GOPALA KRISHNAN NAIR, MUMBAI V. ITO - 23(1)(2), MUMBAI

ITA 2644/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84338 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: S C AGRAWAL
• Keywords: Depreciation; Principle of natural justice

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES SMC, MUMBAI . . , BEFORE SHRI I P BANSAL, JUDICIAL MEMBER ./ITA NO.2644/MUM/2013 ( / ASSESSMENT YEAR:2006-07) GOPALA KRISHNAN NAIR, A-401, FIESTA, VASANT OSCAR L B S MARG, MULUND (W), MUMBAI- 400 080 PAN : ACRPN1536D VS. ITO 23(1)(2) MUMBAI ( ! /APPELLANT) ( '# ! / RESPONDENT) APPELLANT BY : SHRI S C AGRAWAL RESPONDENT BY : SHRI NEIL PHILIP DATE OF HEARING : 26.11.2014 DATE OF PRONOUNCEME NT :26.11.2014 $ / O R D E R THIS APPEAL IS FILED BY THE ASSESSEE. IT IS DIRECT ED AGAINST THE ORDER PASSED BY THE CIT(A) DATED 31.10.2012 FOR A.Y. 2006-07. THE GROUNDS OF APPEAL READ AS UNDER: GROUND NO.1 IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) ERRED IN DISMISSING THE APPEAL WITHOUT APPRECIATING THE FACT THAT :- A. THE APPELLANT COULD NOT ATTEND SINCE HE HAS NOT REC EIVED THE NOTICE OF HEARING. B. THAT THE APPELLANT WAS NOT GIVEN OPPORTUNITY OF BEI NG HEARD AND THEREFORE THE DISMISSAL OF APPEAL IS AGAI NST PRINCIPAL OF NATURAL JUSTICE. 2 ITA NO.2644/MUM.2013 AY:2006-07 GROUND NO.2 DISALLOWANCE OF MOTOR CAR EXPENSES IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF 20% OF MOTOR CAR EXPENSE S RS.45,205/- OUT OF TOTAL EXPENSES OF RS.125329/- & DEPRECIATION RS. 77677/- INTEREST RS.23021/- 226027/- IGNORING THE FACT THAT A. MOTOR CAR IS USED EXCLUSIVELY FOR THE BUSINESS OF T HE APPELLANT B. THAT THE DEPRECIATION ON MOTOR CAR CAN BE DISALL OWED DUE TO INTRODUCTION OF CONCEPT OF BLOCK OF ASSETS THE V ALUE OF INDIVIDUAL ASSET COMPRISING THE BLOCK GETS MERGED A ND THE ASSETS LOSE THEIR INDIVIDUAL IDENTITY WITH THE RESULT THAT DEPRECIATION OF A PARTICULAR ASSET IN THE BLOCK CAN NOT BE WORKED OUT SEPARATELY THEREFORE DISALLOWANCE OF PAR T DEPRECIATION IN RESPECT OF ANY ASSETS CANNOT BE MAD E. THE BOMBAY TRIBUNAL FOLLOWED THE DECISION OF THE JABALPUR BENCH IN THE CASE OF PACKWAL PRINTER V/S A CIT (59 ITD 340) GROUND NO.3 POWDER POINT: DISALLOWANCE FO TELEPHONE EXPNS., STAFF WELFARE AND MISC. EXPENS. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF 20% EXPENSES RS.35469/- OUT OF TOTAL EXPENSES OF RS.177346/- TELEPHONE RS.68399/- STAFF WELFARE RS.73857/- AND MISCELLANEOUS EXP RS.35090/- GROUND NO.4 EXOTICA GARMENTS : ESTIMATING 5% OF TOTAL LABOUR CH ARGES OF RS.1754035/- AS INCOME INSTEAD OF DECLARED INCOME O F RS.15234/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAR NED CIT(A) ERRED IN ESTIMATING THE INCOME AT RS.87700/- 5% OF THE TOTAL RECEIPT OF RS.1754035/- INSTEAD OF DECLARED INCOME OF RS.15234 /- IGNORING THE FACAT THAT : A. THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS AND T HE BOOKS OF ACCOUNT ARE AUDITED B. THE EXPENSES ARE SUPPORTED BY BILLS AND VOUCHERS AN D THE EXPENSES ARE INCURRED EXCLUSIVELY FOR THE BUSIN ESS OF THE ASSESSEE. 3 ITA NO.2644/MUM.2013 AY:2006-07 GROUND NO.5 M/S. EMIRATES FOODS: ESTIMATING 5% OF THE TOTAL RECEIPTS OF RS.384285/- RS.19214/- PROFIT INSTEAD OF DECLARED NET PROFIT OF RS.4924/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEAN ED CIT(A) ERRED IN ESTIMATING THE NET PROFIT AT RS.19214/- BEING 5% OF THE GROSS RECEIPTS OF RS.38425/- INSTEAD OF DECLARED NET PROFIT OF RS. 4924/- IGNORING THE FACT THAT A. THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNTS ARE AUDITED, THE EXPENSES ARE SUPPORTED BY BILL AND VOU CHERS AND THE EXPENSES ARE INCURRED EXCLUSIVELY FOR THE BUSINESS OF THE APPELLANT 2. THE IMPUGNED ORDER PASSED BY THE CIT(A) IS AN EX PARTE ORDER. IT IS THE CASE OF THE ASSESSEE THAT THE LEARNED CIT(A) DID NOT GIV E PROPER OPPORTUNITY TO THE ASSESSEE AND HAS MECHANICALLY UPHELD THE ADDITIONS MADE BY THE AO. IT WAS FURTHER SUBMITTED THAT IN SUBSEQUENT YEAR I.E. A.Y. 2007-08 , THE AO HIMSELF HAS RESTRICTED THE DISALLOWANCE TO THE TUNE OF 10%. MY ATTENTION WAS DRAWN TO THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 2007-08, WHICH IS FILED A T PAGES 32-34 OF THE PAPER-BOOK. THUS, IT WAS SUBMITTED BY THE LEARNED AR THAT THE D ISALLOWANCE AGITATED IN THE PRESENT APPEAL SHOULD BE RESTRICTED TO 10%. WITH R EGARD TO GROUND NOS. 4 AND 5, IT WAS SUBMITTED THAT HAVING REGARD TO THE BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE, WHICH ARE AUDITED, THE AO COULD NOT ESTIM ATE 5% INCOME OF THE TOTAL LABOUR CHARGES IN RESPECT OF M/S. EXOTICA GARMENTS AND OF TOTAL RECEIPTS IN CASE OF M/S. EMIRATES FOODS. IT WAS SUBMITTED THAT THE PRO FITS DECLARED BY THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY THE AO. 3. ON THE OTHER HAND, THE LEARNED DR RELIED UPON TH E ORDERS PASSED BY THE AO AND THE CIT(A). 4. I HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. IN SO FAR AS IT RELATES TO THE ISSUE R AISED IN GROUND NO.1, IN VIEW OF THE SUBMISSIONS OF THE ASSESSEE, AS THE APPEAL OF THE A SSESSEE IS BEING ADJUDICATED ON MERITS, THE SAME DOES NOT REQUIRE TO BE ADJUDICATED . SO FAR AS IT RELATES TO THE DISALLOWANCES OF EXPENSES AS AGITATED IN GROUND NOS . 2 & 3, SINCE THE AO IN A.Y. 4 ITA NO.2644/MUM.2013 AY:2006-07 2007-08 HAS RESTRICTED THE DISALLOWANCE TO 10%, THE AO IS DIRECTED TO RECALCULATE THE DISALLOWANCE @10% INSTEAD OF 20%. THESE GROUNDS AR E PARTLY ALLOWED. 5. SO FAR AS IT RELATES TO GROUND NO.4, IT IS SEEN FROM THE ASSESSMENT ORDER THAT THOUGH THE BOOKS OF ACCOUNT WERE PRODUCED BY THE AS SESSEE BUT AS PER THE OBSERVATIONS OF THE AO, THE EXPENSES ARE NOT FULLY SUPPORTED BY DOCUMENTARY EVIDENCE. IT IS IN THAT CIRCUMSTANCES 5% INCOME HA S BEEN DETERMINED OF THE TOTAL RECEIPTS. IF THE EXPENDITURE CLAIMED BY THE ASSESS EE ARE NOT FULLY SUPPORTED BY DOCUMENTARY EVIDENCE, THEN THE ESTIMATION OF NET PR OFIT CANNOT BE RULED OUT AND 5% NET PROFIT ALSO CANNOT BE SAID TO BE ON THE HIGHER SIDE. THEREFORE, I DECLINE TO INTERFERE IN THE PROFIT DETERMINED BY THE AO. THIS GROUND OF THE ASSESSEE IS DISMISSED. 6. AS IT RELATES TO GROUND NO.5, IT IS THE OBSERVAT ION OF THE AO THAT THE ASSESSEE DID NOT SUBMIT DETAILS IN SUPPORT OF NET PROFIT DEC LARED BY HIM OR WITH REGARD TO THE EXPENSES CLAIMED AND IT IS IN THESE CIRCUMSTANCES, THE LEARNED AO HAS ESTIMATED PROFIT @5%. HERE ALSO FOR THE REASONS RECORDED FOR GROUND NO.4, I DECLINE TO INTERFERE AND THIS GROUND IS ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2014. SD/- (I P BANSAL) JUDICIAL MEMBER MUMBAI, DT : 26 TH NOVEMBER, 2014 SA 5 ITA NO.2644/MUM.2013 AY:2006-07 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, SMC BENCH, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI