M/S R.K. GUPTA, Jaipur v. ACIT, Kota

ITA 461/JPR/2012 | 2006-2007
Pronouncement Date: 21-11-2014 | Result: Partly Allowed

Appeal Details

RSA Number 46123114 RSA 2012
Assessee PAN AABFR5904M
Bench Jaipur
Appeal Number ITA 461/JPR/2012
Duration Of Justice 2 year(s) 6 month(s) 7 day(s)
Appellant M/S R.K. GUPTA, Jaipur
Respondent ACIT, Kota
Appeal Type Income Tax Appeal
Pronouncement Date 21-11-2014
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 21-11-2014
Assessment Year 2006-2007
Appeal Filed On 14-05-2012
Judgment Text
IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 461/JP/2012 ASSTT. YEAR- 2006-07 PAN NO. AABFR 5904 M M/S R.K. GUPTA THE A.C.I.T. C/O- MANGLAM CEMENT LTD. VRS. CIRCLE-1 KOTA. ADITYA NAGAR MORAK KOTA. (APPELLANT) (RESPONDENT) ASSESSEE BY :- SHRI P.C. PARWAL. DEPARTMENT BY :- MRS. NEENA JEPH. DATE OF HEARING : 13/10/2014 DATE OF PRONOUNCEMENT : 21/11/2014 O R D E R PER: T.R. MEENA A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29/03/2012 OF THE LEARNED CIT(A)-KOTA FOR THE A.Y. 2 006-07. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE M ADE BY A.O. OUT OF VARIOUS EXPENSES AS UNDER:- JEEP EXPENSES/VEHICLE EXPENSES RS. 21 061/- DEPRECIATION OF JEEP & MOTOR CYCLE RS. 13 718/- TELEPHONE EXPENSES RS. 4 630/- DIWALI EXPENSES RS. 4 330/- EXPENSES FOR LABOUR RS. 1 50 000/- STAFF MESS EXPENSES RS. 12 181/- ITA 461/JP/2012 R.K. GUPTA VS. ACIT 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 28 687/- (4 615 + 24 072) ON ACCOUNT OF DISCREPANCY IN THE ACCOUNT OF M/S NADOKA CRUSHERS. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF AS SESSEE THAT NET PROFIT RATE AFTER CONSIDERING THESE ADDITIONS/D ISALLOWANCES WOULD WORK OUT AT 8.65% WHICH IS UNREASONABLE AND UNJUSTIFIED. 2. THE GROUNDS NO. 1 TO 3 OF THE ASSESSEES APPEAL A RE INTERLINKED AND AGAINST THE CONFIRMING THE ADDITION MADE BY THE ASS ESSING OFFICER UNDER DIFFERENT HEADS. THE ASSESSEE FIRM IS ENGAGED IN CI VIL CONSTRUCTION WORK COAL BLENDING AND MIXING LABOUR SUPPLY WORK FOR MAN GALAM CEMENT NEER SHREE CEMENT AND LABOUR FOR M/S INDORAMA CEMENT LTD . (PEN (MAHARASTRA) DURING THE PERIOD RELEVANT FOR THE A.Y . 2006-07 UNDER CONSIDERATION THE ASSESSEE HAD SHOWN TOTAL CONTRACT RECEIPTS OF RS. 1 73 26 173/-. ON THESE RECEIPTS NET PROFIT (BEFOR E INTEREST AND REMUNERATION TO PARTNERS) HAD BEEN SHOWN AT RS. 12 63 518/- WHICH WAS 7.29% AS AGAINST 7.32% RETURNED IN A.Y. 2005-06. TH E ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD NOT MAINTAIN ED DAY TO DAY STOCK REGISTER THEREFORE PURCHASES COULD NOT BE VERIFIE D. IT IS FURTHER SEEN FROM THE LABOUR EXPENSES REGISTER FOR LABOUR ATTENDANCE REGISTER/MUSTER ROLL WAS NOT VERIFIABLE. THE ASSESSEE HAD DEBITED RS. 98 7 63/- UNDER THE HEAD JEEP RUNNING EXPENSES AND RS. 6 545/- UNDER THE HEA D VEHICLE EXPENSES ITA 461/JP/2012 R.K. GUPTA VS. ACIT 3 BUT NO LOG BOOK HAD BEEN MAINTAINED. THESE EXPENSES WERE MAINLY CLAIMED FOR FUEL/REPAIR EXPENSES. THE PERSONAL USE OF VEHICLE CANNOT BE RULED OUT THEREFORE HE DISALLOWED 20% OUT OF TOTAL CLAIM. FURTHER DEPRECIATION @ 20% ALSO DISALLOWED ON CAR AND MOTOR C YCLE. THE EXPENSES CLAIMED UNDER THE HEAD TELEPHONE EXPENSES DIWALI EXPENSES WHICH WERE NOT SUPPORTED WITH PROPER REGISTER OR BILL VOUCHER AND PERSONAL ELEMENT WAS FOUND BY THE ASSESSING OFFICER OUT OF 20% WAS DISALLOWED OUT OF TELEPHONE EXPENSE AND 50% ON PURCH ASE OF SILVER COINS SWEETS AND DIWALI EXPENSES. FURTHER THE ASSESSEE HAS DEBITED WAGES AND ALLOWANCES OF RS. 35 29 040/- LABOUR CHARGES OF RS. 30 29 014/- COAL BLENDING AND MIXING EXPENSES OF RS. 26 90 125/- AND SALARY EXPENSES OF RS. 26 18 282/-. NO PROPER RECORD TO VERIFY THE ACT UAL PAYMENT WAS AVAILABLE WITH THE ASSESSEE. MUSTER ROLL REGISTER PR ODUCED FOR THE ATTENDANCE WAS NOT FOUND AUTHENTIC AS NO SIGNATURES WERE MADE ON IT. HE PARTICULARLY QUOTED THE MUSTER ROLL REGISTER PRODUC ED FOR THE MONTH OF AUGUST 2005 AND AUGUST 2006. AS PER HIS OBSERVATI ON IT WAS MAINTAINED AS PER ASSESSEES SUITABILITY. HE COULD NOT VERIFY THE LABOUR FORCE EXECUTED AS PER SPECIFIC WORK ORDER THEREFORE HE DISALLOWED AD HOC ADDITION OF RS. 1 50 000/- FOR THE POSSIBLE LEAKAGE OF REVENUE ON T HIS ACCOUNT. FURTHER THE ASSESSEE CLAIMED STOCK EXPENSES OF RS. 1 21 816 /- ON VERIFICATION OF ITA 461/JP/2012 R.K. GUPTA VS. ACIT 4 BILL VOUCHERS OF HOTEL WHICH WAS NOT FOUND WHOLLY AN D EXCLUSIVELY FOR BUSINESS PURPOSES. THEREFORE 10% OUT OF THIS DISA LLOWED BY THE ASSESSEE FOR NON-BUSINESS PURPOSES. THERE WAS A DISCREPANCY IN THE ACCOUNT OF NAKODA CRUSHERS AS CREDITOR WITHOUT STANDING BALANCE ON 31/3/2006 AT RS. 65 502/-. IN THE CONFIRMATION OF ACCOUNT OBTAINED B Y THE ASSESSEE FROM M/S NAKODA CRUSHERS THE BALANCE WAS SHOWN AS RS. 46 865/-. THE ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD ON THIS ISSUE. AFTER CONSIDERING THE ASSESSEES REPLY HE M ADE ADDITION OF RS. 4 615/- IN COMPUTATION OF INCOME. HOWEVER HE HAS NO T MENTIONED THE PROTECTIVE ADDITION MADE AT RS. 24 072/- IN COMPUTA TION OF INCOME. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED ASSE SSING OFFICER THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A) WHO HAD CONFIRMED THE ADDITION @ 20% OUT OF TOTAL EXPENSES UNDER HEAD JEEP/VEHICLE EXPENSES DEPRECIATION ON JEEP AND MOTOR CYCLE TEL EPHONE EXPENSES 50% OUT OF SWEETS AND SILVER COIN AND TOTAL DISALLOWA NCE OF RS. 4 330/- AS DIWALI EXPENSES ON THE BASIS OF FINDINGS GIVEN BY T HE LEARNED ASSESSING OFFICER AFTER CONSIDERING THE ASSESSEES REPLY. FUR THER HE WAS NOT SATISFIED WITH THE SUBMISSIONS MADE BY THE APPELLANT BEFORE HI M ON SUPPLY OF LABOUR. ACCORDINGLY HE ALSO CONFIRMED RS. 1.50 LAC S OUT OF TOTAL EXPENSES OF RS. 1 18 66 461/-. FURTHER HE ALSO CONFIRMED 10% OUT OF MESS ITA 461/JP/2012 R.K. GUPTA VS. ACIT 5 EXPENSES. FOR THE DISCREPANCY FOUND IN THE ACCOUNT OF M/S NAKODA CRUSHERS IT HAS BEEN HELD THAT IT IS SURPRISING TH AT EVEN AFTER EXPIRY OF MORE THAN FIVE YEARS THE ACCOUNT RELATED TO F.Y. 2 005-06 THE ASSESSEE COULD NOT RECONCILE THE ACCOUNT AND OBTAINED NO INF ORMATION FROM M/S NAKODA CRUSHERS TO JUSTIFY HIS CLAIM THUS HE CONFI RMED THE ADDITION. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE JEEPS AND VEHICLES ARE MAINLY USED FOR TRANSPORTING THE LABOU R FROM ONE SITE TO OTHER SITE AND BRINGING THE LABOUR FROM THE NEARBY VILLAG ES. THE EXPENDITURE UNDER THIS HEAD INCLUDES PETROL EXPENSES DIESEL EX PENSES AND REPAIR EXPENSES AS EVIDENT FROM THE COPY OF LEDGER ACCOUNT PLACED AT PB 9-14. THE EXPENDITURE IS REASONABLE CONSIDERING THE VOLUME OF BUSINESS. THE AO HAS NOT SPECIFIED ANY INSTANCES WHERE VEHICLES ARE USED FOR PERSONAL PURPOSE. THUS THE DISALLOWANCE MADE BY THE AO IS UNJ USTIFIED. FURTHER THE DEPRECIATION IS A STATUTORY PROVISION WHICH CAN NOT BE DENIED ON ACCOUNT OF PERSONAL USE. FOR THIS RELIANCE IS PLACE D IN THE CASE OF KAILSH CHAND GUPTA V/S DCIT 35 TAXWORLD 36 WHEREIN IT WAS HELD THAT CLAIM OF DEPRECIATION IS A STATUTORY PROVISIONS WHICH CANNOT BE DENIED ON THE BASIS OF PERSONAL USE OF THE ASSESSEE. THE BREAKUP OF TELE PHONE EXPENSES IS AT PAGE 5 OF THE CIT(A) ORDER. THE EXPENSES ON MOBILE U SED BY THE PARTNER ITA 461/JP/2012 R.K. GUPTA VS. ACIT 6 IS ONLY RS.3 451/- THEREFORE THE DISALLOWANCE IF AN Y FOR PERSONAL USE SHOULD BE RESTRICTED WITH REFERENCE TO THE MOBILE EX PENSES OF THE PARTNER ONLY. THE DISTRIBUTION OF SILVER COINS AND SWEETS TO VARIOUS PERSONS CONNECTED WITH THE BUSINESS ON THE OCCASION OF DIWALI FESTIVAL IS NORMAL CUSTOM AND THEREFORE THE DISALLOWANCE MADE IS UNJUST IFIED AND BE DELETED. IN RESPECT OF PAYMENT MADE TO LABOUR THE ASSESSEE H AS PRODUCED ATTENDANCE AND LABOUR PAYMENT REGISTER BEFORE THE A O AND ALSO BEFORE CIT(A). THE AO HAS ACCEPTED THAT THE REQUIREMENT OF T HE LABOUR IS LARGE BUT WITHOUT ANY EVIDENCE HELD THAT POSSIBILITY OF EX PENSES BEING MANAGED/INFLATED CANNOT BE RULED OUT. HE HAS NOT PO INTED OUT ANY SPECIFIC INSTANCE OF INFLATION IN THE EXPENSES. HENCE THE A D HOC DISALLOWANCE BE DELETED. EXPENSES ON STAFF WELFARE ARE ON PROVIDING MESS FACILITIES TO THE LABOURS AT SITE. COMPLETE BILLS AND VOUCHERS WERE PR ODUCED BEFORE THE AO. AFTER VERIFICATION OF VOUCHER AO HAS NOT POINTED O UT ANY EXPENSE WHICH IS NOT FOR BUSINESS PURPOSE. HENCE DISALLOWANCE MADE I S UNJUSTIFIED AND BE DELETED. IN VARIOUS CASES IT HAS BEEN HELD THAT AD HOC DISALLOWANCE OUT OF EXPENSES IS NOT JUSTIFIED. FOR THIS RELIANCE IS PLA CED ON THE FOLLOWING CASES:- (I) CIT VS. PREMIER VEGETABLE PRODUCTS LTD. (2014) 97 DTR 230 (RAJ.)(HC) (II) ACIT VS. GANPATI ENTERPRISES LTD. (2013) 142 I TD 118 (DELHI)(TRIB.) ITA 461/JP/2012 R.K. GUPTA VS. ACIT 7 (III) CIT VS. ORACLE INDIA (P) LTD. 199 TAXMAN 181 ( DEL) (HC) (MAG.) (IV) ARTHUR & ANDERSON & CO. VS. ACIT 2010-TIOL-416-I TAT-MUM. IT IS SUBMITTED THAT AS PER THE ACCOUNT OF M/S NAKO DA CRUSHERS IT HAS A RAISED A BILL OF RS.4 615/- WHICH IS NOT ACCOUNTED F OR IN THE BOOKS OF THE ASSESSEE. HAD THIS BILL ACCOUNTED BY THE ASSESSEE T HE EXPENSES WOULD HAVE INCREASED REDUCING THE PROFIT TO THAT EXTENT. THEREFORE WHEN ASSESSEE HIMSELF HAS NOT CLAIMED THE EXPENSES ADDI TION OF RS.4 615/- CONFIRMED BY CIT(A) IS INCORRECT. FURTHER ASSESSEE HAS ISSUED A CHEQUE OF RS.31 505/- TO NAKODA CRUSHERS ON 16.01.2005 WHICH C LEAR FROM HIS BANK ACCOUNT (PB 36) BUT NAKODA CRUSHERS HAS WRONGLY ACCOUNTED IT FOR RS.31 095/-. THEREFORE THIS DIFFERENCE OF RS.410/- CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. AGAIN NAKODA CRUSHERS HAS S HOWN TO HAVE RECEIVED RS.23 662/- BY CHEQUE FROM THE ASSESSEE ON 17.03.2006 WHEREAS THE ASSESSEE HAS NOT ISSUED ANY CHEQUE TO IT AS IS EVIDENT FROM ITS BANK ACCOUNT. THEREFORE THIS AMOUNT ALSO CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS TRANSFERRED THE ACCO UNTS OF NAKODA CRUSHERS TO ITS SISTER CONCERN NAKODA CRUSHERS & EN GINEERS IN AY 2007-08 (PB 40-43) AND AS ON 31.03.2007 THE AMOUNT PAYABLE TO NAKODA CRUSHERS & ENGINEERS IS ONLY RS.12 538/-. THEREFORE THE OBSE RVATION OF THE CIT(A) THAT ASSESSEE COULD NOT RECONCILE THE ACCOUNT EVEN AFTER THE EXPIRY OF ITA 461/JP/2012 R.K. GUPTA VS. ACIT 8 MORE THAN 5 YEARS IS INCORRECT. ASSESSEE HAS SHOWN C ONTRACT RECEIPT OF RS.1 73 26 173/- ON WHICH NET PROFIT DECLARED IS 7.2 9% WHICH IS COMPARABLE WITH NET PROFIT RATE OF 7.23% DECLARED ON RECEIPT OF RS.1 32 93 337/- IN THE LAST YEAR. AS A RESULT OF T HE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY CIT(A) THE NET PROFIT RARE H AS INCREASED TO 8.65%. THIS SHOWS THAT THE VARIOUS DISALLOWANCES MADE BY THE AO IS HIGHLY UNREASONABLE AND EXCESSIVE AND THEREFORE THE VARIOUS DISALLOWANCES MADE BY THE LOWER AUTHORITIES DESERVED TO BE DELETED. 6. AT THE OUTSET THE LEARNED D.R. SUPPORTED THE OR DER OF THE LEARNED CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE C OULD NOT FURNISH REQUIRED DETAILS FOR VERIFICATION OF THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT(A). THE GENUINENESS OF THE EXPENSES IS T O BE SEEN BY THE ASSESSING OFFICER AS THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE WHOLLY AND EXCLUSIVELY WAS INCURRED FOR BUSINESS PURPOSES. NON BUSINESS PURPOSES CANNOT BE RULED OUT UNDER THE SE HEADS. THE LEARNED CIT(A) CONFIRMED THE ADDITION APPEARS TO BE HIGHER SIDE THEREFORE IN THE INTEREST OF JUSTICE WE CONFIRM TH ESE ADDITIONS UNDER THE HEAD JEEP VEHICLE EXPENSE EXCEPT DEPRECIATION ON J EEP AND MOTOR CYCLE ITA 461/JP/2012 R.K. GUPTA VS. ACIT 9 ON WHICH CASE LAW CITED BY THE ASSESSEE SQUARELY APPL ICABLE TELEPHONE EXPENSES UP TO 10%. HOWEVER THE EXPENSES DISALLOWED OUT OF DIWALI EXPENSES IS REASONABLE. OUT OF EXPENSES FOR LABOUR WHICH IS MAJOR IN NATURE. THE ASSESSEES MAINTENANCE RECORD IS POOR AN D FURTHER LOWER AUTHORITY HAS NOT SPECIFIED THE PARTICULAR DEFECTS IN MUSTER ROLL EXCEPT IN THE MONTH OF AUGUST 2005 THE MAIN RECEIPT FROM THE LABOUR SUPPLY OF THE ASSESSEE. THE LEARNED ASSESSING OFFICER HAD REJECTE D THE BOOK RESULT AND HE MADE AD HOC ADDITION OF RS. 1.50 LACS HOWEVER I T APPEARS TO BE HIGHER SIDE. THE LEARNED AR SPECIFICALLY HAS NOT CHA LLENGED THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT BEFORE US. THEREFORE WE CONFIRM THE ADDITION OF RS. ONE LAC IN THE INTEREST OF JUSTICE AS AGAINST THE CONFIRMATION OF RS. 1.5 LACS. THE LEARNED CIT(A) WAS REASONABLE TO CONFIRM 10% ADDITION UNDER THE HEAD STAFF MESS EXPE NSES FOR NON BUSINESS PURPOSES. THE CASE LAW RELIED BY THE ASSESSI NG OFFICER ARE NOT SQUARELY APPLICABLE ON THE ISSUES NARRATED ABOVE. W ITH RESPECT TO DIFFERENCE IN THE M/S NAKODA CRUSHERS THE ASSESSEE HIMSELF HAS NOT SHOWN THE EXPENSE OF RS. 4 615/- FOR WHICH THE ARG UMENT TAKEN BY THE LEARNED AR NOT ACCEPTABLE AS WHO HAS PREVENTED TO TH E APPELLANT FOR CLAIMING THESE EXPENSE. THE ASSESSEE HIMSELF ADMITT ED DIFFERENT CHEQUE GIVEN AND AMOUNT CREDITED BY THE M/S NAKODA CRUSHER S AT RS. 410/-. ITA 461/JP/2012 R.K. GUPTA VS. ACIT 10 FURTHER M/S NAKODA CRUSHERS HAD SHOWN RECEIPT OF CH EQUE OF RS. 23 662/- HAS NOT BEEN RECONCILED WITH EVIDENCE BEFORE THE LOWE R AUTHORITIES FOR WHICH SUFFICIENT TIME HAS BEEN GIVEN TO THE APPELLAN T. THEREFORE WE CONFIRM THE ORDER OF THE LEARNED CIT(A) UNDER THIS HEAD. THE LAST GROUND OF APPEAL IS AGAINST WORKING OF NET PROFIT @ 8.65% BY MAKING THESE ADDITIONS. HOWEVER WE HAVE SUBSTANTIALLY GIVEN THE R ELIEF IN CASE OF THE ASSESSEE IN THIS PARAGRAPH THEREFORE AFTER APPEAL EFFECT THE ASSESSEES NET PROFIT WILL BE REASONABLE WE ALLOW THE APPEAL PAR TLY. 8. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/11/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED : 21 ST NOVEMBER 2014 * RANJAN COPY FORWARDED TO :- 1. M/S R.K. GUPTA KOTA. . 2. THE ACIT CIRCLE-1 KOTA. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 461/JP/2012) BY ORDER AR ITAT JAIPUR.