The ITO, Ward 2(3), RAJKOT-GUJARAT v. M/s Sahil Engineers, RAJKOT-GUJARAT

ITA 1200/RJT/2010 | 2007-2008
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 120024914 RSA 2010
Assessee PAN ABEPS7872B
Bench Rajkot
Appeal Number ITA 1200/RJT/2010
Duration Of Justice 1 year(s) 1 month(s) 26 day(s)
Appellant The ITO, Ward 2(3), RAJKOT-GUJARAT
Respondent M/s Sahil Engineers, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 25-11-2011
Date Of Final Hearing 03-10-2011
Next Hearing Date 03-10-2011
Assessment Year 2007-2008
Appeal Filed On 29-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI T.K. SHARMA (JM) AND SHRI A.L. GEHLOT ( AM) I.T.A. NO.1200/RJT/2010 (ASSESSMENT YEAR 2007-08) ITO WD.2(3) VS M/S SAHIL ENGINEERS RAJKOT AJI GIDC MAIN ROAD B/H SAKHIYA FOUNDRY RAJKOT PAN : ABEPS7872B (APPELLANT) (RESPONDENT) DATE OF HEARING : 23-11-2011 DATE OF PRONOUNCEMENT : 25-11-2011 APPELLANT BY : SHRI CJ MANIAR RESPONDENT BY : NONE O R D E R PER AL GEHLOT (AM) THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III RAJKOT DATED 20-07-2010 FOR THE ASSESSM ENT YEAR 2007-08. 2. THE FOLLOWING ARE THE GROUNDS RAISED BY THE REVE NUE: 1. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.5 00 000/- MADE ON ACCOUNT OF RENT DEPOSIT ALLEGED TO BE UNEXPLAINED DEPOSIT. 2. THE LD.CIT(A)-III RAJKOT HAS ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.1 00 000/- MADE ON ITA NO.1200/RJT/2010 2 ACCOUNT OF RENT ALLEGED TO BE PAID AS UNEXPLAINED EXPENDITURE. 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. AFT ER HEARING THE LD.DR WE PROCEED TO DECIDE THE APPEAL ON MERIT. 4. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN RENT DEPOSIT OF RS.5 LAKHS. AS PER THE RENT DEPOSI T AGREEMENT DATED 29-12- 2006 THE RENT PER MONTH PAYABLE WAS RS.40 000 TO SM T. KANTABEN M SAKHIYA AND SHRI MANUBHAI SAKHIYA FOR THE PROPERTY LOCATED AT SURVEY NO.214. THE ASSESSING OFFICER NOTICED VARIOUS DEFE CTS IN THE RENT AGREEMENT WHICH WAS DISCUSSED ON PAGE 2 AT PARAGRAP H 3 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH EXPLANATION VIDE NOTICE DATED 03-12-2009. THE ASSE SSEE DID NOT GIVE ANY REPLY TO THE ASSESSING OFFICER. THE ASSESSING OFFI CER MADE ADDITION OF THE RENT DEPOSIT OF RS.5 LAKHS AND RS.1 LAKH ON ACCOUNT OF RENT. AS THE ASSESSEE ACCOUNTED FOR RENT OF RS.20 000 PER MONTH BUT AS PER THE AGREEMENT THE RENT WAS RS.40 000 PER MONTH THE ASSE SSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE DID NOT SHOW RS.1 LAKH I N THE BOOKS OF ACCOUNT. THE CIT(A) AFTER CONSIDERING ASSESSEES SUBMISSION DELETED BOTH THE ADDITIONS ON THE GROUND THAT THE RENT DEPOSIT WAS P AID ON BEHALF OF THE ASSESSEE BY M/S AMUL INDUSTRIES PVT LTD WHICH IS A SISTER CONCERN AND THE ITA NO.1200/RJT/2010 3 PRINCIPAL DEBTOR OF THE ASSESSEE FIRM VIDE CHEQUE N O.699257 DATED 05 TH MARCH 2007. THE CIT(A) FOUND THE SAID ENTRY IN TH E BANK STATEMENT OF M/S AMUL INDUSTRIES PVT LTD AND ACCORDINGLY DELETED THE SAID ADDITION OF RS.5 LAKHS. AS REGARDS ADDITION OF RS.1 LAKH ON AC COUNT OF RENT THE CIT(A) NOTED THE FACT THAT THE ASSESSEE WAS CARRYING BUSIN ESS FROM THE RENTED FACTORY FOR A RENT OF RS.40 000 PER MONTH AS PER RE NT AGREEMENT. HOWEVER IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE CIT(A) THAT TWO MONTHS OF PRODUCTION WAS CARRIED OUT AND THEREFORE IT WAS MU TUALLY DECIDED TO PAY ELSSER RENT AT RS.25 000 PER MONTH INSTEAD OF RS.40 000. THE ASSESSEE PAID RS.20 000 PER MONTH TO SMT. KANTABEN SAKHIYA A ND RS.5 000 SHRI MANUBHAI SAKHIYA. THE CIT(A) FURTHER NOTED THAT TH E ASSESSEE FIRM STARTED PRODUCTION FROM FEBRUARY 2007. THEREFORE THE EXPENSES INCURRED PRIOR TO DATE OF PRODUCTION WERE DEBITED TO PREOPER ATIVE EXPENSES WHICH IN TURN WERE CAPITALIZED TO THE FIXED ASSETS. THE CI T(A) FOUND THAT ALL THESE PAYMENTS WERE PROPERLY ACCOUNTED FOR IN THE PREOPER ATIVE EXPENSES AND FIXED ASSETS ACCOUNT THE COPIES OF WHICH WERE FILE D BEFORE HIM. THE CIT(A) NOTED THE FACT THAT THE RENT PAID FOR FEBRUA RY AND MARCH 2007 WAS @RS.25 000 PER MONTH WHICH WAS DEBITED TO THE PROFI T & LOSS ACCOUNT. THEREFORE IN VIEW OF THE FACT THAT THE CIT(A) FOUN D THAT THERE IS NO NEXUS FOR UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. TH E CIT(A) ACCORDINGLY DELETED THE ADDITION OF RS.1 LAKH ALSO. WE FIND THA T THE CIT(A) HAS RECORDED THE FACT AFTER VERIFICATION OF RELEVANT DO CUMENTS AND SUBMISSIONS ITA NO.1200/RJT/2010 4 OF THE ASSESSEE. THE FINDING OF THE CIT(A) IS BASE D ON FACTS WHICH HAS BEEN VERIFIED BY THE CIT(A) HIMSELF AND CONTRARY TO THAT THE REVENUE HAS FAILED TO POINT OUT ANY MATERIAL. NEITHER THE SAME IS AVAILABLE ON RECORD. IN THE ABSENCE OF ANY CONTRARY MATERIAL WE ARE INCLIN ED TO UPHOLD THE ORDER OF CIT(A). 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25-11-2011. SD/- SD/- (T.K. SHARMA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 25 TH NOVEMBER 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III RAJKOT 4. THE CIT-II RAJKOT 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT