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TMI Blog2018 (7) TMI 2310X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of Rs.4,91,607/- on account of gross profit on alleged purchases made through entry. The Ld. counsel explained that the assessee is trader in bullion, wherein, the normal gross profit is @ 0.4 to 0.5 and the addition was made merely on the basis of statement recorded from the supplier, where he confessed that these are accommodation entries. However, the statement was retracted by him on 21/11/2008 and even no opportunity was given to the assessee to cross examine him and finally the addition was made at the rate of 1%. It was pleaded that the credit of gross profit declared by the assessee may be given. The Ld. CIT-DR defended the addition by placing reliance upon the assessment order as well as the order the of the Ld. Commissioner of Income Tax (Appeal). 3.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee is engaged in the business of trading in silvers bars and gold bullion, declared turnover of Rs.298, 75,97,709/- by showing a gross profit of Rs.1,56,31,880/-, which amounts to 0.523% of the turnover. The comparative chart of gross profit for different Assessment Years has been shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns are duly recorded in the stock register and every purchase can be identified with the corresponding sales. It seems that the addition has been made on the basis of statement tendered by Shri S. K. Bajaj and that statement was retracted on 21/11/2008. The cross examination was never provided to the assessee and the whole addition is based upon estimation only, thus, considering the factual matrix and interest of Revenue, we deem it appropriate to adopt the gross profit @ 0.7 minus already GP declared by the assessee and against 1% estimated by the Ld. Assessing Officer. Thus, this ground of the assessee is partly allowed. Our aforesaid conclusion/order will also cover identical grounds for the Assessment Year 2007-08 (ITA No.5523/Mum/2011) and Assessment Year 2008-09 (ITA No.5524/Mum/2011) also. Thus, this ground is partly allowed. 4. The next ground raised by the assessee pertains to sustaining the addition of Rs.5,15,312/- made under section 69C of the Act on account of alleged commission paid on purchase of silver bills. The crux of the argument is that the commission was estimated by the Ld. Assessing Officer @0.5%, which may be reduced to 0.2%. Our attention was invited to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to confirming the disallowance of Rs.1,92,114/-, being 1/6th of car and telephone expenses and further disallowance at the rate of 15% of entertainment expenses for personal use. 5.1. During hearing the ld. counsel for the assessee contended that it is a case of company wherein no disallowance can be made on the basis of personal use for which reliance was placed upon the decision of Hon'ble Gujarat High Court in Sayaji Iron & Engg. Co. vs .Commissioner of Income-tax (253 ITR 749) and Dinesh Mills Ltd. v. Commissioner of Income-tax [2002] 122 Taxman 384 (Gujarat). However, the Ld. CIT-DR defended the disallowance made by the Ld. Assessing Officer by contending that personal use cannot be ruled out. 5.2. We have considered the rival submissions and perused the material available on record. In view of the above, we are reproducing hereunder the relevant portion from the decision in the case of Sayaji Iron & Engg. Company vs CIT ((supra)) for ready reference and analysis:- "At the instance of the assessee, the following question has been referred to this Court for its opinion under the provisions of section 256(1) of the Income-tax Act, 1961 ('the Act'), by the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years the expenditure incurred by the assessee-company towards the vehicles was allowed in toto. It has also been submitted that whenever any expenditure incurred by the assessee towards maintenance of vehicles was disallowed by the Assessing Officer, the disallowance was finally set aside. It has been submitted by the learned advocate that as the expenditure was incurred for the purpose of business by way of salary and perquisites given to the directors, the said expenditure ought not to have been disallowed. 7. On the other hand, the learned advocate Shri Bharat Naik, appearing for the revenue, has submitted that the directors of the assessee-company were using the vehicles for their personal use and as the directors were not using the vehicles exclusively for the purpose of the business of the company, the Tribunal was justified in disallowing 1/6th expenditure of the cars and depreciation claimed by the assessee. He has, therefore, submitted that the view expressed by the Tribunal regarding disallowance of 1/6th of the expenditure is justified. 8. We have heard the learned advocates and have also perused the impugned orders. 9. In our opinion, as the directors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that when the vehicles are used by the directors, 'even if they are personally used by the directors' the vehicles are personally used by the company, because a limited company by its very nature cannot have any 'personal use'. The limited company is an inanimate person and there cannot be anything personal about such an entity. The view that we are adopting is supported by the provisions of section 40(c) and section 40A(5) of the Act. 9.2 It is pertinent to note that except for the assessment year in question, for no other assessment year the expenditure in question has been disallowed. We see no reason for the Tribunal to take a different view for this assessment year, especially when it is an undisputed fact that in the past all such disallowances were deleted by the Tribunal and the said decision was not challenged. 9.3 The Tribunal has, in our view unfortunately, upheld the order of the Commissioner (Appeals) wherein the Tribunal's earlier orders in the assessee's own case have been distinguished by giving reasons which are, to say the least, unwarranted. The earlier orders of the Tribunal are distinguished by stating that even if there is no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench for considering the question. If that is the position even with regard to a question of law, the position will be a fortiori with regard to a question of fact. If the Tribunal wants to take an opinion different from the one taken by an earlier Bench, it should place the matter before the President of the Tribunal so that he could have the case referred to a Full Bench of the Tribunal consisting of three or more members for which there is provision in the Income-tax Act itself." (p. 453) We are in respectful agreement with the aforesaid view. 10. In the circumstances, in our opinion, the Tribunal was wrong while disallowing 1/6th of the total car expenditure and depreciation claimed by the assessee on account of the personal use of the cars which were used by the directors. We, therefore, answer the question in the negative, i.e., in favour of the assessee and against the revenue. 11. The reference is disposed of, accordingly, with no order as to costs. 5.3. Likewise, Hon'ble Gujarat High Court in the case of Dinesh Mills Ltd. vs CIT ((supra)), vide order dated 05/12/2001 held as under:- "The Tribunal, Ahmedabad Bench 'A' has referred the following qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the view that the extent of the loss remained indeterminate and unknown during the year under consideration, and the amount of actual loss could be known only when the assessee entered into compromise decree with the defaulter employee in calendar year 1980 relevant to assessment year 1981-82. Accordingly, the assessee's claim for loss was disallowed. 5. The Commissioner (Appeals) in the appeal filed by the assessee held that the claim of the assessee that the entire loss of Rs. 13,40,000 should be allowed in the year under consideration and the stand of the ITO that not a single rupee claimed should be allowed as embezzlement loss were extreme positions and reasonable and just view would fall somewhere between respective positions taken by the assessee and the department. According to the Commissioner (Appeals), the whole amount of embezzlement had to be considered as comprising of two parts, viz., the part which could reasonably be estimated to be recoverable and the other part, if any, which could not be reasonably expected or estimated to be recoverable. This position had to be ascertained at the end of the previous year, viz., as on 31-12-1976. Based on this line ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the appeal of the assessee. 7. We have heard Mr. J.P. Shah, the learned advocate appearing on behalf of the assessee and Mr. Akil Qureshi, the learned counsel appearing on behalf of the revenue. Both the sides reiterated the contention raised by them before the Tribunal. Mr. Shah made a statement to the effect that in assessment year 1981-82, when the compromise decree was arrived at, though the assessee had claimed the balance amount of loss which was not allowed as a deduction during the year under consideration, the same was not allowed in light of the fact that the assessee was claiming entire loss during the year under consideration. He further stated that out of abundant caution even if in the appeal or further proceedings pertaining to the assessment year 1981-82, any deduction from the balance of loss was allowed, the petitioner-assessee would not raise any objection and surrender the same for the purpose of taxability. 8. In view of the fact that Mr. Shah has made a statement to the effect that no deduction has been allowed in any subsequent year, we hold that the assessee would be entitled to deduction of loss during the year under consideration as this is t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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