M/S. NINA INDUSTRIES, MUMBAI V. ITO 16(2), MUMBAI

ITA 3741/MUM/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62486 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 04-06-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 14-05-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJAY
• Keywords: Corroborative evidences
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I , MUMBAI BEFORE SHRI B. R. MITTAL, J.M. AND SHRI N. K. BILLA IYA, A.M. ITA NO. : 3741/MUM/2007 ASSESSMENT YEAR : 2001-02 M/S. NINA INDUSTRIES MANI BHAVAN, 4 TH FLOOR, 54, HUGHES ROAD, MUMBAI-400 007 PAN NO: AAAFN 0684 K VS. THE INCOME TAX OFFICER 16(2)1, 2 ND FLOOR, MATRU MANDIR, MUMBAI-400 007 (APPELLANT) (RESPONDENT) & ITA NO. : 4306/MUM/2007 ASSESSMENT YEAR : 2001-02 D. C . I . T . , CENTRAL CIRCLE 32, ROOM NO.32(2), GROUND FLOOR, AAYKAR BHAVAN, M. K. ROAD, MARINE LINES, MUMBAI-400 20 VS. M/S. NINA INDUSTRIES MANI BHAVAN, 4 TH FLOOR, 54, HUGHES ROAD, MUMBAI-400 007 PAN NO: AAAFN 0684 K (APPELLANT) (RESPONDENT) A SSESSEE BY : NONE DEPARTMENT BY : SHRI AJAY DATE OF HEARING : 04.06.2012 DATE OF PRONOUNCEMENT : 08.06.2012 ORDER PER N. K. BILLAIYA, A.M.: THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-CENTRAL VIII, M UMBAI DATED 27.03.2007 FOR THE A.Y. 2001-02. AS BOTH THESE APPEALS ARE AG AINST THE SAME ORDER, FOR THE SAKE OF CONVENIENCE AND BREVITY BOTH THESE APPEALS ARE DISPOSED OF TOGETHER BY THIS COMMON ORDER. ITA NOS : 3741 & 4306/MUM/2007 M/S. NINA INDUSTRIES 2 ITA NO. : 3741/MUM/2007 ASSESSMENT YEAR : 2001-02 2. THIS IS THE APPEAL FILED BY THE ASSESSEE BY WHIC H THE ASSESSEE HAS QUESTIONED THE CORRECTNESS OF THE ORDER OF THE LD. CIT(A). GROUND NOS. 1, 2 AND 3 ARE TAKEN UP TOGETHER. THE FACTS GIVING RISE TO THESE GROUNDS SUGGEST THAT DURING THE COURSE OF THE ASSESSMENT PR OCEEDINGS THE A.O. WAS NOT SATISFIED WITH THE CORRECTNESS OF THE BOOKS OF ACCOUNTS. THE A.O. WAS ALSO NOT SATISFIED WITH THE SUPPORTING EVIDENCE S GIVEN FOR THE CLAIM OF EXPENSES UNDER VARIOUS HEADS WHICH PROMOTED THE A.O . TO REJECT THE BOOKS OF ACCOUNTS AND APPLY THE NET PROFIT RATE OF 10%. W HEN THIS MATTER WAS TAKEN BEFORE THE LD. CIT(A), THE LD. CIT(A) FOUND T HAT THE MAJOR HEAD OF EXPENSES WERE WATER PROOFING EXPENSES, WAGES, SALA RY AND ALLOWANCE, LABOUR CHARGES, TRANSPORTATION AND DEBRIS LIFTING A ND CONVEYANCE EXPENSES. THE LD. CIT(A) ALSO FOUND THAT THE AUDIT ORS HAVE QUALIFIED THE REPORT IN RESPECT OF EXPENSES BEING NOT PROPERLY SU PPORTED BY BILLS AND WAS CONVINCED THAT THE REJECTION OF THE BOOKS OF AC COUNTS WAS PROPER. HOWEVER, ON THE QUESTION OF ASSESSMENT OF THE PROFI T, WE FIND THAT THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE A.O . HAS NOT QUOTED ANY COMPARABLE CASES. THE LD. CIT(A) FURTHER RELIED U PON THE DECISION OF THE ITAT IN THE CASE OF ATULRAJ BUILDERS PVT. LIMITED I N I.T.A NO. 4753/MUM/2008, AND DIRECTED THE A.O. TO ADOPT 7% AS PROFIT. 3. THE LEARNED DR STRONGLY RELIED UPON THE FINDINGS OF THE A.O. 4. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORIT IES AND CONSIDERED THE FINDINGS OF THE LD. CIT(A). WE FIND THAT THE D IRECTION OF THE LD. CIT(A) TO ADOPT 7% OF THE NET PROFIT ON GROSS RECEIPTS IS BASED ON THE DECISION OF THE ITAT IN THE CASE OF ATULRAJ BUILDERS PVT. LIMIT ED (SUPRA). AS THE LD. CIT(A) HAS GIVEN REASONS FOR HIS FINDINGS, NO INTER FERENCE IS CALLED FOR. ITA NOS : 3741 & 4306/MUM/2007 M/S. NINA INDUSTRIES 3 ACCORDINGLY, GROUND NOS. 1, 2 AND 3 TAKEN UP TOGETH ER ARE DISMISSED. THE FINDINGS OF THE LD. CIT(A) ARE CONFIRMED TO THIS EX TENT. 5. GROUND NOS. 4.1, 4.2 AND 4.3 RELATES TO THE GRIE VANCE OF THE ASSESSEE THAT THE LD. CIT(A) HAS NOT ALLOWED THE CLAIM OF BA D DEBTS. WE FIND THAT THIS HAS BEEN CONSIDERED BY THE LD. CIT(A) AT PAGE 10, PARA 5 AND 5.1 OF HIS APPELLATE ORDER. WE FIND THAT THIS GROUND WAS NOT TAKEN BY THE ASSESSEE IN ITS ORIGINAL GROUND OF APPEAL BEFORE TH E LD. CIT(A). IT HAS ONLY TAKEN UP IN THE CONCISE GROUNDS OF APPEALS, AND, TH EREFORE, IT WAS REJECTED BY THE LD. CIT(A). HOWEVER, AS THE CLAIM OF BAD DE BTS IS ALLOWABLE U/S.36(VII) AND AS THE LD. CIT(A) HAS DIRECTED TO A DOPT THE NET PROFIT RATE OF 7% , SUCH ESTIMATION OF PROFITS COVERS ALL THE EXP ENSES WHICH ARE ALLOWABLE U/S. 30 TO SECTION 37 OF THE ACT. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GRO UND NOS. 4.1, 4.2 AND 4.3 TAKEN UP TOGETHER ARE DISMISSED. 6. BY GROUND NOS. 5.1 AND 5.2, THE APPELLANT HAS SH OWN ITS GRIEVANCE THAT THE LD. CIT(A) HAS RECOMMENDED THE EHHANCEMEN T OF INCOME AND AT THE SAME TIME, THE LD. CIT(A) HAS HELD THAT NO DEDU CTION ON ACCOUNT OF INTEREST TO BANK OF BARODA CAN BE ALLOWED. THE FAC TS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIMED INTEREST PAYABLE TO BANK O F BARODA AMOUNTING TO `. 37,18,420/-. AS THE BANK HAS TAKEN THE MATTER FOR THE RECOVERY OF PRINCIPLE AND INTEREST BEFORE THE HON'BLE BOMBAY HI GH COURT WHICH RECOVERY SUIT WAS LATER ON TRANSFERRED TO DEBT RECO VERY TRIBUNAL (DRT) AND AS NO ORDER HAS BEEN RECEIVED FROM THE DRT, THE A.O . DISALLOWED THE CLAIM OF INTEREST PAYABLE TO BANK OF BARODA ON CASH CREDI T LIMIT. THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE A.O. ON THE GROUND TH AT FOR THE YEAR UNDER CONSIDERATION, THE PROFIT OF THE ASSESSEE HAS BEEN ESTIMATED AT 7% AND ALL THE RELATED EXPENSES ARE DEEMED TO BE ALLOWED. WE AGREE WITH THE FINDINGS OF THE LD. CIT(A) AS THIS IS A CASE WHERE THE PROFI T HAS BEEN ESTIMATED. WE ITA NOS : 3741 & 4306/MUM/2007 M/S. NINA INDUSTRIES 4 DO NOT FIND ANY ERROR OR INFIRMITY IN THE ORDER OF THE LD. CIT(A). GROUND NOS. 5.1 AND 5.2 TAKEN TOGETHER ARE ALSO DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA NO. : 4306/MUM/2007 ASSESSMENT YEAR : 2001-02 8. THIS APPEAL IS FILED BY THE REVENUE. THE REVENU E HAS QUESTIONED THE FINDINGS OF THE LD. CIT(A) WHO HAS DIRECTED TO ESTIMATE THE PROFIT @ 7% AS AGAINST 10% APPLIED BY THE A.O. AS WE HAVE DISC USSED THIS POINT IN THE ASSESSEES APPEAL IN ITA NO. 3741/MUM/2007 WHERE WE HAVE HELD THAT THE DIRECTIONS OF THE LD. CIT(A) ARE BASED ON THE L OGICAL REASONING, WE DO NOT FIND ANY REASONS TO ADJUDICATE ON THIS MATTER O NCE AGAIN. GROUND NO. 1 AND 2 TAKEN UP TOGETHER ARE DISMISSED. 9. BY GROUND NO. 3 THE REVENUE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT(A) WHO HAS ALLOWED THE RELIEF ON ACCOUNT OF INTEREST INCOME ON FDRS. FACTS OF THE CASE SUGGEST THAT THE ASSESSEE WAS HAVING FIXED DEPOSIT WITH BANK OF BARODA, BORI BUNDER BRAN CH OF WHICH THE ASSESSEE HAS NOT SHOWN ACCRUED INTEREST IN ITS BOOK S OF ACCOUNTS. HOWEVER, AT THE SAME TIME, IT WAS NOTICED BY THE A. O. THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF `. 37,18,420/- AS INTEREST PAYABLE TO BANK OF BARODA. THE A.O. SOUGHT AN EXPLANATION FROM THE AS SESSEE WHY IT HAS NOT SHOWN INTEREST EARNED ON FIXED DEPOSITS. THE ASSES SEE EXPLAINED THAT THE BANK HAS FILED A RECOVERY SUIT AGAINST THE ASSESSEE AND AS THE MATTER IS SUBJUDICED BEFORE THE DRT, THE ASSESSEE WILL MAKE N ECESSARY ENTRIES AFTER RECEIVING THE ORDERS FROM THE DRT. THIS CONTENTION OF THE ASSESSEE WAS REJECTED BY THE A.O. WHO WAS OF THE OPINION THAT SI NCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, IT HAS T O PASS ENTRIES ON BOTH SIDES AND AS THE ASSESSEE IS PASSING INTEREST PAYAB LE AND DEBITING INTEREST ITA NOS : 3741 & 4306/MUM/2007 M/S. NINA INDUSTRIES 5 AMOUNT, THE ASSESSEE WAS ALSO BOUND TO SHOW INTERES T ACCRUED ON FIXED DEPOSIT. AS THE NECESSARY DETAILS WERE NOT AVAILAB LE WITH THE A.O., THE A.O. ESTIMATED THE INTEREST RECEIVABLE AS ON 01.04. 2001 AT `. 15 LAKHS. WHEN THE MATTER WAS TAKEN UP BEFORE THE LD. CIT(A), WE FIND THAT THE LD. CIT(A) HAS GIVEN HIS FINDINGS AT PARA 4.2 OF HIS AP PELLATE ORDER. THE LD. CIT(A) FOUND THAT THE A.O. HAS MADE TWO PRESUMPTION S WHILE MAKING THIS ADDITION. THE FIRST PRESUMPTION WAS THAT THE ASSES SEE HAS FDR WORTH `. 50 LAKHS WITH BANK OF BARODA AND THE SECOND PRESUMPTIO N WAS THAT THE RATE OF INTEREST ON THIS FDR WAS 30%. WE FIND THAT THE LD. CIT(A) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS HAS DIRECTED T HE A.O. TO FIND ACTUAL INTEREST RECEIVED BY THE APPELLANT FROM THE BANK OF BARODA. WE ALSO FIND THAT ON ENQUIRY, THE BANK HAS CERTIFIED THAT DURING THE F.Y. 2000-01 I.E. A.Y. 2001-02 WHICH IS THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS RECEIVED ONLY `. 18,310/- AS INTEREST ON VARIOUS FD RECEIPTS. ACCOR DINGLY, THE LD. CIT(A) DIRECTED THE A.O. TO MAKE AN ADDITIO N OF `. 18,319/- ONLY/-. AS THIS FINDING OF THE LD. CIT(A) IS BASED ON THE L ETTER/ ENQUIRY FROM THE BANK, WE DO NOT FIND ANY REASON TO INTERFERE WITH T HESE FINDINGS. ACCORDINGLY, GROUND NO. 3 IS DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 08 TH DAY OF JUNE, 2012. SD/ - SD/ - ( B. R. MITTAL ) ( N. K. BILLAIYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 08.06.2012 ITA NOS : 3741 & 4306/MUM/2007 M/S. NINA INDUSTRIES 6 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI