Vali Brothers,, v. ACIT, Range-I,,

ITA 206/DEL/2006 | 2002-2003
Pronouncement Date: 14-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 20620114 RSA 2006
Bench Delhi
Appeal Number ITA 206/DEL/2006
Duration Of Justice 4 year(s) 11 month(s) 25 day(s)
Appellant Vali Brothers,,
Respondent ACIT, Range-I,,
Appeal Type Income Tax Appeal
Pronouncement Date 14-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 14-01-2011
Date Of Final Hearing 11-01-2011
Next Hearing Date 11-01-2011
Assessment Year 2002-2003
Appeal Filed On 19-01-2006
Judgment Text
I.T.A. NO206 /DEL/06 1/10 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.K. GARODIA ACCOUNTANT MEMBER I.T.A. NO.206/DEL/2006 ASSESSMENT YEAR : 2002-03 M/S VALI BROTHERS ACIT LAJPAT NAGAR RANGE-1 MORADABAD. V. MORADABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K. SAMPATH ADVOCATE. RESPONDENT BY : SHRI K.RAVICHANDARAN SR. DR. ORDER PER A.K. GARODIA AM: THIS IS AN ASSESSEE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A) BAREILLY DATED 20.10.2005 FOR ASSESSMENT YEAR 2002-03. 2. GROUND NO.1 OF THE APPEAL IS AS UNDER:- THAT IN VIEW OF FACTS & CIRCUMSTANCES OF THE CASE LD CIT(A) HAS ERRED IN LAW TO CONFIRM THE DISALLOWANCE OF CAR RUNN ING EXPENSES. DISALLOWANCES HAVE MADE SIMPLY UPON PRESUMPTION AND ESTIMATE BASIS AT THE RATE OF 10% OF TOTAL EXPENSES CLAI MED WITHOUT SPECIFYING ANY AMOUNT WHILE DAY TO DAY DETA ILS OF EXPENSES WERE FILED. . I.T.A. NO.206/DEL/06 2/10 3. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT OUT OF TOTAL EXPENSES OF `.3 74 703/- INCURRED BY THE ASSESSEE TOWARD CAR AND SCOOTER EXPENSES DISALLOWANCE WAS MADE BY THE ASSESSING OFF ICER TO THE EXTENT OF 10%. IT HAS BEEN SUBMITTED THAT IT IS EXCESSIVE. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BE LOW. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT HAS B EEN NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT NO LOG BOOK HAS BEEN MAINTAINED AND PERSONAL EXPENSES CANNOT BE DENIED. BEF ORE US ALSO NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE M EMBERS OF THE AOP WERE HAVING PERSONAL VEHICLES AND HENCE WE DO NO T FIND ANY REASON TO INTERFERE IN THE ORDERS OF THE AUTHORITIES B ELOW ON THIS ISSUE. REGARDING THE SUBMISSION OF THE LD AR OF THE ASSESSEE THA T THE DISALLOWANCE IS EXCESSIVE WE FEEL THAT IN THE ABSENCE O F PROPER DETAILS AND LOG BOOK DISALLOWANCE OF 10% OF TOTAL EXPENSES I S NOT EXCESSIVE. THIS GROUND IS REJECTED. 5. GROUND NO.2 OF THE APPEAL IS AS UNDER:- THAT THE LD LOWER AUTHORITIES HAVE UNLAWFULLY DISALL OWED DEPRECIATION ON CAR BY APPLYING SECTION 38(2) OF INC OME TAX ACT 1961 WHILE THE SAME IS NOT APPLICABLE FOR VEHICLE DEP RECIATION. BEFORE CONFIRMING DISALLOWANCES OF CAR DEPRECIATION LD CIT(A) HAS NOT CONSIDERED TO THE FACTS THAT DEPRECIATION IS AL LOWABLE AT FULL RATE EVEN IF SERVED FOR A SINGLE DAY FOR BUSINESS P URPOSES. 6. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT TH E PROVISIONS OF SECTION 38(2) ARE APPLICABLE TO PLANT AND MACHINE RY BUT THE CAR IS NEITHER A PLANT NOR A MACHINERY AND HENCE THE PROV ISIONS OF SECTION . I.T.A. NO.206/DEL/06 3/10 38(2) ARE NOT APPLICABLE IN THE PRESENT CASE. AS AGAIN ST THIS LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BE LOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT AS PER P ROVISIONS OF SECTION 38(2) IF THE BUILDING MACHINERY OR PLANT IS NOT EXC LUSIVELY USED FOR PURPOSES OF BUSINESS OR PROFESSION THE DEDUCTIONS ALLOWABL E UNDER SECTIONS 30 31 & 32 SHALL BE RESTRICTED TO FAIR PROPORT IONATE PART THEREOF WHICH THE ASSESSING OFFICER MAY DEEM. THE ASSESSIN G OFFICER HAS MADE DISALLOWANCE TO THE EXTENT OF 10% OF THE TOT AL DEPRECIATION CLAIMED BY THE ASSESSEE ON MOTOR CAR. REGARDING THE SUBM ISSION OF LD AR OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 38(2) AR E NOT APPLICABLE TO A CAR BECAUSE IT IS NEITHER A PLANT NOR A MACHINERY WE ARE NOT IN AGREEMENT WITH HIM. IT IS ADMITTED POSITIO N THAT FOR THE PURPOSES OF DEPRECIATION SCHEDULE THE MOTOR CAR IS ALSO ENTERED UNDER THE BROAD HEADING OF PLANT & MACHINERY AND THEREFOR E WE ARE NOT IN AGREEMENT WITH LD AR OF THE ASSESSEE THAT MOTOR CAR IS N EITHER PLANT NOR MACHINERY. UNDER THE FACTS OF THE PRESENT CASE WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD CIT(A) ON THI LS ISSUE ALSO. GROUND NO.2 IS ALSO REJECTED. 8. GROUND NO.3 OF THE APPEAL IS AS UNDER:- THAT IN VIEW OF FACTS & CIRCUMSTANCES OF THE CASE LD LOWER AUTHORITIES HAVE ERRED IN LAW TO DISALLOW `.75 000/- OUT OF FOREIGN EXHIBITION & TOUR EXPENSES. DISALLOWANCES HAVE BEEN SIMP LY UPON PRESUMPTION AND ESTIMATE BASIS WITHOUT PLACING ANY ADVERSE MATERIAL ON RECORD. 9. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT DISA LLOWANCE OF `.75 000/- OUT OF TOTAL FOREIGN TOUR EXPENSES OF `.37 .24 LAKHS IS . I.T.A. NO.206/DEL/06 4/10 EXCESSIVE. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS NOT ED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT OUT OF THESE EXPEN SES APPROXIMATELY `.7.5 LAKHS HAS BEEN CONSIDERED AS INCURR ED FOR FOREIGN EXCHANGE IN THE NATURE OF PERSONNEL EXPENDITURE. IT IS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT FURNISHED DETAILS OF TRIP- WISE EXPENSES AND THE ASSESSEE HAS MERELY SUBMITTED A LEDGER ACCOUNT COPY. IT IS ALSO NOTED BY THE ASSESSING OFFICER T HAT PERSONAL ELEMENT IN THE FOREIGN VISITS OF THE PARTNERS ETC. CA NNOT BE DENIED. WE ARE IN AGREEMENT WITH LD DR OF THE REVENUE THAT IN THE ABSENCE OF FULL DETAILS OF TRIP-WISE EXPENSES IT IS NOT POSSIBLE FOR THE ASSESSING OFFICER TO EXACTLY PIN POINT THE PERSONAL EXPENSES AND THE ASSESSI NG OFFICER IS LEFT WITH NO OPTION BUT TO ESTIMATE THE PERSONAL EXPE NSES. ESTIMATE THEREOF @ 10% OF TOTAL EXPENSES IN FOREIGN CURRENCY F OR WHICH NO DETAILS HAVE BEEN FURNISHED IS REASONABLE AND NOT EXCESSI VE. WE THEREFORE DECLINE TO INTERFERE IN THE ORDER OF THE LD CIT(A) ON THIS ISSUE ALSO. GROUND NO.3 IS ALSO REJECTED. 11. GROUND NO.4 OF THE APPEAL READS AS UNDER:- THAT IN VIEW OF FACTS & CIRCUMSTANCES OF THE CASE LD L OWER AUTHORITIES HAVE ERRED IN LAW TO DISALLOW `.25 000/-O UT OF TELEPHONE EXPENSES FOR PERSONAL USE OF THE PARTNERS. 12. REGARDING THIS ISSUE ALSO IT WAS THE SUBMISSION OF TH E LD AR OF THE ASSESSEE THAT THE DISALLOWANCE IS EXCESSIVE WE FIND T HAT THE ASSESSING OFFICER HAS DISALLOWED ONLY `.25 000/- OUT OF T OTAL EXPENSES OF `.5.18 LAKHS WHICH IS LESS THAN 5%. HENCE WE ARE O F THE CONSIDERED . I.T.A. NO.206/DEL/06 5/10 OPINION THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER IS REASONABLE AND NOT EXCESSIVE AND THEREFORE WE DECLINE TO INTERFERE IN THE ORDER OF LD CIT(A) ON THIS ISSUE ALSO. GROUND NO.4 IS ALSO REJECTED. 13. GROUND NO.5 OF THE APPEAL IS AS UNDER:- THAT THE LD LOWER AUTHORITIES HAVE UNLAWFULLY DISALL OWED `.54517/- /`.18226/- OUT OF PF & ESIC PAYMENT SAME WAS NOT THE CONTRIBUTION OF EMPLOYEES BUT WAS PAID BY THE APPELLA NT FROM HIS OWN ACCOUNT ON BEHALF OF THE EMPLOYEES. THEREFORE I T WAS AN ALLOWABLE DEDUCTION. MORE SO THE PAYMENT WAS DELAYED DUE TO VARIOUS HOLIDAYS BUT WAS MADE WITHIN GRACE PERIOD. 14. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THE DATES OF PAYMENT OF PF & ESIC ARE NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ITSELF AND IT CAN BE SEEN THAT THE LAST D ATE PF PAYMENT IS 22.4.2002 WHEREAS THE RETURN OF INCOME WAS FILED BY THE ASSESSEE ON DUE DATE I.E. 31.10.2002 AND HENCE NO DISAL LOWANCE U/S 43B IS CALLED FOR. WE ARE IN AGREEMENT WITH LD AR OF THE ASSESSEE BECAUSE IT IS BY NOW SETTLED POSITION OF LAW THAT IF TH E ASSESSEE MAKES PAYMENT OF PF & ESIC BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME NO DISALLOWANCE IS CALLED FOR EITHER OUT OF EMPLOYEE S CONTRIBUTION OR OUT OF EMPLOYERS CONTRIBUTION. WE THEREFORE DELET E THIS DISALLOWANCE. GROUND NO.5 IS ALLOWED. 15. GROUND NO.6 OF THE APPEAL READS AS UNDER:- THAT THE LD LOWER AUTHORITIES HAVE NO JURISDICTION T O DISALLOW `.52 166/- ON ACCOUNT OF BONUS PAID TO EMPLOYEES. THE SAME WAS PAID BEFORE THE DUE DATE OF FILING RETURN WAS CERTIF IED BY THE C.A. LD CIT(A) HAS UNLAWFULLY DISBELIEVED TO C.A. CERTIF ICATE FILED . I.T.A. NO.206/DEL/06 6/10 BEFORE HIM AS ADDITIONAL EVIDENCE IN CONFIRMATION OF PAYMENT. NO OPPORTUNITY WAS GIVEN TO EXPLAIN THE DEFICIENCY IF ANY IN PAYMENT DATES BEFORE REJECTING THE CLAIM. 16. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT THIS ISSU E MAY BE RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION BECAUSE THE ASSESSEE COULD NOT PRODUCE THE PROOF OF PAY MENT OF BONUS BEFORE THE DATE OF FILING OF RETURN OF INCOME. LD D R OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 17. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT HAS BE EN NOTED BY THE LD CIT(A) IN PARA NO.8 OF HIS ORDER THAT THE ASSESSEE HAS FI LED ADDITIONAL EVIDENCE BEFORE HIM IN THE SHAPE OF CERTIFICATE ISSUED BY THE C.A. WHICH IS DATED 29.3.2005 CONTAINING THEREIN THAT THE BONUS HAS BEEN PAID ON 11.10.2002. AS PER THE PROVISION OF SECTION 43 B IF THE AMOUNT OF BONUS HAS BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME I.E. 31.10.2007 IN THE PRESENT CASE NO DISALLO WANCE CAN BE MADE U/S 43B OF THE ACT. IN THE PRESENT CASE AS PER TH E CERTIFICATE OF HIS C.A. DATED 29.3.2005 WHICH WAS FURNISHED BY THE ASSE SSEE BEFORE LD CIT(A) BY WAY OF ADDITIONAL EVIDENCE BONUS IN QU ESTION HAS BEEN PAID BY THE ASSESSEE ON 11.2.2002. THIS CERTIFICATE WAS N OT MADE AVAILABLE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER BUT IN THE INTEREST OF JUSTICE WE SET ASIDE THE ORDER OF THE LD C IT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER FOR A FRESH DECISION. WE WANT TO MAKE IT CLEAR THAT THE BUR DEN IS ON THE ASSESSEE TO BRING ON RECORD THE EVIDENCE REGARDING PAYM ENT OF BONUS IN QUESTION BEFORE 31.10.2002 AND IF THE ASSESSEE CAN SHO W THAT THE BONUS WAS ACTUALLY PAID BEFORE THIS DATE NO DISALLOWAN CE CAN BE MADE U/S 43B OF THE ACT. WITH THESE OBSERVATIONS THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. . I.T.A. NO.206/DEL/06 7/10 18. GROUND NO.7 IS AS UNDER:- THAT LD LOWER AUTHORITIES HAVE ERRED IN LAW TO MAKE AN ADDITION OF `.25 000/- IN TRADING RESULTS. ADDITION HAS BEEN MA DE ON ESTIMATE AND PRESUMPTION BASIS WITHOUT POINTING OUT ANY OMISSION OR DISCREPANCY IN ACCOUNT BOOKS. 19. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT THE ASSE SSEE IS 100% EXPORTER AND THEREFORE EVEN IF THE ASSESSING OFFIC ER IS NOT SATISFIED ABOUT THE VALUATION OF A CLOSING STOCK NO AD DITION IS JUSTIFIED BECAUSE THE BOOKS OF ACCOUNTS HAD NOT BEEN REJECTED BY THE ASSESSING OFFICER. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 20. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE T HROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS NOT ED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT IT HAS BEEN MENTION ED BY THE TAX AUDITOR IN THE TAX AUDIT REPORT THAT THE RELEVANT R ECORDS WERE INADEQUATE FOR THE PURPOSE OF FURNISHING REQUISITE INF ORMATION REGARDING VALUATION OF CLOSING STOCK AND BECAUSE OF TH IS REASON THE ASSESSING OFFICER MADE ADDITION OF `.25 000/-. IT IS NOT ED BY THE LD CIT(A) IN HIS ORDER THAT THE ASSESSEE HAS NOT BROUGHT OU T MATERIAL EVIDENCE TO JUSTIFY THAT THE VALUATION OF STOCK WAS CO RRECTLY DONE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A WHICH CAME INTO EXISTENCE W.E.F. 1.4.1999. BEFORE US ALSO NO SUCH CO NTENTION HAS BEEN RAISED AND NO EVIDENCE HAS BEEN FURNISHED TO SHOW THAT THE VALUATION OF CLOSING STOCK BY THE ASSESSEE IS CORRECT AND PROPER. ON LY SUBMISSION RAISED BEFORE US IS THAT SINCE THE ASSESSEE IS 100% EXPORTER NO ADDITION IS JUSTIFIED. WE ARE NOT IN AGREEMENT WITH L D AR OF THE ASSESSEE ON THIS ISSUE BECAUSE IF THE ASSESSEE IS 100% EXPORTE R AND . I.T.A. NO.206/DEL/06 8/10 ELIGIBLE FOR DEDUCTION U/S 80HHC THE ASSESSEE WILL GET DEDUCTION UNDER THAT SECTION ON THE BASIS OF ENHANCED INCOME BUT FOR T HIS REASON THE ADDITION MADE BY THE ASSESSING OFFICER CANNOT BE DELET ED. WE THEREFORE CONFIRM THE ORDER OF THE LD CIT(A) ON TH IS ISSUE ALSO. GROUND NO.7 IS ALSO REJECTED. 21. GROUND NO. 8 & 9 OF THE APPEAL READ AS UNDER:- 8. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE LD LOWER AUTHORITIES HAVE ERRED IN LAW TO HOLD THAT DEP B IS DIFFERENT FROM DRAW BACK AND NOT COVERED WITHIN THE MEANING O F SECTION 28(IIIA) (IIIB) AND (IIIC) OF THE INCOME TAX ACT 1 961. THEY HAVE ALSO ERRED IN LAW NOT GIVE THE BENEFIT OF DEPB WHILE CALCULATING DEDUCTION U/S 80HHC OF THE ACT. 9. THAT THE CLAIM OF DEDUCTION U/S 80HHC WAS MADE IN ACCORDANCE WITH LAW AS CALCULATED AND CERTIFIED BY C .A. IN HIS AUDIT REPORT. LD LOWER AUTHORITIES HAVE UNJUSTLY AND UNLAWFULLY DISALLOWED THE CLAIM BY APPLYING THE RATIO OF DECISIO N OF HON'BLE SUPREME COURT GIVEN IN THE CASE OF IPCA LABORATORY 2 66 ITR 521. FACTS OF OUR CASE ARE ENTIRELY DIFFERENT FROM THE REF ERRED CASE LAW. NOWHERE IT HAS BEEN HOLD THAT THE DEDUCTION U/S 80HHC SHALL BE ALLOWED ONLY IF THERE WILL BE POSITIVE PROFI T AFTER REDUCING 90% AMOUNT OF INCENTIVE AMOUNT CREDITED IN ACCOUNTS AS APPLIED BY LD LOWER AUTHORITIES TO REJECT THE CLAIM OF DEDUCTION U/S 80HHC. 22. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT AS PER THE RECENT JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDER ED IN THE CASE OFKALPATRU CHEMICALS AS REPORTED IN 328 ITR 461 (BOM. ) THIS ISSUE SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION. . I.T.A. NO.206/DEL/06 9/10 LD DR ALSO AGREED WITH THIS PROPOSITION PUT FORWARD BY LD AR OF THE ASSESSEE AND HENCE WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSIN G OFFICER FOR A FRESH DECISION. THE ASSESSING OFFICER SHOULD CONSIDER THE R ECENT JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN T HE CASE OF KALPATRU CHEMICALS (SUPRA) AND AFTER PROVIDING ADEQU ATE OPPORTUNITY OF BEING HEARD HE SHOULD DECIDE THIS ISSUE AFRESH REGAR DING THE ELIGIBILITY OF THE ASSESSEE FOR DEDUCTION U/S 80HHC. THE ASSESSING OFFICER SHOULD QUANTIFY THE DEDUCTION ALLOWABLE TO T HE ASSESSEE UNDER THAT SECTION IF IT IS HELD THAT THE ASSESSEE IS ELIGIBLE FOR THE SAME. THESE TWO GROUNDS ARE ALLOWED FOR STATISTICAL PURPOSES. 23. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS PARTL Y ALLOWED. 24. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF JANUARY 2011. SD/- SD/- (I.P. BANSAL) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 14.1.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DEL HI. TRUE COPY. BY ORDER (ITAT NEW DELHI). . I.T.A. NO.206/DEL/06 10/10