MANJULA S. GORADIA, MUMBAI V. ITO WD 2(1)(4), MUMBAI

ITA 3356/MUM/2010

• Counselvise Citation: 335619914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 04-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Reassessment proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI P.M. JAGTAP (A.M.) AND SHRI R.S. PADVEK AR (J.M.) ITA NO.3356/MUM/2010 ASSESSMENT YEAR : 2005-2006 MANJULA S. GORADIA C/O. PRAKASH JHUNJHUNWALA, C.A., 5, JOLLY BHAWAN NO.2, 7, NEW MARINE LINES, CHURCHGATE, MUMBAI 400 020. PAN : AASPG3054E VS. I.T.O. WD.2(1)(4) R.NO.575, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JHUNJHUNWALA RESPONDENT BY : SHRI V.V. SHASTRI (AR) DATE OF HEARING : 04.08.2011 DATE OF PRONOUNCEMENT : O R D E R PER P.M. JAGTAP, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED CIT (A)-IV, MUMBAI DATED 04.03.2010. 2. THE GROUND NO.1 RAISED BY THE ASSESSEE IN THIS A PPEAL CHALLENGING THE VALIDITY OF THE ASSESSMENT MADE BY THE AO U/S.143(3 ) R.W.S. 147 HAS NOT BEEN PRESSED BY THE LD COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME IS ACCORDINGLY DISMISSED AS NOT PRESS ED. 3. THE ISSUE RAISED IN REMAINING GROUNDS I.E. GROUN D NO.2 TO 5 RELATES TO THE ADDITION OF RS.16,61,676/- MADE BY THE AO AND C ONFIRMED BY THE LD CIT(A) ON ACCOUNT OF DISALLOWANCE OF VARIOUS EXPENS ES INCURRED IN RESPECT OF PURCHASES ETC. ITA NO.3356/MUM/2010 ASSESSMENT YEAR : 2005-2006 2 4. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 10.10 .2004 DECLARING TOTAL INCOME OF RS.6,91,650/- WHICH WAS COMPRISING OF SAL ARY INCOME AND INCOME FROM OTHER SOURCES. THE SAID RETURN FILED BY THE ASSESSEE WAS ORIGINALLY PROCESSED BY THE AO U/S. 143(1). SUBSEQUENTLY, TH E AO RECEIVED THE INFORMATION THAT THE ASSESSEE HAS SOLD A FLAT IN BU ILDING MANJU APARTMENT IN THE YEAR UNDER CONSIDERATION AND THAT THE INCOME ARISING FROM THE SAID TRANSACTION WAS NOT OFFERED TO TAX. HE, THEREFORE , ISSUED A NOTICE U/S.148 ON 28.03.2008. DURING THE COURSE OF REASSESSMENT PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE WAS OWNER OF THE PREMISES SITUATED AT FLAT-51A, TPS III, VILE PARLE (W), MUMBAI WHICH WAS OCCUPIE D BY TENANTS. SHE STARTED CONSTRUCTION OF A NEW PROJECT ON THE SAID P LOT IN THE PREVIOUS YEAR RELEVANT TO A.Y. 2004-05. THE EXPENSES INCURRED BY THE ASSESSEE ON THE SAID CONSTRUCTION IN ASSESSMENT YEAR 2004-05 AS WEL L AS IN THE YEAR UNDER CONSIDERATION WERE SHOWN AS WORK IN PROGRESS SINCE THE ASSESSEE WAS FOLLOWING A PROJECT COMPLETION METHOD. THE SAID P ROJECT AS CLAIMED BY THE ASSESSEE WAS COMPLETED IN THE IMMEDIATELY SUCCEEDIN G YEAR RELEVANT TO AY 2006-07. DURING THE REASSESSMENT PROCEEDING, NOTI CES U/S.133(6) WERE ISSUED BY THE AO TO THE VARIOUS PARTIES FROM WHOM M ATERIAL WAS CLAIMED TO BE PURCHASED BY THE ASSESSEE. THE SAID NOTICES WER E EITHER RETURNED BACK UNDELIVERED OR REMAINED UN-COMPLIED WITH. THE AS SESSEE ALSO FAILED TO PRODUCE THE CONCERNED PARTIES FOR EXAMINATION BEFOR E THE AO. SHE HOWEVER FILED CONFIRMATIONS ISSUED BY THE SAID PARTIES WHIC H WERE FOUND TO BE UNRELIABLE BY THE AO FOR THE REASONS GIVEN IN THE A SSESSMENT ORDER. THE AO THEREFORE TREATED THE PURCHASES MADE BY THE ASSESSE E FROM THE SAID PARTIES AS BOGUS AND THE AMOUNT OF SUCH PURCHASES AGGREGATI NG TO RS.16,61,676/- WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSE E IN THE ASSESSMENT COMPLETED U/S.143(3) R.W.S. 147. THE PARTY-WISE BR EAK UP OF THE SAID PURCHASES IS GIVEN HEREUNDER: ITA NO.3356/MUM/2010 ASSESSMENT YEAR : 2005-2006 3 SR.NO. NAME OF THE PARTY AMOUNT (RS.) (A) SAM ENTERPRISES 4,00,000 (B) SAI CORPORATION 6,93,600 (C) MAHALAXMI TRADERS 99,119 (D) SHAKTI TRADING 1,36,250 (E) CROWN SALES 1,25,000 (F) GAYATRI ENTERPRISES (L) 16,872 (G) BHUPENDRA KADHI & ASSOCIATES (LEGAL FEES) 35,000 (H) MONIKA AGENCY 42,120 (I) RUSHABH ENTERPRISES 31,500 (J) SENIOR SALES CORPORATION 82,215 5. AGAINST THE ORDER PASSED BY THE AO U/S.143(3) R. W.S.147, APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD CIT(A) CHAL LENGING THEREIN ADDITION OF RS.16,61,676/- MADE BY THE AO ON ACCOUNT OF DISALLO WANCE OF PURCHASES. IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE T HE LD CIT(A) THAT THE PURCHASES DISALLOWED BY THE AO WERE MAINLY MADE IN THE PREVIOUS YEAR RELEVANT TO AY 2004-05 AND DISALLOWANCE THEREOF IN THE YEAR UNDER CONSIDERATION WAS NOT JUSTIFIED. IT WAS ALSO SUBM ITTED BY THE ASSESSEE THAT SIMILAR DISALLOWANCE ON ACCOUNT OF PURCHASES WAS MA DE BY THE AO IN AY 2004-05 ALSO AND THERE WAS THUS NO BASIS TO MAKE A SIMILAR DISALLOWANCE IN RESPECT OF PURCHASES MADE IN AY 2004-05, IN THE YEA R UNDER CONSIDERATION I.E. AY 2005-06. THE LD CIT(A) DID NOT FIND ANY M ERIT IN THIS STAND TAKEN BY THE ASSESSEE. HE FOUND THAT DISALLOWANCE IN AY 04 -05 WAS MADE BY THE AO IN RESPECT OF DIFFERENT PURCHASES AND NOT IN RESPEC T OF PURCHASES DISALLOWED IN THE YEAR UNDER CONSIDERATION. HE, THEREFORE, C ONFIRMED THE DISALLOWANCE MADE BY THE AO IN THE YEAR UNDER CONSIDERATION ON A CCOUNT OF PURCHASES OBSERVING THAT THE SAME WERE NOT VERIFIABLE AS RIGH TLY HELD BY THE AO. AGGRIEVED BY THE ORDER TO THE LD CIT(A), THE ASSESS EE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. ITA NO.3356/MUM/2010 ASSESSMENT YEAR : 2005-2006 4 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LD COUNSEL FOR THE ASSESSEE BEFORE THE LD CIT(A) AS WELL AS BEFORE US, OUT OF THE TOTAL PURCHASES OF RS.16,61,676/- DISALLOWED BY THE AO IN THE YEAR UNDER CONSIDERATION, PURCHASES TO THE EXTENT OF RS.16,09,803/- WERE MADE IN THE PREVIOUS YEAR RELEVANT TO AY 04-05. THE SAID PURCHASES FORMING PART OF THE CLOSING WORK IN PROGRESS OF AY 2004-05 WAS REFECTED IN THE OPENI NG WORK IN PROGRESS OF THE YEAR UNDER CONSIDERATION AND WAS FINALLY CLAIME D AS DEDUCTION IN THE SUBSEQUENT YEAR WHEN THE PROJECT WAS FINALLY COMPLE TED AS THE ASSESSEE IS FOLLOWING THE PROJECT COMPLETION METHOD. IN THESE CIRCUMSTANCES, WE FIND MERIT IN THE CONTENTION OF THE LD COUNSEL FOR THE A SSESSEE THAT THE PURCHASES MADE BY THE ASSESSEE IN THE EARLIER YEAR AND CLAIME D AS DEDUCTION IN THE SUBSEQUENT YEAR CANNOT BE THE SUBJECT MATTER OF DIS ALLOWANCES IN THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DELETE THE DI SALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD CIT(A) ON THIS ISSUE TO THE EXTENT OF RS.16,09,803/-. AS REGARDS THE REMAINING AMOUNT O F RS.51,872/- REPRESENTING PURCHASES OF RS.16,872/- MADE FROM M/S . GAYATRI ENTERPRISES (L) AND PROFESSIONAL FEES O FRS.35,000/- PAID TO BH UPENDRA KADHI & ASSOCIATES, THE SAME ARE UNDISPUTEDLY PERTAINING TO THE YEAR UNDER CONSIDERATION AS HELD BY THE AO AS WELL AS THE LD C IT(A). THE ASSESSEE HOWEVER COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO ESTABLISH THAT THE SAID EXPENSES WERE INCURRED FOR THE PURPOSE OF HER BUSINESS. EVEN BEFORE US, THE LD COUNSEL FOR THE ASSESEE HAS NOT BEEN ABL E TO PRODUCE ANY DOCUMENTARY EVIDENCE TO SUPPORT AND SUBSTANTIATE TH E CASE OF THE ASSESSEE THAT THE SAID EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. WE, THEREFORE, SUSTAIN THE DISALLOWA NCE MADE ON THIS ISSUE TO THE EXTENT OF RS.51,872/-. THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE THUS ARE PARTLY ALLOWED. ITA NO.3356/MUM/2010 ASSESSMENT YEAR : 2005-2006 5 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2011. SD/- (R.S. PADVEKAR) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI, DATED 12.08.2011 JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUMBAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH , MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI