M/s. Rang Rasayan Agencies, Ahmedabad V. The Income tax Officer, Ward-10(3), Ahmedabad

ITA 1150/AHD/2006

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0445 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-11-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 08-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 234B; 191; 12; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, A-BENCH, AHMEDABAD. BEFORE: SHRI R.V. EASWAR, VICE PRESIDENT, AND SHRI M.V. NAYAR, ACCOUNTANT MEMBER. ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002) M/S. RANG RASAYAN AGENCIES, AHMEDABAD. VERSUS THE I.T.O., WD. 10(3), AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AADFR 2491 K FOR THE APPELLANT: SHRI DEEPAK SONI, CA FOR THE RESPONDENT SHRI GOVIND SINGHAL, DR ORDER PER SHRI M.V. NAYAR, ACCOUNTANT MEMBER: ITA NO. 1150/AHD/2006 IS AGAINST THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX(APPEALS)-XVI-AHMEDABAD VIDE ORDER DATED 28-03-2 006 IN APPEAL NO. CIT(A)-XVI/10(3)/35/04-05 OF WHICH THE GROUNDS OF APPEAL ARE AS GIVEN BELOW: 1.0 THE ORDER PASSED BY THE ASSESSING OFFICER WAS BAD IN LAW SINCE IT WAS CONTRARY TO THE PROVISIONS OF LAW AND THE FACTS OF YOUR APPELLANTS CASE. IT IS SUBMITTED THAT IT BE SO HE LD NOW. 1.1 THE ORDER WAS FRAMED BY THE ASSESSING OFFICER I N VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, WITHOUT AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD AND NOT CONSIDERING THE FACTS AND SUBMISSIONS. THE ORDER BE THEREFORE QUASHED. 1.2 THE ORDER OF ASSESSMENT AND THE NOTICE OF DEMAN D OUGHT TO HAVE BEEN SIGNED BY THE ASSESSING OFFICER AND ON SI GNING BOTH THE LEGAL DOCUMENTS THE ASSESSMENT CAN BE SAID TO HAVE BEEN MADE IN THE EYES OF LAW. THE NOTICE OF DEMAND WAS NOT SIGN ED BY THE 2 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) ASSESSING OFFICER AND THEREFORE THE ASSESSMENT WAS BAD IN LAW. THE ASSESSMENT BE THEREFORE QUASHED. 2.0 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING DISALLOWANCE OF RS. 78,975/- OUT OF TELEP HONE EXPENSES. THE APPELLANT SUBMITS THAT EACH AND EVERY EXPENDITU RE ON TELEPHONE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF THE BUSINESS AND ACCORDINGLY FULLY DEDUCTIBLE IN CO MPUTATION OF THE TOTAL INCOME. THE DISALLOWANCE UPHELD BY THE COMMI SSIONER OF INCOME TAX(APPEALS) BE DELETED. 2.1 THE APPELLANT WITHOUT PREJUDICE TO ABOVE FURTHE R SUBMIT THAT DISALLOWANCE OF RS. 78,975/- UNDER THE FACTS PREVAI LING IN ITS CASE IS EXCESSIVELY HIGH. THE DISALLOWANCE IF ANY TO BE UPHELD ON ANY TECHNICAL GROUND BE RESTRICTED TO NOMINAL AMOUNT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3.0 THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING DISALLOWANCE OF RS. 1,68,949/- OUT OF TEL EPHONE EXPENSES. THE APPELLANT SUBMITS THAT OBSERVATIONS IN PARA 3 ARE CONTRARY IN THE ASSESSMENT ORDER TO THE FACTS AND H AVE BEEN MADE WITHOUT AFFORDING ANY OPPORTUNITY OF BEING HEARD. IT IS SUBMITTED THAT EACH AND EVERY EXPENDITURE ON TELEPHONE WAS IN CURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS AND ACCORDINGLY FULLY DEDUCTIBLE IN COMPUTATION OF THE TOTAL INCOME . THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BE DELET ED. 3.1 THE APPELLANT WITHOUT PREJUDICE TO ABOVE FURTHE R SUBMIT THAT DISALLOWANCE OF RS. 1,68,949/- UNDER THE FACTS PREV AILING IN ITS CASE IS EXCESSIVELY HIGH. THE DISALLOWANCE IF ANY TO BE UPHELD ON ANY TECHNICAL GROUND BE RESTRICTED TO NOMINAL AMOUNT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4.0 THE COMMISSIONER OF IN COME TAX (APPEALS) ERRED IN UPHOLDING DISALLOWANCE OF RS. 1, 62,000/- IN RESPECT OF RENT. IT IS SUBMITTED THAT OBSERVATIONS MADE BY THE ASSESSING OFFICER IN PARA 4 OF THE ORDER ARE CONTRA RY TO THE FACTS AND HAVE BEEN MADE WITHOUT AFFORDING ANY OPPORTUNIT Y OF BEING HEARD AND HAVE BEEN MADE ON BASELESS AND IRRELEVANT GROUNDS. THE APPELLANT SUBMITS THAT EACH AND EVERY EXPENDITU RE BY WAY OF RENT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PU RPOSE OF THE BUSINESS AND ACCORDINGLY FULLY DEDUCTIBLE IN COMPUT ATION OF THE TOTAL INCOME. THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER BE DELETED. 3 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 4.1 THE APPELLANT WITHOUT PREJUDICE TO ABOVE FURTHE R SUBMITS THAT DISALLOWANCE OF RS. 1,62,000/- UNDER THE FACTS PREVAILING IN ITS CASE IS EXCESSIVELY HIGH. THE DISALLOWANCE IF ANY TO BE UPHELD ON ANY TECHNICAL GROUND BE RESTRICTED TO NOMINAL AMOUN T. IT IS SUBMITTED THAT IT BE SO HELD NOW. 5.0 THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N UPHOLDING RS. 6,000/- OUT OF SECURITY EXPENSES. IT IS SUBMITTED THAT OBSERVATIONS MADE BY THE ASSESSING OFFICER IN PARA 5 OF THE ORDER ARE CONTRARY TO THE FACTS AND HAVE BEEN MADE WITHOU T AFFORDING ANY OPPORTUNITY OF BEING HEARD AND HAVE BEEN MADE ON BA SELESS AND IRRELEVANT GROUNDS. THE APPELLANT SUBMITS THAT EAC H AND EVERY EXPENDITURE ON SECURITY WAS INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSE OF THE BUSINESS AND ACCORDINGLY FULLY DEDUC TIBLE IN COMPUTATION OF THE TOTAL INCOME. THE DISALLOWANCE MADE BY THE. COMMISSIONER OF INCOME TAX(APPEALS) BE DELETED. 5.1 THE APPELLANT WITHOUT PREJUDICE TO ABOVE FURTHE R SUBMIT THAT DISALLOWANCE OF RS. 6,000/- UNDER THE FACTS PREVAIL ING IN ITS CASE IS EXCESSIVELY HIGH. THE DISALLOWANCE IF ANY TO BE UP HELD ON ANY TECHNICAL GROUND BE RESTRICTED TO NOMINAL AMOUNT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 6.0 THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N NOT DIRECTING TO PROPERLY COMPUTE THE DEMAND IN THE CAS E OF THE APPELLANT. THE APPELLANT SUBMITS THAT THE ASSESSIN G OFFICER BE DIRECTED TO MAKE CORRECT COMPUTATION OF DEMAND AND BE DIRECTED TO ALLOW CREDIT IN RESPECT OF PAYMENT OF TAXES AND BE ALSO DIRECTED TO DELETE INTEREST CHARGES U/S 234B, 234C AND 234D. I T IS SUBMITTED THAT APPROPRIATE RELIEF BE ALLOWED AS PER THE PROVI SIONS OF LAW. 2. ITA NO. 2477/AHD/2009 AGAINST THE ORDER UNDER SE CTION 154 DECIDED BY CIT(A)-XVI, AHMEDABAD, VIDE ORDER DATED 12-02-2009 IN APPEAL NO. CIT(A)XVI/035/2004-05 IN WHICH THE GROUN DS OF APPEAL ARE AS GIVEN BELOW: 1.0 THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX(APPEALS) IS BAD IN LAW SINCE IT IS CONTRARY TO THE PROVISIONS OF LAW AND THE FACTS OF YOUR APPELLANTS CASE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 4 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 2.0 THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N FRAMING ORDER U/S. 154 ON 12 TH FEBRUARY, 2009 AND SERVING UPON THE APPELLANT THE ORDER ON 14 TH MARCH, 2009. THE APPELLANT SUBMITS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT NOT TO HAVE FRAMED THE ORDER U/S 154 ON 14 TH MARCH 2009. 3.0 THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N UPHOLDING THE VALIDITY OF THE ORDER OF ASSESSMENT. THE APPELLANT SUBMITS THAT THE ORDER OF ASSESSMENT WAS BAD IN LAW AS NO REASONABLE OPPORTUNITY OF BEING HEARD WAS ALLOWED T O THE APPELLANT. THE COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE QUASHED THE ORDER OF ASSESSMENT. 4.0 THE COMMISSIONER OF INCOME TAX(APPEALS) ERRED I N NOT QUASHING THE ASSESSMENT. THE APPELLANT SUBMITS THA T THE NOTICE OF DEMAND WAS NOT SIGNED BY THE ASSESSING OFFICER AND THEREFORE THE ASSESSMENT WAS NOT SUSTAINABLE IN THE EYES OF LAW. THE COMMISSIONER OF INCOME TAX(APPEALS) OUGHT TO HAVE Q UASHED THE ASSESSMENT. ITA NO. 2477/AHD/2009 3. APPEAL NO. 2477/AHD/2009 WAS FILED LATE BY 104 D AYS. THE ASSESSEE HAS FILED A CONDONATION APPLICATION DATED 10-10-2009. THE ASSESSEE HAD CHALLENGED THE ASSESSMENT ORDER ON VAR IOUS GROUNDS BEFORE THE CIT(APPEALS), INCLUDING THE GROUND THAT THE NOT ICE OF DEMAND WAS NOT SIGNED AND THEREFORE THE ASSESSMENT ORDER ITSELF WA S INVALID. THIS GROUND WAS NOT DECIDED BY THE CIT(APPEALS) IN HIS ORDER DA TED 28-03-2006. IN THAT ORDER HE DECIDED THE OTHER GROUNDS RAISED BY T HE ASSESSEE ON MERITS. THE ASSESSEE FILED AN APPEAL TO THE ITAT IN ITA NO. 1150/AHD/2006 IN WHICH THE ORDER OF THE CIT(APPEALS) PASSED ON 28-03 -2006 WAS CHALLENGED. IN THE FIRST GROUND IN THIS APPEAL, TH E ASSESSEE ALSO RAISED THE POINT THAT SINCE THE DEMAND NOTICE WAS NOT SIGNED, THE ASSESSMENT ORDER ITSELF WAS INVALID, THOUGH THIS ISSUE HAD NOT BEEN DECIDED BY THE CIT(APPEALS) IN HIS ORDER. THE APPEAL TO THE TRIBU NAL WAS FILED ON 08- 5 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 05-2006. IN THE MEANTIME, THE ASSESSEE ALSO MOVED AN APPLICATION DATED 03-05-2006 UNDER SECTION 154 OF THE ACT, ASKING THE CIT(APPEALS) TO AMEND HIS ORDER WHILE ADJUDICATING UPON THE VALIDIT Y OF THE ASSESSMENT ORDER. THIS APPLICATION WAS DISPOSED OF BY THE CIT (APPEALS) BY ORDER DATED 12-02-2009 AND IN THIS ORDER, THE CIT(APPEALS ) HELD THAT THE ASSESSMENT ORDER WAS VALID AND THUS DISMISSED THE A SSESSEES APPLICATION UNDER SECTION 154. ITA NO. 2477/AHD/2009 IS AN APP EAL AGAINST THIS ORDER OF THE CIT(APPEALS) AND IT IS THIS APPEAL WHI CH IS DELAYED BY 104 DAYS. IN THE CONDONATION APPLICATION IT IS STATED THAT THE ASSESSEE WAS UNDER A BONA-FIDE BELIEF THAT IT WAS NOT NECESSARY TO PREFER A SEPARATE APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER PASSED BY THE CIT(APPEALS) UNDER SECTION 154, BUT THAT IT WAS ADVISED THAT AN APPEAL SHOULD BE FILED TO THE TRIBUNAL BY WAY OF ABUNDANT CAUTION. THE ASSES SEE FILED THE APPEAL PURSUANT TO THIS ADVICE AND IN THE MEANTIME A DELAY HAD BEEN CAUSED. IT IS PRAYED THAT THE DELAY MAY BE CONDONED AS IT WAS NEI THER WILLFUL NOR DELIBERATE. 4. AFTER GOING THROUGH THE CONDONATION APPLICATION AND AFTER HEARING BOTH THE SIDES, WE ARE SATISFIED THAT THE DELAY WAS DUE TO SUFFICIENT CAUSE, THE SUFFICIENT CAUSE BEING THAT THE ASSESSEE WAS UN DER A BONA-FIDE BELIEF THAT NO SEPARATE APPEAL NEED BE FILED AGAINST THE O RDER PASSED BY THE CIT(APPEALS) UNDER SECTION 154. WE CONDONE THE DEL AY AND ADMIT THE APPEAL. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER UNDE R SECTION 154 PASSED BY LD. COMMISSIONER OF INCOME TAX(APPEALS). THE ASSESSEE HAS QUESTIONED THE VALIDITY OF THE ASSESSMENT ORDER ON THE GROUND THAT NOTICE OF DEMAND WAS NOT SIGNED BY THE ASSESSING OFFICER, AS A RESULT OF WHICH THE ASSESSMENT ITSELF BECOMES INVALID. 6 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 6. SHRI. DEEPAK SONI, AR APPEARED FOR THE ASSESSEE. HE SUBMITTED THAT ASSESSMENT UNDER SECTION 143(3) EMBRACES WITHI N ITS MEANING COMPUTATION OF THE TOTAL INCOME IN THE CASE OF THE ASSESSEE AND ALSO THE DETERMINATION OF TAX LIABILITY IN THE CASE OF AN AS SESSEE. IT WAS SUBMITTED THAT THE ORDER SHOWING COMPUTATION OF INCOME AND TH E NOTICE OF DEMAND ARE TWO PARTS OF THE ASSESSMENT AND EACH OF THE PAR T HAS TO BE SINGED BY THE ASSESSING OFFICER. HE SUBMITS THAT THE NOTICE OF DEMAND ADMITTED HAS NOT BEEN SINGED BY THE ASSESSING OFFICER AND TH EREFORE THE ASSESSMENT WAS INVALID. THE AR SUBMITTED THAT THE ASSESSMENT U/S 143(3) FRAMED BY THE ASSESSING OFFICER BE QUASHED. 7. IN THIS CONNECTION THE AR FOR THE ASSESSEE RELIE D ON THE FOLLOWING RULINGS: I. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KALYANKUMAR RAY VS. COMMISSIONER OF INCOME TAX 191 ITR 634 (SC). II. THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PURSHOTTAMDAS T. PATEL 209 ITR 52 (GUJ.) III. THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF SMT. KILASHO DEVI BURMAN AND OTHERS VS. CIT 219 ITR 214 (SC) IV. THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. APARNA AGENCY PVT. LTD. 267 ITR 50 (CAL.) 8. SHRI. GOVIND SINGHAL, DR APPEARED FOR THE REVENU E. HE RELIED ON THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS ). HE POINTED OUT THAT THE ASSESSMENT WOULD BECOME INVALID, IF THE AS SESSING OFFICER HAD FAILED TO SIGN THE ASSESSMENT ORDER. IN THE CASE O F FAILURE TO SIGN THE NOTICE OF DEMAND, THE ASSESSMENT WOULD NOT BECOME I NVALID ONLY THE 7 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) DEPARTMENT WOULD BE PREVENTED FROM ENFORCING COLLEC TION OF REVENUE FROM THE ASSESSEE. HE POINTED OUT THAT THERE WAS N O RULING IN FAVOUR OF THE ASSESSEE ON THIS POINT AND THE ONLY RULING THAT WAS THERE ANY FAVOUR OF REVENUE WHERE IT WAS HELD BY THE CALCUTTA HIGH COUR T IN THE CASE OF B.K. GOOYEE V/S. CIT 62 ITR 109 (CAL) ASSESSMENT-VALIDITY OF NOTICE WHEN UNSIGNED-SERVICE OF VALID NOTICE IS A PRE-CONDITION TO THE JURISDICTION OF THE ITO-IRREGU LARITY BY NOT SIGNING THE NOTICE IS NOT ONE OF MERELY A PROCEDURAL NATURE-IRR EGULARITY CANNOT BE WAIVED BY THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FROM THE ABOVE DECISIONS IT IS CLEAR THAT NO COURT AS HELD THAT IF THE DEMAND NOTICE IS NOT SIGNED THEN THE WHOLE ASSESSMENT ORDER IS INVALID. IN OUR VIEW THE RELIANCE BY THE AR FOR THE ASSESSEE ON THE JUDGMENT IS MISPLACED. 10. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. COM MISSIONER OF INCOME TAX(APPEALS) IN DISMISSING THE APPLICATION U NDER SECTION 154 FILED BY THE ASSESSEE. IN VIEW OF THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KARNANI INDUSTRIAL BANK LTD. 113 ITR 380. ITA NO. 1150/AHD/2006 11. GROUNDS NOS. 1.0, 1.1, AND 1.2 RELATE TO THE VA LIDITY OF ASSESSMENT. THIS HAS ALREADY BEEN DISPOSED OF BY US VIDE OUR SE PARATE ORDER IN ITA NO. 2477/AHD/2009 WHERE WE HAVE DISMISSED THE ARS CONTENTION THAT IF THE NOTICE OF DEMANDS IS NOT SINGED, IT WOULD HAVE THE EFFECT OF ANNULLING THE ASSESSMENT. ACCORDINGLY, WE DISMISS THE ASSESS EES APPLICATION ON THESE 3 GROUNDS. 8 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 12. THE GROUND NO. 2 AND 2.1 RELATES TO THE ACTION OF LD. COMMISSIONER OF INCOME TAX(APPEALS) IN UPHOLDING DI SALLOWANCE OF RS. 78,975/- OUT OF TELEPHONE EXPENSES. 13. THE ASSESSING OFFICER IN PARA 3 OF THE ASSESSME NT ORDER HAS MENTIONED THAT THE ASSESSEE HAS CLAIMED TELEPHONE E XPENSES OF RS. 6,42,800/- AS AGAINST RS. 4,29,573/- CLAIMED LAST Y EAR, WHICH INCLUDED RS. 1,68,949/- MADE TO REMIK TRADING COMPANY. LTD., A R ELATED PERSON COVERED U/S. 40A(2)(B). IT WAS NOTICED THAT SUCH A CLAIM WAS NOT MADE IN THE LAST YEAR. FROM THE BILLS FURNISHED BY THE ASS ESSEE, IT WAS NOTICED THAT MAJORITY OF THE CLAIMS MADE ARE RELATED TO OTHERS B UT ARE CLAIMED IN THE BOOKS OF THE ASSESSEE. THE ASSESSING OFFICER THERE FORE DISALLOWED RS. 94,770/- BEING 1/5 TH OF THE TELEPHONE EXPENSES OF RS. 4,73,851/- EXCLUD ING THE REIMBURSEMENT TO REMIK TRADING CO. 14. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HEL D AS GIVEN BELOW: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS OF THE LD. A.R. AND I FIND FROM THE DETAILS FURNISHED BY THE APPELLANT THAT MAJORITY OF THE CLAIM RELATE TO OTHERS BUT CLA IMED IN THE BOOKS OF THE APPELLANT. THE PERSONAL USE OF TELEPHONE BY THE PARTNERS CANNOT ALTOGETHER BE RULES OUT. HOWEVER, THE DISAL LOWANCE OF RS. 94,770/- BEING 1/5 TH OF RS. 4,73,851/- IS ON A HIGHER SIDE. IT WOULD MEET THE HANDS OF JUSTICE IF 1/6 TH OF RS. 4,73,851/- BEING RS. 78,975/- IS DISALLOWED. THE ASSESSEE GETS A RELIEF OF RS. 15795/-. 15. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE AR SHRI. DEEPAK SONI ARGUED THAT TELEPHONES ARE USED EXCLUSI VELY FOR THE PURPOSE OF BUSINESS AND EACH AND EVERY EXPENDITURE HAS CLOS E CONNECTION WITH THE 9 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) BUSINESS OPERATIONS CARRIED ON BY THE ASSESSEE. IT HAS FURTHER BEEN ARGUED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS EXCESSIVELY HIGH AND BE RESTRICTED TO A NOMINAL AMOUNT. 16. SHRI. GOVIND SINGHAL, DR APPEARED FOR THE REVEN UE. HE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE DISALLOWANCES MADE ARE CORRECT. HOWEVER, WE FEEL THAT SOME RELIE F SHOULD BE GIVEN TO THE ASSESSEE. THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISALLOWANCE TO RS. 70,000/- I.E. THE ASSESSEE GETS A RELIEF OF RS. 8975/-. THE ASSESSEES APPEAL IS PARTLY ALLOWED IN RESPECT OF GROUND NO. 2.0 AND 2.1. 18. GROUND NOS. 3 AND 3.1, THE ASSESSEE HAS COME IN APPEAL AGAINST THE ACTION OF LD. COMMISSIONER OF INCOME TAX(APPEALS) I N UPHOLDING DISALLOWANCE OF RS. 1,68,949/- OUT OF TELEPHONE EXP ENSES. THE ASSESSING OFFICER HAS OBSERVED THAT THE CLAIM OF REIMBURSEMEN T OF RS. 1,68,949/- TO REMIK TRADING COMPANY. LTD. HAS BEEN MADE FOR THE F IRST TIME. THE ASSESSEE HAS NOT BEEN ABLE TO BRING ANY SUPPORTING DOCUMENTS SUCH AGREEMENT WITH THE PARTY, THE PURPOSE FOR WHICH IT WAS REIMBURSED. THE ASSESSEE HAS ONLY PRODUCED A DEBIT NOTE ISSUED BY S HRI B.R. PATEL, DIRECTOR OF REMIK TRADING COMPANY. WITH THE FOLLOWI NG REMARKS. BEING THE AMOUNT OF TELEPHONE EXPENSES INCURRED BY US BY WAY OF TELEPHONE EXPENSES PAID/PAYABLE AS UNDERMENT IOEND TELEPHONE NO. @ 50% FOR THE PERIOD 1.4.2000 TO 28.2 .2001. TELEPHONE NO. 6464757 AMOUNT 50% 337898 168949 10 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) THE ASSESSING OFFICER THEREFORE DISALLOWED THE AMOU NT OF RS. 1,68,949/- REIMBURSED TO REMIK TRADING CO. 19. LD. COMMISSIONER OF INCOME TAX(APPEALS) HELD AS GIVEN BELOW: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS OF THE LEARNED. A.R. THOUGH M/S. REMIK TRADING COMPANY . LTD. WERE INCURRING ADMINISTRATIVE AND ESTABLISHMENT EXPENSES OF THE ASSESSEE, IT CAN BE TERMED AS ENTIRELY A DIFFERENT ENTITY. IT IS ALSO SEEN FROM THE COPY OF TELEPHONE BILLS SUBMITTED THA T THE REIMBURSEMENT MADE ALSO INCLUDES BILLS OF EARLIER Y EARS. CONSIDERING ALL THESE FACTS, I AM OF THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE REIMBURSEMENT OF TELEPHONE EXPENSES OF RS. 1,68,949/-. THIS GROUND OF APPEAL IS, THEREFORE, DISMISSED. 20. THE AR FOR THE ASSESSEE SUBMITTED THAT THE IMPU GNED THAT ADMINISTRATIVE AND ESTABLISHMENT EXPENSES OF THE AS SESSEE WERE INCURRED BY M/S. REMIK TRADING COMPANY. LTD. FOR AND ON BEHA LF OF THE ASSESSEE. IT HAS ALSO BEEN IMPUGNED THAT M/S. REMIK TRADING C OMPANY. HAS SHOWN THE REIMBURSEMENT OF EXPENSES IN THE RETURN OF INCO ME FILED BY IT AND MADE PAYMENT OF TAX THEREON. IT HAS ALSO BEEN SUBM ITTED THAT THE DISALLOWANCE MADE IS EXCESSIVELY HIGH AND MAY BE RE STRICTED TO A NOMINAL AMOUNT. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. M/S. REMIK TRADING COMPANY LIMITED WAS A TOTAL DIFFERENT ENTITY WHICH WAS INCURRING ADMINISTRATIVE AND ESTABLISHMENT EXPENSES WHICH WER E DEBITED TO THE ASSESSEE. NO PROOF HAS BEEN BROUGHT ON RECORD BY T HE ASSESSEE TO ESTABLISH ITS CLAIM THAT THIS WAS INCURRED IN THE I NTEREST OF THE BUSINESS 11 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) CARRIED OUT BY THE ASSESSEE. WE ALSO NOTICE FROM T HE COPIES OF TELEPHONE BILLS SUBMITTED THAT THE REIMBURSEMENT MADE ALSO IN CLUDES BILLS OF EARLIER YEARS. CONSIDERING ALL THESE FACTS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED REIMBURSEMENT OF TEL EPHONE EXPENSES OF RS. 1,68,949/-. WE ACCORDINGLY, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE ASSESSEES APPEAL IN RESPECT OF GROUND NOS. 3.0 AND 3.1. 22. GROUND NO. 4 AND 4.1 OF THE ASSESSEES APPEAL P ERTAINED TO THE ACTION OF LD. COMMISSIONER OF INCOME TAX(APPEALS) I N UPHOLDING THE DISALLOWANCE OF RS. 1,62,000/- IN RESPECT OF RENT. 23. THE ASSESSING OFFICER HAS IN PARA 5 ON PAGE 4 OF THE ASSESSMENT ORDER HAS MENTIONED THAT THE ASSESSEE HAS PAID RENT TO THE FOLLOWING PARTIES, WHO ARE RELATED PERSONS COVERED U/S. 40A(2 )(B). PRAFULBHAI DAHYABHAI FAMILY TRUST RS. 78,000/- NANDUBHAI DAHYABHAI & OTHERS RS. 72,000/- DHRUVKUMAR D. CONTRACT, HUF RS. 12,000/-. THE ASSESSEE COULD NOT PRODUCE ANY PROOF OF OWNERSH IP WITH THE ABOVE PARTIES. THE ASSESSEE HAD ONLY FILED UNNOTORISED A GREEMENTS ONE ON RS. 20 AND ANOTHER ON RS. 10. THE ASSESSING OFFICER DI SALLOWED THE RENT PAID OF RS. 1,62,000/- SINCE THE ASSESSEE HAD FAILED TO DISCHARGE ITS ONUS CAST ON IT BY FURNISHING THE PROOF OF OWNERSHIP. 24. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HEL D AS GIVEN BELOW: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS OF THE LD. A.R. I FULLY AGREE WITH THE OBSERVATIONS O F THE ASSESSING OFFICER THAT ONUS LIES ON THE APPELLANT TO PROVE TH E OWNERSHIP OF THE RENTED PROPERTY. IT IS NOT THE DUTY OF THE ASS ESSING OFFICER TO 12 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) ESTABLISH THE OWNERSHIP WITH THE ABOVE MENTIONED PA RTIES. SINCE THE APPELLANT HAS NOT BEEN ABLE TO DISCHARGE THE ON US OF PROVING THE OWNERSHIP OF THE SAID PREMISES, I AM OF THE VIE W THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE RENT E XPENSES OF RS. 1,62,000/-. THIS GROUND OF APPEAL IS DISMISSED. 25. THE LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE SAID PREMISES HAD TAKEN ON HIRE BY THE APPELLANT WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS. IT HAS ALSO BEEN SUBMITTED THAT THE L AW NOWHERE STIPULATES THAT IT IS ONUS ON THE TENANT TO COLLECT EVIDENCE O F OWNERSHIP BY THE LANDLORD AND FURNISH THEM TO THE DEPARTMENT. 26. SHRI. GOVIND SINGHAL, DR IS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A GREE WITH THE ASSESSING OFFICER THAT THE ONUS LIES ON THE ASSESSE E TO PROVE THE OWNERSHIP OF THE RENTED PROPERTY. IT IS NOT THE DU TY OF THE ASSESSING OFFICER TO ESTABLISH THE OWNERSHIP WITH THE ABOVE M ENTIONED PARTIES. SINCE THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE T HE ONUS OF PROVING THE OWNERSHIP OF THE SAID PREMISES, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE RENT EXPENSES OF RS. 1,62,000/-. WE ACCORDINGLY CONFIRM THE ORDER OF LD. COMMISSIONER O F INCOME TAX(APPEALS) AND DISMISS THE ASSESSEES APPEAL IN R ESPECT OF GROUND NO. 4.0 AND 4.1. 28. GROUND NOS. 5.0 AND 5.1 OF THE ASSESSEES APPEA L ARE AGAINST THE ACTION OF LD. COMMISSIONER OF INCOME TAX(APPEALS) I N UPHOLDING THE DISALLOWANCE OF RS. 6,000 OUT OF SECURITY EXPENSES. 13 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 29. THE LEARNED AR SUBMITTED THAT THE SAID PREMISES HAD TAKEN ON HIRE BY THE APPELLANT WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. IT HAS ALSO BEEN SUBMITTED THAT THE LAW NOWHERE STIPUL ATES THAT IT IS ONUS ON THE TENANT TO COLLECT EVIDENCE OF OWNERSHIP BY THE LANDLORD AND FURNISH THEM TO THE DEPARTMENT. 30. THE LD. COMMISSIONER OF INCOME TAX(APPEALS) HEL D AS GIVEN BELOW: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS OF THE LD A.R. THE APPELLANT WAS NOT ABLE TO PRODUCE ANYT HING ON RECORD TO PROVE THAT THE AMOUNT OF RS. 12,000/- HAD BEEN P AID TO P.D. FAMILY TRUST FOR KEEPING 24 HOURS WATCH OVER THE RE NTED PROPERTY. THEREFORE, I AM OF THE OPINION THAT THE ASSESSING O FFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE APPELLANT ON SE CURITY CHARGES. HOWEVER, THIS DISALLOWANCE IS REDUCED FROM RS. 12,0 00/- TO RS. 6,000 TO MEET THE ENDS OF JUSTICE. 31. THE ASSESSING OFFICER IN PARA 6 OF THE ASSESSME NT ORDER HAS MENTIONED THAT THE ASSESSEE HAS PAID SECURITY CHARG ES OF RS. 12,000/- TO PRAFULBHAI DAHYABHAI FAMILY TRUST, WHO IS COVERED U /S. 40A(2)(B) OF THE I.T. ACT FOR KEEPING 24 HOURS VIGIL OF THE PREMISES TAKEN FROM THEM ON RENT. IT SUPPORT OF THE CLAIM, THE ASSESSEE FILED A DEBIT NOTE, WHICH WAS ISSUED BY THE ASSESSEE ITSELF, AND THE SAME DID NOT BEAR ANYBODYS SIGNATURE. THE ASSESSEE HAD ALSO FILED TWO VOUCHER S ONLY, EACH OF RS. 1,000/- WHICH ALSO DID NOT MENTION NAME OF THE PART Y RECEIVING THE AMOUNT AND WITHOUT STAMP, ETC. HE THEREFORE, DISALL OWED THE CLAIM OF SECURITY CHARGES OF RS. 12,000/-. THE AR FOR THE A SSESSEE SUBMITTED THAT THE EXPENDITURE ON SECURITY WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT HAS ALSO BEEN SUBMITTED TH AT THE DISALLOWANCE MADE IS EXCESSIVELY HIGH. 14 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) 32. SHRI. GOVIND SINGHAL, DR APPEARED FOR THE REVEN UE. HE RELIED ON THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX(APP EALS). 33. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND NO REASON TO INTERFERE WITH THE ORDER OF LD. COMMISSIONER OF INC OME TAX(APPEALS) WHO HAS ALREADY GIVEN REASONABLE RELIEF TO THE ASSE SSEE. THE ASSESSEES APPEAL IS THEREFORE DISMISSED ON GROUND NOS. 5 AND 5.1. 34. THE 6 TH GROUND OF THE ASSESSEES APPEAL RELATES TO THE ACT ION OF LD. COMMISSIONER OF INCOME TAX(APPEALS) IN NOT DIRECTIN G THE ASSESSING OFFICER TO PROPERLY COMPUTE THE DEMAND IN THE CASE OF THE ASSESSEE. IT HAS ALSO BEEN PRAYED THAT LD. COMMISSIONER OF INCOM E TAX(APPEALS) BE DIRECTED TO DELETE INTEREST CHARGED UNDER SECTION 2 34B, 234C AND 234D. 35. LD. COMMISSIONER OF INCOME TAX(APPEALS) HAS HEL D AS GIVEN BELOW: THE LAST GROUND OF APPEAL IS AGAINST CHARGING OF I NTEREST U/S. 234A, B, AND C. THE HON'BLE SUPREME COURT HAS HELD IN THE CASE OF CIT VS. ANJUM N. GHASWALA (2001), 252 ITR 1 (SC) THAT AFTER THE AMENDMENT IN THE FINANCE ACT, 1981, THE EXPRESS ION SHALL USED IN SECTIONS 234A, 234B AND 234C CANNOT BE CONS TITUTED AS MAY , WHICH IS A CLEAR INDICATION THAT THE INTENTION O F THE LEGISLATURE WAS TO MAKE THE CALCULATION OF STATUTOR Y INTEREST MANDATORY. SINCE IN VIEW OF THE SAID DECISION OF T HE APEX COURT, THE CHARGING OF INTEREST UNDER THESE SECTIONS BEING MANDATORY IS HELD VALID. HOWEVER, THE ASSESSING OFFICER WILL HA VE TO RECALCULATE THE SAME IN THE LIGHT OF RELIEFS GRANTED TO THE APP ELLANT IN THE PRECEDING PARAGRAPHS. 36. ON THIS POINT, WE AGREE THAT THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX(APPEALS) IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ANJUMAN GHASWALA 252 ITR 1, TH E CHARGING OF 15 ITA NO.1150/AHD/2006 ITA NO.2477/AHD/2009 (ASSESSMENT YEAR 2001-2002 ) INTEREST UNDER THESE SECTIONS IS MANDATORY AND IS V ALID. HOWEVER, THE ASSESSING OFFICER IS DIRECTED TO RECALCULATE THE CH ARGING OF INTEREST IN VIEW OF THE RELIEFS GRANTED TO THE ASSESSEE BY LD. COMMISSIONER OF INCOME TAX(APPEALS) AND BY THE TRIBUNAL. 37. IN THE RESULT, THE APPEALS OF THE ASSESSEE IS P ARTLY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 13 TH NOVEMBER, 2009. SD/- SD/- (R.V. EASWAR) (M .V. NAYAR) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED: 13/11/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.