The ACIT, 3(1), v. M/s. Khems Engineering Pvt. Ltd.,

ITA 601/IND/2007 | 2004-2005
Pronouncement Date: 11-05-2010 | Result: Dismissed

Appeal Details

RSA Number 60122714 RSA 2007
Bench Indore
Appeal Number ITA 601/IND/2007
Duration Of Justice 2 year(s) 6 month(s) 26 day(s)
Appellant The ACIT, 3(1),
Respondent M/s. Khems Engineering Pvt. Ltd.,
Appeal Type Income Tax Appeal
Pronouncement Date 11-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 11-05-2010
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year 2004-2005
Appeal Filed On 16-10-2007
Judgment Text
PAGE 1 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : N.A. I.T.A.NO.483/IND/2007 A.Y. : 2004-05 KEHEMS ENGINEERING PRIVATE LIMITED ACIT RANGE 3(1) 303 KOTHARI MANOR DIAMOND COLONY INDORE VS INDORE. APPELLANT RESPONDENT I.T.A.NO.601/IND/2007 A.Y. : 2004-05 ACIT RANGE 3(1) KEHEMS ENGINEERING PRIVATE LIMITED INDORE. VS 303 KOTHARI MANOR DIAMOND COLONY INDORE APPELLANT RESPONDENT ASSESSEE BY : SHRI AJAY TULSIYAN AND SHRI MAHESH AGARWAL CAS DEPARTMENT BY : SHRI V.K.KARAN SR. DR DATE OF HEARING : 6 TH MAY 2010. O R D E R PER V.K. GUPTA A.M. PAGE 2 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. THESE CROSS APPEALS ARISE OUT OF ORDER OF LD. CIT( A)-I INDORE DATED 6.7.2007 FOR ASSESSMENT YEAR 2004-05. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. FIRST WE SHALL TAKE UP ASSESSEES APPEAL IN I.T.A. NO. 483/IND/2007. 4. IN GROUND NO. 1 THE ISSUE INVOLVED REGARDING CONFI RMATION OF ADDITION OF RS. 3 13 878./- OUT OF TOTAL ADDITION O F RS. 7 53 183/- MADE BY THE ASSESSING OFFICER U/S 41(1) OF THE ACT. 5. THE FACTS IN BRIEF ARE THAT THE A.O. FOUND THAT T HERE WERE SEVERAL SUNDRY CREDITORS IN THE BALANCE SHEET. HENC E HE REQUIRED THE ASSESSEE TO SUBMIT THE DETAILS OF SUCH CREDITORS PE RIOD-WISE. THE A.O. THEREAFTER MADE AN ADDITION OF SUNDRY CREDITORS W HICH WERE OF MORE THAN THREE YEARS FOR THE REASONS THAT THE A.O. WAS OF TH E OPINION THAT THESE LIABILITIES HAD CEASED TO EXIST. ON APPEAL BY THE A SSESSEE THE LD. CIT(A) GAVE RELIED IN RESPECT OF SUCH CREDITORS TO WHOM TH E ASSESSEE HAD PAID THE MONEY TILL THE DATE OF DISPOSAL OF APPELLATE PROCEE DINGS AND CONFIRMED THE BALANCE AMOUNT. AGGRIEVED BY THIS BOTH ASSESSEE AN D REVENUE ARE IN APPEAL BEFORE US. 6. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE HAD NOT WRITTEN OFF SUCH CREDITORS IN ITS BOOKS OF ACCOUNT. HENCE THERE WAS NO REASON TO PAGE 3 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. TREAT SUCH SUNDRY CREDITORS AS CEASED LIABILITIES MERELY BECAUSE THE PERIOD OF LIMITATION HAD EXPIRED. IT WAS ALSO CONTENDED T HAT TILL THE SUCH CREDITORS WERE SHOWN AS OUTSTANDING IN THE BOOKS OF ACCOUNT THE PERIOD OF LIMITATION WAS NOT APPLICABLE. FOR THIS PROPOSIT ION THE LEARNED COUNSEL RELIED ON THE DECISION OF THE INDORE BENCH OF THE T RIBUNAL IN THE CASE OF BUSYMEN OFF-SET PRINTERS (P) LIMITED IN I.T.A.NO. 3 1/IND/2008 FOR ASSESSMENT YEAR 2004-05 ORDER DATED 30 TH JUNE 2009 WHEREIN A SIMILAR VIEW HAD BEEN EXPRESSED. THE LD. SR. DR ON THE OTH ER HAND PREFERRED TO RELY ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT SUCH CREDITORS ARE BEING SHOWN AS OUTSTANDING IN THE BALANCE SHEET AND IN SOME CASES THE ASSESSEE H AS ALSO MADE PAYMENT SUBSEQUENTLY. EVEN OTHERWISE IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW THAT SUCH LIABILITY HAD ACTUALLY CEASED TO EXI ST THE PROVISIONS OF SECTION 41(1) CANNOT BE APPLIED MERELY BECAUSE SUC H CREDITORS ARE MORE THAN THREE YEARS OLD. IN THIS VIEW OF THE MATTER W E ACCEPT THIS CLAIM OF THE ASSESSEE. THUS THIS GROUND OF THE ASSESSEE STANDS ALLOWED. 9. IN GROUND NO.2 THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 50 000/- MADE OUT OF REPAIRS AND MAINTENANCE EXPENSES. PAGE 4 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. 10. THE FACTS IN BRIEF ARE THAT THE A.O. OBSERVED THA T IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED REPAI RS AND MAINTENANCE EXPENSES AT RS. 2 51 880/- AGAINST AN EXPENDITURE O F RS. 11 189/- IN PREVIOUS YEAR. HENCE THE A.O. REQUIRED THE ASSESSE E TO EXPLAIN SUCH SUBSTANTIAL INCREASE. THE A.O. VERIFIED THE BOOKS A ND FOUND THAT MANY PAYMENTS HAD BEEN MADE IN CASH ON SELF-MADE VOUCHER S AND PURPOSE FOR SUCH EXPENDITURE WAS ALSO NOT VERIFIABLE. HENCE HE DISALLOWED A SUM OF RS. 50 000/- ON AD HOC BASIS. ON APPEAL THE LD. CI T(A) ALSO CONFIRMED THE ACTION OF THE A.O. CONCURRING WITH HIS REASONS. STILL AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL SUBMITTED THAT EXPENDITURE INCU RRED WAS DULY SUPPORTED WITH THE VOUCHERS AND BILLS AND DISA LLOWANCE WAS MADE MERELY BECAUSE THERE WAS SUBSTANTIAL INCREASE UNDER THE HEAD OF THIS EXPENDITURE AND THAT COULD NOT BE A PROPER BASIS FO R MAKING ANY DISALLOWANCE AS SUCH REPAIRS AND MAINTENANCE EXPENS ES WERE INCURRED IN THE COURSE OF BUSINESS ACTIVITIES CARRIED ON BY THE ASSESSEE. THE LD. SR. DR ON THE OTHER HAND PLACED STRONG RELIANCE ON TH E ORDER OF THE LD. CIT(A). 12. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. PAGE 5 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. 13. IN OUR VIEW THE ACTION OF THE REVENUE AUTHORITIES IS NOT JUSTIFIED BECAUSE SUCH EXPENDITURE IS DULY SUPPORTE D WITH BILLS/VOUCHERS AND IN OUR OPINION THE OBSERVATIONS OF THE REVENU E AUTHORITIES ARE VAGUE AND GENERAL ONLY. WE FURTHER HOLD THAT THE NECESSIT Y OF AN EXPENDITURE HAS TO BE EXAMINED FROM THE POINT OF VIEW OF THE BUSINE SSMEN AND NOT OF THE REVENUE AUTHORITIES. HENCE FOR THIS REASON ALSO T HE VIEW OF THE LD. CIT(A) IS NOT CORRECT. THUS THIS GROUND OF THE ASS ESSEE IS ALSO ALLOWED. 14. IN GROUND NOS. 3 4 & 6 THE ISSUE INVOLVED IS REGA RDING AD HOC DISALLOWANCE OUT OF TELEPHONE & TELEX EXPENSES VEH ICLE RUNNING AND MAINTENANCE EXPENSES AND CONVEYANCE EXPENSES ON ACC OUNT OF PERSONAL ELEMENT INVOLVED THEREIN. 15. FROM THE PERUSAL OF THE ASSESSMENT ORDER AS WELL AS APPELLATE ORDER IT IS EVIDENT THAT NO FINDING HAS BEEN GIVEN SO AS TO INDICATE THAT THIS EXPENDITURE WAS DISALLOWED AS INCURRED FOR NO N-BUSINESS PURPOSES AND IN THE CASE OF THE COMPANY THERE CANNOT BE ANY ELEMENT OF PERSONAL USE AS JUDICIALLY SETTLED. HENCE WE ALLOW ALL THES E GROUNDS OF THE ASSESSEE. 16. IN GROUND NO.5 THE ISSUE INVOLVED IS REGARDING AD HOC DISALLOWANCE OF RS. 25 000/- OUT OF TOTAL OFFICE EX PENSES WHICH HAVE BEEN MADE ON THE BASIS OF EARLIER YEARS FINDINGS. PAGE 6 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. 17. THE ASSESSEE HAS NOT BEEN ABLE TO POINT OUT BEFORE US THAT THE FACTS OF THIS YEAR WERE DIFFERENT FROM THAT YEAR H ENCE WE CONFIRM THE DECISION OF THE REVENUE AUTHORITIES IN THIS REGARD. HENCE GROUND NO. 4 OF THE ASSESSEES APPEAL IS DISMISSED. 18. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE STA NDS PARTLY ALLOWED. 19. NOW WE SHALL TAKE UP REVENUES APPEAL IN I.T.A.NO. 601/IND/2007. 20. IN RESPECT OF GROUND NO.1 IN THE REVENUES APPEAL THE FACTS HAVE ALREADY BEEN NARRATED WHILE DISPOSING OF GROUN D NO.1 OF THE ASSESSEES APPEAL HENCE NOT REPEATED. IN VIEW OF OUR DECISION IN RESPECT OF THAT GROUND THIS GROUND OF THE REVENUE IS DISMI SSED. 21. IN GROUND NO.2 THE REVENUE IS AGGRIEVED BY THE DE CISION OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AT RS. 2 LAKHS TO RS. 40 000/- IN RESPECT OF TRAVEL LING EXPENSES CLAIMED BY THE ASSESSEE. 22. THE FACTS IN BRIEF ARE THAT THE A.O. DISALLOWED A SUM OF RS.2 LAKHS OUT OF TOTAL TRAVELLING EXPENSES OF RS. 24 10 211/-. FOR THE REASON THAT SUCH EXPENSES COULD NOT BE FULLY VERIFIED AND THE ELEMENT OF PERSONAL PURPOSE COULD NOT BE RULED OUT. ON APPEAL BY THE AS SESSEE THE LD. CIT(A) REDUCED THE SAME TO RS. 40 000/- AS THE TOTAL FOREI GN TRAVEL EXPENDITURE OF PAGE 7 OF 7 - I.T.A.NO. 483/IND/2007 AND 601/IND/2 007 CROSS APPEALS KEHEMS ENGINEERING PRIVATE LIMITED INDORE. DIRECTORS WAS ONLY TO THE EXTENT OF RS. 56 156/-. A GGRIEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. 23. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES WE FIND NO MERIT IN THIS GROUND OF THE REVENUE AS 80 % OF FOR EIGN TRAVEL EXPENDITURE OF DIRECTORS HAVE BEEN DISALLOWED BY THE CIT(A). TH US THIS GROUND OF THE REVENUE IS ALSO DISMISSED. 24. TO SUM UP ASSESSEES APPEAL IS PARTLY ALLOWED AND REVENUES APPEAL STANDS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 11 TH MAY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH MAY 2010. CPU* 7105