Shri Bharatkumar N. Patel, Surat v. The ACIT.,Circle-3,, Surat

ITA 1488/AHD/2009 | 2006-2007
Pronouncement Date: 03-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 148820514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 1488/AHD/2009
Duration Of Justice 2 year(s) 5 month(s) 23 day(s)
Appellant Shri Bharatkumar N. Patel, Surat
Respondent The ACIT.,Circle-3,, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 03-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 03-11-2011
Date Of Final Hearing 03-11-2011
Next Hearing Date 03-11-2011
Assessment Year 2006-2007
Appeal Filed On 11-05-2009
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI D.K.TYAGI JM AND A. MOHAN ALANKAMON Y AM. BHARATKUMAR N. PATEL PROP. BHAVANI CONSTRUCTION 74 AMBANAGAR OPP. UTSAVPARK APARTMENTS NEW CIVIL ROAD SURAT. VS. ASSTT. CIT CIRCLE-3 SURAT. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI PRITESH SHAH AR RESPONDENT BY:- SHRI SAMIR TEKRIWAL SR.DR DATE OF HEARING : 3/11/2011 DATE OF PRONOUNCEMENT :3/11/2011 O R D E R PER D. K. TYAGI JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A) 11/02/2009 FOR ASST. YEAR 2006-07 RAISING FO LLOWING GROUNDS:- (1) THE LD. CIT(A)-V ERRED IN UPHOLDING THE ACTION OF T HE AO OF MAKING ADDITION OF RS.1 65 000/- AS UNEXPLAINED CAS H CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT 1961. (2) THE LD. CIT(A)-V ERRED IN UPHOLDING THE ACTION OF T HE AO DISALLOWING 20% OF PETROL EXPENSES AND DEPRECIATION . ITA NO.1488/AHD/2009 ASST. YEAR :2006-07 ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 2 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A N INDIVIDUAL ENGAGED IN THE BUSINESS OF CONTRACT WORK AND CARTING WORK. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RETURN OF I NCOME SHOWING TOTAL INCOME OF RS.15 52 445/-. THE AO PASSED THE ASSESSM ENT ORDER U/S 143(3) ASSESSING TOTAL INCOME AT RS.17 39 957/- BY MAKING FOLLOWING ADDITIONS/DISALLOWANCES: -UNSECURED LOAN IN BUSINESS ADDED U/S 68 AS UNEXPLAINED CASH CREDIT RS.1 65 000/- -DISALLOWANCE OF VARIOUS EXPENSES RS. 22 512/-. 3. THE FIRST GROUND OF APPEAL RELATES TO ADDITION O F RS.1 65 000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68. THE AO H AS DISCUSSED THIS ISSUE IN PARA 5.1 TO 5.9 OF THE ASSESSMENT ORDER. D URING THE COURSE OF VERIFICATION OF THE CAPITAL ACCOUNT OF THE ASSESSEE THE AO OBSERVED THAT A FRESH CAPITAL OF RS.1 65 000/- WAS INTRODUCED IN AS SESSEES CAPITAL ACCOUNT. THE AO ASKED THE ASSESSEE TO EXPLAIN THE SOURCE OF FUNDS UTILIZED FOR CAPITAL INTRODUCTION. THE AO ALSO ASKED THE ASSESSE E TO FURNISH THE SUPPORTING EVIDENCE FOR IDENTITY AND CREDITWORTHINE SS OF ABOVE PERSONS WITH BANK PASS BOOK/CASH BOOK FOR VERIFICATION. THE ASSESSEE WAS ONCE AGAIN ASKED TO SHOW CAUSE VIDE ORDER SHEET ENTRY 17 .10.2008 AS TO WHY RS.1 65 000/- SHOULD NOT BE ADDED TO HIS TOTAL INCO ME. IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED THAT THE LOANS WERE BOR ROWED FROM FRIENDS AND RELATIVES AND THE SAME WAS REPAID DURING THE YE AR ITSELF. HE ALSO ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 3 SUBMITTED THAT THE CONFIRMATION AND ADDRESSES OF AL L THE DEPOSITORS HAD ALREADY BEEN SUBMITTED AND ALSO THAT THE DEPOSITORS WERE NOT ASSESSED TO TAX. THE AO AFTER TAKING INTO CONSIDERATION THE SUB MISSIONS AND EVIDENCES ON RECORD AND ALSO RELYING UPON ON RULING S OF VARIOUS COURTS HELD THAT THE ASSESSEE FAILED TO ESTABLISH THE GENU INENESS OF THE CREDIT IDENTITY OF THE DEPOSITORS OR ANY OTHER DOCUMENTS R EGARDING THE DEPOSITORS AND ALSO THAT THE ASSESSEE FAILED TO PRODUCE THE DE POSITORS. ACCORDINGLY THE AMOUNT OF RS.1 65 000/- WAS TREATED AS INCOME O F THE ASSESSEE U/S 68. 4. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY WHEREIN HE SUBMITTED THAT HE IS A CONSTRUCTION CONT RACTOR AND IN HIS LINE OF BUSINESS MOST OF THE EXPENSES LIKE LABOUR CHARGES SUB-CONTRACTORS CHARGES ETC. ARE TO BE MADE IN CASH AND TO MAKE SUC H PAYMENTS HE HAD TAKEN CASH LOANS FROM 9 PARTIES AND INTRODUCED THE SAME AS HIS CAPITAL AND THAT THE SAID LOANS WERE REPAID DURING THE YEAR ITS ELF. THE ASSESSEE FURTHER SUBMITTED IN PARA 2 OF HIS SUBMISSION THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FURNISHED ACCOUNT CONF IRMATION ALONG WITH NAME ADDRESS AND IDENTITY PROOF TO THE AO. HE ALSO SUBMITTED BEFORE THE AO THAT THE LENDERS WERE NOT ASSESSED TO TAX AND PE TTY LOANS OF RS.18 000/- AND RS.19 000/- HAD BEEN TAKEN FROM THE SE PARTIES. THE AO HAD ADDED THE SAID AMOUNT PROVIDING THE REASONS THA T THE GENUINENESS OF LOAN TAKEN COULD NOT BE PROVED AND THE LENDERS COUL D NOT BE PRODUCED ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 4 BEFORE THE AO. THE ASSESSEE RELIED UPON A NUMBER OF RULINGS IN SUPPORT OF HIS CLAIM. 5. THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION OF AO AND THE SUBMISSIONS OF THE ASSESSEE CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER :- I HAVE GONE THROUGH THE CONTENTION OF THE APPELLAN T AS WELL AS THAT OF THE AO. FROM THE DISCUSSION ABOVE IT IS EVIDENT THAT TH E LENDERS ARE NOT ASSESSED TO TAX AND DO NOT MAINTAIN ANY BANK ACCOUN T. THE APPELLANT HAS MENTIONED IN PARA 2 OF HIS SUBMISSION THAT HE FURNI SHED ACCOUNT CONFIRMATION ALONG WITH NAME ADDRESS AND IDENTITY P ROOF OF LENDERS BEFORE THE LD. AO. WHEREAS FROM THE SUBMISSIONS MA DE BEFORE THE AO IT HAS BEEN OBSERVED THAT THE APPELLANT HAD NOT PRODUC ED THE IDENTITY PROOF OF THE LENDERS BEFORE THE AO. HE ONLY PRODUCED CONF IRMATION AT THE TIME OF ASSESSMENT PROCEEDINGS. THOUGH THE APPELLANT HAS FILED COPIES OF IDENTITY PROOF BEFORE ME SAME COULD NOT BE ACCEPTED AT THIS JUNCTURE BY TAKING CUE FROM RULE 46A OF IT RULES. EVEN OTHERWIS E FROM THE IDENTITY PROOF OF THE TWO PARTIES NAMELY MR. NAROTTAMBHAI JO TIRAM PATEL AND MR. HARESHKUMAR KARSHANBHAI PATEL IT HAS BEEN OBSERVED THAT THE SIGNATURES ON THEIR IDENTITY PROOF AND THAT ON CONFIRMATION DO NOT MATCH. AS REGARD THE GENUINENESS OF OTHER PARTIES THEIR IDENTITY PRO OFS DO NOT BEAR THEIR SIGNATURES SO THE POSSIBILITY OF ANY DEFECT CANNOT BE RULED OUT. THE AOS ACTION IS THEREFORE SUSTAINED AND THE APPELLANTS A PPEAL ON THIS GROUND IS DISMISSED. AGGRIEVED BY THIS ORDER OF LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING THE LD. COUNSEL OF THE AS SESSEE FILED AFFIDAVITS OF FOLLOWING CREDITORS AND REQUESTED THA T THE SAME MAY BE ADMITTED AS ADDITIONAL EVIDENCES AND THEN THE MATTE R MAY KINDLY BE RESTORED TO THE FILE OF AO TO DECIDE THE ISSUE AFRE SH IN THE LIGHT OF THESE ADDITIONAL AFFIDAVITS: ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 5 SL. NO. NAME 1. NAROTTAM J. PATEL 2. ALKESH N. PATEL 3. AMRUTBHAI D. PATEL 4. HARESH K. PATEL 5. KAMSIBHAI V. DESAI (RABADI) 6. VIPUL N. PATEL 7. ICCHABEN N. PATEL 8. SHARMILABEN V. PATEL 9. NATHABHAI P. PATEL 7. THE LD. DR DID NOT OBJECT TO THIS PRAYER OF THE ASSESSEE. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RECORD WE ADMIT THE AFFIDAVITS IN RESPECT OF 9 CREDITORS FILE D BY THE LD. COUNSEL OF THE ASSESSEE AS ADDITIONAL EVIDENCE AND IN THE INTEREST OF JUSTICE THE MATTER IS RESTORED BACK TO THE FILE OF AO WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH AFTER PROVIDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. THIS GROUND OF ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. 9. THE SECOND GROUND OF THE APPEAL RELATES TO DISAL LOWANCE OF 20% OF PETROL EXPENSES AND DEPRECIATION. IN PARA 4 OF THE ASSESSMENT ORDER THE AO NOTED HIS VIEW THAT EXPENSES CLAIMED BY THE ASSE SSEE UNDER THE HEAD DEPRECIATION OFFICE AND PETROL EXPENSES WERE NOT F ULLY VOUCHED. ALSO THAT THE ASSESSEE HAD NOT MAINTAINED SEPARATE REGISTER F OR PERSONAL USE OF ABOVE ASSET/EXPENSE. ACCORDINGLY HE DISALLOWED 20% OF THE SAID EXPENSES TREATING THE SAME TO BE INCURRED FOR NON-B USINESS PURPOSE. ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 6 10. IN APPEAL BEFORE LD. CIT(A) THE ASSESSEE CONTEN DED THAT THERE WAS NO PERSONAL ELEMENT INVOLVED IN ANY OF THE EXPENSES . THE LD. CIT(A) SUSTAINED THE ACTION OF AO BY OBSERVING AS UNDER :- I FIND THE APPELLANTS CONTENTION CORRECT AS REGAR D OFFICE EXPENSE. I AM OF THE VIEW THAT NO DISALLOWANCE COULD BE MADE OUT OF THESE EXPENSES. I AM OF THE CONSIDERED OPINION THAT SUCH EXPENSES ARE VERY PETTY IN NATURE AND COMPRISE OF SMALL ITEMS INCURRED ON DAY-TO-DAY BASIS IN ANY BUSINESS. THE PAYMENTS MADE TO THE PERSONS PROVIDING SUCH SER VICES DO NOT PROVIDE ANY BILL OR VOUCHER OR EVEN A CASH RECEIPT. THEREFO RE NO DISALLOWANCE COULD BE MADE OR SHOULD BE MADE OUT OF SUCH EXPENSE S ON THE GROUND OF NON-VERIFIABILITY. IN ANY CASE THERE CANNOT BE ANY PERSONAL ELEMENT IN SUCH EXPENSES. THE AO ON HIS PART HAS NOT BEEN ABLE TO SHOW OR PROVE ANY ITEM OF EXPENDITURE INCLUDED UNDER THE SAID HEA D AS EITHER NOT GENUINE OR NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEREFORE THE DISALLOWANCE OUT OF OFFICE EXPENSES WILL STAND DELETED. AS REGARDS DISALLOWANCE OUT OF PETROL EXPENSES AND DEPRECIATION I AM OF THE VIEW THAT HOWEVER MUCH IT MAY BE CLAIMED THAT S UCH ASSET IS PROCURED AND UTILIZED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS YET THE ELEMENT OF PERSONAL USE OF SUCH ASSET CANNOT BE ENT IRELY RULED OUT ESPECIALLY WHEN NO RECORD OF ITS USAGE IS MAINTAINE D. THEREFORE I HOLD THAT THE AO WAS FULLY JUSTIFIED IN DISALLOWING 20% OF THE EXPENSES CLAIMED AGAINST PETROL EXPENSES AND DEPRECIATION. THEREFORE THE DISALLOWANCE TO THIS EXTENT WILL STAND CONFIRMED. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND GOI NG THROUGH THE ORDERS OF THE LOWER AUTHORITIES WE ARE OF THE VIEW THAT DISALLOWANCE OF 20% OF THE EXPENSES CLAIMED AGAINST PETROL AND DEPR ECIATION EXPENSES IS ON HIGHER SIDE. IT WILL MEET THE ENDS OF JUSTICE IF THE SAME IS RESTRICTED TO 10% SINCE PERSONAL USE OF THE ASSET CANNOT BE RULED OUT. THIS GROUND IS PARTLY ALLOWED. ITA NO.1488/AHD/2009 ASST. YEAR 2006-07 7 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER WAS PRONOUNCED IN OPEN COURT ON 3/11/2011. SD/- SD/- (A. MOHAN ALANKAMONY) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD 1.DATE OF DICTATION 3 /11/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 3/11/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..