KRASNY CORPORATE & TECHNICAL SERVICES P. LTD, NAVI MUMBAI V. ASST CIT 10(3), MUMBAI

ITA 2693/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3788 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR DR
• Assessee Lawyers: PRAKASH K JOTWANI
• Keywords: Depreciation; Opportunity of being heard; Additional evidence
• Section: 143(3)

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENC H, MUMBAI . . , . , ! '#$ ' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI D. KARUNAKA RA RAO, AM ' ./I.T.A. NO.2693/M/2012 ( %& ' / ASSESSMENT YEAR :2009-2010) KRASNY CORPORATE & TECHNICAL SERVICES PVT. LTD., 1201, 12 TH FLOOR, GREAT EASTERN SUMMIT-B, SECTOR-15, PLOT NO.66, CBD BELAPUR, NAVI MUMBAI 400 614. & / VS. ACIT - 10(3), MUMBAI. $( ! ' ./PAN : AAACY 1053 G ( () /APPELLANT) .. ( *+() / RESPONDENT) () , - ' / APPELLANT BY : SHRI PRAKASH K JOTWANI *+() , - ' / RESPONDENT BY : SHRI MANOJ KUMAR, DR ' & , .! /DATE OF HEARING : 7.5.2013 /0' , .! /DATE OF PRONOUNCEMENT :15.5.2013 #1 #1 #1 #1 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 20.4.2012 IS A GAINST THE ORDER OF CIT (A)- 22, MUMBAI DATED 13.02.2012 FOR THE ASSESSMENT YEAR 2009-2010. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW: 1. THE LD CIT (A) ERRED IN HOLDING THAT THE APPELLANT HAD FAILED TO PROVE THAT THE BUSINESS ACTIVITY WAS CARRIED OUT DURING THE YEARS DESPITE EVIDENCE FILED BEFORE HIM. 2. THE LD CIT (A) ERRED IN DISALLOWING THE ENTIRE EXPE NSES CLAIMED DURING THE YEAR EXCEPT AUDITORS FEES AND PRINTING AND STATIONERY . 3. THE LD CIT (A) ERRED IN DISALLOWING SALARY EXPENSES OF RS. 6,32,173/ - ON THE GROUND THAT BREAK-UP OF EXPENSES WAS NOT PROVIDED W HILE IN THE EARLIER PARA THE BREAK-UP WAS REPRODUCED BY THE CIT (A) AND REASONS FOR SUCH CLAIM OF SALARY WAS ALSO PROVIDED. 4. THE LD CIT (A) ERRED IN DISALLOWING PROFESSIONAL EXPENSES OF RS. 1,43,292 /- ON THE GROUND THAT BILLS FOR THE YEARS HAVE BEEN RA ISED IN LATER YEAR AND PAYMENT WAS ALSO MADE IN SUBSEQUENT YEARS IGNORING THE FACT THAT SERVICES WERE RENDERED FOR AND DURING THE YEAR AND BILLS WERE ALSO RECEIVE D FOR THIS YEAR DEMONSTRATING CERTAINTY. 2 5. THE LD CIT (A) ERRED IN DISALLOWING RENT OF RS. 1,14,000 /- RENT PAID FOR ACQUIRING BEING OFFICE PREMISES WHICH WERE TAKEN ON RENT WHICH WERE USED FOR PURPOSE OF BUSINESS. 6. THE LD CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 32,540/- TOWARDS REPAIRS AND MAINTENANCE EXPENSES BEING EXPENSES ON REPAIRS TO COMPUTERS AT RS. 22,040/- AND REPAIRS TO FURNITURE OF RS. 10,500 /-. 7. THE LD CIT ERRED IN CONFIRMING DISALLOWANCE OF RS. 54,279 /- BEING DEPOSITS WRITTEN OFF DURING THE YEAR AND WERE CLAIMED AS BUS INESS EXPENSES AND NOT DEBTS. 8. THE LD CIT (A) ERRED IN DISALLOWING VEHICLE EXPENSES OF RS. 1,06,646/- ON THE GROUND THAT NO BUSINESS ACTIVITY WAS CARRIED OUT AN D ALSO DEPRECIATION ON VEHICLE OF RS. 14,177/- ON THE SAME GROUND. 9. THE LD CIT (A) ERRED IN NOT ALLOWING DEPRECIATION ON OTHER ASSETS IN THE BLOCK OF ASSETS AND NOT GIVING ANY REASONS FOR NOT ALLOWI NG THE SAME. 10. THE LD CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 2,19,761/- TOWARDS VARIOUS OTHER EXPENSES ON THE GROUND THAT SAME CANN OT BE ALLOWED IN ABSENCE OF BUSINESS ACTIVITY. 11. THE LD CIT (A) ERRED IN ASSESSING PROFESSIONAL INCO ME UNDER THE HEAD INCOME FROM OTHER SOURCES AND CONSEQUENTLY ERRED IN CONFIR MING DISALLOWANCE OF EXPENSES OF RS. 93,500/- ON THE GROUND THAT BILLS WERE HANDMADE AND ALSO THEY WERE IN THE NATURE OF PROVISIONS WHICH BEING U NASCERTAINED LIABILITY. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE FILED RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 68,34,090/ -. ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS. 75,22,530/-. IN THE ASSESSMENT, AO CONCLUDED THAT THE ASSESSEE CLAIMED EXPENDITURE WITHOUT CARRYING ON ANY BUSINESS ACTIVITY DURING THE YEAR . AO EXAMINED EACH OF THE RECEIPTS AND HELD THAT THE INCOME OFFERED BY THE AS SESSEE IS TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. CONSEQUENTLY, HE HELD THAT THE EMPLOYEE COST AND OTHER EXPENSES ARE NOT ALLOWABLE AS BUSINESS EXPENS ES. HOWEVER HE ALLOWED SOME EXPENSES CLAIMED AS AUDIT FEES, PRINTING AND STATIO NERY. FURTHER, IN CONNECTION WITH PROFESSIONAL INCOME OF RS. 2 LACS DECLARED IN THE R ETURN, AO RESTRICTED THE EXPENDITURE RELATABLE TO SUCH INCOME TO RS. 50,000/ - FOR SPECIFIED REASONS MENTIONED IN THE ASSESSMENT ORDER. THUS, AO DENIED THE ASSESSEES CLAIM OF EXPENDITURE FOR WANT OF DOCUMENTARY EVIDENCES. OTHE RWISE, ASSESSEE DEBITED EMPLOYEES COST AT RS. 68,34,090/- AND OTHER EXPENSE S AT RS. 8,72,070/-. AGGRIEVED WITH THE ABOVE ADDITIONS/CONCLUSIONS, ASSESSEE FILE D AN APPEAL BEFORE THE CIT (A). 4. DURING THE PROCEEDINGS BEFORE THE CIT (A), ASSES SEE SUBMITTED THAT THE CLAIM OF EXPENDITURE IS ENTIRELY ALLOWABLE WITHOUT ANY RE STRICTIONS. FURTHER, ASSESSEE SUBMITTED THAT THE ASSESSEE IS A JOINT VENTURE COMP ANY WITH YUGSUDO EXPORTS OF UKRAINE, WHICH PROVIDES ORION MICE CONTROL PANAL SY STEM TO THE NAVAL SHIPS AND ITS 3 EXTENT OF BUSINESS DEPENDS ON THE DEMAND AND SUPPLY OF THE MARKET CONDITION. IT IS NOT NECESSARY THAT THE BUSINESS SHOULD EXIST THROUG HOUT THE YEAR IF THE ASSESSEE HAS TO GET THE BUSINESS. HE FURTHER SUBMITTED THAT TO BE ALIVE AND REMAIN ACTIVE IN THE BUSINESS, ASSESSEE HAS TO INCUR THE CLAIMED EXPENDI TURE BY WAY OF OVERHEADS IE SUCH AS EMPLOYEES COST AND OTHER EXPENSES EVERY YEAR, WH ETHER THE ASSESSEE POSSESS CONTRACTS ON HAND OR NOT. FURTHER, HE MENTIONED TH AT ASSESSEE CONDUCTED BUSINESS IN THE EARLIER YEARS AS WELL AS IN THE LATER YEARS . THEREFORE, THIS YEAR IS EXCEPTIONAL AS HE DID NOT REGISTER ANY SALES DURING THE YEAR. HE ALSO MENTIONED THAT THE FINDING OF THE AO THAT THE ASSESSEE HAS NOT CAR RIED ANY BUSINESS IS NOT CORRECT. RELEVANT SUBMISSIONS ARE NARRATED BY THE CIT (A) IN PARA 3.2 OF THE IMPUGNED ORDER. ON HEARING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) EXAMINED THE PAPERS FILED BEFORE HIM AND REJECTED THE SAME BEFORE CONFIRMING THE VIEWS OF THE AO IN MATTERS OF CARRYING ON THE BUSINESS ON ONE SIDE AND DISALLO WANCE OF EXPENSES ON THE OTHER. FINALLY, CIT (A) PARTLY ALLOWED THE APPEAL OF THE A SSESSEE. IN THE BACKGROUND OF THE ABOVE FACTS, ASSESSEE FILED THE PRESENT APPEAL BEFO RE US WITH THE ABOVE MENTIONED GROUNDS. 5. DURING THE PROCEEDINGS BEFORE US, AT THE VERY OU TSET, SHRI PRAKASH K JOTWANI, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION T O THE PAPER BOOK CONTAINING 361 PAGES MOSTLY ADDITIONAL EVIDENCES, AND READ OUT A COVERING LETTER BY WAY OF AFFIDAVIT AND THE CONTENTS OF WHICH READS AS UNDER: 1. THAT IS THE COURSE OF ASSESSMENT, THE AO HAS DIS ALLOWED EXPENSES ON THE GROUND THAT NO BUSINESS ACTIVITY WAS DONE BY THE AP PELLANT. THE AO DID NOT REJECT THE BOOKS OF ACCOUNTS NOR DID HE TREAT THE EXPENSES AS BOGUS. 2. THAT IN VIEW THEREOF, BEFORE THE CIT (A) LETTERS WRITTEN TO THE AO AT PAGE 45 TO 63 WERE NOT FILED, BUT IN OUR SUBMISSION BEFORE CIT (A) ARGUMENTS ON THE BASIS OF THESE LETTERS FILED BEFORE THE AO WERE BROUGHT DOWN . THE LETTERS ARE NOW BEING FILED BEFORE THE TRIBUNAL TO DEMONSTRATE THE ARGUMENT RAI SED BEFORE THE AO. 3. WITH REGARDS TO PAGE NO.99, THE CHART WAS PRODUC ED BEFORE THE AO AND THE DESCRIPTION OF THE SAME WAS ALSO SUBMITTED BEFORE T HE CIT (A), THOUGH SPECIFICALLY THE CHARG WAS NOT FILED BEFORE THE CIT (A). 4. WITH REGARDS TO PAGE NO. 123 TO 124, THE CHART W AS PRODUCED BEFORE THE AO AND THE DESCRIPTION OF THE SAME WAS ALSO SUBMITTED BEFORE THE CIT (A), THOUGH SPECIFICALLY THE CHART WAS NOT FILED BEFORE THE CIT (A). 5. WITH REGARDS TO PAGE NO. 125 TO 346, THESE ARE V OUCHERS AND SUPPORTING DOCUMENTS WHICH WERE NOT FILED BEFORE THE AO AS THE AO HAD NOT ASKED FOR IT. SINCE THE MAIN ISSUE WAS CARRYING ON OF BUSINESS, THESE V OLUMINOUS SUPPORTING DOCUMENTS WERE ALSO NOT FILED BEFORE CIT (A). THE PAPERS ARE NOW BEING FILED TO DISCLOSE THE BONA FIDES OF THE APPELLANT TOWARDS ITS CLAIM MADE OF EXPENSES. 4 6. THAT WITH REGARDS TO STATEMENT AT PAGE NO.348, T HE SAME IS COMPARATIVE CHART FOR A PERIOD OF 12 YEARS TO DEMONSTRATE THE A RGUMENT OF THE APPELLANT FOR ITS CLAIM OF EXPENSES. 7. THAT WE SUBMIT, THAT THE ADDITIONAL EVIDENCE AS STATE ABOVE BE ADMITTED AND APPEAL BE ADJUDICATE BY CONSIDERING TH E SAID EVIDENCE. 6. ELABORATING EACH OF THE ABOVE ITEMS MENTIONED IN THE PAPER BOOK, LD COUNSEL MENTIONED THAT PAGES 3-14 AND 27-44 (IE AUDITED FIN ANCIAL STATEMENTS FOR THE EARLIER AS WELL AS LATER FINANCIAL YEARS) AND THE PAGE 45-9 9 AND 123-361 WERE NOT AVAILABLE EITHER BEFORE THE AO OR BEFORE THE CIT (A ). FURTHER, HE MENTIONED THAT THESE PAPERS IF CONSIDERED, THE LOWER AUTHORIT IES WOULD COME TO DIFFERENT CONCLUSIONS ON THE ISSUE OF EXISTENCE OF BUSINESS A S WELL AS THE ALLOWABILITY OF THE EXPENDITURE CLAIMED IN THE RETURN OF INCOME. LD COU NSEL ALSO MENTIONED THAT THESE PAPERS ARE BEING FURNISHED BEFORE THE ITAT IN THE FORM OF ADDI TIONAL EVIDENCES . IN ALL FAIRNESS, THESE PAPERS ARE REQUIRED TO BE REMANDED TO THE FILES OF THE AO FOR EXAMINING THEM AND DECIDING THE ISSUES R AISED IN THE LIGHT OF THE SAID ADDITIONAL EVIDENCES. HE ALSO MENTIONED THAT THESE PAPERS COULD NOT BE FILED BEFORE THE LOWER AUTHORITIES FOR THE REASON THAT THE LOWER AUTHORITIES WERE ALWAYS CEASED WITH THE PRE-CONCEIVED NOTION THAT THE ABSENCE SALE S IN THE P & L ACCOUNT MEANS THE ABSENCE OF EXISTENCE OF BUSINESS AND THEREFORE THE CLAIM OF EXPENDITURE IS NOT ALLOWABLE. SINCERELY, LD COUNSEL PRAYED FOR ADMITTING THE ADDITIONAL EVIDENCES AND REMANDING THEM TO THE FILES OF THE AO FOR FRESH ADJUDICATION OF THE ISSUE. 7. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDER OF THE AO AND OBJECTS THE ADMISSION OF THE ADDITIONAL EVIDENCES. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE VOLUMINOUS PAPER BOOK FI LED BEFORE US. WE HAVE ALSO EXAMINED THE AFFIDAVIT DATED 26 TH APRIL, 2013 BY THE MANAGING DIRECTOR OF THE COMPANY. ON PERUSAL, IT IS NOTICED THAT THE NUMBER OF PAGES REFERRED TO ABOVE IN THE AFFIDAVIT AS WELL AS IN THE INDEX OF THE PAPER BOOK WERE NOT AVAILABLE EITHER TO THE AO OR CIT (A). UNDOUBTEDLY, THESE PAPERS NOT O NLY THROUGH ADEQUATE LIGHT ON THE ISSUE OF CONSISTENCY OF THE BUSINESS OF THE AS SESSEE BUT ALSO ON THE DECISIONS OF THE AO IN OTHER ASSESSMENT YEARS ON THE CORE ISSUE OF EXISTENCE OF BUSINESS. THEY 5 ALSO RELATES TO THE FACTS ON THE GENUINENESS OF THE EXPENDITURE AND ALLOWABILITY OF THE SAME DESPITE THE ABSENCE OF SALES IN THE YEAR UNDER CONSIDERATION. IT IS ALSO RELEVANT TO MENTION THAT THE OFFICERS HAVE NOT ATTE NDED TO THE CORE ISSUE OF THE NEED FOR MAINTAINING THE OFFICE AND STAFF IN THE YEAR UN DER CONSIDERATION, IF THEY HAVE TO REMAIN ACTIVE IN THE BUSINESS FOR LATER YEARS. IN OUR OPINION, THE EVIDENCES FURNISHED GOES TO THE CORE ISSUE IE THE EXISTENCE O F BUSINESS IN THE YEAR OR NOT. CONSIDERING THE IMPORTANCE OF THE PAPERS, WE ADMIT THE SAME. CONSEQUENTLY, CONSIDERING THE SET PRINCIPLES OF NAT URAL JUSTICE AND AS WELL AS THE ASSESSEES PRAYER TO REVISIT THE ASSESSING OFFI CER, WE FIND NO REASON TO REJECT THE PRAYER OF THE LD COUNSEL FOR ADMITTANCE AND REMANDI NG TO THE AO IN VIEW OF THE JUSTICE. ACCORDINGLY, GROUNDS RAISED BY THE ASSESS EE ARE SET ASIDE TO THE AO. AO IS DIRECTED TO ADMIT THE SAID EVIDENCES AND MAKE USE O F THEM FOR ADJUDICATING THE ISSUES ANALYZED ABOVE. AO SHALL GRANT A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUNDS ARE SET ASIDE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 2 .3 %& 2. , '4, 567 8 $ 9 . , :. ;< ORDER PRONOUNCED IN THE OPEN COURT ON 15.5.2013. . #1 , /0' ! =#&3 15.5.2013 0 , > SD/- SD/- (H.L. KARWA) (D. KARUNAKARA RAO ) / PRESIDENT ! '#$ / ACCOUNTANT MEMBER MUMBAI; =#& DATED 15/05/2013 . %& . ' ./ OKK , SR. PS #1 #1 #1 #1 , ,, , *%.8? *%.8? *%.8? *%.8? @?'. @?'. @?'. @?'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 6 3. A ( ) / THE CIT(A)- 4. A / CIT 5. ?B> *%.%& , , / DR, ITAT, MUMBAI 6. > C / GUARD FILE. '+?. *%. //TRUE COPY// #1& ' #1& ' #1& ' #1& ' / BY ORDER, 5 55 5 / '; '; '; '; : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI