ACIT 20(1), MUMBAI V. HINDUSTAN RUBBERS (SILVASSA), MUMBAI

ITA 1515/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1343 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: SANJAY R PAREKH
• Keywords: Gift; Revised return
• Section: 154; 139

Judgement Text

INCOME-TAX APP ELLATE TRIBUNAL A BENCH MUMBAI , , BEFORE S/SHRI JOGINDER SINGH,JUDI CIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./1515/MUM/2014 , /ASSESSMENT YEAR: 2009-10 ACIT-20(1) ROOM NO.603, 6TH FLOOR, PIRAMAL CHAMBER, PAREL MUMBAI-400 012. VS. M/S. HINDUSTAN RUBBERS (SILVASSA) 1, JANKI CENTRE, OFF VEERA DESAI ROAD ANDHERI (W), MUMBAI-400 053. PAN:AABFH 7112 D ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI SANJAY R. PAREKH / DATE OF HEARING: 11.04.2017 / DATE OF PRONOUNCEMENT: 11.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 24.12.2013,OF THE CIT(A )-31,MUMBAI,THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-FIRM,CARRYING ON BUSINESS OF MANUFACTURING OF RUBBER CONVEYER BELTS,V-BELTS ETC.,FILED ITS RETURN OF INC OME ON 26/09/2009,DECLARING INCOME AT RS.4.21 CRORESS.THE AO COMPLETED THE ASSESSMENT UNDER SECTI ON 143 (3), ON 09/12/2011,DETERMINING ITS INCOME AT RS.4,22,59,820/-. 2. FIRST GROUND OF APPEAL IS ABOUT A CLAIM OF RS. 1.2 0 CRORES. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143 (1). LATER ON IT WAS SE LECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED A REVISED RETUR N ON 06/ 05/2011,STATING THAT THERE WERE CERTAIN MISTAKES IN UPLOADING ORIGINAL ON FILED RET URN OF INCOME, THAT THE ASSESSEE HAD WRONGLY SHOWN DISALLOWANCE OF RS. 1.20 CRORES UNDER SECTION 40 OF THE ACT, THAT THE TAXABLE INCOME SHOWN BY IT AT RS.4,21, 25,730/- INCLUDED THE SAID DISALLOWANCE,THAT THE MISTAKE WAS APPARENT FROM THE RECORD,THAT IT CAME TO KNOW ABOUT THE MIST AKE WHEN IT RECEIVED THE INTIMATION DATED 05/09/2010,THAT IT APPLIED FOR LITIGATION THE SECTI ON 154 OF THE ACT ON 08/01/2011, THAT THE COMPUTER PROCESSING CENTRE(CPC)ADVISED TO FILE A RE VISED RETURN OF INCOME, THAT ACCORDINGLY REVISED RETURN WAS FILED ON 06/05/2011. HOWEVER,THE AO DID NOT ACCEPT THE REVISED RETURN AND COMPLETED THE ASSESSMENT ON THE BASIS OF THE ORIGIN AL RETURN FILED ON 26/09/2009 AT RS. 4.21 CRORES.HOWEVER,THE AO OBSERVED THAT THE ASSESSEE HA D SUFFICIENT TIME TO FILE A REVISED RETURN, THAT IT HAD FAILED TO DO SO. ITA/NO.1515/M/14(09-10) M/S. HINDUSTAN RUBBERS (SILVASSA) 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HER, IT WAS ARGUED THAT DOU BLE ADDITIONS WERE MADE WITH REGARD TO PROVISION FOR FBT (RS.5.34 LAKHS),PROVISION FOR TAX (RS.1.02 CRORES),AMOUNT OF SALARY/BONUS TWO PARTNERS (RS.12 LAKHS) AND OTHER DISALLOWANCES (RS. 1.08 LAKHS).THE FAA DIRECTED THE AO TO FILE REMAND REPORT IN THAT REGARD. AS THE FIRST REMAND R EPORT DID NOT DEAL WITH THE ISSUE OF DOUBLE TAXATION OF RS.1.20 CRORES,SO,SHE,VIDE HER LETTER D T.20/11/2013 DIRECTED THE AO TO GIVE A CLEAR FINDING IN THAT REGARD. EVEN IN THE SECOND REMAND R EPORT THE AO DID NOT GIVE ANY CLEAR FINDING AS TO WHETHER THE DISPUTED AMOUNT WAS INCLUDED TWICE IN THE RETURN FILED BY THE ASSESSEE FOR THE YEAR UNDER APPEAL. ACCORDINGLY,THE FAA PERUSED THE E-RETURN AND VARIOUS COLUMNS FILED BY THE ASSESSEE INCLUDING ITEM NO.8 OF PART-A SCHEDULE BU SINESS AND PROFIT COMPUTATION OF INCOME, ITEM NO.15 OF PART-A. 3.1. AFTER CONSIDERING THE AVAILABLE MATERIAL SHE HELD THAT TOTAL AMOUNT DEBITED UNDER THE HEAD SALARIES AND WAGES INCLUDED RS.12.00 LAKHS OF REMUN ERATION TO PARTNERS, THAT THE AMOUNT WAS WITHIN THE LIMITS SPECIFIED U/S.40B OF THE ACT, THA T THE INCLUSION OF THE SAID AMOUNT IN ITEM 8F OF PART A OF THE RETURN WAS ERRONEOUS, THAT SAME HAD T O BE REDUCED ON THE TOTAL INCOME OF THE ASSESSEE, THAT RS.1.08 LAKHS HAD BEEN ENTERED UNDER THE HEAD DONATION IN ITEM NO.33 OF PART-A, THAT THERE WAS NO PROVISION TO ENTER GENERAL EXPENS ES IN THE RETURN, THAT EXPENSES INCURRED BY ASSESSEE WERE ON ACCOUNT OF PAYMENT MADE TO SWEEPE R, WATCHMAN ETC., THAT THERE WAS NO ENTRY ABOUT THE DONATIONS, THAT AMOUNTS DEBITED ON ACCOUN T OF SCHOOL FEE OF PEON, DURGA PUJA AND GIFTS HAD NOT BEEN SATISFACTORILY DEMONSTRATED TO BE FOR BUSINESS PURPOSES, THAT SAME WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, SHE UPHELD THE DISALLOWANCE OF RS.91,000/- AND PARTLY ALLOWED THE GROUND. SHE FURT HER OBSERVED THAT THAT ASSESSEE HAD ENTERED AN AMOUNT OF RS.2.92 CRORESS AS PROFIT BEFORE TAX I N ITEM NO.43, THAT IN ITEM NO.44 AND 45 AMOUNTS OF RS.1.02 CRORESS AND RS.5.34 LAKHS HAD BE EN REDUCED ON ACCOUNT OF PROVISION FOR CURRENT TAX AND PROVISION FOR FRINGE BENEFIT TAX RE SPECTIVELY, THAT THE AMOUNT OF PROFIT AFTER TAX WOULD COME TO RS1.85CRORESS, THAT IT HAD SHOWN AMOU NT OF RS.1.20 CRORESS BEING DISALLOWANCE U/S. 40 OF THE ACT, THAT IT HAD REFLECTED PROFIT BE FORE TAX AT RS.2.92 CRORESS, THAT AFTER ADDING BACK EXPENSES DEBITED TO P&L ACCOUNT IT COMPUTED PROFIT AT RS.3,00,64,976/-,THAT IT HAD ONCE AGAIN QUANTIFIED THE AMOUNT OF RS.1.20 CRORESS (ITEM NO.1 6) AS AMOUNT DEBITED TO THE P&L ACCOUNT, THAT THE TOTAL INCOME WAS COMPUTED AT RS.4.21 CRORE SS (RS.3.00 CRORESS + RS.1.20 CRORESS), THAT ITA/NO.1515/M/14(09-10) M/S. HINDUSTAN RUBBERS (SILVASSA) 3 THE FIGURE OF RS.2.90 CRORESS INCLUDED AMOUNTS OF P ROVISIONS FOR FBT (RS.5.34 LAKHS) AND AMOUNT OF PROVISION FOR TAX (RS.1.02 CRORESS), THAT CUMULA TIVE SUM OF THESE TWO ITEMS I.E. RS.1.07 CRORESS HAD TO BE REDUCED FROM COMPUTING THE TAXABLE INCOME AS SAME WAS INCLUDED TWICE IN THE FIGURES ENTERED IN THE E-RETURN. FINALLY, THE FAA PARTLY AL LOWED THE GROUNDS RAISED BY THE ASSESSEE AS, STATED EARLIER. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO AND STATED THAT ASSESSEE HAS NOT F ILED THE REVISED RETURN ON TIME. THE AUTHORISED REPRESENTATIVE(AR) SUPPORTED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THERE WERE SOME MISTAKES IN THE E-RETURN FILED BY THE ASS ESSEE,THAT THE CPC ADVISED IT TO FILE A REVISED RETURN,THAT IT FILED A REVISED STATEMENT OF INCOME DURING THE ASSESSMENT PROCEEDINGS, THAT THE AO HAD NOT DOUBTED ABOUT THE CLAIM MADE BY THE ASSESSE E. HOWEVER, REFERRING TO PROVISIONS OF SECTION 139 OF THE ACT,HE DENIED THE CLAIM MADE BY THE ASSESSEE. WE FIND THAT THE FAA HAD TWICE ASKED THE AO TO EXPLAIN AS TO WHETHER A SUM OF RS.1 .20 CRORESS WAS TAXED TWICE OF NOT. BUT, SURPRISINGLY ON BOTH THE OCCASIONS,THE AO DID NOT G IVE ANY FINDING. IN OUR OPINION, IT IS VERY SURPRISING, AS ALL THE DOCUMENTS WERE AVAILABLE WIT H HIM. HE DID NOT MAKE VERIFICATION, AS DIRECTED BY THE FAA. THE FAA HERSELF MADE EFFORTS A ND FOUND THAT THE CLAIM MADE BY THE ASSESSEE WAS GENUINE TO A GREAT EXTENT. SHE HAD GI VEN A CATEGORICAL FINDING OF FACT THAT EXCEPT FOR THE AMOUNTS DEBITED TO SCHOOL FEE OF THE PEON AND D URGA PUJA ETC., REST FOR THE AMOUNTS WERE DOUBLY TAXED. AS PER THE ESTABLISHED PRINCIPLES OF TAXATION JURISPRUDENCE NO INCOME CAN BE TAXED TWICE. IT IS DUTY OF THE AO TO SEE THAT ONLY DUE TA XES ARE COLLECTED FROM THE ASSESSEE. THE PURPOSE OF THE INCOME TAX IS TO COLLECT DUE TAXES FROM THE ASSESSEE ON THE INCOME EARNED BY THEM. WHILE COMPUTING THE INCOME, THE ASSESSEE HAS TO CLAIM EX PENDITURE INCURRED BY IT AS WELL AS DEDUCTIONS DUE TO IT. IN THE CASE UNDER CONSIDERATION, INADVER TENTLY THE ASSESSEE MADE DISALLOWANCE TWICE OF THE SAME AMOUNT AND THUS ITS INCOME HAD INCREASED T O THAT EXTENT. IT WAS THE DUTY OF THE AO TO ASSESS HIM ON CORRECT INCOME AND NOT ON INFLATED IN COME. THE CIRCULAR ISSUED BY THE BOARD AS LONG BACK AS 1955 CLEARLY STIPULATES THAT AO.S ARE NOT SUPPOSED TO TAKE ADVANTAGE OF THE MISTAKES OF THE ASSEESSEES (CIR.NO.14(XI-35, DT.11.4.1955). WE WOULD LIKE TO REPRODUCE THE CIRCULAR AND IT READS AS UNDER :- ITA/NO.1515/M/14(09-10) M/S. HINDUSTAN RUBBERS (SILVASSA) 4 OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF THE ASSESSEE AS TO HIS RIGHTS.IT IS ONE OF THEIR DUTIES TO ASSESS A TAX-P AYER IN EVERY REASONABLE WAY PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEF AND IN THIS REGARD THE OFFICER SHOULD TAKE THE INITIATIVE IN GUIDING A TAX PAYER WHERE PROCEEDINGS OR OTHER PARTICULARS INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. ALTHOUGH, THEREFO RE, THE RESPONSIBILITY FOR CLAIMING REFUND AND RELIEF RESTS WITH THE ASSESSEE ON WHOM IT IS I MPOSED BY THE LAW, OFFICER SHOULD ; (A) DRAW THEIR ATTENTION TO ANY REFUND OR RELIEF WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO TH EIR RIGHTS AND LIABILITIES AND TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AND RE LIEFS. THE ABOVE CIRCULAR OF THE BOARD HAS NOT BEEN WITHDR AWN EVEN TODAY I.E., AFTER MORE THAN 60 YEARS. IN THE CASE UNDER CONSIDERATION,WE FIND THAT THE AO HAD COMPLETELY IGNORED THE GUIDELINES ISSUED BY THE BOARD. INSTEAD OF HELPING THE ASSESSE E IN CLAIMING DUE RELIEF, HE HAD OBSTRUCTED THE RELIEF DUE TO THE ASSESSEE. NOT ONLY THIS, IN HIS R EMAND REPORTS,HE DID NOT FILE A SIMPLE BUT POINTED QUERY RAISED BY FAA ABOUT DOUBLE DISALLOWANCE OF RS .1.20 CRORESS. IT WAS THE FAA WHO PAINSTAKINGLY ANALYSED BOTH THE RETURNS AND DECIDED THE ISSUE AS PER LAW. IN OUR OPINION,HER ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY,SO,CONFIRM ING THE SAME, WE DECIDE FIRST EFFECTIVE GROUND AGAINST THE AO. 6 .NEXT THREE GROUNDS OF APPEAL ARE ABOUT DELETING AD HOC DISALLOWANCE OF RS.35,887/-, RS.35, 161/- AND RS.63,042/- BEING 5% OF MOTOR CAR EXPENSE S, TELEPHONE EXPENSES AND SALES PROMOTION EXPENSES.DURING THE ASSESSMENT PROCEEDINGS,THE AO F OUND THAT THE ASSESSEE HAD CLAIMED RS.17 LAKHS, RS.7.03 LAKHS AND RS.12.60 LAKHS UNDER THE H EADS MOTOR CAR EXPENSES, TELEPHONE EXPENSES AND SALES PROMOTION EXPENSES RESPECTIVELY. HE HELD THAT THE ASSESSEE HAD NOT MAINTAINED ANY LOG BOOK AND DISALLOWED 5% OF THE MOTOR CAR EXPENSES.SI MILARLY,HE HELD THAT THE ASSESSEE DID NOT MAINTAIN ANY MECHANISM, THAT PERSONAL EXPENSES WERE INCURRED UNDER THE HEAD TELEPHONE EXPENSES, THAT MOST OF THE EXPENSES UNDER SALES PRO MOTION EXPENSES INCLUDED UNDER THE HEAD TEA/COFFEE/SNACK, THAT THOSE EXPENSES WERE NOT FULL Y ATTRIBUTABLE TO BUSINESS OF THE ASSESSEE. ACCORDINGLY,HE DISALLOWED 5% OF THE EXPENSES ON ES TIMATE BASIS. 7. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE MAD E DETAILED SUBMISSION BEFORE FAA. AFTER CONSIDERING THE SUBMISSION, SHE HELD THAT THE TURNO VER FOR THE YEAR UNDER APPEAL OF THE ASSESSEE (RS.87.05 CRORESS) HAD INCREASED IN COMPARISON TO TURNOVER OF PRECEDING YEAR (RS.79.22 LAKHS), THAT THE MOTOR CAR EXPENSES REMAINED AT THE SAME LE VEL (RS.7.17LAKHS AND RS.7.11 LAKHS) FOR THE AY. 2009-10 AND AY. 2008-09 RESPECTIVELY, THAT THE AO HAD NOT POINTED OUT ANY SPECIFIC DEFECT ITA/NO.1515/M/14(09-10) M/S. HINDUSTAN RUBBERS (SILVASSA) 5 IN THE BOOKS OF ACCOUNT, THAT TELEPHONE EXPENSES HA D REDUCED SUBSTANTIALLY FROM RS.10.14 LAKHS TO RS.7.03LAKHS FOR THE YEAR,THAT THE INCREASE IN S ALE PROMOTION EXPENSES DID NOT APPEAR UNTOWARD IN BACKDROP OF THE INCREASE IN THE TURNOVER OF THE ASSESSEE, THAT THERE WAS NOTHING UNUSUAL IN THE EXPENSES OF THE ASSESSEE, THAT THE EXPENSE WERE SUP PORTED BY SELF MADE VOUCHERS SINCE TEA/COFFEE VENDORS WOULD NOT ISSUE BILLS, FINALLY SHE DELETED THE ADHOC DISALLOWANCE MADE BY THE AO UNDER ALL THE THREE HEADS. 8. BEFORE US, THE DR SUPPORTED THE ORDER OF AO AND STA TED THAT ADHOC DISALLOWANCE WERE MADE @5% ONLY. THE AR STATED THAT UNDER THE TWO HEADS TH ERE WERE NO INCREASE IN THE EXPENSES, THAT IN THE EARLIER YEAR EXPENSES WERE ALLOWED BY THE DE PARTMENT. 9. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE AVAILABLE MATERIAL. WE FIND THAT AO HAD MADE DISALLOWANCES UNDER THREE HEADS WITHOUT ASSIGN ING ANY REASON, THAT THE BOOKS OF ACCOUNTS WERE NOT REJECTED, THAT NO SPECIFIC DEFECT WAS POIN TED OUT DURING THE ASSESSMENT PROCEEDINGS, THAT THE FAA HAD COMPARED FIGURES OF THE TURNOVER OF THE EARLIER AY. AND CURRENT AY. IF THE TURN OVER AND EXPENSES ARE TAKEN TOGETHER, IT BECOMES CLEAR T HAT THERE WAS NO JUSTIFICATION FOR MAKING ANY ADHOC DISALLOWANCE.CONSIDERING THE PECULIAR FACTS A ND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER F ROM ANY LEGAL INFIRMITY, HENCE, CONFIRMING THE SAME,WE DECIDE ALL THE THREE GROUNDS AGAINST THE AO . AS A RESULT, APPEAL FILED BY AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH APRIL,2017. 11 , 2017 SD/- SD /- ( /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 11.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.