ITO, Dehradun v. M/s Bharat Associates, Dehradun

ITA 3583/DEL/2011 | 2006-2007
Pronouncement Date: 03-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 358320114 RSA 2011
Assessee PAN AAHFB4011D
Bench Delhi
Appeal Number ITA 3583/DEL/2011
Duration Of Justice 6 month(s) 15 day(s)
Appellant ITO, Dehradun
Respondent M/s Bharat Associates, Dehradun
Appeal Type Income Tax Appeal
Pronouncement Date 03-02-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 03-02-2012
Date Of Final Hearing 23-01-2012
Next Hearing Date 23-01-2012
Assessment Year 2006-2007
Appeal Filed On 19-07-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI. BEFORE SHRI I.P. BANSAL AND SHRI K.G. BANSAL I.T.A. NO.3583(DEL)/2011 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER BHARAT ASSOCIATES WARD-2(1) DEHRADUN. VS. TYAG I ROAD DEHRADUN. PAN: AAHFB4011D (APPLICANT) (RESPONDENT) APPELLANT BY : MRS. ANUSHA KHURANA SR. D.R . RESPONDENT BY: N ONE DATE OF HEARING: 23.01.2012 DATE OF PRONOUNCEM ENT: 03.02.2012. ORDER PER K.G. BANSAL : A.M THIS APPEAL WAS FIXED FOR HEARING ON TWO DATES 20.09.2011 AND 23.01.2012. THE NOTICE IN RESPECT OF SECOND H EARING WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK THAT NO SUCH FIRM EXISTS ON THE GIVEN ADDRESS. THE LD. SENIOR DR EXPLAINED THE FACT S OF THE CASE ON 23.01.2012. THE ORDER IS PASSED ON THE BASIS OF THE FACTS ON RECORD AND THE EXPLANATION TENDERED BY THE LD. SENIOR D.R . 2. GROUND NO. 1 IS TO THE EFFECT THAT THE LD. CIT(APPEALS) ERRED IN ALLOWING RELIEF OF RS. 2 35 000/- TO THE ASSES SEE IN RESPECT OF EXPENDITURE INCURRED ON PURCHASE OF BUILDING MA TERIAL AND HE FAILED TO ITA NO. 3583(DEL)/2011 2 APPRECIATE THAT THE ASSESSEE ITSELF HAD ADMITTED TO THE DISALLOWANCE OF RS. 1 44 670/- DURING THE ASSESSMENT PROCEEDINGS. 2.1 IN THIS CONNECTION IT IS MENTIONED IN THE AS SESSMENT ORDER THAT THE ASSESSEE WAS DIRECTED TO PRODUCE BILLS AND VOUCHE RS IN RESPECT OF PURCHASE OF BUILDING MATERIAL ON WHICH EXPENDITURE OF RS. 10 94 857/- WAS INCURRED. A WRITTEN REPLY DATED 23.12.2009 WA S FILED IN WHICH IT WAS MENTIONED THAT THE PROPOSED DISALLOWANCE OF RS. 2 3 5 000/- IS NOT JUSTIFIED AS ALL DELIVERY SLIPS HAVE BEEN SUBMITTED. IT WAS FURTHER SUBMITTED THAT GENERALLY PACCA BILLS FOR BRICKS ETC. ARE NOT I SSUED BY THE SUPPLIER. THEREFORE IT WAS REQUESTED THAT OUT OF THE PROP OSED DISALLOWANCE OF RS. 2 35 000/- THE EXPENDITURE OF RS. 90 330/- MAY BE ALLOWED. HOWEVER THE AO MADE THE DISALLOWANCE OF RS. 2 35 000/- AFTER REJECTING THE EXPLANATION. IT IS MENTIONED THAT ON PERUSAL OF SIMILAR CASES IT IS SEEN THAT ITEMS LIKE BRICKS CEMENT IRON AND BAJRI ARE PROPERLY VOUCHED AND NO PAYMENT IS MADE WITHOUT PRESENTING THE BILL. 2.2 BEFORE THE LD. CIT(APPEALS) IT WAS SUBMITTE D THAT DELIVERY CHALLANS WERE SHOWN TO THE AO AND THUS THERE WAS NO RE ASON FOR ANY ITA NO. 3583(DEL)/2011 3 DISALLOWANCE. IT HAS BEEN HELD THAT SINCE THE AO HAS NOT SHOWN ABSENCE OF ANY DELIVERY CHALLAN THERE WAS NO REASON TO M AKE ANY DISALLOWANCE. 2.3 THE CASE OF THE LD. SENIOR DR BEFORE US IS THAT THE ASSESSEE HAD ITSELF ACCEPTED THE DISALLOWANCE RS. 1 44 670/- IN ASSESSMENT PROCEEDINGS WHEN IT WAS MENTIONED THAT OUT OF PROPOSED DISAL LOWANCE OF RS. 2 35 000/- EXPENDITURE INCURRED ON BAJRI AND BRIC KS TOTALING TO RS. 90 330/- MAY BE ALLOWED. HAVING CONSIDERED THE ASSESSM ENT ORDER IMPUGNED ORDER AND THE SUBMISSION OF THE LEARNED SENIOR D R WE ARE OF THE VIEW THAT IN VIEW OF ACCEPTANCE OF DISALLOWANCE OF RS . 1 44 670/- IN THE ASSESSMENT PROCEEDINGS THE LD. CIT(APPEALS) OU GHT TO HAVE UPHELD THE DISALLOWANCE TO THIS EXTENT. THEREFORE THE DIS ALLOWANCE OF RS. 1 44 670/- IS UPHELD. ACCORDINGLY GROUND NO.1 IS PARTLY ALL OWED. 3. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRE D IN GRANTING RELIEF OF RS. 2.00 LAKH FROM THE EXPENDITURE OF RS. 3 11 612 /- INCURRED UNDER THE HEADS TRAVELING AND CONVEYANCE MISCELLANEOUS PL OT CLEARING AND LABOUR CHARGES. ITA NO. 3583(DEL)/2011 4 3.1 THE LD. SENIOR DR EXPLAINED THAT THE DISAL LOWANCE OF RS. 3 11 612/- COMPRISES OF THREE ITEMS:- (A) RS. 1.00 LAKH DISALLOWED OUT OF RS. 3 83 979/- DE BITED IN THE BOOKS AS TRAVELING AND CONVEYANCE EXPENDITURE ETC. I T WAS SUBMITTED THAT THE ASSESSEE HAD TO TRAVEL TO NAINITAL HIG H COURT IN CONNECTION WITH LITIGATION OF THE FIRM. SINCE THE ASSESSE E COULD NOT PRODUCE EVEN A SINGLE BILL TO SUBSTANTIATE THE EXPENDITUR E A SUM OF RS. 1.00 LAKH WAS DISALLOWED OUT OF THE EXPENDITURE; (B) THE ASSESSEE HAD INCURRED MISCELLANEOUS EXPENSES OF RS. 45 274/-. IT WAS SUBMITTED THAT THE EXPENSES ARE IN RELATIO N TO TEA SNACKS OUT OF POCKET EXPENSES ETC. INCURRED AT THE TIME OF HEARING OF THE CASES IN THE COURTS. THE BILLS COULD NOT BE PROCURED AS THE EXPENSES WERE PETTY IN NATURE. THE AO DISALLOWED HALF OF THE EX PENDITURE AT RS. 22 637/-; (C) AN EXPENDITURE OF RS. 3 77 950/- WAS INCURRED AS LABOUR EXPENDITURE FOR CLEARING THE PLOT OF LAND. THE ASSESSEE PROV IDED THE DETAILS OF THE EXPENDITURE IN TERMS OF NAMES OF THE LABOUR ERS MASONS ITA NO. 3583(DEL)/2011 5 NUMBER OF DAYS RATE OF PAYMENT ETC. AND ALSO F ILED THE VOUCHERS. THEREFORE IT WAS REQUESTED THAT THE WHOLE OF TH E EXPENDITURE MAY BE ALLOWED. THE AO CONSIDERED THE FACTS AND F OUND THE EXPENDITURE TO BE ON HIGHER SIDE. THEREFORE A S UM OF RS. 1 88 975/- WAS DISALLOWED. 3.2 BEFORE THE LD. CIT(APPEALS) IT WAS SUBMITTE D THAT COMPLETE DETAILS OF THE EXPENDITURE HAVE BEEN FURNISHED. THE AO HAS NOT CITED ANY UNVOUCHED EXPENDITURE OR ANY OTHER DISCREPANCY IN THE ACCOUNTING FOR OF THE EXPENSES. HOWEVER IN RESPECT OF CLEARING OF PLOT IT WAS SUBMITTED THAT ALL THE BILLS ARE NOT AVAILABLE AND THEREFORE A SMALL AMOUNT MAY BE DISALLOWED. ACCEPTING THE SUBMISSION OF THE ASSES SEE THE LD. CIT(APPEALS) GRANTED RELIEF OF RS. 2.00 LAKH BY RESTRICTING TH E DISALLOWANCE TO RS. 1 11 612/-. 3.3 BEFORE US THE LD. SENIOR DR RELIED ON THE OR DER OF THE AO. WE FIND THAT ALL THE POINTS MADE BY THE AO IN THE ASSESSM ENT ORDER HAVE BEEN CONSIDERED BY THE LD. CIT(APPEALS). IN RESPECT OF EXPENSES ON PLOT CLEARING ETC. HE HAS RESTRICTED THE DISALLOWANC E TO RS. 1 11 612/-. WE FIND THAT HIS ORDER IS JUSTIFIED ON THE FACTS OF THE CASE. THUS THE ORDER DOES NOT ITA NO. 3583(DEL)/2011 6 REQUIRE ANY INTERFERENCE FROM OUR SIDE. ACCORD INGLY THIS GROUND IS DISMISSED. 4. GROUND NO. 3 IS AGAINST DISALLOWANCE OF RS. 2 96 000/- U/S 40A(3) OUT OF EXPENDITURE OF RS. 16 50 000/- INCURRED AS EVICTION CHARGES. 4.1 IN THIS CONNECTION IT IS MENTIONED THAT THE ASSESSEE PAID EVICTION CHARGES OF RS. 16 50 000/- TO THE TENANTS AND OCC UPANTS OF THE PROPERTY. THE WHOLE OF THE AMOUNT WAS PAID IN CASH. THEREFO RE IT WAS REQUIRED TO STATE AS TO WHY 20% OF THE EXPENDITURE SHOULD NOT BE DISALLOWED U/S 40A(3). IT WAS SUBMITTED THAT A SUM OF RS. 8 .00 LAKH WAS PAID ON 02.10.2005 A NATIONAL HOLIDAY. THIS AMOUNT WAS PAID OUT OF TWO SUMS OF RS. 3.00 LAKH AND RS. 5.00 LAKH RECEIVED FROM SHR I ARVINDER KUMAR AND SHRI S.P. SINGH ON 01.10.2005 AS ADVANCES ON EX ECUTING SALE AGREEMENTS. HOWEVER THE AO DID NOT ACCEPT THIS EXPLANATI ON AS NO EMERGENCY ETC. WAS SHOWN FOR PAYMENT ON 02.10.2005. THEREFORE 20% OF THE WHOLE AMOUNT OF RS. 16 50 000/- AMOUNTING TO RS. 3 30 000/- WAS DISALLOWED. 4.2 BEFORE THE LD. CIT(APPEALS) IT WAS SUBMITT ED THAT A PART OF THE PAYMENT WAS MADE ON THE NATIONAL HOLIDAY WHEN BA NKING FACILITIES WERE ITA NO. 3583(DEL)/2011 7 NOT AVAILABLE. SUCH PAYMENTS WERE TREATED TO HA VE BEEN COVERED UNDER RULE 6DD(J) OF THE INCOME-TAX RULES 1962. THE PAYMENTS WERE MADE FOR BUSINESS PURPOSE. THEREFORE IT WAS REQUESTED THA T THE DISALLOWANCE MAY BE DELETED. THE LD. CIT(APPEALS) CONSIDERED T HE FACTS. HE DELETED THE DISALLOWANCE BY MENTIONING THAT IT IS NOT UNDERSTO OD WHY THE AO GLOSSED OVER THE RULE AND DID NOT ALLOW THE PAYMENT AS IT IS COVERED UNDER RULE 6DD(J). 4.3 BEFORE US THE LD. SENIOR DR DID NOT MAKE AN Y ARGUMENT IN RESPECT OF PAYMENT OF RS. 8.00 LAKH MADE ON THE NATIONAL HOLIDAY. HOWEVER IT WAS HER CASE THAT THERE IS NO EXPLANATION REGARD ING BALANCE CASH PAYMENT OF RS.8 50 000/-. 4.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT CLAUSE (J) OF RULE 6DD TA KES A PAYMENT OUT OF PURVIEW OF SECTION 40A(3) WHERE IT WAS REQUIRED TO BE MADE ON A DAY ON WHICH THE BANKS WERE CLOSED EITHER ON ACCOUNT OF HOLIDAY OR STRIKE. THEREFORE ANY DISALLOWANCE FROM PAYMENT OF RS. 8.00 LAKH WAS UNJUSTIFIED UNDER THE LAW. HOWEVER THIS ARGUMEN T WAS ONLY IN RESPECT OF PAYMENT OF RS. 8.00 LAKH OUT OF A TOTAL PAYMENT OF RS. 16 50 000/-. IT IS ITA NO. 3583(DEL)/2011 8 NOT THE CASE OF THE ASSESSEE THAT THE BALANCE PAYMENT OF RS.8 50 000/- WAS ALSO MADE ON A NATIONAL HOLIDAY WHEN THE BAN KS WERE CLOSED OR ON A DAY WHEN THERE WAS A STRIKE IN BANKS. THIS PAY MENT IS NOT COVERED UNDER ANY OF THE CLAUSES OF RULE 6DD. THEREFORE IT I S HELD THAT THE AO WAS JUSTIFIED IN DISALLOWING 20% FROM THE REMAINING PAYMENT OF RS. 8 50 000/-. ACCORDINGLY THIS GROUND IS PARTLY A LLOWED. 5. GROUND NO. 4 IS THAT THE LD. CIT(APPEALS) ERRED IN REDUCING THE DISALLOWANCE OF RS. 4 80 000/- TO RS. 48 870/- OU T OF THE EXPENDITURE DEBITED UNDER THE HEADS ADMINISTRATIVE AND MARKE TING AND SALARY EXPENSES. 5.1 IN THIS CONNECTION IT IS MENTIONED IN THE ASS ESSMENT ORDER THAT A SUM OF RS. 22 53 518/- WAS DEBITED AS ADMINISTRATIV E EXPENDITURE AND MARKETING AND STAFF SALARIES. THE ASSESSEE WAS REQUIRED TO PROVE THE ACTUAL INCURRING OF THE EXPENDITURE. IT WAS SU BMITTED THAT THE PROPOSED DISALLOWANCE OF RS. 4 48 870/- FROM THE SALARIES IS UNJUSTIFIED. THE REASON IS THAT THE TITLE OF THE ASSESSEE IN THE P ROPERTIES WAS DEFECTIVE. THEREFORE IT WAS DECIDED TO GIVE INCENTIVE AT THE RATE OF 0.25% OF THE SALES TO THE EMPLOYEES WHO WERE INSTRUMENTAL IN DISPOSING OF THE STOCK. ITA NO. 3583(DEL)/2011 9 THEREFORE THE WHOLE OF THE EXPENDITURE IS GENUI NE. HOWEVER THE AO DISALLOWED A SUM OF RS. 4 48 870/-. 5.2 THE FINDING OF THE LD. CIT(APPEALS) IS THAT TH E ASSESSMENT ORDER IS NOT BASED ON ANY EVIDENCE OR VALID ARGUMENT. SI NCE IT HAS BEEN MADE WITHOUT ANY BASIS THE DISALLOWANCE IS RESTRICTED TO RS. 48 870/-. BEFORE US THE LD. SENIOR DR RELIED ON THE ASSESSMENT ORD ER. ON PERUSAL OF THE ASSESSMENT ORDER AND THE IMPUGNED ORDER IT BECOM ES CLEAR THAT THE AMOUNT OF RS. 4 48 870/- CONSISTED OF INCENTIVE P AID TO EMPLOYEES COMPUTED @ 0.25% OF SALES. THE REASON FOR PAYME NT FOR INCENTIVE IS THAT TITLE IN THE PROPERTY BEING STOCK-IN-TRADE WAS D EFECTIVE. THE AO HAS NOT BEEN ABLE TO ESTABLISH IN ANY MANNER THAT THE E XPENDITURE WAS NOT FOR THE PURPOSE OF BUSINESS OR THAT IT WAS NOT INCURRED. LOOKING TO THESE FACTS WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FIN DING IN THE IMPUGNED ORDER. ACCORDINGLY GROUND NO. 4 IS DISMISSED. 6. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (I.P. BANSAL) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA ITA NO. 3583(DEL)/2011 10 COPY OF THE ORDER FORWARDED TO:- BHARAT ASSOCIATES DEHRADUN. ITO WARD 2(1) DEHRADUN. CIT(A) CIT THE D.R. ITAT NEW DELHI. ASSISTANT REGISTRAR.