CONSORT CAPITAL SERVICES P. LTD., MUMBAI V. I.T.O. 3(1)(3), MUMBAI

ITA 2625/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3738 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SHREY JOSHI
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Sham transactions

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BE NCH, MUMBAI . . , , . , ' # BEFORE SHRI I.P. BANSAL, JM AND SHRI D.KARUNAKARA R AO, AM ./ I.T.A. NO.2625/M/2012 ( $ % &% / ASSESSMENT YEAR :2005-2006) CONSORT CAPITAL SERVICES P. LTD., 1409, MAKER CHAMBERS, V. JAMANALAL BAJAJ MARG, NARIMAN POINT, MUMBAI 400 021. $ / VS. ITO - 3(1)(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ' ' ./PAN :AAACC 8124 G ( '( /APPELLANT) .. ( )*'( / RESPONDENT) '( + , / APPELLANT BY : SHRI VIPUL JOSHI & SHREY JOSHI )*'( + , / RESPONDENT BY : SHRI RAJARSHI DWIVEDY, SR. DR $ + -' /DATE OF HEARING : 16.4.2013 ./& + -' /DATE OF PRONOUNCEMENT : 08/05/2013 0 0 0 0 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 18.4.2012 IS A GAINST THE ORDER OF CIT (A)- 6, MUMBAI DATED 31.1.2012 FOR THE ASSESSMENT YEAR 2 005-06. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN A VERY CRYPTIC AND ARBITRARY MANNER AND WITHOUT APPLICATION OF MIND. 1.2. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE AND IN LAW, THE APPELLATE ORDER SO PASSED IS LIABLE TO BE HELD AS ILLEGAL AND BAD. WITHOUT PREJUDICE TO THE ABOVE: 2.1 THE CIT (A) ERRED IN CONFIRMING THE DISALLOWANC E OF RS. 88,027 (RS. 73,500/- PURCHASE OF MOTORIZED TREADMILLS + RS. 14,527/- FOR MICROSOFT ONLINE SERVICES ) MADE BY THE AO OUT OF CLUB MEMBERSHIP FEES, CLAIMED BY TH E APPELLANT AS DEDUCTION WHILE COMPUTING BUSINESS PROFIT. 2.2. WHILE DOING SO, THE LD CIT (A) FAILED TO APPRE CIATE THAT THE EXPENSES INCURRED BY THE APPELLANT WERE GENUINE BUSINESS EXPENSES INC URRED IN THE NORMAL COURSE OF ITS BUSINESS. 2.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 2 2.4. WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) ER RED IN NOT DIRECTING THE AO TO ALLOW DEPRECIATION ON THE PURCHASE OF THE MOTORIZED TREADMILL. 3.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO WHEREBY THE AO MADE DISALLOWANCE OF 50% OUT OF THE SALES PROMOTION EXPE NSES, AMOUNTING TO RS. 89,684/-. 3.2. WHILE DOING SO, THE CIT (A) FAILED TO APPRECIA TE THAT (I) THE EXPENSES INCURRED BY THE APPELLANT WERE GEN UINE BUSINESS EXPENSES INCURRED IN THE NORMAL COURSE OF ITS BUSIN ESS; AND (II) IN ANY CASE, NO SUCH AD-HOC DISALLOWANCE IS P ERMISSIBLE IN LAW. 3.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE, AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 4.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO WHEREBY THE AO MADE DISALLOWANCE OF RS. 3,45,841/- OUT OF THE TRAVELLIN G EXPENSES AMOUNTING TO RS. 4,40,097, CLAIMED BY THE APPELLANT. 4.2. WHILE DOING SO, THE CIT (A) FAILED TO APPRECIA TE THAT THE EXPENSES INCURRED BY THE APPELLANT WERE GENUINE BUSINESS EXPENSES INCURR ED IN THE NORMAL COURSE OF ITS BUSINESS. 4.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE AND IN LAW, NO SUCH DISALLOWANCE WAS CALLED FOR. 5.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO IN MAKING DISALLOWANCE OF INTEREST PAID BY THE APPELLANT AMOUNTING TO RS. 3,29,000/- ON THE ALLEGATION THAT THE AMOUNT BORROWED BY THE APPELLANT WAS DIVERTED TO IT S SISTER CONCERN AT A LOWER RATE OF INTEREST. 5.2. WHILE DOING SO, THE LD CIT (A) FAILED TO APPRE CIATE THAT (A) THE ASSESSEE HAD EARNED NET SURPLUS INTEREST O F RS. 5,83,890/- AND; (B) IN ANY CASE, THE ASSESSEE HAD SUFFICIENT INTER EST FREE FUNDS. 5.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE AND IN LAW NO SUCH DISALLOWANCE WAS CALLED FOR. 6.1. THE LD CIT ERRED IN CONFIRMING THE DISALLOWANC E OF PAYMENTS MADE TO (A) JAINSON ESTATE P. LTD- RS. 2,40,000/-; (B) TRADEFAI R CORPN. RS. 98,500/- AND (C) TRENDY SPORTSWEAR RS. 44,500/- U/S 40A(2)(B) OF THE ACT ON THE ALLEGATION THAT THE PAYMENTS MADE BY THE ASSESSEE TO THE ABOVE MENTIONED CONCERN S WERE UNREASONABLE AND EXCESSIVE. 6.2. WHILE DOING SO, THE CIT (A) FAILED TO APPRECIA TE THAT THE PAYMENTS MADE BY THE APPELLANT WERE GENUINE AND INCURRED IN THE NORMAL C OURSE OF ITS BUSINESS AND AT THE NORMAL MARKET RATE. 6.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE AND IN LAW, NOSUCH DISALLOWANCE WAS CALLED FOR. 7.1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF THE AO WHEREBY THE AO MADE DISALLOWANCE OF RS. 49,366/- OUT OF THE TELEPHONE E XPENSES AMOUNTING TO RS. 3,31,137/- CLAIMED BY THE APPELLANT. 7.2. WHILE DOING SO, THE CIT (A) FAILED TO APPRECIA TE THAT THE EXPENSES INCURRED BY THE APPELLANT WERE GENUINE BUSINESS EXPENSES INCURR ED IN THE NORMAL COURSE OF ITS BUSINESS. 7.3. IT IS SUBMITTED THAT IN THE FACTS AND THE CIRC UMSTANCES OF THE CASE AND IN LAW NO SUCH DISALLOWANCE WAS CALLED FOR. 3. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE BROUG HT OUR ATTENTION TO THE ORDER OF THE CIT (A) AND READ OUT CERTAIN PORTIONS FROM P ARA 6 AND 6.2 OF THE IMPUGNED ORDER AND MENTIONED THAT THE CIT (A) HAS NOT DELIBE RATED ON THE SUBMISSIONS AND NOT CONSIDERED THE EVIDENCES FURNISHED WHILE CONFIR MING THE ADDITION MADE BY THE AO. IN THIS REGARD, HE MENTIONED THAT THE SAID ORDE R OF THE CIT (A) CANNOT BE DESCRIBED AS A SPEAKING ORDER. FURTHER, HE ARGUED STATING THAT ANY APPEALABLE 3 ORDER IS EXPECTED TO BE SPEAKING ORDER, DETERMINING THE ISSUES AND DECIDING ON THEM GIVING THE REASONS. HE ALSO MENTIONED THAT TH E SAID ORDER OF THE CIT (A) IS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 25 0(6) OF THE ACT. FURTHER, HE ALSO MENTIONED THAT THE CORE ISSUE RAISED IN GROUND NO. 1.1 AND ALL OTHER GROUNDS ARE RELATE TO THE INDIVIDUAL ADDITIONS MADE BY THE AO A ND CONFIRMED THE BY THE CIT (A). FURTHER, LD COUNSEL REQUESTED THAT THE ORDER OF THE CIT (A) MAY BE SET ASIDE AND THE GROUNDS MAY BE REMANDED TO THE FILES OF THE CIT (A) FOR ADJUDICATION OF THE ISSUE AFRESH FOR WANT OF A SPEAKING ORDER ON EACH O F THE ISSUES AND ARGUMENTS RAISED BY THE ASSESSEE. 4. ON THE OTHER HAND, LD DR HAS FAIRLY MENTIONED TH AT THE SAID ORDER REQUIRES A LITTLE MORE REASONING. HE, HOWEVER, DUTIFULLY RELI ED ON THE ORDER OF THE AO / CIT (A). 5. WE HAVE HEARD BOTH PARTIES AND PERUSED THE ORDER S OF THE REVENUE ON THIS LIMITED ISSUE RAISED IN GROUND NO.1.1 RELATED TO WHETHER THE ORDER CAN BE DESCRIBED CRYPTIC AND THE DECISION GIVEN BY HIM WA S ARBITRARY OR NOT . FOR THIS PURPOSE, ON SAMPLE BASIS, WE EXAMINED THE ISSU E RAISED RELATING TO DISALLOWANCE U/S 40A(2)(B) OF THE ACT AND ADJUDICATION OF THE SA ID ISSUE BY THE CIT (A) VIDE PARA 6.2. FOR THE SAKE COMPLETENESS, THE SAID PARAGRAPHS IS IMPORTED AS UNDER,- 6.2. THE AO HAS DISCUSSED THIS ISSUE IN DETAIL AT P ARA 7 TO PARA 7, PAGES 8 TO 11 OF THE ASSESSMENT ORDER WHEREIN FACTS IN DETAIL HAVE B EEN DISCUSSED, WHICH NEED TO BE REPEATED HERE AND SHOULD BE READ FROM THE ORDER OF THE AO, INDICATING THAT THE TRANSACTIONS ARE SHAM TRANSACTIONS AND PAYMENTS MAD E TO SISTER CONCERNS ARE EXCESSIVE AND UNREASONABLE. GROUND NO.6, IS THEREF ORE, DISMISSED. 6. FROM THE ABOVE, IT IS EVIDENT THAT THE CIT (A) M ECHANICALLY RELIED ON THE ORDER OF THE AO AND CERTAIN PARAS OF THE SAID ORDER, INST EAD OF DETAILING THE ISSUES AND ADJUDICATING THEM BY GIVING REASONS FOR REJECTING T HE ARGUMENTS OF THE ASSESSEE AND DISMISSING THE EVIDENCES FURNISHED BY THE ASSESSEE. THERE IS NEED FOR CIT (A) TO ADJUDICATE THE ISSUE ONLY IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 250(6) OF THE ACT, WHICH MUST BE STRICTLY FOLLOWED. THE ORDER BEI NG AN APPEALABLE, MUST BE A SPEAKING ORDER, SHOULD CONTAIN THE REASONING AND LO GIC FOR SUSTAINING / DELETING THE ADDITIONS. FROM THAT POINT VIEW, WE ARE OF THE OPI NION THAT THE IMPUGNED ORDER CANNOT BE CALLED AS A SPEAKING ORDER AND THEREFORE, THE ISSUE RAISED IN GROUND 4 NO.1.1 IS ALLOWED IN FAVOUR OF THE ASSESSEE. FURTH ER, WE SET ASIDE ALL THE OTHER ISSUES RAISED IN THE APPEAL TO THE FILES OF THE CIT (A) FOR EXAMINING THE ISSUES AFRESH AND GIVE EFFECT TO EACH OF THE ARGUMENTS RAISED BY THE ASSESSEE AND THE EVIDENCES FURNISHED BY THE ASSESSEE AFTER GRANTING A REASONAB LE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUND NO. 1.1 IS ALLOW ED AND, AS PRAYED BY THE ASSESSEE, THE OTHER GROUNDS ARE SET ASIDE TO THE FILES OF THE CIT (A) FOR FRESH ADJUDICATION. CIT(A) SHALL GRANT REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 1 -2 $ %1- 3+ 456 7 8 - + 9- :; ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF MAY, 2013. . 0 + ./& ' <$2 08/05/2013 / + = SD/- SD/- (I.P. BANSAL) (D. KARUNAKARA RAO) / JUDICIAL MEMBER ' / ACCOUNTANT MEMBER MUMBAI; <$ DATED 08/5/2013 . $ . ./ OKK , SR. PS 0 00 0 + ++ + )-7> )-7> )-7> )-7> ?>&- ?>&- ?>&- ?>&- / COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. )*'( / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. >A= )-$ , , / DR, ITAT, MUMBAI 6. = % B / GUARD FILE. 5 *>- )- //TRUE COPY// 0$ 0$ 0$ 0$ / BY ORDER, 4 44 4 / : : : : 9 9 9 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI