M/S ADWISE CONSULTATIONS PVT. LTD, Mumbai V. DCIT, CIRLCE 4(1)(2), Mumbai

ITA 275/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0067 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 21-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T R KHALSALD
• Assessee Lawyers: RAJEEV KHANDELWAL LD
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE HONBLE SHRI PAVAN KUMAR GADALE, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.275/MUM/2019 ( / ASSESSMENT YEAR: 2012-13) M/S EDWISE CONSULTANTS PVT. LTD. JER MAHAL, OPP. METRO CINEMA DHOBI TALAO, MUMBAI 400 002 / VS. D CIT - CIRCLE 4(1)(2) 642, AAYKAR BHAWAN M.K.ROAD, MUMBAI 400 020 ./ ./PAN/GIR NO. AAACR-2363-N ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI RAJEEV KHANDELWAL LD. AR REVENUE BY : SHRI T.R.KHALSA-LD. DR / DATE OF HEARING : 30/12/2020 / DATE OF PRONOUNCEMENT : 30/12/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. IN THE CAPTIONED APPEAL FOR ASSESSMENT YEAR (AY) 2012-13, THE ASSESSEE IS AGGRIEVED BY CONFIRMATION OF DISALL OWANCE OF RS.13 LACS BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, MUMBAI [CIT(A)], APPEAL NO.CIT(A)-2/IT/10084/2018-19 DATED 30/08/2018. THE IMPUGNED DISALLOWANCE WAS MADE BY LD. AO INVOKI NG THE PROVISIONS OF SEC.40A(2)(A) WHILE FRAMING ASSESSMEN T U/S 143(3) ON 19/03/2015. 2. THE LD. AR RELIED ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2008-09 TO 2010-11, I TA NOS. 5376/MUM/2011 & ORS., COMMON ORDER DATED 14/10/2015 TO SUBMIT 2 THAT SIMILAR DISALLOWANCE MADE IN THOSE YEARS HAS B EEN DELETED BY THE TRIBUNAL. THE LD. DR, ON THE OTHER HAND, DRAWIN G ATTENTION TO THE ORDERS OF LOWER AUTHORITIES, SUBMITTED THAT THE ASSESSEE PAID EXCESSIVE REMUNERATION DESPITE REDUCTION IN OVERALL PROFITABILITY AND TURNOVER. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN S UCCEEDING PARAGRAPHS. 3. THE IMPUGNED DISALLOWANCE STEM FROM THE FACT THA T THE ASSESSEE PAID AGGREGATE REMUNERATION OF RS.130 LACS TO THREE OF ITS DIRECTORS, AS TABULATED IN PARA 5.1 OF THE ORDE R. THE DISALLOWANCE STEM FROM THE FACT THAT THERE WAS REDUCTION IN PROF IT TO RS.9.85 CRORES DURING THE YEAR AS AGAINST RS.10.26 CRORES I N THE PRECEDING YEAR. SIMILAR FALL IN OVERALL REVENUE WAS NOTED WHI CH LED LD. AO TO CONCLUDE THAT THE REMUNERATION WAS EXCESSIVE AND UN REASONABLE IN TERMS OF SEC.40(2)(A) AND ACCORDINGLY, HE MADE ADHO C DISALLOWANCE OF 10% AGAINST THE REMUNERATION SO PAI D BY THE ASSESSEE. THE STAND OF LD. AO, UPON CONFIRMATION BY LD.CIT(A) , IS IN FURTHER APPEAL BEFORE US. 4. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED IN PRECEDING PARAGRAPHS, IT IS QUITE DISCERNIBLE THAT THE ADHOC DISALLOWANCE OF 10% HAS BEEN MADE ONLY IN VIEW OF T HE FACT THAT THERE WAS OVERALL REDUCTION IN PROFIT AND TURNOVER DURING THE YEAR. THE SAID REASONING, ON STANDALONE BASIS, WOULD NOT SUFFICE TO MAKE ADHOC DISALLOWANCE OF LEGITIMATE BUSINESS EXPENDITU RE INCURRED THE ASSESSEE. UPON PERUSAL OF DOCUMENTS ON RECORD, WE F IND THAT THE 3 ASSESSEE AS WELL ALL THE THREE DIRECTOR FALL WITHIN THE MAXIMUM TAX BRACKET AND THE ASSESSEE WOULD NOT GAIN ANYTHING BY BOOKING EXCESSIVE EXPENDITURE. THE REMUNERATION SO PAID BY THE ASSESSEE HAS BEEN REFLECTED BY DIRECTORS IN THEIR RESPECTIVE INCOME TAX RETURNS. NO VIOLATION OF ANY RULES UNDER THE COMPAN IES ACT HAS BEEN DEMONSTRATED BEFORE US WHILE PAYING THE STATED REMUNERATION. PERTINENTLY, THE TRIBUNAL, ON SIMILAR FACTS AND CIRCUMSTANCES, IN AYS 2008-09 TO 2010-11, DELETED T HE DISALLOWANCE BY OBSERVING THAT THE LD.AO HAD NOT EX AMINED THE CLAIM OF THE ASSESSEE IN TERMS OF MANDATORY CONDITI ONS PRESCRIBED IN SEC.40(2)(A) WHICH CAST AN ONUS ON THE LD. AO TO DETERMINE THE EXCESSIVE PAYMENT HAVING REGARD TO THE MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH HE PAYMENT WAS MAD E OR HAVING REGARD TO LEGITIMATE BUSINESS NEEDS OF THE ASSESSEE . WE FIND SIMILAR FACTUAL MATRIX IN THIS YEAR. FURTHER, THE F ACTS OF THE CASE ARE COVERED BY THE RATIO OF BINDING DECISIONS OF HONBL E BOMBAY HIGH COURT IN CIT V.S INDO SAUDI SERVICES TRAVELS PVT. LTD. (310 ITR 306) AS WELL AS V. S. DEMO & CO. P. LTD. (336 ITR 209). GOING BY THE SAME, WE ARE INCLINED TO DELETE THE IMPUGNED AD HOC DISALLOWANCE OF RS.13 LACS. THIS GROUND STAND ALLOW ED. NO OTHER GROUNDS HAVE BEEN URGED BEFORE US. 5. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED ON 30 TH DECEMBER, 2020. SD/- SD/- SD/- (PAVAN KUMAR GADALE) (MANOJ KUMAR AGGARW AL) !' / JUDICIAL MEMBER !' / ACCOUNTANT MEMBER MUMBAI; ! DATED : 30/12/2020 S R.PS, SUDIP SARKAR 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. % ( ) / THE CIT(A) 4. % / CIT CONCERNED 5. &' ( , ( , / DR, ITAT, MUMBAI 6. ')*+ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.