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Income Tax Appellate Tribunal, ‘’ SMC’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
(Applicant) (Respondent) Assessee by : Shri T.P. Hemani, Sr. Advocate with Shri Parimal Sinh Parmar, A.R Revenue by : Shri S.S. Shukla, Sr.D.R सुनवाई क� तारीख/Date of Hearing : 01/06/2021 घोषणा क� तारीख /Date of Pronouncement: 23/06/2021 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-XIV, Ahmedabad, dated 21/11/2013 arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2009-2010.
The assessee has raised the following ground of appeal:
1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the action of AO in disallowing Rs.28,3877- out of vehicle repair expenses.
2. The learned CIT(A) has erred both in law and on the facts of the case in confirming disallowance of un-reconciled credit balance made by the AO to the extent of Rs.43,759/- by treating the same as bogus and excessive.
The learned CIT(A) has erred both in law and on the facts of the case in confirming the addition made by the AO to the extent of Rs.12,60,000/- being outstanding creditors u/s.68 of the Act. 4. The learned CIT(A) has erred both in law and on the facts of the case ir. Confirming the action of the AO of disallowing Rs.32,022/-being 20% of various vehicle expenses. 5. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 6. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in levying interest u/s.234A/B/C of the Act. 7. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in initiating penalty u/s.271(1)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal
at the time of or before the hearing of the appeal.
3. The assessee in ground No. 1 has raised the issue that the learned CIT (A) erred in confirming the order of the AO by sustaining the addition of Rs. 28,387.00 with respect to insurance claimed received against the vehicle repairing expenses.
4. The assessee in the present case is an individual and engaged in the business of trading in electric items. The assessee in the year under consideration has claimed vehicle repairing expenses of Rs.36,919.00 in his profit and loss account. However the AO found that the assessee has received a sum of Rs. 28,387.00 from the insurance company against the damage of the vehicles but the same was not offered to tax. Accordingly the AO made the addition of Rs. 28,387.00 to the total income of the assessee.
5. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us submitted that the Revenue on one hand has disallowed the vehicle repairing expenses to the tune of Rs. 28,387.00 by treating the insurance claim as income out of the total expenses of Rs. 36,919.00 and on the other hand the Revenue has further made disallowance of Rs.7,384.00 being 20% of Rs. 36,919.00 on the reasoning that the personal use of the vehicles cannot be ruled out. Accordingly, it was contended that there was the double disallowance made by the authorities below which is unwanted under the provisions of law. Accordingly the learned AR prayed to allow the deduction of Rs. 28,387.00 only.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. The amount received by the assessee for Rs. 28,387.00 represents the receipt from the insurance company against the damage of the vehicles which was not offered to tax. The assessee on one hand has claimed full vehicle running expenses and on the other hand insurance claim received by him against such expenses has not been offered to tax. As such, the assessee was liable to offer such insurance claim of Rs. 28,387.00 to income tax. Accordingly, we do not find any infirmity in the order of the authorities below. Hence, the ground of appeal of the assessee is dismissed.
10. The 2nd issue raised by the assessee is that the learned CIT (A) erred in confirming the order the AO by sustaining the addition of Rs. 43,759.00 representing unreconciled credit balance.
The AO during the assessment proceedings found that there was the difference in the balance of sundry creditor namely M/s Canbara International private Ltd between the ledger and the balance sheet of the assessee amounting to Rs.1,40,041.00 which was not reconciled by the AO. Accordingly the AO treated the same as income and added to the total income of the assessee.
Aggrieved assessee preferred an appeal to the learned CIT (A) who reduced the addition made by the AO to Rs.43,759.00 by observing as under:
4.3 Ground No.3 pertains to addition of Rs.1,40,041/- being the excessive credit balance shown in the name of Canbara international Pvt. Ltd. The Assessing Officer noticed that in the Balance Sheet, credit balance of Rs.2,35,643/- was shown, but the Ledger revealed credit balance of Rs.95,602/-. The appellant has furnished a detailed explanation stating the there are two accounts in the name of Canbara International Pvt. Ltd. As details below:-
/Canbara International Pvt. Credit balance Rs. 1,40,040. 60 Ltd. Canbara International Pvt. -do- Rs. 95,602.70 Ltd, (Ahd) Total Rs. 2,35,643. 30 However, at the time of assessment proceedings, the Assessing Officer has V; compared only one Ledger Account. During the course of appellate proceedings, the Ld. Authorized Representative has furnished confirmation, copy of account from Canbara International Pvt. Ltd. and the same was also '; sent to the Assessing Officer, but he has stated in Remand Report that no confirmation was 'filed without verifying the same. I find that Canbara International Pvt. Ltd. has maintained only one account of the appellant. which shows debit balance in the name of appellant at Rs.1,91,884/-. Thus, even after considering both the accounts, the appellant has shown more credit balance by Rs.43,759/- (Rs.2,35,643 - Rs.1,91,884) in the name of Canbara International Pvt. Ltd. The Ld. Authorized Representative has explained that the difference was. on account of difference in the opening balance. However, the same has not been explained with supporting :documentary evidence. Thus, it is clear that excessive liability shown by the appellant is bogus and the same cannot be allowed un-reconciled year to year and hence in my considered view, addition to the extent of Rs.43,759/-deserves to be sustained instead of addition of Rs.1,40,041/-. Accordingly,': the addition to the tune of Rs.43,759/- is confirmed. The Assessing Officer is. : directed to allow consequential relief. Thus, appellant succeeds partly in respect of Ground No. 3.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us submitted that difference of Rs. 43,759.00 is representing the difference in the opening balance which has been carried forward from the earlier assessment year. In other words such difference does not represent with respect to the transactions carried out by the assessee in the year under consideration with the aforesaid creditor. For this purpose the learned AR drew attention on pages 54 to 56 of the paper book where the copy of the ledger was placed. Accordingly it was contended that such difference need not to be added to the total income of the assessee in the year under consideration.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. On perusal of the copies of the ledgers placed on pages 54 to 56 of the paper book, we note that such difference is arising in the account of the sundry creditor on account of opening balance which were carried forward from the preceding year. Therefore such difference in the opening balance cannot be added to the total income of the assessee in the year under consideration. The impugned difference, if liable to be added to the total income of the assessee, then the same can be done in the year to which it relates and not in the year under consideration. At the time of bearing, the learned DR has not brought anything on record contrary to the argument advanced by the learned AR for the assessee. Accordingly we do not find any reason to uphold the finding of the authorities below. Hence, the ground of appeal of the assessee is allowed.
17. The next issue raised by the assessee is that the learned CIT (A) erred in confirming the order of the AO by sustaining the addition of Rs.12,60,000 under section 68 of the Act.
18. The AO during the assessment proceedings found that the assessee has shown sundry creditors amounting to Rs. 29,50,024.00 but failed to justify the nature of credit appearing in the financial statements against their names. Thus in the absence of any reply from the side of the assessee, the AO added the same to the total income of the assessee.
19. Aggrieved assessee preferred an appeal to the learned CIT (A) who deleted the amount of loan received from Shri Pankaj Navanitlal Choksi amounting to Rs.5,50,000 only.
20. Regarding the loan from Shri Bhavin D Contractor for Rs. 11,48,513.00, the learned CIT (A) deleted the addition but made the addition of the separate amount of Rs.90,000.00 which was reflecting in the bank account of the party.
20.1 Regarding the loan of Rs.12,51,511.00 received from Shri Suketu D. Contractor, the learned CIT (A) found that there were receipt of the Rs.74,900.00 in the bank account of the party with the narration ‘postmaster maturity’ which was accepted by him as an explained entry and therefore the same was deleted. Thus the learned CIT (A) out of the total addition confirmed a sum of Rs.11,70,000.00 as unexplained cash credit. Thus the learned CIT (A) was pleased to delete the addition made by the AO except for a sum aggregating to Rs. 12,60,000.00 and to allow the appeal of the assessee in part.
Being aggrieved by the order of the learned CIT (A) the assessee is in appeal before us.
The learned AR before us submitted that the AO has made the addition with respect to Shri Bhavin D. contractor amounting to Rs.11,48,513.00 only which was duly explained by the assessee and admitted by the learned CIT (A). However the learned CIT (A) has made the addition for Rs.90,000 which was not subject matter of addition/dispute before the AO. Accordingly it was contended that such addition represents the enhancement of income of the assessee which was made by the learned CIT (A) without issuing notice of such enhancement. Accordingly the learned AR contended that the same is liable to deleted.
Regarding the addition of Rs.11,70,000.00 in respect of Shri Suketu D. Contractor, learned AR contended that the assessee has discharged his onus by furnishing the identity of the party. Furthermore, the transaction was carried out through the banking channel and therefore the genuineness of the same cannot be doubted. Had there been any doubt by the AO about the credit worthiness of the party, the same should have been verified by the AO by issuing notice under section 133(6)/131 of the Act but the AO has failed to do so.
On the other hand the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. With respect to the addition of ₹90,000 in respect of Bhavin D. contractors, we note that such addition was not subject matter of dispute before the AO. This fact can be verified from the copy of the ledger of the party placed on page 57 of the paper book. Admittedly, such addition can be made by the learned CIT (A) only after affording the opportunity of being heard to the assessee on account of such enhancement. But the learned CIT (A) has not done so and therefore such enhancement in the addition is not sustainable. Accordingly we direct the AO to delete the addition of ₹90,000 in respect of Bhavin D. contractor.
25.1 Regarding the addition of Rs. 11,70,000 in respect of Shri Suketu D. Contractor, we note that such party is the son of the assessee and therefore it was within the reach of the assessee to furnish the creditworthiness of the party. But the assessee has not furnished satisfactory and necessary documents in support of credit worthiness of the party. However, we note that the learned CIT (A) in his order has accepted the sum of Rs. 2,38,000.00 received by the party namely Shri Suketu D. Contractor on account of salary and bonus but no credit for the same has been given by the learned CIT (A). Accordingly to the extent of Rs. 2,38,000.00, we direct the AO to delete the addition made by him. Hence the addition of Rs. 9,38,000.00 (approx.) is sustained. Hence the ground of appeal of the assessee is partly allowed.
26. The next issue raised by the assessee is that learned CIT (A) erred in confirming the order of the AO by sustaining the disallowance of ₹ 32,022.00 being 20% of various vehicle expenses.
27. The AO during the assessment proceedings found that the assessee is not maintaining separate logbook of the vehicles and therefore he was of the view that it cannot be said that all the expenses in relation to the vehicles have been incurred for the purpose of the business. Furthermore the AO found that many expenses have been incurred in cash and on the basis of self-made vouchers. Accordingly he was of the view that the possibility of personal element with respect to the expenses in connection with the vehicles cannot be ruled out. Accordingly the AO made the disallowance of ₹ 32,022.00 being 20% of the expenses of ₹ 1,60,110.00 and added to the total income of the assessee.
28. Aggrieved assessee preferred an appeal to the learned CIT (A) who confirmed the order of the AO by observing as under: Ground No. 5 pertains to disallowance of Rs.32,022/- out of various vehicle expenses for non-business purposes. It is noticed that the Assessing Officer has disallowed 20% of petrol expenses, depreciation: on motor car, interest on car loan, vehicle insurance and vehicle repairing since no log book was maintained to establish exclusive use of vehicle for business purposes. During the course of appellate proceedings, the appellant has not furnished any evidence to prove that he also owned other vehicle for personal use by him and his family members. Under these circumstances,! personal use of the vehicle claimed in the business, cannot be ruled out and accordingly disallowance made by the Assessing Officer which is very reasonable, is sustained. Hence, Ground No. 5 is dismissed.
Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us.
The learned AR before us submitted that the addition has been made by the authorities below on presumption basis without pointing out any defect in the audited books of accounts. As such under the law, there is no provision for making the disallowance on ad hoc basis.
30.1 The learned AR also contended that if the addition with respect to the insurance claim is confirmed as raised in the ground No. 1 then it will lead to the double addition.
30.2 The learned AR alternatively contended that the disallowance at the rate of 20% is on the higher side and prayed to make some token disallowance in the interest of justice.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion we note that the AO has made the disallowance at the rate of 20% of the following expenses:
Petrol expenses Rs.45,340/- Depreciation on motor car Rs.65,939/- Interest on car loan Rs.9,519/- Vehicle insurance Rs.2,393/- Vehicle repairing Rs.36,919/- Rs.1,60,110/- 32.1 Regarding the depreciation of ₹ 65,939.00 we note that it is not an expenditure but the allowance which is to be allowed on year to year basis. Therefore, we are of the view that there cannot be disallowance with respect to such depreciation. Accordingly we direct the AO to delete the addition made by him with respect to the depreciation on the motor car.
32.2 Regarding the car repairing expenses, we note that the assessee has effectively claimed such expenses in its books of accounts for Rs. 8532.00 only (36919-28387) only. Thus, the disallowance at the rate of 20% at ₹ 36,919.00 will lead to double addition which is not desirable under the provisions of law. Accordingly the amount of Rs. 8532.00 only can be considered for the purpose of disallowance.
32.3 For the remaining expenses, we are of the view that there was no basis of making the disallowance at the rate of 20% of the expenses as discussed above. In fact there is no standard jacket formula for making the disallowance on a ad-hoc basis in the given facts and circumstances. It is because the possibility of personal element in the expenses discussed above cannot be ruled out. However in the interest of justice and fair play, we direct the AO to restrict the disallowance at the rate of 12% of the expenses after considering the preceding discussion. Hence the ground of appeal of the assessee is partly allowed.
In the result the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 23/06/2021 at Ahmedabad.