CYMA EXPORTS P.LTD, MUMBAI V. ITO 5(1)(3), MUMBAI

ITA 1912/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70877 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 21-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T ROUMUON PAITE
• Keywords: Gift

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, AM AND SHRI VIJAY PAL RA O, JM ./ I.T.A. NO.1912/MUM/2012 ( / ASSESSMENT YEAR: 2006-07) CYMA EXPORTS P. LTD, 220, 2 ND FLOOR, ARUN CHAMBERS,TARDEO MUMBAI - 400 034 / VS. ITO 5(1)(3) AAYAKAR BHAVAN, M.K.D MUMBAI - 400 020 ./ ./PAN/GIR NO. AABCC 4920 F ( ! /APPELLANT ) : ( '#! / RESPONDENT ) ! $ / APPELLANT BY : SHRI KIRIT SANGHVI '#! % $ / RESPONDENT BY : SHRI T. ROUMUON PAITE, DR & ' ( % ) * / DATE OF HEARING : 04.07.2013 +,- % ) * / DATE OF PRONOUNCEMENT : 30.08.2013 . / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-9, MUMBAI (CIT(A) FOR SHO RT) DATED 06.02.2012, CONFIRMING THE LEVY OF PENALTY IN THE SUM OF RS.83000/- BY THE ASSESSING OFFICER (AO) FOR THE ASSESSMENT YEAR (A.Y.) 2006-07 VIDE ORDER DATED 26. 08.2011. 2 ITA NO. 1912 /MUM/2012 (A.Y. 2006-07) CYMA EXPORTS P. LTD. VS. ITO 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-COMPANY, IN THE BUSINESS OF BUILDERS, WAS FOUND TO HAVE CLAIMED EXPENDITURE ON REPAIRS IN THE SUM OF RS. 2,42,017/- IN RESPECT OF A PROPERTY, BEING FLAT NO. 101, BELMO NT, 37 D, NEPEAN SEA ROAD, MUMBAI- 6. THE SAID PROPERTY APPEARING NEITHER IN THE ASSES SEES BALANCE SHEET NOR IN ANY OF ITS COMMUNICATIONS; WITH IN FACT IT CARRYING ON THE DEV ELOPMENT ACTIVITIES AT BANGLORE AND NOT AT MUMBAI, IT WAS QUESTIONED IN ITS RESPECT. IT WAS EXPLAINED THAT THE SAID PROPERTY WAS TENANTED BY THE ASSESSEE FROM ITS OWNER, MRS. A RUNA VORA, RELATIVE OF THE, SHRI SURESH VORA, EX-DIRECTOR OF THE ASSESSEE-COMPANY, S INCE 1970. AS REPAIRS HAD NOT BEEN CARRIED OUT FOR A LONG TIME, THE ASSESSEE AS A TENA NT WAS REQUIRED TO BEAR THE PROPORTIONATE SHARE OF THE REPAIRS OF THE SAID BUILDING AS CHARGE D BY THE HOUSING SOCIETY. THE ASSESSEE, HOWEVER, BEING UNABLE TO EXPLAIN THE BUSINESS PURPO SE FOR WHICH THE SAID PROPERTY WAS RENTED, THE SAID EXPENDITURE, WHICH ALSO INCLUDED R ENT FOR THE YEAR, I.E., RS. 4800, STOOD DISALLOWED. THE SAME STOOD CONFIRMED IN APPEAL UP T O THE TRIBUNAL (VIDE ITS ORDER IN ITA NO. 1510/M/2010 DATED 14.1.2011/ PB PAGES 26-30); T HE ASSESSEE BEING UNABLE TO JUSTIFY ITS CLAIM FOR EXPENDITURE WITH REFERENCE TO ANY BUS INESS PURPOSE; IT, RATHER, HAVING AN OFFICE PREMISES AT MUMBAI AT 220, ARUN CHAMBERS, TA RDEO MUMBAI-34. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT HAVI NG BEEN INITIATED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WERE TAKEN UP FOR CONCLUSIO N. THE ASSESSEE BEING UNABLE TO EXPLAIN ANY BUSINESS PURPOSE IN RESPECT OF THE SAID EXPENDITURE, WITH MENS REA BEING NOT AN ESSENTIAL INGREDIENT FOR THE LEVY OF PENALTY U/S . 271(1)(C), BEING IN THE NATURE OF A CIVIL AND STRICT LIABILITY, THE SAME STOOD LEVIED AT IMPU GNED AMOUNT, 100% OF THE TAX SOUGHT TO BE EVADED WORKING TO RS.82603/-. THE SAME STOOD CON FIRMED IN APPEAL FOR THE SAME REASONS. THE ASSESSEE, WHO DID NOT CARRY OUT ANY BU SINESS ACTIVITY OF DEVELOPMENT DURING THE RELEVANT YEAR, HAD BEEN CARRYING ON ITS BUSINES S OF DEVELOPMENT AT BANGALORE. THE ONLY BUSINESS ACTIVITY DURING THE RELEVANT YEAR WAS SALE OF ONE FLAT AND A PARKING SLOT AND PURCHASE OF TWO FLATS. THE ADDRESS OF ITS MUMBAI OF FICE, STATED TO BE ITS OFFICIAL ADDRESS, WAS OF ARUN CHAMBERS, TARDEO. ACCORDINGLY, THE PURP OSE FOR MAINTAINING THE PROPERTY AT BELMONT, N.S. ROAD, MUMBAI HAD NOT BEEN STATED BY T HE ASSESSEE. THE FACT THAT IT HAD BEEN CLAIMING AND BEEN ALLOWED RENT FOR THE EARLIER YEARS WOULD NOT JUSTIFY A CLAIM FOR THE 3 ITA NO. 1912 /MUM/2012 (A.Y. 2006-07) CYMA EXPORTS P. LTD. VS. ITO SAME, OR FOR REPAIR AND MAINTENANCE EXPENDITURE TOW ARD THE SAME FOR THE CURRENT YEAR. IN OTHER WORDS, THE ASSESSEES CASE IS WHOLLY UNSUBSTA NTIATED, SO THAT IT HAD BEEN ABLE TO FURNISH ANY SATISFACTORY EXPLANATION IN TERMS OF EXPLANATION 1 TO 271(1)(C). SEVERAL CASE LAW WERE ALSO CITED BY THE LD. CIT(A) IN SUPPORT, B ESIDES EXPLAINING THE FACTS IN DETAIL. AGGRIEVED, THE ASSESSEE IS IN SECOND APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES EXPLANATION IS THAT IT BEING A TENAN T IN RESPECT OF THE SAID PROPERTY, HAD NECESSARILY TO BEAR THE IMPUGNED EXPENDITURE SO AS TO MAINTAIN ITS TENANCY. THE ARGUMENT, THOUGH APPEALING AT FIRST SIGHT, HOWEVER, FAILS ON SCRUTINY. THE ASSESSEE, DESPITE THE SAID PROPERTY BEING RENTED BY IT, I.E., GRANTING SO, HAS NOT BEEN ABLE TO STATE ANY USER OF THE SAME FOR ITS BUSINESS OR EVEN THE BUSIN ESS PURPOSE FOR WHICH THE SAME HAD BEEN RETAINED. THAT IS, IT HAS NOT BEEN ABLE TO SPE CIFY ANY BUSINESS USER OR BUSINESS PURPOSE FOR WHICH THE SAME, A RESIDENTIAL FLAT, HAS BEEN TAKEN ON RENT AT ANY TIME IN THE PAST, MUCH LESS AS TO WHY IT CONTINUES TO BE RETAIN ED. THERE IS ALSO NOT AN IOTA OF EVIDENCE ON RECORD TO SUBSTANTIATE THE BUSINESS USER OF THE SAME FOR THE ASSESSEES BUSINESS, AND WHICH LED TO THE DISALLOWANCE OF THE SAID EXPENDITU RE IN THE QUANTUM PROCEEDINGS. COUPLE THIS WITH THE FACT THAT THE ASSESSEE HAS A BUSINESS ADDRESS EACH AT MUMBAI AND BANGALORE, ITS CASE BECOMES WHOLLY UNSUSTAINABLE. IN FACT THE NON-USER FOR BUSINESS PURPOSES, OR, PUT DIFFERENTLY, THE RETENTION OF THE HOUSE PROPERTY BY THE ASSESSEE-COMPANY FOR PURPOSE OTHER THAN A BUSINESS PURPOSE, GETS CRYSTALLIZED AS A FAC T BY THE ORDER BY THE TRIBUNAL IN ITS CASE IN THE QUANTUM PROCEEDINGS. WITH REGARD TO THE PLEA FOR EXPENDITURE BEING REQUI RED TO BE INCURRED TO SAFEGUARD ITS TENANCY, THE SAME, AGAIN, APPEALING AT FIRST BL USH, DOES NOT STOOD THE TEST OF SCRUTINY. IN THE ABSENCE OF RETENTION OF THE HOUSE PROPERTY FOR THE PURPOSE OF BUSINESS, SO THAT IT IS SANS ANY BUSINESS PURPOSE, THE CLAIM OF EXPENDITURE WOU LD NOT STAND THE TEST OF EITHER SECTION 30 OR S. 37(1), NOTWITHSTANDING THE FACT OF THE ASSESSEE-COMPANY BEING A TENANT, TOWARDS WHICH AGAIN THERE IS NO DOCUMENTARY EVIDENC E OTHER THAN OF ITS MENTION IN THE GIFT DEED; THE SAID PROPERTY HAVING BEEN SINCE GIFT ED BY THE OWNER, MRS. ARUNA VORA, TO 4 ITA NO. 1912 /MUM/2012 (A.Y. 2006-07) CYMA EXPORTS P. LTD. VS. ITO SHRI SURESH VORA AND HIS WIFE LATA VORA VIDE GIFT D EED DATED 25.08.2004. FURTHER, AGAIN, THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSE E WAS OBLIGATED UNDER THE TERMS OF ARRANGEMENT OR THE RENT AGREEMENT TO BEAR THE SAID EXPENDITURE. THE ASSESSEE HAS EXPLAINED THIS BY STATING THAT EVERYTHING NEED NOT BE IN WRITING. WE ARE UNABLE TO COMPREHEND THE SAME, I.E., THE SAID REASONING. THER E IS, ON THE CONTRARY, NOTHING IN WRITING. THE ASSESSEE IS A LEGAL ENTITY, A JURIDICA L PERSON, WHICH COULD ACT OR EXPRESS ITS WILL ONLY THROUGH AND ON THE BASIS OF WRITTEN DOCUM ENTS, VIZ. RESOLUTIONS, AGREEMENTS, ETC., AND NOT ORALLY, AS AN INDIVIDUAL MAY. FURTHER , NO PERSON WOULD UNDERTAKE REPAIRS UNTIL REQUIRED TO IN TERMS OF THE RELEVANT ARRANGEM ENT OR UNDERSTANDING, AND WHICH HAS NOT BEEN SPELLED OUT IN ANY MANNER, SO THAT THE RETENTI ON OF THE SAID RESIDENTIAL FLAT BY THE ASSESSEE-COMPANY FOR YEARS TOGETHER ITSELF REMAINS A MYSTERY. IN FACT, THE COPY OF THE LEDGER ACCOUNT (PB PGS. 40-41) CLEARLY SHOWS THAT T HE EXPENDITURE HAS BEEN INCURRED FOR AND ON BEHALF OF SHRI SURESH VORA, AND WHICH WOULD ONLY IMPLY THAT IT IS THE SAID SHRI VORA WHO IS LIABLE FOR THE SAME. FINALLY, AS IS CLE AR FROM THE GIFT DEED (PB PGS. 31-38), THE ASSESSEE IS A MONTHLY TENANT (AT RS.400/- PER M ONTH), AND WHICH DOES NOT, THEREFORE, GIVE RISE TO ANY TENANCY RIGHTS, TO PROTECT WHICH T HE EXPENDITURE IS CLAIMED TO HAVE BEEN INCURRED. THE ASSESSEES CLAIM OF THE IMPUGNED EXPENDITURE IS THUS DE HORS ANY EXPLANATION AND/OR MATERIAL ON RECORD. UNDER THE FACTS AND CIRC UMSTANCES, THEREFORE, WE FIND NO INFIRMITY IN THE LEVY OF PENALTY, WHICH IS AT NEARL Y 100% OF THE TAX SOUGHT TO BE EVADED. WE, ACCORDINGLY, THEREFORE, CONFIRM THE SAME. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. /- )0 '1 2/) % 3 / % ) 45 ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 30, 20 13 SD/- SD/- (VIJAY PAL RAO) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER & 6( MUMBAI; 7' DATED : 30.08.2013 5 ITA NO. 1912 /MUM/2012 (A.Y. 2006-07) CYMA EXPORTS P. LTD. VS. ITO .'../A.K.PATEL P.S. ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '#! / THE RESPONDENT 3. & ?) ( ) / THE CIT(A) 4. & ?) / CIT - CONCERNED 5. B C ')'D1 , * D1- , & 6( / DR, ITAT, MUMBAI 6. C E2 F ( / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , & 6( / ITAT, MUMBAI