M/S. MUTHA FOUNDERS PVT. LTD., MUMBAI V. DCIT, C-4(2)(2), MUMBAI

ITA 208/MUM/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6970 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 16-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: JAYESH KANUNGOLD
• Keywords: Earning of tax free income; Fair market value; Rule 8D
• Section: 143(3); 14A

Judgement Text

ITA NO.208/MUM/2019 M/S. MUTHA FOUNDERS PVT. LTD. ASSESSMENT YEAR :2007-08 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO 208/MUM/2019 ( / ASSESSMENT YEAR : 2007-08 ) M/S. MUTHA FOUNDERS PVT. LTD. 121, VITHALWADI, KALBADEVI, MUMBAI 400002. / VS. D CIT - C IRCLE 4(2)(2), 6 TH FLOOR, AAYKAR BHAWAN M.K. ROAD, MUMBAI 400020. %& ./ ./PAN/GIR NO. AAACM-3091-N ( &( /APPELLANT ) : ( )*&( / RESPONDENT ) ASSESSEE BY : MR. JAYESH KANUNGO-LD. AR REVENUE BY : MS. JOTHILAKSHMI NAYAK- LD. DR / DATE OF HEARING : 29/01/2020 / DATE OF PRONOUNCEMENT : 05/02/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [IN SHORT REFERRED TO AS AY] 2007-08 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-2, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-2/IT/10114/2018-19 DATED 10/10/20 18 ON FOLLOWING GROUNDS OF APPEAL: I. THE ORDERS PASSED BY THE LEARNED LOWER AUTHORITI ES ARE BAD IN LAW AND BAD IN FACTS. II. THE LEARNED LOWER AUTHORITIES HAVE GROSSLY ERRE D IN NOT FOLLOWING THE DIRECTIONS OF THE HONBLE TRIBUNAL AND HAVE FURTHER ERRED IN MAKING AN ADDITION OF RS. 88,995/-. THE IMPUGNED ADDITION IS WHOLLY UNWARRANTED. ITA NO.208/MUM/2019 M/S. MUTHA FOUNDERS PVT. LTD. ASSESSMENT YEAR :2007-08 2 III. THE LEARNED LOWER AUTHORITIES HAVE GROSSLY ERR ED IN MAKING IMPUGNED ADDITION OF RS. 88,995/- WITHOUT BRINGING ANY COMPARABLE INS TANCES ON RECORD TO SUBSTANTIATE THE ALLEGATION OF PAYMENT OF HIGHER PR ICE FOR SERVICES AVAILED. IV. HAVING REGARD TO THE FACTS OF THE CASE, PROVISI ONS OF LAW AND JUDICIAL PROPOSITIONS THE IMPUGNED ADDITION OF RS. 88,995/- IS WHOLLY UNTENABLE. V. THE LEARNED LOWER AUTHORITIES HAVE GROSSLY ERRED IN MAKING/UPHOLDING AN ADDITION OF RS.6675/- BY RECOURSE TO SECTION 14A OF THE IT ACT, 1961. THE IMPUGNED ADDITION IS WHOLLY UNWARRANTED AND DESERVE S TO BE DELETED. VI. THE APPELLANT MAY PLEASE BE PERMITTED TO RAISE ANY ADDITIONAL OR ALTERNATIVE GROUND ON OR BEFORE THE HEARING OF APPEAL. 1.2 THIS IS SECOND ROUND OF APPEAL BEFORE TRIBUNAL SINCE THE ASSESSMENT WAS ORIGINALLY FRAMED U/S 143(3) ON 27/1 1/2009 ASSESSING THE INCOME AT RS.225.15 LACS AFTER CERTAIN ADDITION S AS AGAINST RETURNED INCOME OF RS.224.11 LACS E-FILED BY THE ASSESSEE ON 01/11/2007. THE ASSESSEE WAS SADDLED WITH DISALLOWANCES OF RS.0.89 LACS & RS.0.14 LACS U/S 40A(2)(B) AND U/S 14A RESPECTIVELY. THE ST AND OF LD. AO, UPON CONFIRMATION BY LD. CIT(A), WAS CHALLENGED BEFORE T HIS TRIBUNAL VIDE ITA NO. 2907/MUM/2011 ORDER DATED 20/03/2013 WHEREIN TH E MATTER WAS RESTORED BACK TO THE FILE OF LD. AO FOR RE-ADJUDICA TION. 1.3 ACCORDINGLY, AN ASSESSMENT WAS AGAIN FRAMED U/S 143(3) R.W.S. 254 ON 30/03/2015 WHEREIN THE ASSESSEE WAS SADDLED WITH SIMILAR DISALLOWANCES. THESE DISALLOWANCES, UPON PARTIAL CO NFIRMATION BY LD. CIT(A), ARE UNDER FURTHER APPEAL BEFORE US. 1.4 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED RELEVANT MATERIAL ON RECORD. OUR ADJUDICATION TO TH E SUBJECT MATTER OF PRESENT APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARA GRAPHS. DISALLOWANCE U/S 40A(2)(B) 2.1 THE ASSESSEE WAS DIRECTED TO JUSTIFY THE CLAIM OF RS.17.79 LACS PAID TO SISTER CONCERN ON ACCOUNT OF MACHINING CHAR GES, FITTING CHARGES, ITA NO.208/MUM/2019 M/S. MUTHA FOUNDERS PVT. LTD. ASSESSMENT YEAR :2007-08 3 SAND MOLDS ETC. THE ASSESSEE DEFENDED THE SAME BY S UBMITTING THAT THE ASSESSEE DID NOT AVAIL ANY SUCH SERVICES FROM OUTSI DE PARTIES AND IT WAS NOT POSSIBLE FOR THE ASSESSEE TO PROVIDE ANY COMPAR ABLE INSTANCES FOR THE SAID EXPENSES. THEREFORE, THE DISALLOWANCE WAS REPEATED IN THE FRESH ASSESSMENT. THE LEARNED CIT(A) CONFIRMED THE SAME AGAINST WHICH THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE U S. 2.2 UPON DUE CONSIDERATION, WE FIND THAT IN TERMS O F SEC. 40A(2)(A), THE ONUS WAS ON REVENUE TO ESTABLISH THAT THE EXPENDITU RE INCURRED BY ASSESSEE WAS UNREASONABLE OR EXCESSIVE HAVING REGAR DS TO THE FAIR MARKET VALUE OF GOODS, SERVICES OR FACILITIES FOR W HICH THE PAYMENT IS MADE. HOWEVER, WE FIND THAT NO SUCH EFFORTS WERE MA DE BY LD. AO TO DETERMINE THE FAIR MARKET VALUE OF SERVICES BEING A VAILED BY THE ASSESSEE AND LD. AO CHOSE TO MAKE ADHOC DISALLOWANCE AS AGAINST THE INTENT OF LEGISLATION WHICH MANDATE LD.AO TO BRING ON RECORD MATERIAL TO ESTABLISH THAT THE PRICE PAID BY THE ASSESSEE WAS E XCESSIVE OR UNREASONABLE. THEREFORE, BY DELETING THE SAME, WE A LLOW THIS GROUND OF APPEAL. DISALLOWANCE U/S 14A 3.1 THE MATTER OF DISALLOWANCE OF RS.0.14 LACS U/S 14A, WAS RESTORED BACK BY TRIBUNAL SINCE RULE 8D WAS FOUND TO BE NOT APPLICABLE FOR YEAR UNDER CONSIDERATION. THE ASSESSEE SUBMITTED THAT IT RECEIVED EXEMPT INCOME OF RS.0.19 LACS WHICH WAS RECEIVED DIRECTLY THROUGH ECS AND NO EXPENDITURE WAS INCURRED TO EARN THE EXEMPT INCOME. HOWEVER, NOT CONVINCED, LD.AO COMPUTED DISALLOWANCE AT RS.0.11 L ACS AND ACCORDINGLY, PROVIDE RELIEF OF RS.0.03 LACS TO THE ASSESSEE. THE LD. CIT(A) RESTRICTED THE SAME TO THE EXTENT OF RS.6,67 5/-, BEING EXEMPT ITA NO.208/MUM/2019 M/S. MUTHA FOUNDERS PVT. LTD. ASSESSMENT YEAR :2007-08 4 INCOME EARNED BY THE ASSESSEE. STILL AGGRIEVED, THE ASSESSEE IS UNDER FURTHER APPEAL BEFORE US. 3.2 WE FIND THAT LD. CIT(A) HAS GONE WRONG IN NOTIN G DOWN THE QUANTUM OF EXEMPT INCOME EARNED BY THE ASSESSEE DUR ING THE YEAR SINCE AS PER SUBMISSIONS BEFORE LD. AO, IT APPEARS THAT THE ASSESSEE HAS EARNED EXEMPT INCOME OF RS.19,230/- WHICH HAS W RONGLY BEEN READ AS RS.6675/- BY LD. CIT(A). BE THAT AS THE CASE MAY BE, RULE 8D WAS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION AND THE DISALLOWANCE WAS TO BE WORKED OUT ON AN ESTIMATED BASIS. THEREFORE, NO FAULT COULD BE FOUND IN THE ACTION OF LD. CIT(A) IN RESTRICTING TH E SAME TO RS.6,675/-. BY CONFIRMING THE SAME, WE DISMISS THIS GROUND OF APPE AL. CONCLUSION 4. THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 TH FEBRUARY, 2020. SD/- SD/- (MAHAVIR SINGH) (MA NOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 05/02/2020 SR.PS. JAISY VARGHESE !'#' / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT ITA NO.208/MUM/2019 M/S. MUTHA FOUNDERS PVT. LTD. ASSESSMENT YEAR :2007-08 5 3. 1 ( ) / THE CIT(A) 4. 1 / CIT CONCERNED 5. 23),4 , 4 , / DR, ITAT, MUMBAI 6. 3567 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.