SAVANI HUF, MUMBAI V. ITO WD 12(1)1), MUMBAI

ITA 2014/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101057 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 21-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RADHA KATYAL NARANA
• Keywords: Business income

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND PAWAN SINGH , JM ./ I.T.A. NO . 2014 / MUM/20 1 1 ( / ASSESSMENT YEA R : 20 0 6 - 07 ) M N SAVANI - HUF, 5 B FELTHAM HOUSE, J N HEREDIA ROAD, BELLARED ESTATE, MUMBAI - 400001 / VS. INCOME TAX OFFICER, WARD 12(1)(1), MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AADHM5053N / APPELLA NT S BY NONE / R EVENUE BY MS.RADHA KATYAL NARANA, / DATE OF HEARING : 21.9 . 201 5 / DATE OF PRONOUNCEMENT: 21 . 9. 201 5 / O R D E R P ER B R BASKARAN, AM : THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 24.11.2010 PASSED BY LD CIT(A) - 23, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2006 - 07. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE FOLLOWING DISALLOWANCES M ADE BY THE AO: - (A) ADHOC DISALLOWANCES MADE OUT OF EXPENSES (B) DISALLOWANCE OF PART OF INTEREST EXPENDITURE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. WE NOTICE FROM THE ORDER SHEET NOTING THAT THE ASSESSEE HAD SOUGHT ADJOURNMENT ON THREE OCC ASIONS, BUT FAILED TO APPEAR ON SEVERAL OCCASIONS. WE FURTHER NOTICE ITA NO. 2014 / MUM/20 1 1 2 THAT THE NOTICE OF HEARING WAS SENT BY REGISTERED POST ON TWO OCCASIONS. HENCE WE PROCEED TO DISPOSE OF THIS APPEAL EX - PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 4. WE HEARD LD D .R AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DISALLOWANCE MADE OUT OF EXPENSES. ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT, THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED ROYALTY INCOME IN RESPECT OF HIS FILM RIGHTS AND HE HAS ALSO CARRIED OUT CLOTH TRADING ACTIVITY AT A MINIMAL LEVEL. HOWEVER, THE ASSESSEE HAD CLAIMED HUGE EXPENSES IN HIS PROFIT AND LOSS ACCOUNT. ACCORDINGLY, THE AO CONSIDERED THE CLAIM TOWARDS EXPENSES AS EXCESSIVE. FURTHER THE ASSESSEE ALSO FAILED TO SUBSTANTIATE THE CLAIM OF EXPENSES ALSO FAILED TO FURNISH EVIDENCES IN SUPPORT OF THE EXPENDITURE CLAIM. HENCE THE AO DISALLOWED SALES PROMOTION EXPENSES, SERVICING CHARGES PROFESSIONAL TAX AND SALES TAX IN FULL. FURTHER HE DISALLOWED 50% OF CAR AND TELEPHONE EXPENSES, 2/3 RD OF CAR EXPENSES AND ALSO 50% OF PRINTING AND STATIONERY EXPENSES, REPAIRS, ELECTRICITY ETC. THUS, THE AGGREGATE DISALLOWANCE MADE BY THE AO WAS RS.6,22,140/ - . THE LD CIT(A) ALSO CONFIRMED THE SAME. 5. THE AO FURTHER NOTICED THAT THE ASSESSEE HAS DECLARED INTEREST INCOME OF RS.24,19,887/ - UNDER THE HEAD BUSINESS. THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED INTEREST INCOME FROM ITS KARTHA NAMED SHRI MAGANLAL N SAVANI. HE FURTHER NOTICED THAT THE ASSESSEE HAD ACCEPTED THE INTEREST INCOME IN AY 2 002 - 03 AS ITS INCOME FROM OTHER SOURCES. ACCORDINGLY, THE AO TREATED THE INTEREST INCOME AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO FURTHER NOTICED THAT THE ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.29,34,580/ - . THE AO RESTRICTED T HE INTEREST EXPENDITURE CLAIM TO THE EXTENT OF INTEREST INCOME, REFERRED ABOVE AND ACCORDINGLY DISALLOWED THE BALANCE AMOUNT OF RS.5,14,693/ - . THE LD CIT(A) CONFIRMED THE SAID DISALLOWANCE. ITA NO. 2014 / MUM/20 1 1 3 6. WE HEARD LD D.R AND PERUSED THE RECORD. IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS STATED THAT THE INTEREST DISALLOWANCE MADE IN AY 2002 - 03 WAS RESTORED BACK TO THE FILE OF THE LD CIT(A) WITH THE DIRECTION TO EXAMINE THIS ISSUE IN THE LIGHT OF DECISION RENDERED BY THE AHMEDABAD BENCH OF TRIBUNAL IN THE CASE OF T ORRENT FINANCIER. HOWEVER, THE ASSESSEE HAS NOT FURNISHED THE RESULT OF THE DECISION TAKEN BY THE LD CIT(A) IN AY 2002 - 03. SINCE THE ISSUE URGED BEFORE US IS CLAIMED TO BE IDENTICAL IN NATURE, WE PREFER TO SET ASIDE THE ISSUE RELATING TO INTEREST DISALLO WANCE TO THE FILE OF THE LD CIT(A) WITH THE DIRECTION TO RE - EXAMINE THIS ISSUE IN THE LIGHT OF DECISION TAKEN IN AY 2002 - 03 IN THE SET ASIDE PROCEEDINGS. 7. WITH REGARD TO THE DISALLOWANCE MADE OUT OF EXPENSES, THE ASSESSEE IS CONTESTING THE DISALLOW ANCE TO THE EXTENT OF RS.5,50,187/ - . WE HAVE EARLIER NOTICED THAT THE ASSESSEE HAS FAILED TO SHOW AS TO HOW THESE EXPENSES ARE RELEVANT TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE. FURTHER PART OF EXPENSES HAS BEEN DISALLOWED U/S 38(2) OF THE ACT ALSO. IN THE GROUNDS OF APPEAL, IT IS STATED THAT THE TRIBUNAL HAS TREATED THE INTEREST INCOME AS BUSINESS INCOME OF THE ASSESSEE AND ALLOWED EXPENSES. HOWEVER, SINCE THE AO HAS DISALLOWED THE EXPENSES ON SPECIFIC REASONS, WE ARE OF THE VIEW THAT THE DECISION RENDERED BY THE TRIBUNAL IN AY 2002 - 03 SHALL NOT BE BINDING ON THIS YEAR. ACCORDINGLY, WE PROCEED TO EXAMINE EACH OF THE DISALLOWANCES MADE IN THIS YEAR: - (A) WE NOTICE THAT THE AO DISALLOWED SALES PROMOTION EXPENSES FOR WANT OF EVIDENCES. BEFORE LD CIT (A) AS WELL AS BEFORE US ALSO, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPPORT OF THIS CLAIM. ACCORDINGLY, WE CONFIRM THE SAID DISALLOWANCE. (B) THE PROFESSIONAL TAX AND SALES TAX PAYMENTS HAVE BEEN DISALLOWED FOR WANT OF PROOF. SINCE THESE ARE PAYMENTS MADE TO GOVERNMENT BODIES, WE PREFER TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO FURNISH RELEVANT PROOFS. ACCORDINGLY, WE SET ASIDE THIS MATTER TO THE FILE OF THE AO. IF THE ASSESSEE IS ABLE TO PRODUCE THE PROOF TO THE SATISFACTION OF THE A SSESSING OFFICER, THEN THE AO SHOULD ITA NO. 2014 / MUM/20 1 1 4 DELETE THIS DISALLOWANCE. OTHERWISE, HE SHOULD AGAIN DISALLOW THE CLAIM OF PROFESSIONAL TAX AND SALES TAX PAYMENTS. (C) THE AO HAS DISALLOWED 50% OF OTHER EXPENSES LIKE TELEPHONE, MOTOR CAR, PRINTING & STATIONERY, RE PAIRS ETC. WE CONSIDER THE SAME TO BE ON THE HIGHER SIDE. ACCORDINGLY, WE MODIFY THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 20% OF THE RELEVANT EXPENSES. WE ORDER ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 21 - 09 - 2015. 21ST SEPT , 2015 S D SD ( PAWAN SINGH ) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 21ST SEPT , 2015 . . . ./ SRL , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, T RUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI