M/s Goel Jewellers Overseas Corporation, New Delhi V. ACIT, New Delhi

ITA 3029/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6761 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 03-10-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 27-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: P J KHANNA
• Keywords: Opportunity of being heard

Judgement Text

1 ITA NO. 3029/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-3, NEW DELHI BEFORE SH. N. K. SAINI, ACCOUNTANT MEMBER ITA NO. 3029/DEL/20 16 : ASSTT. YEAR : 2012-13 GOEAL JEWELLERS OVERSEAS CORPORATION C/O M/S P. N. KHANNA & CO. CA, 14-15 F, SHIVAM HOUSE, CONNAUGHT PLACE, NEW DELHI AAGFG6440E VS ACIT CIRCLE-51(1), CIVIC CENTRE, DR. S. P. MUKHERJEE MARG NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. P. J. KHANNA, CA REVENUE BY : SH. F. R. MEENA, SR. DR DATE OF HEARING : 03.10.2016 DATE OF PRONOUNCEMENT : 02 .11.2016 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 5/4/2016 PASSED BY CIT(A)-17, NEW DELHI. 2. VIDE GROUND NO.1, GRIEVANCES OF THE ASSESSEE REL ATES TO THE CONFIRMATION OF DISALLOWANCE OF RS.6 LACS MADE BY THE A.O ON ACCOUNT OF PAYMENT OF SALARY TO THE PARTNERS IN VIOLATION OF PROVISIONS OF SECTION 40(A) (3) OF THE INCOME- TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2 ITA NO. 3029/DEL/2016 3. FACTS OF THE CASE IN BRIEF ARE THAT THE A. O MA DE THE IMPUGNED ADDITION BY OBSERVING THAT THE ASSESSEE HA D DEBITED AN AMOUNT OF RS.12 LACS UNDER THE HEAD SALA RY TO PARTNERS IN HIS PROFIT AND LOSS ACCOUNT AND ON EXAM INING THE LEDGER ACCOUNT OF PARTNERS SALARY, FILED BY TH E ASSESSEE IT WAS FOUND THAT A SUM OF RS.6 LACS WAS P AID IN CASH ON VARIOUS DATES IN VIOLATION OF A PROVISIONS OF SECTION 40(A) (3) OF THE ACT. HE, THEREFORE, DISAL LOWED THE SAID AMOUNT AND ALSO MENTIONED THAT SIMILAR DISALLO WANCE WAS MADE IN THE PRECEDING ASSESSMENT YEAR. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD .CIT(A) WHO CONFIRMED THE DISALLOWANCE BY OBSERVING THAT IN ASSESSEES OWN CASE ON IDENTICAL FACTS THIS ISSUE W AS ADJUDICATED BY HIS PREDECESSOR FOR THE ASSESSMENT Y EAR 2010-11. NOW, THE ASSESSEE IS IN APPEAL. 4. THE LD. COUNSEL FOR THE SUBMITTED THAT THE DISAL LOWANCE MADE BY THE A.O AND CONFIRMED BY THE LD.CIT (A) WAS NOT JUSTIFIED BECAUSE NONE OF THEM CONSIDERED THIS VITA L FACT THAT THE AMOUNT DEBITED IN THE SALARY ACCOUNT WERE THE WITHDRAWALS MADE BY THE PARTNERS ON DIFFERENT DATES AND THE SALARY WAS CREDITED TO THEIR ACCOUNT AT THE END OF THE YEAR ON 31 ST MARCH, SO THERE WAS NO VIOLATION OF THE PROVISIONS CONTAINED IN SECTION 40(A) (3) OF THE AC T. 5. IN HIS RIVAL SUBMISSION, THE LD. DR STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 3 ITA NO. 3029/DEL/2016 6. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD IN THE PRESENT CASE IT IS NOT CLEAR AS TO WHETHER THE AMOU NT CONSIDERED BY THE A.O IN VIOLATION OF THE PROVISION S OF SECTION 40(A) (3) OF THE ACT ON ACCOUNT OF PARTNER S SALARY WERE THE WITHDRAWALS BY THE PARTNERS OR NOT. IN MY OPINION, THIS ISSUE REQUIRES FRESH ADJUDICATION AT THE LEVEL OF THE A.O. THEREFORE, THE IMPUGNED ORDER IS SET A SIDE ON THIS ISSUE AND THE MATTER IS RESTORED TO THE FILE O F THE A.O TO BE ADJUDICATED A FRESH IN ACCORDANCE WITH LAW AF TER PROVIDING A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. THE NEXT ISSUE VIDE GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS.53,782/-MADE BY THE A.O OUT OF EXPENSES DEBITED UNDER THE HEADS BUSINESS PROMOTION & ENTERTAINMENT, MISCELLANEOUS EXPENSES AND STAFF WEL FARE. 8. THE FACTS RELATED TO THIS ISSUE IN BRIEF OF THAT THE ASSESSEE DEBITED A SUM OF RS.2, 56,200/-, RS.1, 49,800/-, RS . 1,31,818/- TOTALING TO RS.5,37,818/- UNDER THE HEAD S BUSINESS, PROMOTION AND ENTERTAINMENT, MISCELLANEOU S EXPENSES AND STAFF WELFARE RESPECTIVELY. THE A.O DISALLOWED 1/10 TH OF THOSE EXPENSES BY OBSERVING THAT THE EXPENSES WERE NEITHER FULLY VOUCHED NOR VERIFIABLE, SO IN ORDER TO PROTECT THE INTEREST OF REVENUE, 1/10 TH OF THOSE EXPENSES WAS TO BE DISALLOWED. BEING AGGRIEVED THE 4 ITA NO. 3029/DEL/2016 ASSESSEE CARRIED THE MATTER TO THE LD.CIT(A)WHO SUS TAINED THE DISALLOWANCE BY OBSERVING THAT ON THE BASIS OF SELF- MADE VOUCHERS THERE WAS POSSIBILITY TO INFLATE THE EXPENDITURE. NOW THE ASSESSEE IS IN APPEAL. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO SPECIFIC INSTANCE WAS MENTIONED BY THE A.O WHILE DISALLOWING THE EXPENSES. THEREFORE, THE AD-HOC DISALLOWANCE MADE BY THE A.O AND SUSTAINED BY THE LD.CIT (A) WAS NOT JUSTIFIED. 10. IN HIS RIVAL SUBMISSIONS, THE LD. DR SUPPORTED THE ORDERED OF THE AUTHORITIES BELOW. 11. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FAC T THAT THE A.O HAS NOT POINTED OUT ANY SPECIFIC INSTANCE WHERE THE EXPENSES INCURRED WERE NOT FOR THE BUSINESS PURPOSE S. AT THE SAME TIME, THE EXPENSES WERE NOT FULLY VOUCHED. THEREFORE, THE LEAKAGE OF REVENUE AND THE PERSONAL USE BY THE PARTNERS CANNOT BE RULED OUT. IN MY OPINION, T HE DISALLOWANCE MADE BY THE A.O IS ON HIGHER SIDE. 5 ITA NO. 3029/DEL/2016 THEREFORE, TO MEET THE ENDS OF JUSTICE THE DISALLOW ANCE IS RESTRICTED TO RS.25,000/- TO COVER UP THE LEAKAGE I F ANY. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 02/11/2016) SD/- (N. K. SAIN I) ACCOUNTANT MEMBER DATED: 02/11/2016 *R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 6 ITA NO. 3029/DEL/2016 DATE INITIAL 1. DRAFT DICTATED ON 01.11.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 01.11.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2.11.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 .11.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 3029/DEL/2016