THOMAS JOSEPH MORAS, MUMBAI V. ITO 12(2)(3), MUMBAI

ITA 4128/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4289 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: KIRIT N MEHTA
• Keywords: Business income; Depreciation; Business expenditure; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI . . , . !' , # $ BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLA IYA, AM . / ITA NO.4128/MUM/2012 % % % % / ASSESSMENT YEAR 2008-09 SHRI THOMAS JOSEPH MORAS, C/0.M/S.INTERNASTIONAL NOVELTIES, 515, GRANT BLDG., ARTHUR BUNDER ROAD, COLABA, MUMBAI 400005 / VS. INCOME TAX OFFICER 12(2)(3), ROOM NO.110, 1 ST FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 & # ./ '( ./ PAN/GIR NO. : AAHPM0565F ( &) / APPELLANT ) .. ( *+&) / RESPONDENT ) &) , / APPELLANT BY: SHRI KIRIT N. MEHTA *+&) - , / RESPONDENT BY : SHRI RAJENDRA KUMAR - .# / DATE OF HEARING : 10/07/2013 /0% - .# / DATE OF PRONOUNCEMENT : 10/07/2013 1 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-23MUMBAI DATED 6/3/2012 FOR AS SESSMENT YEAR 2008-09. GROUNDS OF APPEAL READ AS UNDER: 1. THE ORDER OF THE LEARNED C.I.T. (A) IS CONTRARY TO THE LAW, FACTS AND CIRCUMSTANCES THE CASE. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED C.I.T (A) ERRED IN DETERMINING THE TOTAL INCOME AT RS.6,40,72 0/- AS AGAINST THE RETURNED TOTAL INCOME OF RS.2,95,230/- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C.I.T (A) ERRED IN OBSERVING THAT AS PER SECTION 44AA BOOKS OF ACCO UNTS ARE NOT MAINTAINED BY THE ASSESSEE. . / ITA NO.4128/MUM/2012 % % % % / ASSESSMENT YEAR 2008-09 2 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C.I.T (A) ERRED IN COMING TO THE CONCLUSION THAT PROVISION UNDER SE CTION 44AB (OF TAX AUDIT) IS ATTRACTED ON THE BASIS OF GROSS AMOUNT OF SALE OF L OTTERY TICKETS. 5. THE LEARNED C.I.T (A) ERRED IN COMPUTING PROFIT FROM SALE OF LOTTERY TICKETS AT THE RATE OF 3/O OF TOTAL SALES AMOUNTING TO RS.5,51,57 4/- AND NOT ALLOWING DEDUCTION FOR LEGITIMATE BUSINESS EXPENSES INCURRED BY THE APPELL ANT. 2. IT WAS SUBMITTED BY LD. AR THAT GROUND NO.1 IS A GENERAL GROUND FOR WHICH NO SPECIFIC ADJUDICATION IS REQUIRED. HE SUBMITTED THAT GROUND NO.2 IS ALSO A BROAD GROUND AND EFFECTIVE GROUND IS ONLY AGAINST ASSESSMENT OF COMMISSION INCOME AGAINST WHICH NO EXPENDITURE HAS BEEN GRANTE D BY THE A.O. IT WAS FURTHER SUBMITTED THAT GROUND NO.3 & 4 RELATE TO THE OBSERV ATION OF THE AO IN THE ASSESSMENT ORDER THAT ASSESSEE DID NOT MAINTAIN ACC OUNTS AS PRESCRIBED UNDER THE INCOME TAX ACT 1961(THE ACT) AND ON THE BASIS OF THOSE OBSERVATIONS THE AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271 A OF THE ACT. HE FURTHER SUBMITTED THAT IT IS ALSO OBSERVED BY THE AO THAT A SSESSEE IS UNDER AN OBLIGATION TO GET ITS ACCOUNTS AUDITED, AS ACCORDING TO AO TH E ENTIRE VALUE OF THE LOTTERY TICKET SOLD BY THE ASSESSEE WAS TURNOVER OF THE ASS ESSEE. THEREFORE, THE AO HAS INITIATED PENALTY PROCEEDINGS UNDER SECTION 271B OF THE ACT. THEREFORE, LD. AR SUBMITTED THAT EFFECTIVE GROUND TO BE ADJUDICATED I N THE PRESENT APPEAL IS REGARDING QUANTUM OF ASSESSABLE INCOME WITH REGARD TO COMMISSION INCOME EARNED BY THE ASSESSEE ON SALE OF LOTTERY TICKETS. THEREFORE, HE SUBMITTED THAT GROUND NO.1 TO 4 MAY BE CONSIDERED AS NOT PRESSED W ITHOUT PREJUDICE TO THE RIGHT OF THE ASSESSEE TO CHALLENGE THOSE OBSERVATIONS OF AO WITH REGARD TO INITIATION OF PENALTY UNDER SECTION 271A & 271B OF THE ACT IN AP PROPRIATE PROCEEDINGS. 3. WE HAVE HEARD LD. A.R ON THIS ISSUE AND IT WAS O BSERVED THAT CONTESTING THE OBSERVATION OF AO WITH REGARD TO HIS FINDING ON INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271A & 271B OF THE ACT, T HE SAME ARE PREMATURE AND WHEN THOSE PENALTIES ARE LEVIED THEN ASSESSEE CAN A GITATE THOSE OBSERVATIONS OF AO. THEREFORE, WITHOUT PREJUDICE TO THAT RIGHT OF THE ASSESSEE, THESE GROUNDS ARE DISMISSED BEING NOT PRESSED. . / ITA NO.4128/MUM/2012 % % % % / ASSESSMENT YEAR 2008-09 3 4. NOW COMING TO GROUND NO.5, THE FACTS ARE THAT AS SESSEE IS SELLING LOTTERY TICKETS ON COMMISSION BASIS ON WHICH ASSESSEE IS EN TITLED TO RECEIVE 3% COMMISSION. THE SALE PRICE OF TICKETS HAS BEEN DES CRIBED IN ASSESSMENT ORDER ITSELF AT PAGE- 3. THE SALE PRICE IS RS. 1,83,85,7 94.90 OF WHICH AO HAS ESTIMATED NET PROFIT @3% AND THUS INCOME HAS BEEN COMPUTED A T RS.5,51,573.82/- . AGAINST SUCH ACTION OF THE AO, IT IS THE CASE OF THE ASSESSEE THAT HE IS ENTITLED TO GET COMMISSION @3% AND AO HAS ADMITTED SUCH FACT. HOWEVER, AO HAS NOT ALLOWED ANY EXPENDITURE AGAINST COMMISSION INCOME AND THUS THE INCOME ASSESSED IN RESPECT OF COMMISSION IS UNJUSTIFIED A ND ARBITRARY. IT WAS SUBMITTED THAT BY MISTAKE ASSESSEE IN THE RETURN OF INCOME HA D SUBMITTED THAT IT IS A NO ACCOUNT CASE. HOWEVER, ASSESSEE HAD MAINTAINED THE REQUISITE ACCOUNTS WHICH WERE PRODUCED BEFORE THE AO. ACCORDING TO SUCH AC COUNTS THE COMMISSION RECEIVED BY THE ASSESSEE WAS A SUM OF RS.5,52,694/- , AGAINST WHICH EXPENDITURE OF RS.3,48,002/- WERE CLAIMED AND NET INCOME WAS S HOWN AT RS.2,04,692/-. IN THIS REGARD REFERENCE WAS MADE TO P&L ACCOUNT, COPY OF WHICH HAS BEEN SUBMITTED AT PAGE 5 OF THE PAPER BOOK, WHICH IS ALS O BEING REPRODUCED HEREIN BELOW FOR THE SAKE OF CONVENIENCE. MR. THOMAS MORAS PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2008. PARTICULARS AMOUNT PARTICULARS AMOUNT TO SALARY,BOUS & OVERTIME ACCOUNT WRITING CHARGES TO ELECTRICITY CHRG TO SUNDRY EXPS.6858 TO PRINTING & STATIONARY TO SHOP RENT TO DEPRECIATION TO CONVEYANCE TO REPAIRS & MAINTENANCE TO TELEPHONE CHRGS TO PROF. FEES TO REFRESHMENT EXPS. 9420 TO BANK CHARGES TO BUSINESS EXPS. TO SUB COMMISSION NET PROFIT TRSF TO CAP A/C. 156,000 36,000 9,909 17,258 5,400 8,439 10,937 9,856 8,756 21,650 2,247 27,040 172 6,703 27,635 204,692 BY LOTTERY COMMISSION 552,694 552,694 552,694 . / ITA NO.4128/MUM/2012 % % % % / ASSESSMENT YEAR 2008-09 4 4.1 IT WAS FURTHER SUBMITTED THAT IN SUBSEQUENT YEA R I.E. A.Y 2009-10 ASSESSMENT HAS BEEN FRAMED UNDER SECTION 143(3) OF THE ACT AND NO ADDITION HAS BEEN MADE BY THE AO WHEN SIMILAR EXPENSES WERE CLAI MED BY THE ASSESSEE. HE HAS PRODUCED BEFORE US COPY OF THE ASSESSMENT ORDER DATED 2/12/2011 PASSED UNDER SECTION 143(3) OF THE ACT. THUS IT WAS PLEAD ED BY LD. AR THAT THE ACTION OF THE AO WHICH HAS BEEN CONFIRMED BY LD. CIT(A) IS HI GHLY UNJUSTIFIED AND THE ASSESSEE MAY BE GRANTED WITH APPROPRIATE RELIEF. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDERS PASSED BY AO AND LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. WE FIND THAT IT IS NOT EVEN THE CASE OF AO THAT AS SESSEE HAS EARNED ANY EXTRA AMOUNT FROM THE SALE OF LOTTERIES OTHER THAN THE CO MMISSION OF 3%. IT IS FOR THAT REASON THAT AO HAS COMPUTED NET PROFIT ON SUCH ACTI VITY @3%. THERE IS NO EVIDENCE ON RECORD TO SHOW THAT ASSESSEE HAS EVER R ECEIVED ANY EXTRA AMOUNT APART FROM 3% COMMISSION ON SALE OF LOTTERIES. IF IT IS SO, IN OUR CONSIDERED OPINION THE ASSESSEE IS ENTITLED TO GET EXPENDITURE INCURRED BY HIM WITH REGARD TO ACTIVITY OF SALE OF LOTTERY. WE HAVE CAREFULLY GON E THE PROFIT AND LOSS ACCOUNT, WHICH HAS BEEN REPRODUCED ABOVE AND WE FIND THAT TH E NATURE OF EXPENDITURE IS SUCH THAT THEY ARE INCURRED FOR BUSINESS OF THE ASS ESSEE. EVEN IF CASE OF THE DEPARTMENT IS ADMITTED THAT ASSESSEE COULD NOT PRO DUCE PROPER EVIDENCE TO SUPPORT THE ENTIRE EXPENDITURE BUT AT THE SAME TIME IT WILL BE INCORRECT TO SAY THAT EXPENDITURE AT ALL ARE NOT ALLOWABLE. BY MAKI NG A REASONABLE ESTIMATE WE RESTRICT ALLOWANCE OF EXPENDITURE TO RS.2,50,000 /- AGAINST EXPENDITURE OF RS.3,48,002/- CLAIMED BY THE ASSESSEE. THEREFORE, THE INCOME OF THE ASSESSEE FROM SALE AND PURCHASE OF LOTTERY IS TAKEN AT A S UM OF RS.3,02,694/- ( AMOUNT . / ITA NO.4128/MUM/2012 % % % % / ASSESSMENT YEAR 2008-09 5 RECEIVED BY THE ASSESSEE AS COMMISSION SHOWN IN THE P&L ACCOUNT RS.5,52,694/- (-) EXPENDITURE ALLOWABLE RS.2,50,000/-). THE AO SHALL COMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. GROUND NO.5 IS PARTLY AL LOWED IN THE MANNER AFORESAID. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/20 13 1 - /0% # 3 45 10/07/2013 0 - 6 7 SD/- SD/- ( !' / N.K.BILLAIYA ) ( . . / I.P. BANSAL ) # / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 4 DATED 10/07/2013 1 1 1 1 - -- - *.89 *.89 *.89 *.89 :9%. :9%. :9%. :9%. / COPY OF THE ORDER FORWARDED TO : 1. &) / THE APPELLANT 2. *+&) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. 9<6 *. , , / DR, ITAT, MUMBAI 6. 6= > / GUARD FILE. 1 1 1 1 / BY ORDER, +9. *. //TRUE COPY// ? ?? ? / @ @ @ @ ' ' ' ' (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . ./ VM , SR. PS