ASST CIT 10(1), MUMBAI V. CHOUDHARY & CHOUDHARY (INDIA) LTD, MUMBAI

ITA 5161/MUM/2012

• Counselvise Citation: 516119914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 13-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 13-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBAR DAS
• Assessee Lawyers: FEROZ ANADARUJINA
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & DR.STM PAVLAN , J M ITA NO. 5 161 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 9 - 10 ) ACIT 10(1), MUMBAI VS. M/S CHOUDHURY & CHOUDHURY INDIA LIMITED, NO.1, RAJKAMAL, OPP. UNIVERSITY CAMPUS, CST ROAD, KALINA, MUMBAI - 400 098 PAN/GIR NO. : A A ACC 4637 J ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. PITAMBAR DAS /ASSESSEE BY : MR.FEROZ ANADARUJINA DATE OF HEARING : 13 TH MARCH , 201 4 DATE OF PRONOUNCEMENT : 21 ST MARCH , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), DATED 1 - 5 - 2012 , FOR THE ASSESSMENT YEAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) (II) OF THE I.T. ACT. 2 . THE ONLY GRIEVANCE OF REVENUE RELATES TO DELETION OF ADDITION OF RS.13,18,504/ - MADE BY THE AO ON ACCOUNT OF REIMBURSEMENT OF EXPENSES. ITA NO. 5 161 /2 0 1 2 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4 . FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE B USINESS OF CIVIL ENGINEERING, BUILDER AND CONTRACTOR. DURING THE SCRUTINY ASSESSMENT, THE AO OBSERVED THAT LAST YEAR ASSESSEE HAS RECEIVED EXPENSES OF RS. 13,18,504/ - AS REIMBURSEMENT FROM M/S A.A. ESTATES PVT. LTD. , HOWEVER, NO INCOME WAS SHOWN ON ACCOUNT OF REIMBURSEMENT OF EXPENSES DURING THE YEAR. THE ASSESSEE WAS ASKED TO SHOW AS TO WHY THERE WAS NO REIMBURSEMENT OF THE EXPENSES THIS YEAR. IT WAS REPLIED THAT ASSESSEE BOOKED THE INCOME ON RECEIPT BASIS AND SINCE THERE WAS NO RECEIPT DURING THE YEAR, NO INCOME WAS SHOWN ON ACCOUNT OF REIMBURSEMENT. THE AO DID NOT AGREE WITH THE ASSESSEES CONTENTION AND BY OBSERVING THAT ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, ACCORDINGLY, HE MUST HAVE SHOW N ALL THE RECEIPTS ON ACCRUAL BASIS RATHER THAN AC TUAL BASIS. BY OBSERVING THAT ASSESSEE HAD NOT SHOWN ANY REIMBURSEMENT OF EXPENSES DURING THE YEAR UNDER CONSIDERATION, HE ADDED THE SIMILAR AMOUNT AS ACTUALLY RECEIVED BY THE ASSESSEE IN THE PREVIOUS YEAR AMOUNTING TO RS. 13,18,504/ - , IN THE CURRENT YEARS INCOME OF THE ASSESSEE. BY THE IMPUGNED ORDER CIT(A) DELETED THE ADDITION AFTER HAVING FOLLOWING OBSERVATION : - I HAVE CONSIDERED THE FACTS OF THE CASE. DURING IMMEDIATELY PRECEDING YEAR I.E. A.Y.2008 - 09 THE APPELLANT RECEIVED REIMBURSEMENT OF EXPENSES O F RS.13,18,504/ - . DURING THE YEAR UNDER CONSIDERATION THE APPELLANT HAD NOT SHOWN ANY SUCH RECEIPT ON A C COUN T OF REIMBURSEMENT OF EXPENSES. ON THIS BASIS THE A.O. HAS PRESUMED THAT THE APPELLANT MUS T HAVE RECEIVED REIMBURSEMENT OF EXPENSES DURING THIS YEAR ALSO AND THEREFORE, THE A.O. HAS MADE ADDITION OF RS.13,18,504/ - ON ITA NO. 5 161 /2 0 1 2 3 ADHOC/PRESUMPTION BASIS . IN THE SUBMISSIONS, THE APPELLANT HAS SATISFACTORILY EXPLAINED THAT IT HAD RECEIVED ADVANCE OF RS.50 LAKHS FROM M/S AA ESTATE P. LTD. IN THE A.Y. 2007 - 08. THE ENTI RE ADVANCE OF RS.50 LAKHS HAD ALREADY BEEN ACCOUNTED AS INCOME IN THE ACCOUNTS OF A.Y.2007 - 08 AND 2008 - 09 AND NOTHING LEFT FOR APPROPRIATION DURING THE YEAR UNDER CONSIDERATION . THE APPELLANT H AS ALSO EXPLAINED THAT IT HAD NOT RECEIVED AN Y FURTHER AMOUNT/R ECEIPT FROM M/ S. A.A. ESTATE P. LTD. . THERE IS NO EVIDENCE ON RECORD TO SUPPORT THE A.OS FINDING THAT THE APPELLANT HAD ACTUALLY RECEIVED REIMBURSEMENT OF EXPENSES OF RS.13,18,504/ - DURING THE YEAR. EVEN THERE IS NO CASE THAT THE APPELLANT HAD BECOME ENTIT LED FOR REIMBURSE MENT OF SUCH EXPENSES DURING THE YEAR. IN OTHER WORDS THERE WAS NO CASE OF ACCRUAL OF INCOME/RECEIPT OF RS. 13,18,504/ - . IN THE FA CTS AND CIRCUMSTANCES THE AO. W AS NOT JUSTIFIED IN MAKING ADDITION OF RS. 13,18,504/ - ON PRESUMPTION BASIS. TH E ADDITION, MADE BY THE AO IS THEREFORE DELETED. THIS GROUND OF APPEAL IS ALLOWED . 5 . AGAINST THE SAID DELETION, REVENUE IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO WITHOUT APPRECIATING THE FACT THAT THE REIMBURSEMENT OF EXPENSES ACCRUED TO THE ASSESSEE DURING THE PREVIOUS YEAR SHALL BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR SINCE THE ASSESSEE IS FOLLOWING MERC ANTILE SYSTEM OF ACCOUNTING AND ACCORDINGLY MUST SHOW ALL THE RECEIPTS ON ACCRUAL BASIS RATHER THAN ACTUAL BASIS. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM THE RECORD THAT IN THE YEAR 2007 ASSESSEE HAS RECEIVED RS. 50 LAKHS FROM M/S AA ESTAT E P. LTD. TO BE ADJUSTED AGAINST MONTHLY CHARGES OF RS. 91,000/ - . THIS AMOUNT WAS ADJUSTED AS INCOME BY THE ASSESSEE DURING THE ASSESSMENT YEAR 2007 - 08 AND 2008 - 09. IN THE YEAR ENDING ON 31 - 3 - 2007, INCOME WAS TAKEN AT RS. 13,17,784/ - AND RS. 23,63,712/ - AND R S.13,18,504/ - IN THE YEAR ENDING ON 31 - 3 - 2008 . T HUS, THE TOTAL AMOUNT OF RS. 50 LAKHS SO RECEIPT WAS ADJUSTED IN THE RESPECTIVE YEARS. DURING THE YEAR UNDER CONSIDERATION ASSESSEE WAS NEITHER RECEIVED ANY AMOUNT NOR ANY AMOUNT ACCRUED ON ACCOUNT OF REIMBUR SEMENT. ONLY ITA NO. 5 161 /2 0 1 2 4 ON THE PRESUMPTION THE AO HAS TAKEN THE AMOUNT O F EARLIER YEAR AS ACCRUED TO THE ASSESSEE DURING THE YEAR UNDE R CONSIDERATION ON AD - HOC BASIS ON THE PLEA THAT ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. AS PER OUR CONSIDERED VIEW, EVEN UNDER MERCANTILE SYSTEM OF ACCOUNTING UNLESS THERE IS ACCRUAL OF INCOME, SAME CANNOT BE BROUGHT TO TAX NET. INCOME CAN BE BROUGHT TO TAX NET EITHER ON RECEIPT BASIS OR ACCRUAL BASIS . W HEN THERE IS NO RECEIPT OF INCOME NOR ACCRUAL NOR ANY RIGHT TO REC EIVE OR ACCRUE, THE SAME CANNOT BE BROUGHT TO TAX NET. IN THE INSTANT CASE, N OTHING WAS BROUGHT ON RECORD BY THE AO TO HOLD THAT THIS INCOME WAS ACTUALLY RECEIVED BY THE ASSESSEE OR ANY REIMBURSEMENT OF EXPENSES ACCRUED IN ITS FAVOUR. THE DETAILED FINDING RECORDED BY THE CIT(A) AT PARA 4.3 HAS NOT BEEN CONTROVERTED , ACCORDING TO WHICH NOTHING WAS RECEIVED BY THE ASSESSEE N OR ANY RIGHT TO RECEIVE OR ACCRUE WAS THERE IN FAVOUR OF THE ASSESSEE . NO GROUND HAS BEEN TAKEN BY THE REVENUE IN THE GROUND S OF APPEAL W ITH REGARD TO VIOLATION OF RULE 46A. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) FOR DELETING THE ADDITION OF RS.13,18,504/ - . 7 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST MARCH . 201 4 . 21 ST MARCH ,2014 SD/ - SD/ - ( ) ( S.T.M.PAVLAN ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 21 / 0 3 /2014 ITA NO. 5 161 /2 0 1 2 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDE R, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESP ONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//