CHANCHAL DEEPAK HEMDEV, MUMBAI V. ITO 19(2)(1), MUMBAI

ITA 1746/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79107 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIKAS AGGRAWAL
• Keywords: Opportunity of being heard; Corroborative evidences

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH, MUMBAI . . , , !'# , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO.5679/MUM/2012 ( & & & & / ASSESSMENT YEAR :2009-2010 THE ACIT 25(3), 308,C-11, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 / VS. SMT. PAYAL MANNAN BHATT, A/101, BHOOMI UTSAV, M.G. ROAD, KANDIVALI (W), MUMBAI-400 067 ' $ ./ () ./ PAN/GIR NO. : AMKPBO256H ( '* / APPELLANT ) .. ( +,'* / RESPONDENT ) '* - / APPELLANT BY: SHRI VIKAS AGGRAWAL +,'* . - / RESPONDENT BY: MS. AASIFA KHAN . /0$ / DATE OF HEARING :05.06.2014 12& . /0$ / DATE OF PRONOUNCEMENT :05.06.2014 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-35, MUMBAI DT.7.6.2012 PERTAINING TO A.Y. 2 009-10. 2. THE GRIEVANCE OF THE REVENUE READ AS UNDER: ITA NO. 5679/M/12 2 (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN GIVING RELIEF ON THE IS SUE OF ADDITION OF COMMISSION EXPENSES U/S.69C OF RS.17,84 ,982/-, WITHOUT APPRECIATING THE FACT THAT NONE OF THE RECI PIENTS OF COMMISSION, RESPONDED TO NOTICE U/S.133(6) WHICH PR OVES THAT THE CLAIM IS NOT GENUINE. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF TELEPHONE EXPENSES TO THE EXTENT OF RS. 3,93,322/- WITHOUT APPRECIATING THE FACT THAT THE EXPENSES DEBITED UND ER THIS HEAD IS EXORBITANT I.E. 33% OF THE NET PROFIT. MORE OVER, THE LD.CIT(A)S DIRECTION TO RESTRICT THE EXPENSES ON A CCOUNT OF PERSONAL USE TO 5% IS VERY LOW. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN GIVING RELIEF ON THE IS SUE OF ADDITION OF RS.1,90,364/- BEING 1/5 TH OF TOTAL EXPENSES, WITHOUT APPRECIATING THAT MOST OF THESE EXPENSES WE RE MADE IN CASH AND THE ASSESSEE FAILED TO FULLY SUBSTANTIA TE GENUINENESS OF THESE EXPENSES WITH BILLS/VOUCHERS A ND THEIR RELATION WITH THE BUSINESS. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN GIVING RELIEF ON THE IS SUE OF ADDITION OF RS.20,000/- BEING INTEREST FROM SHRI AN IRAG CHANDEKAR, WITHOUT APPRECIATING THAT SHE HAD NOT AC COUNTED THE RECEIPT IN THE INCOME. 3. GROUND NO. 1 RELATES TO THE DELETION OF ADDITION OF COMMISSION EXPENSES OF RS. 17,84,982/-. 4. THE ASSESSEE IS IN THE BUSINESS OF FINANCIAL CO NSULTANCY, FINANCIAL PLANNING, AND FINANCIAL ADVISORY. DURING THE COUR SE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS CLAIMED RS. 17,84,982/- AS COMMISSION EXPENDITU RE. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM ALONGWITH SUPPORTING EVIDENCES. AFTER CONSIDERING THE DETAILS, THE AO OBSERVED THAT THE ASSESSEE FAILED TO ITA NO. 5679/M/12 3 SUBSTANTIATE THE NECESSITY OF PAYING COMMISSION AND WHAT WERE THE BENEFITS WHICH THE ASSESSEE RECEIVED BY THE PAYMENT OF THE COMMISSION, ACCORDINGLY RS. 17,84,982/- WAS DISALLOWED. 5. BEFORE THE LD. CIT(A), THE ASSESSEE CLAIMED THAT THE COMMISSIONS HAVE BEEN PAID TO THE PERSONS WHO BROUGHT CUSTOMERS TO THE ASSESSEE. IT WAS STRONGLY CONTENDED THAT THE PAYMENTS WERE MADE THROUGH CHEQUES AND TDS HAS BEEN MADE AS AND WHERE APPLICABLE. THE LD. CIT(A) WAS CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND DIRECTED THE AO TO DELETE THE ADDITION OF RS. 17,84,982/-. 6. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 7. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY STA TED THAT THE ASSESSEE HAS NOT SUBSTANTIATED HER CLAIM FOR THE PA YMENT OF COMMISSION AND THEREFORE THE LD. CIT(A) ERRED IN DELETING THE SAME. 8. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE STR ONGLY SUBMITTED THAT THE PAYMENTS HAVE BEEN MADE THROUGH CHEQUES SUPPORT ED BY PROPER BILLS AND VOUCHERS. THE LD. COUNSEL ALSO DREW OUR ATTENT ION TO THE LIST OF THE PERSONS TO WHOM THE COMMISSIONS HAVE BEEN PAID. IT IS THE SAY OF THE LD. COUNSEL THAT THE SAME HAS BEEN PAID FOR THE PROSPER ITY OF THE BUSINESS, THEREFORE SHOULD BE ALLOWED. 9. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THERE IS NO DISPUTE IN SO FAR AS PAYMENT OF COMMISSION IS CONCERNED BUT WE FIND THAT THE ASSESS EE HAS NOT BROUGHT ANY EVIDENCE ON RECORD WHICH COULD SUGGEST THAT SOM E SERVICES WERE RENDERED BY THE RECIPIENTS OF THE COMMISSION. THER E WAS NO AGREEMENT ITA NO. 5679/M/12 4 BETWEEN THE ASSESSEE AND THE PAYEES. WE ALSO FIND THAT THIS ASPECT HAS NOT BEEN LOOKED UPON BY THE AO. THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, WE RESTORE THIS ISSUE BACK TO THE FILE O F THE AO. THE ASSESSEE IS DIRECTED TO BRING DEMONSTRATIVE EVIDENCE WHICH COUL D SUGGEST THAT SOME SERVICES WERE RENDERED BY THE RECIPIENTS OF THE COM MISSION. THE AO IS DIRECTED TO VERIFY THE SAME AND DECIDE THE ISSUE AF RESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. GROUND NO. 1 IS ALLOWED FOR STATISTICAL PURPOSE. 10. GROUND NO. 2 RELATES TO THE DELETING OF DISALLO WANCE OF TELEPHONE EXPENSES TO THE EXTENT OF RS. 3,93,322/-. 11. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PR OCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAS DEBITED RS. 8,74,050/ - UNDER THE HEAD TELEPHONE CHARGES. THE AO OBSERVED THAT THE AMOUN TS SO DEBITED COMES TO RS. 2,500/- PER DAY WHICH IS ABOUT 33% OF THE NE T PROFIT OFFERED BY THE ASSESSEE. THE ASSESSEE WAS ASKED TO JUSTIFY THE CL AIM. IT WAS EXPLAINED THAT THE TELEPHONE EXPENSES INCLUDE MOBILE BILL OF 60 EMPLOYEES. HOWEVER, THIS EXPLANATION OF THE ASSESSEE DISMISSED BY THE AO WHO WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ABLE TO SU BSTANTIATE HER CLAIM AND DISALLOWED 50% OF THE CLAIM AND ADDED A SUM OF RS. 4,37,025/-. 12. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IT WAS CONTENDED BEFORE THE LD. CIT(A) THA T THE ASSESSEE IS HAVING FIXED LINE TELEPHONE WITH 32 LINES. IN ADDI TION TO THIS, THE ASSESSEE WAS PAYING MOBILE BILLS OF ITS EMPLOYEES. ALL THE SUPPORTING EVIDENCES WERE FILED BEFORE THE AO. AFTER CONSIDERING THE FA CTS AND THE SUBMISSIONS, THE LD. CIT(A) RESTRICTED THE DISALLOW ANCE TO 5% OF THE TOTAL EXPENSES AND ALLOWED RELIEF OF RS. 3,93,322/-. ITA NO. 5679/M/12 5 13. AGGRIEVED BY THIS, REVENUE IS BEFORE US. 14. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED T HE FINDINGS OF THE AO. 15. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 16. WE FIND THAT THE AO HAS NOT POINTED OUT ANY SPE CIFIC DEFECT OR ERROR IN THE SUPPORTING EVIDENCES FILED BY THE ASSESSEE. HOWEVER, PERSONAL USAGE OF THE TELEPHONE/MOBILES CANNOT BE RULED OUT. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO 5%. IN OUR CONSIDER ED VIEW, LOOKING TO THE NATURE OF THE BUSINESS OF THE ASSESSEE, DISALLOWANC E OF 15% WOULD MEET THE ENDS OF JUSTICE. THE TOTAL DISALLOWANCE WILL S TAND AT RS. 1,31,107/-. GROUND NO. 2 IS PARTLY ALLOWED. 17. GROUND NO. 3 RELATES TO THE DELETION OF ADDITIO N OF RS. 1,0,364/- BEING 1/5 TH OF THE EXPENSES CLAIMED UNDER THE HEAD CONVEYANCE , TRAVELLING AND XEROX CHARGES. 18. WHILE SCRUTINIZING THE RETURN, THE AO NOTICED T HAT RS. 3,70,973/- WAS INCURRED ON ACCOUNT OF CONVEYANCE, RS. 3,72,526 /- ON ACCOUNT OF TRAVELLING AND RS. 2,08,323/- ON ACCOUNT XEROX CHAR GES. ON FURTHER PROBE, THE AO NOTICED THAT ALL THE EXPENSES HAVE BE EN INCURRED ON CASH. HE ACCORDINGLY DISALLOWED RS. 1,90,364/- BEING 1/5 TH OF THE EXPENSES CLAIMED UNDER THE ABOVE HEAD. ITA NO. 5679/M/12 6 19. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFO RE THE LD. CIT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, TH E LD. CIT(A) WAS OF THE OPINION THAT NO ADHOC DISALLOWANCE SHOULD HAVE BEEN MADE WITHOUT POINTING OUT ANY SPECIFIC DEFECT AND DELETED THE AD DITIONS. 20. BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE AO. 21. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN SUBMITTED BEFORE THE LD. CIT(A). 22. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW. NO DOUBT, THE ADDITIONS HAVE BEEN MADE ON ADHOC BASIS WITHOUT POINTING OUT ANY SPECIFIC DEFECT. WE, THEREFORE, DO NOT FIND AN Y REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 3 IS ACCORDINGLY DISMISSED. 23. GROUND NO. 4 RELATES TO THE DELETION OF ADDITIO N OF RS. 20,000/-. 24. AS PER THE AIR INFORMATION RECEIVED BY THE AO, THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS RECEIVED INTEREST OF RS. 20,000/- FROM SHRI ANURAG AVINASH CHANDEKAR. THE AO OBSERVED THAT THI S INTEREST HAS NOT BEEN DISCLOSED BY THE ASSESSEE IN HER RETURN OF INC OME. HE ACCORDINGLY ADDED RS. 20,000/- TO THE INCOME OF THE ASSESSEE. 25. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT IN SO FAR AS INCOME FROM OTHER SOURCES IS CONCERNED, THE ASSESSE E IS FOLLOWING CASH SYSTEM OF ACCOUNTING. SINCE THE INTEREST WAS NOT R ECEIVED DURING THE YEAR, THE SAME WAS NOT OFFERED FOR TAX. THE LD. CIT(A) W AS CONVINCED AND DELETED THE ADDITION. ITA NO. 5679/M/12 7 26. BEFORE US, THE LD. DR SIMPLY SUPPORTED THE FIN DINGS OF THE AO. 27. THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON TH E FINDINGS OF THE LD. CIT(A). 28. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW. WE FIND THAT THE METHOD OF ACCOUNTING HAS NOT BEEN DIS CUSSED BEFORE THE AO IN SO FAR AS INCOME FROM OTHER SOURCES IS CONCERNED . ON THE CONTRARY, IN THE ASSESSMENT ORDER, THE METHOD OF ACCOUNTING MENT IONED IS MERCANTILE SYSTEM OF ACCOUNTING. THIS ISSUE NEEDS TO BE VERIF IED AGAIN AT THE ASSESSMENT STAGE. WE, THEREFORE, RESTORE THIS ISSU E TO THE FILE OF THE AO. THE ASSESSEE IS DIRECTED TO JUSTIFY HER CLAIM OF ME THOD OF ACCOUNTING BY BRINGING COGENT MATERIAL EVIDENCE ON RECORD. THE A O IS DIRECTED TO CONFRONT THE AIR INFORMATION TO THE ASSESSEE AND DE CIDE THE ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 4 IS ALLOWED FOR STATISTICAL PURPOSE. 29. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON 5 TH JUNE, 2014 . 3 . 2& $ 4 56 05.06.2014 2 . 7 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 5 DATED 05.06.2014 . . ./ RJ , SR. PS ITA NO. 5679/M/12 8 3 3 3 3 . .. . +/ +/ +/ +/ 8 &/ 8 &/ 8 &/ 8 &/ / COPY OF THE ORDER FORWARDED TO : 1. '* / THE APPELLANT 2. +,'* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, , / +/ //TRUE COPY// = == = / > > > > ( ( ( ( (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI