RANMAL D. GALA, MUMBAI V. ITO 19(2)(2), MUMBAI

ITA 4899/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3472 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 26-02-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH SONKAR
• Assessee Lawyers: J V CHHABRIA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . . !' #$%& , !' () ! BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./I.T.A. NO.4899/MUM/2010 ( * * * * / ASSESSMENT YEAR :2006-07 SHRI RANMAL D. GALA, SHOP NO. 2, JAY APARTMENTS, NEHRU ROAD, SANTACRUZ (E), MUMBAI-400 055 / VS. THE ITO, WARD-19(2)(2), MUMBAI )+ !' ./ ,- ./PAN/GIR NO. : AAEPG 9663M ( +. /APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ! / APPELLANT BY: SHRI J.V. CHHABRIA /0+. 2 1 ! / RESPONDENT BY : SHRI PEEYUSH SONKAR 2 3' / DATE OF HEARING : 30.5.2013 45* 2 3' / DATE OF PRONOUNCEMENT :30.5.2013 (!6 / O R D E R PER N.K. BILLAIYA, AM: THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF TH E ORDER OF THE LD. CIT(A)-30, MUMBAI DT. 30.3.2010 PERTAINING TO ASSES SMENT YEAR 2006-07. 2. THE ASSESSEE IS AGGRIEVED BY THE ADHOC DISALLOWA NCE MADE BY THE AO ON ACCOUNT OF CONVEYANCE, SUNDRY EXPENSES, SALAR IES, DELIVERY CHARGES AND MAJURI CHARGES. THE ASSESSEE IS FURTHE R AGGRIEVED BY THE ADDITION OF RS. 72,000/- ON ACCOUNT OF LOW WITHDRAW AL FOR HOUSEHOLD EXPENSES. (A) CONVEYANCE EXPENSES RS. 35,847/- ITA NO.4899/M/2010 2 IT IS THE CLAIM OF THE ASSESSEE THAT IT MAKES THE P AYMENT TO THE EMPLOYEES FOR THEIR TICKETS ,TAXIES & TRAVELLING A LLOWANCE. THE ASSESSEE FURTHER EXPLAINED THAT THIS BEING THE FIRS T YEAR OF HIS BUSINESS THEREFORE IN ORDER TO GIVE EXTRA SERVICES TO HIS CUSTOMERS, THE ASSESSEE DELIVERED THE GOODS BY AUTO RICKSHAW A ND OTHER MODES OF TRANSPORTS. THE AO DISALLOWED 20% OF THE EXPENS ES CLAIMED WHICH DISALLOWANCE HAS BEEN CONFIRMED BY THE LD. CI T(A). WE FIND THAT THE TURNOVER OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION IS AT RS. 1,49,24,129/-. THE EXPENSE S CLAIMED BY THE ASSESSEE COMES TO 0.25% OF THE TOTAL TURNOVER. CON SIDERING THIS FACT, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 1/10 TH OF THE EXPENSES CLAIMED. (B) SUNDRY EXPENSES RS. 33,327/- THESE EXPENSES WERE CLAIMED BY THE ASSESSEE HAVE BE EN INCURRED ON REPAIRS AND MAINTENANCE, FESTIVALS, ENT ERTAINMENT ETC. THE AO DISALLOWED 20% OF THE EXPENSES CLAIMED WHICH WERE CONFIRMED BY THE LD. CIT(A). WE FIND THAT THE EXPE NSES CLAIMED BY THE ASSESSEE ON THIS ACCOUNT COMES TO 0.22% OF THE TOTAL TURNOVER. WE THEREFORE DIRECT THE AO TO RESTRICT T HE DISALLOWANCE TO 1/10 TH OF THE EXPENSES CLAIMED. (C) DELIVERY CHARGES RS. 31,763/- THE ASSESSEE CLAIMED THESE EXPENSES ON ACCOUNT OF O IL, PETROL/DIESEL AND CLAIMED THAT FOR SUCH EXPENSES B ILLS WERE NOT TAKEN. IT WAS ALSO EXPLAINED THAT THE ASSESSEE HAS HIRED OUTSIDE TEMPO FOR DELIVERY OF GOODS. THE AO MADE AN ADHOC ITA NO.4899/M/2010 3 DISALLOWANCE OF 20% WHICH WAS CONFIRMED BY THE LD. CIT(A). WE FIND THAT THE TOTAL EXPENDITURE ON THIS ACCOUNT COMES TO 0.21% OF THE TOTAL TURNOVER. WE ACCORDINGLY DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 1/10 TH OF THE EXPENSES CLAIMED ON THIS ACCOUNT. (D) MAJURI CHARGES RS. 21,370/- THE AO HAS MADE ADHOC DISALLOWANCE OF 20% FOR NOT MAINTAINING PROPER VOUCHERS AND FOR THE SAME REASON THE ADHOC DISALLOWANCE WAS CONFIRMED BY THE LD. CIT(A). WE FIND THAT THE EXPENSES CLAIMED ON THIS ACCOUNT COMES TO 0.14% OF THE TOTAL TURNOVER. WE, ACCORDINGLY DIRECT THE AO TO RESTRIC T THE DISALLOWANCE TO 1/10 TH OF THE EXPENSES CLAIMED. (E) SALARY RS. 78,000/- OUT OF RS. 2,34,000/- WHILE SCRUTINIZING THE RETURN, THE AO NOTICED THAT THE ASSESSEE HAS PAID RS. 78,000/- EACH TO SHRI VINOD G ALA AND SHRI PRAVIN GALA ON ACCOUNT OF SALARY INVOKING THE PROV ISIONS OF SEC. 40A(2)(B). THE ASSESSEE WAS ASKED TO JUSTIFY THE R EASONABLENESS OF SUCH PAYMENT. ON RECEIVING NO DETAILS, THE AO DISA LLOWED 50% OF THE SALARY CLAIMED BY THE ASSESSEE ON ACCOUNT OF PA YMENT TO SHRI VINOD GALA AND SHRI PRAVIN GAL. BEFORE THE LD. CIT(A), IT WAS EXPLAINED THAT THE AS SESSEE PAID SALARY TO HIS TWO SONS BECAUSE OF HIS ILL HEAL TH AND LOSS OF MEMORY FOR WHICH HIS TWO SONS WERE ENGAGED TO LOOK AFTER THE BUSINESS. THE ASSESSEE ALSO FILED AN AFFIDAVIT EXP LAINING HIS MEDICAL BACKGROUND. THE SUBMISSIONS OF THE ASSESSE E DID NOT FIND ITA NO.4899/M/2010 4 ANY FAVOUR FROM THE LD. CIT(A) WHO CONFIRMED THE DI SALLOWANCE MADE BY THE AO. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITER ATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. A PE RUSAL OF THE AFFIDAVIT OF THE ASSESSEE SHOWS THE MEDICAL BACKGRO UND OF THE ASSESSEE ACCORDING TO WHICH THE ASSESSEE WAS IN COM A IN EARLIER YEARS AND AFTER COMING BACK FROM THE COMA, THE ASSE SSEE HAD LOSS OF MEMORY. THEREFORE, HE ENGAGED HIS TWO SONS TO L OOK AFTER THE BUSINESS FOR WHICH THEY WERE PAID SALARY OF RS. 6,5 00/- PER MONTH EACH. WE FIND THAT THE AO HAS INVOKED THE PROVISIO NS OF SEC. 40A(2)(B) BUT HAS NOT BROUGHT ANY COMPARABLE CASE O F UNRELATED PARTIES ON RECORD. FURTHER BY ANY STRETCH OF IMAGI NATION, SALARY OF RS. 6500/- PER MONTH IN A PLACE LIKE MUMBAI CANNOT BE SAID TO BE EXCESSIVE. CONSIDERING THE FACTS IN TOTALITY, WE D O NOT FIND ANY REASON FOR THE ADDITION OF RS. 78,000/- ON THIS ACC OUNT. WE, ACCORDINGLY DIRECT THE AO TO DELETE THE ADDITION OF RS. 78,000/-. (F) ON ACCOUNT OF LOW WITHDRAWALS ADDITION OF RS. 72,00 0/- WHILE SCRUTINIZING THE RETURN, THE AO NOTICED THAT THE ASSESSEE HAS SHOWN DRAWINGS OF MERE RS. 48,000/-. THE ASSESSEE WAS ASKED TO PROVIDE THE DETAILS OF HIS FAMILY MEMB ERS FOR HOUSEHOLD EXPENSES. THE ASSESSEE EXPLAINED THAT TH E TOTAL FAMILY DRAWINGS AMOUNTED TO RS. 1,61,240/-. THE AO WAS OF THE OPINION THAT THE ASSESSEE HAS FAILED TO FURNISH ANY DETAILS OF ACTUAL HOUSEHOLD AND PERSONAL EXPENSES. FURTHER, THE AO O BSERVED THAT THE ASSESSEE HAS ALSO NOT SUBMITTED ANY EVIDENCE TO SHOW THE INCOME EARNED AND THE DRAWINGS MADE BY OTHER FAMILY MEMBERS. ACCORDING TO THE AO, SINCE THE ASSESSEE LIVES IN A PRIME LOCALITY OF ITA NO.4899/M/2010 5 SANTACRUZ AND THE FAMILY OF THE ASSESSEE CONSISTS O F 7 MEMBERS, THEREFORE IT IS DIFFICULT TO ACCEPT THE WITHDRAWALS SHOWN BY THE ASSESSEE FOR HOUSEHOLD EXPENSES. ACCORDINGLY, AN A DDITION OF RS. 72,000/- WAS MADE ON ACCOUNT OF LOW DRAWINGS. BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED THAT THE TOTAL FAMILY DRAWINGS AMOUNTED TO RS. 1,61,240/-. IT WAS FURTHER EXPLAINED THAT THE FLAT TO WHICH THE AO REFERRED IS ONLY 385 SQ.FT IN CARPET AREA. THE LD. CIT(A) WAS NOT CONVINCED AND CONFIRMED THE ADDITION MADE BY THE AO. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE MERELY REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. WE FIND THAT THE ASSESSEES TWO SONS ARE DRAWING SALARY OF RS. 78,00 0/- PER ANNUM AS DISCUSSED BY US IN THE AFOREMENTIONED PARAGRAPHS AND CONSIDERING THAT THE ASSESSEE HAS SHOWN RS. 48,000/ - AS DRAWINGS FOR THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERA TE VIEW, AN ADDITION OF RS. 36,000/- WOULD MEET THE ENDS OF JUS TICE. WE THEREFORE, DIRECT THE AO TO RESTRICT THE DISALLOWAN CE ON ACCOUNT OF LOW WITHDRAWALS AT RS. 36,000/- ONLY. 3. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.5.2013 . (!6 2 5* '! 7 8( 9 30/05/2013 5 2 : SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT !' () / ACCOUNTANT MEMBER MUMBAI; 8( DATED 30 /05 /2013 . . ./ RJ , SR. PS ITA NO.4899/M/2010 6 (!6 (!6 (!6 (!6 2 22 2 /3# /3# /3# /3# ;!#*3 ;!#*3 ;!#*3 ;!#*3 / COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. < ( ) / THE CIT(A)- 4. < / CIT 5. #=: /3 , , / DR, ITAT, MUMBAI 6. : > / GUARD FILE. (!6 (!6 (!6 (!6 / BY ORDER, 0#3 /3 //TRUE COPY// ? ?? ? / @ @ @ @ , , , , (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI