Income Tax Appellate Tribunal - Jaipur
Krishan Kumar Batra, Alwar vs Ito, Alwar on 7 November, 2019
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES 'SMC', JAIPUR
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Before : Shri Vijay Pal Rao, Judicial Member
vk;dj vihy la-@ITA No. 236/JP/2017, 265 to 267/JP/2018
fu/kZkj.k o"kZ@Assessment Years : 2011-12 to 2014-15
Shri Krishan Kumar cuke The ITO
B-11, New Sabji Mandi Vs. Ward 2(3)
Alwar Alwar
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACOPK 2586 P
vihykFkhZ@ Appellant izR;FkhZ@ Respondent
fu/kZkfjrh dh vksj ls @Assessee by :Shri Rajeev Sogani, CA &
Ms. Shivangi Samdhani, CA
jktLo dh vksj ls@ Revenue by : Smt. Runi Pal, JCIT- DR
lquokbZ dh rkjh[k@ Date of Hearing : 20/09/2019
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 07 /11/2019
vkns'k@ ORDER
PER VIJAY PAL RAO, JM
These four appeals filed by the assessee are directed against four separate orders of the ld. CIT(A), Alwar dated 3-02-2017, 28-12-2017, 28-12-2017 and 22- 01-2018 for the Assessment Years 2011-12 to 2014-15 respectively. The assessee has raised the common grounds in these appeals. The grounds of appeal for the Assessment Year 2011-12 are reproduced as under:-
2ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar ''1. In the facts and circumstances of the case and in law, the ld. CIT(A) is not justified in sustaining the addition of INR 1,26,121 in respect of adhoc disallowance @ 10% of various expenses i.e. cash discou9nt, wages, travelling, bardana, food & beverages, telephone, petrol and entertainment.
2. In the facts and circumstances of the case and in law, the ld. CIT(A) is not justified in sustaining the error made by AO in referring the house constructed by assessee for valuation u/s 142A of the Act.
3. In the facts and circumstances of the case and in law, the ld. CIT(A) is not justified in sustaining the addition of INR 4,05,322/- being difference in value of house ascertained by the Assistant Valuation Officer and declared by the assessee.
4. In the facts and circumstances of the case and in law, the ld. CIT(A) is not justified in sustaining the error made by AO in not complying with the directions of the JCIT, Alwar u/s 144A wherein with respect to the report of the Valuation Officer, the JCIT has specifically asked him to consider the reply of the assessee before passing the order.
2.1 At the time of hearing, the ld.AR of the assessee stated at Bar that he does not want to press the Ground Nos. 2 & 4 of the appeals which are common in all the four appeals and therefore, the same may be dismissed as not pressed for which the ld. DR has no objection. Hence, the Ground Nos. 2 and 4 of the assessee's appeals are dismissed being not pressed by the ld.AR of the assessee. 3.1 The Ground No. 1 of the assessee is regarding adhoc disallowance of various expenses.
3ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar 3.2 During the course of assessment proceeding, the AO noted that the assessee has debited in the profit and loss account various expenses on account of Cash discount, Wages, Traveling expenses, Bardana expenses, Food & Beverages expenses, telephone and petrol expenses. The AO has made adhoc disallowances in respect of all these expenses. The details of all these expenses which were claimed by the assessee in the profit and loss account and the disallowance made by the AO are as under:-
Particulars Actual Expenses Disallowed by AO Cash discount 4,86,209 97,242 Wages 2,08,124 50,000 Travelling expenses 36,496 8,000 Bardana 13,255 3,000 Food & Beverages 27,960 6,000 Telephone expenses 15,805 3,000 Petrol expenses 26,590 3,000 Entertainment 35,483 7,000 Total 8,49,922 1,77,242
Thus the AO made disallowances of Rs. 1,77,242/- out of these expenses of Rs. 8,49,922/-.
3.3 On appeal, the ld. CIT(A) granted part relief in respect of cash discount expenses by reducing disallowance from 20% to 10% but rest of the disallowances made by the AO were confirmed by the ld. CIT(A).
4ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar 3.4 Aggrieved by the impugned orders of the ld. CIT(A), the assessee has filed the present appeals before the Tribunal. The ld.AR of the assessee has submitted that though the ld. CIT(A) considered the disallowance in respect of cash discount at 10% as reasonable as against the adhoc disallowance of 20% made by the AO. However, as regards the other disallowances made by the AO, ld. CIT(A) has not given consistent findings. The ld.AR has thus pleaded that if the disallowances can be restricted to 10% then it will be reasonable in the facts and circumstances of the case. However, the assessee could not produce the supporting evidences to substantiate these petty expenses and majority of which are petty expenses. 3.5 On the other hand, the ld. DR has relied on the orders of the authorities below and submitted that the assessee has failed to establish that the expenses are incurred wholly and exclusively for the business purposes. The disallowances made by the AO and sustained by the ld. CIT(A) are reasonable. 3.6 I have considered the rival submissions and carefully gone through the materials available on record. The AO made the disallowances in respect of various expenses and the details of which are reproduced in preceding para of this order. The AO has not given the basis of making adhoc disallowances of specific amounts. Even there was no percentage adopted by the AO while making the disallowances. However, the disallowances are also not based on the quantum for 5 ITA No. 236/JP/2017 Kishan Kumar vs ITO, Ward- 2(3), Alwar which assessee could not furnish the supporting evidences. The ld. CIT(A) has considered this issue in para 8.3 of his order hereunder restricting the disallowance to 10% of the expenses on account of cash discount ''8.3 I have gone through the assessment order as well as submissions made by the appellant. In order to get deduction under section 37 of the Act, it is incumbent upon the assessee to prove that such expenditure are incurred or expended wholly and exclusively for the purpose of the business or profession. The onus to provide credible evidences in this regard also lies on the assessee. I have perused the assessment order. It is obvious that most of such expenses have been incurred in cash and not all bills/vouchers have been produced by the assessee during the assessment proceeding. Therefore, it is justified that a part of such expenses have been disallowed by the AO.
However, with regard to cash discount given by the assessee to the debtors for early timely payment is a trade practice as is also certified by the mandi. But still the evidences of such payments were required to be submitted by the assessee. In the absence of all such vouchers, AO had disallowed 20% of the expenses. Considering the trade practice, I find it reasonable to restrict the disallowance to 10% of the expenses on account of cash discounts. With this the cumulative addition is addition is 6 ITA No. 236/JP/2017 Kishan Kumar vs ITO, Ward- 2(3), Alwar reduced to Rs. 1,26,121/-. Accordingly, the appellant's ground of appeal is partly allowed.'' It is noted that the ld. CIT(A) has not given any findings on the quantum of the disallowances made by the AO in respect of other expenses, though the ld. CIT(A) has observed that the AO is justified in making the disallowances i.e. quantum varies in case of each expenses and no reasonable or consistent basis is adopted by the AO. Hence, the question arises whether the disallowances made by the AO are reasonable and proper when the expenses are not found to be absolutely false or bogus and these are written expenses and some of which are essential for doing business activities by the assessee. Therefore, the expenses claimed by the assessee can be questioned only on the point of correctness of the claim or inflated expenses. When the expenses are incurred as regular expenses while doing business activities by the assessee and most of them are essential to carry out the business activities then the reasonableness of disallowances are very relevant material. Accordingly, having regard to the facts and circumstances of the case when the ld. CIT(A) has restricted the disallowance in respect of one of item of expenses to 10% then the disallowances made by the AO in respect of other items is also restricted to 10%. Thus Ground No. 1 of the assessee is partly allowed. 7 ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar 4.1 The Ground No. 3 of the assessee is regarding addition made on account of unexplained investment in construction of house.
4.2 Brief fact of the case are that the assessee constructed the house during the financial year 2009-10 to 2013-14 and claimed total cost of construction at Rs. 30,23,879/-. The assessee filed the report of the Registered Valuer in support of the cost of construction. As per the Valuation report, the cost of construction is shown at Rs. 28,72,212/-. The AO ascertained the cost of construction by obtaining the report of valuation from the DVO who has determined the cost of construction at Rs. 48.00 lacs. The details regarding the cost of construction shown by the assessee, the cost of construction as per Registered Valuer and the cost of construction as per DVO are as under:-
Years % of progress Cost of Cost of Cost of
construction as construction as construction as
per assessee per Registered per DVO
Valuer (considered by
AO)
F.Y.2009-10 2.80 68,000 71,677 1,34,417
F.Y.2010-11 56.58 14,67,622 15,05,226 27,16,179
F.Y.2010-11 3,00,000 - -
Surrender
F.Y.2011-12 17.47 4,89,240 5,34,178 8,38,665
F.Y.2012-13 14.23 4,21,575 4,83,142 6,83,125
F.Y.2013-14 8.92 2,77,442 2,83,989 4,28,214
100.00 30,23,879 28,78,212 48,00,600
8
ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar
The AO has made addition in respect of these four years of Rs. 20,10,304/- being the difference between the cost of construction as per registered valuer and cost of construction as per DVO.
4.3 On appeal, the ld. CIT(A) has granted relief on account of PWD rates as against CPWD rates and reduced the cost of construction to 20% thereby the addition made by the AO was restricted to Rs. 7,77,075/- on this account. Further , the credit of Rs. 3.00 lacs was also given on account of surrender made by the assessee for the Assessment Year 2011-12.
4.4 Aggrieved by the impugned orders of the ld. CIT(A), the assessee has filed the present appeals before Tribunal.
4.5 During the course of hearing, the ld.AR of the assessee submitted that the DVO has applied the CPWD rates as against PWD rates and further on various items of electricity, water supply installation as well as external service connection the DVO has adopted the cost @ 12.5% as against 10%. Similarly for water supply connection, the DVO has taken the cost at 12% as against 3% actually incurred by the assessee. There is no cost incurred by the assessee for the external service connection whereas the DVO has taken the same at 5%. Similarly, the DVO has taken architect fee at 2% whereas the assessee has not incurred any expenditure in this respect. The ld.AR has further submitted that DVO has allowed 7.5% discount 9 ITA No. 236/JP/2017 Kishan Kumar vs ITO, Ward- 2(3), Alwar on account of self supervision whereas the said discount should have been allowed at 12% as held by this Tribunal in various decisions. Thus the ld.AR has contended that if these reliefs are granted then the difference between the value determined by the DVO and value determined by the Registered Valuer will be less than 6% which is within the tolerance limit. In support of the same, the ld.AR of the relied on the decisions of ITAT Jaipur Bench in the case of Sita Ram Khetan vs ITO (ITA No. 826/JP/2013 for the Assessment Year 2010-11 date of order 27-07- 2016) and Divakar Leasing & Finance Pvt. Ltd vs ITO (ITA No.1304/JP/2018 for the Assessment Year 2013-14 dated of order 27-03-2019). 4.6 On the other hand, the ld. DR has submitted that the ld. CIT(A) has already granted 20% rebate on account of CPWD rates adopted by the DVO which subsumes all the factors of variation between the value determined by the DVO and the value determined by the Registered Valuer. The ld. DR thus relied on the orders of the authorities below.
4.7 I have considered the rival submissions as well as the relevant materials available on record. The assessee has himself claimed the cost of construction at Rs. 30,23,879/- whereas the Registered Valuer has determined the cost of construction at Rs. 28,78,212/- which shows that actual cost of construction is more than the valuation determined by the Registered Valuer. However, the ld. 10 ITA No. 236/JP/2017
Kishan Kumar vs ITO, Ward- 2(3), Alwar CIT(A) has taken the cost of construction as determined by the Registered Valuer as well as DVO and rebate of 20% was granted on account of CPWD rates applied by the DVO as against PWD rates applied by the Registered Valuer. It is pertinent to note when the Registered Valuer has taken care of all these factors which includes various expenditure on account of electric installation, water supply, architect fee as well as self supervision charges then further discount on account of these factors cannot be allowed particularly when assessee has claimed the expenditure more than the cost of construction determined by the Registered Valuer. Therefore, further relief of around 8% was granted by the ld. CIT(A) on account of difference of cost of construction shown by the assessee against which the cost of construction is determined by the Registered Valuer. In these facts and circumstances of the case when the ld. CIT(A) has sustained the addition only of Rs. 4,05,322/- then these claims of further rebate on account of actual expenditure incurred by the assessee is accepted then cost of construction would be less than the value determined by the Registered Valuer. It is also noted that the actual cost of construction of assessee is more than the cost of construction adopted by the Registered Valuer. Hence, no further discount or rebate can be granted on account of cost of construction on specific items. Therefore, the decisions relied on by the ld.AR of the assessee will not help the case of the assessee due to peculiar facts of 11 ITA No. 236/JP/2017 Kishan Kumar vs ITO, Ward- 2(3), Alwar the present case where the actual cost of construction is more than the value adopted by the Registered Valuer. Thus Ground No. 3 of the assessee is dismissed. 8.0 In the result, the appeals of the assessee are partly allowed.
Order pronounced in the open court on 07 /11/2019.
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(Vijay Pal Rao)
U;kf;d lnL;@Judicial Member
Tk;iqj@Jaipur
fnukad@Dated:- 07 /11 / 2019
*Mishra
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Krishan Kumar, Alwar
2. izR;FkhZ@ The Respondent- The ITO, Ward- 2(3), Alwar
3. vk;dj vk;qDr¼vihy) @ CIT(A),
4. vk;dj vk;qDr@ CIT,
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No.236/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar