Income Tax Appellate Tribunal - Lucknow
Shri Kamal Raheja, Kanpur vs Department Of Income Tax on 17 March, 2016
1
IN THE INCOME TAX APPELLATE TRIBUNAL
LUCKNOW BENCH "B", LUCKNOW
BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER
AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER
ITA No.557/LKW/2014
Assessment year:2009-10
Income Tax Officer-3(2), Vs Shri Kamal Raheja,
Kanpur Flat No. 502, Leela Palace,
7/87, Tilak Nagar,
Kanpur.
PAN:ABJPR2102G
(Appellant) (Respondent)
Appellant by Shri Amit Nigam, D. R.
Respondent by Shri Rakesh Garg, Advocate
Date of hearing 03/03/2016
Date of pronouncement 17/03/2016
ORDER
PER A. K. GARODIA, A.M.
This is Revenue's appeal directed against the order passed by learned CIT(A)-II, Kanpur dated 27/03/2014 for the assessment year 2009-
10.
2. In this appeal, the Revenue has raised the following grounds:
"1. Ld. Commissioner of Income Tax (A)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.76,58,226/- made by the Assessing Officer without appreciating the facts brought of record by the Assessing Officer who rightly added the unsecured loans raised by the assessee u/s 68 of the Income Tax Act, 1961 as the assessee could not proved the genuineness of the transactions and credit worthiness of the concerned persons.
2. Ld. Commissioner of Income Tax (A)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.32,82,000/- made by the Assessing Officer without 2 appreciating the facts brought of record by the Assessing Officer who rightly added this amount appearing in the books of accounts of the assessee against sundry creditors since the assessee could not substantiate these credits.
3. Ld. Commissioner of Income Tax (A)-II, Kanpur has erred in law and on facts in deleting the addition of Rs.4,25,000/- made by the Assessing Officer without appreciating the facts brought on record by the Assessing Officer who rightly disallowed the expenses as the assessee was not able to substantiate his claim in respect of these expenses.
4. That the order of the Ld. CIT(A)-II, Kanpur dated 27.03.2014 being erroneous in law and on facts, be quashed and the order dated 30.12.2011 passed u/s 144 of the Income Tax Act,1961 by the Assessing Officer be restored."
3. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A).
4. We have considered the rival submissions. Regarding ground No. 1, we find that this issue was decided by CIT(A) as per the following findings on page No. 47 of his order, which is reproduced below for the sake of ready reference:
"From the above facts it is evident that there is no cash credit received during the previous year relevant to Assessment Year 2009-2010. All the loans were received prior to 01.04.2008. The most of the loans were appearing since in Audited Balance Sheets as on 31/03/2002 to 31/03/2005 and have been considered in the regular assessment proceedings made for the A.Y. 2002-2003 to A.Y. 2005-2006. The loan transactions after 31.03.2005 are through banking channel and appellant has successfully supported the same from his bank statements. In all the cases relevant details with confirmations have been filed. The independent enquiry has also been carried out by the A.O. In remand report the A.O. has expressed doubt 3 about the genuineness / creditworthiness of the creditor but this is not tenable in view of the facts that no loan has been received during previous year relevant to AY 2009-10 and also in consideration of the loans in regular assessment proceedings in AY 2002-03/2003-04/2004-05/2005-06. The explanation of the appellant in the matter of different signature of Sri Mohan Lal at the affidavit and receipt of notice is found satisfactory. The appellant has also furnished the PAN (AERPK5498M) of Meena Kesarwani which is confirmed from site of NSDL. The explanation of the appellant with regard to above 18 cash credit accounts is found satisfactory. Besides this, I also agree with the contention of the appellant that on the basis of genuineness /creditworthiness etc. relating to loans received prior to previous year relevant to A.Y. 2009-2010 no addition can be made in A.Y. 2009-10, As held by Hon'ble Delhi High Court in CIT vs. Usha Stud Agricultural Farms Limited - 2008-301 ITR 384 and by Hon'ble Rajasthan High Court in CIT vs. Prameshwar Bohra - (2007) - 301 ITR 404. The addition of Rs. 76,58,226/-. Is hereby deleted."
4.1 From the above para from the order of CIT(A), it is seen that a categorical finding has been given by CIT(A) that there is no cash credit received during the present year and all the loans were received prior to 01/04/2008. This finding of CIT(A) could not be controverted by Learned D. R. of the Revenue. Hence, we find no reason to interfere in the order of CIT(A) because no addition can be made u/s 68 of the Act in respect of any loan which was received prior to the start of the previous year relevant to present assessment year. Accordingly, this ground is rejected.
5. Regarding ground No. 2, we find that this issue was decided by learned CIT(A) on page No. 50 of his order, which is reproduced below for the sake of ready reference:
"I have considered the facts of the case. The appellant has filed confirmations regarding these liabilities and above explanations. The A.O. has examined these liabilities and discussed in his Remand Report, dated 09-01-2014. In the case of Sri Ajay Kumar Gupta and Sri Dinesh Kumar Gupta statement have also been recorded. In the case of Sri Ajay Kumar Gupta 4 the appellant has advanced Rs.12,51,000/- in the month of September, October and November, 2006 for purchase of land from his personal amount. Sri Ajay Kumar Gupta returned this amount in May, 2008. The proceeds were credited in the Proprietorship Concern - M/s. Kamal Kumar Dinesh Kumar and thus Sundry Creditors appeared in the books of the appellant. Similar is the case of Sri Dinesh Kumar Gupta who was advanced Rs.17,51,000/- by the appellant from his personal account, for purchase of House Property. Sri Dinesh Kumar Gupta returned this money in May, 2008 and the proceeds were deposited in the business concern (M/s. Kamal Kumar Dinesh Kumar) of the appellant by credit of proceeds account of Dinesh Kumar Gupta shown credit balance of Rs.17,51,000/-. All the transactions of the appellant with these parties are through banking channel and evident from his bank statements. In fact this is the repayment by these parties to Shri Kamal Raheja which is credited to his proprietary business concern. The transactions with Shri Ajay Kumar Gupta and Shri Dinesh Kumar Gupta are neither in the nature of extinguishment of trade liabilities nor receipts in the course of business. The transactions with these parties are not related with the business of the appellant. The liability of Smt. Priya Raheja is duly confirmed by her. In the facts of the case there is nothing to attract provision u/s 41(1) of the Income Tax Act. In view of these facts the additions made of Rs.32,82,000/- is hereby deleted."
5.1 From the above para from the order of CIT(A), it can be seen that a categorical finding has been given by CIT(A) that there is nothing to attract the provisions of section 41(1) of the Act. He has also given a finding that regarding the amount of Rs.12.51 lac in respect of credit in the case of Shri Ajay Kumar Gupta, the amount was advanced by the assessee in the month of September to November 2006 for purchase of land from his personal account but Shri Ajay Kumar Gupta returned this money in May, 2008 and the proceeds were deposited in the proprietorship business concern of the assessee M/s Kamal Kumar Dinesh Kumar and the same was appearing in the as sundry creditors in the books of that concern. Under these facts, it cannot be said that there is any liability which has ceased to exist. Same is the fact in the case of the liability of Rs.17.51 lac appearing in the name of 5 Shri Dinesh Kumar Gupta as noted by CIT(A) in the above para of his order. Under these facts, we find no reason to interfere in the order of learned CIT(A) and accordingly reject ground No. 2 of the Revenue.
6. Regarding ground No. 3, we find that this issue was decided by CIT(A) as per his categorical finding regarding each and every item of expenses on pages 58 to 63 of his order, which are reproduced below for the sake of ready reference:
"All above expenses are wholly necessarily and exclusively related to my business of Polyester and metalized film and income arising out of transactions in share and securities. I have also enclosed the certified copy of the Ledger account of the expenses debited in the business concern M/s. Kamal Kumar Dinesh Kumar as per Para No. 5 below. I have also enclosed and submitted to the A.O. in remand Proceedings the copy of account statement of share brokers evidencing the expenses such as Brokerage expenses, D.P. Charges, Security Transaction Tax incurred with reference to share transactions. The expenses are duly detailed in the copy of accounts and are evidenced from bills, vouchers and records.
I have considered the facts of the case. The appellant has claimed total expenses amounting to Rs.9,96,429/- under various heads. The AO has disallowed a sum of Rs.4,98,215/- being 50% of Rs.9,96,429/- being excessive and unverifiable in nature and to cover up the possible leakage.
Regarding audit fee the-in remand report the A.O. has stated that Audit Fee of Rs.5,000/- is for share transactions, share is not the business of M/s. Kamal Kumar Dinesh Kumar; further no evidence of payment of Audit Fee has been produced. This has been explained by the appellant that this is Assessment of Kamal Raheja Individual, who has two business divisions i)M/s Kamal Kumar Dinesh Kumar and share transactions. Audit fee of Rs.6,000/- is with regard to M/s. Kamal Kumar Dinesh Kumar and further Audit Fee of Rs. 5,000/- is for share business. The Audit Fee has been accounted for in accounts maintained division wise. This is payable as on 31.3.2009 and has been paid subsequently to 6 auditor - Amit Drivedi & Associates. Copy of account for F.V. 2009-2010 evidencing the payment has been submitted. The payment of audit fee is by cheque no.172083 dated 19.08.2010 for Rs. 6,000/- and Rs. 5,000/- vide cheque no.180835 dated 21-08-2010. The appellant has satisfactorily explained the expense of Audit Fee. The disallowance made in this regard is hereby deleted.
Regarding advertisement it is submitted by the appellant that the public notices were got published in the local News Paper - Jagran Prakashan. All payments were made by account payee cheques directly to the Jagran Prakashan for the purpose. It is further submitted that appellant have duly shown lawn income of Rs.8,50,000/- duly credited in Profit & Loss Account. To protect his interest in property, he has to issue Public Notices and. The expenses have been paid through cheque to M/s. Jagran Prakashan Limited. The expense is fully relatable to our lawn income and is deductible expense as claimed. I find that the appellant has offered lawn income of Rs.8,50,000/- shown in the audited Profit & Loss account. The payments are through cheques towards public notices published in local News Paper - Jagran. The expenses incurred have been claimed to protect his interest in property which is generating income. This expense is directly related with the income and is allowable expense in computation of income. The disallowance made in this regard is hereby deleted.
Regarding bank charges it is submitted by the appellant that bank charges have been accounted for as debited by Indian Overseas Bank, Bank of India CC account, Development Cooperative Bank, Union Bank of India, Punjab National Bank. All such expenses are duly evidenced from bank statements. In remand report there is no adverse view therefore the disallowance made in this regard is hereby deleted.
Regarding Depreciation it is submitted by the appellant that depreciation has been computed as allowable under the Provisions of Income Tax Act. This is as per Annexure -D referred in Form - 3CD by the Auditor. In remand report no error in computation has been pointed out. From the details of depreciation it is seen that "-here is claim of depreciation of Rs.45,402/- for car. The personal use of car cannot be ruled out. It would be justified to restrict the disallowance of depreciation for personal use to the extent of 1/5th being Rs.9,080/-. The remaining disallowance is deleted.7
Regarding Insurance it is submitted by the appellant that this expense is paid to ICICI Lumbard GIC Limited towards Car Insurance. In remand report the A.O. has observed that the necessary evidence/copy of insurance policy was not produced for verification. In this regard appellant has explained that the payment is through banking channel for insurance of Car however policy of Insurance not traceable. I have considered the facts in this regard. The payment is evident from entry in bank statement. The expense is therefore allowable. However as held in the case of depreciation on car, it would be justified to restrict the disallowance of depreciation for personal use to the extent of 1/5th being Rs.3,282/-. The remaining disallowance is deleted.
Regarding legal expenses it is submitted by the appellant that there are various Legal proceedings relating to Trade Tax, Income Tax, Civil matters etc. and which warranted payment of fee to the Counsels / advocates. /All such fee has been paid by cheques except Rs. 250/- related with appeal fee for F.Y. 2004- 2005. In remand report the Ld. A.O. has observed that 'it is noticed that these expenses relate to the amounts paid for Income Tax and Sales Tax Cases and payments made to three other persons (on four occasions - total Rs. 35,500/-) in respect of property No.7/87, Tilak Nagar, Kanpur. In this regard the appellant has submitted that there is lawn income of Rs. 8,50,000/- shown by me is relating to lawn at property no. 7/87 Tilak Nagar, Kanpur. To protect my interest in property I had to avail services of advocates. The expense related to my income, and is fully allowable as claimed. In allowing advertisement expenses I have held that this expense is directly related with the income and is allowable expense in computation of income. For the same reason the disallowance made in this regard is hereby deleted.
Regarding loading expenses it is submitted that the expenses are related with loading of goods. This is in the nature of palledars charges paid to workers. In remand report the A.O. has observed that there are no proper bills / vouchers which could substantiate the claim of the assessee beyond doubt. It is further noticed that the expenses have been booked mechanically @ Rs. 0.25 per kg of load which is not a practice followed in such type of expenses (i.e. palledari). In this regard the appellant has submitted that these expenses are paid to the palledars in cash. The palledaries are paid as settled at the rate 8 of Re.0.25 per kg. The expense is fully relatable to the loading of goods. This is neither mechanical nor out of practice. The Ld. A.O, did not indicate the material for his observation. In the matter of suspicion it is held by Hon'ble Rajasthan High Court Bench, Jaipur in the case of CIT Ajmer vs. Jai Kumar Bakliwal that "suspicion howsoever strong it may be is not sufficient itself. This squarely applies to this finding of the Ld. A.O..I have considered the facts in this regard. The payment of palledaries in cash is usual market practice and there is no restriction in this regard. In the market the rates of palledaries are settled per bag, weight, container etc. This expense is in the nature of wages, for the business and if paid at a particular rate with goods, the same cannot be adversely viewed merely for the reason that these are paid in cash. There is no specific material brought on record against allowability of loading expenses. Therefore the disallowance made in this regard is hereby deleted.
Regarding Miscellaneous Expenses it is submitted that this is interest payment against late payment of VAT. The interest payment is not panel character and hence allowable business expense. The disallowance made in this regard is deleted.
Regarding Postage and Telegram Expenses Rs.101/- it is submitted that these are in the nature of Courier Charges. This is fully allowable business expense. In remand report it is mentioned that expenses have been incurred in cash. The payment made in cash for Courier expenses does not come in the way of allowability. This disallowance made is hereby deleted.
Regarding Printing and Stationery Rs.2,787/-, it is submitted that the expense is in the nature of purchase of paper, refilling of ink and charges debited by Cooperative Bank towards stationary and this is fully allowable as business expense. In remand report it is observed that sum of the expenses have been incurred in cash. The payment made in cash for stationery expenses does not come in the way of allowability. This disallowance made is hereby deleted.
Regarding Repairs and Maintenance Rs.13,694/- It is submitted thai the expenses are in the nature of purchase of wireless router to up keep internet connectivity, change of oil relating to car and purchase of battery to up keep our assets.9
In remand report the A.O. has observed that it is not verifiable that these expenses were fully and exclusively for business purposes only. From details of expenses it is seer, that Rs.11,594/- (Rs. 2,994/-, 7500/- and 1100/-) are appears to be related with Car. The disallowance is restricted to Rs.5,000/-.
Regarding Salary Rs.1,71,000/-, it is submitted that the expenses are in the nature of regular employment of staff for business purposes. In remand report it is observed by the A.O. that it is not verifiable from the details submitted by the assessee that these expenses were fully and exclusively for business purposes. The appellant has submitted to have furnished the details of person along with services rendered to whom salary have been paid. It was further submitted that appellant has godown at Panki, head office at Tilak Nagar. The expenses are less then Rs. 50,000/- per month. I have considered the facts of the case. The payment to Sri Amit Arora and Sri Anurag Mishra have been paid in cash on regular basis. Sri Amit Arora have been claimed to maintain account and Sri Anurag Mishra is looking after other business affairs. The payment to Sachidanand Drivedi and Kishan Kumar Basodia have been paid by cheque. Who were employed for part of the year. The business places have at Tilak Nagar and Panki. The business require complying with Sales Tax, Income Tax, Visiting to Bank, maintaining record and controlling the stock etc. In consideration of facts and considering monthly expense less then Rs.50,000/- per month, the contention of the appellant that salary expense is exclusively for the business purposes, is accepted. The disallowance made in this regard is hereby deleted.
Regarding Sales Promotion Rs.1,488/- it is submitted that the expenses are in the nature of entertaining customer. In remand report it is observed by A.O. that these expenses have been incurred in cash. I have seen the details of expense and this expense is incurred on 31.05.2008 for entertaining customer and bill no. 1516 of Antarang Restaurant has been paid in cash. In view of this fact that bill no. and name of restaurant etc. has been given, the expense is verifiable. The payment in cash in such expenses is normal feature. The disallowance is made in this regard is hereby deleted.
Regarding Telephone Expenses Rs.33,088/- it is submitted by the appellant that there is land line phone and mobile phone for the business purposes. The provision of Rs.10
2,988/- for the month of March, 2009 has been made on the basis of bills relating to March, 2009 received after March and appellant have other phone no. 2543643 and 9453036132 the expense of which not debited for business expense. However, the disallowance is restricted to Rs.5,000/-.
Regarding Travelling expenses R.41,01/- it is submitted that in business there is need of travelling to meet our supplier. In remand report the A.O. has observed that it is not established beyond doubt that these visits were in fact undertaken fully and exclusively for business purposes keeping in mind that assessee has not furnished anything from third parties regarding these business trips. In this regard the appellant has submitted that these were purely business trips and no family members were accompanied. It is open for the A.O. to make third party enquiry but in travelling expenses no third party evidences are submitted. I have seen with details of travelling expenses. There is force in the submission of the appellant that in case of travelling expenses third party evidences and not required and in any case it was open to the A.O. to make enquiry if so required by him but this has not been done. In view of these facts the disallowance made is hereby deleted.
Regarding Vehicle Running and Maintenance Rs.2,15,957.99 it is submitted that the office situate at Shakkar Patti, Godown situate at Panki Industrial Area. There is regular requirement in the business to visit office, godown, banks and to our customers, service providers, Income Tax, Vat Tax, Counsels, to the court and Civil Counsels etc. etc.. The purchase of fuel (petrol) for car is debited under this head. Except Rs. 1007- all expenses have been paid through cheques to M/s. Sri Ram Motors (petrol pump) against purchase of fuel. In remand report A.O. has observed s the user of above referred fuel and lubricants for the personal user can not be rules out in absence of any concrete evidence in support of its user for business purposes only. I have seen the details of expenses and considered the facts. The personal use of vehicles cannot be rules out and it is estimated at Rs.50,000/-. The disallowance is restricted to Rs.50,000/-.
Regarding Brokerage Expenses Rs.1,44,735.29, DP Charges Rs.1754.29 and Security Transaction tax Rs.33,890/- it is submitted by the appellant that these expenses are related with share transactions. Brokerage have been paid to -IL&FS 11 Invest Mart Securities Limited and Kotak Securities Limited. DP Charges is charged on Demat Account and Security Transaction Tax is evidenced from the account statement / contract note of the broker and STT Certificate. There is no adverse remarks in the remand report. I have seen the details the expenses are fully allowable business expense relating to share transactions. The disallowances made in this regard are hereby deleted."
6.1 As above paras from the order of CIT(A), it is seen that CIT(A) has examined each and every item of expense in detail and the disallowance was deleted by him on the basis of his categorical finding that all the expenses are fully, necessarily and exclusively related to assessee's business and the same are allowable expenses except small portion which is already disallowed by him and these findings of CIT(A) could not be controverted by Learned D. R. of the Revenue. Hence, we find no reason to interfere in the order of CIT(A).
7. In the result, the appeal of the Revenue stands dismissed.
(Order was pronounced in the open court on the date mentioned on the caption page) Sd/. Sd/.
(SUNIL KUMAR YADAV) ( A. K. GARODIA )
Judicial Member Accountant Member
Dated:17/03/2016
*Singh
Copy of the order forwarded to :
1.The Appellant
2.The Respondent.
3.Concerned CIT
4.The CIT(A)
5.D.R., I.T.A.T., Lucknow Asstt. Registrar