Principal Commissioner of Income-tax v. Shah Virchand Govanji Jewellers Pvt. Ltd
[Citation -2019-LL-0820-230]

Citation 2019-LL-0820-230
Appellant Name Principal Commissioner of Income-tax
Respondent Name Shah Virchand Govanji Jewellers Pvt. Ltd.
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 20/08/2019
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags reassessment proceedings • disallowance of gratuity • accommodation entries • escapement of income • revenue expenditure • rule of consistency • capital expenditure • investigation wing • evidentiary value • insurance premium • bogus purchase • capital nature • entry operator • stock broking • remuneration • insurance expenses • remuneration to director • hawala
Bot Summary: Whether on the facts and in circumstance of the case, the order of the Hon ble ITAT is correct as the Hon ble ITAT has erred in reducing the addition of bogus purchase to 3 despite the dissimilarities between the bills of purchase submitted by the assessee and those submitted by the vendors to the assessee TAX APPEAL No.73 OF 2019: 1. Thereafter, the case was reopened under section 147 of the Act on the basis of information from the Investigation Wing, Mumbai, wherein two purchases of Rs.40,08,960/ from M/s. A2 Jewels and Rs.1,50,20,000/ from M/s. Amit Diamonds, made by the assessee, during the assessment year 2011 12, were held to be bogus purchases from the Bhanvarlal Jain Group of hawala concerns. 4.1 The assessee carried the matter in appeal before the Commissioner of Income Tax, who observed that in the reassessment proceedings, the assessee had explained the purchases of polished diamonds on the basis of its audited books of account along with quantitative record of items purchased and other evidences of material receipt register, etc. On behalf of the assessee it was contended that the payments for purchases were made through account payee cheques, the goods were reflected in the Page 12 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER stock statement, and the purchases should not be disallowed merely on the statement of a third party. In such a case, the only possible situation can be that the assessee purchased polished diamonds from a third party in the cash/grey market and ended up getting bills for purchases from the concerns of Bhanvarlal Jain Group. The Commissioner observed that in the case of M/s. Sahajanand Exports and other cases, a disallowance of 2 to 3 was considered as reasonable to account for any suppression of profits by way of purchase bills from Hawala concerns, and accordingly, found it reasonable to disallow 3 of the total purchases of Page 14 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER Rs.1,90,28,960/ from bogus Hawala concerns and reduced the addition from Rs.1,90,28,960/ to Rs.5,70,869/ only. The Tribunal found that the parties from whom the purchases were shown to Page 17 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER have been made were perhaps a creation of the assessee itself for the purpose of banking purchases into the books of account because the purchases with bills were not feasible.


IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 72 of 2019 With R/TAX APPEAL NO. 73 of 2019 With R/TAX APPEAL NO. 74 of 2019 PRINCIPAL COMMISSIONER OF INCOME TAX Versus M/S SHAH VIRCHAND GOVANJI JEWELLERS PVT. LTD. Appearance: MR NIKUNT RAVAL FOR MRS KALPANAK RAVAL(1046) for Appellant(s) No. 1 MR JP SHAH FOR MR MANISH J SHAH(1320) for Opponent(s) No. 1 CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR.JUSTICE VIRESHKUMAR B. MAYANI Date : 20/08/2019 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. All these three appeals under section 260A of Income tax Act, 1961 (hereinafter referred to as Act ) arise out of common order dated 28.09.2018 passed by Income Tax Appellate Tribunal, Surat Bench, Surat (hereinafter referred to as Tribunal ) in I.T.A. No.1, 2 & 3/SRT/2018 and involve common questions and hence, same were taken up for hearing together and are decided by this common judgment. 2. appellant has challenged impugned Page 1 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER order passed by Tribunal by proposing following questions, stated to be substantial questions of law: TAX APPEAL NO.72 OF 2019: 1. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition u/s.36(i)(ii) of Rs.3,28,36,400/ , without considering judgment of Special Bench of Hon ble ITAT in case of Dalal Broacha Stock Broking Pvt. Ltd. v. Addl. CIT, Ranger 4(1), Mumbai, 131 ITD 36 (Mumbai) (SB)? 2. Whether on facts and in circumstance of case, order of Hon ble ITAT is correct as Hon ble ITAT has erred in reducing addition of bogus purchase to 3% despite dissimilarities between bills of purchase submitted by assessee and those submitted by vendors to assessee? TAX APPEAL No.73 OF 2019: 1. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition u/s.36(i)(ii) of Rs.7,12,65,000/ , without considering judgment of Special Bench of Hon ble ITAT in case of Dalal Broacha Stock Borking Pvt. Ltd. v. Addl. CIT, Range 4(1), Mumbai, 131 ITD 36 (Mumbai) (SB)? TAX APPEAL No.74 OF 2019: Page 2 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER 1. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition u/s.36(i)(ii) of Rs.5,38,20,000/ , without considering judgment of Special Bench of Hon ble ITAT in case of Dalal Broacha Stock Broking Pvt. Ltd. v. Addl. CIT, Range 4(1), Mumbai, 131 ITD 36 (Mumbai) (SB)? 2. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition made on account of disallowance of gratuity expense of Rs.11,26,728/ without considering that assessee did not have approval of Commissioner of Income tax? 3. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition on account of disallowance of Gratuity expenses of Rs.11,26,728/ ? 4. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition on account of disallowance of Insurance expense of Rs.99,865/ ? 5. Whether on facts and in circumstance of case, Hon ble ITAT erred in deleting addition of Rs.5,38,20,000/ on account of additional remuneration to Directors disallowed u/s.36(1)(ii) of I T Act? 3. Proposed question No.1 in Tax Appeal No.72 of 2019 as well as sole question proposed in Tax Appeal No.73 of 2019 and questions No.1 and 5 in Tax Appeal No.74 of 2019 are more or less similarly worded except that amount differs Page 3 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER in each case. 3.1 facts relating to said questions are that during course of assessment proceedings, it was noticed that respondent Company had claimed expenditure of Rs.3,28,36,400/ for assessment year 2011 12, Rs.7,12,65,000/ for assessment year 2012 13 and Rs.5,38,20,000/ for assessment year 2014 15 on account of payment of commission to five Directors/shareholders. Assessing Officer was of view that payment to Directors/shareholders was hit by provisions of section 36(1)(ii) of Act as said commission would have been payable to Directors as dividend and accordingly, disallowed same and added it to total income of assessee by following decision of Special Bench of ITAT in case of Dalal Broacha Stock Broking (P) Ltd. v. Additional Commissioner of Income tax Range 4(1), Mumbai, (2011)10 ITR(T) 357 (Mumbai) (SB). 3.2 Being aggrieved, assessee went in appeal before Commissioner of Income tax (Appeals), who dismissed said ground of appeal. 3.3 assessee carried matter in further appeal before Tribunal, which allowed ground of appeal. Page 4 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER 3.4 Mr. Nikunt Raval, learned advocate for appellant, invited attention of court to decision of ITAT, Mumbai Bench in case of Dalal Broacha Stock Broking (P) Ltd. v. Additional Commissioner of Income tax Range 4(1), Mumbai (supra) to submit that Tribunal has failed to consider said decision while deciding issue in favour of respondent assessee. It was submitted that, therefore, matter requires consideration and appeal deserves to be admitted on this question. 3.5 On other hand, Mr. J.P. Shah, Senior Advocate, learned counsel for respondent, invited attention of court to order passed by Tribunal, to point out that such payment of commission made by assessee to Directors since assessment year 2006 07 was allowed up to assessment year 2010 11, that is, continuously for period of five years, whereafter dispute has been raised. It was submitted that it is settled legal position that rule of consistency is required to be followed by Income tax authorities and that in absence of any difference in facts and circumstances of case for assessment year under consideration, Assessing Officer was not justified in disallowing claim. Page 5 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER 3.5.1 In support of such submission, learned counsel placed reliance upon decision of Supreme Court in case of Commissioner of Income Tax v. Excel Industries Ltd., (2013) 358 ITR 295 (SC), wherein court observed that it appears from record that Revenue accepted order of Tribunal in favour of assessee and had not pursued matter any further but in respect of some assessment years, matter was taken up in appeal before Bombay High Court but without any success. That being so, Revenue cannot be allowed to flip flop on issue and it ought to have let matter rest rather than spend tax payers money in pursuing litigation for sake of it. 3.5.2 Reliance was also placed upon unreported decision of Supreme Court in case of Commissioner of Income Tax, Delhi IV v. M/s. Dalmia Promoters & Devels (P) Ltd. rendered on 16.09.2015 in Civil Appeal No.74 of 2017, wherein court has held that consistency does demand that there being no change in circumstances, income for year 1993 94 would also have to be treated as business income as for previous three years. 3.5.3 It was, accordingly, urged that Page 6 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER Tribunal did not commit any error and hence, said ground of appeal does not give rise to question of law, much less, substantial question of law. 3.6 As can be seen from impugned order, Tribunal has noted that payment of commission had been made by assessee Company to its Directors since assessment year 2006 07, which was allowed up to assessment year 2010 11, continuously for five years, and for first time, dispute was raised by Assessing Officer in assessment year 2011 12 by way of initiating re assessment proceedings and that too without specifically alleging or mentioning or stating about escapement of income regarding payment of commission or additional remuneration in reasons recorded for reopening of assessment. Tribunal has observed that it is well accepted principle of tax jurisprudence that principle of res judicata does not apply to tax cases, but rule of consistency has to be respected by tax authorities. Tribunal, after referring to various decisions of Supreme Court in this regard, has held that rule of consistency also supports case of assessee as facts and circumstances of present case are quite similar and identical in present assessment year 2011 12 and it is not Page 7 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER case of Assessing Officer that there was any difference in facts and circumstances of present assessment year as compared to immediately preceding years. 3.7 At this juncture it may be apposite to refer to decision of Supreme Court in case of Radhasoami Satsang, Saomi Bagh, Agra v. CIT, (1992) 1 SCC 659, wherein has held thus: "13. One of contentions which learned senior counsel for assessee appellant raised at hearing was that in absence of any change in circumstances, Revenue should have felt bound by previous decisions and no attempt should have been made to reopen question. He relied upon some authorities in support of his stand. Full Bench of Madras High Court considered this question in T.M.M. Sankaralinga Nadar & Bros. v. CIT, 4 ITC 226 (Mad) (FB). After dealing with contention Full Bench expressed following opinion: principle to be deduced from these two cases is that where question relating to assessment does not vary with income every year but depends on nature of property or any other question on which rights of parties to be taxed are based, e.g., whether certain property is trust property or not, it has nothing to do with fluctuations in income; such questions if decided by Court on reference made to it would be res judicata in that same question Page 8 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER cannot be subsequently agitated. 14. One of decisions referred to by Full Bench was case of Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC). Speaking for Judicial Committee, Lord Shaw stated: Parties are not permitted to begin fresh litigation because of new views they may entertain of law of case, or new versions which they present as to what should be proper apprehension by court of legal result either of construction of documents or weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, same principle, namely, that of setting to rest rights of litigants, applies to case where point, fundamental to decision, taken or assumed by plaintiff and traversable by defendant, has not been traversed. In that case also defendant is bound by judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. These observations were made in case where taxation was in issue. 15. This Court in Parashuram Pottery Works Co. Ltd. v. ITO, (1977) 106 ITR 1, stated: At same time, we have to bear in mind that policy of law is that Page 9 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER there must be point of finality in all legal proceedings, that stale issues should not be reactivated beyond particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity." Assessments are certainly quasi judicial and these observations equally apply. 16. We are aware of fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being unit, what is decided in one year may not apply in following year but where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. 17. On these reasonings in absence of any material change justifying Revenue to take different view of matter and if there was no change it was in support of assessee we do not think question should have been reopened and contrary to what had been decided by Commissioner of Income Tax in earlier proceedings, different and contradictory stand should have been taken. We are, therefore, of view that these appeals should be allowed and question should be answered in affirmative, namely, that Tribunal was justified in holding that income derived by Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of Income Tax Act of 1961. Page 10 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER [Emphasis supplied] 3.8 Thus, as held by Supreme Court in above decision, where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year. In present case, payment of commission made by assessee Company to its Directors has been allowed for five continuous assessment years. Nothing has been pointed out to show that position has changed in year under consideration. Under circumstances, Tribunal was wholly justified in allowing ground of appeal. said ground of appeal, therefore, does not give rise to any question of law, much less, substantial question of law, warranting interference. 4. Insofar as question No.2 in Tax Appeal No.72 of 2019 which relates to addition of bogus purchases to 3% is concerned, it appears that assessee Company is engaged in trading and manufacture of silver, gold, diamonds, stones and its jewellery. assessee filed its return of Page 11 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER income for assessment year 2011 12 on 29.09.2011 declaring total income of Rs.7,70,89,860/ . return of income was processed under section 143(1) of Act without any alteration to total income of assessee. Thereafter, case was reopened under section 147 of Act on basis of information from Investigation Wing, Mumbai, wherein two purchases of Rs.40,08,960/ from M/s. A2 Jewels and Rs.1,50,20,000/ from M/s. Amit Diamonds, made by assessee, during assessment year 2011 12, were held to be bogus purchases from Bhanvarlal Jain Group of hawala concerns. Assessing Officer framed assessment under section 143(3) read with section 147 of Act, inter alia making addition of Rs.1,90,28,960/ on account of bogus purchases. 4.1 assessee carried matter in appeal before Commissioner of Income Tax (Appeals), who observed that in reassessment proceedings, assessee had explained purchases of polished diamonds on basis of its audited books of account along with quantitative record of items purchased and other evidences of material receipt register, etc. On behalf of assessee it was contended that payments for purchases were made through account payee cheques, goods were reflected in Page 12 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER stock statement, and, therefore, purchases should not be disallowed merely on statement of third party. assessee had also shown from its books of account that sale of diamond jewellery shown in Profit and Loss account could not have been made without purchases of polished diamonds. Commissioner (Appeals) observed that this led to situation where suppliers, that is, M/s. A2 Jewels and M/s. Amit Diamonds are proved to be bogus/paper entities providing accommodation entries, whereas evidence indicates purchase of polished diamonds from said two parties and use of same in making as well as sale of diamond jewellery. Commissioner (Appeals) was of view that finding of search of Investigating Wing, Mumbai as regards entry provider is also undeniable fact. He further found that same could be explained from statement of Bhanvarlal Jain and his associates under section 132(4) of Act, wherein whole modus operandi of diamond trade was explained. It was stated that group s concerns import diamonds on behalf of cash/grey market operator, who take away physical stock of imported diamond and concerns of Bhanvarlal Jain and others end up having fictitious stock. cash/grey market operators provide funds through cheque to Page 13 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER entry operator for payment to foreign supplier of rough diamonds. Thus, any purchaser of polished diamonds from such grey market operators ends up getting bills of purchases from Hawala concerns. In such case, only possible situation can be that assessee purchased polished diamonds from third party in cash/grey market and ended up getting bills for purchases from concerns of Bhanvarlal Jain Group. Commissioner (Appeals) has further observed that assessee had shown from its audited books of account, stock statement as well as material receipt register that it could not have sold equivalent quantum of diamond jewellery without these two purchases. According to him, assessee's books of accounts could not be rejected merely on third party statement under section 132(4) of Act, which has evidentiary value for party making statement and not any other person. He was, therefore, of view that there could be case of over invoicing of purchases only to some extent. Commissioner (Appeals) observed that in case of M/s. Sahajanand Exports and other cases, disallowance of 2% to 3% was considered as reasonable to account for any suppression of profits by way of purchase bills from Hawala concerns, and accordingly, found it reasonable to disallow 3% of total purchases of Page 14 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER Rs.1,90,28,960/ from bogus Hawala concerns and reduced addition from Rs.1,90,28,960/ to Rs.5,70,869/ only. 4.2 Revenue carried matter in appeal before Tribunal, which confirmed view of Commissioner (Appeals) and dismissed ground of appeal. 4.3 Mr. Nikunt Raval, learned advocate for appellant, submitted that impugned order passed by Tribunal, confirming order of Commissioner (Appeals), whereby he has reduced extent of disallowance of bogus purchases to 3% of total bogus purchases, is against decision of this court in case of N.K. Proteins Limited v. Deputy Commissioner of Income tax, (2017)2 92 CTR 354. It was submitted that reasoning applied by High Court in above case is squarely applicable to present case inasmuch as purchases claimed to have been made by assessee were held to be bogus purchases by Assessing Officer and that, once purchases are held to be bogus, then disallowing part of such purchases is against principles of sections 68 and 69C of Act. It was submitted that therefore, Tribunal was not justified in confirming order passed by Commissioner of Income Tax Page 15 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER (Appeals) restricting bogus purchases to 3% only. It was, accordingly, urged that matter requires consideration. 4.4 On other hand, Mr. J.P. Shah, learned counsel for respondent, submitted that after duly considering facts of case, Tribunal has restricted addition to 3%. It was submitted that percentage of addition is matter of estimation, which does not give rise to any question of law. It was also submitted that it is admitted position that respondent assessee has shown sale of diamond jewellery manufactured from diamonds stated to have been purchased from M/s. Amit Diamonds and M/s. A2 Jewels. Assessing Officer has found that M/s. A2 Jewels and M/s. Amit Diamonds were bogus entities. However, as rightly held by Commissioner (Appeals), though two entities were found to be bogus, assessee had, in fact, purchased diamonds which were used for purpose of making diamond jewellery and therefore, sale of such diamond jewellery has been accepted by Assessing Officer. Under circumstances, Commissioner (Appeals) was justified in not disallowing entire purchase and in restricting same to 3% of amount of purchases and Tribunal was wholly justified in confirming same. Page 16 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER 4.5 This court in N.K. Industries v. Deputy Commissioner of Income tax (supra) had relied upon its earlier decision in case of Vijay Proteins Ltd. v. Commissioner of Income Tax, [2015] 58 taxmann.com 44 (Gujarat), wherein it has been held thus: It is matter of fact that goods were not received from parties from whom it is shown to have been purchased, but such material was received from different source which is exclusively within knowledge of assessee and none else. Therefore, it is evident that assessee had inflated expenditure in question by showing higher amount of purchase price through fictitious invoices in names of 33 bogus suppliers. Considering overall factual scenario, Tribunal was justified in disallowing 25% of purchase price. 4.6 This court in Sanjay Oilcake Industries v. Commissioner of Income tax, 2009(316) ITR 274, on which reliance has been placed in case of Vijay Proteins Ltd. v. Commissioner of Income tax (supra), has recorded findings of Tribunal, wherein Tribunal had concurred with action of Commissioner of Income tax (Appeals) of confirming 25% of amount claimed as fair and reasonable. Tribunal found that parties from whom purchases were shown to Page 17 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER have been made were perhaps creation of assessee itself for purpose of banking purchases into books of account because purchases with bills were not feasible. Thus, said parties become conduit pipes between assessee firm and sellers of raw materials. Under circumstances, it was not impossible for assessee to inflate prices of raw materials. Tribunal, accordingly, held that addition of 25% for extra price paid by assessee, over and above prevalent price, is fair and reasonable and accordingly, confirmed findings of Commissioner of Income tax (Appeals). 4.7 This court concurred with findings of Commissioner (Appeals) and Tribunal and held that estimate made by two appellate authorities did not warrant interference as, even otherwise, whether estimate should be at particular sum or at different sum, can never be issue of law. 4.8 This court is in agreement with concurrent findings recorded by Tribunal and Commissioner (Appeals), namely, that assessee had shown purchases as well as sales. If sales were accepted, Assessing Officer could not have rejected purchases. Once Page 18 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER purchases are accepted, difference between inflated and actual price of purchases would be required to be disallowed and as to what would be extent of difference would be matter of estimate. 4.9 In present case, Commissioner (Appeals) has estimated this difference at 3% of bogus purchases and Tribunal has accepted same. As has been held by this court in Sanjay Oilcake Industries v. Commissioner of Income tax (supra), whether estimate should be at particular sum or at different sum can never be issue of law. Under circumstances, this ground of appeal also does not give rise to question of law, much less, substantial question of law. 5. Insofar as questions No.2 and 3 of Tax Appeal No.74 of 2019 are concerned, learned counsel for Revenue has fairly invited attention of court to decision of Supreme Court in case of Commissioner of Income tax v. Textool Co. Ltd., [2013] 35 taxmann.com 639 (SC), to submit that controversy in issue stands concluded by said decision of Supreme Court. Under circumstances, these questions also do not give rise to any substantial question of law warranting interference. Page 19 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER 6. Insofar as proposed question No.4 in Tax Appeal No.74 of 2019, which relates to addition on account of disallowance of insurance expense of Rs.99,865/ is concerned, before Tribunal, assessee had challenged disallowance pertaining to insurance expense incurred on purchase of new motor car during year. Assessing Officer was of view that any expenditure incurred towards purchase of new plant, machinery or furniture during current year, inclusive of insurance premium, was of capital nature and thereby, disallowed Rs.99,865/ as capital expenditure for assessment year under consideration. assessee carried matter in appeal before Commissioner (Appeals), who dismissed said ground of appeal. assessee carried matter in further appeal before Tribunal, which held that object behind incurring expense on insurance premium of car is to protect vehicle from third party thefts, damages, etc. and that such expenditure has to be incurred regularly every year by owner of car. Tribunal was of opinion that insurance premium paid by assessee on purchase of old or new car is expenditure of revenue nature, which should be allowed in year when it has been incurred and that under Page 20 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 C/TAXAP/72/2019 ORDER provisions of section 31(ii) of Act, any premium paid in respect of any insurance against risk of damage or destruction to machinery, plant or furniture, which includes car, is allowable as revenue expenditure and accordingly, held that disallowance of insurance expense by Assessing Officer and Commissioner (Appeals) is against mandate of section. Tribunal, accordingly, allowed ground of appeal. This court is in total agreement with view adopted by Tribunal, namely, that insurance premium paid by assessee towards purchase of new car is revenue in nature, which should be allowed in year in which it is incurred. Under circumstances, said ground of appeal also does not give rise to any question of law. 7. In light of above discussion, it cannot be said that impugned order passed by Tribunal suffers from any illegality or infirmity so as to give rise to any question of law, much less, substantial question of law warranting interference. appeals, therefore, fail and are, accordingly, dismissed. (HARSHA DEVANI, J) (VIRESHKUMAR B. MAYANI, J) PRAVIN KARUNAN Page 21 of 21 Downloaded on : Tue Sep 24 12:53:41 IST 2019 Principal Commissioner of Income-tax v. Shah Virchand Govanji Jewellers Pvt. Ltd
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