PHARMALAB FINANCIAL SERVICES PVT. LTD.(FORMERLY PHARMALAB PACKAGING SYSTEMS PVT. LTD., MUMBAI V. A.C.I.T. 10(3), MUMBAI

ITA 2569/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87961 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PARMANAND J
• Keywords: Rectification of order
• Section: 14A; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE S/SHRI H.L. KARWA, PRESIDENT AND B. R.BASKARAN (AM) . . , . . , ./ I.T.A. NO.2569/MUM/2012 ( / ASSESSMENT YEAR :2009-10) PHARMALAB FINANCIAL SERVICES PVT.LTD., (FORMERLY PHARMALAB PACKAGING SYSTEMS PVT LTD) KASTURI SANGHAVI ESTATE, GOVANDI STATION ROAD, GOVANDI (E), MUMBAI-400088. / VS. ASSTT.COMMISSIONER OF INCOME TAX-10(3), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) .. ( ! / RESPONDENT) ./ #$ ./ PAN/GIRNO.:AAACS5510L % / APPELLANT BY : SHRI K GOPAL ! & % / RESPONDENT BY SHRI PARMANAND J ' ( & ) * / DATE OF HEARING : 1.1.2015 +, & ) * /DATE OF PRONOUNCEMENT : 16.01.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 28-02-2012 PASSED BY LD CIT(A)-22, MUMBAI AND IT RE LATES TO THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURI NG OF MACHINERIES USED BY PHARMACEUTICAL AND ALLIED INDUSTRIES; INVES TMENTS ETC. THE ASSESSMENT WAS COMPLETED BY MAKING VARIOUS ADDITION S AND THE ASSESSEE COULD NOT GET MUCH RELIEF IN THE APPEAL FILED BEFOR E LD CIT(A). HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. ITA NO6266 /MUM/2012 2 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF 50% OF THE EXPENSES CLAIMED BY THE ASSESSEE. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAI MED AGGREGATE AMOUNT OF RS.57,24,914/- AS EXPENSES UNDER VARIOUS HEADS. IN THE IMMEDIATELY PRECEDING YEAR, THE ASSESSEE HAD CLAIMED AGGREGATE AMOUNT OF RS.1.35 CRORES. HOWEVER, IT WAS NOTICED THAT THE ASSESSEE HAD CARRIED OUT BUSINESS ONLY FOR FOUR MONTHS DURING THE YEAR UNDER CONSIDERATION. BEFORE THE AO, THE ASSESSEE COULD NOT SUBMIT ANY EVIDENCE TO SUPPORT THE EXPENDITURE CLAIMED BY IT. HENCE, THE AO DISALLOW ED 50% OF THE CLAIM ON THE REASONING THAT THE ASSESSEE HAS INFLATED THE EX PENSES. 4. AT THE TIME OF HEARING, THE LD A.R SUBMITTED T HAT THE ASSESSING OFFICER HAS REACHED THE CONCLUSION ABOUT INFLATION OF EXPENSES WITHOUT BRINGING ANY MATERIAL ON RECORD. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS ALSO FAILED TO SUBSTANTIATE T HE EXPENDITURE CLAIM BY PRODUCING THE RELEVANT EVIDENCES. WE NOTICE THAT T HE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE ASSESSEE HAS INCURRED 50% OF EXPENSES BY WAY OF CASH, WHICH ARE NOT SUSCEPTIBLE FOR VERIFICATION. AT THE SAME TIME, WE FIND MERIT IN THE CONTENTIONS OF BOTH THE PARTIES, MEANI NG THEREBY, THE STAND OF BOTH THE PARTIES REMAIN UNSUBSTANTIATED. UNDER THES E SET OF FACTS, IN ORDER PUT THIS ISSUE AT REST, WE DIRECT THE ASSESSING OFF ICER TO RESTRICT THE DISALLOWANCE OF EXPENSES TO 20% OF THE EXPENDITURE CLAIMED BY THE ASSESSEE AND IN OUR VIEW IT WOULD MEET THE ENDS OF JUSTICE. THE ORDER OF LD CIT(A) STANDS MODIFIED ACCORDINGLY. 5. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MA DE U/S 14A OF THE ACT. THE ASSESSEE HAD EARNED DIVIDEND INCOME RS.8,67,507 /-, BUT THE ASSESSEE DID NOT MAKE ANY DISALLOWANCE U/S 14A OF THE ACT. HENCE, THE AO COMPUTED THE DISALLOWANCE BY APPLYING THE PROVISION S OF RULE 8D AT RS.3,58,798/- (INTEREST RS.13,740/- AND OTHER EXPEN SES RS.3,45,058/-) AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN THE APPELLATE ITA NO6266 /MUM/2012 3 PROCEEDINGS, THE LD CIT(A) NOTICED THAT THE EXPENSE S CLAIMED BY THE ASSESSEE INCLUDED PORTFOLIO MANAGEMENT FEE OF RS.1, 37,417/- AND SHARE DEALING EXPENSES OF RS.34,088/-. BOTH THE EXPENSES, BEING DIRECT EXPENSES, THE AO ENHANCED THE DISALLOWANCE BY THE A GGREGATE OF BOTH THE ABOVE SAID AMOUNTS, I.E., BY RS.1,71,505/-. 6. AT THE TIME OF HEARING, THE LD A.R SUBMITTED TH AT THE LD CIT(A) HAS ENHANCED THE DISALLOWANCE BY RS.1,71,505/- WITHOUT GIVING NOTICE OF ENHANCEMENT. HOWEVER, A PERUSAL OF THE ORDER OF LD CIT(A), WE NOTICE THAT THE LD CIT(A) HAS BROUGHT THE PROPOSAL OF THE DISALLOWANCE TO THE NOTICE OF THE ASSESSEE AND FURTHER THE ASSESSEE HAS ACCEPTED FOR THE ENHANCEMENT, MEANING THEREBY, THE LD CIT(A) HAS ENH ANCED THE DISALLOWANCE BY GIVING PROPER OPPORTUNITY. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A) ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE ADDITION OF LOS S ON INVESTMENT OF RS.50.68 LAKHS. WE NOTICE THAT THE ASSESSEE HAD AL READY MOVED A PETITION U/S 154 OF THE ACT BEFORE THE AO FOR RECTIFICATION OF MISTAKE RELATING TO THE ABOVE SAID AMOUNT. THE LD CIT(A) HAS ALSO DIRECTED THE AO TO DISPOSE OF THE RECTIFICATION PETITION FILED BY THE ASSESSEE. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD CIT(A) ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS PARTLY ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 16TH JAN,2015. +, ' - ./ 0 1 16 TH JAN 2015 , & 2( 3 SD SD ( . . / H.L. KARWA) ( . . , / B.R. BASKARAN ) / PRESIDENT / ACCOUNTANT MEMBER . ' ( MUMBAI: 16TH JAN, 2015. ITA NO6266 /MUM/2012 4 . . ./ SRL , SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. ' 7) ( ) / THE CIT(A)- CONCERNED 4. ' 7) / CIT CONCERNED 5. 6. 89 2 ): , * : , . ' ( / DR, ITAT, MUMBAI CONCERNED 2 ; < ( / GUARD FILE. = ' / BY ORDER, TRUE COPY > # (ASSTT. REGISTRAR) * : , . ' ( /ITAT, MUMBAI