Nischay Fab Pvt. Ltd., Ahmedabad V. The ACIT, Circle-5, Ahmedabad

ITA 463/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8220 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: J P SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 463/AHD/2015 (ASSESSMENT YEAR: 2011-12) NISCHAY FAB PVT. LTD. 8, LAVANYA SOCIETY, NR. JALTARANG CLUB, VASNA, AHMEDABAD-380007 V/S ASST. COMMISSIONER OF INCOME TAX, CIRCLE-5, AHMEDABAD-380015 (APPELLANT) (RESPONDENT) PAN: AABCN4115F APPELLANT BY : SHRI J.P. SHAH, ADVOCATE RESPONDENT BY : SHRI UMASHANKAR PRASAD, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -11-201 7 DATE OF PRONOUNCEMENT : 14 -11-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)-9, AHMEDABAD DATED 22.01.2015 PERTAINING TO A.Y. 2011- 12. ITA NO. 463/ AHD/2015 . A.Y. 2011-12 2 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 19,26,441/-. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A PPELLANT COMPANY FIELD ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 1,58 ,570/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY ST ATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. FOUND THAT IN ITS FINANCIAL STATEMENTS, THE ASSESSEE HAD SHOWN INCOME FROM THE FOLLOWING SOURCES: (I) DIVIDEND INCOME RS. 420/- (II) OTHER INTEREST INCOME RS. 62,500/- (III) SHARE OF PROFIT FROM GUJARAT STEEL AND PIPES RS. 7,19,875/- (IV) INTEREST INCOME RS. 19,75,876/-. 5. THE A.O. FURTHER NOTICED THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION. THE I NCOME SHOWN BY THE ASSESSEE DO NOT SUGGEST ANY BUSINESS ACTIVITY DONE BY THE AS SESSEE DURING THE YEAR. THE A.O. FOUND THAT AGAINST THE INCOME SHOWN BY THE ASS ESSEE, IT HAS CLAIMED EXPENDITURE OF RS. 19,26,441/- AS UNDER:- (I) DIRECTORS REMUNERATION RS. 7,20,000 (II) SALARY AND BONUS EXPENSES RS. 11,00,000 (III) VARIOUS OTHER EXPENSES RS. 1,06,441/- 6. THE A.O. ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM OF EXPENDITURE AS NO BUSINESS ACTIVITY WAS FOUND TO BE CARRIED OUT DURING THE YEA R. ITA NO. 463/ AHD/2015 . A.Y. 2011-12 3 7. IN ITS REPLY, THE ASSESSEE STATED THAT IT IS NOT CO RRECT TO SAY THAT THERE WAS NO BUSINESS ACTIVITIES CARRIED OUT. THE ASSESSEE STRON GLY CONTENDED THAT SINCE IT CONTEMPLATED TO COMMENCE TRADING ACTIVITIES IN IRON AND STEEL AND HAS STARTED MARKET SURVEY AND SOURCES OF SUPPLIES FOR WHICH STA FF WERE EMPLOYED. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE FILED SUBSE QUENT YEARS DETAILS TO SHOW THAT PURCHASE AND SALES WERE ACTUALLY DONE IN THOSE YEARS. 8. THE REPLY OF THE ASSESSEE WAS CONSIDERED BUT WAS NO T ACCEPTED BY THE A.O. WHO WAS OF THE FIRM BELIEF THAT MERELY BECAUSE ASSE SSEE HAD BUSINESS ACTIVITY IN THE SUBSEQUENT YEARS, THE SAME CANNOT BE THE BASIS FOR CLAIMING EXPENSES IN THE YEAR UNDER CONSIDERATION. 9. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE A.O. DISALLOWED THE CLAIM OF EXPENDITURE AND COMPLETED THE ASSESSMENT. 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERA TED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES AND IN SUPPORT RELIED UPON TWO DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SAMSUNG IND IA ELECTRONICS LTD. 356 ITR 354 AND CAREFOUR WC & C INDIA PVT. LTD. 368 ITR 692. 12. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE FIN DINGS OF THE LOWER AUTHORITIES. 13. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS HEAVILY RELIE D UPON THE ENQUIRIES MADE ITA NO. 463/ AHD/2015 . A.Y. 2011-12 4 FROM VARIOUS PERSONS IN RELATION TO THE PURCHASE AN D SALES OF IRON AND STEEL TRADING. HOWEVER, WE DO NOT FIND ANY DOCUMENTARY EV IDENCE BROUGHT ON RECORD WHICH COULD SUGGEST THE ASSESSEE HAS REGISTERED ITS ELF AS A TRADING CONCERN AND HAS PROCURED STATUTORY LICENCES FROM THE STATE/LOCA L AUTHORITIES. THERE IS NOT EVEN A SINGLE EVIDENCE TO SUGGEST SOME PURCHASE WER E MADE DURING THE YEAR UNDER CONSIDERATION. MERELY BECAUSE, THE ASSESSEE H AD DONE SOME CORRESPONDENCES WITH SOME PARTIES WOULD NOT LEAD TO CARRYING ON ANY BUSINESS ACTIVITY. 14. AT THE SAME TIME, WE FIND THAT THE ASSESSEE IS A PA RTNER IN THE FIRM GUJARAT STEEL AND PIPES FROM WHERE ITS HAS RECEIVED ITS SHARE OF PROFIT. WE CAN UNDERSTAND THAT TO PROTECT ITS INTEREST IN THE PARTNERSHIP FIR M, THE DIRECTORS OF THE ASSESSEE COMPANY MUST HAVE DEVOTED SOMETIME IN THE BUSINESS OF THE PARTNERSHIP FIRM. TO THIS EXTENT, IN OUR CONSIDERED OPINION, SOME EXP ENDITURE RELATING TO DIRECTORS REMUNERATION IS ALLOWABLE. THEREFORE, ON THE GIVEN SET OF FACT, DIRECTORS REMUNERATION AND SALARY TO THE EXTENT OF RS. 4.50 LACS SHOULD MEET THE ENDS OF JUSTICE ON THIS ACCOUNT. 15. SINCE THE APPELLANT COMPANY IS A BODY CORPORATE, TH EREFORE, TO MAINTAIN THE CORPORATE STATUS, THE ASSESSEE MUST HAVE INCURRED S OME EXPENDITURE AND IN OUR CONSIDERED OPINION, THE SAME CAN BE ALLOWED TO THE EXTENT OF RS. 50,000/-. 16. ON THE PECULIAR FACTS OF THE CASE IN HAND, WE DIREC T THE A.O. TO ALLOW EXPENDITURE TO THE EXTENT OF RS. 5 LACS ONLY. THE B ALANCE STANDS CONFIRMED. ASSESSEE GETS PARTIAL RELIEF AND THE APPEAL IS PART LY ALLOWED. ITA NO. 463/ AHD/2015 . A.Y. 2011-12 5 17. BEFORE CLOSING AS MENTIONED ELSEWHERE, THE ASSESSEE IS RELIED UPON TWO JUDGMENTS OF HONBLE DELHI HIGH COURT BUT WE FIND T HAT THOSE JUDGMENTS ARE ON DIFFERENT SET OF FACTS. THEREFORE, CLEARLY DISTI NGUISHED. ORDER PRONOUNCED IN OPEN COURT ON 15 - 11- 20 17 SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCO UNTANT MEMBER AHMEDABAD: DATED 15/11/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD