Shree Vatsaa Fianance & Leasing Ltd., ... vs Assessee

This is assessee's appeal directed against the order passed by learned CIT(A)-I, Kanpur dated 13/09/2013 for the assessment year 2004- 2005.

2. Ground No. 1 & 2 are inter-connected, which are as under:

"1. BECAUSE the CIT(A), after having deleted addition of Rs.1,41,300/- as had been made in the assessment on account of outstanding liability in the account of "Om Prakash" and "M/s Globel Infotech (P) Ltd.", could not have given direction to the Assessing Officer "to examine genuineness of these credits u/s 68 in the relevant year".

2. BECAUSE no such direction could have been given in exercise of powers under section 251(1)(c) as has been done by the CIT(A) in the instant case, and the same are liable to be quashed."

2 3. It was submitted by Learned A.R. of the assessee that this issue is squarely covered in favour of the assessee by a judgment of Hon'ble Calcutta High Court rendered in the case of Mrs. R. H. Dave vs. CIT [1983] 140 ITR 1035 (Cal).

4. Learned D.R. of the Revenue supported the orders of the authorities below.

5. We have considered the rival submissions. We find that it is noted by CIT(A) that the amount of two deposits totaling to Rs.1,41,300/- added by the Assessing Officer in the present year is not received in the present year but it was received in earlier year. The CIT(A) has given a clear finding that since liability does not pertain to current year, it cannot be added in the present year and he deleted the addition. To this extent, there is no grievance of the assessee but after deleting the addition in the present year, the CIT(A) has given direction to the Assessing Officer u/s 251(1)(c) of the Act to examine the genuineness of the credits u/s 68 in the relevant year. Now in the light of these facts, we examine the applicability of the judgment of Hon'ble Calcutta High Court in the case of Mrs. R. H. Dave vs. CIT (supra), cited by Learned A.R. of the assessee. In this case, the issue in dispute before the CIT(A) was regarding assessment of a particular income in assessment year 1971-72. The CIT(A) has deleted the addition in that year but directed the Assessing Officer to assess the said income in assessment year 1962-63. Against this direction of AAC in that case, the matter travelled up to Calcutta High Court and it was held by Hon'ble Calcutta High Court that AAC has no jurisdiction to direct the Assessing Officer to bring the amount to tax in the current assessment year but this judgment of Hon'ble Calcutta High Court is as per the provision of clause (a) of sub section 1 of section 251, which empowered the AAC in relevant assessment year to set aside the assessment and refer the case 3

back to Income Tax Officer for making fresh assessment in accordance with the directions given by AAC and there is no reference to clause (c) of sub section (1) of section 251 in this judgment. As per clause (c) of sub section (1) of section 251, CIT(A) can pass such orders in the appeal as he thinks fit. In our considered opinion, the provision of clause (c) of sub section (1) of section 251 are providing much wider powers to CIT(A) and the directions given by CIT(A) are consequential directions and in our considered opinion, there is no infirmity in the order of CIT(A) on this issue and the judgment on which reliance was placed by assessee is not applicable because of amendment in section 251(1)(c) by omitting a portion having with the words "or he may set aside" and ending with the words "on the basis of such fresh assessment" omitted by Finance Act 2001 with effect from 01/03/2001. Moreover, Hon'ble Calcutta High Court has not considered clause (c) of sub section (1) of section 251 whereas in the present case, the directions were given by CIT(A) u/s 251(1)(c) and therefore, this judgment of Hon'ble Calcutta High Court is not applicable in the present case. As per above discussion, we do not find any reason to interfere in the order of CIT(A) on this issue. Accordingly, ground No. 1 & 2 are rejected.

6. Ground Nos. 3, 4 & 5 are inter-connected, which read as under:

"3. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance of rent aggregating Rs.70,000/- as had been paid to the two directors (in equal proportions) of the "appellant" company, on the ground that the payment had been made for "small premises where only books of account are kept not physical business carried out at all".

4. BECAUSE while upholding the disallowance in question the CIT(A) has failed to appreciate and missed to note that

(a) undisputedly, the premises in question were in possession of the "appellant" and the same were 4

''in use" also in the relevant previous year, for the period for which rent was paid;

(b) even though the payments were within the purview of section 40A(2)(a) of the Act, there existed no material which could go to show that the same was excessive looking to the rental value as prevalent in the market;

(c) the payment of rent was in continuation to the rent paid (at the same rate) in earlier years; and

(d) necessity to incur such expenditure is within the exclusive domain of an assessee.

and disallowance as sustained by him is wholly vitiated.

5. BECAUSE similarly/ disallowance of Watch & Ward expenses claimed at Rs.1,70,280/- is based on misinformation and misconception about the genuineness of the expenditure as well as admissibility of the same in the assessment, and such disallowance cannot be sustained."

7. It was submitted by Learned A.R. of the assessee that as per the company's master details report available on page No. 28 of the paper book, the address of the assessee company is 120/500(10), Lajpat Nagar, Kanpur, U.P. He submitted that as per page No. 29 of the paper book also being letter from The Stock Exchange, Mumbai to the assessee company being letter dated 17/03/2003, the address of the assessee company has been noted as 120/500(10), Lajpat Nagar, Kanpur, U.P. He submitted that as per this notice, it can be seen that the premises for which rent of Rs.50,000/- was paid by the assessee in the present year was being used as office of the assessee company and therefore, disallowance of Rs.20,000/- is not justified and as a consequence, the expenses on account of watch & ward expenses of the same office premises is also not justified.

8. Learned D. R. of the Revenue supported the orders of the authorities below.

5 9. We have considered the rival submissions. We find that the disallowance of rent was made by the Assessing Officer and confirmed by learned CIT(A) on the basis that the assessee could not establish that the premises for which rent was paid by the assessee of Rs.70,000/- was being used by the assessee company as its office but as per the evidence available in the paper book being letter dated 17/03/2003 from Stock Exchange, Mumbai, the address of the assessee company is 120/500(10) Lajpat Nagar, Kanpur, it is seen that this premises was being used by the assessee as its office and therefore, the payment of rent is allowable business expenditure. We, therefore, delete this disallowance.

10. Regarding the second aspect, being disallowance of watch & ward expenses of Rs.1,70,280/-, we find that this disallowance was made mainly on the basis that the assessee was not maintaining office in Kanpur and therefore, watch & ward expenses claimed for that office are not allowable. We have already decided the issue regarding allowability of rent expenses in favour of the assessee and therefore, the very basis adopted by the Assessing Officer for making this disallowance does not survive. We, therefore, delete this disallowance also. Accordingly, ground No. 3, 4 & 5 are allowed.

11. Ground No. 6 is as under:

"6. BECAUSE the expenses aggregating Rs.13,093/- claimed under the head 'Business Promotion Expenses' were fully vouched and verifiable and the CIT(A) went wholly wrong in observing/holding that "assessee has not been able to justify expenses of Rs.11,417/- by providing bills and vouchers for verification" and on that ground in upholding disallowance of the sums aggregating Rs.13,093/-."

6 12. Learned A.R. of the assessee reiterated the same contentions, which were raised before CIT(A) whereas Learned D. R. of the Revenue supported the orders of the authorities below.

13. We have considered the rival submissions. We find that the Assessing Officer has made disallowance of Rs.13,093/- consisting of Rs.11,417/- on account of hotel bill and Rs.1,676/- for purchase of VIP briefcase. The CIT(A) has deleted the disallowance of Rs.1,676/- but confirmed the disallowance of Rs.11,417/- on the basis that the assessee has not been able to justify this expenditure by providing bills and vouchers for verification. As per the written submissions of assessee before the CIT(A), reproduced by him on page No. 8 of his order, it was submitted by Learned A.R. of the assessee that the assessee has incurred Rs.11,417/- towards hotel bill for organizing business meet but there is no detail regarding the nature of such business meet and there is no explanation as to what was the outcome of this business meet and how many persons participated in that business meet and what was the purpose of that business meet. In the absence of any detail regarding the business requirement for that said business meet and in the absence of bills and vouchers etc., the claim of the assessee was rightly disallowed by the authorities below. We do not find any reason to interfere in the order of CIT(A) on this issue. Accordingly, ground No. 6 is rejected.

14. Ground No. 7 reads as under:

"7. BECAUSE the CIT(A) has erred in law and on facts in upholding the disallowance of Rs.28,532/- "out of car running and maintenance expenses" as had been made in the assessment, on account of personal user."

15. Learned A.R. of the assessee placed reliance on a judgment of Hon'ble Gujarat High Court rendered in the case of Sayaji Iron And Engg.

7 Co. vs. CIT [2002] 253 ITR 749 (Guj) whereas Learned D. R. of the Revenue supported the orders of the authorities below.

16. We have considered the rival submissions. We find that as per this judgment of Hon'ble Gujarat High Court, the expenses incurred in respect of vehicles of the assessee company cannot be disallowed on this basis that the vehicles were used by the Directors of the assessee company for personal use. It was held that even if there is personal use of the vehicle, the perquisites value can be added in the income of the concerned director but no disallowance can be made in the hands of the assessee company. Therefore, respectfully following this judgment of Hon'ble Gujarat High Court, this ground is decided in favour of the assessee.

17. In the result, the appeal of the assessee stands partly allowed.

(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:11/06/2015 *C.L.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