ACIT 12(1), MUMBAI V. DAMJI DHIRAOO & SONS, MUMBAI

ITA 3809/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1153 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 13-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 11-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GOPAL R NAIK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 3809/MUM/2009 (ASSESSMENT YEAR: 2005-06) ACIT 12(1) M/S. DAMJI DHIRAOO & SONS ROOM NO. 117. AAYAKAR BHAVAN ROOM NO. 16, 1ST FLOOR M.K. ROAD, MUMBAI 400020 VS. PILANMAI BLDG, 12/14 VAJU KOTAK MARG, MUMBAI 400001 PAN - AAAFD 5148 A APPELLANT RESPONDENT APPELLANT BY: SHRI SUNIL KUMAR SINGH RESPONDENT BY: SHRI GOPAL R. NAIK O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A)-XII, MUMBAI DATED 23.03.2009. 2. REVENUE HAS RAISED THE FOLLOWING GROUND, WHICH IS M ATERIAL FOR CONSIDERING THE APPEAL: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE OUT OF CASH EXPENSES TO 15% AS AGAINST DISALLOWANCE OF 25% MADE BY THE ASSESSING OFFICER AS IN SIMILAR CASES APL (INDIA) P LTD. 96 ITD 227, CORROSION ROAD LINES 92 TTJ 625 AND ACIT VS KAMATH & CO. IN ITA NO. 7453/MUM/02, DISALL OWANCE OF 25% OF SUCH EXPENSES HAS BEEN UPHELD BY THE ITAT. 3. BRIEFLY STATED, THE A.O. IN HIS ORDER OBSERVED THAT THE ASSESSEE HAD CLAIMED AN AMOUNT OF RS.2,28,19,601/- AS CASH EXPEN SES. AS THE ASSESSEE BEING IN THE BUSINESS OF CLEARING AND FORWARDING AG ENT, INCURRED HUGE CASH EXPENSES WHICH ARE NOT SUPPORTED BY THIRD PARTY VOU CHERS, RELYING ON THE DECISION OF THE ITAT IN THE CASE OF CIT VS. APL (IN DIA) P. LTD. 96 ITD 22, CORROSION ROAD LINES VS. DCIT 92 TTJ 625 AND ACIT V S. KAMATH & CO. IN ITA NO. 7453/MUM/2002, DISALLOWED 25% OF THE TOTAL EXPENDITURE AMOUNTING TO RS.57,04,900/-. AS THE ASSESSEE HAD DE CLARED AN ADDITIONAL ITA NO. 3809/MUM/2009 M/S. DAMJI DHIRAOO & SONS 2 INCOME OF RS.40 LAKHS IN THE COURSE OF SURVEY PROCE EDINGS, THE ADDITION MADE WAS ONLY RS.17,04,900/-. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE EXPENDITURE LISTED BY THE A.O. HAVE BEEN INCURRED O N BEHALF OF THE CLIENTS AND THE ENTIRE EXPENDITURE WAS REIMBURSED BY THE CL IENTS AND THE ASSESSEE HAS NOT INCURRED ANY CASH EXPENDITURE FOR ITS OFFIC E ADMINISTRATION PURPOSES. THE CIT(A) CONSIDERED THE FACTS AND NATUR E OF THE BUSINESS AND ALSO THE FACT THAT THE EXPENDITURE WAS INCURRED ON BEHALF OF THE CLIENTS, ON THE BASIS THAT THE EXPENSES ARE NOT VERIFIABLE IN T OTO RESTRICTED THE DISALLOWANCE TO 15% OF THE TOTAL CASH EXPENSES CLAI MED. IN THE RESULT, THE ADDITION MADE BY THE A.O. WAS DELETED AS 15% WOULD RESULT IN LESS THAN RS.40 LAKHS ALREADY ADMITTED BY THE ASSESSEE. THE R EVENUE IS AGGRIEVED. 4. THE LEARNED D.R. SUBMITTED THAT THE ASSESSEE HAS MA DE LOT OF CASH PAYMENTS AND ON THE BASIS OF THE TRIBUNAL ORDERS, W HICH CONFIRMED THE DISALLOWANCE OF 25%, THE CIT(A) SHOULD HAVE UPHELD THE DISALLOWANCES MADE BY THE A.O. 5. THE LEARNED COUNSEL, IN REPLY, SUBMITTED THAT THIS EXPENDITURE IS NOT INCURRED BY THE ASSESSEE IN ITS OWN P & L ACCOUNT B UT IT IS AN EXPENDITURE REIMBURSED BY THE CLIENTS AND ACCORDINGLY NO DISALL OWANCE IS CALLED FOR. SINCE THE ASSESSEE HAS ALREADY ADMITTED AN AMOUNT O F RS.40 LAKHS AS ADDITIONAL INCOME DURING THE SURVEY PROCEEDINGS BAS ED ON CASH PAYMENT MADE, THE CIT(A)S ORDER RESTRICTING TO 15% WAS NOT CONTESTED IN APPEAL. FURTHER, HE RELIED ON THE ORDER FOR A.Y. 01-02 BY T HE CIT(A) XII, MUMBAI DATED 19.10.2004 WHEREIN THE A.O. DISALLOWED 20% OF THE CASH EXPENSES OF RS.32,35,525/- WHICH WAS RESTRICTED TO 10% BY THE C IT(A), WHICH ORDER WAS ACCEPTED BY THE REVENUE AND NO FURTHER APPEAL WAS M ADE. IN VIEW OF THE PAST RECORD OF THE ASSESSEE, IT WAS HIS SUBMISSION, THAT THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY MODIFICATION. 6. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE FACT S OF THE CASE THE ENTIRE CASH EXPENDITURE WAS INCURRED ON BEHALF OF T HE CLIENTS AND AS SUBMITTED THE EXPENDITURE WAS REIMBURSED BY THE CLI ENTS AND THERE WAS NO EFFECT ON THE P & L ACCOUNT AS SUCH EXPENDITURE WAS NOT CLAIMED AS DEDUCTION. FURTHER, THE ASSESSEE ALSO DISCLOSED AN AMOUNT OF RS.40 LAKHS AS ITA NO. 3809/MUM/2009 M/S. DAMJI DHIRAOO & SONS 3 ADDITIONAL INCOME, WHICH THE A.O. HAS GIVEN CREDIT WHILE MAKING THE DISALLOWANCE OF 25%. IT MAY BE TRUE THAT THE ITAT H AS CONFIRMED 25% OF THE CASH EXPENSES IN THE ABOVE CASES RELIED UPON BY THE REVENUE BUT AS SEEN FROM THE FACTS, THOSE ARE THE CASES IN WHICH THERE WAS A CLAIM OF EXPENDITURE UNDER SECTION 37(1). IN THIS CASE THE FACTS ARE CLE ARLY DIFFERENT AS THE ASSESSEE HAS INCURRED THE EXPENDITURE ON BEHALF OF THE CLIENTS, WHICH WAS REIMBURSED FULLY. THEREFORE, THOSE DECISIONS ARE NO T APPLICABLE TO THE FACTS OF THE CASE. MOREOVER IN EARLIER YEAR ALSO THE CIT(A) HAS RESTRICTED SUCH DISALLOWANCE TO 10%, WHICH SEEMS TO HAVE BEEN ACCEP TED BY THE REVENUE AS NO FURTHER APPEAL WAS PREFERRED. CONSIDERING THESE FACTS, THE DISALLOWANCE OF 15% MADE IN THIS YEAR IS REASONABLE AND DOES NOT RE QUIRE ANY RECONSIDERATION OR MODIFICATION. ACCORDINGLY THE GR OUND IS REJECTED. 7. IN THE RESULT, OF THE REVENUE IS APPEAL DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH JULY 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 9 TH JULY 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.