M/s. Choudhary Krishi Sewa Kendra P.Ltd.,, Shajapur v. The ACIT., Ujjain

ITA 184/IND/2010 | 2005-2006
Pronouncement Date: 14-01-2011 | Result: Allowed

Appeal Details

RSA Number 18422714 RSA 2010
Bench Indore
Appeal Number ITA 184/IND/2010
Duration Of Justice 9 month(s) 5 day(s)
Appellant M/s. Choudhary Krishi Sewa Kendra P.Ltd.,, Shajapur
Respondent The ACIT., Ujjain
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 14-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2005-2006
Appeal Filed On 08-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C.SHARMA ACCOUNTANT MEMBER PAN NO. : AACCC2796-G I.T.A.NO.184 & 427/IND/2010 A.Y. : 2005-06 & 2000-01 M/S. CHOUDHARY KRISHI SEWA KENDRA PVT.LTD. ACIT 2(1) 28 A.B.ROAD VS UJJAIN TANKI CHOURAHAN SHAJAPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.S.DESHPANDE C. A. RESPONDENT BY : SHRI P.K.MITRA SR. DR O R D E R PER R. C. SHARMA A.M. I.T.A.NO. 184/IND/2010: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) UJJAIN DATED 03.02.2010 FOR THE ASSESSM ENT YEAR 2005-06 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT 1961. -: 2: - 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE L IMITED COMPANY DOING THE BUSINESS OF SALE AND PURCHASE OF TRACTORS AND ITS PARTS AT SHAJAPUR. IT IS ALSO HAVING ITS BR ANCH AT DEWAS. THE ASSESSEE FILED ITS RETURN OF INCOME DULY AUDITED. BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO FOR VE RIFICATION. IN RESPECT OF EXPENDITURE INCURRED ON DIESEL AND PE TROL TELEPHONE AND HOTEL CHARGES SALES PROMOTION EXPENS ES GIFT ARTICLES ETC. THE AO DISALLOWED 20 % OF THIS EXPEN DITURE BY STATING THAT A PROPER DOCUMENTARY EVIDENCE WAS NOT FILED BY THE ASSESSEE. IN AN APPEAL FILED BEFORE THE CIT(A) THE LD. CIT(A) OBSERVED THAT WHILE BILLS HAVE BEEN MAINTAINED IN R ESPECT OF TELEPHONE DIESEL AND PETROL EXPENSES THERE ARE CE RTAIN EXPENDITURE UNDER THE HEAD HOTEL CHARGES GIFT ARTI CLES ETC. SALES PROMOTION EXPENSES FOR WHICH EITHER SELF MADE VOUCHERS WERE PREPARED OR THE BILLS DID NOT INDICAT E THE GENUINENESS OF THE EXPENSES FOR BUSINESS PURPOSES O NLY. ACCORDINGLY HE ALSO CONFIRMED THE ACTION OF THE AO . -: 3: - 3 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT THE ASSESSEE HAS INCURRE D EXPENDITURE OF RS. 1 15 140/- IN RELATION TO DEWAS BRANCH AND RS. 1 97 900/- FOR SHAJAPUR OFFICE. DETAILS OF VARI OUS EXPENDITURE INCURRED BY THE ASSESSEE WERE FURNISHED BEFORE THE AO WITH FULL PARTICULARS. AN AD HOC DISALLOWANC E OF 20 % WAS MADE BY HIM OUT OF ALL THESE EXPENDITURE. THE L D. CIT(A) HAS CATEGORICALLY OBSERVED THAT BILLS HAVE BEEN MAI NTAINED IN RESPECT OF TELEPHONE DIESEL PETROL EXPENSES GIFT ARTICLES HOTEL BILLS AND SALES PROMOTION EXPENSES WHICH WERE EITH ER SELF MADE VOUCHERS OR BILLS. WE FOUND THAT THE NATURE OF THE EXPENDITURE ITSELF INDICATE THAT THEY WERE BUSINESS EXPENDITURE AND THE DISALLOWANCE HAVE BEEN BASICALLY MADE ON TH E PLEA THAT THEY WERE WHOLLY AND EXCLUSIVELY NOT FOR BUSIN ESS PURPOSES BUT FOR PERSONAL PURPOSES ALSO. THE ASSESS EE IS A CORPORATE ENTITIES HAVING SEPARATE EXISTENCE FROM I TS SHAREHOLDERS. THERE IS NO QUESTION OF ANY DISALLOWA NCE IN THE HANDS OF THE COMPANY ON ACCOUNT OF PERSONAL BENEFIT OUT OF THESE EXPENDITURE BY ITS DIRECTORS OR SHAREHOLDERS. HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON AND E NGG. -: 4: - 4 CO.LTD. 121 TAXMAN 43 HELD THAT NO DISALLOWANCE O UT OF EXPENSES ON ACCOUNT OF INVOLVEMENT OF PERSONAL ELEM ENT CAN BE MADE IN CASE OF AN ASSESSEE BEING A CORPORATE EN TITY. THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY ITSELF INDICATE THAT THEY WERE BUSINESS EXPENDITURE EVEN IF PART OF SUCH EXPENDITURE IS ALLEGED TO BE FOR PERSONAL B ENEFIT OF THE DIRECTORS/SHAREHOLDERS ETC. NO DISALLOWANCE CAN BE MADE IN THE HANDS OF THE COMPANY. THE AO HAS NOT IDENTIFIED THE PARTICULAR EXPENDITURE WHICH WAS NOT PROPERLY VOUC HED OR EXPENDITURE WHICH WERE FOR NON-BUSINESS PURPOSES. ACCORDINGLY WE DO NOT FIND ANY JUSTIFICATION FOR M AKING AD HOC DISALLOWANCE OF 20 % OUT OF BUSINESS EXPENDITURE IN CURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ACCORDINGLY THE SAME ARE DIRECTED TO BE DELETED. 5. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWA NCE OF EXPENDITURE OF RS. 56 483/- INCURRED ON INSURANC E PAYMENT FOR TROLLEYS. 6. AS THE ASSESSEE WAS INVOLVED IN PURCHASE AND SALE O F TRACTOR AND ITS PARTS. IT HAS GOT TRACTOR AND TROLL EYS INSURED WITH THE INSURANCE COMPANY. THE AO HAS ALLOWED INSU RANCE -: 5: - 5 CLAIM IN RESPECT OF TRACTORS BUT DISALLOWED IN RESP ECT OF TROLLEY ON THE PLEA THAT THE SAME WAS NOT SOLD BY THE ASSES SEE AND REMAINED WITH THE ASSESSEE. SINCE THE TRACTOR AND T ROLLEY BOTH WERE ASSESSEES STOCK IN TRADE WHICH IS REQUIRED T O BE INSURED TO SAFEGUARD AGAINST ANY CONTINGENCY. SINCE INSURAN CE PREMIUM PAID WAS ITS BUSINESS EXPENDITURE THERE IS NO JUSTIFICATION FOR DENIAL OF INSURANCE PREMIUM PAID FOR SUCH TROLLEYS. ACCORDINGLY THE AO IS DIRECTED TO ALLOW THE SAME. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. I.T.A.NO. 427/IND/2010: 8. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) UJJAIN DATED 20 TH APRIL 2010 FOR THE ASSESSMENT YEAR 2000-01 IN THE MATTER OF IMPOSITION OF PENALTY U/S 271(1)(C) OF THE INCOME-TAX ACT 1961. 9. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 10. THE AO HAS LEVIED PENALTY IN RESPECT OF FOLLOWING ADDITIONS/DISALLOWANCES OF EXPENSES :- (A) ADDITION ON ACCOUNT OF LOOSE PAPER AND VARIOUS EXPENSES CLAIMED IN HEAD OFFICE 1 00 000/- -: 6: - 6 RESTRICTED BY CIT(A) (B) TRACTOR COMMISSION 30 500/- (C) TRACTOR COMMISSION 17 400/- (D) ADDITION ON ACCOUNT OF LOOSE PAPER AND VARIOUS EXPENSES CLAIMED IN BRANCH OFFICE 1 25 000/- (E) PROFIT ON SALE OUT OF BOOK PROFIT OF DEWAS BRANCH RESTRICTED BY CIT(A). 50 000/- 11. DURING THE COURSE OF HEARING OF THE APPEAL THE L D. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO THE QUANTUM ORDER OF THE LD. CIT(A) IN QUANTUM PROCEEDINGS WHE REIN THE LD. CIT(A) AT PARA 4.1.3 AT PAGE 10 OBSERVED AS UNDER : - THE TOTAL OF AGGREGATE ADDITIONS AND DISALLOWANCE STAND AT RS. 2 23 610/- OUT OF WHICH ADDITION TO TH E EXTENT OF RS. 17 450/- AS RIGHTLY POINTED OUT BY TH E APPELLANT IS DOUBLE ADDITION. THE DISALLOWANCE MADE AT 20 % OF VARIOUS EXPENSES IN THE LIGHT OF LATER FINDINGS OF THE AO IS AGAIN APPARENTLY EXCESSIVE AN D WITHOUT ANY JUSTIFIABLE BASIS. FURTHER THE AO WAS REQUIRED TO JUSTIFY THE ADDITION BASED ON LOOSE PAPERS BY SPECIFYING THE NATURE OF EXPENSES OR -: 7: - 7 JOTTING ON SUCH LOOSE PAPERS AND HE HAS SIMPLY SUBMITTED THE BRIEF DETAILS AND AMOUNT MENTIONED IN LOOSE PAPERS WITHOUT GIVING A DEFINITE FINDINGS WHETHER SUCH LOOSE PAPER RELATED TO EXPENSES INCURRED OR WAS A ROUGH NOTING AND JOTTING AS CONTENDED BY THE APPELLANT. HENCE ON OVERALL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND CONSIDERING THE LATER FINDINGS OF THE AO I N THE MATTER OF VERIFIABILITY OF EXPENSES THE TOTAL DISALLOWANCES EXCLUDING TRACTOR COMMISSION WHICH IS DISCUSSED LATER IS DIRECTED TO BE RESTRICTED TO RS. 1.00 LAKH. IT IS CLEAR FROM THE ABOVE OBSERVATION OF THE CIT(A ) THAT THE DISALLOWANCE HAS BEEN MADE AT 20 % OF VARIOUS EXPEN SES DEBITED IN THE PROFIT AND LOSS ACCOUNT AND ON THE PLEA THAT EXCESSIVE EXPENDITURE HAS BEEN INCURRED WITHOUT JUS TIFIABLE BASIS. IN RESPECT OF ADDITION BASED ON LOOSE PAPERS WITHOUT SPECIFYING THE NATURE OF EXPENSES OR JOTTING ON SUC H LOOSE PAPERS AND THE AO HAS SIMPLY SUBMITTED THE BRIEF DE TAILS AND AMOUNTS MENTIONED IN THE LOOSE PAPERS WITHOUT GIVIN G A DEFINITE FINDING WHETHER SUCH LOOSE - -: 8: - 8 PAPERS RELATED TO EXPENSES INCURRED OR WAS A ROUGH NOTINGS AND JOTTINGS. HOWEVER ONLY ON THE GROUND THAT THE AO HAS MADE OBSERVATION REGARDING VERIFIABILITY OF EXPENSE S THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE AND LEVIED PE NALTY IN RESPECT OF THESE DISALLOWANCES. MERE DISALLOWANCE OF PART OF THE EXPENSES WILL NOT ALTER THE BONA-FIDE CLAIM OF THE ASSESSEE THEREFORE NO PENALTY U/S 271(1)(C) IS TO BE IMPOSED FOR SUCH DISALLOWANCE. HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158 WHILE CONFIRM ING THE ORDER OF HONBLE HIGH COURT DELETING THE PENALTY IM POSED U/S 271(1)(C) FOR DENIAL OF ASSESSEES CLAIM OF DEDUCTI ON OF INTEREST EXPENDITURE HAS CATEGORICALLY OBSERVED THAT BY AN Y STRETCH OF IMAGINATION MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. ACCORDINGLY IT WAS HELD THAT DECLINE OF ASSESSEES CLAIM OF INTEREST AGAINST THE LOAN UTILIZED FOR MAKING INVES TMENT IN TAX FREE SECURITIES WILL NOT AMOUNT TO FURNISHING OF I NACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERIN G THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF DILIP N .SHROFF 291 -: 9: - 9 ITR 519 (SC) AND DHARMENDER TEXTILE PROCESSORS 30 6 ITR 277 (SC) HELD AS UNDER:- A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE THAT BY ITSELF WOULD NOT IN OUR OPINION ATTRACT THE PENALTY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY REASON THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. -: 10: - 10 12. IN VIEW OF THE ABOVE OBSERVATION IT IS NOT A FIT C ASE FOR LEVY OF PENALTY. 13. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 14 TH JANUARY 2011. CPU* 1314