECTION BY THE REVENUE WE ARE NOT INCLINED TO DISTURB THE AMOUNT OF RS.60 800/- ALREADY ALLOWED BY THE ASSESSING AUTHORITY. BUT RE GARDING THE DISALLOWANCE OF THE RESIDUAL AMOUNT OF RS.47 200/- WE CONFIRM THE ORDER OF THE LOWER AUTHORITIES. 3. THE THIRD GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.45 600/- BEING THE RENT PAID TO ASSESSEES FATHER IN RESPECT OF THE OFFICE PREMISES OF THE ASSESSEE. THE AO HAS DISALLOWED THE RENT ON THE GROUND THAT BROTH ER OF THE ASSESSEE WAS NOT PAYING ANY RENT TO ASSESSEES FATHER FOR THE US E OF THE PREMISES. NON- PAYMENT OF RENT BY THE ASSESSEES BROTHER IS NOT A GOOD REASON TO DISALLOW PAGE - 3 ITA NO.114/AHD/2006 AND ITA NO.1068/AHD/2008 -3- THE CLAIM MADE BY THE ASSESSEE. THERE IS NO CASE T HAT THE RENT PAID BY THE ASSESSEE WAS EXCESSIVE. THERE IS NO CASE THAT THE ASSESSEE HAS NOT TAKEN ON RENT THE PREMISES FROM HIS FATHER FOR THE PURPOS E OF RUNNING THE OFFICE. IN THESE CIRCUMSTANCES WE FIND THAT THE DISALLOWAN CE OF RS.45 600/- IS NOT JUSTIFIED. THE SAID DISALLOWANCE IS DELETED. 4. THE FOURTH GROUND RAISED BY THE ASSESSEE IS THAT THE CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.50 000/- ON T HE GROUND OF CONTROL ROOM EXPENSES PAID TO CITYLINK NETWORK. 5. THE ASSESSEE IS CARRYING ON THE BUSINESS OF CABL E NET-WORKING. THE ASSESSEE HAS ASSOCIATED WITH M/S.CITYLINK NETWORK F OR MAINTAINING A CONTROL ROOM. THE RUNNING OF CONTROL ROOM IS VERY ESSENTIAL TO SUPPORT THE BUSINESS CARRIED ON BY THE ASSESSEE. THERE IS NO DOUBT REGARDING THE PAYMENT OF RS.50 000/- MADE TO CITYLINK NETWORK. T HEREFORE IT IS TO BE SEEN THAT THE PAYMENT WAS MADE TOWARDS MEETING THE EXPENSES RELATING TO THE BUSINESS. THEREFORE THE SAID EXPENDITURE IS T O BE ALLOWED AS A DEDUCTION. WE DELETE THE ADDITION OF RS.50 000/-. 6. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT T HE CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.69 707/- TREATING T HE SAME AS CAPITAL EXPENDITURE. THE SAID EXPENDITURE IN FACT WAS INCU RRED FOR REPAIRING OF OFFICE SYSTEM AND EQUIPMENTS. SUCH REGULAR REPAIRS CANNOT BE TREATED AS CAPITAL EXPENDITURE. THE DISALLOWANCE IS NOT JUSTI FIED. IT IS ACCORDINGLY DELETED. 7. THE LAST GROUND RAISED BY THE ASSESSEE IS THAT T HE CIT(A) HAS ERRED IN UPHOLDING THE ADDITION OF RS.7 010/- BEING THE A MOUNT TRANSFERRED TO HDFC BANK. IN THE ABSENCE OF DETAILS THIS ADDITIO N IS CONFIRMED. PAGE - 4 ITA NO.114/AHD/2006 AND ITA NO.1068/AHD/2008 -4- 8. THE ASSESSEE IS PARTLY SUCCESSFUL IN HIS APPEAL. 9. NEXT WE WILL CONSIDER THE APPEAL AGAINST THE PEN ALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. THE PENALTY OF RS.49 339/- HAS BEEN LEVIED BY THE ASSESSING AUTHORITY ON THE AMOUNT OF ADDITIO N OF RS.1 61 237/- CONFIRMED BY THE CIT(A) ON THE GROUND OF DIFFERENCE IN ROYALTY COLLECTION. THIS ISSUE HAS BEEN CONSIDERED BY US I N PARAGRAPHS ABOVE WHILE DEALING WITH THE QUANTUM APPEAL. WE HAVE UP HELD THE ADDITION. BUT THE ADDITION AS SUCH DOES NOT JUSTIFY IMPOSITIO N OF PENALTY. THE CLAIM OF THE ASSESSEE WAS THAT COLLECTIONS WERE ACCOUNTED ON CASH BASIS. THE ARGUMENT OF THE REVENUE WAS THAT THE COLLECTION HAS TO BE RECOGNIZED ON ACCRUAL BASIS. BUT FOR THIS DIFFERENT APPROACH THE RE IS NO QUESTION OF FURNISHING INACCURATE PARTICULARS OR CONCEALING ANY AMOUNT OF INCOME. THERE IS NO LEGAL HITCH AGAINST THE ASSESSEE IN MAK ING SUCH AN ARGUMENT BEFORE THE ASSESSING AUTHORITY. BUT THE ASSESSEE W AS NOT SUCCESSFUL FOR WANT OF EVIDENCE. BUT THAT DOES NOT MEAN THAT THE P ARTICULARS FURNISHED BY THE ASSESSEE ARE INACCURATE FOR THE PURPOSE OF INCO ME TAX ASSESSMENT. THE EXPLANATIONS BASED ON THE PARTICULARS MAY NOT B E ACCEPTABLE TO THE AO. BUT THAT DOES NOT AMOUNT TO INACCURATE PARTICU LARS. THEREFORE WE FIND THAT THERE IS NO JUSTIFICATION IN LEVYING THE PENALTY IN THE PRESENT CASE. THE PENALTY IS DELETED. 10. IN RESULT THE QUANTUM APPEAL FILED BY THE ASSES SEE IS PARTLY ALLOWED AND THE PENALTY APPEAL FILED BY THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON WEDNESDAY THIS SIXTH DAY OF JAN UARY 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PAGE - 5 ITA NO.114/AHD/2006 AND ITA NO.1068/AHD/2008 -5- PLACE : AHMEDABAD DATE : 06-01-2010 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR ITAT AHMEDABAD