M/s Mehra Jewel Palace Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3362/DEL/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3221 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3); 14A; 115JB; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3362/DEL/2017 ASSESSMENT YEAR: 2012-13 M/S. MEHRA JEWEL PALACE PVT. LTD., S-555, GREATER KAILASH, PART- I, NEW DELHI VS. INCOME TAX OFFICER, WARD-16(3), NEW DELHI PAN :AAACM5478K (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST O RDER DATED 30/01/2017 PASSED BY THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-33, NEW DELHI [IN SHORT THE CIT(A)] FOR ASSESSMENT YEAR 2012-13, RAISING FOLLOWING GROUNDS: 1. THAT THE ASSESSMENT MADE IS BAD IN LAW AND IN FA CTS 2. THAT THE LD. CIT. PREJUDICIALLY DISALLOWED SALAR Y OF RS 7,20,000/- U/S 40A(2)(B) OF THE INCOME TAX ACT,1961. APPELLANT BY SHRI SUMIT GUPTA, CA RESPONDENT BY SHRI K. HAUTHANG, SR.DR DATE OF HEARING 24.09.2019 DATE OF PRONOUNCEMENT 14.11.2019 2 ITA NO.3362/DEL/2017 3. THAT THE LD. CIT WAS NOT JUSTIFIED WHILE DISALLO WING INTEREST OF C.L.MEHRA & SONS HUF, MR. C.L.MEHRA, CHAND ''MEHRA AND VINAY MEHRA U/S 37 READ WITH SEC 40A(2)(B) 4. THAT THE LD CIT UNFAIRLY APPLIED THE PROVISIONS OF SECTION 14A OF THE I.T. ACT 1961 AND ADDED SUM OF RS. 26,21,773/- WHIL E THE SAME SECTION WAS NOT APPLICABLE. HE ALSO OVERRULED THE H OHAB'LE DELHI HIGH COURT JUDGMENT FOR WHICH LD. CIT WAS BOUND TO COMPLY AND OBEY. 5. THAT THAT THE ASSESSEE RESERVES THE RIGHT TO ADD , DELETE , ALTER AND MODIFY TO THE ABOVE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE AT THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF JEWE LRY, TRADING OF BULLION AND DIAMONDS. FOR THE YEAR UNDER CONSIDERAT ION, THE ASSESSEE FILED RETURN OF INCOME ON 29/09/2012 DECLA RING NIL INCOME UNDER REGULAR PROVISIONS OF THE INCOME-TAX A CT, 1961 (IN SHORT THE ACT) AND INCOME OF THE RS.51,47,486/- U /S 115JB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND STA TUTORY NOTICES WERE ISSUED AND COMPLIED WITH. THE SCRUTINY ASSESSM ENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED ON 23/03/20 15, AFTER MAKING CERTAIN ADDITIONS/DISALLOWANCE TO THE RETURN ED INCOME. THE APPEAL FILED BY THE ASSESSEE, BEFORE THE LD. CI T(A) HAS BEEN PARTLY ALLOWED. AGGRIEVED WITH THE ORDER OF THE LEA RNED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL RAISING T HE GROUNDS AS REPRODUCED ABOVE. 3. THE GROUND NO. 1 OF THE APPEAL, BEING GENERAL IN N ATURE, WE ARE NOT REQUIRED TO ADJUDICATE UPON AND ACCORDINGLY , DISMISSED AS INFRUCTUOUS . 4. THE GROUND NO. 2 OF THE APPEAL RELATES TO DISALLOWA NCE OF 7,20,000/- UNDER SECTION 40A(2)(B) OF THE ACT, WHIC H HAS BEEN UPHELD BY THE LEARNED CIT(A). 3 ITA NO.3362/DEL/2017 4.1 THE ASSESSING OFFICER MADE DISALLOWANCE OF RS.22,8 0,000/- OUT OF THE SALARY EXPENSES PAID TO THE SEVEN PERSON S SPECIFIED AS RELATIVE UNDER SECTION 40A(2)(B) OF THE ACT, DUE TO INCREASE IN THE SALARY IN THE YEAR UNDER CONSIDERATION AS COMPARED TO THE PRECEDING YEAR WITHOUT ANY VALID JUSTIFICATION. THE LD. CIT(A), FOLLOWING THE FINDING OF HIS PREDECESSOR, UPHELD DI SALLOWANCE IN RESPECT OF SH. C. L. MEHRA (RS. 3,60,000/-), LATA R ANI MEHRA ( RS. 3,60,000/-), NAMITA MEHRA (RS. 3,60,000/-) TOTALLIN G 7, 20,000/-AND DELETED THE DISALLOWANCE IN RESPECT OF THE BALANCE PERSONS. 4.2 BEFORE US, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ACCEPTED THAT IN PRECEDING ASSESSMENT YEAR 2011-12, THE TRIB UNAL HAS UPHELD THE DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT, HOWEVER, HE SUBMITTED THAT IN VIEW OF THE EXPERIENC E OF THE PERSONS IN THE INDUSTRY AND SERVICES RENDERED, THE EXPENSES MIGHT BE ALLOWED IN THE HANDS OF THE ASSESSEE. 4.3 THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 4.4 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER MADE DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT DUE TO LACK OF ANY JUSTIFICATION FOR HIGHER SALARY PAID TO RELATIVES AS COMPARED TO ASSESSMENT YEAR 2010-11. THE LEARNED CIT(A) EXAMINE D THE QUALIFICATION AND EXPERIENCE OF THE PERSONS AND DID NOT FIND ANY JUSTIFICATION IN RESPECT OF SALARY EXPENSES OF SH. C .L. MEHRA AND MS. LATA RANI MEHRA FOLLOWING THE DECISION OF HIS PREDECESSOR. IN RESPECT OF MS. NAMITA MEHRA ALSO BE SUSTAINED THE D ISALLOWANCE. 4 ITA NO.3362/DEL/2017 THE TRIBUNAL IN ITA NO. 5749 AND 5855/DEL/2015 FOR ASSESSMENT YEAR 2011-12 UPHELD THE DISALLOWANCE OBSERVING AS U NDER: 16. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIR MITY IN THE ORDER OF THE ID. C1T(A) ON THIS ISSUE. HE HAS GIVEN JUSTIFIA BLE REASONS WHILE DELETING OR SUSTAINING THE DISALLOWANCE U/S 40A(2)( B) MADE BY THE ASSESSING OFFICER. HE HAS CONSIDERED THE QUALIFICAT ION OF THE CONCERNED PERSONS AND THE NATURE OF JOB/RESPONSIBIL ITY OF EACH OF THE PERSONS AND ACCORDINGLY HE HAS COME TO A CONCLUSION THAT THE SALARY PAID TO ARADHANA MEHRA, ROSHNI MEHRA AND PAWAN MEHR A ARE JUSTIFIED WHERE THE SALARY PAID TO REMAINING PERSON S ARE NOT JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE FIND ING GIVEN BY THE ID. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE ID. CIT(A) IS UPHELD AND THE GROUND RAISED BY THE REVENUE AND THE ASSESS EE IS DISMISSED. 4.5 IN VIEW OF THE IDENTICAL ISSUE IN DISPUTE INVOLVED IN THE YEAR UNDER CONSIDERATION, RESPECTFULLY FOLLOWING THE FIN DING OF THE TRIBUNAL (SUPRA), THE ORDER OF THE LEARNED CIT(A) I S UPHELD AND THE GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS DISMI SSED. 5. THE GROUND NO. 3 OF THE APPEAL RELATES TO DISALLOW ANCE OF INTEREST TO M/S. CL MEHRA & SONS (HUF), MR C L MEH RA, MR. CHAND MEHRA AND MR. VINAY MEHRA U/S 37 READ WITH SE CTION 40A(2)(B) OF THE ACT. 5.1 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE. THE LD. COUNSEL OF THE ASSESSEE REITERA TED THE ARGUMENTS WHICH WERE MADE BEFORE THE LOWER AUTHORIT IES, PARTICULARLY IN RELATION TO THE TRADEMARK OF MEHRA SONS OWNED BY SH. CL MEHRA. THE LEARNED CIT(A) FOLLOWING THE FIND ING OF HIS PREDECESSOR IN ASSESSMENT YEAR 2011-12 SUSTAINED TH E DISALLOWANCE OF INTEREST IN RESPECT OF SH. CL MEHRA , M/S. MEHRA AND SONS HUF, MR. CHAND MEHRA AND MR. VINAY MEHRA. THE 5 ITA NO.3362/DEL/2017 TRIBUNAL IN ASSESSMENT YEAR 2011-12 SUSTAINED THE D ISALLOWANCE OBSERVING AS UNDER: 20. AFTER HEARING BOTH THE SIDES, WE FIND THE ID. CIT(A) SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON T HE GROUND THAT THE ASSESSEE FAILED TO PROVE THAT C.L. MEHRA OWNS T HE TRADEMARK MEHRASONS AND C.L. MEHRA IS NOT AT ALL THE OWNER OF THE TRADEMARK MEHRASONS AND THE AMOUNT ADVANCED TO C.L. MEHRA C ANNOT BE TREATED AS PRUDENT AND EXPEDIENT FOR THE BUSINESS P URPOSES. SIMILARLY, IN THE CASE OF CHAND MEHRA, HE OBSERVED THAT THE ASSESSEE FAILED TO PROVE WITH EVIDENCE THAT ANY SER VICE HAS BEEN RENDERED AT ALL BY CHAND MEHRA TO THE ASSESSEE. HOW EVER, IN THE CASE OF ADVANCE GIVEN TO MEHRA SONS JEWELERS PVT. L TD. OF RS.23,50,000/-, NAMITA MEHRA OF RS.6,94,914/- AND S AKSHI MEHRA OF RS.2,57,779/- THESE WERE ALLOWED BY HIM ON THE G ROUND THAT THESE ADVANCES ARE FOR BUSINESS PURPOSES. SO FAR AS ADVANCE OF RS.L 1,71,865/- TO VINAY MEHRA IS CONCERNED, HE GAVE A F INDING THAT THE ASSESSEE TAILED TO PROVE WITH EVIDENCE AS TO WHETHE R ANY SERVICE AT ALL HAS BEEN RENDERED BY MR. VINAY MEHRA AND. THERE FORE, HE HELD THAT THESE ADVANCES ARE NOTHING BUT DIVERSIFYING OF BUSINESS FUND FOR WHICH HE UPHELD THE DISALLOWANCE OF INTEREST. 5.2 IN VIEW OF IDENTICAL ISSUE-IN-DISPUTE IN THE GROUN DS RAISED BEFORE US, THUS, RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL (SUPRA), THE ORDER OF THE LEARNED CIT(A) ON THE ISS UE IN DISPUTE IS UPHELD. THE GROUND NO. 3 OF THE ASSESSEE IS DISMISS ED. 6. THE GROUND NO. 4 OF THE APPEAL RELATES TO DISALLO WANCE OF 26, 21,773/- UNDER SECTION 14A OF THE ACT. 6.1 WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL SUBMIT TED THAT NO DIVIDEND INCOME WAS EARNED BY THE ASSESSEE DURING T HE YEAR UNDER CONSIDERATION AND, THUS, FOLLOWING THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD., 378 ITR 33 , DISALLOWANCE MIGHT BE DELETED. WE FIND THAT THE ASSESSING OFFICER HAD ALSO NOTED THE FACT THAT NO D IVIDEND INCOME HAS BEEN EARNED BY THE ASSESSEE IN THE YEAR UNDER C ONSIDERATION. 6 ITA NO.3362/DEL/2017 THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE HO NBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD (SUPRA) THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT IS DELETED. THE GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY ALLOWE D. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER, 2019. SD/- SD/- (BHAVNESH SAINI) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH NOVEMBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI