MANISHA K. MEHTA, MUMBAI V. ITO 21(1)(3), MUMBAI

ITA 4421/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9830 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 24-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Assessee Lawyers: KAMLESH MEHTA
• Keywords: Depreciation; Condonation of delay
• Section: 143(3)

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM & SHRI SANDEEP GOSAIN, JM ./ I.T.A. NO . 4421 /MUM/201 4 , ( / ASSESSMENT YEAR: 2007 - 08 ) SMT MANISHA K. MEHTA A - 103, SHIV KESAR APPT. ST XAVIER SCHOOL RD, VILE PARLE(W), MUMBAI - 400056 . / VS. ITO 21(1)(3) MUMBAI PIN - ./ ./ PAN/GIR NO. A HIPM8130E ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI KAMLESH MEHTA / RESPONDENTBY : SH RI T. A. KHAN / DATE OF HEARING : 2 7 /0 2 /201 8 / DATE OF PRONOUNCEMENT : 19/03/2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEAL) - 32, MUMBAI DATED 28.0 1.14. 2 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 2. LD. AR APPEARING ON BEHALF OF THE ASSESSEE DRAWN OUR ATTENTION TO LETTER DATED 18.03.17 WHICH RELATES TO CONDONATION OF DELAY IN FILING APPEAL BEFORE HONBLE ITAT. LD. AR SUBMITTED THAT THE PRESENT APPEAL COULD NOT BE FILED WITHIN TIME BECAUSE THE FATHER IN LAW OF ASSESSEE WAS HOSPITALIZED AND THEREFORE THE ASSESSEE COULD NOT CONTACT HIS AUTHORIZED REPRESENTATIVE AND DUE TO WHICH, THERE WAS A DELAY OF 87 DAYS IN FILI NG THE PRESENT APPEAL. 3. ON THE OTHER HAND, LD. DR REQUESTED FOR DISMISSAL OF THE SAID APPLICATION. 4. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES ON THIS APPLICATION FOR SEEKING CONDONATION OF DELAY AND WHILE TAKING INTO CONSIDERATION THE CONTENTS O F APPLICATION FILED BY THE ASSESSEE AND FOLLOWING THE PRINCIPLES LAID DOWN BY HONBLE SUPREME COURT IN CASE OF LAND ACQUISITION COLLECTOR VRS. MSTKITZI, AIR 1987 S.C. 1353 /(1987) 167 ITR 471 (SC), WE CONDONE THE DELAY OF 87 DAYS IN FILING THE APPEAL. RESULTANTLY, THIS APPLICATION IS ALLOWED AND APPEAL IS ADMITTED TO BE HEARD ON MERITS. 3 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 5 . AS PER THE FACTS OF THE PRESENT CASE, THE ASSESSEE IS EARNING INCOME FROM BUSINESS FROM HER PROPRIETARY CONCE RN M/S MANISHA ENTERPRISES. THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,32,163/ - WAS FILED ON 31.10.07. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING TO THE ASSESSEE , ORD ER OF ASSESSMENT U/S 143(3) OF THE I.T. A CT WAS PASSED, THEREBY MAKING ADDITIONS UNDER DIFFERENT HEADS. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES , PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE ASSESSEE HAS PREFERRED THE PRESENT APP EAL BY RAISING THE GROUNDS . GROUND NO. I 6 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A ) IN CONFIRMING THE DISALLOWANCE OF EXPENDI TURE MADE BY AO . 4 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 7 . WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALU ATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A ) HAS DEALT WITH THE ABOVE GROU NDS RAISE D BY THE ASSESSEE IN PARA NO. 6(6.1 TO 6.5) IN ITS ORDER. THE OPERATIV E PORTION OF THE ORDER OF LD. CIT(A ) IS CON T AINE D IN PARA NO. 6.5 AND THE SAME IS REPRODUCED BEL OW: - 6.5 I HAVE CONSIDERED FACTS OF THE CASE, WRITTEN SUBMISSIONS OF THE APPELLANT AND ALSO THE OBSERVATIONS / FINDINGS OF THE AU IN THE ASSESSMENT ORDER AND REMAND REPORT. THE SUBMISSION AND CONTENTIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED A S UNDER: - I. THE AO IN THE REMAND REPORT HAS MENTIONED THAT THE ASSESSEE HAS FILED LEDGER ACCOUNT OF EXPENSES DEBITED TO P&L A/C AND FURTHER THE DETAILS AND VOUCHERS IN RESPECT OF OCTROI CHARGES AND TRANSPORTATION CHARGES. II. IT IS SEEN FROM THE P&L A/C O F THE ASSESSEE THAT APART FROM THE AFORESAID EXPENSES THE APPELLANT HAS DEBITED RENT (RS.96,000), REPAIRS FOR MACHINERY (RS. 5 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 1,950), SALARY AND WAGES (RS.2, 1O,00Q), OTHER EXPENSES (RS.56,950), COMMISSION (RS.65,861), TELEPHONE RS.52,750), AUDIT FEE (RS.4, 500), OTHER EXPENSES (RS.73,820), INTEREST (RS.69,1 16), DEPRECIATION (RS.34,175) TOTALING TO RS.5,78,722/ - . THE ASSESSEE HAS NOT SUBMITTED ANY BILLS AND VOUCHERS IN SUPPORT OF SUCH EXPENSES. UNDER SUCH FACTS AND CIRCUMSTANCES OF THE CASE IT CANNOT BE CONS IDERED THAT ALL THESE EXPENSES ARE WHOLLY AND EXCLUSIVELY INCURRED FOR, THE BUSINESS PURPOSES. ACCORDINGLY THE AO IS DIRECTED TO DI.ALLOW 25% OF THESE EXPENSES WHICH WORKS OUT TO RS. 1,44,680/ - . THE APPELLANT GETS CONSEQUENTIAL RELIEF. ACCORDINGLY, GROUND NO. 2.4 IS PARTLY ALLOWED. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT IN THE PRESENT CASE, SEVERAL NOTICES WERE SERVED BY THE AO UPON THE ASSESSEE BUT ASSESSEE DID NOT RESPOND TO ANY OF THE NOTICES. FROM THE FACTS, WE ALSO NOTICED THAT THE AO HAD ALSO SERVED NOTICES UPON THE NEW ADDRESS. EVEN THE LD . CIT(A) HAD SUPPLIED THE COPY OF REMAND REPORT CALLED FROM THE AO AND GAVE SUFFICIENT OPPORTUNITY TO THE 6 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA ASSESSEE TO FILE HIS REPLY TO THE CORRECTNESS OF THE SAID REMAND REPORT, BUT THE ASSESSEE FILED NO OBJECTIONS TO THE SAID REMAND REPORT. THEREFORE LD. CIT(A) HAD LEFT WITH NO OTHER OPTION EXCEPT TO DECIDE THE CASE ON THE BASIS OF DOCUMENTS ALREADY ON THE RECORD. FROM THE REMAND REPORT, LD. CIT(A) HAS CORRECTLY NOTICED THAT THE AO HAS MENTIONED THAT THE ASSESSEE HAS FILED LEDGER ACCOUNT OF EXPENSES DEBITED TO P & L ACCOUNT AND F URTHER THE DETAILS AND VOUCHERS IN RESPECT OF OCTRAI CHARGES AND TRANSPORTATION CHARGES. THE REST OF THE AMOUNT OF EXPENSES PERTAINING TO RENT, REPAIR, SALARY, COMMISSION, AUDIT, DEPRECIATION, INTEREST, ETC AMOUNTING TO RS. 5,78,722/ - ARE CONCERNED, IN THI S RESPECT, NO EVIDENCE WAS FURNISHED BY THE ASSESSEE, THEREFORE THE SAME WAS RIGHTLY DISALLOWED @ 25%, WHICH WORKS OUT TO RS. 1,44,680/ - . T HE ASSESSEE COULD NOT PROVE THAT ALL THESE EXPENSES WERE WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSES. T HEREFORE, IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT LD. CIT(A) HAS PASSED JUDICIOUS AND WELL REASONED ORDER. 7 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA MOREOVER, N O NEW FACTS OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US I N ORDER TO CONTROVERT OR REBUT THE FINDINGS RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTA NTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS DISMISSED . GROUND NO. II 8 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN CONFIRMING THE ADDITION S MADE BY AO ON ACCOUNT OF LIABILITY CEASED TO EXIST OF SUNDRY CREDITORS. 9 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RAISED BY THE ASSESSEE IN PARA NO. 8 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 5(5.1 TO 5.5) IN ITS ORDER. THE OPERATIVE PORTION OF THE ORDER OF LD. C IT(A) IS CONTAIN ED IN PARA NO. 5.5 AND THE SAME IS REPRODUCED BELOW: - 5.5 I HAVE CONSIDERED FACTS OF THE CASE, WRITTEN SUBMISSIONS OF THE APPELLANT AND ALSO THE OBSERVATIONS / FINDINGS OF THE AO IN THE ASSESSMENT ORDER AND REMAND REPORT. THE SUBMISSION A ND CONTENTIONS OF THE APPELLANT ARE BEING DISCUSSED AND DECIDED AS I) . THE AO HAS MENTIONED THAT THE ASSESSEE FILED CONFIRMATIONS IN RESPECT OF 9 PARTIES WHERE THE AMOUNT IS SHOWN AT RS.953366.24 AS AGAINST TOTAL AMOUNT OF SUNDRY CREDITORS AT RS.78,31,442 / - . II. THE AO HAS FURTHER MENTIONED THAT THE ASSESSEE HAS NOT FILED ANY CONFIRMATION OR MATERIAL EVIDENCE FOR THE BALANCE SHOWN AGAINST BHIKABHAI GORDHANDAS 86 CO. WHEREAS IN THE BALANCE SHEET FOR A.Y. 2006 - 07 THE CLOSING BALANCE SHOWN AGAINST THE PARTY W AS RS. 154551.35. III. THE AO FURTHER MENTIONED THAT AGAINST SHIP YARD CO. AND SURESH PAREKH THERE ARE DEBIT BALANCE SHOWN AT RS.889322.59 AND RS.1000000. HE ALSO MENTIONED THAT SHIP YARD CO. IS A LOAN CREDITOR FOR RS. 4 LACS. 9 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA IV. THE ASSESSEE HAS NOT BEEN ABLE TO CONTROVERT SUCH FACTUAL OBSERVATIONS AND NON SUBMISSION OF SUNDRY CREDITORS IN RESPECT OF THE BALANCE AMOUNT OF RS.6878075.76 (RS.7831442 RS.953366.24). IN VIEW OF SUCH FACTS AND CIRCUMSTANCES AND THE FACTUAL OBSERVATIONS OF THE AO, DISALLOWANCE AT 20% OF THE CREDITORS FOR WHICH NO CONFIRMATIONS HAVE BEEN SUBMITTED WHICH COMES TO RS.13,75,615/ - IS FOUND TO BE JUSTIFIED. ACCORDINGLY THE AO IS DIRECTED TO RESTRICT THE ADDITION UNDER THIS HEAD TO THE AMOUNT OF RS.13,75,615/1 AND THE APPELLANT GETS C ONSEQUENTIAL RELIEF. V. THEREFORE GROUNDS NO. 2.2 86 2.3 ARE PARTLY ALLOWED. LD. AR SUBMITTED THAT THE LIABILITY OF THE SUNDRY CREDITORS ARE STILL OUTSTANDING IN THE BALANCE SHEET AS ON THE LAST DATE OF RELEVANT ACCOUNTING YEAR IN THE STATEMENT OF ACCOUNT S. IT WAS ALSO SUBMITTED THAT THERE WAS NO MATERIAL ON THE RECORD TO PROVE THE SAID LIABILITY TO CEASE TO EXIST AND EVEN THE ASSESSEE HAS NOT WRITTEN OFF THE SAID OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNTS. ON THE OTHER HAND, LD. DR RELIED UPON THE O RDERS PASSED BY REVENUE AUTHORITIES. 10 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS CONSIDERING THE ORDERS PASSED BY REVENUE AUTHORITIES AND SUBMISSIONS MADE BY BOTH THE PARTIES, WE FIND THAT LD. CIT(A) HAS MODIFIED THE ORDERS PASSED B Y THE AO BY TAKING INTO CONSIDERATION THE REMAND REPORT, AS WELL AS THE CONFIRMATIONS IN RESPECT OF 9 PARTIES AND DELETED THE SAID ADMISSIONS ON ACCOUNT OF THE ABOVE PARTIES WHO HAVE FILED CONFIRMATION. IN RESPECT OF THE PARTIES/CREDITORS, WHO HAVE NOT FIL ED THEIR CONFIRMATIONS, THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY AO @ 20% OF THE TOTAL AMOUNT. THE REVENUE AUTHORITIES HAVE NOT CONSIDERED THE FACT THAT THE LIABILITIES OF SUNDRY CREDITORS ARE STILL OUTSTANDING IN THE BALANCE SHEET AND THE ASSESSEE H AS NOT WRITTEN OFF THE SAID OUTSTANDING LIABILITIES IN THE BOOKS OF ACCOUNTS. TO OUR MIND, MAKING DISALLOWANCE ON ESTIMATION BASIS IN RESPECT OF SUNDRY CREDITORS IS NOT KNOWN TO LAW, THEREFORE THE ORDERS PASSED BY REVENUE AUTHORITIES ARE NOT SUSTAINABLE IN THE EYES OF LAW. HENCE IN VIEW OF OUR ABOVE FINDINGS, WE DELETE THE DISALLOWANCE MADE BY AO IN RESPECT OF SUNDRY CREDITORS. RESULTANTLY, THIS GROUND RAISED BY THE ASSESSEE STANDS ALLOWED . 11 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA GROUND NO. III 10 . THIS GROUND RAISED BY THE ASSESSEE RELATES TO CHALLENGING THE ORDER OF LD. CIT(A) IN UPHOLDING THE ORDERS PASSED BY AO IN RESPE CT OF LEVY OF PENALTY U/S 271B FOR NON - COMPLIANCE U/S 44AB OF THE I.T. ACT. 11 . LD. AR SUBMITTED THAT THE ASSESSEE HAD SUBMITTE D FORM NO. 3CB AND FORM NO. 3CD AND AUDIT REPORTS U/S 44AB OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE SAID REPORT WAS ON THE RECORD AND THE ACCOUNTS WERE DULY SIGNED BY CA ON 30.10.07 AND THE RETURN WAS FILED ON 31.10.2007. THEREFORE, IT WAS REQUESTED T HAT PENALTY U/S 271B FOR NON - COMPLIANCE U/S 44AB MAY BE DELETED. 12 . ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS PASSED BY REVENUE AUTHORITIES. 13 . WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE AO HAD LEVIED THE PENALTY ON THE GROUND THAT SUFFICIENT OPPORTUNITY WAS GRANTED TO 12 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA THE ASSESSEE BUT EVEN THEN THE AUDIT REPORT WAS NOT SUBMITTED ALONG WITH THE RETURN OF INCOME AND WAS NOT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HOWEVER, THE SAID GROUND WAS DISMISSED IN APPEAL BY HOLDING THAT SUFFICIENT OPPORTUNITIES WERE GRANT ED TO THE ASSESSEE AND HENCE THE DEFENCE OF THE ASSESSEE WAS REJECTED. BE THAT IT MAY, CONSIDERING THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO PASS AFRESH ORDER ON THIS GROU ND ON MERITS BY CONSIDERING THE PLEA RAISED BY THE ASSESSEE. BEFORE PARTING, WE MAY MAKE IT CLEAR THAT OUR DECISION TO RESTORE THE MATTER BACK TO THE FILE OF AO SHALL IN NO WAY BE CONSTRUED AS HAVING ANY REFLECTION OR EXPRESSION ON THE MERITS OF THE DISPUT E, WHICH SHALL BE ADJUDICATED BY THE AO INDEPENDENTLY IN ACCORDANCE WITH LAW. RESULTANTLY THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. IV 14. THIS GROUND IS GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 13 I.T.A. NO. 4421 /MUM/201 4 SMT MANISHA K. MEHTA 15 . IN THE NET RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH MARCH 2018. SD/ - SD/ - (G. S. PANNU ) (SANDEEP GOSAIN) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 19 . 03 .201 8 SR.PS . DHANANJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI