MEGA ENTERPRISES, MUMBAI V. ITO WD 13(2)(2), MUMBAI

ITA 171/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1662 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DIPAK KUMAR SINHA
• Assessee Lawyers: ARUN AGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO. 171/MUM/2012(A.Y.2008-09) MEGA ENTERPRISE, 39, MEHTA CHAMBERS, 127-A, KALYAN STREET, MUMBAI - 400 009. PAN : AAAFM 9969Q (APPELLANT) VS. INCOME TAX OFFICER, WARD 13(2)(2), AAYKAR BHAVAN, MK ROAD, MUMBAI - 400 020. (RESPONDENT) APPELLANT BY : S/SHRI AMIT AGRAWAL & ARUN AGARWAL RESPONDENT BY : SHRI DIPAK KUMAR SINHA DATE OF HEARING : 02/01/2013 DATE OF PRONOUNCEMENT : 04/01/2013 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-24, MUMBAI DATED 21/10/2011 FO R THE ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL RAISED BY THE ASSE SSEE READ AS UNDER: THE APPELLANT PARTNERSHIP FIRM IS OPERATING A DIVI SIONAL DISPATCH CENTRE FOR ONLY 1 CLIENT, CEAT LTD. AT NASHIK. 1) UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN PARTLY CONFIRMI NG THE ADHOC DISALLOWANCE MADE BY AOUPTO RS.279049 (I.E. 10% INF LATION AND STRAPPING CHARGES OF RS.874845 & 10% OF LOADING & U NLOADING EXPENSES OF RS.1915650) 2) UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) & AO OUGHT TO HAVE CONSIDERED THE N ATURE OF BUSINSS CARRIED ON BY APPELLANT AND THE FACT THAT THE SAID EXPENSES WERE WHOLLY & EXCLUSIVELY FOR PURPOSE OF BUSINESS. ITA NO. 171/MUM/2012(A.Y.2008-09) 2 2. THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF PROVIDING LOGISTIC SERVICE TO M/S. CEAT LTD. THERE WAS A DECLINE IN THE NET P ROFIT RATE WHICH WAS 9.88% FOR THE LAST YEAR AS COMPARED TO 6.47% OF IMPUGNED ASSESSMENT YEAR. THE AO GOING THROUGH THE DETAILS OF EXPENSES MADE AN ADHOC DISALLOWANCE OF 30% OF CERTAIN EXPENSES. LD. CIT(A) HAS RESTRICTED THE DI SALLOWANCE TO 10%. 3. BEFORE US LD. AR HAS FILED THE WRITTEN SUBMISSIO N IN WHICH HE HAS CONTESTED THE SUSTENANCE OF 10% ADHOC DISALLOWANC E IN RESPECT OF INFLATION AND STRAPPING CHARGES AND LOADING & UNLOADING EX PENSES. IT IS THE MAIN CONTENTION OF THE LD. AR THAT UNDER SIMILAR CIRCUM STANCES FOR A.Y 2007-08 THE AO HAD DISALLOWED 10% OF THESE CHARGES AND LD. CIT( A) HAD RESTRICTED THE SAID ADDITION TO RS.25,000/-. LD. AR HAS GIVEN COMPARI SON OF THESE CHARGES IN RESPECT OF BOTH THE YEARS. 5. THE SAID EXPENSES HAVE ALSO REDUCED IN COMPARIS ON TO PREVIOUS YEAR BY RS.7000/-. A.Y. 2008-09 2007-08 INFLATION AND STRAPPING CHARGES 874 ,845 10,12,847 LOADING AND UNLOADING EXPENSES 19,15,650 17,84,800 RS. 27,90,495 27,97,647 IT IS THE CASE OF THE LD. AR THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO ONLY RS.25,000/-. IT IS ALSO THE CASE OF LD. AR THAT IN PREVIOUS YEAR I.E. A.Y 2007-08 GROSS INCOME WAS SHOWN IN THE P&L ACCOUNT AS NET O F SERVICE TAX, WHEREAS IN THE RELEVANT YEAR SERVICE TAX HAS BEEN SHOWN SEPARA TELY AT RS.7,99,983/- AND IF THE SAME IS CONSIDERED THE PROFIT OF THE ASSESSEE W ILL BE BETTER THAN THE ASSESSMENT YEAR 2007-08. TO SUBSTANTIATE THE FOLLO WING TABLE HAS BEEN SUBMITTED. A.Y. 2008-09 A.Y.2007-08 GROSS SERVICE CHARGES 72,76,380 LESS: SERVICE TAX 7,99,983 64,76,397 63,64,397 NET PROFIT (BEFORE INTEREST ON CAPITAL) 11,80,223 11,36,933 PERCENTAGE 18.22% 17.86% ITA NO. 171/MUM/2012(A.Y.2008-09) 3 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED AO AND CIT(A). 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. THE MAIN REASON WEIGHED IN THE MIND OF AO WHILE MAKING THE ADDITION WAS DECLINE IN THE NET PROFIT R ATE. THE DISALLOWANCE MADE BY THE AO IS ADHOC. IT IS TRUE THAT ASSESSEE MAY N OT HAVE PROPER VOUCHERS TO SUPPORT THE ENTIRE EXPENSES CLAIMED BY IT BUT UNDE R ALMOST SIMILAR CIRCUMSTANCES IN EARLIER YEAR THE AO HAD MADE 10% A DHOC DISALLOWANCE. NO REASON HAS BEEN STATED BY THE AO TO RAISE ADHOC DIS ALLOWANCE FROM 10% TO 30%. IN ASSESSMENT YEAR 2007-08 THE DISALLOWANCE H AS BEEN RESTRICTED BY LD. CIT(A) TO A SUM OF RS.25,000/-. IN VIEW OF THE POS ITION EXPLAINED BY LD. AR IT CAN BE SEEN THAT THERE IS NO DECLINE IN THE PROFIT RATE. THEREFORE, KEEPING IN VIEW THE ENTIRETY OF FACTS, WE ARE OF THE OPINION T HAT DISALLOWANCE SHOULD BE RESTRICTED ONLY TO A SUM OF RS.25,000/- AS IT WAS R ESTRICTED BY LD. CIT(A) IN RESPECT OF A.Y 2007-08. THEREFORE, DISALLOWANCE SU STAINED BY LD. CIT(A) ARE RESTRICTED TO RS.25,000/-. WE DIRECT ACCORDINGLY. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THE 4 TH DAY OF JAN.2013 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 4 TH JAN.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R B BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.