Income Tax Appellate Tribunal - Delhi
Assistant Commissioner Of Income Tax vs Allied Construction on 27 October, 2005
Equivalent citations: (2007)106TTJ(DELHI)616
ORDER
A.D. Jain, J.M.
1. These two appeals have been preferred by the Department for the asst. yr.1996-97. Income-tax Appeal No. 3009 being the quantum appeal is being taken up first.
2. The Department has raised the following grounds in the appeal:
(1) The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 10,540 and Rs. 50,000 being insurance expenses and depreciation on car and jeep respectively, ignoring the facts, detailed reasons discussed by the AO in assessment order. Therefore the learned CIT(A) is not justified in allowing the above relief to the assessee on the facts and circumstances of the case.
(2) The learned CIT(A) has erred in law and on facts in deleting the addition of Rs. 97,635 on account of labour expenses ignoring the facts, detailed reasons discussed by the AO in assessment order. Therefore, the learned CIT(A) is not justified in allowing the above relief to the assessee on the facts and circumstances of the case.
(3) The learned CIT(A) has erred in law and on facts in directing the AO to adopt the same basis as has been adopted for the same year as per order dt. 25th March, 1999. The learned CIT(A) vide earlier order dt. 25th March, 1999 set aside the matter. Now the learned CIT(A) has no such power. Therefore, the learned CIT(A) is not justified in setting aside the issue, on the facts and circumstances of the case.
(4) The learned CIT(A) has erred in law and on facts in partly allowing the relief against addition of Rs. 21,85,501 on account of interest on FDRs, ignoring the facts, detailed reasons discussed by the AO in assessment order. Therefore, the learned CIT(A) is not justified in allowing the above relief to the assessee on the facts and circumstances of the case.
3. Apropos ground No. 1, the AO made the addition on the ground that element of personal user with regard to use of vehicle cannot be ruled out. Juxta-posed with this, the learned CIT(A) has found as a fact that the car and jeep were used only at the site of the assessee and that insurance and depreciation respectively thereon had to be allowed in full. The Department has not been able to controvert this finding of fact arrived at by the learned CIT(A). It has not been alleged, much less proved that the vehicles in question were used at places other than the site of the assessee. This being so, the deletion ordered by the learned CIT(A) is well reasoned. It is hereby upheld. Ground No. 1 is rejected.
4. Ground No. 2 pertains to the deletion of addition made on account of labour expenses. The AO found that the vouchers submitted by the assessee were self-made and not reliable. Accordingly, 10 per cent of the expenses were disallowed. The learned CIT(A) deleted the disallowance. It has not been denied that as observed by the learned CIT(A), the disallowance in question was an ad hoc disallowance. The AO had not required the assessee to furnish the addresses of the labourers. The expenses were disallowed without any test check. It was not pinpointed that which item of expenditure was not verifiable. Accordingly, the (deletion of) disallowance in question was correctly ordered. We hold so. Ground No. 2 is rejected.
5. Ground No. 3 relates to additions made by the AO under the head of truck hire charges, machinery hire charges and roller hire charges. The AO observed that the assessee had not maintained separate accounts for these earnings. It was held that the assessee had not been able to establish as to whether the truck hire charges and the machinery hire charges were gross. It was also held that the assessee had failed to file any evidence like agreement, etc., to the effect that for earning the aforesaid hire charges, the assessee would incur any expenditure for running and maintenance of the articles hired out. The AO accordingly assessed the income as net income. The stand of the assessee was that the AO never put any query to the assessee. As and when the plant and machinery were idle, they were hired out to other contractors. The gross receipt had been credited to the P&L a/c. The expenses incurred for running of the plant and machinery had been debited to the expenses account. The bills and vouchers, the credit vouchers regarding the receipt of hire charges, were with the Department. No discrepancy was found therein. The AO never asked the assessee for furnishing any agreement for running and hire charges. No expenses were allowed against the receipt of hire charges, despite there not being any discrepancy. Moreover, vide order dt. 25th March, 1999, the learned CIT(A) had directed the AO to decide the issue afresh by applying the reasonable net profit rate. The AO had not pointed out as to which expenses were not verifiable.
The above facts had not been disputed. Since the AO did not carry out the directions of the learned CIT(A), as delineated above, the learned CIT(A) cannot be said to have erred in directing the AO to adopt the same basis as that taken for asst. yr. 1996-97. Therefore, ground No. 3 is also found to be devoid of force. It is rejected.
The last ground pertains to the learned CIT(A) having allowed part relief to the assessee against addition of Rs. 21,85,501 on account of interest on FDRs. Vide a detailed order, the learned CIT(A) has observed that the FDRs on which the interest was earned, were purchased by the assessee for the purpose of purchasing overdraft and getting bank guarantee. It was found that the bank guarantee as well as overdraft had been utilized for business expenses of the assessee. It was in this view that the interest earned on the FDRs was considered as a business receipt. Pertinently, the learned CIT(A) found one FDR for Rs. 70 lakhs purchased on 17th Jan., 1996, to be in the hands of the assessee on being not utilized for obtaining a bank guarantee and overdraft. Accordingly, interest earned on this FDR for the period 17th Jan., 1996 to 31st March, 1996 was considered not to be business income. This finding of the learned CIT(A) had not been appealed against by the assessee.
8. Again, the Department has not been able to overturn the factual findings recorded by the learned CIT(A). Since the FDRs have been found to be utilized for business purposes, interest thereon has to be considered as a business receipt of the assessee. Hence the grievance of the Department is unjustified. Accordingly, ground No. 4 is also rejected.
9. As a result, the appeal of the Department is found to be without merit. ITA No. 3008:
10. Income-tax Appeal No. 3008 is against cancellation of penalty amounting to Rs. 41 lakhs by the learned CIT(A), levied under Section 271(1)(c) of the IT Act, 1961. The learned CIT(A) cancelled the penalty in question, holding that the additions on which the imposition of penalty was sustained, were on estimate basis, not calling for imposition of penalty. The grievance of the Department is that in holding so, the learned CIT(A) did not appreciate that the first appellate order in the quantum matter had not been accepted by the Department and the Department had appealed thereagainst to the Tribunal.
11. The learned counsel for the assessee has brought to our notice the Tribunal order dt. 15th Feb., 2000 in ITA No. 1746/Del/1997 for asst. yr. 1996-97, i.e., the Department's appeal against the CIT(A)'s order in the first round. In this order, the Tribunal, apropos the addition of Rs. 2,18,550, on account of interest on FDRs, has not adjudicated upon it in view of the fact that the CIT(A) had set aside this issue to the file of the AO. We, while dealing with ITA No. 3009 in the preceding paras, have upheld the subsequent order of the learned CIT(A) in this regard. Regarding the issue of disallowance out of labour expenses, we have decided this matter in favour of the assessee. The deletion of addition has been upheld. So far as regards the addition on account of unverifiable expenses amounting to Rs. 8,03,873, the learned CIT(A) has held while deciding (sic-deleting) the addition in this regard, that on verification of the impounded books of account of the assessee, all the items of expenses were found fully vouched. This finding of the learned CIT(A) has not been challenged by the Department. It has, thus, become final. Concerning the addition on account of unverifiable opening/closing stock, the addition was made on the basis that the correctness of the opening/closing stock could not be verified since the assessee had not maintained any stock register. The AO held that the assessee had furnished inaccurate particulars of its income by not claiming/opposing correct expenses/income. In this regard, the findings of the learned CIT(A) with regard to the expenses being fully vouched, are referred to again. The learned CIT(A) has detailed all the expenses. The addition of Rs. 50,000 was an ad hoc addition.
12. The learned CIT(A), in the impugned order, has correctly observed that in the quantum appeal, almost all the additions on the basis of which the impugned penalty was imposed, had been deleted and that whatever additions had been sustained, were on estimate basis not calling for imposition of any penalty. In the facts discussed hereinabove, no error is found in the order of learned CIT(A), which is hereby confirmed. The cancellation of penalty in question is, therefore, upheld.
13. In the result, both the appeals of the Department are dismissed.