The ITO, Ward-6(1),, Surat v. Shri Ashokkumar H.Kothari, Surat

ITA 3448/AHD/2007 | 2004-2005
Pronouncement Date: 16-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 344820514 RSA 2007
Assessee PAN ADJPK1858H
Bench Ahmedabad
Appeal Number ITA 3448/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 7 day(s)
Appellant The ITO, Ward-6(1),, Surat
Respondent Shri Ashokkumar H.Kothari, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 16-07-2010
Date Of Final Hearing 24-06-2010
Next Hearing Date 24-06-2010
Assessment Year 2004-2005
Appeal Filed On 09-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 24/06/2010 DRAFTED ON: 13/ 07/2010 1. ITA NO.3433/AHD/2007 2. ITA NO.3448/AHD/2007 ASSESSMENT YEAR : 2004-05 1. ASHOKKUMAR H.KOTHARI PROP.B.ASHOKKUMAR & CO. 12 SHAKTI CHAMBERS RUGHNATHPURA SURAT 2. THE ITO WARD-6(1) SURAT VS. 1.THE ITO WARD-6(1) SURAT 2. ASHOKKUMAR H. KOTHARI SURAT PAN/GIR NO. : ADJPK 1858 H (APPELLANT) .. (RESPONDENT) ASSESSEE BY : SHRI M.K. PATEL A.R. REVENUE BY: SHRI GAURAV BATHAM D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : THESE ARE CROSS APPEALS RESPECTIVELY BY THE ASSE SSEE AND THE REVENUE BOTH HAVE EMANATED FROM THE COMMON ORDER OF THE LEARNED CIT(APPEALS)-IV SURAT DATED 08/06/2007 PASSED FOR ASSESSMENT YEAR 2004-05. 2. FIRST WE SHALL TAKE UP THE ASSESSEES APPEAL I. E. ITA NO.3433/AHD/2007. THE ONLY SUBSTANTIVE GROUND READ S AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AS WELL AS LAW ON THE SUBJECT THE LEARNED COM OF THE INCOME T AX (APPEALS) ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 2 - HAS ERRED CONFIRMING THE ACTION OF THE ASSESSING OF FICER IN DISALLOWING 30% OF BUSINESS EXPENDITURE TO THE TUNE OF RS.18 15 800. 3. THIS IS AN ORDER DATED 27/11/2006 PASSED U/S.143 (3) OF THE I.T. ACT 1961 AND WRITTEN IN HINDI THROUGH WHICH FACTS IN BR IEF HAVE EMERGED THAT ON TOTAL TURNOVER OF RS.150 87 04 195/- THE GROSS P ROFIT WAS DISCLOSED AT RS.31 23 617/- THEREON REFLECTING THE GROSS PROFIT AT 0.20%. THE NET PROFIT DISCLOSED BY THE ASSESSEE WAS AT RS.1 27 428 /-. A SHOW-CAUSE NOTICE HAS ALSO BEEN ISSUED AND IN COMPLIANCE THE A SSESSEE HAS FURNISHED THE DETAILS OF EXPENDITURE AS FOLLOWS:- IN REPLY OF YOUR ABOVE SHOW CAUSE WE WOULD LIKE TO SUBMIT THE FOLLOWING DETAILS/DOCUMENT/EVIDENCE FOR YOUR KIND P ERUSAL. 2. (I) (A) LOCAL CONVEYANCE EXP. OF RS.47600.00 YOU HAVE WRITTEN IN ABOVE NOTICE THAT THIS EXP. ARE WRITTEN IN BOOKS OF ACCOUNT WITHOUT SUPPORTING DOCUMENT. THESE E XPENSES ARE PAID FOR THE PURPOSE OF LOCAL TRAVELLING BY THE AUT O BUS AND TAXI ETC. AND PRACTICALLY IT IS NOT POSSIBLE TO GET SUPP ORTING DOCUMENT FOR THESE PETTY ETC. FROM THESE PERSONS HOWEVER PE RSONS WHO HAVE TRAVELLED BY THESE TRANSPORT THEY HAVE SIGNED ON VO UCHERS. THESE EXP. ARE FOR THE PURPOSE OF BUSINESS ACTIVITY. (B) TRAVELLING EXP. OF RS.51241.00 THESE EXPENSES ARE PAID FOR THE PURPOSE OF TRAVELLI NG FOR PURCHASE OF DIAMOND FROM BHAVNAGAR JAIPUR AND OTHER CITIES. PERSONS WHO HAVE TRAVELLED AND PAID THE EXP. THEY HAVE SIGNED O N VOUCHERS. THESE EXP. ARE FOR THE PURPOSE OF BUSINESS ACTIVITY . (C) OFFICE EXP. OF RS.156354.00 ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 3 - THESE EXPENSES ARE RELATED TO TEA COFFEE OTHER GEN ERAL EXP. AND ENTERTAIN TO PARTIES WHO VISITS OUR OFFICE. PERSO NS WHO HAVE PAID THE EXP. THEY HAVE SIGNED ON VOUCHERS. THESE EXP. ARE FOR THE PURPOSE OF BUSINESS ACTIVITY. (D) TELEPHONE EXPENSES OF RS.42556.00 THESE EXPENSES ARE RELATED TO STD CALLS DONE BY THE EMPLO9YEE FROM SURAT TO B.O. MUMBAI FOR THE BUSINESS PURPOSE. (II) (A) BROKERAGE EXPENSES OF RS.2045407.00 FOR THESE EXP. YOU HAVE WRITTEN THAT WE HAVE PLACED ONLY SELF MADE DOCUMENTS. HOWEVER THESE DOCUMENTS (WHICH CON TAIN DETAILS OF EACH TRANSACTION OF BROKERAGE PAID) WAS CONFIRMED BY THE RECIPIENTS BROKER WITH THEIR PAN NO. FURTHER WE HAVE PAID ALL THESE EXP. BY A/C PAYEE CHEQUE TO RESPECTIVE BROKER AND DIRECTED IN BANK STATEMENT WHICH IS SUBMITTED TO YOU. FURTH ER WE COULD PRODUCE ACK. OF I.T. RETURN OF THE ABOVE PERSONS (B ROKER) IN WHICH THEY HAVE SHOWN THIS INCOME FOR THIS PURPOSE WE REQUIRE 15 DAYS MORE TIME. (LEDGER AND ABOVE DOCUMENTS ATTACH ED.) (B) REPRESENTATIVE REMUNERATION OF RS.176000.00 THIS REMUNERATION PAID TO BROKERS PERSON WHO ARE G OES TO OTHER COUNTRY FOR THE PURPOSE OF IMPORT. THESE EXPENSES ARE PAID BY A/C PAYEE CHEQUE AND TDS HAVE BEEN DEDUCTED. WE WILL P RODUCE ACK. OF I.T. RETURN OF THE ABOVE PERSONS IN WHICH T HEY HAVE SHOWN THIS INCOME AND PAID TAX FOR WHICH WE REQUIRE 15 D AYS MORE ITEM. (LEDGER AND DETAILS ARE ATTACHED.). (C) SALARY EXP. OF RS.294000.00 THESE EXPENSES ARE PAID BY A/C PAYEE CHEQUE IN THE MOST OF CASES. FURTHER WE WILL PRODUCE ACK. OF I.T. RETURN OF THE ABOVE PERSONS AND THEY HAVE SHOWN THIS INCOME AND PAID TAX. (III) FOREIGN TRAVELLING EXP. OF RS.2634188.00 FOR THESE EXP. WE ARE ATTACHING THE INVOICES OF TRA VEL AGENT AND EXCHANGE MEMO FROM RBI AUTHORIZED AGENT FOR CURRENC Y EXCHANGE ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 4 - (SUCH AS AMERICAN EXPRESS SERVICES LTD.). FOR THE PURPOSE OF IMPORT WE HAVE TO SENT REPRESENTATIVES OF OUR BROKE R ON OUR BEHALF AS THEY ARE MASTERS FOR THESE PURCHASES OF IMPORT A ND THEY ARE DEALING EVERYDAY THESE OVERSEAS SELLER SO THEY CAN PURCHASE AT VERY COMPETITIVE PRICE. FOR THIS PURPOSE WE HAVE P AID THE REPRESENTATIVE REMUNERATION TO THESE PERSON. FURTH ER AS YOU SAID THAT THESE ARE NOT BUSINESS PURPOSE FOR THIS WE CO ULD PRODUCE THE CHART THAT WHICH IMPORT MADE BY THE WHICH REPRESENT ATIVE. 3.1. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINC ED AND HE HAS HELD THAT IN RESPECT OF LOCAL CONVEYANCE TRAVELLING EXP ENSES OFFICE EXPENSES AND TELEPHONE EXPENSES 100% DISALLOWANCE HAS TO BE MADE. HOWEVER IN RESPECT OF BROKERAGE EXPENSES REPRESENTATIVE RE MUNERATION SALARY EXPENSES AND FOREIGN TRAVEL ONLY 50% DISALLOWANCE H AD TO BE MADE. WITH THE RESULT IN RESPECT OF 100% DISALLOWANCE T HE QUANTUM WAS DETERMINED AT RS.2 97 751/- AND IN RESPECT OF 50% D ISALLOWANCE THE QUANTUM WAS DETERMINED AT RS.25 74 798/- RESPECTIVE LY FOR THOSE EXPENSES. THE TOTAL OF THE TWO I.E. RS.28 72 549/- WAS TAXED IN THE HANDS OF THE ASSESSEE. BEING AGGRIEVED THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. THE LEARNED CIT(APPEALS) HAS EXAMINED THE DETAIL S OF THE CASE AND ALSO COMPARED THE PROFITS OF THE PAST YEARS. I N HIS OPINION INSTEAD OF BIFURCATING INTO TWO GROUPS THE QUESTIONED EXPENSES IT WAS JUSTIFIABLE TO RESTRICT THE DISALLOWANCE OF THE TOTAL CLAIMED EXPE NDITURE AT 30% OF THE ENTIRE SUM. HE HAS EXAMINED SOME OF THE VOUCHERS AND THE CONNECTED EVIDENCES AND THEN GIVEN HIS FINDING THAT THE DISAL LOWANCE AT THE RATE OF 50% ON SUCH EXPENDITURE WAS TOWARDS HIGHER SIDE. HE HAS ALSO GIVEN A ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 5 - FINDING THAT IN RESPECT OF THE OTHER GROUP OF EXPEN DITURE THE DISALLOWANCE AT THE RATE OF 100% EXPENDITURE WAS NOT AT ALL JUST IFIED. SINCE THE DISALLOWANCE WAS RESTRICTED TO 30% THEREFORE OUT OF THE TOTAL EXPENDITURE OF BOTH THE GROUPS TOTALING TO RS.54 47 346/- THE DISALLOWANCE WAS COMPUTED AT RS.18 15 800/-. SINC E A PART RELIEF WAS GRANTED THEREFORE PRESENTLY BOTH THE SIDES ARE AG GRIEVED AND NOW IN APPEAL AS NOTED (SUPRA). 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A ND ON CAREFUL EXAMINATION OF THE FACTS OF THE CASE WE HAVE ALSO NOTICED THAT THE COMPARATIVE FIGURE OF THE PROFIT RATIO OF THE PAST FEW YEARS AS WELL AS FOR THE NEXT ASSESSMENT YEAR WAS AS FOLLOWS:- A.YEAR 2002- 2003 TURNOVER G.P. G.P. RATIO N.P. N.P. RATIO 2002-03 856801113.00 1890548.00 0.22% 97941.00 0.00011431 2003-04 1759735856.00 4118917.00 0.23% 126707.00 0.00007200 2004-05 1508704195.00 3123617.00 0.21% 127428.00 0.00008446 2005-06 1465524662.00 334038.00 0.02% 224806.00 0.0015340 6. ON THE BASIS OF ABOVE DETAILS LEARNED AUTHORISE D REPRESENTATIVE OF THE ASSESSEE SHRI M.K.PATEL HAS PLEADED THAT INS TEAD OF PROLONGING THE LITIGATION AND TO SAVE THE TIME OF THE COURT IT WO ULD BE BETTER THAT A LUMP SUM ADDITION MAY BE DIRECTED TO BE MADE FOR THE YEA R UNDER CONSIDERATION. HE HAS FURTHER ELABORATED THAT THIS APPROACH WOULD BE REASONABLE BECAUSE THE REVENUE AUTHORITIES HAS ALS O ADOPTED THE SAME APPROACH OF DISALLOWANCE OF EXPENDITURE MERELY ON T HE BASIS OF ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 6 - ESTIMATION. EVEN LEARNED DEPARTMENTAL REPRESENTATI VE HAS NO SERIOUS OBJECTION IF A LUMP SUM FIGURE BE DIRECTED TO BE TA XED IN THE HANDS OF THE ASSESSEE PRIMARILY BECAUSE OF THE REASON THAT THIS ASSESSEE WAS SHOWING A MINIMAL NET PROFIT FOR TAX PURPOSE WHICH ACCORDING TO HIM WAS INADEQUATE CONSIDERING THE TOTAL TURNOVER OF THE AS SESSEE. BY ACCEPTING THE SUGGESTIONS OF BOTH THE SIDES WE ARE OF THE VI EW THAT UNDER CERTAIN CIRCUMSTANCES AN ADHOC ADDITION CAN BE SUGGESTED BY THIS TRIBUNAL BEING A FINAL FACT FINDING AUTHORITY; AS IT WAS ALREADY HELD IN ONE OF THE CASE OF ITAT AHMEDABAD BENCH A VIZ. ITO VS. M/S.NARE NDRA DHIRUBHAI DESAI (IN ITA NO.3280/AHD/2008) FOR ASSESSMENT YE AR 2005-06 DATED 09/07/ 2010 WHEREIN THE TRIBUNAL HAS HELD AS UNDER :- 5. WE HAVE HEARD BOTH THE SIDES AND ALSO CAREFULLY EXAMINED THE FACTS OF THE CASE IN THE LIGHT OF THE ORDERS OF THE AUTHORITIES BELOW. THIS IS A SIMPLE CASE TO PUT ONE ESTIMATE AGAINST ANOTHE R ESTIMATE AS ADOPTED BY ASSESSING OFFICER & LEARNED CIT(APPEALS) RESPECT IVELY. ON ONE HAND THE ASSESSING OFFICER HAS DISALLOWED THE EXPE NDITURE BY ADOPTING AN ESTIMATE OF PERCENTAGE AT 20% WHILE THE LEARNED CIT(APPEALS) HAS PARTLY SUSTAINED BY REDUCING THE DISALLOWANCE AFTER ADOPTING AN ESTIMATED PERCENTAGE AT 10%. NEVERTHELESS THE C ONTENTION OF THE ASSESSEE WAS THAT THE EXPENDITURE SUCH AS INTERES T BONUS DISCOUNT ETC. WERE LOWER IN PERCENTAGE COMPARING THE PAST YEARS BOOK RESULTS; MOREOVER CLAIMED TO BE EVIDENCED BY TDS CERTIFICATE ETC. WHICH WERE PROCURED AND STATED TO BE FURNISHED BEFORE THE ASSE SSING OFFICER. ADDITIONALLY IT WAS ALSO PLEADED THAT THE LOSS OF BOOKS OF ACCOUNTS WAS DUE TO FORCE MAJEURE WHICH HAS ALSO BEEN AFFIRMED BY FURNISHING AN AFFIDAVIT BEFORE THE AO. ACCORDING TO US UNDOUBT EDLY THESE SUBMISSIONS ARE QUITE GENERAL IN NATURE SO THAT MUS T NOT SUBSTITUTE THE PRIMARY ONUS OF FURNISHING OF REQUISITE DETAILS AS AFFIXED ON THE ASSESSEE. ANY CLAIM OF EXPENDITURE HAS TO BE SUPP ORTED BY COGENT EVIDENCE WHICH WAS ADMITTEDLY LACKING IN THE PRESEN T CASE. THE LEARNED CIT(APPEALS) HAS APPRECIATED THE FACTS OF T HE CASE AND THEREAFTER THOUGHT IT PROPER TO GIVE ONLY PART REL IEF. SINCE THE ASSESSEE HAS NOT IMPROVED HIS CASE EVEN BEFORE THIS FORUM BY FILING ANY ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 7 - EVIDENCE MAY BE A COGENT ONE; RATHER FAILED TO SU BSTANTIATE HIS CASE MORE THAN WHAT WAS EXPLAINED TO LEARNED CIT(APPEALS ) HENCE WE ARE ALSO OF THE OPINION THAT LEARNED CIT(APPEALS) WAS R EASONABLE AND FAIR TO GIVE A PART RELIEF TO THE ASSESSEE. BY APPROVI NG THE SAID REASONING OF LEARNED CIT(APPEALS) ATLEAST THIS ASSESSEE SHA LL NOW PAY SOME TAX ON A HUGE TURNOVER OF MORE THAN RS.6 CRORES INSTEAD OF DECLARING NIL INCOME. GENERALLY AN ESTIMATION OR ADHOCISM IS N OT APPROVED BY US BUT SPARINGLY A CERTAIN DEGREE OF GUESS-WORK OR A BEST JUDGEMENT OF THE REVENUE OFFICERS HAS TO BE APPROVED AND THAT TOO DU E TO NON- COMPLIANCE OR INCOMPLETE COMPLIANCE BY THE ASSESSEE FOR WHICH HE HIMSELF IS TO BE BLAMED. IF THERE IS NO ARBITRARIN ESS IN THAT ADHOCISM OR ESTIMATION AND A REASONABLE APPROACH HAS BEEN ADOPT ED BY THE REVENUE DEPARTMENT THEN WE HAVE TO CONFIRM SUCH OVERRIDING POWERS GIVEN TO REVENUE OFFICERS IN EXCEPTIONAL CIRCUMSTANCES. TH IS APPEAL CAN BE SAID TO HAD FALLEN IN SUCH A CATEGORY OF EXCEPTION AL CASE. WE ARE THEREFORE OF THE VIEW THAT THE PERCENTAGE AS ADOPT ED BY THE LEARNED CIT(APPEALS) HAS TO BE AFFIRMED. WE ORDER ACCORDIN GLY. WITH THE RESULT REVENUES GROUND IS DISMISSED. 7. THEREFORE FOLLOWING THE ABOVE VIEW WE HEREBY H OLD THAT IT IS INEVITABLE BUT TO RESORT TO AN ADHOC DISALLOWANCE W HICH ACCORDING TO OUR BEST JUDGMENT SHOULD BE RS.10 LACS IN RESPECT OF TH E ALLEGED HEADS OF EXPENDITURE. WE HAVE COMMUNICATED THIS FIGURE EVE N TO BOTH THE SIDES AT THE END OF THE HEARING WHICH APPEARS TO HAVE BEE N ACCEPTED BY THEM. IN THE RESULT WE HEREBY DIRECT TO RESTRICT THE DIS ALLOWANCE OF EXPENDITURE AT RS.10 LACS FOR THE YEAR UNDER CONSIDERATION. RE SULTANTLY ASSESSEES APPEAL IS PARTLY ALLOWED. REVENUES APPEAL I.E. ITA NO.3448/AHD/2007 8. ONCE A VIEW HAS ALREADY BEEN TAKEN IN RESPECT OF THE ALLEGED DISALLOWANCES UNDER THOSE VERY HEADS OF EXPENDITURE WHICH WAS ITA NO.3433/AHD/2007 (BY ASSESS EE) AND ITA NO.3448/AHD/2007 (BY REVENUE) ASHOKKUMAR H.KOTHARI VS. ITO ASST.YEAR 2004-05 - 8 - CHALLENGED BEFORE US IN AN IDENTICAL MANNER BY THE ASSESSEE IN THE APPEAL DEALT WITH HEREINABOVE THEREFORE ON THE S AME LINES THE REVENUES GRIEVANCE ALSO HEREBY STOOD SETTLED. IN THE RESULT THE REVENUES GROUND MAY BE TREATED AS PARTLY ALLOWED. 9. RESULTANTLY THE APPEAL OF THE ASSESSEE AS WELL AS APPEAL OF THE REVENUE BOTH ARE PARTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 16/ 07 /2010. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SHRAWA T ) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMEDABAD; DATED 16 / 07 /2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-IV SURAT 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD