MUKESH U UDANI HUF, MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 1426/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2767 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 03-06-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 10-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PASSED
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . . , , !' # $%, & , ' BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.1426/MUM/15 ( &( ') / ASSESSMENT YEAR: 2004-05) M/S. MUKESH U. UDANI HUF 11, ADITYA APARTMENT, OLD NAGARDAS ROAD, ANDHERI EAST, MUMBAI - 400069 ( / VS. THE INCOME TAX OFFICER 20(2)(2) ROOM NO.610, PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400012 /. /. PAN/GIR NO. : AAAHM2069K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 09.02.2016 !' /DATE OF PRONOUNCEMENT: 23.09.2016 O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER DATED. 31.12.20 14 FILED BY THE ASSESSEE PASSED BY COMMISSIONER OF INCOME TAX (APPE ALS) 36, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)], MUMBAI R ELEVANT TO A.Y.2004-05. 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. INCOME TAX OFFICER HAS ERRED IN LAW AND IN FACTS BY DISALLOWING SALARY OF RS.4,06,801/- AND THE LD. CIT (APPEALS)-36 BY DISALLOWING THE SAME BY 50% I.E. RS.203400/- BUT THE SALARY WAS FULLY ALLOWED BY THE FIRST ITO WHILE PASSING TH E ORDER FOR THE FIRST TIME. THE SALARY SHOULD BE FULLY ALLOWED AS DONE IN THE FIRST ORDER. ASSESSEE BY: SHRI BHUPENDRA SHAH DEPARTMENT BY: SHRI VISHWAS JADHAV ITA 1426/M/15 A.Y.2004-05 2 2. THE LD. ASSESSING OFFICER HAS ERRED IN LAW AND I N FACTS BY DISALLOWING COMMISSION FULLY AND THE CIT(APPEALS)-3 6 BY DISALLOWING 50% OF THE SAME. IT SHOULD BE FULLY AL LOWED AS FULL DETAILS WERE PROVIDED TO THE ITO AND THE CIT(A)-36. THE DISALLOWANCE IS WITHOUT ANY BASE AND ARBITRARILY DI SALLOWED. 3. THE LD. ASSESSING OFFICER AND THE LD. CIT(A)-36 HAVE ERRED IN LAW AND IN FACTS BY DISALLOWING STAFF WELFARE EXPEN SES OF RS.75,419/- FULLY AND 50% RESPECTIVELY BUT THE SAME WAS DISALLOWED BY THE FIRST ASSESSING OFFICER ONLY RS.1 9,388/-. THE DISALLOWANCE IS NOT JUSTIFIED AND DONE ARBITRARILY BY CIT(A)-36. 4. THE LD. ITO AND CIT(A)-36 ERRED IN LAW AND IN FA CTS BY DISALLOWING THE SALES PROMOTION EXPENSES OF RS.315, 890/- AND RS.157,945/- RESPECTIVELY. THIS IS DONE ARBITRARIL Y AND WITHOUT ANY BASE. 5. THE LD. ITO AND CIT(A)-36 ERRED IN LAW AND IN FA CTS BY DISALLOWING TRAVELLING EXPENSES OF RS.88,344/- AND RS.44,172/- RESPECTIVELY. THIS IS DONE ARBITRARILY AND WITHOUT ANY BASE. 6. THE LD. ITO AND CIT(A)-36 ERRED IN LAW AND IN FA CTS BY DISALLOWING TELEPHONE EXPENSES OF RS.23,660 AND RS. 11,830/- AS FULL DETAILS WERE PROVIDED OF TELEPHONE NO. AND AMO UNT OF EACH BILL. 7. THE LD. ITO AND CIT(A)-36 ERRED IN LAW AND IN FA CTS BY DISALLOWING CONVEYANCE EXPENSES BY RS.10,850/- AND RS.5125/- RESPECTIVELY. THIS IS DONE ARBITRARILY AND WITHOUT ANY BASE. 8. THE LD. ITO AND CIT(A)-3 ERRED IN LAW AND IN FAC TS BY DISALLOWING OFFICE EXPENSES OF RS.19,770/- AND RS.9 885/- RESPECTIVELY. THIS IS DONE ARBITRARILY AND WITHOUT ANY BASE. 9. THE LD. ITO AND CIT(A)-36 ERRED IN LAW AND IN FA CTS BY DISALLOWING EXPENSES OF HMV ENTERPRISES OF RS.92,43 4/-. THIS IS DONE ARBITRARILY AND WITHOUT ANY BASE. 10. THE LD. CIT(A)-36 AND LD. ITO HAVE ERRED IN LAW AND IN FACTS IN LEVYING INTEREST U/S.234B AND 234C OF THE ACT. 3. THE FACTS OF THE CASE ARE THAT THE APPELLANT IS A HUF AND FILED ITS RETURN OF INCOME FOR A.Y 2004-05 ON 30.10.2004 DECL ARING TOTAL INCOME TO THE TUNE OF 1,19,370/-. THE ORIGINAL ASSESSMENT WA S COMPLETED VIDE ORDER DT. 30.11.2006 U/S 143(3) DETERMINING ITS TOTAL INC OME TO THE TUNE OF ITA 1426/M/15 A.Y.2004-05 3 RS.18,17,430/-. THE APPELLANT CARRIED THE MATTER U P TO THE TRIBUNAL AND VIDE ORDER DT. 12.3.2010 THE TRIBUNAL RESTORED THE MATTER BEFORE THE ASSESSING OFFICER FOR AFRESH ASSESSMENT. SUBSEQUEN TLY, THE ASSESSMENT PROCEEDINGS WAS COMPLETED DETERMINING THE TOTAL INC OME TO THE TUNE OF RS.14,34,870/-. THE ASSESSING OFFICER MADE THE FOL LOWING ADDITIONS / DISALLOWANCES:- I COMMISSION : RS.2,83,700/- II SALARY : RS.4,06,801/- III STAFF WELFARE ALLOWANCE : RS.75,419/- IV SALES PROMOTION EXPENSES : RS.3,15,890/- V TRAVELLING EXPENSES : RS. 88,344/- VI TELEPHONE EXPENSES : RS. 23,660/- VII CONVEYANCE : RS. 10,850/- VIII OFFICE EXPENSES : RS. 19.770/- IX NET INCOME OF HMV INVESTMENT : RS. 92,434/- THEREAFTER, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) AND PARTIAL RELIEF WAS GRANTED BY THE LEARNED CIT(A) ALLOWING 50% OF T HE AMOUNT IN DISPUTE. HOWEVER, THE ASSESSEE WAS NOT SATISFIED, THEREFORE, THE PRESENT APPEAL HAS BEEN FILED BEFORE US. ISSUE NO.1, 2 &3:- 4. THE ASSESSEE HAS SHOWN THE SALARY EXPENSES TO T HE TUNE OF RS.4,06,801/- AND COMMISSION TO THE TUNE OF RS.2,83 ,700/- AND STAFF WELFARE ALLOWANCE TO THE TUNE OF RS.75,419/- TO THE MR.MAYUR ACHARYA, MR. NATHURAM KENDRE, MR.BATTA BEHERA, MR.LAMBODAR MISHR A AND MR.CHIDANAND GODIMANI. ASSESSING OFFICER OBSERVED THAT THE SALARY AS WELL AS THE COMMISSION WERE GIVEN TO THE SAME PERSO N. THEREFORE, NOTICES U/S.133(6) OF THE ACT WERE ISSUED TO THE PERSON WHO M THE COMMISSION WAS ITA 1426/M/15 A.Y.2004-05 4 PAID WHICH WERE NOT SERVED UPON MR.MAYUR ACHARYA, M R. NATHURAM KENDRE, MR.BATTA BEHERA AND MR.LAMBODAR MISHRA. HO WEVER, MR. ANANT PANDA AND MR. CHIDANAND GODIMANI DID NOT RESPOND TO THE NOTICE. ACCORDINGLY, ON ACCOUNT OF NON APPEARANCE, THE STAF F WELFARE ALLOWANCE REMAINED UNEXPLAINED THEREFORE THE ASSESSING OFFICE R DISALLOWED THE SALARY TO THE TUNE OF RS.4,06,801/- AND COMMISSION TO THE TUNE OF RS.2,83,700/- AND STAFF WELFARE ALLOWANCE TO THE TUNE OF RS.75,41 9/- AND ADDED IN THE INCOME OF THE ASSESSEE. SUBSEQUENTLY, THE CIT(A) D ISALLOWED 50% OF THE SALARY, COMMISSION AND STAFF WELFARE EXPENSES. THE REASONS HAVE BEEN MENTIONED THAT THE EMPLOYEE AND THE RECIPIENT OF CO MMISSIONS WERE NOT FILING THE INCOME TAX RETURNS ON THE GROUND OF THAT THEY ARE NOT HAVING TAXABLE INCOME, THEREFORE, THE GENUINENESS OF THE P ARTIES COULD NOT BE VERIFIED. THE ASSESSEE HAS PRODUCED THE RECORD IN CONNECTION WITH THE EMPLOYEES AND THE NAME OF THE PERSONS TO WHOM THE C OMMISSION WAS PAID. SO FAR AS THE PAYMENT IN CONNECTION WITH STAFF WELF ARE EXPENSES IS CONCERNED THE SAME HAS BEEN PAID TO THE EXTENT OF R S.800/- PER PERSON PER MONTH WHICH ALSO SEEMS JUSTIFIABLE. THE CIT(A) WA S OF THE VIEW THAT THE RECORDS SEEMS JUSTIFIABLE AND THE EXPENSES DOES NOT SEEMS ON HIGHER SIDES THEREFORE DISALLOWANCE WAS RESTRICTED TO THE EXTENT OF 50%. ON SEEING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE SALARY OF THE EMPLOYEES HAS BEEN DISALLOWED MERELY ON ACCOUNT OF NON-VERIFICATION OF THE EMPLOYEES AND ON THE BASIS OF NON-VERIFICATION OF THE PERSON TO WHOM THE COMMISSION WAS PAID IN CASH DOES NOT SEEMS JUST IFIABLE SPECIFICALLY ON ACCOUNT OF THE FACT THAT THE RECORD WAS PROPERLY MA INTAINED BY THE ASSESSEE. RECORD OF STAFF WELFARE COMMISSION HAS ALSO BEEN MA INTAINED BY THE ASSESSEE WHERE THE EXPENDITURE WAS NOT FOUND IN HIG HER SIDE. THEREFORE, IN THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE DISALLOWANCE TO THE EXTENT OF 50% TOWARDS THE SALARY COMMISSION AND STA FF WELFARE EXPENSES IS ITA 1426/M/15 A.Y.2004-05 5 ON HIGHER SIDE AND THE END OF THE JUSTICE WOULD BE MEET IF THE DISALLOWANCE BE RESTRICTED TO THE EXTENT OF 25% ON ACCOUNT OF SA LARY TO THE TUNE OF RS.4,06,801/- AND COMMISSION TO THE TUNE OF RS.2,83 ,700/- AND STAFF WELFARE ALLOWANCE TO THE TUNE OF RS.75,419/- . WE ORDERED ACCORDINGLY. ACCORDINGLY, THESE ISSUES HAVE BEEN DECIDED IN FAVO UR OF THE ASSESSEE AND AGAINST THE REVENUE. ISSUE NO.4:- 5. UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE TO THE EXTENT OF 50% OF SALE PROMOTION EXPENSES TO THE TUNE OF RS.3,15,890/-. ASSESSING OFFICER OBSERVED THAT THI S EXPENDITURE WAS INCURRED ON EVENT SUCH AS PICNIC, HOTEL ETC. ASSES SEE DID NOT FURNISH THE NAME WHO WERE TAKEN AT PICNIC AND HOTEL. ASSESSEE DID NOT ESTABLISH THE CONNECTION OF BUSINESS WITH THIS EXPENDITURE. THER EFORE, THE ASSESSING OFFICER DISALLOWED THE SAID EXPENDITURE AND ADDED T O THE INCOME OF THE ASSESSEE. HOWEVER, BEFORE THE CIT(A) THE ASSESSEE EXPLAINED THAT IT WAS A COMMON PRACTICE TO ORGANISE PICNIC AND GROUP GATHER ING AND HOLD THE MEETING IN HOTELS FOR PROSPECTIVE CUSTOMERS IN ORDE R TO ATTRACT THE BUSINESS. HOWEVER, ASSESSEE FURNISHED THE REASONABLE DETAILS OF THESE EXPENSES IN THE FORM OF COPIES OF VOUCHER AND LEDGER ACCOUNT ETC. SINCE THE 7 YEARS HAS BEEN LAPSED THEREFORE, THE ASSESSEE DID NOT RETAIN THE RELEVANT VOUCHERS. CONSIDERING ALL THESE FACTS, THE CIT(A) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 50%. THE CIT(A) WAS SATISFIED WITH THE E XPLANATION OF ASSESSEE. AFTER THE EXPIRATION OF 7 YEARS THE RECORD COULD NO T BE PRODUCE PROPERLY. HOWEVER, ASSESSEE FURNISHED THE REASONABLE DETAILS OF THESE EXPENSES IN THE FORM OF COPIES OF VOUCHER AND LEDGER ACCOUNT ETC. THEREFORE, IN THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DISALLOW ANCE TO THE EXTENT OF 50% TOWARDS THE SALE PROMOTION EXPENSES TO THE TUNE OF RS.3,15,890/- IS OF THE HIGHER SIDE AND THE END OF THE JUSTICE WOULD BE MEET IF THE DISALLOWANCE ITA 1426/M/15 A.Y.2004-05 6 BE RESTRICTED TO THE EXTENT OF 25% OF THE SALES PRO MOTION EXPENSES OF RS.3,15,890/-. WE ORDERED ACCORDINGLY. ACCORDING LY, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. ISSUE NO.5 TO 9:- 6. UNDER THESE ISSUES THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF TRAVELLING EXPENSES TO THE TUNE OF RS.88,344/-, TEL EPHONE EXPENSES OF RS.23,660, CONVEYANCE EXPENSES OF RS.10,850, OFFICE EXPENSES OF RS.19,770/- AND DISALLOWING EXPENSES OF HMV ENTERPR ISES OF RS.92,434/-. THE ASSESSING OFFICER DISALLOWED THE SAID EXPENSES BEING NOT SUPPORTED BY BILLS AND VOUCHERS. THE TRAVELLING IS IN-EVADIBLE EXPENDITURE AND ON THE ISSUE OF DISALLOWANCE OF TELEPHONE, CONVEYANCE AND OFFICE EXPENSES ETC. THERE ARE PROPER ENTRIES IN THE LEDGER ACCOUNT BOOK S AND THE DETAILS HAVE BEEN MENTIONED IN THE VOUCHERS. MOREOVER THE ASSES SEE WAS ASKED TO PRODUCE THE DOCUMENTS AFTER THE LAPSE OF SEVEN YEAR S THEN IN THE SAID CIRCUMSTANCES THE VOUCHERS AND BILLS ARE NOT POSSIB LY PRODUCED BY THE ASSESSEE, THEREFORE, IN THE SAID CIRCUMSTANCES THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 50%. THEREFORE, IN THE SA ID CIRCUMSTANCES WE ARE OF THE VIEW THAT THE DISALLOWANCE TO THE EXTENT OF 50% TOWARDS THE TRAVELLING EXPENSES OF RS.88,344/-, TELEPHONE EXPEN SES OF RS.23,660/-, CONVEYANCE EXPENSES OF RS.10,850/-, OFFICE EXPENSES OF RS.19,770/- AND DISALLOWING EXPENSES OF HMV ENTERPRISES OF RS.92,43 4/- ARE OF THE HIGHER SIDE AND THE END OF THE JUSTICE WOULD BE MEET IF TH E DISALLOWANCE BE RESTRICTED TO THE EXTENT OF 25% OF THE TRAVELLING E XPENSES OF RS.88,344/-, TELEPHONE EXPENSES OF RS.23,660/-, CONVEYANCE EXPEN SES OF RS.10,850/-, OFFICE EXPENSES OF RS.19,770/- AND EXPENSES OF HMV ENTERPRISES OF RS.92,434/-. WE ORDERED ACCORDINGLY. ACCORDINGLY , THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. ITA 1426/M/15 A.Y.2004-05 7 ISSUE NO.10:- 7. THIS ISSUE IS CONSEQUENTIAL IN NATURE, THEREFORE , IS NOT REQUIRED TO BE ADJUDICATED. THE INTEREST WOULD FOLLOW THE CONSEQU ENCES OF THE DELAY IN ACCORDANCE WITH LAW. ACCORDINGLY THIS ISSUE IS HER EBY ORDERED TO BE DECIDED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER $% # /JUDICIAL MEMBER & ' MUMBAI; (# DATED : 23 RD SEPTEMBER, 2016 MP MP MP MP + ,&#$- .-)# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ) ( / THE CIT(A)- 4. ) / CIT 5. ,-. %%/0 , /0' , & ' / DR, ITAT, MUMBAI 6. .23 4 / GUARD FILE. ( / BY ORDER, , % //TRUE COPY// //% /(DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI