DCIT 13(2)(1), MUMBAI V. SPYKAR LIFESTYLES P.LTD, MUMBAI

ITA 3409/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 2892 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2021
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 21-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA SINDHU
• Keywords: Revenue expenditure
• Section: 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI BEFORE SHRI PRAMOD KUMAR, HONBLE VICE PRESIDENT AN D SHRI SAKTIJIT DEY, HONBLE JUDICIAL MEMBER ITA NO. 3409/MUM/2019 ASSESSMENT YEAR: 2011-12 DY. COMMISSIONER OF INC OME TAX -13(2)(1), ROOM NO. 146, 1 ST FLOOR, AAYKAR BHAWAN, M.K. ROAD, MUMBAI - 400020 VS. M/S SPYKAR LIFESTYLES PVT. LTD., LOTUS CORPORATE PARK, 19 TH FLOOR, A-WING, JAY COACH JUNCTION, OFF. WESTERN EXPRESS HIGHWAY, GOREGAON (EAST), MUMBAI - 400063 PAN: AAECS3455N (APPELLANT) (RESPONDENT) ITA NO. 2423/MUM/2019 ASSESSMENT YEAR: 2011-12 M/S SPYKAR LIFESTYLES PVT. LTD., 19 TH FLOOR, A WING, LOTUS CORPORATE PARK, JAY COACH JUNCTION, OFF. WESTERN EXPRESS HIGHWAY, GOREGAON (EAST), MUMBAI - 400063 PAN: AAECS3455N VS. ADDL. CIT, RANGE - 7(2), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) REVENUE BY : RAVINDRA SINDHU (CIT DR) ASSESSEE BY : SHRI PRATEEK JHA (AR) DATE OF HEARING : 11 /10 /202 1 DATE OF PRONOUNCEMENT: 22/10/2021 O R D E R PER SAKTIJIT DEY, JM CAPTIONED CROSS APPEALS ARISE OUT OF ORDER DATED 28 .02.2019 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI FOR THE ASSESSMENT YEAR 2011-12. 2 ITA NOS. 2423 & 3409/MUM/2019 ASSESSMENT YEAR: 2011-12 2. THE ONLY ISSUE IN REVENUES APPEAL AND THE ISSUE RAISED IN GROUND NO. 1 OF ASSESSEES APPEAL RELATES TO THE DECISION OF LEA RNED COMMISSIONER (APPEALS) IN RESTRICTING THE DISALLOWANCE TOWARDS NON-GENUINE PURCHASES TO 12.5%. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A RESIDEN T COMPANY AND IS ENGAGED IN THE BUSINESS OF TRADING IN READYMADE GARMENT, AP PAREL THROUGH MULTI-BRAND OUTLETS, LARGE RETAIL CHAINS AND BUSINESS OUTLETS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, ASSESSEE FILED ITS RETURN OF INCOME ON 10.09.2011 DECLARING LOSS RS. 13,74,27,494/-. IN COURSE OF ASSESSMENT PROCEED INGS, THE AO FOUND THAT AS PER THE INFORMATION RECEIVED FROM SALES TAX AUTHORI TIES, MUMBAI PURCHASES OF RS. 10,51,351/- ARE NON-GENUINE. ACCORDINGLY, HE CA LLED UPON THE ASSESSEE TO PROVE SUCH PURCHASE. THOUGH, THE ASSESSEE FURNISHED SOME DOCUMENTARY EVIDENCES TO PROVE THE PURCHASES, HOWEVER, AO WAS U NCONVINCED. ULTIMATELY, HE CONCLUDED THAT THE DISPUTED PURCHASES ARE NON-GE NUINE AND ACCORDINGLY ADDED BACK TO THE INCOME OF THE ASSESSEE. ASSESSEE CONTESTED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER (APPEALS). AFT ER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD, LEARNED COMMISSIONER (APPEALS) RESTRICTED THE DISAL LOWANCE TO 12.5% OF THE ALLEGED NONGENUINE PURCHASES. BEING AGGRIEVED, BOT H, THE ASSESSEE AND THE REVENUE ARE BEFORE US. 4. HAVING CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE FIND THAT THOUGH THERE MAY BE SOME DOUBT REGARDI NG THE SOURCE OF PURCHASES, HOWEVER, THE FACTS ON RECORD REVEAL THAT THE ASSESSEE INDEED HAD PURCHASED THE GOODS, MAY BE, FROM UNVERIFIED SOURCE S. THEREFORE, THE ENTIRE PURCHASES CANNOT BE DISALLOWED, BUT, ONLY THE PROFI T ELEMENT EMBEDDED IN SUCH 3 ITA NOS. 2423 & 3409/MUM/2019 ASSESSMENT YEAR: 2011-12 PURCHASES CAN BE CONSIDERED FOR DISALLOWANCE. THIS IS THE CONSISTENT VIEW OF NOT ONLY OF DIFFERENT BENCHES OF THE TRIBUNAL BUT E VEN OF THE HIGHER COURTS. IN VIEW OF THE AFORESAID, WE UPHOLD THE DECISION OF LE ARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUNDS RAISED, BOTH, BY TH E ASSESSEE AND THE REVENUE ARE DISMISSED. 5. ONLY OTHER SURVIVING ISSUE RAISED IN GROUND NO. 2 AND 3 OF ASSESSEES APPEAL RELATES TO DISALLOWANCE OF CERTAIN EXPENDITU RE INCURRED BY THE ASSESSEE TOWARDS STORE RENOVATION/INTERIOR DESIGNING. 6. BRIEFLY THE FACTS ARE, IN COURSE OF ASSESSMENT P ROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF RS. 11,8 0,204/- BEING PAYMENT MADE TO APERION ARCHITECTS AND RS. 17,12,268/- TO N POWER & COMPANY. ON FURTHER VERIFICATION, HE FOUND THAT AS PER ASSESSEE S CLAIM, THESE EXPENDITURES WERE INCURRED FOR DESIGNING AND CONCEPTUALIZING THE LOOK AND APPEARANCE OF THE STORES, OUTLETS AND SHOPS AND BASED ON SUCH DESIGN FURNITURE AND FIXTURE ARE PURCHASED AND INSTALLED. IT WAS SUBMITTED, SINCE SU CH EXPENDITURE ON DESIGNING AND CONCEPTUALIZING ARE WITH REGARD TO SE ASONS, TRENDS ETC. AND ARE IN THE NATURE OF ADVISORY SERVICES/DESIGN, CONSULTA NCY FEES PAID TO PROFESSIONAL DESIGNERS TO IMPROVE THE OUTLOOK OF THE STORES/OUTL ETS ARE IN THE NATURE OF REVENUE EXPENDITURE. THE AO, HOWEVER, WAS NOT CONVI NCED WITH THE SUBMISSIONS OF THE ASSESSEE. HE OBSERVED, SIMILAR P AYMENT MADE TO APERION ARCHITECTS WAS DISALLOWED IN THE ASSESSMENT ORDER P ASSED FOR ASSESSMENT YEAR 2009-10. ACCORDINGLY, HE DISALLOWED THE PAYMENT OF RS. 11,80,204/-. AS REGARDS, THE PAYMENT MADE TO N POWER & COMPANY, THE AO ON EXAMINING THE CEO OF THE SAID ENTITY CONCLUDED THAT THE PAYMENT M ADE IS NOT A GENUINE 4 ITA NOS. 2423 & 3409/MUM/2019 ASSESSMENT YEAR: 2011-12 EXPENDITURE, HENCE CANNOT BE ALLOWED. WITHOUT PREJU DICE, HE OBSERVED THAT THE EXPENDITURE INCURRED IS OF CAPITAL NATURE. ACCORDIN GLY, HE DISALLOWED THE EXPENDITURE. WHILE CONSIDERING THE ISSUE IN APPEAL, LEARNED COMMISSIONER (APPEALS) SUSTAINED THE DISALLOWANCE OF PAYMENT MAD E TO APERION ARCHITECT BY REFERRING TO THE ASSESSMENT ORDER PASSED FOR ASSESS MENT YEAR 2009-10. AS REGARDS, THE PAYMENT MADE TO N POWER & COMPANY, LEA RNED COMMISSIONER (APPEALS) DID NOT AGREE WITH THE AO THAT THE EXPEND ITURE IS NOT GENUINE. HOWEVER, HE AGREED WITH THE AO THAT THE EXPENDITURE IS OF CAPITAL NATURE. NEVERTHELESS, HE DIRECTED THE AO TO ALLOW DEPRECIAT ION AFTER VERIFICATION. 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE DECIDING ASSESSEES APPEAL IN ASSESSMENT YEAR 2009-10, THE T RIBUNAL IN ITA NO. 7296/MUM/2014 DATED 23.03.2017 HAS RESTORED THE ISS UE RELATING TO THE PAYMENTS MADE TO APERION ARCHITECTS AND N POWER & C OMPANY TO THE AO FOR DECIDING AFRESH AFTER EXAMINING THE ADDITIONAL EVID ENCES FILED BY THE ASSESSEE. THE AFORESAID FACTUAL POSITION HAS NOT BEEN CONTROV ERTED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. CONSIDERING THE FACT T HAT IDENTICAL ISSUE ARISING IN ASSESSMENT YEAR 2009-10 HAS BEEN RESTORED BACK T O THE AO, WHICH IS STILL PENDING BEFORE HIM, AS A MATTER OF CONSISTENCY, WE RESTORE THE ISSUE TO THE AO IN THE IMPUGNED ASSESSMENT YEAR AS WELL. THE AO MUS T EXAMINE THE ISSUE IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE TRIBUNA L IN ASSESSMENT YEAR 2009- 10. NEEDLESS TO MENTION, DUE OPPORTUNITY OF BEING H EARD MUST BE PROVIDED TO THE ASSESSEE. THESE GROUNDS ARE ALLOWED FOR STATIST ICAL PURPOSES. 5 ITA NOS. 2423 & 3409/MUM/2019 ASSESSMENT YEAR: 2011-12 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED, WH EREAS, ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 22 OCTOBER, 2021. SD/- SD/- ( PRAMOD KUMAR ) VICE PRESIDENT (SAKTIJIT DEY) JUDICIAL MEMBER MUMBAI; DATED: 22/10/2021 ALINDRA, 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. / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI