NEELA SAMIR BHATIA, Mumbai V. ACIT CIRCLE 21(2), Mumbai

ITA 1987/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4262 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: UDAYA BHASKAR JAKKE
• Keywords: Earning of tax free income; Corroborative evidences; Rule 8D
• Section: 14A; 13

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL SMC BENCH MU MBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.1987/MUM/2019 (ASSESSMENT YEAR 2012-13) NEELA SAMIR BHATIA, FLAT NO. 303A, BEAUMONDE TOWERS, APPASAHEB MARATE MARG, PRABHADEVI, MUMBAI-40025 P AN: AAUPB4190J VS. ACIT-21(2), ROOM NO. 115, 1 ST FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-40012. APPELLANT RESPONDENT APPELLANT BY : NONE REVENUE BY : SHRI UDAYA BHASKAR JAKKE (DR) DATE OF HEARING : 05.10.2020 DATE OF PRONOUNCEMEN T : 13.10.2020 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER SAKTIJIT DEY, JUDICIAL MEMBER; 1. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER DAT ED 28.01.2019 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-48, MUMBAI [FO R SHORT THE LD. CIT(A)] FOR ASSESSMENT YEAR 2012-13. 2. WHEN THE APPEAL WAS CALLED FOR HEARING, NO ONE WAS PRESENT ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE. HOWEVER, CONSID ERING THE NATURE OF DISPUTE, I PROCEED TO DISPOSE OF THE APPEAL EX- PARTE QUA THE ASSESSEE AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE A ND ON THE BASIS OF MATERIALS AVAILABLE ON RECORD. 3. IN GROUND NO. 1 TO 1.2, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 2,03,746/- MADE UNDER SECTION 14A R.W.R 8D OF T HE ACT. ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 2 4. BRIEFLY THE FACTS ARE, THE ASSESSEE IS AN INDIVIDUA L. AS STATED BY THE ASSESSING OFFICER, THE ASSESSEE IS ENGAGED IN RUNNI NG A PLACEMENT AGENCY IN THE NAME AND STYLE OF SEARCH & INSPIRE. FOR TH E ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HER RETURN OF INC OME ON 08.09.2012 DECLARING TOTAL INCOME OF RS. 34,72,769/-. DURING T HE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT IN T HE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS EARNED EXEMPT INCOM E BY WAY OF DIVIDEND AMOUNTING TO RS. 1,302/-. NOTICING THE ABOVE, THE A SSESSING OFFICER CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE UNDER SECTION 14A R.W.R 8D BEING EXPENDITURE ATTRIBUTABLE TO EARNING OF EXEMPT INCOME SHOULD NOT BE MADE. THOUGH, THE ASSESSEE OBJECTED T O THE PROPOSED DISALLOWANCE, HOWEVER, THE ASSESSING OFFICER REJECT ED THE SUBMISSIONS OF THE ASSESSEE AND PROCEEDED TO DISALLOW RS. 2,03,746 /- TOWARDS ADMINISTRATIVE EXPENDITURE UNDER RULE 8D(2)(III). T HOUGH, THE ASSESSEE CHALLENGED THE AFORESAID DISALLOWANCE BEFORE LD. CI T(A), HOWEVER, SHE WAS UNSUCCESSFUL. 5. I HAVE HEARD THE SUBMISSIONS OF LD. DEPARTMENTAL RE PRESENTATIVE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE GROUNDS RAISED, ASSESSEES GRIEVANCES ARE TWOFOLD. FIRSTLY, BEFORE MAKING DISALLOWANCE, THE ASSESSING OFFICER HAS NOT RECORDE D ANY SATISFACTION AND SECONDLY, THE DISALLOWANCE MADE UNDER SECTION 14A R .W.R 8D CANNOT EXCEED THE EXEMPT INCOME EARNED DURING THE YEAR. AS FAR AS THE FIRST ISSUE ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 3 IS CONCERNED, I DO NOT FIND ANY MERIT IN THE CONTEN TIONS OF THE ASSESSEE. IT IS EVIDENT, THE ASSESSEE SUO-MOTU HAS NOT COMPUTED ANY DISALLOWANCE UNDER SECTION 14A R.W.R 8D, THOUGH SHE HAD EARNED E XEMPT INCOME DURING THE YEAR. THEREFORE, IN ABSENCE OF ANY SUO-MOTU DIS ALLOWANCE MADE BY THE ASSESSEE IN THE RETURN OF INCOME, THE ASSESSING OFF ICER HAS RIGHTLY PROCEEDED FOR MAKING DISALLOWANCE UNDER SECTION 14A . HOWEVER, IN SO FAR AS THE SECOND ISSUE IS CONCERNED, I FIND SUBSTANTIA L FORCE IN THE CONTENTION OF THE ASSESSEE. UNDISPUTEDLY, DURING THE YEAR UNDE R CONSIDERATION THE ASSESSEE HAD EARNED AN AMOUNT OF RS. 1,302/- AS EXE MPT INCOME, WHEREAS, THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF R S. 2,03,746/-. NOW, IT IS FAIRLY WELL-SETTLED, BY VIRTUE OF RATIO LAID DOW N IN A PLETHORA OF JUDICIAL PRECEDENTS THAT DISALLOWANCE UNDER SECTION 14A R.W. R 8D CANNOT EXCEED THE QUANTUM OF EXEMPT INCOME EARNED DURING THE YEAR . IN CONFORMITY WITH THE SETTLED LEGAL POSITION, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE UNDER SECTION 14A R.W.R 8D TO RS. 1,30 2/-. CONSEQUENTLY, GROUND NO. 1 & 1.1 ARE DISMISSED. WHEREAS, GROUND N O.1.2 IS ALLOWED. 6. IN GROUND NO. 1.3, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF RS. 4,20,000/- BEING EXPENSES INCURRED TOWARDS SALARY P AID TO PEONS, SWEEPERS, CLEANERS ETC. 7. BRIEFLY, THE FACTS ARE, DURING THE ASSESSMENT PROCE EDING, THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS DEBITED AN AMOUNT O F RS. 11,80,300/- UNDER THE HEAD SALARY, OUT OF WHICH AN AMOUNT OF RS. 4, 20,000/- WAS TOWARDS ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 4 THE SALARY PAID TO SWEEPERS, CLEANERS AND PEON. AFT ER CALLING FOR SUPPORTING EVIDENCE AND VERIFYING THEM, HE OBSERVED THAT THE AFORESAID AMOUNT COMPRISES OF THE FOLLOWING:- (I) SWEEPERS, CLEANERS AND PEON RS. 1,27,000/- (II) PRAKASH BHONSALE - RS. 1,49,500/- (III) SHIVAJI NAIK - RS. 1,43,500/-. 8. THE ASSESSING OFFICER DISALLOWED THE AFORESAID EXPE NDITURE ON THE REASONING THAT THE VOUCHERS SUBMITTED ARE UNDATED A ND UNSIGNED. THE AFORESAID DISALLOWANCE MADE BY ASSESSING OFFICER WA S ALSO SUSTAINED BY LD. CIT(A). 9. I HAVE CONSIDERED THE SUBMISSIONS OF LD. DEPARTMENT AL REPRESENTATIVE AND PERUSED THE MATERIALS ON RECORD. AS COULD BE SEEN F ROM THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, SHRI PRAKASH BHONSALE AND SHRI SHIVAJI NAIK WERE WORKING WITH THE ASSESSE E AS OFFICE PEONS. IT IS ALSO SEEN THAT THOUGH THE ASSESSEE SUBMITTED SALARY VOUCHERS OF THESE TWO PERSONS, HOWEVER, THEY WERE NOT ACCEPTED BY THE ASS ESSING OFFICER SINCE THEY WERE UNDATED. HOWEVER, FACT REMAINS THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF PLACEMENT AGENCY. IT IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS OFFERED INCOME UNDER THE HEAD BUSINES S & PROFESSION. THEREFORE, IT HAS TO BE ACCEPTED THAT THE ASSESSEE MUST BE HAVING A OFFICE SET-UP TO CARRY ON HER BUSINESS ACTIVITY. THAT BEIN G THE CASE, SERVICES OF OFFICE PEON IS ESSENTIALLY REQUIRED. IT IS ALSO NOT A FACT THAT THE ASSESSEE HAS ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 5 FAILED TO PRODUCE ANY SUPPORTING EVIDENCE. THE ASSE SSEE DID PRODUCE SUPPORTING SALARY VOUCHERS, HOWEVER, THEY WERE REJE CTED ONLY ON THE GROUND THAT THEY ARE UNDATED, THOUGH AS PER ASSESSE ES VERSION, THE MONTH FOR WHICH THE SALARY WAS PAID HAS BEEN MENTIONED IN THE VOUCHER. BE THAT AS IT MAY, NO FURTHER ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER TO ASCERTAIN WHETHER THE CONCERNED PERSONS WERE AT ALL WORKING WITH THE ASSESSEE OR NOT. IN VIEW OF THE AFORESAID, I HOLD T HAT THE SALARY PAID TO PRAKASH BHONSALE AND SHIVAJI NAIK HAS TO BE ALLOWED . AS REGARDS THE AMOUNT OF RS. 1,27,000/- PAID TO SWEEPER, CLEANER A ND PEON, IT IS NOTICED AS PER THE SUBMISSIONS OF THE ASSESSEE BEFORE THE A SSESSING OFFICER, AN AMOUNT OF RS. 46,000/- P.A. WAS PAID TO SWEEPER TO CLEAN OFFICE PREMISES. AN AMOUNT OF RS. 45,000/- WAS PAID TO A PERSON WHO SUPPLIED WATER TO STAFF AND AN AMOUNT OF RS. 36,000/- P.A. WAS PAID T O A FLORIST WHO MAKES GARLANDS FOR GODS PHOTOS KEPT IN OFFICE PREMISES. 10. AFTER CONSIDERING THE NATURE AND PURPOSE OF SUCH PA YMENT, I AM OF THE VIEW THAT THE PAYMENT MADE TO THE SWEEPER AND THE P ERSON SUPPLYING WATER IS REASONABLE, HENCE, NEEDS TO BE ALLOWED. HO WEVER, PAYMENT MADE TO THE FLORIST AT RS. 3000/-P.M. APPEARS TO BE ON T HE HIGHER SIDE. IN MY VIEW, PAYMENT TO THE FLORIST CAN REASONABLY BE ESTI MATED AT RS. 2000/- P.M. WORKING OUT TO RS. 24,000/- P.A. THEREFORE, THE BAL ANCE AMOUNT OF RS. 12,000/- OUT OF THE PAYMENT MADE TO THE FLORIST HAS TO BE DISALLOWED. THUS, THIS GROUND IS PARTLY ALLOWED. ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 6 11. IN GROUND NO. 2, THE ASSESSEE HAS CHALLENGED THE DI SALLOWANCE OF RS. 49,057/- OUT OF CONVEYANCE EXPENSES. 12. BRIEFLY THE FACTS ARE, DURING THE ASSESSMENT PROCEE DING, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED AN AMOU NT OF RS. 1,96,229/- TOWARDS CONVEYANCE EXPENSES. AFTER CALLING UPON THE ASSESSEE TO JUSTIFY SUCH CLAIM, THE ASSESSING OFFICER ULTIMATELY HELD T HAT THE ASSESSEE WAS UNABLE TO ESTABLISH THAT THE ENTIRE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. ALLEGING INVO LVEMENT OF PERSONAL FACTOR, THE ASSESSING OFFICER DISALLOWED 25% OUT OF THE EXPENDITURE CLAIMED, WHICH WORKED OUT TO RS. 49,057/-. THE AFOR ESAID DISALLOWANCE WAS ALSO SUSTAINED BY LD. CIT(A). 13. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE SUBM ISSIONS MADE BY THE ASSESSEE BEFORE THE DEPARTMENTAL AUTHORITIES, THE C ONVEYANCE EXPENDITURE WAS INCURRED FOR TRAVELLING IN TAXI, AUTO, BUS ETC. BY THE ASSESSEE AS WELL AS THE STAFF MEMBERS FOR OFFICIAL WORK. IT IS ALSO EVIDENT, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS ONLY FOR THE REASO N THAT A PART OF THE EXPENDITURE MIGHT HAVE BEEN FOR PERSONAL PURPOSE OF THE ASSESSEE. THOUGH, INVOLVEMENT OF PERSONAL ELEMENT CANNOT BE C OMPLETELY RULED OUT, HOWEVER, DISALLOWANCE OF 25% FOR THAT PURPOSE IS CE RTAINLY ON THE HIGHER SIDE. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER T O RESTRICT THE ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 7 DISALLOWANCE TO 10% OF THE EXPENDITURE CLAIMED. HEN CE, THIS GROUND IS PARTLY ALLOWED. 14. IN GROUND NO. 2.1, THE ASSESSEE HAS CHALLENGED THE PART DISALLOWANCE OF EXPENDITURE INCURRED ON ENTERTAINMENT. 15. BRIEFLY, THE FACTS ARE, DURING THE ASSESSMENT PROCE EDING, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS DEBITED AN AMOU NT OF RS. 78,370/- TOWARDS ENTERTAINMENT EXPENSES. ON VERIFYING THE BI LLS/INVOICES FURNISHED BY THE ASSESSEE, HE WAS OF THE VIEW THAT ENTERTAINM ENT EXPENSES MAY NOT HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF RS. 15,674/ -, BEING 20% OF THE TOTAL EXPENDITURE CLAIMED. LD. CIT(A) ALSO SUSTAINE D SUCH DISALLOWANCE. 16. I HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. AS COULD BE SEEN FROM THE FACT S ON RECORD, THE DISPUTED EXPENDITURE WAS INCURRED MOSTLY FOR HOTEL/ RESTAURANT BILLS. THOUGH, I AGREE THAT SOME AMOUNT OF PERSONAL ELEMEN T MAY BE INVOLVED CONSIDERING THE NATURE OF EXPENDITURE, HOWEVER, THE DISALLOWANCE AT 20% IS ON THE HIGHER SIDE. ACCORDINGLY, I DIRECT THE AS SESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 10% OF THE EXPENDITURE CLAIMED. HENCE, THIS GROUND IS PARTLY ALLOWED. 17. IN VIEW OF MY DECISION IN GROUND NO. 2 & 2.1, THERE IS NO NEED FOR SEPARATE ADJUDICATION OF GROUND NO.2.2. 18. GROUND NO.3 BEING A GENERAL GROUND IS DISMISSED. ITA NO. 1987 MUM 2019-NEELA SAMIR BHATIA 8 19. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 BY PLACING IN THE NOTICE BOAR D ON 13 TH OCTOBER 2020. SD/- SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATE: 13.10.2020 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR SMC BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST . REGISTRAR ITAT , MUMBAI