Income Tax Appellate Tribunal - Delhi
Rajesh Kumar, Gurgaon vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : F : NEW DELHI
BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER
AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No.2833/Del/2009
Assessment Year : 2005-06
Income Tax Officer, Vs. Shri Rajesh Kumar,
Ward-3, Prop. R.K. Finishing,
Gurgaon. 83 D, Udyog Vihar Phase VI,
Gurgaon.
PAN : AARPK9348L
C.O. No.300/Del/09
(ITA No.2833/D/2009)
Assessment Year : 2005-06
Shri Rajesh Kumar, Vs. Income Tax Officer,
Prop. R.K. Finishing, Ward-3,
83 D, Udyog Vihar Phase VI, Gurgaon.
Gurgaon.
PAN : AARPK9348L
(Appellant) (Respondent)
Assessee by : Shri Rajinder Mittal, CA
Revenue by : Shri H.K. Lal, Sr. DR
ORDER
PER I.P. BANSAL, JUDICIAL MEMBER
The appeal is filed by the revenue and the Cross Objections by the assessee. Both are directed against the order of the CIT (A) dated 16th March, 2009 for assessment year 2005-06. The grounds of appeal and the grounds of Cross Objections read as under:-
Grounds of appeal
1. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in directing the 2 ITA No.2833/Del/2009 C.O. No.300/Del/2009 Assessing Officer to compute the long term capital gains/loss in respect of the asset sold even though the asset is a business asset on which during the earlier Asstt. Year 2004-
05, depreciation at Rs.8938 @ 5% has been claimed.
2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in deleting the addition of Rs.1,38,638/- made by the Assessing Officer on account of excess depreciation claimed disregarding the fact that depreciation can be allowed to shed only in respect of cost of super structure and not in respect of the land over which the structure stands.
3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in deleting the addition of Rs.4,16,138/- made by the Assessing Officer on account of inflated consumption of consumable and other stocks even though the same remained unsubstantiated.
4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in deleting the addition of Rs.62,958/- made by the Assessing Officer on account of repair and maintenance even though the assessee had failed to justify the correctness of these expenses.
5. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in deleting the addition of Rs.39,106/- made by the Assessing Officer on account of late deposit of employees' contribution towards ESI disregarding the fact that the payments were made beyond the due dates and were, therefore, not allowable u/s 36(1)(va) and were to be treated as income u/s 2(24)(x) of the Income Tax Act, 1961, in contravention of the decision in the case of CIT vs. Pamwi Tissues Limited 215 CTR 150 (Bom.)?
6. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.
Grounds of Cross Objections
1. That the departmental appeal is bad in law as well as on facts and is liable to be dismissed.
2. That the learned lower authorities have erred in claiming a long term residential house as business asset and claiming a short term capital gain of Rs.41,229 on the same. The learned lower authorities have failed to appreciate irrefutable 3 ITA No.2833/Del/2009 C.O. No.300/Del/2009 documentary evidence on record.
3. That the learned lower authorities have erred in alleging that the depreciation of Rs.1,38,638/- claimed by the assessee is not allowable and have failed to appreciate irrefutable documentary evidence on record.
4. That the learned lower authorities have erred in challenging the righteous deletion of Rs.4,16,138/- by the Ld. CIT (A) unjustifiably added by the learned lower authorities on account of imaginary inflated consumption of consumable and other stocks and have failed to appreciate the necessary explanations and documentary evidence on record.
5. That the learned lower authorities have erred in upholding unjustifiable addition of Rs.62,958/- on account of repair and maintenance even though the assessee has justified the correctness of these expenses.
6. That the learned lower authorities have erred in assuming disallowance of Rs.39106/- in respect of delay of deposit of ESI for Rs.39,106/- and have failed to appreciate detailed explanation and documentary evidence on record.
7. That the learned CIT (A) has erred on both facts and law in sustaining the lopsided and factually incorrect version of learned Assessing Officer that the prior period income of Rs.1,73,852.21 cannot be considered in the relevant assessment year and has to be considered only in the year to which it pertains.
8. That the learned CIT (A) sustaining the adhoc disallowance made by the learned Assessing Officer, to the extent of Rs.32,060/- on the contention that the same can be attributed to personal use by the assessee is contrary to law and facts of the case.
9. That the assessee craves leave to add/alter any of the grounds of cross objections before or at the time of hearing.
2. The appeal and cross objections filed have some common issues. They were heard together and, for the sake of convenience, they are being decided by this consolidated order.
4 ITA No.2833/Del/2009 C.O. No.300/Del/20093. Ground of appeal No.1 and Ground No.2 of CO raise a common issue. This issue has been discussed by the Assessing Officer in para 3 of his order. The facts relating to this issue are that residential plot was owned by the assessee since 24th August, 1982 on which the said house is built. The property is known as E-66, Mohan Garden, Near Uttam Nagar, New Delhi and the said house was sold on 31st March, 2004 for a sum of Rs.2 lac. The assessee claimed long-term capital loss amounting to Rs.84,530/- by taking the cost and the cost of construction, etc. into account. The calculation is given in para 3.1 of the order of the CIT (A). The assessee also claimed depreciation upon the said asset amounting to Rs.7938.55 which was surrendered by letter dated 16th November, 2007. The Assessing Officer did not accept the claim of the assessee on two grounds, viz.,
(i) the residential house was sold in financial year 2003-04 which was relevant to assessment year 2004-05; and
(ii) Receipt of consideration did not change the year under which capital gain is taxable.
4. The Assessing Officer further observed that according to depreciation chart filed by the assessee depreciation was also claimed in respect of that residential house in assessment year 2004-05. Thus, the Assessing Officer observed that the computation of long term capital gain was not in accordance with the provisions of the Act. Thus, he arrived at a calculation of short-term capital gain by reducing the book value from the sale consideration and he observed that the said balance of Rs.41,229/- will be assessed as short-term capital gain in assessment year 2004-05 and he observed that an appropriate action for the same will be taken in accordance with the provisions of the Income- tax Act.
5. This issue has been discussed by the CIT (A) in para 3 to 3.3. It was submitted before the CIT (A) that the said house was shown as personal asset in the balance sheet filed by the assessee. The depreciation was inadvertently 5 ITA No.2833/Del/2009 C.O. No.300/Del/2009 claimed on the said residential house which was duly surrendered before the Assessing Officer during the course of assessment proceedings vide letter dated 16th November, 2007. The Assessing Officer did not give any reason and such addition is an ad hoc addition without assigning proper reasons. It was submitted that even after disallowing depreciation on the asset, the Assessing Officer did not allow long-term capital loss on sale of the same for assessment year 2004-
05. Considering these submissions, the CIT (A) has observed that as Assessing Officer has disallowed depreciation in respect of house which has been sold and further in the absence of evidence that the house was used for business purpose, the Assessing Officer was not justified in computing the short-term capital gain on sale of house and under these facts the Assessing Officer was directed to compute the long-term capital gain in respect of the assets sold.
6. Ld. DR, after narrating the facts submitted that the Assessing Officer was right in not considering the claim of the assessee during the year under consideration as the asset was not sold during the year. He submitted that the CIT (A) has not given any finding on this aspect of the matter and straightaway directed the Assessing Officer to compute the long-term capital gain/loss in respect of the asset sold. He, therefore, submitted that depreciation having claimed in assessment year 2004-05 also the short-term capital gain was to be computed as the same was business asset.
7. On the other hand, relying upon the submissions made before the Assessing Officer and CIT (A) it was submitted by Ld. AR that the assessee has never claimed the depreciation and whatever claim made by the assessee was inadvertent. He submitted that for assessment year 2005-06 the assessee surrendered the claim during the course of assessment proceedings and for assessment year 2004-05 the Assessing Officer did not allow such claim of the assessee for depreciation and in the absence of claim of depreciation, short-term capital gain could not be computed in respect of asset even for assessment year 2004-05. Thus, it was submitted that the order of the CIT (A) should be upheld.
6 ITA No.2833/Del/2009 C.O. No.300/Del/20098. We have carefully considered the rival submissions in the light of the material placed before us. The fact that the relevant asset was sold during the preceding financial year i.e., financial year 2003-04 relevant to assessment year 2004-05 has not been controverted by Ld. AR. The Assessing Officer has clearly observed that the receipt of consideration in the year under consideration has no relevance on the assessability of the said sale in assessment year 2004-05. Besides, the claim that whether or not short-term capital gain could be assessed in respect of the asset, it was required to be determined that in which year such gain could be made taxable. No basis whatsoever has been suggested by the assessee on the basis of which it can be said that the said gain for the property sold in earlier year could be assessed in the year under consideration. Therefore, we are of the opinion that the Assessing Officer was right in coming to the conclusion that the gain or loss whatever it may be cannot be assessed in the year under consideration as property was not sold during the year under consideration. The assessability of the said sum either as "short-term capital gain" or "long-term loss" can be examined only in the year in which the property was sold. Therefore, in our opinion, the CIT (A) was not right in directing the Assessing Officer to compute the long-term capital gain/loss in respect of the said asset which was not sold during the year under consideration. Ld. CIT (A) should have restricted his findings only to the year under consideration. As the property was not sold during the year, this issue was not having any relevance for the year under consideration. The Assessing Officer himself has not made any addition in the year under consideration for the said sale. Therefore, the findings of CIT (A) on this issue are set aside and that of Assessing Officer are restored. The leviability either of short-term capital gain or long-term capital loss is subject matter of decision in assessment year 2004-05 and to that year the issue is open for both the parties i.e., the assessee and the revenue to contest the same as per the provisions of law. With these observations the ground of appeal No.1 filed by the revenue is allowed and ground No.2 of cross objections is dismissed.
7 ITA No.2833/Del/2009 C.O. No.300/Del/20099. Ground No.2 of the appeal and ground No.3 of the Cross Objections raise common issue. It was submitted that similar issue had come up for consideration before the Tribunal in assessment year 2006-07 and vide order dated 29th January, 2010 in ITA No.4441/Del/2009 the matter was restored back to the file of Assessing Officer for re-adjudication and it was submitted that following the said order the matter maybe restored back to the file of Assessing Officer to decide the same as per the directions given therein. For the sake of convenience the relevant portion of the said order is reproduced below:-
"2. In this appeal, in Grounds No.1(a) and 2(a), the assessee has challenged the action of Ld. CIT(A) in upholding the disallowance of depreciation on the industrial shed on the assumption that 90% of the cost of shed representing the cost of land. It was the submission by the Ld. A.R. that the assessee had purchased an industrial shed form M/s. HSIDC for a cost of Rs.21,54,829/- during the Assessment Year 2002-03. The assessee had claimed depreciation thereon. The A.O. had demarcated the cost of the industrial shed and the land on which the shed was built. The A.O. has demarcated the cost of land to the 90% and the shed for only a value of 10% of the cost. Consequently, the A.O. had disallowed the depreciation in respect of 905 of the industrial shed as claimed by the assessee. It was the submission by the Ld. A.R. that after denying the depreciation in respect of 90% of the value holding the same to be in relation to the land and WDV had been reworked year-wise and for the relevant Assessment Year the A.O. had reworked the depreciation and the Ld. CIT(A) has upheld such disallowance of claim of depreciation as made by the assessee and had upheld the depreciation as computed by the A.O. in respect of the industrial shed alone. It was agreed by the Ld. A.R. that the industrial shed purchased from HSIDC included the cost of the land. It was also agreed by the Ld. A.R. that the assessee had under the bona fide impression claimed the purchase price as the cost of industrial shed, as the industrial shed could not have survived without the land. It was the submission that due to this bona fide belief, the assessee had claimed depreciation by taking the total cost as paid by the assessee to be in relation to the industrial shed. It was fairly agreed by the Ld. A.R. that the guideline value of the land was liable to be excluded from the purchase price and only the balance could be held to be the cost of the industrial shed. On this proposition, the Ld. D.R. did not have any objection. It was the submission of the Ld. D.R. that the Assessment Year involved in the appeal before us was the Assessment Year 2006-07 and that's 8 ITA No.2833/Del/2009 C.O. No.300/Del/2009 correction if any would have to take place in the Assessment Year 2002-03. Here, it was the submission by the Ld. A.R. that for the year in which the industrial shed was purchased and the depreciation claimed was also in appeal before the Ld. CIT(A) and the same was pending disposal. It was the submission that he had no objection if the direction was given to assess the value of the land on which the industrial shed was constructed and which was purchased by the assessee by applying the guideline value in view of the bona fide belief of the assessee.
3. We have considered the rival submissions. A perusal of the assessment order clearly shows that the A.O. has reworked the depreciation on the industrial shed by taking into consideration the WDV. However it is also noticed that the A.O. has taken the cost of land at 90% of the purchase price paid by the assessee in respect of the industrial shed purchased from HSIDC. There is no basis for taking the cost of the land on which the industrial shed is situated @ 90% of the purchase price. In these circumstances, this issue is restored to the file of the A.O. for re-adjudication and recompilation. In this recompilation, the A.O. shall take into consideration the claim of the assessee that the cost of the land in respect of the industrial shed is to be taken at the guideline value as fixed by the Government for the purpose of registration of the land in that area. In these circumstances this issue is restored to the file of the A.O. for re-adjudication. This correction would have to be done right from the year in which the industrial shad has been purchased by the assessee and put to use."
10. In this view of the situation, after hearing both the parties, respectfully following the aforementioned order of the Tribunal in assessee's own case, we restore this issue to the file of Assessing Officer with the similar directions. Thus, ground Nos.2 of appeal and ground No.3 of CO are considered to be allowed for statistical purposes.
11. Ground No.3 of appeal and ground No.4 of cross objections raise common issue. The assessee is engaged in the job work undertaken for stitching, embroidery of various manufacturers and exporters, had his factory for which it required to consume thread, paper, needles and oil and lubricants, etc. which was debited under the head 'consumable stores' amounting to Rs.16,66,554/- as against similar expenses of Rs.1,45,241/-during the immediate preceding year.
9 ITA No.2833/Del/2009 C.O. No.300/Del/2009The Assessing Officer required the explanation of the assessee to explain the same. It was explained that last year was the first year of operation and the assessee was able to obtain order only to the tune of Rs.38.78 lac whereas during the year under consideration the turnover was Rs.177.56 lac. It was explained that the consumption of chemicals and other washing lubricants depends upon the order at particular site and, thus, the expenses shown are reasonable. The Assessing Officer went through the copy of stock register submitted by the assessee and observed that the assessee has inflated the consumption of consumables and stores. He found that in some cases the quantity consumed in the whole year was equal to the quantity consumed on 30th March, 2005 and 31st March, 2005. He has drawn a table which is reproduced below:-
S.No. Name of the Qty. Consumption Value of
Product consumed in on 30.3.05 & consumption on
whole year 31.3.05. 30.3.05 &
31.3.05.
1. Tinofix 200 Kg. 200 Kg. Rs.25000.00
2. Denicele 200 Kg. 200 Kg. Rs.65000.00
3. Sodium 1000 Kg. 1000 Kg. Rs.20000.00
4. Chemicals 9154 Kg. 60 Kg. Rs.18600.00
Total Rs.128600.00
12. Thus, the Assessing Officer observed that non-production of the evidence by the assessee in respect of consumption of material, change in circumstances/contract leading to higher consumption of consumable stores, ¼ of the total expenses amounting to Rs.4,16,132/- is disallowed and he has assigned the following reasons to make such disallowance:-
(i) Non production of any evidence in respect of consumption of these material, particularly when compared with previous year.
(ii) Non accounting of value of stores remaining unconsumed/unbilled at end of the year.10 ITA No.2833/Del/2009 C.O. No.300/Del/2009
(iii) Non submission of month wise consumption/manufacturing account as asked in para (10) of notice dated 16.11.2007, in fact in para (10) of reply dated 26.11.2007, assessee submitted as under:-
"It is respectfully submitted in the assessee is engaged in the business of fabrication of garment on job work on behalf of other exporters and manufacturer, not as manufacturer of the garments and therefore manufacturing account cannot prepared in accordance with proviso of law."
(iv) Inflated consumption of consumables/stores at end of the year.
(v) Non accounting of work-in-progress and unbilled completed job work."
13. On similar reasoning the Assessing Officer also disallowed 1/3rd of repair and maintenance amounting to Rs.62,958/- and 50% of Diwali expenses amounting to Rs.28000/- and, thus, all these three disallowances put together were counted at Rs.5,07,096/-. The disallowance on account of repair and maintenance reflects in ground No.4 of departmental appeal and ground No.5 of cross objections.
14. Arguing the appeal of the revenue on this issue, it was submitted by Ld. AR that the Assessing Officer was right in rejecting the claim of the assessee regarding consumables to the extent of ¼ for the reasons assigned by the Assessing Officer in the assessment order. He submitted that the Ld. CIT (A) without appreciating the factual position narrated by the Assessing Officer has wrongly deleted the addition. He submitted that the Assessing Officer has clearly brought on record that the consumption of two days was equal to the consumption made in whole of the year in respect of three items and Ld. CIT (A) without appreciating that factual position has deleted the addition. He submitted that the order of the Assessing Officer on this issue should be restored and that of CIT (A) should be set aside.
15. On the other hand, it was submitted by the Ld. AR that Ld. CIT (A) has specifically found that three items mentioned by the Assessing Officer, namely, Tinofix, Denicele and Sodium purchased in small quantity during the period of 11 ITA No.2833/Del/2009 C.O. No.300/Del/2009 February-March and, thus, items were mostly used for washing and fixing the colour of cloth and once it is dissolved in water, the unused store left cannot be used again. Hence, the question of valuation of such stock does not arise. Most of the raw material and chemicals, etc. were provided by the clients for whom the assessee did the job work and there was no question of valuation of the remaining consumable in respect of consumable supplied by the clients and, thus, the CIT (A) was right in deleting the addition.
16. We have carefully considered the rival submissions in the light of the material placed before us. If the consumption of consumable is compared with the immediate preceding year, the position will emerge as follows:-
Year Sales Consumption %
2003-04 38.79 Lacs 1.45 Lacs 3.74
2004-05 177.56 lacs 16.67 lacs 9.39
17. It is the case of the assessee that there cannot be any relationship between the consumption of consumable store and sales since the consumable stores are supplied by the clients themselves and some times purchased by the assessee as per the terms of the contract. The variation in the consumable is huge as the same has risen to 9.39% from 3.74%. If it is the contention of the assessee that the variation is due to the fact that some times consumable stores are supplied by the clients and some times purchased by the assessee himself, then it was obligatory on the assessee to place evidence on record to support such contention which has not been done. Rather, the assessee has turned the table upon the Assessing Officer to contend that the Assessing Officer has not disallowed any specific item of consumable, but he has made ad hoc addition. In our opinion, if expenses are claimed by the assessee, it is for him to explain the same and if some contention is taken that it is required to be supported by some evidence. The Assessing Officer has brought material on record to suggest that the consumption shown by the assessee on the last two days of the accounting year was equal to the consumption done for the same items during the whole of the years. That figure is sufficient to draw a presumption against the assessee 12 ITA No.2833/Del/2009 C.O. No.300/Del/2009 and the assessee was required to explain the same. The CIT (A) has not given a specific finding upon the same. Keeping in view the fact that the assessee has maintained the stock register and the entire particulars were available, we are of the opinion that it will be in the interest of justice if the matter is restored back to the file of Assessing Officer for re-consideration. While restoring the issue we have also kept in view the fact that the assessee had filed an affidavit under Rule 46A of the IT Rules, 1962, to support the evidence for consumption of consumable stores, etc. We restore this issue to the file of Assessing Officer for proper verification and examination thereof with a direction to give the assessee a proper opportunity of hearing and to file evidence. After affording such opportunity, the Assessing Officer will re-adjudicate the issue as per the provisions of law. We direct accordingly. Ground of appeal No.3 of the departmental appeal is allowed for statistical purposes and ground No.4 of Cross Objections is dismissed.
18. Now, coming to Ground No.4 of the departmental appeal and ground No.5 of cross objections which is with regard to addition made on account of repair and maintenance, the facts have already been discussed while dealing with ground No.3 of departmental appeal and ground No.4 of cross Objections. We have heard both the parties on this issue. The details of repair and maintenance are filed at pages 140-144 of the paper book. The items pertains to repairs, etc. of the machinery and all these expenditure are supported by the bill nos. As per the findings given by the CIT (A) also, copy of repair and maintenance account along with copy of all the correspondence bills, were submitted to the Assessing Officer in response to notice dated 22nd October, 2007 and no specific item has been disallowed by the Assessing Officer. The disallowance being 1/3 was an ad hoc disallowance. Therefore, we find that Ld. CIT (A) has rightly deleted the addition. We decline to interfere. This ground of the revenue is dismissed. And grounds of Cross Objections become infructuous and the same is dismissed.
19. Ground No.5 of the departmental appeal and ground No.6 of cross objections raise one issue i.e., the disallowance made on account of late deposit 13 ITA No.2833/Del/2009 C.O. No.300/Del/2009 of employees contribution towards ESI. It has been the contention of the assessee that all the payments were made along with interest before the due date of filing the income-tax return and on these findings the CIT (A) has deleted the addition. During the course of hearing no material has been brought on record by the revenue to show that such contention of the assessee is incorrect. If the payment has been made before the due date of filing the income-tax return, then, the disallowance has rightly been deleted by the CIT (A) which is as per the decision of Hon'ble Supreme Court in the case of CIT vs. Alom Extrusions Ltd. 319 ITR 306 (SC) wherein it has been held that the deletion of second proviso to Section 43B by the Finance Act, 2003 is retrospective and it would operate w.e.f. 1.4.88. it may be mentioned here that in para 9 of the assessment order, the due date as well as the date of bank clearance is also given and the latest date of payment is 2nd December, 2004 which falls within the accounting year itself. Therefore, we see no reason to interfere in the order of the CIT (A) vide which the impugned addition has been deleted. This ground of appeal raised by the revenue is dismissed. As the ground of the revenue is dismissed, the ground of cross objection has become infructuous, hence, the same is also dismissed.
20. Ground No.7 of the assessee cross objection. This issue has been discussed by the Assessing Officer in para 6 of his order. A sum of Rs.1,74,011.21 was shown under the head 'miscellaneous income' which included a sum of Rs.1,73,852.21 relation to prior period income. According to explanation given by the assessee the amount of bill No.17 dated 3rd January, 2004 was Rs.2,74,784/- which was wrongly entered in the books of account as Rs.27,478.40 in financial year 2003-04. It was submitted by the assessee that the customer had debited on account of rate and quality difference of Rs.73,453.39 during the year 2003-04, therefore, the difference of Rs.1,73,852.21 was taken as income for the year under consideration. From the reply of the assessee the Assessing Officer observed that income to the extent of Rs.1,73,852.21 did not relate to the year of assessment, but related to assessment year 2004-05. After detection of error the assessee was under legal obligation to revise return for the relevant assessment year and, therefore, the 14 ITA No.2833/Del/2009 C.O. No.300/Del/2009 Assessing Officer reduced the said amount of Rs.1,73,852.21 from the income of the current year with the observation to take appropriate action for the relevant assessment year in accordance with the IT Act, 1961.
21. Ld. CIT (A) has discussed this issue in para 5 to 5.3. It was submitted before him that the assessee did not become aware of the mistake till the completion of the assessment for assessment year 2004-05 and it was only during the finalisation of the accounts for the assessment year 2005-06 the assessee became aware of such mistake and had tried to rectify the same by including it in the income of the assessment year 2005-06 since the time limit for the filing the revised return u/s 139 (5) had already expired. It was submitted that the assessee is a law abiding citizen and has acted bonafidely in disclosing his income and had no mala fide intention as can be seen from the willful disclosure in the succeeding assessment year of the income relating to assessment year for which assessment has already been completed and decided in favour of the assessee. It was stated that Rs.1,73,852.21 relates to prior period income being an amount of bill No.17 dated 3rd January, 2004 for Rs.2,74,784/- which was wrongly entered as Rs.27,478.40 by the assessee in financial year 2003-04, but the customer had debited on account of rate and quality difference for Rs.73,453.39 during the year 2003-04 and, therefore, the difference of Rs.1,73,852.21 was taken as income for the year under consideration. Reference was made to Accounting Standard II relating to disclosure of prior period and extraordinary items and change in accounting policies notified by the Central Government vide Notification No.9949 dated 25th January, 1996 u/s 145 (2) which defines prior period items as material changes or credits which arise in the previous year as a result of error or omission in the preparation of financial statement of one or more previous year as mentioned in para B (13) (e) of the aforesaid Notification. It was contended that the said Notification allow prior period items to be included in the determination of profit and loss for the current period as mentioned in para B(7) of the aforesaid Notification and, thus, it was requested that the Assessing Officer was wrong in taking Rs.1,73,852.21 from the income of the assessment year 2005-06.
15 ITA No.2833/Del/2009 C.O. No.300/Del/200922. Considering these submissions, Ld. CIT (A) has observed that the income of the assessee was required to be computed in accordance with the provisions of the Act. The scope of income has been defined u/s 5 of the Act. Ld CIT (A) has observed that admittedly the sum of Rs.1,73,852.21 does not pertain to the year under consideration and has to be considered in the year to which it pertains. Thus, he has upheld the action of the Assessing Officer on the ground that there was no infirmity in such adjustment made by the Assessing Officer and the ground of appeal of the assessee in that regard was dismissed. The assessee is aggrieved, hence, has filed Ground No.7 of cross objections.
23. After narrating the facts, it was submitted by Ld. AR that by the time the mistake came to the notice of the assessee, the time for filing the revised return had expired. It was submitted that even assessment for assessment year 2004- 05 had finalized, therefore, the assessee had no option, but to show the difference in the year under consideration and this was so done by the assessee. It was submitted that Ld. CIT (A) has wrongly upheld the action of the Assessing Officer. Ld. AR was required to submit the details of the assessment order for assessment year 2004-05 to substantiate his contention that assessment for that year was already finalized when the mistake came to the notice of the assessee. The Ld. AR has submitted the assessment order for assessment year 2004-05 which is dated 28th December, 2006 and the order is passed u/s 143 (3) of the Act.
24. On the other hand, relying upon the order of the Assessing Officer and CIT (A) it was pleaded by Ld. DR that Ld. CIT (A) has rightly upheld the action of the Assessing Officer and this ground of the cross objection of the assessee should be dismissed.
25. We have carefully considered the rival contentions in the light of the material placed before us. From the facts, it is clear that the amount which is sought to be shown as income for the year under consideration pertains to assessment year 2004-05. The assessment in that case was completed vide 16 ITA No.2833/Del/2009 C.O. No.300/Del/2009 order dated 28th December, 2006. The accounts of the assessee were finalized latest by 31st October, 2005 which is the date of filing of the return for assessment year 2005-06. Therefore, there is no force in the contention of the assessee that by the time assessee became aware of the mistake, no option was available to the assessee to inform about the mistake happened for assessment year 2004-05. As the assessment for 2004-05 was finalized only on 28th December, 2006, the process of assessment year 2004-05 was going on when the mistake came to the notice of the assessee. The assessee could well inform the Assessing Officer that by mistake such amount has been less credited and, therefore, income to that extent can be assessed in assessment year 2004-05. This having not been done, the contention of the assessee is rejected that there was no option available with the assessee to inform the department regarding the mistake on the basis of which the income has been shown in the year under consideration. According to the well established law the assessee is under an obligation to disclose the full and true particulars of income relating to a particular assessment year in that very particular assessment year. Merely for the reason that in earlier year the assessee by mistake could not show that income, the said income cannot be assessed in another year. Therefore, we see no infirmity in the order of the CIT (A) vide which such action of the Assessing Officer was upheld. We dismiss this ground.
26. The next ground i.e., ground No.8 relates to partial disallowance in respect of expenses incurred on vehicle which have been sustained by CIT (A) to the extent of Rs.32,060/-. The Assessing Officer made the disallowance of 1/6th of the expenses which has been upheld by the CIT (A) on account of its being reasonable. It was submitted before us that for assessment year 2006-07 the Tribunal has considered this issue whereby the disallowance made by the Assessing Officer and confirmed by the CIT (A) at 1/6th was reduced to 1/10th. He has referred to the aforementioned order of the Tribunal dated 29th January, 2010 for assessment year 2006-07 and he invited our attention towards para 4 of the said order which read as under:-
17 ITA No.2833/Del/2009 C.O. No.300/Del/2009"4. In grounds No. 1(b) & 1(b) the assessee has challenged the action of Ld. CIT(A) in upholding the ad hoc disallowance of 1/6th of the telephone and vehicle expenses on the assumption of personal use by the assessee and his family members. It was fairly agreed by both the sides that ad-hoc disallowance should be restricted to 1/10th considering the fact that there is no specific identification of personal use of the vehicle as also the fact that there is no log book maintained in respect of the vehicle and similar register in respect of the telephone. In these circumstances considering the submission of the Ld. A.R. and the Ld. D.R., the disallowance out of the vehicle and telephone expenses is restricted to 1/10th. In these circumstances the appeal of the assessee is partly allowed for statistical purposes."
27. In this view of the situation, after hearing both the parties, we restrict the disallowance to 1/10th of expenses. The Assessing Officer will compute the disallowance accordingly. This ground of the Cross Objections of the assessee is partly allowed.
28. In the result, the appeal of the revenue and the Cross Objections filed by the assessee, both are partly allowed in the manner aforesaid.
29. The order pronounced in the open court on 30.07.2010.
Sd/- Sd/-
[R.C. SHARMA] [I.P. BANSAL]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated, 30.07.2010.
dk
18 ITA No.2833/Del/2009
C.O. No.300/Del/2009
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches