VAZIFDAR BUILDERS P.LTD, MUMBAI V. ITO WD 3(3)(4), MUMBAI

ITA 1813/MUM/2012

• Counselvise Citation: 181319914 RSA 2012
• Duration Of Justice: 2 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rule of consistency
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI . . , / BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND . , SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER . / ITA NO.1813/MUM/2012 / ASSESSMENT YEAR 2007-08 M/S. VAZIFDAR BUILDERS PVT. LTD. 17, CORINTHIAN, GROUND FLOOR, OFF. ARTHUR BUNDER ROAD, COLABA, MUMBAI 400 020 / VS. INCOME-TAX OFFICER, WARD-3 (3)(4), MUMBAI. ! ./ '# ./ PAN/GIR NO. : AAACV1854C ( !$ / APPELLANT ) .. ( %&!$ / RESPONDENT ) !$ ' / APPELLANT BY: SHRI NISHIT GANDHI %&!$ ( ' / RESPONDENT BY : SHRI RAJENDRA KUMAR ( ) / DATE OF HEARING : 20/05/2014 *+ ( ) / DATE OF PRONOUNCEMENT : 20/05/2014 , / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST ORDER PASSED BY LD. CIT(A)-7, MUMBAI DATED 25/10/2011 FOR ASSESSMENT YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1.1 THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS )-7, MUMBAI (CIT(A)} ERRED IN CONFIRMING THE ASSESSING OFFICERS ACTION TO DISALLOW THE EXPENSES AMOUNTING TO RS.8,51,403/-. 1.2 IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSEE , COMPANY HAS INCURRED THESE EXPENSES FOR THE BUSINESS AND IT HAS NO BEARI NG ON THE INCOME FROM HOUSE PROPERTY OR INCOME FROM OTHER SOURCES. . / ITA NO.1813/MUM/2012 / ASSESSMENT YEAR 2007-08 2 2. THE AO DISALLOWED A SUM OF RS.8,51,403/- ON THE GROUND THAT THESE EXPENSES HAVE NOT BEEN INCURRED BY THE ASSESSEE FO R THE PURPOSES OF ITS BUSINESS AS AGAINST THE CASE OF THE ASSESSEE THAT THESE ARE INCURRED FOR THE PURPOSE OF BUSINESS. LD. CIT(A) HAS UPHELD THE DISALLOWANCE F OLLOWING HIS ORDER FOR A.Y 2005-06 AND 2006-07. IT WILL BE RELEVANT TO REPROD UCE THE CONCLUSION OF LD. CIT(A) VIDE WHICH HE HAS UPHELD THE DISALLOWANCE ON THE BASIS OF HIS PREDECESSORS ORDER FOR A.Y 2005-06 AND 2006-07. 4.2 I HAVE CONSIDERED THE A.OS ORDER AS WELL AS APPELLANT ARS SUBMISSION. HAVING CONSIDERED BOTH, I FIND THAT SIMILAR ISSUE H AS BEEN DECIDED AGAINST THE APPELLANT BY MY PREDECESSOR CIT(A) VIDE HIS ORDER N O.CIT(A)-7/ITO.3(3)(3)/IT- 384/09-10 AND ORDER NO. CIT(A)-7/ITO.3(3)(4)/IT-365 /09-10 DATED 22.09.2010 FOR A.YR. 2005-06 AND 2006-07 RESPECTIVELY. I, THEREFO RE, FIND IT PROPER AND APPROPRIATE TO FOLLOW THE RULE OF CONSISTENCY. FURTHER, I AGRE E WITH THE A.O THAT IN THE ABSENCE OF DETAILS AND VERIFIABILITY, ESTIMATED DISALLOWANCE H AS TO BE MADE. ACCORDINGLY, THE ADDITION MADE BY THE AO IS CONFIRMED EVEN FOR THE Y EAR UNDER CONSIDERATION. THUS, APPELLANTS THIS GROUND OF APPEAL IS DISMISSED. 3. ON THESE FACTS, IT WAS THE CASE OF LD. AR THAT T HE ISSUE RAISED BY THE ASSESSEE IN THE PRESENT CASE IS COVERED BY THE DECI SION OF TRIBUNAL DATED 23/08/2013 PASSED IN ITA NO.8269&8270/MUM/2010 IN R ESPECT OF ASSESSMENT YEAR 2005-06 AND 2006-07, WHEREIN THE AFOREMENTIONE D ORDER OF LD. CIT(A) FOR A.Y 2005-06 AND 2006-07 WAS REVERSED AND THE APPEAL FILED BY THE ASSESSEE WERE ALLOWED. FOR THE SAKE OF COMPLETENESS THE SAID ORD ER IS REPRODUCED BELOW. THESE TWO APPEALS BY THE ASSESSEE RELATE TO THE AS SESSMENT YEARS 2005-2006 AND 2006-2007. SINCE COMMON ISSUE IS RAISED IN BOTH THE SE APPEALS, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 2005-2006 2. THE ONLY ISSUE RAISED IS AGAINST THE CONFIRMATIO N OF DISALLOWANCE OF `4,74,591 ON ACCOUNT OF CERTAIN EXPENSES. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF PAIN TING. IT ALSO EARNED INCOME FROM DIVIDEND, INTEREST AND DIVIDEND. THE ASSESSING OFFI CER NOTICED THAT TOTAL EXPENSES OF `31.11 LAKH WERE DEBITED TO THE PROFIT AND LOSS ACC OUNT, OUT OF WHICH ADMINISTRATIVE, OPERATING AND OTHER EXPENSES AMOUNTED TO `15.85 LAK H. ON BEING CALLED UPON TO JUSTIFY SUCH EXPENSES, THE ASSESSEE FILED ITS REPLY DATED 05.02.2007 WHICH HAS BEEN REPRODUCED ON PAGES 4-5 OF THE ASSESSMENT ORDER. TH ROUGH THIS REPLY, THE ASSESSEE SUBMITTED DETAILS AND REASONS FOR THE CLAIM OF DEDU CTION IN RESPECT OF EACH EXPENDITURE DISTINCTLY. THE ASSESSING OFFICER HELD THAT : THE REASONS GIVEN BY THE . / ITA NO.1813/MUM/2012 / ASSESSMENT YEAR 2007-08 3 ASSESSEE FOR SUCH AN EXCESSIVE CLAIM OF EXPENSES AR E NOT ACCEPTABLE. THEREFORE AFTER CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE C OMPANY, THE FOLLOWING DISALLOWANCE U/S 37(1) OF THE I.T.ACT, 1961 ARE MAD E:- EXPENSES CLAIMED DISALLOWED RENT 6,22,379 NIL RATES & TAXES 98,350 88,350 REPAIRS & MAINTENANCE 1,49,841 1,49,841 INSURANCE CHARGES 20,332 NIL PRINTING & STATIONERY 28,815 14,400 MOTORCAR EXPENSES 2,03,913 50,000 AD. PUB 13,494 3,000 TRAVELLING 19,258 8,000 PROFESSIONAL & LEGAL EXPENSES 34,540 10,000 DIRECTORS SITTING FEES 4,750 NIL DIRECTORS CLUB FEES 31,312 16,000 TELEPHONE CHARGES 83,090 17,000 REMUNERATION TO AUDITORS 22,040 NIL DONATION 1,000 1,000 MISCELLANEOUS EXPENSES 1,15,116 75,000 OFFICE EXPENSES 20,410 5,000 DIRECTORS REMUNERATION 60,000 NIL FUEL 56,688 28,000 2.1 RESULTANTLY, AN ADDITION OF `4,74,591 WAS MADE OUT OF SUCH EXPENSES. THE LEARNED CIT(A) UPHELD THE ACTION OF THE ASSESSING O FFICER ON THIS ISSUE. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT THE ASSESSE E GAVE DUE EXPLANATION IN SUPPORT OF DEDUCTION OF EXPENSES HEAD-WISE. FOR EXA MPLE, IN SUPPORT OF DEDUCTION FOR REPAIRS AND MAINTENANCE AMOUNTING TO `1,49,841, THE ASSESSEE SUBMITTED THAT : DETAILS IS ALREADY SUBMI TTED TO YOUR HONOUR. REPAIR IS FOR THE OFFICE PREMISES OF THE COMPANY. THE ASSESSING OFFICER DISALLOWED THE ENTIRE EXPENDITURE WITHOUT GIVING AN Y REASON WORTH THE NAME. SIMILAR IS THE POSITION ABOUT OTHER DISALLOWA NCES MADE BY THE ASSESSING OFFICER IN RESPECT OF WHICH THE ASSESSEE FURNISHED DETAILS AND ALSO REASONS FOR THE ALLOWABILITY. SUCH AN APPROACH ADOPTED BY THE ASSESSING OFFICER IN ARBITRARILY DISALLOWING EXPEND ITURE WITHOUT CONTRADICTING THE EXPLANATION GIVEN BY THE ASSESSEE, IS TOTALLY U NCALLED FOR. WHEN AN ASSESSEE GIVES EXPLANATION IN SUPPORT OF DEDUCTION FOR AN EXPENSE, IT BECOMES THE DUTY OF THE ASSESSING OFFICER TO EITHER ACCEPT OR REJECT THE SAME. IN CASE HE ACCEPTS THE EXPLANATION, THE MATTER ENDS . NO ADDITION CAN BE MADE. FOR MAKING ANY DISALLOWANCE IT IS INCUMBENT U PON THE ASSESSING OFFICER TO SHOW AS TO WHERE THE EXPLANATION GIVEN B Y THE ASSESSEE WAS WRONG. SIMPLY SAYING THAT THE CLAIM IS UNREASONABL E OR EXCESSIVE, WITHOUT GOING INTO THE DETAILS FURNISHED BY THE ASSESSEE OR SHOWING THAT HOW IT IS UNREASONABLE OR EXCESSIVE, IS NOT WARRANTED. THE LEARNED CIT(A) ALSO FOLLOWED THE SUIT BY SIMPLY REJECTING THE GROUND BY WRITING THREE LINES AS UNDER:- . / ITA NO.1813/MUM/2012 / ASSESSMENT YEAR 2007-08 4 I HAVE CONSIDERED THE FACTS OF THE CASE. THE A.O. HAS DISCUSSED THE ISSUE IN DETAIL AND GIVEN REASONS FOR THE DISALLOWANCE. I AG REE WITH THE A.O. THAT IN THE ABSENCE OF DETAILS AND VERIFIABILITY, ESTIMATED DISALLOWANCE HAS TO BE MADE. THE DISALLOWANCE MADE BY THE A.O. IS REASONAB LE AND THEREFORE CONFIRMED. 3.1 IT IS APPARENT THAT THE REASONING GIVEN BY THE LEARNED CIT(A) IS ALSO INCORRECT BECAUSE THE ASSESSEE GAVE THE DETAILS OF SUCH EXPEN SES WHICH FACT HAS BEEN ADMITTED AND RECORDED ON PAGES 4 AND 5 OF THE ASSE SSMENT ORDER. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THA T THERE IS NO BASIS FOR MAKING OR SUSTAINING ANY SUCH DISALLOWANCE OF EXPENSES. WE, T HEREFORE, OVERTURN THE IMPUGNED ORDER ON THIS ISSUE AND ORDER FOR THE DELE TION OF ADDITION. ASSESSMENT YEAR 2005-2006 4. THE FACTS FOR THIS YEAR ARE ADMITTEDLY MUTATIS M UTANDIS SIMILAR TO THOSE FOR ASSESSMENT YEAR 2005-2006. FOLLOWING THE SAME PATTE RN AS ADOPTED IN THE EARLIER YEAR, THE ASSESSING OFFICER MADE DISALLOWANCES OUT OF CERTAIN EXPENSES ON AN ARBITRARY BASIS. SUCH DISALLOWANCES WORKED OUT TO ` 6.51 LAKH. THE LEARNED CIT(A), FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2004-2005, SUSTAINED THE ADDITION. AS NO DISTINCTION IN THE FACTS AND CIRCUMSTANCES OF THE C ASE FOR THE INSTANT ASSESSMENT YEAR HAS BEEN BROUGHT TO OUR NOTICE, FOLLOWING THE VIEW TAKEN HEREINABOVE FOR ASSESSMENT YEAR 2005-2006, WE ORDER FOR THE DELETIO N OF ADDITION OF `6,51,898 FOR THE CURRENT YEAR. 5. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. 4. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY LD. CIT(A). 5. AFTER HEARING BOTH THE PARTIES, AS THE ADDITION HAS BEEN CONFIRMED BY LD. CIT(A) SIMPLY FOLLOWING THE ORDER FOR A.Y 2005-06 A ND 2006-07 AND THOSE ORDERS HAVE BEEN REVERSED BY THE TRIBUNAL, THEREFORE, RESP ECTFULLY FOLLOWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL WE DELETE THE ADDITION IN THE PRESENT YEAR ALSO AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWE D. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/05/201 4 , ( *+ - ./ 20/05/2014 + ( 0 1 SD/- SD/- ( . / D.KARUNAKARA RAO ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; . DATED 20/05/2014 . / ITA NO.1813/MUM/2012 / ASSESSMENT YEAR 2007-08 5 , , , , ( (( ( %)2 %)2 %)2 %)2 32 ) 32 ) 32 ) 32 ) / COPY OF THE ORDER FORWARDED TO : 1. !$ / THE APPELLANT 2. %&!$ / THE RESPONDENT. 3. 4 ( ) / THE CIT(A)- 4. 4 / CIT 5. 250 %) , , / DR, ITAT, MUMBAI 6. 0 6 / GUARD FILE. , , , , / BY ORDER, &2) %) //TRUE COPY// 7 77 7 / 8 8 8 8 ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS