FASTMOVERS SHIPPING AGENCY, MUMBAI V. ITO 12(1)(4), MUMBAI

ITA 1494/MUM/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1754 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R V JAIN

Judgement Text

ITA NO. 1494/MUM/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI R S PADVEKAR, JUDICIAL MEMBER ITA NO. 1494/MUM/2010 (ASST YEAR 2006-07) FASTMOVERS SHIPPING AGENCY 44 MATHUTI LANE FORT MUMBAI 1 VS THE INCOME TAX OFFICER WQRD 12(1)(4), MUMBAI (APPELLANT) (RESPONDENT) PAN-AABFF3472A ASSESSEE BY: SHRI RAHUL HAKANI REVENUE BY: SHRI R V JAIN O R D E R PER R S PADVEKAR: IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMP UGNED ORDER OF THE LD CIT(A) 23, MUMBAI FOR THE ASSESSMENT YEAR 2006-0 7 DATED 17.12.2009. 2 THE SHORT ISSUE IN CONTROVERSY IS IN RESPECT OF 2 0% DISALLOWANCE MADE BY THE AO OUT OF POCKET EXPENSES. 3 THE ASSESSEE FIRM IS A CUSTOM AGENT. IT WAS NOTIC ED BY THE AO THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE TOWARDS OUT OF POCKET EXPENSES IN CASH TO THE EXTENT OF RS. 6,97,697/-. AS OBSERVED B Y THE AO, THE SAID EXPENDITURE WAS NOT SUPPORTED BY GENUINE THIRD-PART Y VOUCHERS. IT IS FURTHER OBSERVED THAT THESE EXPENSES ARE REIMBURSED TO THE ASSESSEE BY ITS CLIENTS. IT IS FURTHER OBSERVED BY THE A.O. THAT I T IS A COMMON PRACTICE IN THE BUSINESS LINE OF THE ASSESSEE TO BILL THE CLIENTS O N THE HIGHER SIDE AND THE ITA NO. 1494/MUM/2010 2 DIFFERENCE BETWEEN THE REIMBURSED AMOUNT AND THE AC TUAL EXPENDITURE INCURRED IS NEVER OFFERED FOR TAXATION PURPOSES. TH E AO, THEREFORE, MADE THE ADDITION OF 20% OUT OF RS. 6,97,697/- WHICH WORKED OUT TO RS. 1,39,539/-. THE AO REFERRED TO THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF AZAD SHIPPING AGENCY VS ITO IN ITA NO.6449/MUM/03. THE A SSESSEE CHALLENGED THE SAID ADDITION BEFORE THE LD CIT(A). 3.1 BEFORE THE LD CIT(A), IT WAS PLEADED THAT FOR A NY EXPENSE TO BE DISALLOWED, IT SHOULD FIRST BE DEBITED TO THE P&L A CCOUNT AND IN THIS CASE, THE ASSESSEE HAS NOT DEBITED THE SAID EXPENDITURE T O THE P&L ACCOUNT. THE ASSESSEE ALSO REFERRED TO THE ORDER OF THE TRIBUNAL IN THE CASE OF MANOJ DOSHI VS ITO IN ITA NO.5842/MUM/2003. THE LD CIT(A) DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE; ACCORDINGLY, HE AGREED WITH THE VIEW TAKEN BY THE AO AND CONFIRMED THE ADDITION. NOW, THE ASSESSE E IS IN APPEAL HERE BEFORE THE TRIBUNAL. 4 I HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL BEFORE ME. THE LD COUNSEL REITERA TED THE ARGUMENTS WHICH ARE ADVANCED BEFORE THE LD CIT(A). ADMITTEDLY, THE ASSESSEE HAS NOT CLAIM ANY DEDUCTION TOWARDS SAID EXPENSES B DEBITING TO P & L A/C. IN THE CASE OF MANOJ DOSHI (SUPRA), IDENTICAL DISALLOWANCE WAS MA DE. IN THE SAID CASE, IT WAS PLEADED THAT THE EXPENSES WERE NOT PART OF THE P&L ACCOUNT AND NEVER CLAIMED BY THE ASSESSEE AS DEDUCTION AND THEREFORE A QUESTION OF DISALLOWANCE DID NOT ARISE. THE TRIBUNAL ACCEPTED THE PLEA OF THE ASSESSEE AND HELD THAT AS THE ASSESSEE HAS NOT CLAIMED ANY D EDUCTION OR EXPENDITURE, THERE WAS NO JUSTIFICATION TO MAKE THE ADDITION. 5 IN THE PRESENT CASE ALSO THE ASSESSEE HAS NOT DEB ITED ANY EXPENDITURE IN THE P&L ACCOUNT. ONLY ON THE PRESUMPTION AND SUR MISES, THE AO MADE THE ADDITION. I DO NOT FIND A SINGLE INSTANCE WHIC H IS BROUGHT ON RECORD THAT THE ASSESSEE HAS MADE ANY EXCESS BILLING TO ITS CL IENTS AND WITHOUT ANY EVIDENCE, MAKING AN ADDITION IS AGAINST THE SPIRIT OF LAW. IN MY OPINION, ITA NO. 1494/MUM/2010 3 THERE IS NO JUSTIFICATION TO SUSTAIN THE ADDITION M ADE BY THE AO; I ACCORDINGLY, DELETE THE SAME. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THE 11 TH , DAY OF JUNE 2010. SD/- ( R S PADVEKAR ) JUDICIAL MEMB ER PLACE: MUMBAI : DATED: 11 TH , JUNE 2010 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI