DCIT CIR 3(3), MUMBAI V. VISHAL BEVERAGES P.LTD, MUMBAI

ITA 2092/MUM/2012

• Counselvise Citation: 209219914 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-12-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJNASH K ARVIND
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Depreciation; Business expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./I.T.A. NO. 2092/MUM/2012 ( / ASSESSMENT YEAR :2007-08) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3(3), ROOM NO.609, 6 TH FLOOR, AYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 / VS. M/S VISHAL BEVERAGES PVT.LTD., 26, NEW VORA BLDG., 59, NAKHODA STREET, TAMBAKANTA, MUMBAI-400003 ( / APPELLANT) .. ( !' / RESPONDENT) ./ #$ ./PAN/GIR NO. : AAACV1698L % / APPELLANT BY : SHRI RAJNASH K ARVIND !' & % /RESPONDENT BY : DR.K SHIVRAM ' ( & ) * / DATE OF HEARING : 26.8.2014 +, & ) * /DATE OF PRONOUNCEMENT : 28.8.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DATED 7.12.2011 PASSED BY LD. CIT(A)-7, MUMBAI AND IT REL ATES TO THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS FILED THE FOLLOWING REVISED GROU NDS OF APPEAL: 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.9,83,757/- MADE OUT OF BUSINESS EXPENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO P ROVE THE GENUINENESS OF THE EXPENSES CLAIMED.' 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,534/- ON ACCOUNT OF PRIOR PERIOD EXPENSES WITHOUT APPRECIATING THE FACT THAT THE EXPENSES I.T.A. NO. 2092/MUM/2012 2 WERE RELATED TO A.Y.2006-07 AND NOT ALLOWABLE AS PE R PROVISIONS OF THE I. T. ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .51,721/- U/S.14A OF THE I. T. ACT, 1961 BY IGNORING THE RATIO OF THE DE CISION OF SPECIAL BENCH OF HON'BLE ITAT, DELHI IN THE CASE OF M/S. CH EM INVEST LTD.' 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .61,339/-MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED ON VEHICLE PURCHASED FROM THE DIRECTOR'S SON WITHOUT APPRECIATING THE FA CT THAT THE ASSESSEE HAD FAILED TO PROVE THE ADMISSIBILITY OF THE DEPREC IATION EXPENSES CLAIMED.' 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A ) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER BE RESTORED.' 6. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 3. WE NOTICE THAT THE GROUNDS NO.5 AND 6 ARE GENERA L IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION, HENCE, D ISMISSED. 4. AT THE TIME OF HEARING, THE LD. A.R SUBMITTED TH AT THE GROUNDS NUMBERED AS 2,3 AND 4 ARE NOT ARISING OUT OF THE ORDER PASS ED BY THE LD. CIT(A). WHEN THE LD. DR CONFRONTED WITH THE ABOVE SAID STATEMENT , HE COULD NOT CONTROVERT THE SAME. ACCORDINGLY, GROUND NOS. 2, 3 AND 4 ARE DISM ISSED. 5. THE REMAINING GROUND I.E. GROUND NO.1 RELATES TO THE DISALLOWANCE OF PART OF BUSINESS EXPENSES ON ADHOC BASIS. 6. THE FACTS RELATING TO THE ABOVE SAID GROUND ARE STATED IN BRIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT THE ASSESSEE HAS CLAIMED FOLLOWING EXPENSES:- I.T.A. NO. 2092/MUM/2012 3 I RENT, RATES AND TAXES RS.2,07,701/ - II REPAIRS TO PLANT AND MACHINERY RS.2,94,416/ - III DIRECTORS TRAVELLING RS.2,77,682/ - IV SUNDRY TAX DEMAND RS.3,55,348/ - V SELLING AND DISTRIBUTION EXPEN SES RS.15,70,300/ - VI LEGAL AND PROCESSIONAL FEE RS.2,78,310/ - RS.29,83,757/ - 7. THE AO ASKED THE ASSESSEE TO ESTABLISH THE BUSIN ESS PURPOSE FOR INCURRING THE ABOVE SAID EXPENDITURES. IN RESPONSE THERETO, THE ASSESSEE FILED LEDGER ACCOUNT OF THE ABOVE STATED EXPENDITURES. SINCE TH E ASSESSEE FAILED TO ESTABLISH THE NECESSITY OF INCURRING THE ABOVE EXPENDITURES, THE AO DISALLOWED A SUM OF RS.9,83,757/- ON AD-HOC BASIS FROM THE ABOVE SAID C LAIM FOR WANT OF EXPLANATION. IN THE APPEAL FILED BEFORE THE LD. CIT(A), THE LD. CIT(A) DELETED THE DISALLOWANCE AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS DERIVING RENTAL INCOME FROM CO MMERCIAL PREMISES AND IS ALSO CARRYING ON THE BUSINESS OF MANUFACTURING OF PET PE RFORMANCE AND ALSO DOING JOB WORK FOR PET PERFORMANCE. THE ASSESSEE HAS CLAIME D VARIOUS TYPE OF EXPENSES AS DETAILED ABOVE IN ITS PROFIT AND LOSS ACCOUNT. THE ACCOUNTS OF THE ASSESSEE COMPANY ARE AUDITED UNDER THE COMPANIES ACT. AS ST ATED EARLIER, THE AO HAS MADE THE ADHOC DISALLOWANCE FOR WANT OF EXPLANATION S FROM THE ASSESSEE ABOUT THE BUSINESS NECESSITY OF INCURRING THE ABOVE SAID EXPENSES. IT IS NOT THE CASE OF THE AO THAT THE EXPENSES WERE NOT SUPPORTED BY PROP ER VOUCHERS. BEFORE THE LD. CIT(A) THE ASSESSEE HAS SUBMITTED THAT ALL THE ABOV E EXPENDITURES ARE INCIDENTAL TO CARRYING ON THE BUSINESS AND THEY WER E INCURRED IN THE NORMAL COURSE OF BUSINESS. IT WAS FURTHER SUBMITTED THAT T HE AO DID NOT BRING ANY I.T.A. NO. 2092/MUM/2012 4 MATERIAL ON RECORD TO SHOW THAT THESE EXPENDITURES WERE INCURRED FOR PERSONAL PURPOSES. THE ASSESSEE ALSO RELIED ON THE CATENA O F CASE LAWS TO SUPPORT ITS CONTENTIONS. THE LD. CIT(A) BY CONSIDERING THE E XPLANATION GIVEN BY ASSESSEE DELETED THE ADDITION WITH THE FOLLOWING OBSERVATION S : 6.4 I HAVE CONSIDERED THE APPELLANTS SUBMISSIONS AS WELL AS THE ORDER OF THE AO. HAVING CONSIDERED BOTH, I FIND MERITS I N THE ARGUMENTS OF THE APPELLANT. ON PERUSAL OF ASSESSMENT ORDER, IT REVE ALS THAT THE AO HAS MADE THE SAID ADDITIONS MERELY ON ADHOC BASIS THE AO HAS NOT POINTED OUT ANY VARIATION IN THE SUBMISSION OF THE APPELLAN T. THUS, IN ABSENCE OF ANY BASE, I CONSIDER IT PROPER AND APPROPRIATE TO H OLD THAT THE AO WAS NOT JUSTIFIED IN MAKING THIS DISALLOWANCE. FURTHER I AL SO FIND THAT THE ACCOUNT OF THE APPELLANT COMPANY WERE DULY AUDITED UNDER TH E COMPANIES ACT, 1956 AND IT HAS ALSO BEEN STATED BY THE APPELLANT C OMPANY THAT ALL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES, HENCE THE QUESTION OF MAKING DISALLOWANCE WITHOUT ANY BASIS IS NOT SUSTAI NABLE. CONSIDERING ALL THE FACTUAL POSITION OF THE CASE AND ALSO AFTER TAK ING NOTE OF JUDICIAL PRONOUNCEMENT AS DEPICTED ABOVE IN FOREGOING PARAS OF APEX COURT, I CONSIDER IT PROPER AND APPROPRIATE TO HOLD THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE APPELLANT. HENCE, THE ADDITION SO MADE BY THE AO IS DELETED. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED 9. AT THE TIME OF HEARING, THE LD. DR COULD NOT FUR NISH ANY OTHER MATERIAL TO CONTROVERT THE FINDINGS OF THE LD. CIT(A). UNDER T HESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD . CIT(A) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL FILED BY THE REVE NUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28TH AUGUST, 2014 . +, ' - ./ 0 1 28TH AUGUST, 2014 , & 3( 4 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER . ' ( MUMBAI: 28TH AUGUST,2014. . . ./ SRL , SR. PS I.T.A. NO. 2092/MUM/2012 5 ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. ' 6) ( ) / THE CIT(A)- CONCERNED 4. ' 6) / CIT CONCERNED 5. 78 3 !)9 , * 9 , . ' ( / DR, ITAT, MUMBAI CONCERNED 6. 3 : ( / GUARD FILE. ; ' / BY ORDER, TRUE COPY < # (ASSTT. REGISTRAR) * 9 , . ' ( /ITAT, MUMBAI