SANDEEP S. SURI, MUMBAI V. DCIT RG 15(3), MUMBAI

ITA 1842/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88407 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-01-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH, MUMBAI , , , BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ./ I.T.A. NO.1842/MUM/2010 ( / ASSESSMENT YEAR : 2006-07) SHRI SANDEEP S. SURI 6, LAXMI SADAN N.S. ROAD NO.10 JUHU MUMBAI-400 049. / VS. DY. COMMISSIONER OF INCOME - TAX- RANGE-15(3) MUMBAI. ./ ./PAN/GIR NO. : ANRPS 9421 R ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI - A R / RESPONDENT BY : SHRI JEETENDRA KUMAR - DR !' # $ / DATE OF HEARING : 27 /01/2015 %&' $ / DATE OF PRONOUNCEMENT : 11/02 /2015 ( / O R D E R PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 21/1/2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSE E HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 26, MUMBAI [LD. CIT(A)'] ERRED IN CONFIRMING THE ASSESSING OFFICER' S ACTION TO ADD RS.9,66,194/- BY APPLYING PROVISION OF SECTION 145(3). IT IS RESPECTFULLY SUBMITTED THAT APPELLANT HAS TRI ED TO RECONCILE THE SAID DIFFERENCE WITH THE INFORMATION RECEIVED U/S.133(6). HOWEVER, DUE T O SHORTAGE OF TIME AND LACK OF DETAILS AVAILABLE, APPELLANT COULD NOT RECONCILE THE SAME AT THE TIME OF HEARING. 2 ITA NO.1842/M/10 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 26, MUMBAI ['LD. CIT (A)'] ERRED IN CONFIRMING THE ASSESSING OFFICER'S A CTION TO ADD RS.5,35,000/- ON ACCOUNT OF COMMISSION PAID. IT IS RESPECTFULLY SUBMITTED THAT THE SAID ADDITION IS MADE ON THE BASIS OF ASSUMPTIONS AND WITHOUT ANY CONCRETE EVIDENCE ON RECORD. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 26, MUMBAI [TD. CIT(A)'] HAS UPHELD THE DECISION OF ASSESSING OFFICER WHEREB Y CONFIRMED THE ADDITION OF RS.2,05,600/- MADE ON ACCOUNT OF SALES PROMOTION EXPENSES. IT IS RESPECTFULLY SUBMITTED THAT CONSIDERING THE N ATURE OF ACTIVITY CARRIED OUT BY THE APPELLANT, THIS KIND OF EXPENSES ARE INCURRED DURIN G THE NORMAL COURSE OF BUSINESS FOR OBTAINING THE NEW BUSINESS AND ENTERTAINING THE CLI ENTS TO KEEP THE HEALTHY BUSINESS ENVIRONMENT. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 26, MUMBAI ['LD. CIT(A)'] HAS CONFIRMED THE ADDITION OF RS.6,00,000/- MADE ON ACCOUNT OF SALARY. IT IS RESPECTFULLY SUBMITTED THAT ALL THE SALARIES HAVE BEEN PAID THROUGH CHEQUES AND DETAILS OF SALARIES I.E. NAME OF PERSONS TO WHOM TH E SALARIES PAID, HAS SUBMITTED TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT. ADDITION IS MADE ON THE BASIS OF ASSUMPTIONS. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - 26, MUMBAI [LD. CIT(A)'] ERRED IN CONFIRMING THE ASSESSING OFFICER' S ACTION OF MAKING ADDITION OF RS. 10,70,000/- ON ACCOUNT OF DISALLOWA NCE OF VARIOUS EXPENSES. IT IS RESPECTFULLY SUBMITTED THAT SAID EXPENSES ARE INCURRED GENUINELY FOR THE BUSINESS PURPOSE AND ARE INCURRED DURING THE NORMAL COURSE O F BUSINESS. ALSO ADDITION IS MERELY ON ASSUMPTION. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OUTDO OR ADVERTISING, CARRIES ON BUSINESS IN THE NAME AND STYLE OF M/S. PERQ ADVERTI SING (P) LTD.(PAPL). THE ASSESSEE SCOUTS AND PROCURES HOARDING SITES AS PER THE ORDER S RECEIVED FROM ITS PRINCIPAL M/S. PERQ ADVERTISING (P) LTD. IN FACT THE SITES ARE IDE NTIFIED AND PROCURED ON THE BASIS OF NEEDS OF VARIOUS CLIENTS OF ITS PRINCIPAL M/S. PAPL . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE WORK OF THE ASSES SEE IS ONLY PURCHASE OF SITE AND SELLING THE SAME TO M/S. PAPL. THUS, THE AO WAS OF THE VIEW THAT THE VARIOUS EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF CONVEYANCE, T ELEPHONE, SUNDRY VEHICLE EXPENSES, OFFICE TRANSPORTATION, SALES PROMOTION, C OMMISSION ETC. ARE PURELY PERSONAL IN NATURE AND HAS NO CONNECTION WITH THE BUSINESS. TO VERIFY THE ALLOWABILITY OF EXPENSES AND RELATION WITH THE BUSINESS ACTIVITY OF THE ASSE SSEE , THE AO SOUGHT INFORMATION U/S. 133(6) OF THE ACT FROM THE VARIOUS PARTIES. THE ASS ESSEE WAS ASKED TO RECONCILE THE 3 ITA NO.1842/M/10 INFORMATION RECEIVED BY THE AO. THE ASSESSEE SUBMIT TED ITS WORKING ON THE DIFFERENCES POINTED OUT BY THE AO VIDE REPLY FATED 3/12/2008. T HE AO HELD THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENSES ON ACCOUNT OF TELEPHONE, ELE CTRICITY ETC. AND ACCORDINGLY DISALLOWED THE AMOUNT OF RS.9,63,194/- BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT. APART FROM THIS THE AO HAS FURT HER MADE DISALLOWANCE ON ACCOUNT OF PAYMENT OF COMMISSION, SALES PROMOTION, SALARY E XPENSES, SUNDRY EXPENSES ETC. THE ASSESSEE CHALLENGED THE ACTION OF AO BEFORE CIT(A) BUT COULD NOT SUCCEED. 3. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAS CLAIMED BOGUS EXPENDITURE AND ACCORDIN GLY THE AO INVOKED PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT IN PARA -13 AS UNDER :- 13. I HAVE CONSIDERED ASSESSEES REPLY, WHICH IS ONLY AS VAGUE REPLY. THE EXPENSES UNDER THE HEAD TELEPHONE AND ELECTRICITY A RE BEING CLAIMED BY M/S. PAPL AND THEREFORE, IN THIS CONCERN ONLY BOGUS EXPENDITU RE ARE CLAIMED. IF THE ASSESSEE HAS PARTED WITH THE EXPENDITURE OF M/S. PAPL, HE MU ST HAVE PROCURED THE EVIDENCE OF THE SAME BUT THAT IS NOT THE CASE HERE IN OTHER WOR DS, THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE. THUS, THE TOTAL ADDITION ON THIS ACCO UNT COMES TO RS.9,63,194/-, WHICH IS OUTGROWTH OF DIFFERENCE ARISING DUE TO ISSUANCE OF NOTICE U/S. 133(6) OF THE INCOME TAX ACT, 1961 AND THE SAME WILL BE ADDED TO THE TOT AL INCOME OF THE ASSESSEE AFTER APPLYING THE PROVISIONS OF SECTION 145(3) OF THE IN COME TAX ACT, 1961. INITIATE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME TAX ACT, 1 961 ON THIS POINT FOR FURNISHING ACCURATE PARTICULARS AND CONCEALMENT OF INCOME. 3.1 DESPITE INVOKING PROVISIONS OF SECTION 145(3) T HE AO PROCEEDED TO DISALLOW VARIOUS OTHER EXPENSES AND COMPUTED TOTAL INCOME OF THE ASSESSEE AS UNDER :- COMPUTATION OF TOTAL INCOME: AMOUNT IN RUPEES INCOME AS PER RETURNED INCOME 1789076 ADD: ADDITIONS AS DISCUSSED IN THIS ORDER (I) ADDITION ON ACCOUNT OF INTEREST AS DISCUSSED IN PARAGRAPH 5 OF THIS ORDER 12940 (II) ADDITION U/S. 133(3) OF INCOME TAX ACT, 1961 AS DISCUSSED IN PARAGRAPHS 11 TO 13 OF THIS ORDER 963194 (III) ADDITION ON ACCOUNT OF COMMISSION-AS DISCUSSED IN PARAGRAPH 14 OF THIS 535000 4 ITA NO.1842/M/10 ORDER (IV) ADDITION ON ACCOUNT OF SALES PROMOTION EXPENSES AS DISCUSSED IN PARAGRAPHS 15 AND 16 OF THIS ORDER 205600 (V) ADDITION ON ACCOUNT OF SALARY AS DISCUSSED IN PARAGRAPH 17 AND 18 OF THIS ORDER 600000 (VI) ADDITION ON ACCOUNT OF OTHER HEADS EXPENSES AS DISCUSSED IN PARAGRAPHS 19 TO 24 OF THIS ORDER 1070000 3386734 TOTAL TAXABLE INCOME 3386734 5175810 ROUNDED OFF TO 5175810 3.2 THUS, IT IS CLEAR THAT THE AO AFTER REJECTING T HE BOOK RESULTS OF THE ASSESSEE PROCEEDED TO COMPUTE TOTAL INCOME BY TAKING INTO AC COUNT THE RETURNED INCOME OF THE ASSESSEE AND MAKING VARIOUS ADDITIONS TO THE RETURN ED INCOME. ONCE THE AO FOUND THAT THE ACCOUNTS OF THE ASSESSEE ARE NOT CORRECT OR INC OMPLETE AND CONSEQUENTLY INVOKED PROVISION OF SECTION 145(3) THEN THE ASSESSMENT HAS TO BE MADE ON THE BASIS OF BEST JUDGMENT BY IGNORING THE BOOK RESULTS. ACCORDINGLY, PROPER COURSE OF MAKING THE ASSESSMENT OF THE TOTAL INCOME IS THE BEST JUDGMENT AND, THE AO SHOULD HAVE APPLIED THE GP/NET PROFIT RATE AS PREVALENT IN THE INDUSTRY . ACCORDINGLY THE ACTION OF THE AO IS NOT AS PER PROVISIONS OF LAW BECAUSE ONCE THE BOOK RESULTS ARE REJECTED U/S. 145(3) THEN AO IS REQUIRED TO MAKE ASSESSMENT AS PER PROVI SIONS OF SECTION 144. 3.4 AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN THE INTEREST OF JUSTICE WE SET ASIDE THIS MATTER TO THE RECORD OF T HE AO FOR DENOVO ASSESSMENT. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11/02 /2 015. ( %&' ! ) *' + 11/02/2015 ,# SD/- SD/- ( SANJAY ARORA ) ( VIJAY PAL RAO ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER !-# MUMBAI; *' DATED 11/02/2015 . ' . ./ JV, SR. PS 5 ITA NO.1842/M/10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , !' / DR, ITAT, MUMBAI 6. #$ %' / GUARD FILE. & & & & / BY ORDER, & //TRUE COPY// ' ' ' ' / &( &( &( &( ) ) ) ) (DY./ASSTT. REGISTRAR) , !' / ITAT, MUMBAI.