PARUL A SHAH, MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 3024/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79299 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 01-01-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 18-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL K AGARWAL
• Assessee Lawyers: ABHISHEK TILAK
• Keywords: Audit objection
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO.3024/M/2011 ( AY: 2002 - 2003) ./I.T.A. NO.3025/M/2011 ( AY: 2003 - 2004) PARUL A SHAH, A/10, STERLING APARTMENT, 38G DESHMUKH MARG, MUMBAI - 26. / VS. ITO - 16(1)(1), MATRU MANDIR, TARDEO, MUMBAI - 07. ./ PAN : AAVPS 3595 D ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI AND MR. ABHISHEK TILAK / RESPONDENT BY : SHRI SUNIL K AGARWAL / DATE OF HEARING : 07.7 .2014 / DATE OF PRONOUNCEMENT : 07 .7.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS OF THE CIT (A) - 27, MUMBAI COMMONLY DATED 20.1.2011. SINCE, THE ISSUES RAISED IN BOTH THE APPEALS ARE IDENTICAL AND THE ONLY DIFFE RENCE IS IN THE FIGURES, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE AND GROUND WISE ADJUDICATION IS GIVEN IN THE SUCCEEDING PARAGRAPHS OF THIS ORDER. 2. SINCE, THE GROUNDS RAISED IN BOTH THE APPEALS ARE IDENTICAL FOR THE SAKE OF REFERENCE, THE GROUNDS RAISED IN APPEAL ITA NO.3024/M/2011 FOR THE AY 2002 - 2003 ARE REPRODUCED HERE UNDER: 1. THE LD CIT (A) ERRED IN CONFIRMING THE ORDER OF THE AO IN REGARD TO PENALTY OF R S. 8,69,400/ - U/S 271(1)(C) OF THE ACT. B. THE LD CIT (A) ERRED IN NOT CONSIDERING THE FOLLOWING: I. T HE ASSESSMENTS WERE REOPENED FOR THE ABOVE YEARS U/S 147 OF THE ACT ON THE BASIS OF AUDIT OBJECTION . II. THE DISALLOWANCE IN RESPECT OF CAR HIRING BUSINES S TO THE EXTENT OF 75% WAS MADE FOR PERSONAL USE AND NOT ON THE BASIS THAT THE CAR HIRING BUSINESS WAS NOT GENUINE. 2 III. THE DISALLOWANCE WAS RESTRICTED BY THE LD CIT (A) TO 75% OF EXPENSES IN SHARE TRADING BUSINESS CONSIDERING THE VOLUME AND FREQ UENCY OF TRANSACTIONS AND NOT O N THE BASIS THAT THE TRANSACTIONS WERE NOT GENUINE (PARA 4.3 OF THE ORDER OF THE LD CIT). C. I. THE APPELLANT SUBMITS THAT THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (P) LTD (322 ITR 158) HAS HELD THAT: A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE APPELLANT. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS (PARA 9). II. THE A BOVE OBSERVATION WHICH IS RELEVANT IS NOT CONSIDERED BY THE LD CIT (A). 3. AT THE VERY OUTSET, SHRI NISHIT GANDHI AND MR. ABHI SHEK TILAK, LD COUNSELS FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE COMMONLY DRAFTED GROUNDS IN BOTH THE ASSESSMENT YEARS RAISI NG THE OBJECTIONS RELATING TO THE VALIDITY OF THE REOPENING OF THE RELATED ASSESSMENTS BASING ON AUDIT OBJECTIONS ON THE SUSTAINABILITY OF PENALTY ORDER U/S 271(1)(C) OF THE ACT. FURTHER, LD COUNSEL MENTIONED THAT AO MADE A COUPLE OF DISALLOWANCES NAMELY CAR RELATED EXPENSES AND ALLOWABILITY OF BUSINESS LOSS ON ACCOUNT OF SHARE TRADING BUSINESS. BRINGING OUR ATTENTION TO THE RESPECTIVE ORDERS OF THE AO, LD COUNSEL MENTIONED THAT IN THE AY 2002 - 2003, ON THE ISSUE OF CAR HIRING B USINESS , AO MENTIONED THAT THE ASSESSEE CLAIMED EXPENSES AMOUNTING TO RS.4,89,935/ - AND AO ALLOWED A SUM OF RS. 1,04,111/ - ONLY. ACCORDINGLY, AO DISALLOWED DIFFERENCE AMOUNT OF RS. 3,85,824/ - . THE BASIS FOR DISALLOWANCE, AS IS APPARENT FROM THE CONTENTS OF PARA 4.1 OF THE AO, IS THAT ON AD - HOC BASIS AO DISALLOWED 75% OF RS. 4,89,935/ - AND ALLOWED ONLY A BALANCE OF 25%, EQUIVALENT OF RS. 1,04,111/ - . IT IS THE ARGUMENT OF THE LD COUNSEL THAT IN CASE WHERE THE DISALLOWANCE WAS MADE BY THE AO ON AD - HOC BASIS, THE PENALTY U/S 271(1)(C ) IS UNSUSTAINABLE IN LAW. 4. SIMILARLY, BRINGING OUR ATTENTION TO THE CONTENTS OF PARA 4.2 OF THE ASSESSMENT ORDER, RELATING TO SHARE TRADING BUSINESS, LD COUNSEL BROUGHT OUR ATTENTION TO THE FACTS GIVEN IN THE SAID PARA 4.2 AND MENTIONED THAT THE AO CO MPLETELY DENIED THE EXPENSES CLAIMED BY THE ASSESSEE AND PROCEEDED TO MAKE ADDITION OF RS. 17,64,324/ - . 5. DURING THE FIRST APPELLATE PROCEEDINGS, THE CIT (A) COMMENTED BY STATING THAT THE DENIAL OF THE CLAIM OF THE ASSESSEE IS NOT FAIR. THE RELEVANT DISCUSSION IS GIVEN IN PARA 4.2 TO 6 OF THE IMPUGNED ORDER OF THE CIT (A). FURTHER, CIT (A) MENTIONED THAT AO I S NOT JUSTIFIED IN DENYING THE ENTIRE LOSS. CONSIDERING THE VOLUME AND FREQUENCY OF THE TRANSACTIONS, CIT (A) IS OF THE OPINION THAT THE MAKING DISALLOWANCE OF 75% OF THE EXPENDITURE WOULD BE REASONABLE. THUS, THE CIT (A) GRANTED RELIEF TO THE 3 ASSESSEE A ND CONFIRMED THE DISALLOWANCE ON AD - HOC BASIS. THE REVENUE IS NOT IN APPEAL AGAINST THE RELIEF GRANTED BY THE CIT (A) . I N CONNECTION WITH THE ABOVE ADDITIONS , CONFIRMED BY THE CIT (A), AO LEVIED PENALTY U/S 271(1)(C) OF THE ACT AMOUNTING TO RS. 8,69,400/ - FOR THE AY 2002 - 03 AND RS. 6,90,236/ - FOR THE AY 2003 - 04. THERE ARE ERRORS WITH REGARD TO THE QUANTUM OF CONCEALED INCOME WHICH WAS POINTED OUT BY THE BENCH TO THE LD REPRESENTATIVES. THEY MENTIONED THAT THESE ARE THE TYPOGRAPHIC MISTAKES, WHICH REQUIRE S RECTIFICATION. NOTWITHSTANDING THE ABOVE ERRORS, LD COUNSEL MENTIONED THAT THE DISALLOWANCE MADE BY THE AO ON BOTH THE ACCOUNTS FOR BOTH THE ASSESSMENT YEARS IS ON AD - HOC BASIS . 6. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITI ES AND CONCORD WITH THE FACT THAT THE DISALLOWANCE IS MADE ON THE AD - HOC BASIS. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. ON HEARING BOTH THE PARTIES, WE FIND THE RE IS NO DISPUTE ON THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON BOTH THE ACCOUNTS. THERE IS NO MATERIAL BROUGHT BEFORE US TO DEMONSTRATE THAT THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INACCURATE PARTICULARS . PRIMA FACIE, WE FIND IT IS A CASE OF AD - HOC DISALLOWANCE AND THE IMPUGNED DISALLOWANCES ARE DEBATABLE IN NATURE. ON THE ISSUE OF SUSTAINABILITY OF THE PENALTIES IN RESPECT OF SUCH AD - HOC ADDITIONS, THERE ARE NUMBER OF JUDICIAL PRONOUNCEMENTS IN THIS REGARD TO SUGGEST THAT THE AD - HOC ADDITIONS BEING IN THE NATURE OF DEBATABILITY, DO NOT ATTRACT PENALTIES U/S 271(1)(C). THEREFORE, THE GROUNDS RAISED BY THE ASSESSEE ON MERITS ARE ALLOWED IN BOTH THE APPEALS . 8. CONSIDERING OUR ADJUDICATION GIVEN WITH REGARD TO THE GROUNDS RELATING TO ADHOC ADDITIONS, THE ADJUDICATION OF THE LEGAL ISSUES RAISED BY THE ASSESSEE BECOME ACADEMIC AND THEREFORE, THEY ARE DISMISSED AS ACADEMIC . 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED . ORDER PRONOU NCED IN THE OPEN COURT ON 7 T H JULY, 2014. S D / - S D / - ( VIJAY PAL RAO ) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 7 /7/2014 4 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI