RAMKARAN R KARWA, MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 17(3)(NOW DCIT-19(3)), MUMBAI

ITA 2318/MUM/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4884 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 13-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Revised return
• Section: 142(1); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 2318 /MUM/201 8 ( / ASSESSMENT YEAR: 20 1 1 - 1 2 ) RAMKARAN R. KARWA 206, 2 ND FLOOR, ANAND ESTATE, 18 9 - A SANE GURUJI MARG, MUMBAI - 400011 . / VS. ACIT - 17(3) (NOW DCIT - 19(3), 206, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400007. ./ ./ PAN/GIR NO. : ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 06 / 0 5 / 201 9 / DATE OF PRONOUNCEMENT : 22 / 05 / 201 9 / O R D E R PER AMARJI T SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 20 . 0 2 .201 8 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 3 2 , MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 11 - 1 2 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) (THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC DISALLOWANCE MADE BY THE LD. AO OF RS.2,28,225/ - BEING 15% OF THE FOLLOWING EXPENS ES: SR. NO. HEAD OF EXPENDITURE EXPENSES DEBITED IN PROFIT IN LOSS ACCOUNT AMOUNT DISALLOWANCE 15% OF EXPENSES ASSESSEE BY : SHRI BHUPENDRA KARKHANIS REVENUE BY: SHRI S. K. MITRA ITA NO. 2318 / M/201 8 A.Y.20 1 1 - 12 2 (RS.) AMOUNT (RS.) 1 TRAVELLING EXPENSES 7,12,495 1,06,874 2 TELEPHONE EXPESNES 77,831 11,675 3 CONVEYANCE CHARGES 6,55,055 98,258 4 STAFF WE LFARE EXPENSES 76,119 11,418 TOTAL 12,21,500 2,28,225 BY HOLDING THAT THE ESTIMATION MADE BY AO @ 15% OF ABOVE MENTIONED EXPENSES WAS FAIR AND REASONABLE WITHOUT PROVIDING THE BASIS OF SUCH ESTIMATION AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE INCOME TAX ACT, 1961 AND THE RULES MADE THERE UNDER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC - DISALLOWANCE MADE BY T HE AO OF RS.66,963/ - BEING 10% OF SALES PROMOTION EXPENSES OF RS.6,69,628/ - BY HOLDING THAT ESTIMATION MADE BY AO @ 10% WAS FAIR AND REASONABLE WITHOUT PROVIDING THE BASIS OF SUCH ESTIMATION AND THE REASONS ASSIGNED FOR DOING SO ARE WRONG AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF THE I.T. ACT, 1961 AND THE RULES MADE THERE UNDER. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ADHOC - DISALLOWANCE MADE BY THE AO IGNORING THE FACT THAT THE SIMILAR ADHOC DISALLOWANCES WERE DELETED BY CIT(A) FOR ASSESSMENT YEAR 2012 - 13 AND ALSO BY HONBLE MUMBAI ITAT IN APPELLANTS OWN CASE FOR A.Y. 2004 - 05 EVEN THOUGH THE SAID DECISIONS WERE REFERRED TO IN THE SUBMISSIONS AND POINTED OUT BY THE APPELLANT. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETU RN OF INCOME ON 30 . 09.2011 DECLARING TOTAL INCOME TO THE TUNE OF RS.1,20,85,150 / - . THE ASSESSEE HAS ALSO REVISED RETURN OF INCOME ON 04.12.2012 DECLARING TOTAL INCOME TO TH E TUNE OF RS.1,02,30,000/ - . THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE CLAIMED THE TRAVELLING ITA NO. 2318 / M/201 8 A.Y.20 1 1 - 12 3 EXPENSES, TELEPHONE EXPENSES, CONVEYANCE CHARGES, SALES PROMOTION EXPENSES & STAFF WELFARE . THE AO DISALLOWED THE 15% OF THE CLAIM OF THE TRAVELLING EXPENSES, TELEPHONE EXPENSES, CONVEYANCE CHARGES, SALES PROMOTION EXPENSES & STAFF WELFARE ON THE BASIS OF NON - PRODUCTION OF EVIDENCES AND ON THE BASIS OF THIS FACT THAT THE SELF - MADE VOUCHERS COULD NOT BE VERIFIED AND PERSONAL ELEMENT OF EXPENSES COULD NOT BE RULED OUT. THE PROMOTION EXPENSES WAS ALSO DISALLOWED TO THE EXTENT OF 10% BEING THE VOUCHERS WERE SEL F - MADE AND GENUINENESS OF THE CLAIM COULD NOT BE VERIFIABLE. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS. 1,05,25,188/ - . FEELING AGGRIEVED, THE A SSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE AO , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NOS. 1 TO 3 4. UNDER THESE ISSUES THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE DISALLOWANCE TO THE EXTENT OF 15% OF THE CLAIM OF THE TRAVELLING EXPENSES, TELEPHONE EXPENSES, CONVEYANCE CHARGES, SALES PROMOTION EXPENSES & STAFF WELFARE . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2004 - 05 HAS DELETED THE SUCH TYPE OF ADDITION , THEREFORE, THE CLAIM OF THE ASSESSEE IS LIABLE TO BE ALL OWED ACCORDINGLY . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 5 THE A PPELLANT RAISED THESE GROUNDS AGAINST THE AO'S ACTION IN MAKING ADHOC DISALLOWANCES OF VARIOUS EXPENSES AS UNDER: ITA NO. 2318 / M/201 8 A.Y.20 1 1 - 12 4 TRAVELLING EXPENSES: RS.1,06,874/ - (BEING 15% RS.7,12,495) ON ACCOUNT OF CASH PAYMENTS AND SELF - MADE VOUCHERS. A) TRAVELLING EXPENSES: RS.1,06, 874/ - (BEING 15% RS.7,12,495) ON ACCOUNT OF CASH PAYMENTS AND SELF - MADE VOUCHERS. B) TELEPHONE EXPENSES: RS.11,675/ - (BEING 15% OF RS.77,831) ON ACCOUNT OF PERSONAL USE. C) CONVEYANCE CHARGES: RS.98,258/ - (BEING 15% OF RS.6,55,055/ - )ON ACCOUNT OF CASH PAYMEN TS AND PERSONAL USE. D) SALES PROMOTION EXPENSES: RS.66,963/ (BEING 10% OF RS.6,69,628/ - ON ACCOUNT OF CASH PAYMENTS. E) STAFF WELFARE: RS.11,418/ - (BEING 15% OF RS.76,119) ON ACCOUNT OF CASH PAYMENTS. 5.1 THE AO HAS DURING THE ASSESSMENT PROCEEDINGS, OBSE RVED THAT THE PAYMENTS FOR ABOVE SAID EXPENSES WERE MADE IN CASH, SOME OF THEM WERE SUPPORTED ONLY BY SELF - MADE VOUCHERS AND ALSO HELD THAT PERSONAL ELEMENT CANNOT BE RULED OUT. HAVING CONSIDERED THIS TO BE A FIT CASE AS EXCESSIVE CLAIM OF EXPENSES, THE AO HAS TO MAKE A PROPER AND FAIR ESTIMATION OF UNREASONABLE PORTION OF THE EXPENDITURE CLAIMED. IN HIS BEST JUDGMENT THE ID AO ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, ESTIMATED THE EXCESS 15% AND 10% AS ABOVE. ACCORDINGLY, THE EXCESSIVE PART WAS THUS DISALLOWED. ONCE THE AO CONSIDERS IT TO MAKE AN ESTIMATION, IT IS NEEDLESS TO SAY THAT IT IS THE SOLE DISCRETION OF THE AO HOW TO COMPUTE INCOME OF THE ASSESSEE. BUT THE QUESTION ARISES HERE IS THAT WHETHER THE AO HAS FAIRLY AND CORRECTLY EXERCISED SUCH D ISCRETION OR NOT. IN THE INSTANT CASE, IT IS OBSERVED THAT THE ID AO HAS ESTIMATED DISALLOWANCE AT @ 15% AND 10%. IT IS CONSIDERED THAT THE ESTIMATION MADE BY THE AO TO BE VERY FAIR AND REASONABLE. AS THE AO HAD EXERCISED HIS DISCRETION AND MADE BEST JUDGM ENT AND ALSO TAKING INTO CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I DO NOT FIND ANY REASON TO DELETE THE SAME. I THEREFORE UPHOLD THE ADDITIONS MADE BY THE AO AND HENCE THESE GROUNDS RAISED BY THE APPELLANT ARE DISMISSED. 5. ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CIT(A) HAS ALMOST RELIED UPON THE FINDING OF THE AO IN CONNECTION WITH THE ISSUES. THE ASSESSEE PAID THE AMOUNT IN CASH AND PRODUCE THE SELF - MADE VOUCHERS. THE ELEMENT OF PERSONAL EXPENSES COULD NOT BE R ULED OUT. ANYHOW, IT IS INCUMBENT UPON THE ASSESSEE TO PROVE ITS CASE BY ADDUCING THE COGENT AND CONVINCING EVIDENCE ON RECORD. IT IS ALSO NOT IN DISPUTE THAT ITA NO. 2318 / M/201 8 A.Y.20 1 1 - 12 5 THE AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE TO THE EXTENT OF 15% OF THE EXPENSES ON ESTIMATIO N BASIS. THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE ITAT IN HIS OWN CASE FOR THE A.Y. 2004 - 05 BUT EACH YEAR IS DIFFERENT AND CLAIM OF THE ASSESSEE SURROUNDS UPON THE FACTS AND CIRCUMSTANCES EACH CASE , THEREFORE, THE FINDING OF GIVEN BY HONBLE IT AT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2004 - 05 IS NOT LIABLE TO BE FOLLOWED . T O END THE LITIGATION AND ALSO IN THE INTEREST OF JUSTICE , W E ARE OF THE VIEW THAT THE END OF JUSTICE WOULD MET IF THE DISALLOWANCE OF ALL THE EXPENSES BE RESTRICTED TO THE EX TENT OF 5%. ACCORDINGLY, WE RESTRICT THE ADDITION TO THE EXTENT OF 5% OF THE TRAVELLING EXPENSES, TELEPHONE EXPENSES, CONVEYANCE CHARGES, SALES PROMOTION EXPENSES & STAFF WELFARE . ACCORDINGLY, THE CLAIM OF THE ASSESSEE IS HEREBY PARTLY ALLOWED. 6 . IN THE R ESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ORDERED TO BE PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 /05 /2019 . SD/ - SD / - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 22 /05 /2019 V IJAY ITA NO. 2318 / M/201 8 A.Y.20 1 1 - 12 6 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) , / ITAT, MUMBAI