SHRI. NARAYAN SHIVRAM KOTNIS , MUMBAI V. ASST CIT 26(2), MUMBAI

ITA 1193/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8726 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAHENDRA PASTE
• Keywords: Depreciation; TDS
• Section: 271(1)(c); 143(3); 142(1); 143(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “B” BENCH, MUMBAI BEFORE SMT DIVA SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis 301, Tejas Heights Trombay Road Mumbai - 400022 PAN: ABIPK5022D v. ACIT – 26(2) Room No. 510, 5 th Floor Pratyakshkar Bhavan Bandra Kurla Complex Bandra (E), Mumbai – 400051 (Appellant) (Respondent) Assessee by : Shri Mahendra Paste Department by : Shri Kishore Dhule Date of Hearing : 24.11.2021 Date of Pronouncement : 17.02.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of Learned Commissioner of Income Tax (Appeals)-38, [hereinafter in short “Ld.CIT(A)”] dated 16.12.2019 for the A.Y.2011-12. 2. Brief facts of the case are that, assessee filed his return of income on 25.09.2011 declaring total income ₹.2,47,92,573/-. The return was 2 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis processed u/s 143(1) of the Income Tax Act, 1961 (for short “Act”). Subsequently, based on the information received from Jt. Commissioner of Income Tax (OSD), Central Circle-2(1) Mumbai that during the F.Y.2010-11, the assessee had received commission of ₹.4,42,76,742/- from M/s. Royal Twinkle Star Club Pvt. Ltd (for short RTSC) and M/s.Citrus Check-Inns P Ltd (for short CCPL). It was also informed that during the course of assessment proceedings for A.Y.2008-09, 2009-10 and 2010-11 in the case of Anita L. Ghadge one of the clients of RTSC and CCPL expenses claimed were restricted to 70% of the total expenses and also could not furnish the details of expenses incurred and in many cases TDS was not deducted. Considering the above, the assessee also received similar commission from RTSC and CCPL the present case was reopened u/s. 147 of the Act by supplying the reasons for reopening to the assessment. 3. In response assessee filed return of income on 11.09.2018 declaring the same income declared in the original return of income. Accordingly, notices u/s. 143(2) and 142(1) were issued and served on the assessee. The Assessing Officer observed that the assessee has not filed any objection to the reopening of the case. The assessee is an individual and engaged in the business of selling holiday plans. During the year assessee 3 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis derived income under the head “income from house property”, “business or profession” and “other sources”. 4. Assessing Officer after verification of Profit and Loss Account observed that assessee has claimed ₹.1,87,02,229/- as expenses for this year and assessee was asked to furnish the documentary evidences like bills, vouchers, invoices, copy of bank statements and details of TDS deducted in support of the aforesaid expenses debited in the Profit and Loss Account. The Assessing Officer observed that assessee has not submitted any details/explanation during the assessment proceedings. Since assessee failed to produce any details/documents supporting the claim, the Assessing Officer relying on the case of Anita L. Ghadge, one of the clients of RTSC and CCPL as in the above cases 30% of the expenses claimed by the assessee was disallowed, accordingly, Assessing Officer relying on the above case disallowed 30% of the expenses claimed by the assessee to the extent of ₹.56,10,669/-. 5. Aggrieved assessee preferred appeal before the Ld.CIT(A). Ld.CIT(A) considered the detailed submissions submitted by the assessee, for the sake of clarity it is reproduced below: - 4 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis “6.1 The appellant Mr. Narayan Kotnis (hereinafter called assessee) is doing commission business and filing income tax returns and paying taxes regularly in time. The assessee has filed income tax return for assessment year 2011-12. The assessee has made Net Taxable Total Income of Rs.2,47,92,575/- during the said assessment year. The ACIT has taken into account in addition the above income Rs.56,10,669/- as disallowance of expenses. In the given case assessee had incurred expenses excluding depreciation of Rs.1,87,02,229. In respect of this expenses, assessee has submitted details. As per contention of ACIT, during the course of assessment proceedings for A.Y. 2008-09, 2009-10 and 2010-11 in the case of Anita L.Ghadge, one of the commission agent of of M/s.Royal Twinkle Star Club Pvt. Ltd and M/s. Citrus Check Inns Pvt. Ltd, expenses claimed were restricted to 70 percent of the total expenses claimed and 30 percent of the expenses were disallowed as the assessee could not furnish the details of expenses incurred and in many cases TDS was not deducted, by considering this fact of the case and material available on record and the information received into consideration, an amount of Rs.56,10,669/- being 30 percent total expenses of Rs.1,87,02,229 debited in Profit and Loss Account is disallowed on an estimate basis as not proved or established to have been laid out or expended wholly and exclusively for the purposing the commission income and added to the total income of Thus total disallowances comes to Rs.56,10,669 and added back to the total income of the assessee. Total income assessed as per ACIT as follows: As per return of income Rs.2,47,92,575/- Add: Disallowance out of expenses as discussed above Rs.56,10,669/- total income Rs.3,04,03,244/-. Your appellant plead that, considering the nature of business, all expenses (excluding depreciation) incurred of Rs.1,87,02,229/- as mentioned in assessment order is reasonable and incurred for wholly and exclusively for the business, as per sec.37 of Income Tax Act. 1961. Your appellant further plead that in the case of ITAT order, Asst. Commissioner of Income Tax, Circle 21(3) vs. Anita Lahu Ghadge, approximately 40% net profit ratio accepted against approximately 10% net profit ratio offered by Anita L. Ghadge, and your appellant have showed 57% net profit ratio which was much higher than the case of Anita L. Ghadge. After considering this facts, appellant state that all expenses paid to parties is reasonable. Your appellant plead that TDS was not liable to be deducted, hence in the said expenses to be allowed considering the nature of business. Your appellant 5 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis prays to consider the above facts and allow the whole claim of expenditures and delete the additions made to total income in the assessment order passed u/s.143(3) r.w.s 147 of Income Tax Act, 1961 and cancel the initiation of penalty proceeding and grant relief on the above facts.” 6. After considering submissions of the assessee, Ld.CIT(A) rejected the plea and dismissed the appeal filed by the assessee. Further, he observed that in the case of Anita L. Ghadge (supra) the ITAT has confirmed the disallowance made by the Assessing Officer. 7. Aggrieved assessee preferred appeal before us raising following grounds in its appeal: -  The learned Asst. Commissioner of Income Tax has erred in passing the order under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 and disallowing expenses which were incurred during the year.  The learned Asst. Commissioner of Income Tax has erred in making addition in total income of the assesse.  The learned ACIT has erred in not taking into consideration explanation to prove the genuine of expenses.  The learned ACIT has erred in initiating penalty proceedings u/s.271(1)(c) of Income tax act, 1961.  Your appellant craves to add, amend or alter any of the grounds of appeal on or before the hearing. 8. At the time of hearing Ld. AR of the assessee did not press the ground relating to reopening of assessment, accordingly, the issues relating to reopening is dismissed as not pressed and with regard to 6 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis penalty u/s. 271(1)(c) of the Act it is pre-mature therefore it is also dismissed. 9. With regard to merits of the case, Ld. AR submitted that Assessing Officer resorted to disallow 30% of the expenses merely relying on the case of Anita L. Ghadge (supra). He submitted that the facts of the Anita L. Ghadge (supra) case are distinguishable from the facts of the assessee case. In the case of Anita L. Ghadge (supra) she has declared only 10% of the gross revenue as the profit whereas the assessee has declared 56% of the gross revenue as Gross Profit. Therefore, assessee has declared considerable profit, therefore, by relying on such case disallowing 30% in the case of the assessee is unjustified. Further he submitted that in assessee’s own case for the A.Y. 2012-13 the Assessing Officer assessed the income u/s. 143(3) of the Act and has restricted the disallowance @5% on total expenses. 10. On the other hand, Ld. DR submitted that assessee has claimed huge expenditure and failed to substantiate by filing any documents in support of the above expenditure, it shows that the expenditure claimed by the assessee are not genuine. He brought to our notice the facts in Anita L. Ghadge (supra) case where in ITAT has confirmed the 7 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis disallowance at 30%. He submitted that since assessee is dealing with same group of companies and facts of the assessee are exactly same, hence, he supported the orders of the lower authorities in confirming the disallowance of 30%. 11. Considered the rival submissions and material placed on record, we observed that assessee has not submitted any document before tax authorities for claiming the expenses. We also observed that Assessing Officer fully relied on the findings in the case of Ms. Anita L. Ghadge without analyzing the nature of transactions in that case. Ms. Anita L. Ghadge was sub-contracting the agency services to others, whereas the assessee completes the services himself. Further Ms. Anita L. Ghadge declared the profit @10% whereas the assessee declared Gross Profit @56% after adjusting direct expenses. In our view, the assessee has declared better profit and the fact in Ms. Anita L. Ghadge cannot be applied in the case of the assessee. We observe that no doubt the assessee has not submitted proper documents, the disallowance based on Ms. Anita L. Ghadge to the extent of 30% is too high. In our considered view, the disallowance of 10% of the total expenses will be appropriate, considering the fact that Assessing Officer in the subsequent assessment year has disallowed only 5% of the expenses in the regular assessment 8 ITA NO. 1193/MUM/2020 (A.Y: 2011-12) Shri Narayan Shivram Kotnis u/s. 143(3) of the Act. Therefore, we direct Assessing Officer to disallow 10% of the total expenses claimed by the assessee. Accordingly, ground raised by the assessee is partly allowed. 12. In the result, appeal filed by the assessee is partly allowed. Order pronounced on 17.02.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (DIVA SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 17.02.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum