TOVASTE PROPINVEST P.LTD, MUMBAI V. ITO 9(3)(3), MUMBAI

ITA 1215/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2152 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C KANOJIA
• Section: 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY , JM AND SHRI MANOJ KUMAR AGGARWAL , AM ./ I.T.A. NO. 1215/MUM/2015 ( / ASSESSMENT YEAR: 2011 - 2012 ) M/S. TOVASTE PROPINVEST PRIVATE LIMITED A - 2, MAY FAIR BUILDING, 26 S.V. ROAD, BANDRA (WEST), MUMBAI 400 050. / VS. INCOME TAX OFFICER 9(3)(3), MUMBAI. ./ ./ PAN/GIR NO. AACCT4975C ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : NONE / RESPONDENT BY : SHRI K.C. KANOJIA, DR / DATE OF HEARING : 27/10/2016 / DATE OF PRONOUNCEMENT : 09 /1 1 /2016 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2011 - 12 IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 21 [CIT(A)], MUMBAI DATED 10/12/2014 ON THE FOLLOWING GROUNDS OF APPEAL: - 2 ITA NO. 1215 /MUM / 2015 M/S. TOVASTE PROPINVEST PVT.LTD. ASSESSMENT YEAR 2011 - 2012 1 . THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) 21 UPHELD THE DISALLOWANCE OF A SUM AMOUNTING IN ALL TO RS. 2,55,000/ - MADE BY THE ASSESSING OFFICER, BEING REMUNERATION PAID TO TWO OF THEIR DIRECTOR, UNDER SECTION 40A (2)(A) OF THE INCOME TAX ACT, 1961. YOUR APPELLANTS SUBMIT THAT THE SAID DISALLOWANCE BE DELETED. 2 . THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) 21, AGAINST THE DISALLOWANCE OF RS. 50,000/ - MADE THE ASSESSING OFFICER TOWA RDS VEHICLE EXPENSES, RESTRICTED THE DISALLOWANCE TO A SUM OF RS. 19,900/ - . 3 . THE HONORABLE COMMISSIONER OF INCOME TAX (APPEALS) 21, AGAINST THE DISALLOWANCE OF RS. 50,000/ - MADE THE ASSESSING OFFICER TOWARDS MISCELLANEOUS EXPENSES, RESTRICTED THE DISALLOW ANCE TO A SUM OF RS.2,868/ - . 2. NONE IS PRESENT ON BEHALF OF THE ASSESSEE DESPITE BEING PROVIDED WITH SEVERAL OPPORTUNITIES. THE REGD. POST (RPAD) ISSUED UPON DIRECTIONS OF BENCH DURING LAST HEARING WAS DULY RECEIVED BUT STILL NONE IS PRESENT FOR ASSESSEE WHICH SHOWS NON - SERIOUSNESS ON THE PART OF THE ASSESSEE TO PURSUE ITS APPEAL. THEREFORE, WE PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING REVENUES CONTENTIONS. 3. FACTS QUA THE DISPUTE ARE THAT THE ASSESSEE IS A RESIDENT PRIVATE LIMITED COMPANY WHO FILED ITS RETURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR DECLARING LOSS AT RS. 19,38,332/ - WHICH WAS TAKEN UP FOR SCRUTINY ASSESSMENT U/S. 143(3) WHEREIN, TOTAL LOSS WAS DETERMINED AT RS. 15,8 3,331/ - VIDE ASSESSING OFFICER [ AO ] ORDER DATED 28/0 2/2014. THE ASSESSEE CARRIED OUT THE BUSINESS OF TRADING AND EXPORT OF ELECTRONIC GOODS. A SUM OF RS.2, 55,000/ - PAID AS DIRECTORS REMUNERATION WAS DISALLOWED BY AO U/S 40A(2)(A) ON THE GROUND THAT THE ASSESSEE INCURRED LOSS ES DURING THE YEAR AND THERE WAS DECLINE IN TURNOVER. FURTHER, ADHOC DISALLOWANCE OF RS.50 , 000/ - EACH WAS MADE UNDER THE HEAD VEHICLE EXPENSES AND MISCELLANEOUS EXPENSES FOR WANT OF VERIFICATION. 4 . THE ASSESSEE S APPEAL BEFORE CIT(A) W AS PARTLY ALLOWED VIDE ORDER DATED 10/12/2014. CIT(A) NOTED THAT THERE WAS S UBSTANTIAL FALL IN TURNOVER AND COMPANY 3 ITA NO. 1215 /MUM / 2015 M/S. TOVASTE PROPINVEST PVT.LTD. ASSESSMENT YEAR 2011 - 2012 INCURRED LOSSES DURING THE YEAR AND UPHELD DISALLOWANCE QUA DIRECTORS REMUNERATION. BUT, HE RESTRICTED OTHER DISALLOWANCES TO 10%. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. DR RELIES ON THE STAND OF LOWER AUTHORITIES. 5. QUA DIRECTORS REMUNERATION THE ASSESSEES MAIN CONTENTIONS ARE AS FOLLOWS: - OUT OF A SUM OF RS. 2,55,000/ - , RS. 1,95,000/ - HAS BEEN PAID TO MR. GANGADHAR TULSIANI, DIRECTOR, W HO IS FULL TIME IN THE OFFICE AND MONITORING/SUPERVISING THE FUNCTIONING OF THE OFFICE ON A CONTINUOUS BASIS. IT IS PERTINENT TO NOTE THAT ONE OF THE DIRECTORS, MR. BHAGWAN SHIVLANI IS A NON - RESIDENT INDIAN & WITH A VIEW TO ENSURE THAT PROPER SUPERVISION AND CONTROLS ARE EXERCISED, HE HAS TO RELY ON TRUSTED EMPLOYEE S AND MANAGERIAL STAFF AND FOR WHICH PURPOSE SUCH COSTS NEEDS TO BE INCURRED. THEREFORE, ON THE FACTS AND CIRCUMSTANCE, WE DEEM IT FIT TO RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR LIMI TED PURPOSE OF VERIFY ING THE FACT THAT WHETHER THE DIRECTOR S REMUNERATION OF RS.1 , 95 , 000/ - PAID TO ONE OF THE DIRECTOR HAS DULY BEEN REFLECTED IN HIS RETURN OF INCOME. IF SO, THE DEDUCTION IS T O BE ALLOWED TO THE ASSESSEE OTHERWISE THE SAME SHALL BE DISAL LOWED. NO EXPLANATION IS OFFERED WITH RESPECT TO BALANCE DIRECTORS REMUNERATION O RS.60,000/ - AND HENCE, THE SAME IS CONFIRMED. GROUND NO. 1 OF THE ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 6. REGARDING OTHER DISALLOWANCE S , WE FIND THAT SUBSTANTIAL RELI EF HAS ALREADY BEEN PROVIDED TO THE ASSESSEE BY CIT(A) AND HENCE, THE SAME DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. GROUND NOS.2 & 3 IS DISMISSED. 7. THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER , 201 6 SD/ - SD/ - ( SAKTIJIT DEY ) ( MANOJ KUMAR AGGARWAL ) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 09 .1 1 .201 6 PS: - POOJA K. 4 ITA NO. 1215 /MUM / 2015 M/S. TOVASTE PROPINVEST PVT.LTD. ASSESSMENT YEAR 2011 - 2012 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED SELF TYPED ON COMPUTER BY MEMBER SR.PS/PS 2 DRAFT DICTATED ON SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 ORDER PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER