PRAJAPATI GAURAV PREMISES P.LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 1692/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0858 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: PRAKASH JOTHWANI
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 1692 / MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. PRAJAPATI GAURAV PREMISES PVT. LTD., 146/147, LAKRI BUNDER DARUKHANA REAY ROAD MUMBAI 400 010 VS. ITO 2(1)(1) , MUMBAI PAN/GIR NO. AACCA8072H APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI PRAKASH JOTHWANI REVENUE BY MS. N. HEMALATHA DATE OF HEARING 24 / 10 /201 7 DATE OF PRONOUNCEME NT 22 / 01 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 4, MUMBAI DATED 04/03/2016 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW : - 1. THE LEARNED AO ERRED IN PASSING AN ORDER .WITHOUT PROVIDING THE APPELLANT A SUFFICIENT OPPORTUNITY OF BEING HEARD . 2. DISALLOWANCE OF REMUNERATION : RS. 7,20,000 / - THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 7,20,000/ - BEING REMUNERATION PAID TO THE EMPLOYEE'S (WIVES OF THE DIRECTORS) FOR MANAGING THE AFFAIRS OF THE BUSINESS. 3. DISALLOWANCE OF MOTOR CAR EXPENSES : RS. 79,117/ - THE LEARNED CIT(A) ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 79,117 / - BEING MOTOR CAR EXPENSES INCURRED BY THE APPELLANT, IN RESPECT THE MOTOR CAR BELONGING TO THE DIRECTORS PERSONALLY. ITA N O. 1692/MUM/2017 M/S. PRAJAPATI GAURAV PREMISES PVT. LTD., 2 4. U NEXPLAINED CASH DEPOSITS : RS. 16,24,450/ - THE LEARNED CIT(A) ERRED IN CONFIRMING THE AD DITION OF RS. 16,24,450/ - ON THE GROUND T HAT THE APPELLANT WAS UNABLE TO EXPLAIN THE SOURCE OF THE CASH CREDIT, ALTHOUGH THE APPELLANT HAD MADE SEVERAL WITHDRAWALS AT DIFFERENT INTERVALS AND OF DIFFERENT AMOUNTS DURING THE YEAR, WHICH FACT HAS NOT BEEN DEN IED BY THE AO & CIT(A), BUT FAILED TO ACCEPT THE DEPOSITS. THE LEARNED CIT(A) ERRED IN CONCLUDING THE CASH CREDIT WAS UNEXPLAINED MERELY ON THE GROUND THAT THE WITHDRAWALS DID NOT MATCH THE DEPOSITS IN THE BANK. THE APPELLANT CRAVES LEAVE TO ADD, ALTER O R AMEND THE GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF THE APPEAL. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CLOSELY HELD PRIVATE LIMITED COMPANY CARRYING ON BUSINESS AS BUILDERS / DEVELOPERS THE NAME OF THE COMPANY WAS CHANGED TO 'PRA JAPATI GAURAV PREMISES PRIVATE LIMITED' FROM 'AMPHRAY INVESTMENTS AND PROPERTIES PVT. LTD. WHICH WAS TAKEN OVER BY T HEM IN FINANCIAL YEAR ENDED 31.3.2007. THE COMPANY HAS CARRIED ON ONLY ONE BUILDING PROJECT BY PUTTI NG UP A BUILDING ON PLOT NO.3, SEC.2, KHARGHAR. DURING THE SUBJECT YEAR THE COMPANY HAS SOLD SOME OF THE UNSOLD UNITS IN THE PROJECT WHICH WAS COMPLETED IN FINANCIAL YEAR 2007 -- 08. THE COMPANY HAS BEEN REGULARLY FOLLOWING THE COMPLETED PROJECT METHOD OF AC COUNTING AND HAS RECOGNIZED THE PROFITS OUT OF SALE OF FINISHED OUTPUT IN THE FINANCIAL YEAR THUS, REALIZING THE RESIDUAL PROFITS DURING THE CURRENT FINANCIAL YEAR UNDER ASSESSMENT . 4. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED REMUNERATIO N TO THE WIVES OF THE DIREC T ORS AMOUNTING TO RS.7.20 LAKHS ON ITA N O. 1692/MUM/2017 M/S. PRAJAPATI GAURAV PREMISES PVT. LTD., 3 THE PLEA THAT NO SERVICES WERE RENDERED BY THESE LADIES AND THAT EXPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS CONTENDED BY LEARNED AR THAT THESE LADIES HAVE RENDERED FOLLOWING SERVICES TO THE COMPANY, THEREFORE, THERE IS NO REASON FOR THE DISALLOWANCE OF THE REMUNERATION PAID TO THEM. A.TO GET DAILY ATTENDANCE SHEET PREPARED PROPERLY . B. TO APPROVE MONTHLY SALARY SHEET INCLUDING MONITORING OF HOLIDAYS A ND LATE ATTENDANCE. C. HR RELATED ACTIVITIES LIKE ARRANGING OUTINGS AND PICNICS, EDUCATION SEMINARS AS WELL AS SOCIAL WELFARE PROGRAMMES FOR STAFF. D. TO APPROVE AND ORDER FOR OFFICE PETTY PURCHASES LIKE FILES ETC, SNACKS FOR STAFF, XEROX , PRINTS OF DRAWI NGS ETC . E. TO ASSIGN AND DISTRIBUTE WORK TO LOWER STAFF INCLUDING PEONS AND JUNIOR EXECUTIVES. 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT CIT(A) HAS CONFIRMED THE DISALLOWANCE OF REMUNERATION AFTER OBSERVING AS UNDER: - 6. AS REGARDS DISALLOWAN CE OF REMUNERATION SHOWN IN THE NAME OF MS. SUNITA PRAJAPATI A ND MS. SHRADDHA PRAJAPATI. IT IS PERTINENT TO MENTION THAT APPELLANT HAS FAILED TO DEMONSTRATE ANY EVIDENCE THAT BOTH THESE LADIES HAVE ACTUALLY DONE ANYTHING FOR APPELLATE COMPANY SINCE THE APP ELLANT HAS FAILED TO PRODUCE ANY EVIDENCE THAT MS. SUNITA PRUJAPATI AND MS. SHRADDHA PRAJAPATI, HAVE ACTUALLY DONE ANYTHING OR HAVE MANAGED AFFAIRS OF THE BUSINESS OF THE COMPANY, SUCH DISALLOWANCE MADE BY AO DESERVES C ONFIRMATION. IT IS ALSO IMPORTANT TO POINT CUT THAT IN P&L A/C EXPENDITURE HAS BEEN SHOWN AS REMUNERATION TO THE DIRECTORS WHERE AS IN REALITY SUCH EXPENDITURE IS NOT OF DIRECTORS DND ASSESSEE HAS ALREADY DEBITED AN AMOUNT OF RS.8,21,12G/ - UNDER THE HEAD EMPLOYEE:;; REMUNERATION. THUS THERE I S A VISIBLE DISCREPANCY AND FURTHER APPELLANT HAS FAILED TO P R ODUCE ANY EVIDENCE OF RENDERING SERVICES OF THESE TWO LADIES FOUND TO BE WIVES OF DIRECTORS, FURTHER IT IS IMPORTANT TO NOTE THAT DURING THE YEAR ASSE S SEE HAS LOSS OF ITA N O. 1692/MUM/2017 M/S. PRAJAPATI GAURAV PREMISES PVT. LTD., 4 RS.18,66,425/ - , HENCE THE RE IS NO PROPRIETY FOR ENHANCEMENT OF EX PENDITURE IN THE NAME OF WIVES O F THE DIRECTORS, HENCE FIND NO REASON OR EVIDENCE OR ACCEPTABLE EXPLANATION TO DELETE SUCH EXPENDITURE. THEREFORE, FINDING OF THE AO IS APPROVED AND DISALLOWANCE OF. 55 EXPENDI TU RE OF RS.7,20,000/ - IS SUSTAINED. 6. IT APPEARS THAT LOWER AUTHORITIES HAVE NOT PROPERLY APPRECIATED THE WORK DONE BY THESE LADIES AND FURTHERMORE IT WAS ALSO CONTENTION OF LEARNED AR THAT SIMILAR REMUNERATION WAS ALLOWED BY THE DEPARTMENT ITSELF UNDER SCRU TINY ASSESSMENT U/S.143(3). KEEPING IN VIEW TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER CONSIDERING ASSESSEES SUBMISSION. 7. NEXT GRIEVANCE RELATES TO DISALLOWANCE OF MOTOR CA R EXPENSES OF RS.79,117/ - . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT EXPENSES SO REIMBURSED WERE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. FURTHERMORE NO DISALLOWANCE ON ACCOUNT OF PERSONAL USE CAN BE MADE IN CASE OF CORPORATE ENTITIES. GUJARAT HIGH COURT IN CASE OF SHAYAJI STEEL HAVE HELD THAT NO DISALLOWANCE IN CASE OF CORPORATE ENTITIES IS TO BE MADE ON ACCOUNT OF PERSONAL USE BY DIRECTOR / STAFF. RESPECTFULLY FOLLOWING THE DECISION OF THE GUJARAT HIGH COURT, I DO NOT FIN D ANY MERIT FOR THE DISALLOWANCE SO MADE BY THE AO. 8. LAST GRIEVANCE OF ASSESSEE RELATES TO ADDITION ON ACCOUNT OF UNEXPLAINED DEPOSIT IN THE BANK ACCOUNT. 9. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BE LOW AND FOUND THAT SOME OF THE AMOUNTS WERE DEPOSITED IN THE BANK WAS OUT OF ADVANCE RECEIVED FROM THE CUSTOMERS WHICH IS AROUND RS.4 LAKHS. DURING THE YEAR ITSELF, THE ASSESSEE HAS ITA N O. 1692/MUM/2017 M/S. PRAJAPATI GAURAV PREMISES PVT. LTD., 5 WITHDRAWN CASH FROM THE BANK AND VERY SAME CASH WAS AGAIN STATED TO BE DE POSITED IN THE BANK ACCOUNT. ACCORDINGLY, I DIRECT THE ASSESSEE TO FURNISH CASH FLOW STATEMENT BEFORE THE AO. AO HAS TO DECIDE THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART AS INDICATED ABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 22 / 01 /201 8 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 22 / 01 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGIS TRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//