NAVZAR JAMSHED MANECKSHAW, MUMBAI V. ITO WD 14(3)(1), MUMBAI

ITA 1688/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8810 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI VIJAY PAL RAO (JM) ITA NO.1688/M/2010 ASSESSMENT YEAR 2005-06 SHRI NAVZAR JAMSHED MANECKSHAW THE ITO WARD 14(3) (1), MUMBAI PRINCESS BUILDING, 275, PRINCESS STREET MUMBAI 400 002. PAN : AAIPS0719G APPELLANT RESPONDENT ASSESSEE BY : SHRI DEEPAK TRALSHAWALA REVENUE BY : SHRI PIYUSH JAIN O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 12.1.10 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06. THE ASSE SSEE IN THIS APPEAL HAS RAISED DISPUTES ON THREE DIFFERENT GROUNDS. 2. THE FIRST DISPUTE IS REGARDING DISALLOWANCE OUT OF SECURITY GUARD EXPENSES. THE ASSESSEE IS IN THE BUSINESS OF RUNNIN G SECURITY AGENCIES. FOR THE RELEVANT YEAR THE ASSESSEE HAD DECLARED TOTAL PROFE SSIONAL RECEIPTS OF RS.20,51,126/- WHICH WAS SUPPORTED BY THE DETAILS A ND TAX HAD ALSO BEEN DEDUCTED AT SOURCE. HOWEVER THE EXPENDITURE CLAIMED BY THE ASSESSEE ON VARIOUS ACCOUNTS WAS NOT SUPPORTED BY ANY EVIDENCE AS THE BOOKS OF ACCOUNTS WERE CLAIMED TO HAVE BEEN DESTROYED DURING FLOODS I N MUMBAI IN 2005. THE 2 ASSESSEE HAD CLAIMED EXPENDITURE OF RS.12,67,967/- ON ACCOUNT OF SALARY TO SECURITY GUARDS AND STAFF. IN THE ABSENCE OF FULL D ETAILS AND EVIDENCE THE AO DISALLOWED 5% OF SUCH EXPENSES ON ESTIMATE WHICH IN APPEAL HAS BEEN CONFIRMED BY THE CIT(A) AGGRIEVED BY WHICH THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 2.1 WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECO RDS AND CONSIDERED THE MATTER CAREFULLY. THE ASSESSEE IS IN THE BUSINESS O F RUNNING A SECURITY AGENCY. THE TOTAL RECEIPTS SHOWN WERE AT RS.20,51,126/- AGA INST WHICH THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.12,67,961/- ON SALARY TO SECURITY GUARDS AND STAFF. THERE IS NO DISPUTE THAT FULL DETAILS AND EV IDENCE IN RESPECT OF SUCH EXPENDITURE IS NOT AVAILABLE AS THE BOOKS OF THE AC COUNTS OF THE ASSESSEE WERE LOST IN FLOODS. THE AO HAS THEREFORE DISALLOWED ON ESTIMATE 5% OF SUCH EXPENSES WHICH HAS BEEN CONFIRMED BY CIT(A). CONSID ERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE SEE NO INFIRMITY IN TH E ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF 5% OF SUCH EXPENSES. THE ORDER OF CIT(A) IS THEREFORE UPHELD ON THIS POINT. 3. THE SECOND DISPUTE IS REGARDING ESTIMATED DISALL OWANCE OUT OF OTHER ADMINISTRATIVE EXPENSES. THE ASSESSEE HAD CLAIMED E XPENDITURE OF RS.4,58,764/- UNDER VARIOUS HEADS DETAILS OF WHICH HAVE GIVEN IN PARA 4 OF ASSESSMENT ORDER. THE SAID EXPENDITURE INCLUDED A S UM OF RS.1,47,049/- ON ACCOUNT OF UNIFORM, SHOES/BELTS & RAINCOATS; RS.300 0/- ON ACCOUNT OF INTEREST ON LOAN; RS.1341/- ON ACCOUNT OF BANK CHARGES AND R S.599/- ON DEPRECIATION. THE AO HAD MADE DISALLOWANCE IN RESPECT OF EXPENDIT URE ON UNIFORM, SHOES/BELTS AND RAINCOATS SEPARATELY WHICH IS NOT S UBJECT MATTER OF DISPUTE BEFORE THE TRIBUNAL. IN RESPECT OF INTEREST ON LOAN , BANK CHARGES AND 3 DEPRECIATION NO DISALLOWANCE HAD BEEN MADE. EXCLUDI NG THE ABOVE FOUR ITEMS THE BALANCE EXPENDITURE WAS RS.3,06,775/-. AS THE E XPENDITURE WAS NOT SUPPORTED BY BILLS AND VOUCHERS THE AO DISALLOWED 8 0% OF SUCH EXPENDITURE. BUT IN APPEAL CIT(A) HAS REDUCED THE DISALLOWANCE O F EXPENDITURE TO 40%. THE VARIOUS EXPENDITURE CONSIDERED FOR DISALLOWANCE REL ATED TO TELEPHONE EXPENSES (71,813/-); CONVEYANCE CHARGES (91949); BUSINESS PR OMOTION EXPENSES (32350); ELECTRICITY CHARGES (24496); OFFICE EXPENS ES (30922); PROFESSIONAL EXPENSES (22000) AND INSURANCE (8704). 3.1 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THE EXPENSES UNDER CONSIDERATION WERE INTEGRAL PART OF RUNNING O F ANY OFFICE FOR THE PURPOSE OF BUSINESS. THE DISALLOWANCE MADE BY THE CIT(A) @ 40% WAS HIGHLY EXCESSIVE. THE LEARNED DR ON THE OTHER HAND PLACED RELIANCE ON THE ORDER OF CIT(A). 3.2 WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ESTIMATED DISALLOWANCE OUT OF CERTAIN EXPENSES SUCH AS TELEPHONE, CONVEYANCE, ELECTRICITY CHARGES ETC. DET AILS OF WHICH HAVE BEEN GIVEN IN THE PRECEDING PARA. THE EXPENDITURE IS NOT SUPPORTED BY BILLS AND VOUCHERS WHICH ARE CLAIMED TO HAVE BEEN LOST IN FLO ODS. UNDER THESE CIRCUMSTANCES THE ESTIMATED DISALLOWANCE IS JUSTIFI ED. IN OUR VIEW THE DISALLOWANCE MADE BY THE CIT(A) @ 40% IS EXCESSIVE. THE EXPENSES CLAIMED ARE NORMAL BUSINESS EXPENSES OF ANY BUSINESS. BUT S INCE THESE ARE NOT SUPPORTED BY PROPER EVIDENCE SOME DISALLOWANCE IS C ALLED FOR ON ESTIMATE. IN OUR VIEW IT WILL MEET THE ENDS OF JUSTICE IF THE DI SALLOWANCE IS RESTRICTED TO 20%. WE HOLD ACCORDINGLY. 4 4. THE THIRD DISPUTE IS REGARDING ADDITION OF RS.1, 20,305/- BEING THE AMOUNT DEPOSITED IN BANK ACCOUNT. THE AMOUNT HAD BE EN ADDED AS UNEXPLAINED BY THE AO WHICH IN APPEAL WAS CONFIRMED BY THE CIT(A) AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBU NAL. HOWEVER AT THE TIME OF HEARING OF APPEAL THE LEARNED AR FOR THE ASSESSEE D ID NOT PRESS THIS GROUND. THEREFORE THIS GROUND IS DISMISSED AS NOT PRESSED. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY A LLOWED. 6. THE ORDER WAS PRONOUNCED IN OPEN COURT ON 19.01. 2011. SD/- SD/- ( VIJAY PAL RAO) (RAJEN DRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 19.01.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR B BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK