EAST AND WEST TRADING CO., MUMBAI V. ITO 12 (1) (4), MUMBAI

ITA 3797/MUM/2010

• Counselvise Citation: 379719914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 11-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VASANTI B PATEL
• Keywords: Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI D.K. AGARWAL (JM) & SHRI J. SUDHAKAR R EDDY (AM) I.T.A.NO.3797/MUM/2010 (A.Y. 2006-07)) EAST & WEST TRADING CO., 4 TH FLOOR, KAMANWALA CHAMBERS, SIR PM RD., FORT,MUMBAI-400001. PAN: AAEFT0886H VS. INCOME-TAX OFFICER-12(1)(4), AAYKAR BHAVAN, M.K.ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY MS. VASANTI B. PATEL. RESPONDENT BY SHRI R .K. GUPTA. O R D E R PER D.K. AGARWAL, JM: THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01-02-2010 PASSED BY THE LD. CIT(A) FOR THE ASSTT. YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE FIRM IS ENGAGED IN THE BUSINESS OF WAREHOUSING FOR STORAGE OF VARIOUS MATE RIALS. BESIDES THIS, THE ASSESSEE IS ALSO ENGAGED IN THE BUSINESS OF MAINTEN ANCE OF PROPERTIES AND ALSO EARNS INCOME FROM FINANCE AND INVESTMENTS. IT FILED RETURN DECLARING TOTAL INCOME AT RS.7,22,230/-. DURING THE COURSE OF ASSESSMENT, THE AO NOTED THAT THE ASSESSEE HAS CREDITED ITS P & L A/C. WITH DIVIDEND INCOME FROM SHARES AT RS.79,198/-, DIVIDEND ON MUTUAL FUND RS.4,73,130/- , TAX FREE INTEREST RS.15,593/- ETC. WHICH IS EXEMPT. HE FURTHER NOTED THAT THE ASSESSEE HAS ALSO DEBITED VARIOUS EXPENSES IN P & L A/C. THE AO, IN V IEW OF THE PROVISIONS OF SEC.14A READ WITH RULE 8D AND KEEPING IN VIEW THE D ECISION OF THE SPECIAL BENCH ITA NO.3797/M/10 EAST & WEST TRADING CO. 2 OF THE TRIBUNAL IN THE CASE OF DAGA CAPITAL MANAGEM ENT PVT. LTD. FOR ASSTT. YEAR 2001-02 IN ITA NO.8057/MUM/2003, HAS WORKED OUT THE DISALLOWANCE U/S.14A AT RS.1,38,250/- AS PER CALCULATION GIVEN IN PARA 5.2 OF THE ASSESSMENT ORDER AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. APART FROM THIS, THE AO ALSO NOTED THAT THE ASSESSEE HAS CLAIMED LABOUR CHARGES TO THE TUNE OF RS.39,780/-. THE ASSESSEE WAS REQUESTED TO FURNISH DOCUMENTARY P ROOF IN SUPPORT OF THE CLAIM MADE. THE ASSESSEE COULD PRODUCE ONLY SELF-MADE VOU CHERS, NOT SUPPORTED BY THIRD PARTY VOUCHERS. THEREFORE, THE AO MADE DISALL OWANCE OF RS.9,945/- BEING 25% OF THE TOTAL CLAIM OF LABOUR CHARGES OF RS.39,7 80/- AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS.8,70,42 5/- VIDE ORDER DATED 18- 12-2008 PASSED U/S.143(3) OF THE I.T. ACT (THE ACT ). ON APPEAL, THE LD. CIT(A), WHILE AGREEING WITH THE VIEWS OF THE AO, CONFIRMED BOTH THE DISALLOWANCES AND DISMISSED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NOS.1 TO 14 ARE AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.1,38,250/- U/S.14A OF THE ACT. 5. A THE TIME OF HEARING, BOTH THE PARTIES HAVE AGR EED THAT THIS ISSUE STANDS COVERED BY THE JUDGMENT OF HONBLE SUPREME COURT IN GODREJ & BOYCE MFG. CO. LT. VS. DCIT AND, THEREFORE, THE ISSUE MAY BE SET A SIDE TO THE FILE OF THE AO. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND MERIT IN THE PLEA OF THE PARTIES THAT THE ISSUE STANDS COVERED BY THE RECENT JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN GODREJ & BOYCE MFG. CO. LTD. VS. DCIT REP ORTED IN (2010) 328 ITR 81 (BOM) WHEREIN THEIR LORDSHIPS, AFTER CONSIDERING TH E DECISION OF THE TRIBUNAL IN DAGA CAPITAL INVESTMENT PVT. LTD. (117 ITD 169) (MU M) (SB), WHILE HOLDING THAT ITA NO.3797/M/10 EAST & WEST TRADING CO. 3 THE PROVISIONS OF SUB-SECTIONS (2) AND (3) OF SEC. 14A OF THE ACT ARE CONSTITUTIONALLY VALID, HAVE HELD VIDE PLACITUM 88( VI) APPEARING AT PAGE 138 OF THE ITR AS UNDER : (VI) EVEN PRIOR TO ASSESSMENT YEAR 2008-09, WHEN R ULE 8D WAS NOT APPLICABLE, THE ASSESSING OFFICER HAS TO ENFORCE THE PROVISIONS OF SUB SECTION (1) OF SECTION 14A. F OR THAT PURPOSE, THE ASSESSING OFFICER IS DUTY BOUND TO DET ERMINE THE EXPENDITURE WHICH HAS BEEN INCURRED IN RELATING TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOM E UNDER THE ACT. THE ASSESSING OFFICER MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FACTS AND CIRCUMSTANCES AFTER FURNISHING A REASONAB LE OPPORTUNITY TO THE ASSESSEE TO PLACE ALL GERMANE MA TERIAL ON THE RECORD. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT, WE SET A SIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK T HE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE AND ACCORDINGLY THE GROUNDS TAKEN BY THE ASSESSEE ARE PARTLY ALLOWED FO R STATISTICAL PURPOSES. 7. GROUND NOS. 15 TO 17 ARE AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.9,945/- OUT OF LABOUR CHARGES. 8. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ABOVE DISALLOWANCE HAS BEEN MADE ON AD HOC BASIS BY OBSERVING THAT THE SAID EXPENDITURE IS NOT SUPPORTED BY THIRD PARTY VOUCHER S. SHE FURTHER SUBMITS THAT IN DISALLOWING THE AO FAILED TO APPRECIATE THAT THE SA ID LABOUR CHARGES WERE INCURRED TO EARN WAREHOUSING CHARGES OF RS.20,89,696/- AND A S SUCH THE EXPENDITURE ON LABOUR CHARGES OF RS.39,780/- CONSTITUTED ONLY 1.90 % OF WAREHOUSING CHARGES RECEIVED. SHE FURTHER SUBMITS THAT THE SAID EXPENDI TURE IS FULLY SUPPORTED BY DULY AUTHORIZED VOUCHERS AND HENCE THE AD HOC DISALLOWA NCE MADE BY THE AO WITHOUT POINTING OUT ANY DEFECT BE DELETED. ITA NO.3797/M/10 EAST & WEST TRADING CO. 4 9. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ERS OF AO AND THE CIT(A). 10. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE RE IS NO DISPUTE THAT THE ASSESSEE FILED COMPLETE DETAILS OF EXPENSES SUPPORT ED BY VOUCHERS. THE AO, WITHOUT POINTING OUT ANY ITEM OF DISALLOWABLE NATUR E TO SHOW THAT THE EXPENSES INCURRED BY THE ASSESSEE HAVE NOT BEEN INCURRED FOR THE PURPOSES OF BUSINESS OR PERSONAL IN NATURE, HAS MADE AD HOC DISALLOWANCE OF RS.9,945/- BEING 25% OF THE TOTAL AMOUNT OF LABOUR CHARGES CLAIMED RS.39,780/- WHICH IS 1.90% OF TOTAL WAREHOUSING CHARGES RECEIVED OF RS.20,89,696/-. THI S BEING SO AND CONSIDERING THE FACT THAT THE DISALLOWANCE WAS MADE ON ESTIMAT E BASIS, WHICH IS NOT PERMISSIBLE UNDER THE LAW, THE DISALLOWANCE OF RS.9 ,947/- MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS DELETED. THE GROUNDS TAK EN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 11. IN THE RESULT, THE ASSESSEES APPEAL STANDS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 29TH DAY OF JUNE, 201 1. SD/- SD/- (J. SUDHAKAR REDDY) (D.K. AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 29TH JUNE , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-23,MUMBAI. 4 CIT-XII,MUMBAI. 5.DR,E BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) ITA NO.3797/M/10 EAST & WEST TRADING CO. 5 BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 22-06-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 24-06-11 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/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER