ITO WD 21(1)(2), MUMBAI V. FAISAL MOAMMED KAPADI, MUMBAI

ITA 3467/MUM/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7745 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 22-02-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Assessee Lawyers: NEELAM SALVI
• Keywords: Business expenditure; Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH: MUMBAI BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3467/MUM/2009 (ASSESSMENT YEAR: 2001-02) THE INCOME-TAX OFFICER -21(1)(2), 6TH FLOOR, ROOM NO.604, PRATYAKSHAKAR BHAVAN, BANDRA-KURLA COMPLEX, BANDRA (E), MUMBAI -400 051 .. REVENUE VS FAISAL MOAMMED KAPADI, PROP. GLOBE BIOMEDICAL, C-2, JUHU APARTMENT, JUHU ROAD, VILE-PARLE-WEST, MUMBAI -400 049 .ASSESSEE PAN: AAGPK 7166 D ASSESSEE BY: SMT. NEELAM SALVI REVENUE BY: SMT ASHIMA GUPTA O R D E R PER R.S. PADVEKAR, JM THIS APPEAL IS FILED BY THE REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. CIT (A) 21, MUMBAI DATED 18.03.2009 FOR THE A.Y. 2002-02. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN DS:- 1. THE LD. CIT (A) ERRED IN LAW IN DELETING THE P ENALTY U/S.271(1)(C) IMPOSED ON THE BASIS OF DISALLOWANCE OF EXPENSES OF ` 1,95,500/- ON ACCOUNT OF SALES PROMOTION ITA 3467/M/2009 FAISAL MOAMMED KAPADI 2 EXPENSES BY HOLDING IT ONLY AS AN ADHOC DISALLOWANC E WITHOUT REALIZING THAT MOST OF THE EXPENSES OUT OF CREDIT C ARD EXPENSES UNDER THE HEAD RATANLAL PARS SPENT ON DOCTORS AND OTHER EXPENSES WERE NOT FOR BUSINESS PURPOSES. 2. THE LD. CIT (A) ERRED IN LAW IN DELETING THE PEN ALTY U/S.271(1)(C) IMPOSED ON THE BASIS OF DISALLOWANCE MADE OUT OF TRAVELING EXPENSES OF DOCTORS ABROAD AND OF DOCT ORS AND THEIR WIVES IN INDIA ALTHOUGH THESE WERE NOT FOR BU SINESS PURPOSES AND THE DOCTORS WERE NOT EMPLOYEE OF THE A SSESSEE. 3. WITHOUT PREJUDICE TO GROUND NO.(I) AND (II), THE LD. CIT (A) ERRED IN NOT CONSIDERING THE FACT THAT NO EVIDENCE OF THE SE EXPENSES INCURRED WAS PRODUCED BY THE ASSESSEE BEFORE THE AS SESSING OFFICER. 4. THE LD. CIT (A) ERRED IN LAW IN DELETING THE PEN ALTY U/S.271(1)(C) WITHOUT CONSIDERING THE FACT THAT THE PENALTY WAS IMPOSED AFTER THE QUANTUM APPEAL WAS DISMISSED BY T HE CIT (A) AND THE ITAT WHICH MEANS THAT THE FACT THAT THE EXPENSES WERE NOT GENUINE HAD BECOME FINAL. 5. THE LD. CIT (A) ERRED IN LAW IN NOT APPRECIATING THE FACT THAT THE QUANTUM APPEAL FILED BY THE ASSESSEE BEFORE THE ITAT WAS WITHDRAWN BY HIM WHICH IS A CONFESSION BY THE ASSES SEE OF HAVING FALSELY CLAIMED THESE EXPENSES. 6. THE LD. CIT (A) ERRED IN DELETING THE PENALTY U/ S.271(1)(C) OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT BY CLAIMING UNTRUE EXPENSES THE ASSESSEE HAD SUPPRESSED HIS REA L INCOME. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORTING AN D TRADING IN HEALTHCARE PRODUCTS AND CARRYING ON THE BUSINESS AS A PROPRIETARY CONCERN UNDER THE NAME AND STYLE AS M/S. GLOBE BIO MEDICALS. THE ASSESSEE FILED THE RETURN OF INCOME DECLARING THE T OTAL INCOME AT ` 86,910/- FOR THE A.Y. 2001-02 WHICH WAS SELECTED FO R THE SCRUTINY. THE ITA 3467/M/2009 FAISAL MOAMMED KAPADI 3 A.O. DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT ` 17,94,660/- BY MAKING THE FOLLOWING ADDITIONS AS UNDER:- I) DISALLOWANCES OUT OF THE COMMISSION AS NON-BUSIN ESS EXPENDITURE ` 3,94,455/- II) DISALLOWANCES OUT OF THE SALES PROMOTION EXPEN SES ` 1,95,500/- III) DISALLOWANCES OUT OF THE TELEPHONE EXPENSES A S NON-BUSINESS EXP ` 1,29,073/- IV) DISALLOWANCES OUT OF THE TRAVELING EXPENSES AS NON-BUSINESS EXP ` 9,33,885/- V) DISALLOWANCES OUT OF THE MOTORCAR EXPENSES ` 9,146/- 3. THE A.O. INITIATED THE PENALTY PROCEEDINGS U/S.2 71(1)(C) OF THE ACT AND LEVIED THE PENALTY OF ` 5,32,758/-. THE ASSESSEE CHALLENGED THE PENALTY LEVIED BY THE A.O. BEFORE THE LD. CIT (A) A ND FOUND FAVOUR. THE LD. CIT (A) WAS OF THE OPINION THAT MERELY BECAUSE THE AD-HOC ADDITIONS ARE MADE THAT MAY NOT JUSTIFY THE LEVY OF THE PENAL TY. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. D.R. VEHEMENTLY ARGUED THAT A S THE ASSESSEE MADE MALA FIDE CLAIMS AND HENCE, THE ADDITIONS WERE MA DE BY DISALLOWING THE EXPENDITURE. PER CONTRA, THE LD. COUNSEL RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIAN CE PETRO PRODUCTS LTD. 322 ITR 158 AND SUBMITTED THAT NOWHERE IT IS A CASE OF THE A.O. THAT THE ASSESSEE HAS FILED ANY BOGUS CLAIM. THE LD. CO UNSEL TOOK US THROUGH THE ASSESSMENT ORDER AND SUBMITS THAT ADMIT TEDLY THE ASSESSEE IS IN THE TRADING OF SURGICAL PRODUCTS AND EXPENDIT URE CLAIMED ARE RELATING TO THE TRADES. MERELY BECAUSE AD-HOC DISA LLOWANCE IS MADE THAT MAY NOT BE THE GROUND OF THE LEVY OF PENALTY U/S.27 1(1)(C). THE A.O. MADE THE DIFFERENT DISALLOWANCES. IN RESPECT OF TH E COMMISSION PAYMENT, IT APPEARS THAT THE A.O. ISSUED NOTICES U/S.133(6) TO VERIFY THE CLAIM OF THE ASSESSEE IN RESPECT OF THE COMMISSION PAYMENT. THE NOTICES WERE SENT TO (I) J.S. SHARMA, (II) M. ALAML. (III) RAGHU NATHAN AND (IV) R. ANANDAN BUT SAME COULD NOT BE SERVED. THE ASSESSEE HAS FILED THE CONFIRMATION LETTERS OF THE PARTIES BUT A.O. INSIST ED ON FURTHER EVIDENCE. ITA 3467/M/2009 FAISAL MOAMMED KAPADI 4 THE A.O., THEREFORE, MADE THE DISALLOWANCE TO THE E XTENT OF ` 3,91,455/- AND MADE THE ADDITION TO THE INCOME OF THE ASSESSEE . SAME WAY, ASSESSEE HAD CLAIMED SALES PROMOTION EXPENDITURE, T HE A.O. MADE DISALLOWANCE OF ` 1 LAKH AND TREATED THE SAME AS A NON-BUSINESS EXPENDITURE, WHICH WAS IN RESPECT OF THE PAYMENTS M ADE THROUGH THE CREDIT CARDS. THE A.O. ALSO MADE THE DISALLOWANCE IN RESPECT OF FAN SPONSORSHIP, EXPENDITURE ON HOLIDAYS TO THE TRADES, ETC AND MADE FURTHER ADDITION OF ` 95,500/- BY DISALLOWING THE SALES PROMOTION EXPEND ITURE CLAIMED BY THE ASSESSEE. THE A.O. ALSO MADE THE DI SALLOWANCE OUT OF TELEPHONE EXPENDITURE BY GIVING REASON THAT THE A SSESSEE HAS TWO COMMUNICATIONS AS TELEPHONE AND AS CAPITAL. ON THE PERUSAL OF THE ASSESSMENT ORDER, IT IS SEEN THAT THE A.O. MADE THE DISALLOWANCES CLAIMING THE SAME AS A FOR NON-BUSINESS EXPENDITURE . NOWHERE, IT IS A CASE OF THE A.O., AS RIGHTLY ARGUED BY THE LD. COUN SEL, THAT THE ASSESSEE HAS CLAIMED ANY BOGUS EXPENDITURE. IN THE CASE OF RELIANCE PETRO PRODUCT COMPANY LTD. (SUPRA) HONBLE SUPREME COURT HAS EXPLAINED THE EXPRESSION INACCURATE PARTICULARS AND HELD THAT MERELY BECAUSE BONA FIDE CLAIM IS MADE BY THE ASSESSEE WHICH IS DISALLOWED THAT MAY NOT BE THE GROUND TO LEVY THE PENALTY. THE LD. D.R. SUBMI TTED THAT THE QUANTUM IS CONFIRMED BY THE TRIBUNAL. IN OUR OPINI ON, THE PARAMETERS FOR DETERMINING THE QUANTUM ARE DIFFERENT THAN THE LEVY OF THE PENALTY AND MERELY BECAUSE THE ADDITIONS ARE CONFIRMED THAT MAY NOT BE THE GROUND TO LEVY THE PENALTY UNLESS THE MANDATE OF SE CTION 271(1)(C) ARE FULFILLED. IN OUR OPINION, NO INTERFERENCE IS CALL ED FOR IN THE ORDER OF THE LD. CIT (A). 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ITA 3467/M/2009 FAISAL MOAMMED KAPADI 5 ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 3 1ST MARCH 2011. SD/- SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 31ST MARCH 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) XXI, MUMBAI. 4) THE CIT CITY 21, MUMBAI. 5) THE D.R. F BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA 3467/M/2009 FAISAL MOAMMED KAPADI 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 10.03.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 14.03.2011 SR.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 SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER