SHRI. RAMESH RAVILAL FARIA , MUMBAI V. ACIT 33 (3), MUMBAI

ITA 320/MUM/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4044 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 13-01-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Corroborative evidences
• Section: 271(1)(c)

Judgement Text

INTHEINCOMETAX APPELLATETRIBUNAL MUMBAI BENCHDMUMBAI BEFORE SHRI MAHAVIRSINGH (VICEPRESIDENT)AND SHRI S. RIFAURRAHMAN(ACCOUNTANT MEMBER) ITANO.320/MUM/2020 ASSESSMENT YEAR:2016-17 SHRI RAMESHRAVILAL FARIA, D-202, SOLITAIREHOMES, SUHASHMODI ROAD, NEARRAJGURU FLYOVER, KANDIVALI(E), MUMBAI-400 101. VS. ACIT-33(3), 8 TH FLOOR, KAUTILYABHAVAN, BKC, BANDRA(E), MUMBAI-400051. PANNO.AAJPF 6552 D APPELLANT RESPONDENT ASSESSEEBY : MR. VIMAL PUNMIYA , AR REVENUEBY : MR. BHARAT ANDHLE, DR DATE OF HEARING : 27 /07/2021 DATE OF PRONOUNCEMENT : 17/09/2021 ORDER PER S.RIFAUR RAHMAN, A.M. THE PRESENT APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-45, MUMBAI [IN SHORT CIT(A)] FOR THE ASSESSMENT YEAR 2016-17 DATED 24.10.2019 AND ARISES OUT OF ASSESSMENT COMPLETEDU/S143(3)OF THE INCOMETAXACT, 1961(IN SHORTTHE ACT). 2. BRIEF FACTS OF THE CASE ARE, THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2016-17 ON 31.03.2017 DECLARING TOTAL INCOME AT RS.1,20,53,610/-. THE CASE WAS TAKEN UP FOR COMPULSORY MANUAL SCRUTINY AND SHRI RAMESH RAVILAL FARIA ITA NO.320/M/2020 2 NOTICEU/S143(2)AND142(1)WEREISSUEDANDSERVEDONTHEASSESSEE.THEAROF THEASSESSEEATTENDEDANDFURNISHEDTHE INFORMATION ASCALLED FOR. THE ASSESSEE IS A PROPRIETOR ENGAGED IN THE BUSINESS OF MANUFACTURING OF LADIES READYMADE GARMENTS IN THE NAME AND STYLE OF M/S DEVKA ARTS. A SURVEY WAS CONDUCTED IN OFFICE PREMISES AS WELL AS AT THE FACTORY PREMISES OF THE ASSESSEE ON 23.09.2016.DURINGTHE ASSESSMENT PROCEEDINGS,IT WASINFORMEDTO THE ASSESSINGOFFICER THAT THE ACCOUNTSOF THE ASSESSEE WERE NOTFINALIZEDON THE DATE OF SURVEY AND AUDIT OF THE ACCOUNTS WAS PENDING. IT WAS ALSO INFORMED THAT THERE WERE MANY EXPENSES YET TO BE ENTERED INTO SYSTEM. THE ASSESSING OFFICER OBSERVED FROM THE DETAILS SUBMITTED THAT OTHEREXPENSES WHICH ARE INCURRED BY THE ASSESSEE IN CASH AND NOT SUPPORTED BY ANY DETAILS. THE DETAILS OF EXPENSES ARE ASUNDER: PARTICULAR SURVEY FINAL DIFFERENCE REMARKS PACKING EXPENSES 9608072 96718 62 63790 NO BILLS PURCHASETAXFREE 44182782 44863421 508 639 BILLS SUBMITTEDTO THEEXTENT OFRS.172316 ONLY OUT OF 680639 PURCHASETAXFREE VAPI 166616948 166968580 351632 NO PROOF /CASHEXPENSES BUSINESS PROMOTION 1254620 1402501 147831 NO PROOF /CASH EXPANSES CONVEYANCE - 702451 702451 NO PROOF/ CASHEXPENSES DIWALI EXP. 94564 415704 321140 NO PROOF/ CASHEXPENSES GENERAL EXP. 352744 458055 105311 NO PROOF/ CASHEXPENSES MOTORCAREXPENSES 574095 639500 65405 NO PROOF/ CASHEXPENSES POSTAGE & COURIER EXP. 1344603 1544232 199629 NO PROOF/ CASHEXPENSES STAFF WELFARE EXPENSES - 368990 368990 NO PROOF/ CASHEXPENSES NET PROFIT 2834868 3. SINCE THE ASSESSEE COULD NOT FURNISH SUPPORTING EVIDENCE PROOF OF THE ABOVEEXPENSES,THEASSESSINGOFFICERDISALLOWEDTHEABOVEEXPENSESU/S69COF THE ACT. SHRI RAMESH RAVILAL FARIA ITA NO.320/M/2020 3 4. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THECIT(A)ANDLD.CIT(A)CONSIDERINGTHESUBMISSIONSOFTHEASSESSEEREMANDED THEMATTERTOTHE ASSESSINGOFFICER.DURINGTHEREMANDPROCEEDING,THEASSESSEE SUBMITTED SAMPLE BILLS OF THE ABOVE EXPENSES CLAIMED. THE ASSESSING OFFICER ISSUEDNOTICE U/S133(6)ON THE ADDRESSESMENTIONEDON THE BILLSRANDOMLYAND NOTICESWEREDULYSERVEDONTHEPARTIES.THEASSESSINGOFFICERAFTERVERIFYINGTHE DOCUMENTS AND EVIDENCES PRODUCED BEFORE HIM. HE SPLIT THE AMOUNT INTO TWO PARTS (I) RELATING TO PACKAGING EXPENSES, PURCHASE TAX FREE AND OTHER RELEVANT EXPENSES TO THE EXTENT OF RS.11,89,095/- AND (II) EXPENSES RELATING TO BUSINESS PROMOTION, CONVEYANCE EXPENSES, DIWALI EXPENSES, GENERAL EXPENSES AND STAFF WELFAREEXPENSESAMOUNTINGTORS.16,45,773/-.THEASSESSINGOFFICERSUBMITTED THAT PACKAGING EXPENSES AND OTHER EXPENSES ARE FOUND TO BE ACCEPTABLE AND RELATING TO SECOND CATEGORY OF EXPENSES, THE ASSESSING OFFICER OPINED THAT THE CONSIDERING THE TURNOVER OF THE ASSESSEE BEING RS.53.12 CRORES AND EXPENSES INCURRED BY THE ASSESSEE IS RS.16,45,773/- WHICH AMOUNTS TO APPROX. 0.30% OF THE TURNOVERAND WHICHISNOTGROSSLYEXCESSIVE. 5. AFTER CONSIDERING THE REMAND REPORT SUBMITTED BY THE ASSESSING OFFICER AND REJOINDER FILED BY THE ASSESSEE, THE LD. CIT(A) SUSTAINED THE 50% OF THE SECOND CATEGORY OF EXPENSES WITH THE OBSERVATION THAT THESE EXPENSES WERE INCURREDINCASHANDWITHOUTPROPERANDACCEPTABLEEVIDENCETHATTHESAMEWERE INCURREDWHOLLYANDEXCLUSIVELYFOR THE PURPOSE OF BUSINESS. 6. AGGRIEVEDWITHTHEABOVEORDER,THEASSESSEEISINAPPEALBEFOREUSRAISING FOLLOWINGGROUNDSOFAPPEAL : SHRI RAMESH RAVILAL FARIA ITA NO.320/M/2020 4 1. ONTHEFACTSANDCIRCUMSTANCESOFTHECASE ANDIN LAW, THELD. CIT(A)ERREDINCONFIRMING 50% EXPENSES ON ACCOUNT OF BUSINESS PROMOTION EXPENSES, CONVEYANCE EXPENSES, DIWALI EXPENSES, GENERAL EXPENSES AND STAFF WELFARE EXPENSES OF RS.16,45,773/- AMOUNTING TO RS.8,22,887/- ONAD-HOC BASIS AS NOT INCURREDFORBUSINESSPURPOSES: 2. (A)THE EVIDENCES PROVIDED DURINGREMAND PROCEEDINGS AND 3. THE SATISFACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX-33(3) IN THE REMAND REPORT FAVOURINGTHE ASSESSEE. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE CHARGING OF INTEREST U/S 234A, 234B, 234C AND 234DOF THE INCOMETAX ACT,1961. 5. THELD.CIT(A) ERRED IN CONFIRMINGTHEINITIATION OFTHE PENALTYPROCEEDINGU/S 274R.W.S. 271(1)(C) OF THEINCOME TAXACT, 1961. 7. CONSIDEREDTHE RIVALSUBMISSIONSANDMATERIALON RECORD.WENOTICEDTHAT THEASSESSEEISINTHEBUSINESSOFMANUFACTURINGLADIESREADYMADEGARMENTSAND ASSESSEE HAS INCURRED EXPENSES LIKE BUSINESS PROMOTION, CONVEYANCE EXPENSES, DIWALI EXPENSES AND STAFF WELFARE EXPENSES TO THE EXTENT OF RS.16,45,773/-. IN ORDER TO RUN A MANUFACTURING UNIT, THE ASSESSEE MAY HAVE TO INCUR CERTAIN EXPENDITURE AND INVARIABLY IT MAY HAVE TO INCUR IN CASH AND RECORDING THE SAME IN PETTY CASH SYSTEM. CONSIDERING THE TURNOVER, THE ASSESSEE HIMSELF IN REMAND PROCEEDING OBSERVED THAT THE EXPENSES INCURRED BY THE ASSESSEE IS ONLY 0.30% OF THE TURNOVER. CONSIDERING THE NATURE OF BUSINESS AND THE AO HAS FOUND THE QUANTUMOFEXPENSESNOTGROSSLYEXCESSIVE.WEAREINCLINEDTOREDUCETHEAD-HOC DISALLOWANCE TO THE EXTENT OF 10% OF THE EXPENSES INCURRED BY THE ASSESSEE. THEREFORE,THEGROUNDNO.1 &2RAISEDBY THE ASSESSEEAREPARTLYALLOWED. WITH REGARD TO GROUND NO. 4 CHARGINGAS INTEREST U/S 234A, 234B, 234C & 234D WHICH IS CONSEQUENTIAL IN NATURE AND GROUND NO. 5 IS INITIATION OF PENALTY SHRI RAMESH RAVILAL FARIA ITA NO.320/M/2020 5 PROCEEDINGS WHICH IS PREMATURE AND GROUND NO. 6 IS GENERAL IN NATURE. ACCORDINGLY,GROUNDNO.4,5 &6ARE DISMISSED. 8. IN THE RESULT,THE APPEALFILEDBYTHE ASSESSEEISPARTLYALLOWED. ORDER PRONOUNCEDINTHEOPENCOURTON 17/09/2021. SD/- SD/- ( MAHAVIRSINGH ) ( S. RIFAURRAHMAN ) VICEPRESIDENT ACCOUNTANTMEMBER MUMBAI; DATED:17/09/2021 RAHUL SHARMA,SR. P.S. COPYOFTHEORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT,MUMBAI 6. GUARDFILE. BY ORDER, //TRUE COPY// (DY./ASSISTANTREGISTRAR) ITAT,MUMBAI