Income Tax Appellate Tribunal - Ahmedabad
Arvindbhai C. Zaveri, Surat vs Dy.Cit.,Circle-4,, Surat on 1 May, 2017
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'ए' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 747/Ahd/2011 & 2354/Ahd/2011
िनधा रण वष / Assessment Year : 2007-08 & 2008-09 respectively
Arvindbhai Chhabildas ACIT/DCIT,
Zaveri, Vs Circle-4,
5/B, Ratnakunj Ravindham Surat
Complex, Nr. Panjrapole,
Ghod Dod Road, Surat
PAN : AAWPT 9614 K
अपीलाथ /
अपीलाथ (Appellant) यथ
यथ /
थ (Respondent)
Assessee by : Shri Rushi Parekh with
Shri MK Patel, ARs
Revenue by : Shri K. Madhusudan, Sr DR
सुनवाई क तारीख/ Date of Hearing : 17/04/2017
घोषणा क तारीख / Date of Pronouncement: 01/05/2017
आदेश/O R D E R
PER AMARJIT SINGH, ACCOUNTANT MEMBER :-
These are two appeals filed by the assessee against the respective order of the CIT(A) -II, Ahmedabad dated 30.12.2010 and order of CIT(A)-II, Sruat dated 07.07.2011 for AYs 2007-08 and 2008-09 respectively.
AY 2007-08
2. For AY 2007-08 the assessee has taken following grounds:-
1. That the CIT(A) erred in confirming the addition of Rs.20,00,000/- for unexplained cash credit u/s 68.
2. That the CIT(A) erred in confirming the disallowance of Rs.45,368/-being interest on unexplained cash credit.
3. That the CIT(A) erred in confirming the disallowance out of vehicles to the extent of 10% of the expenses.
ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 2
4. That the CIT(A) erred in not waiting for remand report which he called for from A.O. in respect of various evidences in the form of confirmation of depositor, with PAN No. & bank statement which were submitted to CIT(A) on which remand report was called for as informed to the A.R.
5. The principles of Natural justice & Audi Alteram partem had been violated. It be so held now & order of CIT(A) be set aside.
6. The order CIT(A) is being illegal & bad in law, may kindly be set aside.
Ground No.1, 2 & 4Since Grounds Nos. 1, 2 & 4 are inter-connected, therefore, for the sake of convenience, they are clubbed together and disposed of as under:-
3. In this case, the return of income declaring total income of Rs.44,58,362/- was filed on 31.10.2007. Thereafter, the case was selected under scrutiny by issuing notice under Section 143(2) of the Act 30.07.2008.
During the course of assessment proceedings, the Assessing Officer noticed that the assessee had obtained unsecured loans to the tune of Rs.20,00,000/- from various individuals. On enquiry, the Assessing Officer found that the creditors were people with limited means and were not capable of advancing huge loans out of their savings and the findings of the Range Inspector obtained in this regard have been narrated in the assessment order, which is reproduced hereunder:-
"1 Shri Bhuralal D. Mehta - This man is 80 years old he was found at the given address and his statement was recorded u/s. 131 wherein he has stated that he has not been working since passed 7 to 8 years. He is dependent on his son and he has not earned income from last 7 to 8 years. It is further reported that there is no business activity in the name of Prachi Enterprises has no books etc were found at the given address. The person have also stated in his statement that he does not have any bank account.
2. Shri Gunvantlal N. Mehta - It was learned that this person is a Pujari in the temple. No business activity was found at the said address. However, as per the P&L account filed with the confirmation by the assessee the said individual is supposed to received diamond labour income. Which was in person denied. The said family appeared to the belonging to lower middle ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 3 class with absolutely no assets and obviously no capacity of landing Rs. 5,00,000/- to the assessee during the year.
3. Shri Suresh J. Sangvi (HUF) - On inquiring sister in law of the said person was found at the given address that who stated that Shri Suresh is working as low time diamond labourer in the diamond market He has no office of his own. There was no business activity or books of account found on this address. Again the said person was found to be of poor means with hardly any capacity to lend Rs. 5,00,000/- to the assessee.
4. Shri Nailesh B. Mehta. - This person was also found to be working as a diamond labourer in the diamond market without any office of his own. No books of accounts or any business activity was found at this address. His wife stated that she was not aware of the assessee or any loan advance to him by her husband."
4. Thus, the Assessing Officer was of the view that the assessee has failed to discharge the primary onus to establish the credit worthiness of the creditor and therefore the genuineness of the transactions. The Assessing Officer accordingly treated the sum of Rs.20 lacs as unexplained cash credit of the assessee under Section 68 of the Act and Rs.45,358/-being interest claimed on the above amount was also disallowed and added the same to the total income of the assessee.
5. Aggrieved, the assessee went in appeal before the ld. CIT(A) who, after considering the submissions of the assessee, sustained the addition made by the Assessing Officer by observing as under:-
"5. I have considered the facts and submissions. I do not agree with the appellant's views. Although the appellant has filed confirmations, PA Nos etc. and discharged the initial onus as per decision of Hon'ble Gujarat High Court in the case of Rohini Builders. However, after filing these details, the Assessing Officer has conducted further enquiries and found that these persons have no capacity to give the loans. Their Income-tax returns show very little income. Although Shri Bhuralal D. Mehta was found at the given address and his statement was recorded u/s 131 but he has stated that he has not been working since past 7 to 8 years. He is dependent on his son and he has not earned income from last 7 to 8 years. It is further reported that there is no business activity in the name of Prachi Enterprieses as no books etc. ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 4 were found at the given address. The person has also stated in his statement that he does not have any ban account. In respect of Shri Gunvantlal N. Mehta, it was learnt that he is a pujari in the temple. No business activity was found at the said address. However, as per the P&L account filed with the confirmation by the assessee, the said individual is supposed to have received diamond labour income which was in person denied. In respect of Shri Suresh J. Sangvi (HUF), his sister in law was found at the given address who stated that Shri Suresh is working as low time diamond labourer in the diamond market. He has no office of his own. There was no business activity or books of account found on this address. Shri Nailesh B. Mehta was also found to be working as a diamond labourer in the diamond market without any office of his own. No books of accounts or any business activity was found at this address. Therefore, it is evident that these person have no capacity to give the loans. When these facts were contended to the appellant, the onus again shifts on him to produce these persons and prove their capacity which the appellant failed to do. In view of these facts, it is held that the Assessing Officer was justified in making the addition for unexplained cash credit and disallowing the interest thereon. Accordingly, the addition is confirmed and both the grounds are rejected."
6. Further aggrieved by the order of the ld. CIT(A), the assessee is now in appeal before the Tribunal.
7. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. We have also gone through the paper-book filed by the ld. Counsel, which contained the detailed submissions made before the ld. Assessing Officer, copy of pass-book, reply to notice under 133(6), copy of inspector's enquiry report, copy of bank certificate etc. The ld. Counsel has also submitted that the depositors have filed the income-tax returns and their bank accounts were showing several entries including advances made by them. He further contended that the so-called enquiry conducted by the Ward Inspector was contrary to the evidence filed by the assessee and further no show-cause notice was issued to the assessee on the basis of enquiry conducted by the Assessing Officer. Assessee filed the supporting documents on 21.12.2009 and the assessment order was framed on 31.12.2009 without any further ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 5 communication. After considering the facts and circumstances of the case, we find that proper opportunities have not been provided by the Assessing Officer in this case and the submissions made by the assessee were not fully considered. Therefore, we set aside this issue to the file of the ld. Assessing Officer to decide the same afresh after providing the assessee due opportunity of being heard. Accordingly, Ground Nos. 1, 2 & 4 of assessee's appeal for AY 2007-08 are allowed for statistical purposes.
8. Ground No.3 relates to the disallowance out of vehicle running expenses to the extent of 10% of the total expenses.
9. During the course of assessment proceedings, Assessing Officer observed that the assessee has debited Rs.58,005/- under the head of "Vehicle Fuel Expenses". He also observed that the assessee has also debited an amount of Rs.12,62,902/- being the depreciation on motorcar compared to Rs.5,79,946/- claimed last year. Assessee was asked to furnish the details thereof in this regard; however, assessee could not furnish any evidence with regard to its claim. Therefore, the Assessing Officer disallowed the Vehicle Running Expenses amounting to Rs.11,600/- being the 1/5th of the total vehicle running expenses of Rs.58,000/-. The Assessing Officer also disallowed 1/5th of the depreciation on motor car which worked out to Rs.2,52,580/-. Thus, in aggregate, a total amount of Rs.2,64,180/- has been disallowed by the Assessing Officer on account of vehicle running expenses.
10. Aggrieved by the order of ld. Assessing Officer in this regard, the assessee went in appeal before the ld. CIT(A). However, ld. CIT(A) restricted this disallowance to 10% of the expenses on the ground that the ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 6 element of personal usage cannot be ruled out as no log book was maintained for vehicle running.
11. Aggrieved by the order of ld. CIT(A), the assessee is now in appeal before this Tribunal.
12. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the assessee was not maintaining log book towards the running of vehicles for the office purposes. Therefore, the action of ld. CIT(A) in restricting the addition to 10% of these expenses is found justifiable. Thus, the order of ld. CIT(A) does not require any interference on this issue, which is upheld. Accordingly, this ground of the assessee is dismissed.
13. In the result, the appeal of the assessee for AY 2007-08 is partly allowed for statistical purposes.
AY 2008-09
14. In this year, the assessee has raised following substantive grounds:_ "1. On the facts and in the circumstances of the case, as well as on the subject, the learned AO erred in making addition of Rs.30,328/- being 20% of Rs.1,51,639/- towards telephone, mobile and vehicle fuel expenses treating it as non-business expenditure without appreciating the facts of the case.
2. On the facts and in the circumstances of the case, as well as on the subject, the learned AO erred in making addition in respect of Interest claimed to the tune of Rs.1,84,084/- treating it as bogus without any cogent evidence."
15. The first ground is related to disallowance made out of various expenses like telephone & mobile expenses and vehicle fuel expenses. This year also, the Assessing Officer, during the course of assessment ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 7 proceedings, observed that most of the vouchers related to telephone & mobile expenses as well as vehicle fuel expenses are not verifiable. Therefore, the Assessing Officer disallowed 20% of the total expenses claimed of Rs.1,51,639/-, which comes to Rs.30,328/-.
16. On appeal, ld. CIT(A) dismissed this ground of the assessee and upheld the action of the Assessing Officer on the ground that the vouchers were not verifiable because details of activity for which expenses are incurred were not mentioned in the vouchers; thus, the assessee has failed to prove the entire expenses were incurred for business purposes.
17. Further aggrieved, the assessee is now in appeal before the Tribunal.
18. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. We find that the ld. CIT(A) was justified in upholding the disallowance made by the ld. Assessing Officer for want of verification of proper supporting vouchers/evidences which could not furnished by the assessee to substantiate its claim. Thus, we do not find any infirmity in the order of the ld. CIT(A) in this behalf, which is upheld and this ground of the assessee is dismissed.
19. Second ground of the assessee relates to the disallowance of interest of Rs.1,84,084/- on the amount of loan obtained during FY 2006-07 to the tune of Rs.5,00,000/- each from four persons namely, Shri B.D. Mehta, Shri G.N. Mehta, Shri S.J. Sanghvi and Shri N. B. Mehta. On appeal, the ld. CIT(A) upheld the action of the Assessing Officer and confirmed this addition on the ground that the assessee's appeal against the addition of the ITA Nos. 747 & 2354/Ahd/2011 Assessee-Arvindbhai Chhabildas Zaveri AY : 2007-08 & 2008-09 8 principal amount of loan of Rs.5,00,000/- in each cases in the AY 2007-08 has been dismissed
20. We have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. We have already set aside this issue to the file of the Assessing Officer for deciding the same afresh as referred above in the order for AY 2007-08 (supra). We, therefore, restore this issue also to the file of the ld. Assessing Officer to decide the same afresh alongwith AY 2007-08. Thus, the ground of the assessee is allowed for statistical purposes. Accordingly, this appeal of the assessee for AY 2008-09 is partly allowed for statistical purposes.
21. In the combined result, both the appeals of the assessee are partly allowed for statistical purposes.
Order pronounced in the Court on 1st May, 2017 at Ahmedabad.
Sd/- Sd/-
(RAJPAL YADAV) (AMARJIT SINGH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 01/05/2017
*Biju T.
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent.
3. संबंिधत आयकर आयु / Concerned CIT
4. आयकर आयु (अपील) / The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदेशानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad