ACIT, New Delhi v. Sh. Vasudev Pahwa, New Delhi

ITA 3712/DEL/2009 | 2006-2007
Pronouncement Date: 26-02-2010 | Result: Dismissed

Appeal Details

RSA Number 371220114 RSA 2009
Assessee PAN AAKPP0764G
Bench Delhi
Appeal Number ITA 3712/DEL/2009
Duration Of Justice 5 month(s) 25 day(s)
Appellant ACIT, New Delhi
Respondent Sh. Vasudev Pahwa, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 26-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 26-02-2010
Date Of Final Hearing 18-02-2010
Next Hearing Date 18-02-2010
Assessment Year 2006-2007
Appeal Filed On 01-09-2009
Judgment Text
I.T.A. NO. 3712 /DEL/2009 1/10 IN THE INCOME TAX APPELLATE TRIBUNAL NEW DELHI BENCH H BEFORE SHRI K. G. BANSAL ACCOUTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER ITA NO. 3712 /DEL/2009 (ASSESSMENT YEAR 2006-07) ACIT CIRCLE 27(1) VS. SH. VASUDEV PAHWA NEW DELHI. (PROP. SURYA INTERNATIONAL) B-59/2 NARAINA INDUSTRIAL AREA PHASE II NEW DELHI-28 (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAKPP0764G APPELLANT BY: SHRI R. R. PRASAD SR. DR RESPONDENT BY: SHRI SANJEEV JAIN CA ORDER PER GEORGE MATHAN JM: 1. THIS APPEAL BY THE REVENUE HAS BEEN PREFERRED AG AINST THE ORDER OF LD. CIT(A)-XIV NEW DELHI IN APPEAL NO.303/2008-09 DATED 4.6.2009 FOR THE ASSESSMENT YE AR 2006-07. SHRI R R PRASAD SR. DR REPRESENTED FOR T HE REVENUE AND SHRI SANJEEV JAIN CA REPRESENTED FOR T HE ASSESSEE. IN THE REVENUES APPEAL THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF I.T.A. NO. 3712 /DEL/2009 2/10 RS.15 36 436/- IN RESPECT OF ADDITION MADE ON ACCOUNT OF REPAIR & MAINTENANCE. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF FOREIGN EXPENSES AMOUNTING TO RS.2 58 827/- MADE BY THE A.O. AS NO EVIDENCE TO SHOW THAT THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF BUSINESS AS PER PROVISIONS OF SEC.37 OF THE I. T. ACT 1961. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD .CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNACCOUNTED STOCK AMOUNTING TO RS.21 73 159/- AS THE A.O. HAS MADE THE ADDITION THAT THE G P RATIO WAS IN LINE WITH THE GP RATIO OF THE ASSESSEE FOR THE PAST TWO YEARS. 2. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE G ROUND NO.1 WAS AGAINST THE ACTION OF LD. CIT(A) IN DELETING TH E ADDITION MADE BY THE A.O. ON ACCOUNT OF DISALLOWANC E MADE OUT OF THE REPAIRS & MAINTENANCE EXPENSES CLAI MED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE AS SESSEE HAD CLAIMED REPAIRS & MAINTENANCE EXPENSES TO AN EX TENT OF RS.16 61 012/-. IT WAS THE SUBMISSION THAT THE A.O. HAD TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE AS T HE REPAIRS & MAINTENANCE HAD GIVEN ENDURING BENEFIT TO THE ASS ESSEE IN SO FAR AS THE BUILDING WOULD BE USED BY THE ASSE SSEE FOR FURTHER PERIOD. IT WAS THE SUBMISSION THAT THE A.O . HAD GRANTED THE ASSESSEE THE DEPRECIATION AND HAD DISAL LOWED THE BALANCE OF THE REVENUE EXPENDITURE CLAIMED. IT WAS THE I.T.A. NO. 3712 /DEL/2009 3/10 SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE ADDI TION BY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREM E COURT IN THE CASE OF BALLIMAL NAVAL KISHORE AND ANO THER REPORTED IN 224 ITR 414. IT WAS THE SUBMISSION THA T AS THE EXPENDITURE WAS INCURRED BY THE ASSESSEE ON THE FAC TORY BUILDING WHICH WAS MORE THAN 35 YEARS OLD AND THAT HAD RESULTED IN THE ENHANCED USAGE OF THE BUILDING EVEN THOUGH NO NEW STRUCTURE WAS BUILT UP OR CREATED THE SAME WAS LIABLE TO BE TREATED ONLY AS CAPITAL EXPENDITURE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE A.O. 2.1 IN REPLY THE LD. A.R. SUBMITTED THAT THERE WAS NO NEW ASSET WHICH HAD BEEN CREATED BY VIRTUE OF THE EXPE NDITURE CLAIMED. IT WAS THE FURTHER SUBMISSION THAT THE BU ILDING WAS 35-YEAR-OLD BUILDING AND THE SAME HAD BEEN USED AS BUSINESS PREMISES AND GODOWN AND AS THERE WAS LEAKA GE IN THE ROOF RESULTING INTO SEEPAGE OF WATER IN THE GOD OWN WHICH COULD HAVE RESULTED IN THE DAMAGE OF STOCKS L YING IN THE GODOWN MAJOR REPAIR IN RESPECT OF THE GODOWN A ND THE OFFICE BUILDING OF THE ASSESSEE HAD BEEN UNDERTAKEN . IT WAS THE SUBMISSION THAT ON ACCOUNT OF REPAIRS & MAINTENANCE THERE WAS NO INCREASE IN THE SPACE NOR THE CAPACITY. IT WAS THE FURTHER SUBMISSION THAT THE A SSESSEE IS IN THE BUSINESS OF EXPORT OF HANDICRAFTS AND IF THE PRODUCT OF THE ASSESSEE GETS DRENCHED BY WATER ON ACCOUNT O F I.T.A. NO. 3712 /DEL/2009 4/10 LEAKAGE IN THE ROOF DURING RAIN THE VALUE OF THE P RODUCTS ITSELF WOULD DETERIORATE SUBSTANTIALLY AND IT WAS O NLY TO PROTECT THE INTEREST OF THE BUSINESS THE EXPENDITUR E HAD BEEN INCURRED. IT WAS THE SUBMISSION THAT THE CIT( A) HAD RIGHTLY FOLLOWED THE PRINCIPLES LAD DOWN BY THE HON 'BLE SUPREME COURT IN THE CASE OF BALLIMAL NAWAL KISHORE & ANOTHER REFERRED TO SUPRA. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ASSESSMENT ORDER AS ALSO THE ORDER OF LD. CIT(A ) CLEARLY BRINGS OUT THE FACT THAT ON ACCOUNT OF REPA IRS & MAINTENANCE THE ASSESSEE HAS NOT GOT ANY ENDURING BENEFIT IN SO FAR AS THERE IS NO NEW ASSET CREATED NOR IS T HERE ANY INCREASE IN THE CAPACITY. IN FACT THE REPAIRS & MA INTENANCE DETAILS OF WHICH ARE EXTRACTED IN PAGE 2OF THE ASSE SSMENT ORDER CLEARLY SHOWS THAT SUBSTANTIAL EXPENDITURE IS ON ACCOUNT OF CHANGING THE LOOSE PLASTER FLOORING RE PAIRS TO THE OLD BUILDING DOORS AND WINDOWS. IT IS ALSO NOT ICED THAT THE EXPENDITURE HAS BEEN INCURRED FOR CHANGING THE OLD SWITCHES AND ELECTRICAL POINTS WHITE WASH AND PAIN TING OF THE BUILDING. IT IS ALSO NOTICED THAT WATER PROOFI NG HAS ALSO BEEN DONE AND THERE IS ABSENCE OF PURCHASE OF BRICK S AND STEEL WHICH NORMALLY GO INTO CONSTRUCTIONS WHICH IS NEWLY MADE. THIS SUPPORTS THE CLAIM OF THE ASSESSEE THAT WHAT I.T.A. NO. 3712 /DEL/2009 5/10 WAS DONE WAS ONLY BASIC REPAIRS & MAINTENANCE OF TH E BUILDING. THE A.O. ALSO DOES NOT DISPUTE THE FACT THAT THE BUILDING IS A 35 YEAR OLD BUILDING. OBVIOUSLY WHEN REPAIRS ARE DONE ON A 35 YEARS OLD BUILDING AND NO EXTRA SP ACE HAS BEEN CREATED IT CANNOT BE SAID THAT A NEW ASSET HA S COME INTO EXISTENCE AND THAT THE ASSESSEE HAS DERIVED AN Y ENDURING BENEFIT FROM THE REPAIRS. IN THESE CIRCUM STANCES WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS RIGHT IN FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE S UPREME COURT IN THE CASE OF BALLIMAL NAWAL KISHROE & ANOTH ER REFERRED TO SUPRA AND HOLDING THAT THE SAID EXPENDI TURE IS REVENUE EXPENDITURE. IN THESE CIRCUMSTANCES GROUN D NO.1 OF THE REVENUES APPEAL STANDS DISMISSED. 3. IN GROUND NO.2 OF THE REVENUES APPEAL THE REVE NUE HAS CHALLENGED THE ACTION OF CIT(A) IN DELETING THE ADD ITION MADE ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES. IT WAS THE SUBMISSION BY THE LD. D.R. TH AT THE ASSESSEE HAD CLAIMED FOREIGN TRAVEL EXPENSES TO THE EXTENT OF RS.25 88 273/-. IT WAS THE SUBMISSION THAT ON A CCOUNT OF THE FACT THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE DOCUMENTARY EVIDENCE IN RESPECT OF UTILIZATION OF F OREIGN EXCHANGE PURCHASED BEINGS THE TAXI BILLS FOOD BILL S ETC THE A.O. HAD MADE THE AD HOC DISALLOWANCE OF 1/10 TH OF THE EXPENDITURE CLAIMED ON AN ESTIMATE BASIS. IT WAS T HE I.T.A. NO. 3712 /DEL/2009 6/10 SUBMISSION THAT THE LD. CIT(A) HAD DELETED THE DISALLOWANCE BY HOLDING THAT THE EXPENDITURE WAS ON LY ABOUT 1.8% OF THE TOTAL TURNOVER AND NO AD-HOC DISALLOWANCE COULD BE MADE. THE LD. D.R. VEHEMENTL Y SUPPORTED THE ORDER OF THE A.O. 3.1 IN REPLY THE LD. A.R. SUBMITTED THAT ALL THE E XPENSES WERE VOUCHED THOUGH IN RESPECT OF THE EXPENDITURE ON ACC OUNT OF HIRING THE TAXIS HIRING THE SERVICES OF INTERPR ETER HIRING OF OTHER INFRASTRUCTURE FOR TRADE FAIR TEA COFFEE REFRESHMENT PAID WERE SELF VOUCHERS PREPARED BY THE PERSONS WHO HAVE UNDERTAKEN THE TRAVEL. IT WAS THE SUBMISSION THAT THE TRAVEL BEING FOR THE PURPOSE OF BUSINESS HAS NOT BEEN DISPUTED BY THE REVENUE. THE ONLY REASON FOR AD-HOC DISALLOWANCE WAS NON-AVAILABILITY OF THE VOUCHERS AND BILLS WHICH WERE IN FACT SUPPORTED BY SELF- MADE VOUCHERS BY THE PERSONS WHO HAVE TRAVELED. IT WAS THE SUBMISSION THAT THE EXPENDITURE IS TO BE JUDGED FROM THE VIEW OF BUSINESSMAN. IT WAS THE SUBMISSIONS TH AT THE LD. CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING TH E DECISION OF HON'BLE HIGH COURT OF DELHI IN CASE OF DALMIA CEMENT REPORTED IN 254 ITR 377. IT WAS THE FURTHER SUBMISSION THAT IT IS NOT THE CASE OF THE REVENUE T HAT THE SELF-VOUCHERS WERE BOGUS. IT WAS FURTHER SUBMITTED THAT THE AD HOC DISALLOWANCE COULD NOT BE MADE WHEN ALL THE I.T.A. NO. 3712 /DEL/2009 7/10 EXPENDITURE ARE SUPPORTED BY VOUCHES. HE VEHEMENTL Y SUPPORTED THE ORDER OF LD. CIT(A). 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S NOTICED THAT THE LD. CIT(A) HAS SPECIFICALLY BROUGHT ON REC ORD THAT THE PERSONS WHO HAVE UNDERTAKEN THE FOREIGN TRAVEL PREPARED SELF VOUCHERS FOR THE EXPENDITURE WHICH CO ULD NOT BE SUPPORTED BY THE BILLS AND VOUCHES. IT IS FURTH ER NOTICED THAT THE LD. CIT(A) HAS FOUND THAT THE ASSESSEE HAS JUSTIFIED THE EXPENSES BY THE DETAILS AND SUPPORTIN G DOCUMENTS AND THAT THE EXPENSES HAD BEEN INCURRED I N THE COUNTRIES WHERE THE ASSESSEE IS HAVING ITS BUSINESS CONNECTIONS. IT IS ALSO NOTICED THAT THE LD. CIT(A ) HAS CONSIDERED THE FACT THAT THE FOREIGN EXCHANGE HAD B EEN UTILIZED FOR THE PURPOSE OF BUSINESS AND IT IS NOT THE CASE OF THE REVENUE THAT THE FOREIGN EXCHANGE HAD BEEN UTIL IZED FOR THE PERSONAL PURPOSES. IN THESE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS RIGHT IN DELETING THE AD- HOC DISALLOWANCE WHICH IN ANY CASE IS NOT PERMISSIB LE BY FOLLOWING THE DECISION OF HON'BLE HIGH COURT OF DEL HI IN CASE OF DALMIA CEMENT REFERRED TO SUPRA. IN THESE CIRCUMSTANCES THE GROUND NO.2 OF THE REVENUES APPE AL STANDS DISMISSED. 4. IN GROUND NO.3 THE REVENUE HAS CHALLENGED THE A CTION OF LD. CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF I.T.A. NO. 3712 /DEL/2009 8/10 UNACCOUNTED STOCK. IT WAS THE SUBMISSION BY THE LD . D.R. THAT THERE WAS A SURVEY IN THE PREMISES OF THE ASSE SSEE ON 04.03.2006 AND AS A CONSEQUENCE OF THE SURVEY THE A.O. HAD REWORKED THE CLOSING STOCK STATEMENT OF THE ASS ESSEE AND HAD COMPUTED THE CLOSING STOCK AT RS.1 54 78 02 8/- AS AGAINST THE CLOSING STOCK SHOWN AS PER THE BOOKS AT RS.1 33 04 877/-. IT WAS THE SUBMISSION BY THE LD. D.R. THAT THE ADDITION ON ACCOUNT OF CLOSING STOCK HAD B EEN DONE BY APPLYING THE GP RATE AS DISCLOSED BY THE AS SESSEE IN THE EARLIER YEARS. IT WAS THE SUBMISSION THAT T HE LD .CIT(A) ERRED IN DELETING THE ADDITION. 4.1 IN REPLY THE LD. A.R. SUBMITTED THAT IN THE CO URSE OF SURVEY THE PHYSICAL STOCK HAD BEEN TAKEN AND THE P HYSICAL STOCK INVENTORY PREPARED AT THE TIME OF SURVEY TALL IED WITH THE PHYSICAL STOCK AS DISCLOSED IN THE BOOKS OF THE ASSESSEE. IT WAS THE SUBMISSION THAT IT WAS THE VA LUE OF THE STOCK WHICH WAS TINKERED WITH. IT WAS THE SUBMISS ION THAT FOR THE PURPOSE OF VALUING THE STOCK THE A.O. HAD T AKEN THE SALES PRICE AND HAD MADE THE ADJUSTMENT BY REDUCING THE GP RATE ON A HYPOTHETICAL FIGURE @ 17.95% WHICH WAS OBJECTED TO BY THE ASSESSEE. IT WAS THE FURTHER SU BMISSION THAT THE LD. CIT(A) HAD DELETED THE ADDITION BY CONSIDERING THE FACT THAT THERE WAS NO DIFFERENCE B ETWEEN THE QUANTITATIVE DETAILS OF CLOSING STOCK AS VERIFI ED BY THE I.T.A. NO. 3712 /DEL/2009 9/10 SURVEY TEAM AND AS DISCLOSED BY THE ASSESSEE IN ITS BOOKS. THE LD. A.R. VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). 4.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A P ERUSAL OF PAGE 33 PARA 6.3 OF THE ORDER OF LD. CIT(A) CLEARLY SHOWS THAT THE LD. CIT(A) HAS CONSIDERED THE FACT THAT ON 15.11.2008 IT HAS BEEN SUBMITTED BY THE ASSESSEE TO THE A.O. THAT THE STOCK INVENTORY BY THE SURVEY TEAM TA LLIED QUANTITATIVELY WITH THE STOCK REGISTER AND THIS FAC T HAD NOT BEEN REBUTTED NOR DENIED BY THE A.O. SINCE THE PHY SICAL STOCK IN THE COURSE OF SURVEY AND THE STOCK AS MENT IONED IN THE STOCK BOOKS TALLIED ON INVENTORY BASIS THERE C OULD NOT BE ANY VARIATION IN THE CLOSING STOCK VALUE. FURTH ER THE A.O. HAS ADOPTED THE GP RATE @ 17.95% AND IT IS AL SO NOT CLEAR HOW IT IS ARRIVED AT ESPECIALLY WHEN THE G P DISCLOSED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR IS HIGHER AT 19.45%. THUS THE PROFITS DISCLOSED BY TH E ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR ITSELF BEING HIGHER NO FURTHER ADDITION CAN BE MADE BY ADOPTING HYPOTHETICAL GP RATE @ 17.95% JUST TO TINKER WITH T HE CLOSING STOCK VALUE. IN THESE CIRCUMSTANCES THE F INDINGS OF LD. CIT(A) IN DELETING THE ADDITION IS FOUND TO BE ON RIGHT FOOTING AND THE GROUND NO.3 OF THE REVENUES APPEAL STANDS DISMISSED. I.T.A. NO. 3712 /DEL/2009 10/10 5. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT O N 26 TH FEB. 2010. SD./- SD./- (K. G. BANSAL) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:26 TH FEB. 2009 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR ITAT NEW DELHI