Shri Ashok Narang, Indore v. The I T O, Indore

ITA 228/IND/2009 | 2001-2002
Pronouncement Date: 31-01-2011 | Result: Allowed

Appeal Details

RSA Number 22822714 RSA 2009
Assessee PAN DTOBE7400S
Bench Indore
Appeal Number ITA 228/IND/2009
Duration Of Justice 1 year(s) 8 month(s) 24 day(s)
Appellant Shri Ashok Narang, Indore
Respondent The I T O, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 31-01-2011
Date Of Final Hearing 21-01-2011
Next Hearing Date 21-01-2011
Assessment Year 2001-2002
Appeal Filed On 06-05-2009
Judgment Text
1 `IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.261 TO 264/IND/2006 A.YS.998-99 1999-00 2000-01 AND 2001-02 AND ITA NO.228/IND/2009 A.Y.2001-02 ASHOK NARANG INDORE PAN AAQPN-6525K APPELLANT VS INCOME TAX OFFICER 2(2) INDORE RESPONDENT ITA NO.310/IND/2009 A.Y.2001-02 INCOME TAX OFFICER 2(2) INDORE APPELLANT VS ASHOK NARANG INDORE RESPONDENT ASSESSEE BY : SHRI MANJEET SACHDEVA DEPARTMENT BY : SHRI P.K. MITRA O R D E R 2 PER JOGINDER SINGH JUDICIAL MEMBER THESE APPEALS ARE BY THE ASSESSEE AGAINST DIFFERENT ORDERS OF THE LEARNED CIT(A) DATED 28.2.2006 AND 24.3.2009 WHEREA S THE APPEAL OF THE REVENUE IS AGAINST THE IMPUGNED ORDER DATED 28. 2.2006 (ASSESSMENT YEAR 2001-02 ITA NO. 310/IND/2006). 2. FIRST WE SHALL TAKE UP THE APPEALS OF THE ASSESS EE WHEREIN FOR THE ASSESSMENT YEAR 1998-99 (ITA NO.261/IND/06) THE ASS ESSEE HAS PREFERRED FOLLOWING GROUNDS OF APPEAL :- I. THAT THE LEARNED CIT(A) HAS ERRED IN RESTRICTI NG THE DISALLOWANCE OF MOTOR CAR EXPENSES AT RS.5784/- II. THAT THE LEARNED CIT(A) HAS FURTHER ERRED IN R ESTRICTING THE DISALLOWANCES OF RS. 10 000/- HAMMALI/CARTAGE. III. THAT THE LEARNED CIT(A) HAS ERRED IN RESTRICT ING DISALLOWANCE IN RENT A/C AT RS.61155/-. IV. THAT THE LEARNED CIT(A) HAS ERRED IN CONFIRMIN G/RESTRICTING DISALLOWANCE IN :- A. RS. 6000/- OUT OF MISC. EXPENSES B. RS. 3000/- OUT OF TELEPHONE EXPENSES C. RS. 1707/- OUT OF CAR DEPRECIATION D. RS. 4829/- DEPRECIATION OF ALUMINIUM DOORS. 2. DURING HEARING OF THESE APPEALS WE HAVE HEARD T HE LEARNED RESPECTIVE COUNSEL AND CONSIDERED THE ARGUMENTS ADV ANCED BY THEM. 3 SO FAR AS GROUNDS RELATING TO HAMMALI AND TELEPHONE EXPENSES ARE CONCERNED THE BENCH BY ORDER OF EVEN DATE IN THE C ASE OF M/S R.S. NARANG COMPANY V. ACIT (ITA NO. 181/IND/2006) ON ID ENTICAL FACTS HAS DELIBERATED UPON BOTH THESE ISSUES. THE RELEVANT P ORTION OF THE SAME IS REPRODUCED HEREUNDER :- THESE ARE THE APPEALS BY THE ASSESSEE AGAINST THE RESPECTIVE ORDERS DATED 12.1.2006 OF THE LEARNED C IT(A). IN ITA NO. 181/IND/2006 THE ASSESSEE HAS RAISED THE FOLLOW ING GROUNDS :- 1. HAMMALI/CARTAGE/LABOUR EXPENSES THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN RESTRICTING THE DISALLOWANCE AT RS.40 000/- OUT OF THE TOTAL CLAIM OF RS.1 29 997/- . 2. TELEPHONE EXPENSES THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN RESTRICTING THE DISALLOWANCE IN TELEPHONE EXPENSES AT RS. 5 500/- A S FAIR AND REASONABLE. 2. THE FIRST GROUND RAISED BY THE REVENUE PERTAINS TO RESTRICTING THE DISALLOWANCE TO RS.40 000/- OUT OF THE TOTAL CL AIM OF RS. 1 29 997/- ON ACCOUNT OF HAMMALI/LABOUR CHARGES. T HE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT DURING SURVEY THE BOOKS OF ACCOUNTS WERE IMPOUNDED BY THE DEPARTMENT AND THE SAME ARE STILL WITH THEM. THE LEARNED ASSESSING OF FICER DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE AND ON AD HO C BASIS DISALLOWED 50% OF SUCH EXPENSES RESULTING INTO ADDI TION OF RS.1 29 997/- OUT OF THE CLAIMED HAMMALI CHARGES OF RS. 2 59 993/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS C&F AGENT OF M/S HIMALAYA DRUG COMPANY AND RECEIVED COMMISSION ON THE SALES EXECUTED BY THE ASSESSEE. I T WAS FURTHER PLEADED THAT THE JOB OF C&F AGENT IS TO PRO VIDE SPACE TO ENSURE PROPER MAINTENANCE OF STOCK AND TO GET THE G OODS LOADED/UNLOADED FROM THE TRUCKS FOR STORAGE IN THE GODOWN AND FINALLY TO DESPATCH THE GOODS TO VARIOUS DEALERS AS PER THE ORDERS BOOKED BY THEM. ON THE OTHER HAND THE LEA RNED SENIOR DEPARTMENTAL REPRESENTATIVE DEFENDED THE IMPUGNED O RDER BY CONTENDING THAT NECESSARY DETAILS WERE NOT FURNISHE D BY THE ASSESSEE. 4 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A P ARTNERSHIP FIRM AND DERIVES INCOME FROM C&F AGENCY OF M/S HIMALAYA DRUG COMPANY BANGALORE AND THE BUSINESS IS CARRIED OUT UNDER THE NAME AND STYLE OF R.S. NARANG COMPANY. THE RETURN FOR THE ASSESSMENT YEAR 1998-99 WAS FILED ON 4.9.1998 DECLA RING INCOME OF RS.89 307/-. A SURVEY U/S 133A OF THE AC T WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSE E ON 6.1.2003 AND THE BOOKS OF ACCOUNTS WERE IMPOUNDED B Y THE REVENUE FOR THE ASSESSMENT YEARS 1998-99 TO 2001-02 . THE NOTICES U/S 148 OF THE ACT WERE SERVED UPON THE ASS ESSEE. THE ASSESSMENT WAS COMPLETED U/S 147/144 OF THE ACT AT THE INCOME OF RS.5 51 056/- AFTER MAKING VARIOUS DISALLOWANCES/ADDITIONS AGAINST WHICH THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) WHEREIN PART RELIEF WAS GIVEN. SO FAR AS THE CLAIM OF HAMMALI EXPENSES OF RS. 2 59 993/- IS CONCERNED TH E CONTENTION/EXPLANATION OF THE ASSESSEE WAS NOT ACCE PTED AND ON AD HOC BASIS 50% OF SUCH EXPENSES WERE DISALLOWE D RESULTING INTO ADDITION OF RS.1 29 997/- TO THE RET URNED INCOME OF THE ASSESSEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS C&F AGENT OF M/S HIMALAYA DRUG COMPANY AND WAS RECEIVING COMMISSION ON THE SALES EXECUTED BY IT. THE GODOWN OF THE ASSESSEE WAS SITUATED AT DEWAS NAKA WHERE NA TURALLY FOR LOADING AND UNLOADING LABOUR IS REQUIRED AND THE M AJORITY OF THE LABOURS WAS UNEDUCATED. A COPY OF THE C&F AGREEMEN T WITH HIMALAYA DRUG COMPANY WAS ALSO FILED WITH THE ASSES SING OFFICER AS PER WHICH THE ASSESSEE WAS RESPONSIBLE F OR PAYMENT OF LABOUR/HAMMALI EXPENSES AND AS PER CLAUSE 18 OF THE AGREEMENT THE ASSESSEE WAS ENTITLED TO GET COMMISS ION @ 0.8% FOR TURNOVER UPTO RS. 6.25 CRORES AND AT STILL LOWER RATES WHEN THE TURNOVER EXCEEDED THE FIGURE. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED COMM ISSION OF RS. 13 82 602/- WHICH MEANS THAT THERE WAS A TURNO VER OF OVER RS. 17 CRORES THEREFORE THE EXPENSES OF RS. 2 59 993/- ON ACCOUNT OF HAMMALI/LABOUR CHARGES ON SUCH HUGE TURN OVER CANNOT BE SAID TO BE EXCESSIVE. EVEN OTHERWISE NO AD HOC DISALLOWANCE SHOULD HAVE BEEN MADE UNDER THE FACTS NARRATED ABOVE. EVEN THE LEARNED FIRST APPELLATE AUTHORITY IN HIS ORDER HAS OBSERVED AS UNDER :- EVEN IF THE VOUCHERS WERE NOT AVAILABLE IT CANNOT BE DENIED THAT SUCH EXPENSES WERE BEING INCURRED BY THE APPELLANT OVER THE YEARS AND SAME WERE BEING ALLOWED ALSO. THE BOOKS OF ACCOUNTS WERE AVAILABLE WITH THE A.O. AND HE COULD VERY WELL REACH A CONCLUSION REGARDING SUCH EXPENSES FROM THE VOLUME OF STOCK MOVED FROM ONE PLACE TO THE OTHER DURING THE YEAR. THE APPELLANTS EXPLANATION THAT THE 5 LABOURERS BEING LARGELY ILLITERATE DID NOT SIGN ANY RECEIPT VOUCHERS. OTHERWISE ALSO HAD THE APPELLANT S INTENTION BEEN OF CLAIMING SUCH EXPENSES AT INFLATE D FIGURES IT COULD HAVE PREPARED SELF-MADE VOUCHERS. THE APPELLANT MUST BE GIVEN CREDIT FOR MENTIONING T HE FACTUAL POSITION. THE DISALLOWANCE OF 50% OF SUCH EXPENSES IS TOTALLY UNREASONABLE. KEEPING IN VIEW THE FACTS OF THE CASE AND NATURE OF EXPENSES AS WEL L AS THE VOLUME OF BUSINESS (COMMISSION EARNED) IT W ILL BE FAIR AND REASONABLE IF THE DISALLOWANCE IS RESTR ICTED TO RS. 40 000/-. THE APPELLANT THUS GETS A RELIEF OF RS. 89 997/-. IF THE TOTALITY OF FACTS AND THE OBSERVATIONS MADE BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN THE AFORESA ID PARA ARE ANALYSED THEN UNDISPUTEDLY KEEPING IN VIEW THE VOLUME OF BUSINESS/HUGE TURNOVER OF THE ASSESSEE VIS--VIS NA TURE OF ASSESSEES BUSINESS. THE EXPENDITURE INCURRED ON HU MMALI IS MOST REASONABLE. THE GENUINENESS OF THE EXPENDITURE WAS ALSO NOT DOUBTED. SINCE THE BOOKS OF ACCOUNTS WERE WITH THE DEPARTMENT NOTHING CONTRARY WAS BROUGHT ON RECORD BY THE REVENUE FOR KEEPING ADHOC DISALLOWANCE OF RS.40 000 /-. WE THEREFORE DIRECT FOR DELETION FOR RS.40 000/- RETAI NED BY THE LD. CIT(A). THIS GROUND IS THEREFORE ALLOWED. 4. THE NEXT GROUND PERTAINS TO RESTRICTING THE DISA LLOWANCE OF TELEPHONE EXPENSES TO RS. 5500/-. AFTER HEARING THE RIVAL SUBMISSIONS IT IS SEEN THAT THE ASSESSING OFFICER DISALLOWED RS. 8310/- @ 50% OUT OF THE TELEPHONE EXPENSES OF RS.16 620/- ESTIMATED BY THE ASSESSING OFFICER. THE TELEPHONE EXPENSES CANNOT BE CLAIMED TO BE INCURRED WHOLLY AND EXCLUSI VELY FOR THE PURPOSES OF BUSINESS AS THE PERSONAL USE CANNOT BE RULED OUT AND MORE SO UNDER THE FACTS STATED IN THE ASSESSMEN T ORDER/IMPUGNED ORDER. THEREFORE THE CONCLUSION DRA WN IN THE IMPUGNED ORDER IS QUITE JUSTIFIED CONSEQUENTLY UP HELD. THEREFORE THIS GROUND OF THE ASSESSEE IS DISMISSED . THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. SO FAR AS THE ISSUE OF DISALLOWANCE OF RENT IS CONC ERNED THE SAME HAS BEEN DELIBERATED UPON BY THE BENCH VIDE OR DER OF EVEN DATE IN THE CASE OF M/S R.S. NARANG COMPANY (I TA NO. 182/IND/2006) AS CONTAINED IN PARAS 7 AND 8 OF THAT ORDER. THE RELEVANT PORTION OF THE SAME IS REPRODUCED HEREUNDE R :- 6 7. THE NEXT GROUND PERTAINS TO RESTRICTING THE DIS ALLOWANCE OF RENT TO RS. 29 440/- AS AGAINST THE TOTAL CLAIM OF RS.1 83 508/-. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE ASSESSEE INCURRED EXPENSES ON ACCOUNT OF RENT PAID FOR GODOWN AT RS.1 83 508/- PAID TO SMT. SUSHMA NARANG AND SMT . RAVI NARANG PARTNERS OF THE ASSESSEE FIRM. THE COVERED AREA OF THE PROPERTY WAS ARGUED TO BE 7400 SQ.FT. AND THE RENT PAID WORKS OUT TO RS.1.73 PER SQ.FT. THE LEARNED SENIOR DEPART MENTAL REPRESENTATIVE DEFENDED THE DISALLOWANCE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER A LLOWED RENT OF RS. 88 800/- ESTIMATING THE SAME @ RE.1/- PER SQ.FT . PER MONTH RESULTING INTO DISALLOWANCE OF RS.94 708/- ON THE P LEA THAT THE RENT PAID IS VERY EXCESSIVE IN COMPARISON TO THE RE NT PAID IN THE AREA BY THE OTHER CONCERNS WHEREAS THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND PERSUED THE CONTENTS OF THE ASSESSMENT ORDER. THE A.O. HAS OBSERVED THAT THE RENT CLAIMED AT THE RATE OF RS. 1.73P PER SQ.FT. PE R MONTH WAS VERY HIGH RATE AS COMPARED TO RATES SHOWN BY OTHER CONCERNS FOR THE PROPERTIES LOCATED IN THE SAME AREA. HE THEREFORE ALLOWED THE RENT OF RS.88800/- WORKING OUT THE SAME @ RS.1.00 PER SQ.FT . PER MONTH AND DISALLOWED THE BALANCE AMOUNT OF RS.94708/-. HE DID NOT APPLY MIND TO THE FACT THAT LAST YEAR ALSO THE RENT WAS CLAIMED @ RS. 1.73P PER SQ.F T PER MONTH BUT THE TOTAL CLAIM AMOUNTED TO RS.154068/-. HOW COULD THIS INCREASE TO RS. 183508 /- WHEN THE TOTAL AREA AS WELL AS THE RATE ARE SAME. APPARENTLY THE RENT HAS BEEN CALIMED AT A HIGHER FIGURE. DURING THE APPELLATE PROCEEDINGS THE APPELLANT EXPLAINED THAT THE RENT WAS PAID AT A HIG HER FIGURE THIS YEAR AS THE OWNERS HAD TO INCUR CERTAIN EXTRA EXPENSES PAYABLE TO LOCAL AUTHORITIES FOR LEGALIZATION OF THE BUILDING AS ALSO THE DIVERSIONA RY CHARGES. THIS CONTENTION OF THE APPELLANT CANNOT B E ACCEPTED AS THERE IS NO RENT AGREEMENT LAYING DOWN THE TERMS AND CONDITIONS OF OCCUPANCY OF THE PREMISES. THE EXPENSES INCURRED BY THE OWNER ARE O F CAPITAL NATURE AND ARE THE LIABILITY OF THE OWNERS. THE SAME CANNOT BE PASSED ON TO THE TENANTS. HOWEVER THE APPELLANT HAS RIGHTLY ARGUED THAT THE A.O. HAS GIVEN NO COMPARABLE INSTANCE AND DURING THE PERIOD UNDER CONSIDERATION THE RATE OF RENT IN THE AREA W AS RATHER HIGHER THAN EVEN RS. 1.73P PER SQ.FT. PER MONTH. IN MY VIEW BOTH THE ARGUMENTS ARE WITHOUT 7 ANY COGENT BASIS. IN MY ORDER FOR THE PRECEDING ASSESSMENT YEAR THE RATE OF RS.1.73P PER SQ.FT. PE R MONTH HAS BEEN HELD TO BE QUITE REASONABLE. FOR TH E YEAR UNDER CONSIDERATION ALSO THE PAYMENT OF RENT OF RS.154068/- IS CONSIDERED TO BE REASONABLE. THE ADDITION IS THEREFORE RESTRICTED TO RS.29440/-. THE APPELLANT THUS GETS A RELIEF OF RS.65268/-. IF THE TOTALITY OF FACTS AND THE CONCLUSION DRAWN I N THE IMPUGNED ORDERS ARE ANALYSED CONSIDERING THE MATERIAL PLACE D ON RECORD WE FIND THAT THERE ARE THREE PARTNERS IN THE FIRM A ND NO COMPARABLE INSTANCE WAS QUOTED BY THE ASSESSING OFF ICER WHICH IS IDENTICAL TO THE FACTS OF THE PRESENT APPE AL SINCE THE FACTUM OF PAYMENT OF RENT WAS NOT UNDER DISPUTE. RE NT PAID BY ASSESSEE WAS QUITE REASONABLE AS THE SAME WAS INCUR RED WHOLLY & EXCLUSIVELY FOR THE PURPOSES OF BUSINESS O F THE ASSESSEE. NO DISALLOWANCE IS WARRANTED CONSEQUENTL Y THIS GROUND IS ALLOWED. IN VIEW OF THE ABOVE SINCE THE FACTS ARE IDENTICAL THEREFORE ON THE REASONING CONTAINED THEREIN ABOVE THE SAME ORDER W ILL BE APPLICABLE TO THESE GROUNDS ALSO THEREFORE THESE ARE DISPOSED O F IN THE TERMS INDICATED ABOVE. SO FAR AS THE RESTRICTING THE DISALLOWANCE OF MOTO R CAR EXPENSES AT RS. 5784/- IS CONCERNED IT IS SEEN THAT THE ASSESS EE CLAIMED RS.34 704/- ON ACCOUNT OF CAR EXPENSES OUT OF WHICH THE LEARNED ASSESSING OFFICER DISALLOWED RS.13 352/- FOR THE PE RSONAL USE OF THE CAR OUT OF TOTAL EXPENSES. AS PER THE REVENUE THE ASSE SSEE COULD NOT PRODUCE THE TOTAL VOUCHERS/LOG BOOK FOR CLAIMING SU CH EXPENSES. HOWEVER THE CLAIM OF THE ASSESSEE IS THAT ALL THE EXPENSES WERE INCURRED FOR BUSINESS PURPOSES ONLY. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO 8 1/6 TH OF THE TOTAL EXPENSES. KEEPING IN VIEW THE TOTALIT Y OF FACTS THE DISALLOWANCE IS RESTRICTED TO RS.4 000/- THEREFORE THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 3. IN GROUND NO. 5 THE ASSESSEE HAS CHALLENGED CONF IRMING/RESTRICTING CERTAIN DISALLOWANCES BY THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS). 3.1 SO FAR AS THE DISALLOWANCE OF RS. 6 000/- OUT O F MISCELLANEOUS EXPENSES RS. 3 000/- OUT OF TELEPHONE EXPENSES RS . 1707/- OUT OF CAR DEPRECIATION AND RS. 4829/- ON DEPRECIATION ON ALUM INIUM DOORS IS CONCERNED THESE WERE LEFT TO THE COURT BY THE LEAR NED RESPECTIVE COUNSEL BEING SMALL AMOUNTS INVOLVED. KEEPING IN VI EW THE ARGUMENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSELS AND THE AMOUNTS INVOLVED A FURTHER DISALLOWANCE/ DEPRECIATION OF 50% OF THE AMOUNT IN DISPUTE WILL MEET THE ENDS OF JUSTICE. WE ORDER ACCORDINGLY . ITA NO. 262/IND/2006 (ASSESSMENT YEAR 1999-00) 4. SO FAR AS GROUND NOS. 1 TO 3 ARE CONCERNED THE SAME HAVE BEEN DELIBERATED BY US ABOVE THEREFORE ON THE REASONIN G CONTAINED THEREIN THE SAME ORDER WILL BE APPLICABLE TO THESE GROUNDS ALSO THEREFORE THESE GROUNDS ARE DISPOSED OF AS INDICATED ABOVE. 9 5. FOR GROUND NO. 4 WHEREIN CONFIRMING/RESTRICTING THE DISALLOWANCES SUCH AS MISCELLANEOUS EXPENSES TELEPHONE EXPENSES AND CAR DEPRECIATION HAS BEEN CHALLENGED WE FIND THAT THIS ISSUE HAS BEEN DELIBERATED UPON US IN PARA 3.1 AND FOR THE REASONS MENTIONED THEREIN WE RESTRICT THE DISALLOWANCE TO 50% OF THE SAME. T HEREFORE THIS GROUND IS PARTLY ALLOWED. 6. IN GROUND NO. 5 THE SALE TRADING LOSS OF RS.1 28 977/- HAS BEEN CHALLENGED BY THE ASSESSEE. THE SUBMISSION ON BEHA LF OF THE ASSESSEE IS THAT COMPLETE DETAILS WERE FURNISHED BY THE ASSE SSEE AND IN THE SUBSEQUENT ASSESSMENT YEAR THE ASSESSING OFFICER AL LOWED THE SAME. WHEREAS THE STAND OF THE REVENUE IS THAT CLAIMED DE TAILS WERE NOT FILED BY THE ASSESSEE FOR WHICH OUR ATTENTION WAS INVITED TO PAGE 6 OF THE IMPUGNED ORDER. IN COUNTER REPLY OUR ATTENTION WA S INVITED BY THE LEARNED COUNSEL FOR THE ASSESSEE TO PAGE 9 OF THE P APER BOOK PARA SERIAL NO. 0.4 AND PAGE 13 OF THE PAPER BOOK. 6.1 ON PERUSAL OF RECORD AND AFTER HEARING THE RIVA L SUBMISSIONS WE FIND THAT THE ASSESSEE VIDE LETTER DATED 19.2.2004 (PAGE 9) ADDRESSED TO THE LEARNED ASSESSING OFFICER SPECIFICALLY FURNISHE D THE LIST OF STOCKS PURCHASED WITH DATES ALONG WITH PHOTOCOPIES OF THE BILLS OF THE BROKER. AT PAGES 13 TO 18 THE NECESSARY DETAILS ARE AVAILAB LE THEREFORE IN VIEW OF THIS FACTUAL POSITION THIS GROUND OF THE ASSESS EE IS ALLOWED. 10 7. GROUND NO. 6 IS GENERAL IN NATURE AND REQUIRES NO DELIBERATION FROM OUR SIDE. THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 263 IND/2006 (ASSESSMENT YEAR 2000-01) 8. GROUND NOS. 1 TO 3 ARE THE SAME AS IN ITA NO. 26 2/IND/2006 . SINCE THE FACTS ARE IDENTICAL AS CANVASSED FROM BOT H THE SIDES THEREFORE FOR THE REASONS CONTAINED IN THE ORDER W HILE DISPOSING OF THE IDENTICAL GROUNDS ABOVE THESE GROUNDS ARE ALSO DIS POSED OF ON THE TERMS CONTAINED THEREIN. 9. GROUND NO. 4 IS ALSO IDENTICAL THEREFORE THE C ONFIRMATION/ RESTRICTION OF DISALLOWANCES IS FURTHER REDUCED TO 50% AS THE FACTS ARE IDENTICAL THEREFORE THIS GROUND IS PARTLY ALLOWED . 10. GROUND NO. 5 IS IDENTICAL TO THE GROUND NO. 5 I N ITA NO. 262/IND/2006 FOR THE ASSESSMENT YEAR 1999-00. BOTH THE LEARNED REPRESENTATIVES AGREED THAT THIS GROUND IS IDENTICA L THEREFORE FOR THE REASONS MENTIONED THEREIN AND ALSO THE FACTS ARE ID ENTICAL THIS GROUND OF THE ASSESSEE IS ALLOWED. THIS APPEAL IS THEREFORE PARTLY ALLOWED. 11. IN ITA NO. 264/IND/2006 (ASSESSMENT YEAR 2001-0 2) THE FIRST GROUND PERTAINS TO RESTRICTING THE DISALLOWANCE TO RS. 42 000/- ON ACCOUNT OF RENT. THE CRUX OF ARGUMENTS ON BEHALF O F THE ASSESSEE IS THAT THE LEARNED ASSESSING OFFICER WRONGLY DISALLOWED TH E CLAIM OF THE 11 ASSESSEE BECAUSE GODOWN NO. 55 SDA COMPOUND WAS IN THE POSSESSION OF THE ASSESSEE AS THE ASSESSEE WAS TRYI NG TO OBTAIN NEW C&F AGENCY AND THE RENT WAS PAID BY WAY OF CHEQUE. THE RENT PAID IN EARLIER YEARS WAS ALSO ALLOWED AS BUSINESS EXPENDIT URE. ON THE OTHER HAND THE SENIOR DEPARTMENTAL REPRESENTATIVE DEFEN DED THE IMPUGNED ORDER. 11.1 ON PERUSAL OF RECORD AND AFTER HEARING THE RIV AL SUBMISSIONS IT IS SEEN THAT THE ASSESSEE WAS ENGAGED IN BUSINESS OF C &F AGENCY FOR WHICH AVAILABILITY OF PROPER STORAGE OF GOODS IS TH E PRIME REQUIREMENT. SINCE THE ASSESSEE APPLIED FOR OBTAINING C&F AGENCY THE GODOWN WAS KEPT ON RENTAL BASIS AND THE PAYMENT WAS MADE THROU GH CHEQUE CONSEQUENTLY IT IS A BUSINESS EXPENDITURE THEREFO RE IT HAS TO BE ALLOWED ESPECIALLY WHEN NO CONTRARY FACTS WERE BRO UGHT TO OUR NOTICE. 12. AS FAR AS CONFIRMING THE DISALLOWANCE OF RS.13 120/- OUT OF TELEPHONE EXPENSES IS CONCERNED THE STAND OF THE R EVENUE IS THAT SINCE NO BUSINESS ACTIVITY WAS CARRIED OUT AT THE SDA COM POUND THEREFORE THE SAME WAS RIGHTLY DISALLOWED. ON THE OTHER HAND THE STAND OF THE ASSESSEE IS THAT THE EXPENDITURE ON TELEPHONE WAS I NCURRED FOR BUSINESS PURPOSES ONLY THEREFORE IT HAS TO BE ALLOWED. 12.1 WE HAVE PERUSED THE RECORD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSEL. SINCE NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE IN SDA COMPOUND GOD OWN THEREFORE 12 THERE IS NO QUESTION OF ALLOWING THE TELEPHONE AND ELECTRICITY EXPENSES AS THE SAME CANNOT BE SAID TO BE INCURRED FOR BUSIN ESS PURPOSES. CONSEQUENTLY THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT THEREFORE THIS GROUND OF THE ASSESSEE HAS NO MERIT. THE SAME IS THEREFORE DISMISSED. IDENTICAL IS THE SITUATION FOR ELECTRICA L EXPENSES THEREFORE GROUND NO. 3 IS ALSO HAVING NO MERIT AND DISMISSED AS SUCH. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 310/IND/2006 13. IN THIS APPEAL OF THE REVENUE GROUND NOS. 1 AND 2 PERTAIN TO DELETING THE ADDITION ON ACCOUNT OF RENEWAL OF DRUG LICENCE BANK COMMISSION AND INTEREST PAID. THE ASSESSING OFFICE R DISALLOWED THESE EXPENSES ON THE GROUND THAT THE ASSESSEE DID NOT CA RRY OUT ANY BUSINESS ACTIVITY AT 55 SDA COMPOUND WHEREAS THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE AD DITIONS ON THE GROUND THAT THESE EXPENSES WERE NECESSARY FOR THE B USINESS OF THE ASSESSEE. 13.1 ON PERUSAL OR RECORD AND AFTER HEARING THE RIV AL SUBMISSIONS WE ARE IN AGREEMENT WITH THE CONCLUSION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AS THE DRUG LICENCE FEE BANK COMMISSION AND THE INTEREST PAID WAS THE BUSINESS NECESSITY THEREFORE THERE IS NO MERIT IN THIS GROUND OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 13 14. SO FAR AS DELETING THE ADDITION OF RS.82 000/- ON ACCOUNT OF SHARE TRADING IS CONCERNED IT IS SEEN THAT THE ASSESSEE SHOWED PROFIT OF RS.1 18 000/- FROM SHARE TRADING WHICH WAS ESTIMATE D AT RS. 2 LACS ON AD HOC BASIS BY THE ASSESSING OFFICER ON THE GROUND THAT NO DETAILS OF SALES AND PURCHASES WERE FILED. KEEPING IN VIEW TH E TOTALITY OF FACTS THIS GROUND OF APPEAL IS REMANDED TO THE FILE OF THE ASS ESSING OFFICER WITH THE DIRECTION TO EXAMINE THE DETAILS IF ANY FILED BY THE ASSESSEE AND TO DECIDE THE ISSUE ACCORDING TO LAW. THIS GROUND IS THEREFORE ALLOWED FOR FOR STATISTICAL PURPOSES ONLY. 15. GROUND NO. 3 PERTAINS TO DELETING THE ADDITION OF DEPOSIT IN THE NAME OF MISS PRIYANKA NARANG AMOUNTING TO RS.5 35 0 00/-. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS IT IS SEEN THAT THE ADDITION OF RS. 5 35 000/- WAS MADE ON ACCOUNT OF D EPOSIT FROM THE MINOR DAUGHTER OF THE ASSESSEE NAMELY PRIYANKA NARA NG BY TRADING THE SAME AS BOGUS U/S 68 OF THE ACT ON THE GROUND THAT AT THE TIME OF RECORD OF STATEMENT NO EVIDENCE WAS PRODUCED. HOWEVER I T IS SEEN THAT THE COPY OF ACCOUNT OF PRIYANKA NARANG WAS FILED WITH T HE RETURN WHICH SHOWS THAT SHE WAS HAVING OPENING BALANCE OF RS.3 5 1 000/- IN SAVINGS BANK ACCOUNT NO. 12081 IN BANK OF INDIA. THE ASSES SING OFFICER COMPLETED THE EARLIER YEARS ASSESSMENT AND WOULD H AVE VERIFIED THE CLOSING BALANCE FROM THE BOOKS OF ACCOUNTS OF PRIYA NKA NARANG AS COPY OF ACCOUNT OF PRIYANKA NARANG WAS FILED WITH THE RE TURN OF INCOME 14 THEREFOR THE AMOUNT OF RS. 3 51 000/- IS ALLOWED. THE REMAINING AMOUNT OF RS.1 74 000/- (RS. 5 .35 000 (-) RS. 3 51 000/-) IS AFFIRMED THEREFORE THIS GROUND OF THE REVENUE IS PARTLY ALLOWED. THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. ITA NO. 228/IND/2009 (ASSESSMENT YEAR 2001-02) 16. THROUGH THIS APPEAL THE ASSESSEE HAS CHALLENGE D THE CONFIRMATION OF PENALTY OF RS.24 300/- IMPOSED U/S 271(1) OF THE ACT. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT FIRSTLY IT IS CONSEQUENTIAL TO THE ABOVE ORDER AND SECONDLY THE D ISALLOWANCES WERE MADE ON ESTIMATE BASIS AND NO FAULT WAS FOUND WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY THE ASSESSING OFFICER THEREFORE NO PENALTY IS LEVIABLE. RELIANCE WAS PLACED ON THE DECISION IN COMMISSIONER OF SALESTAX UP VS. SANJEEV FABRICS (2011) 1 STD 16 (SC ). ON THE OTHER HAND THE SENIOR DEPARTMENTAL REPRESENTATIVE DEFEND ED THE IMPOSITION OF PENALTY. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AND THE ASSESSMENT WAS COMPLETED U/S 147 OF THE ACT VIDE ORDER DATED 26.3. 2004 AT THE INCOME OF RS.8 43 073/- AGAINST THE RETURNED INCOME OF RS. 1 35 750/-. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) GAVE PARTIAL RELIEF AGAINST WHICH APPEAL WAS PREFERRED BEFORE TH E TRIBUNAL. THE 15 ASSESSING OFFICER THEREAFTER IMPOSED PENALTY ON THE QUANTUM ADDITION TOTALING TO RS.69 013/- CONSISTING OF RS.42 000/- T OWARDS DISALLOWANCE OF RENT RS. 13 893/- TOWARDS ELECTRICITY AND RS.13 12 0/- TOWARDS DISALLOWANCE OUT OF TELEPHONE EXPENSES. THESE DISA LLOWANCES RELATE TO EXPENSES IN RESPECT OF GODOWN AT 55 SDA COMPOUND DEWAS NAKA INDORE. IT IS SEEN THAT THE ADDITION WAS BASED UPON THE STATEMENT RECORDED AT THE TIME OF SURVEY WHEREIN AS PER THE R EVENUE THE ASSESSEE TENDERED THAT NO BUSINESS ACTIVITY WAS CARRIED OUT FROM THE SAID GODOWN DURING THAT YEAR. 18. IF THE TOTALITY OF FACTS IS ANALYSED IT IS SE EN THAT PENALTY OF RS.24 300/- HAS BEEN CHALLENGED AND SOME OF THE ADD ITIONS HAVE BEEN DELETED BY US ABOVE. AT THE SAME TIME QUANTUM ADD ITION AND PENALTY PROCEEDINGS ARE ALTOGETHER DIFFERENT. EVEN IF A WR ONG CLAIM HAS BEEN MADE BY THE ASSESSEE DOES NOT MEAN THAT EITHER INAC CURATE PARTICULARS WERE FILED OR THE ASSESSEE CONCEALED THE PARTICULAR S OF INCOME WHICH ARE THE MAIN INGREDIENTS FOR IMPOSING PENALTY U/S 271(1 )(C) OF THE ACT THEREFORE WE ARE OF THE CLEAR VIEW THAT UNDER THE FACTS NARRATED ABOVE NO PENALTY IS LEVIABLE. THE RATIO LAID DOWN IN K.C. BUILDERS V. ACIT; 265 ITR 562 (SC) LATEST DECISION IN COMMISSIONER OF SA LESTAX VS. SANJEEV FABRICS (SUPRA) AND THE DECISION IN CEMENT MARKETI NG COMPANY OF INDIA LIMITED V. ASSTT. CST; 1 SCC 71 (WHICH RELATES TO I MPOSITION OF PENALTY U/S 43 OF THE M.P.G.S.T. ACT) SUPPORTS THE CASE OF THE ASSESSEE 16 WHEREIN HE HONBLE APEX COURT HAS HELD THAT THE USE OF EXPRESSION FALSELY REPRESENTS IS INDICATIVE OF THE FACT THAT THE OFFENCE U/S 10(B) OF THE CST ACT COMES INTO EXISTENCE ONLY WHERE THERE I S A DELIBERATE DEFIANCE OF LAW OR THE ASSESSEE IS GUILTY OF CONTUM ACIOUS OR DISHONEST CONDUCT. IN THIS LATEST DECISION THE HONBLE APE X COURT SET ASIDE THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT AND FO LLOWED THE DECISION IN CEMENT MARKETING COMPANY OF INDIA LIMITED VS. AS SISTANT CST INDORE AND OTHERS (1980) 1 SCC 71 NATHULAL VS. STA TE; AIR 1966 SC 43 (PARA 13) R.S. JOSHI V. AJIT MILLS LIMITED; 40 STC 497 (SC) (PARA 6) GUJRAT TRAVENCORE AGENCY VS. CIT; 3 SCC 52 AND VARI OUS DECISIONS WHICH ARE AVAILABLE AT PAGE 20 OF THE ORDER OF CST V. SANJEEV FABRICS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. SKYLINE AUTO PRODUCTS PRIVATE LIMITED; 271 ITR 335 (M.P.) EVEN W ENT TO THE EXTENT THAT FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT WHERE MISTAKE IS BONAFIDE IT MAY NOT BE LEVIED. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARIGOPAL SINGH V. CIT; 258 IT R 85 HELD THAT PENALTY CANNOT BE LEVIED WHEN INCOME HAS BEEN ESTIMATED. IN THESE APPEALS THE MAJORITY OF THE ADDITIONS HAVE BEEN DELETED BY US THEREFORE IT IS A FIT CASE WHERE PENALTY HAS TO BE DELETED. ACCORDINGLY THIS APPEAL OF THE ASSESSEE IS ALLOWED. FINALLY THE APPEAL OF THE REVENUE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES WHEREAS THE APPEALS OF THE ASSESSEE ARE DI SPOSED OF AS 17 INDICATED ABOVE AND ITA NO. 228/IND/2009 IS ALLOWED . ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF LEARNED REPRESENTATIVES OF BOTH THE SIDES ON 21 ST JANUARY 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31 ST JANUARY 2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE DN/-