KAMLESH S. MEHTA, MUMBAI V. ITO 21(2)(2), MUMBAI

ITA 1475/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3762 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 30-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 03-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KAMLESH S MEHTA IN PERSON
• Keywords: Bogus purchase; Capital asset; Business expenditure; Principle of natural justice; Corroborative evidences; Capital expenditure
• Section: 142(1); 133(6); 32; 37; 6; 12; 28; 10; 2; 11

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI .. , , , BEFORE, SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.1475/MUM/2014 ASSESSMENT YEAR: 2010-11 KAMLESH S MEHTA, PROP. M/S SHIPYARD COMPANY 401, M.U. ARCADE BAPISTA RD. VILE-PARLE (WEST), A-103, SHIVKESAR APPT, ST. XAVIER SCHOOL ROAD, VILE PARLE (W), MUMBAI-400056 / VS. ITO-21(1)(2) MUMBAI ( !'#$ /ASSESSEE) ( % / REVENUE) PAN. NO. AEYPM3118B !'#$ / ASSESSEE BY SHRI KAMLESH S MEHTA (ASSESSEE IN PERSON) % / REVENUE BY SHRI AARSI PRASAD & %'($) / DATE OF HEARING : 09/02/2016 ($) / DATE OF ORDER: 01/03/2016 ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER D ATED 31/12/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE FIRST GROUND RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING THE AD-HOC DISALLOWANCE OF RS.69,329/- AT THE RATE OF 20% OF THE BUSINESS EXPENSES TO THE TUNE OF RS.3,46,644/-. 2. THE ASSESSEE HIMSELF ARGUED HIS CASE. THE CRUX OF ARGUMENT IS THAT THE AD-HOC DISALLOWANCE OUT OF STA FF WELFARE, OCTROI, TRANSPORTATION WAS MADE WITHOUT ANY REASON AND DESERVES TO BE DELETED, MORE SPECIFICALLY WHEN THE NECESSARY EVIDENCE AND EXPLANATION FOR THE SAME WAS DULY ADDU CED BEFORE THE LD. ASSESSING OFFICER AND THE ACCOUNTS O F THE ASSESSEE ARE AUDITED ONE, THEREFORE, THE ADDITION I S PURELY ON THE BASIS GUESS WORK. OUR ATTENTION WAS INVITED TO EXHIBIT A (PAGES 1 & 2) AND EXHIBIT D CONTAINING LEDGER OF TRANSPORTATION, OCTROI AND STAFF WELFARE EXPENSES. 2.1. ON THE OTHER HAND, THE LD. DR, SHRI AARSI PRA SAD, DEFENDED THE DISALLOWANCE BY CONTENDING THAT NECESS ARY DETAILS OF THE CLAIMED EXPENSES WERE NOT FURNISHED BY THE ASSESSEE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 3 HARDWARE, STEEL AND COMMISSION AGENCY IN THE NAME A ND STYLE OF M/S SHIPYARD COMPANY. THE ASSESSEE IN HIS PROFIT & LOSS ACCOUNT DEBITED RS.63,101/- ON ACCOUNT OF STAF F WELFARE EXPENSES, RS.1,12,752/- AS OCTROI CHARGES AND RS.1, 70,791/- AS TRANSPORTATION CHARGES (TOTAL RS.3,46,644/-). DU RING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO F URNISH SUPPORTING EVIDENCES. AS PER THE LD. ASSESSING OFFI CER, THE ASSESSEE DID NOT PRODUCE ANY BILL OR VOUCHER. IT HA S BEEN OBSERVED IN PARA 4.1 OF THE ASSESSMENT ORDER THAT N O DOUBT, THE ASSESSEE MIGHT HAVE INCURRED THESE EXPENSES BUT THE QUANTUM APPEARS TO BE LITTLE HIGHER, THEREFORE, HE MADE AD- HOC DISALLOWANCE OF RS.69,325/- AT THE RATE OF 20% AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AFFIRMED THE S AME, AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LE ADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSER TIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXT APOSITION AND ANALYZED, WE NOTE THAT KEEPING IN VIEW, THE TOT ALITY OF FACTS AND MAGNITUDE OF THE BUSINESS OF THE ASSESSEE , THE EXPENSES OF RS.63,101/- AS STAFF WELFARE EXPENSES I S NOT TOWARDS HIGHER SIDE. IDENTICALLY, OCTROI CHARGES I S ALLOWABLE DEDUCTION AND TRANSPORTATION CHARGES ARE ALSO SEEMS TO BE GENUINE. THE ACCOUNTS OF THE ASSESSEE ARE AUDITED O NE AND THE TOTAL TURNOVER OF THE ASSESSEE IS APPROXIMATELY RS.29 CRORES. THE ASSESSEE BEFORE THE LD. ASSESSING OFFIC ER PRODUCED ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 4 THE LEDGER OF EXPENSES AND THE PAYMENT OF EXPENSES ARE TO THE REPUTED TRANSPORTATION. THE AD-HOC DISALLOWANCE HAS BEEN MADE PURELY ON GUESS WORK AND IT HAS NOT BEEN MENTIONED IN THE ASSESSMENT ORDER THAT SUCH EXPENSE S WERE NOT INCURRED. AS MENTIONED EARLIER, THE LD. ASSESSI NG OFFICER HIMSELF HAS MENTIONED THAT POSSIBLY THE EXPENSES HA VE BEEN INCURRED, THUS, SINCE, THE INCURRING OF EXPENSES IS NOT IN DOUBT, THE AD-HOC DISALLOWANCE MADE BY THE LD. ASSE SSING OFFICER CANNOT BE SAID TO BE JUSTIFIED, MORE SPECIF ICALLY, WHEN NO DEFECT WAS POINTED OUT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 3. THE NEXT GROUND, RAISED BY THE ASSESSEE PERTAIN S TO ADDITION ON ACCOUNT OF PURCHASES AMOUNTING TO RS.4,76,446/-. THE CRUX OF ARGUMENT, ON BEHALF OF T HE ASSESSEE IS THAT PURCHASES OF THE MATERIAL WAS MADE FROM THREE SUPPLIERS, WHOSE NAME APPEARING IN THE LIST O F SUSPICIOUS DEALER OF THE WEBSITE OF SALES TAX DEPAR TMENT OF THE GOVERNMENT OF MAHARASHTRA, WHO ARE INDULGING IN ISSUING INVOICES WITHOUT SUPPLYING THE MATERIAL. IT WAS CONTENDED THAT THE BURDEN IS UPON THE DEPARTMENT TO PROVE THAT THE TRANSACTIONS WERE BOGUS. RELIANCE WAS PLAC ED UPON THE DECISION IN THE CASE OF DURGA PRASAD GOEL VS IT O (2006) 98 ITD 227 (AGR) (SB). ON THE ISSUE OF PROVING THAT THE TRANSACTIONS WERE BOGUS, IT WAS CONTENDED THAT BURD EN IS UPON THE TAXING AUTHORITY FOR WHICH RELIANCE WAS PL ACED UPON THE FOLLOWING DECISIONS. ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 5 I. KALWA DEVADATTAM VS UOI 49 ITR 165 (SC) II. CIT VS DAULATRAM RAWATMAL 87 ITR 349 (SC) III. CIT VS DURGA PRASAD MORE 82 ITR 540 (SC) ON VIOLATION OF PRINCIPLE OF NATURAL JUSTICE, RELIA NCE WAS PLACED UPON THE DECISION IN TIN BOX COMPANY VS CIT (2001) 249 ITR 216 (SC). 3.1. ON THE OTHER HAND, THE LD. DR DEFENDED THE AD DITION BY INVITING OUT ATTENTION TO THE FINDING CONTAINED IN THE ASSESSMENT ORDER AS WELL AS THE IMPUGNED ORDER. 3.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE CLAIMED TO HAVE CERTAIN PURCH ASES FROM VARIOUS PARTIES. THE ASSESSEE WAS ASKED TO FURNISH THE LIST FROM WHOM PURCHASES WERE MADE. THE LD. ASSESSING OF FICER WAS HAVING INFORMATION THAT HARSH CORPORATION (RS.1,30,303/-), SHIVAM TRADING COMPANY (RS.1,64,25 1) AND M/S SWASTIK ENTERPRISE (RS.1,81,892/-) ARE ON THE SUSPICIOUS LIST OF PARTIES, WHO ARE PROVIDING BOGUS BILLS, WITHOUT SUPPLY OF GOODS OR MATERIAL, ON THE BASIS O F WEBSITE OF SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA (WWW.MAHAVAT.GOVT.IN). NOTICES ISSUED U/S 133(6) OF THE ACT BY THE LD. ASSESSING OFFICER WAS EITHER RETURNED BA CK BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN OR N OT RESPONDED TOO. THE LD. ASSESSING OFFICER VIDE NOTIC E U/S 142(1) OF THE ACT DATED 18/03/2013 ASKED THE ASSESS EE AS TO WHY THE PURCHASES MADE FROM THESE PARTIES SHOULD BE ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 6 TREATED AS BOGUS PURCHASES AND FURTHER WHY SHOULD N OT BE ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE W AS ASKED TO FILE THE DETAILS UP TO 22/03/2013. AS PER THE LD . ASSESSING OFFICER, THE ASSESSEE NEITHER PROVIDED ANY EXPLANAT ION NOR FILED ANY DETAILS. THE SALES TAX DEPARTMENT ALSO P UBLISHED A LIST OF PARTIES, WHO ARE PROVIDING BOGUS BILLS WITH OUT SUPPLY OF GOODS/MATERIAL. THE LD. ASSESSING OFFICER RELIED U PON THE DECISION IN CIT VS CALCUTTA AGENCY LTD. 19 ITR 191 (SC) AND IMPERIAL CHEMICALS INDU. LTD. 74 ITR 17 (SC) ALONG WITH VARIOUS OTHER DECISION AS MENTIONED IN PARA 5.5 OF THE ASSESSMENT ORDER ALONG WITH THE DECISION IN UDAIPUR MINERAL DEVELOPMENT SYNDICATE PVT. LTD. 269 ITR 263 (RAJ.) BY HOLDING THAT ONUS IS UPON THE ASSESSEE TO PROVE THA T THE EXPENSES, IF ANY, WAS INCURRED FOR BUSINESS PURPOSE S. THE LD. ASSESSING OFFICER ALSO PLACED RELIANCE UPON THE DEC ISION FROM HONBLE ANDHRA PRADESH HIGH COURT IN TRANSPORT CORP ORATION OF INDIA LTD. 269 ITR 701 (AP) AND A DECISION FROM A JURISDICTIONAL HIGH COURT IN RAMANAND SAGAR VS DCIT 256 ITR 134 (BOM.) AND ALSO LAXMIT NARAYAN MADANLAL 86 ITR 439 (SC) AND FURTHER IN THE ABSENCE OF ANY MATERIAL /EVIDENCE MADE ADDITION OF RS.4,76,446/-. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE ADDITION WAS CONFIRMED. THE ASSESSEE IS IN FURTHER APPEAL BEFORE THIS TRIBUNAL. 3.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 7 DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, THE ASSESSEE HAS NOT CONTRADICTED THE FACTUM THAT THE CLAIMED PARTIES M/ S HARSH CORPORATION, SHIVAM TRADING COMPANY AND SWASTIK ENTERPRISES ARE ON THE SUSPICIOUS LIST OF SALES TA X DEPARTMENT OF THE STATE GOVERNMENT, WHO ARE PROVIDI NG BOGUS BILLS WITHOUT SUPPLY OF GOODS/MATERIAL. THE N OTICES ISSUED U/S 133 (6) BY THE LD. ASSESSING OFFICER WER E EITHER RETURNED UN-SERVED BY THE POSTAL AUTHORITIES WITH T HE REMARK NOT KNOWN OR SUCH PARTY DID NOT RESPOND TO THE NO TICES. SO FAR AS, ONUS OF PROVING THE SAME TO BE GENUINE IS C ONCERNED, WE ARE OF THE VIEW THAT PRIMARILY SUCH ONUS IS UPON THE ASSESSEE AND IF PLAUSIBLE EXPLANATION IS ADDUCED, B Y THE ASSESSEE, OR THE ONUS IS SATISFACTORILY DISCHARGED, ONLY THEN IT SHIFTS TO THE REVENUE. WE FIND THAT THE ASSESSEE HA S NOT DISCHARGED HIS ONUS IN SPITE OF PROVIDING OPPORTUNI TY TO THE ASSESSEE AND FURTHER ISSUANCE OF NOTICE TO SUCH PAR TIES BY THE ASSESSING OFFICER. THE RATIO LAID DOWN BY HONBLE A NDHRA PRADESH HIGH COURT IN TRANSPORT CORPORATION OF INDI A LTD. 269 ITR 701 (AP), DECISION FROM A JURISDICTIONAL HI GH COURT IN RAMANAND SAGAR VS DCIT 256 ITR 134 (BOM.) AND ALSO LAXMIT NARAYAN MADANLAL 86 ITR 439 (SC) FROM HONBL E APEX COURT SUPPORTS OUR VIEW. IDENTICAL RATIO WAS LAID D OWN IN DALMIA JAIN & COMPANY LTD. 33 ITR 294 (PAT.), LIBER TY CINEMA 52 ITR 153 (CAL.) AND UDAIPUR MINERAL DEVELO PMENT SYNDICATE PVT. LTD. 269 ITR 263 (RAJ.). ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 8 3.4. SECTION 28 OF THE ACT DEALS WITH PROFIT & GAI NS OF BUSINESS OR PROFESSION, WHEREAS, SECTION 37 OF THE ACT DEALS WITH ALLOWABILTIY OF ANY EXPENDITURE (NOT BEING EXP ENDITURE OF THE NATURE DESCRIBE IN SECTION 30 TO 36) AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPEN SES OF THE ASSESSEE LAID OUT OR EXPANDED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSES OF BUSINESS OR PROFESSION. FOR READY REFE RENCE, WE ARE REPRODUCING HEREUNDER SECTION 28 OF THE ACT:- PROFITS AND GAINS OF BUSINESS OR PROFESSION. 28. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', (I) THE PROFITS AND GAINS OF ANY BUSINESS OR PROFE SSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR ; (II) ANY COMPENSATION OR OTHER PAYMENT DUE TO OR R ECEIVED BY, (A) ANY PERSON, BY WHATEVER NAME CALLED, MANAGING THE WHOLE OR SUBSTANTIALLY THE WHOLE OF THE AFFAIRS OF AN INDIAN COMPANY, AT OR IN CONNECTION WITH THE TERMINATION OF HIS MANAGEMENT O R THE MODIFICATION OF THE TERMS AND CONDITIONS RELATING THERETO; (B) ANY PERSON, BY WHATEVER NAME CALLED, MANAGING THE WHOLE OR SUBSTANTIALLY THE WHOLE OF THE AFFAIRS IN INDIA OF ANY OTHER COMPANY, AT OR IN CONNECTION WITH THE TERMINATION OF HIS OFFICE OR THE MODIFICATION OF THE TERMS AND CONDITIONS RELATING THERETO ; (C) ANY PERSON, BY WHATEVER NAME CALLED, HOLDING A N AGENCY IN INDIA FOR ANY PART OF THE ACTIVITIES RELATING TO THE BUSINESS OF ANY OTHER PERSON, AT OR IN CONNECTION WITH THE TERMINATION OF THE AGENCY OR THE MODIFICATION OF THE TERMS AND CONDITIONS RELATING THERETO ; (D) ANY PERSON, FOR OR IN CONNECTION WITH THE VEST ING IN THE GOVERNMENT, OR IN ANY CORPORATION OWNED OR CONTROLLED BY THE GO VERNMENT, UNDER ANY LAW FOR THE TIME BEING IN FORCE, OF THE MANAGEMENT OF ANY PROPERTY OR BUSINESS ; (III) INCOME DERIVED BY A TRADE, PROFESSIONAL OR SI MILAR ASSOCIATION FROM SPECIFIC SERVICES PERFORMED FOR ITS MEMBERS ; (IIIA) PROFITS ON SALE OF A LICENCE GRANTED UNDER T HE IMPORTS (CONTROL) ORDER, 1955, MADE UNDER THE IMPORTS AND EXPORTS (CO NTROL) ACT, 1947 (18 OF 1947) ; (IIIB) CASH ASSISTANCE (BY WHATEVER NAME CALLED) RE CEIVED OR RECEIVABLE BY ANY PERSON AGAINST EXPORTS UNDER ANY SCHEME OF THE GOVERNMENT OF INDIA ; ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 9 (IIIC) ANY DUTY OF CUSTOMS OR EXCISE RE-PAID OR RE- PAYABLE AS DRAWBACK TO ANY PERSON AGAINST EXPORTS UNDER THE CUSTOMS AND CE NTRAL EXCISE DUTIES DRAWBACK RULES, 1971 ; (IIID) ANY PROFIT ON THE TRANSFER OF THE DUTY ENTIT LEMENT PASS BOOK SCHEME, BEING THE DUTY REMISSION SCHEME UNDER THE EXPORT AN D IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOR EIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992) ; (IIIE) ANY PROFIT ON THE TRANSFER OF THE DUTY FREE REPLENISHMENT CERTIFICATE, BEING THE DUTY REMISSION SCHEME UNDER THE EXPORT AN D IMPORT POLICY FORMULATED AND ANNOUNCED UNDER SECTION 5 OF THE FOR EIGN TRADE (DEVELOPMENT AND REGULATION) ACT, 1992 (22 OF 1992) ; (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHE R CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSION ; (V) ANY INTEREST, SALARY, BONUS, COMMISSION OR REM UNERATION, BY WHATEVER NAME CALLED, DUE TO, OR RECEIVED BY, A PARTNER OF A FIRM FROM SUCH FIRM : PROVIDED THAT WHERE ANY INTEREST, SALARY, BONUS, COMMISSION OR REMUNERATION, BY WHATEVER NAME CALLED, OR ANY PART THEREOF HAS NOT BEEN ALLOWED TO BE DEDUCTED UNDER CLAUSE (B) OF SECTION 40, THE INCOME UNDER THIS CLAUSE SHALL BE ADJUSTED TO THE EXTENT OF THE AMOUNT NOT SO ALLOWED TO BE DEDUCTED ; (VA) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN CA SH OR KIND, UNDER AN AGREEMENT FOR (A) NOT CARRYING OUT ANY ACTIVITY IN RELATION TO ANY BUSINESS; OR (B) NOT SHARING ANY KNOW-HOW, PATENT, COPYRIGHT, TRADE-MARK, LICENCE, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCIAL RIGHT OF SIMILAR NATURE OR INFORMATION OR TECHNIQUE LIKELY TO ASSIST IN THE MA NUFACTURE OR PROCESSING OF GOODS OR PROVISION FOR SERVICES: PROVIDED THAT SUB-CLAUSE (A) SHALL NOT APPLY TO (I) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN C ASH OR KIND, ON ACCOUNT OF TRANSFER OF THE RIGHT TO MANUFACTURE, PRODUCE OR PROCESS ANY ARTICLE OR THING OR RIGHT TO CARRY ON ANY BUSINESS, WHICH IS C HARGEABLE UNDER THE HEAD 'CAPITAL GAINS'; (II) ANY SUM RECEIVED AS COMPENSATION, FROM THE M ULTILATERAL FUND OF THE MONTREAL PROTOCOL ON SUBSTANCES THAT DEPLETE THE OZ ONE LAYER UNDER THE UNITED NATIONS ENVIRONMENT PROGRAMME, IN ACCORDANCE WITH THE TERMS OF AGREEMENT ENTERED INTO WITH THE GOVERNMENT OF INDIA . EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, (I) 'AGREEMENT' INCLUDES ANY ARRANGEMENT OR UNDER STANDING OR ACTION IN CONCERT, (A) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS FORMAL OR IN WRITING; OR (B) WHETHER OR NOT SUCH ARRANGEMENT, UNDERSTANDING OR ACTION IS INTENDED TO BE ENFORCEABLE BY LEGAL PROCEEDINGS; ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 10 (II) 'SERVICE' MEANS SERVICE OF ANY DESCRIPTION W HICH IS MADE AVAILABLE TO POTENTIAL USERS AND INCLUDES THE PROVISION OF SERVI CES IN CONNECTION WITH BUSINESS OF ANY INDUSTRIAL OR COMMERCIAL NATURE SUC H AS ACCOUNTING, BANKING, COMMUNICATION, CONVEYING OF NEWS OR INFORM ATION, ADVERTISING, ENTERTAINMENT, AMUSEMENT, EDUCATION, FINANCING, INS URANCE, CHIT FUNDS, REAL ESTATE, CONSTRUCTION, TRANSPORT, STORAGE, PROC ESSING, SUPPLY OF ELECTRICAL OR OTHER ENERGY, BOARDING AND LODGING; (VI) ANY SUM RECEIVED UNDER A KEYMAN INSURANCE PO LICY INCLUDING THE SUM ALLOCATED BY WAY OF BONUS ON SUCH POLICY. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, THE E XPRESSION 'KEYMAN INSURANCE POLICY' SHALL HAVE THE MEANING ASSIGNED T O IT IN CLAUSE (10D) OF SECTION 10; (VII) ANY SUM, WHETHER RECEIVED OR RECEIVABLE, IN C ASH OR KIND, ON ACCOUNT OF ANY CAPITAL ASSET (OTHER THAN LAND OR GOODWILL O R FINANCIAL INSTRUMENT) BEING DEMOLISHED, DESTROYED, DISCARDED OR TRANSFERR ED, IF THE WHOLE OF THE EXPENDITURE ON SUCH CAPITAL ASSET HAS BEEN ALLOWED AS A DEDUCTION UNDER SECTION 35AD. EXPLANATION 1.[OMITTED BY THE DIRECT TAX LAWS (AME NDMENT) ACT, 1987, W.E.F. 1-4-1989.] EXPLANATION 2.WHERE SPECULATIVE TRANSACTIONS CARRI ED ON BY AN ASSESSEE ARE OF SUCH A NATURE AS TO CONSTITUTE A BUSINESS, T HE BUSINESS (HEREINAFTER REFERRED TO AS 'SPECULATION BUSINESS') SHALL BE DEE MED TO BE DISTINCT AND SEPARATE FROM ANY OTHER BUSINESS. WE ARE ALSO REPRODUCING HEREUNDER SECTION 37 OF THE ACT FOR READY REFERENCE AND ANALYSIS:- 37. (1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE), LAID OUT OR EXP ENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHAL L BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. [EXPLANATION 1.]FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO H AVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE. [EXPLANATION 2.FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTION (1), ANY EXPENDITURE INCURR ED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBIL ITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT, 2013 (18 OF 2013) SHALL NOT BE D EEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BU SINESS OR PROFESSION.] (2) [* * *] ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 11 (2B) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECT ION (1), NO ALLOWANCE SHALL BE MADE IN RESPECT OF EXPENDITURE INCURRED BY AN AS SESSEE ON ADVERTISEMENT IN ANY SOUVENIR, BROCHURE, TRACT, PAMPHLET OR THE LIKE PUBLISHED BY A POLITICAL PARTY. THE WORD BUSINESS USED IN THE SECTIONS HAS BEEN DEF INED IN SECTION 2 (13) OF THE ACT, WHICH INCLUDES ANY TRADE , COMMERCE OR MANUFACTURE OR ANY ADVENTURE OR CONCERN IN THE N ATURE OF TRADE, COMMERCE OR MANUFACTURE. THE ANALYSIS OF BUS INESS EXPENDITURE HAS BEEN DEALT WITH IN B.K. KHANNA & CO MPANY PVT. LTD. VS CIT (2001) 247 ITR 705, 709 (DEL.). IN OTHER WORDS TO BE AN ALLOWABLE EXPENDITURE, THE MONEY PAID OUT OR AWAY MUST BE (A) PAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS (B) MUST NOT BE (I) CAPITAL EXPENDITURE, ( II) PERSONAL EXPENDITURE OR (III) AN ALLOWANCE OF THE CHARACTER DESCRIBE IN SECTION 32 TO 36 (FOR A.YS. 1976 -77 TO 1985-86 AND SECTION 80VV). HOWEVER, THE ASSESSEE EVEN AFTER ASKING BY T HE LD. ASSESSING OFFICER NEITHER FURNISHED THE LIST OF PER SONS FROM WHOM PURCHASES WERE MADE AND EVEN DID NOT EXPLAIN T HE GENUINENESS OF THE PURCHASES FROM THE AFOREMENTIONE D THREE PARTIES. THE ASSESSEE WAS ISSUED NOTICE U/S 142(1) DATED 18/03/2003 ASKING THE ASSESSEE TO EXPLAIN THE PURCH ASES BUT THE SAME WAS NEITHER EXPLAINED NOR THE PARTIES WERE PRODUCED AT ANY STAGE. THE TOTALITY OF FACTS, CLEARLY INDICA TES THAT THE ONUS CAST UPON THE ASSESSEE TO EXPLAIN THE GENUINEN ESS OF THE CLAIM WAS NOT DISCHARGED, THEREFORE, WE FIND NO INF IRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). SO FAR AS, CASES RELIED UPON BY THE ASSE SSEE IS CONCERNED, THEY ARE ON DIFFERENT FACTS, THEREFORE, MAY NOT HELP ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 12 THE ASSESSEE. SO FAR AS, BURDEN UPON THE DEPARTMENT IS CONCERNED, WE ARE OF THE VIEW THAT THE INITIAL BURD EN IS UPON THE ASSESSEE WHICH HAS NOT BEEN DISCHARGED, THEREFO RE, THERE IS NO QUESTION OF SHIFTING THE BURDEN UPON THE REVE NUE. SO FAR AS, VIOLATION OF PRINCIPLE OF NATURAL JUSTICE IS CO NCERNED, DUE OPPORTUNITY WAS PROVIDED TO THE ASSESSEE, THEREFORE , THERE IS NO VIOLATION AS SUCH, CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS HAVING NO MERIT, THEREFORE, DISMISSED. 4. THE NEXT GROUND PERTAINS TO AGEING ANALYSIS OF SUNDRY CREDITORS TO THE TUNE OF RS.20,28,605/-. THE CRUX OF ARGUMENT ON BEHALF OF THE ASSESSEE IS THAT THE ANAL YSIS FOR FIVE PARTIES WAS SUBMITTED BEFORE THE ASSESSING OFFICER AND OUT OF THESE THREE PARTIES ARE HAVING CREDIT BALANCES AND TWO PARTIES ARE HAVING DEBIT BALANCES. IT WAS CONTENDED THAT T HE ADDITION WAS MADE WITH RESPECT TO ALL THE FIVE PARTIES. IT W AS ALSO EXPLAINED THAT CONFIRMATION COULD NOT BE SUBMITTED AS SUFFICIENT TIME WAS NOT PROVIDED TO THE ASSESSEE, H OWEVER, IT WAS CLAIMED THAT PARTY-WISE EXPLANATION WAS SUBMITT ED BEFORE THE ASSESSING OFFICER. PLEA WAS ALSO RAISED THAT EV EN THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OVERLOOKED THE FACTUAL MATRIX AND REJECTED THE DETAILS SUBMITTED BEFORE HI M. THE ASSESSEE EXPLAINED THAT THE AMOUNT OF RS.3,53,976/- FOR MEGHNA ENTERPRISES AND RS.2,76,838/- FOR MEGHNA POL YMERS PVT. LTD. ARE DEBIT BALANCES AND THESE AMOUNTS HAS TO BE RECOVERED BY THE ASSESSEE BUT STILL THEY WERE ADDED TO THE INCOME OF THE ASSESSEE. FOR THE REMAINING THREE PA RTIES, IT ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 13 WAS EXPLAINED THAT LIABILITIES ARE STILL OUTSTANDIN G IN THE BALANCE SHEET, THUS, THERE IS NO QUESTION OF ADDITI ON, MORE SPECIFICALLY, WHEN THE ASSESSEE HAS NOT WRITTEN OFF THE OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNTS. O N THE OTHER HAND, THE LD. DR, DEFENDED THE ADDITION. 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE FOREGOING DISCUSSION, WE ARE OF THE VIEW THAT ONE M ORE OPPORTUNITY NEEDS TO BE PROVIDED TO THE ASSESSEE, S O THAT TRUE FACTS CAN BE ASCERTAINED AND THEN MAY BE DECIDED IN ACCORDANCE WITH LAW. THE ASSESSEE IS DIRECTED TO FU RNISH THE NECESSARY EVIDENCE BEFORE THE LD. ASSESSING OFFICER SO THAT IT CAN BE EXAMINED. OPPORTUNITY BE PROVIDED TO THE AS SESSEE TO SUBSTANTIATE HIS CLAIM, THUS, THIS GROUND OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 01/03/2016. SD/- SD/- ( G.S. PANNU ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; + DATED : 01/02/2016 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : ITA NO.1475/MUM/2015 KAMLESH S. MEHTA 14 1. , -. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 11 & 2$ ( , ) / THE CIT, MUMBAI. 4. 11 & 2$ / CIT(A)- , MUMBAI 5. 4%5/$! , 1, ),!6 , & ' / DR, ITAT, MUMBAI 6. 7'8' / GUARD FILE. / BY ORDER, 04$/$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI