RAM VIJAY TEXTILES INDUSTRIES LTD, MUMBAI V. ITO WD 14(1)(2), MUMBAI

ITA 5184/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9265 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 23-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 19-07-2013
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Assessee Lawyers: AJAY NAGPAL
• Section: 143(3); 234B

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 5184/M/2013 (AY:2010 - 2011) M/S. RAM VIJAY TEXTI L ES INDUSTRIES LTD., A/315, 3 RD F LOOR, KEWAL INDUSTRIAL ESTATE, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. VS. INCOME TAX OFFICER - 14(1)(2), ROOM NO.607, EARNEST HOUSE, NARI MAN POINT, MUMBAI 400 021. ./ PAN : AAFFR2003R ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI AJAY NAGPAL, AR / RESPONDENT BY : SHRI LOVE KUMAR, DR / DATE OF HEARING : 23.2.2015 / DATE OF PRONOUNCEMENT : 11 .3.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 19.7.2013 IS AGAINST THE ORDER OF THE CIT (A) - 25, MUMBAI DATED 15/5/2013 FOR THE ASSESSMENT YEAR 2010 - 2011 . IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DISPOSING OFF THE APPEAL EX - PARTE AND NOT ALLOWING EFFECTIVE SUFFICIENT AND REASONABLE OPPORTUNITY OF HEARING TO THE APPELLANT BEFORE MAKING EX - PARTE ORDER. B) THOUGH THE FIRST NOTICE U/S 250 DA TED 30 - 4 - 2013 FIXING THE HEARING ON 9.5.2013 WAS RECEIVED ON 2.5.2013 BY THE ACCOUNTANT OF THE APPELLANT BUT SHE COULD NOT INFORM ABOUT THE HEARING TO THE TAX CONSULTANT AS SHE FELL SICK ON THE NEXT DAY AND REMAINED ABSENT FOR ONE WEEK AND AS SUCH THE APPE LLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM ATTENDING THE HEARING. C) THE LD CIT (A) OUGHT TO HAVE ALLOWED AT LEAST ONE MORE OPPORTUNITY OF HEARING TO THE APPELLANT BEFORE PASSING THE EX - PARTE ORDER. 2. A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE APPELLANT BY WAY OF DISALLOWING THE FOLLOWING EXPENSES. I) BROKERAGE & COMMISSION RS. 30,294/ - II) BUSINESS PROMOTION EXPENSES RS. 4 0,000/ - III) CONVEYANCE EXPENSES RS. 76,822/ - IV) SUNDRY EXPENSES RS. 58,180/ - 2 V) TRAVELLING EXPENSES RS. 1,66,836/ - VI) TELEPHONE EXPENSES RS. 47,973/ - B) THE LD CIT (A) FAILED TO APPRECIATE THAT ALL THESE EXPENSES WERE INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSES OF THE BUSINESS CARRIED ON BY THE APPELLANT. C) IN REACHING TO THE CONCLUSION AND CONFIRMING SUCH ADDITIONS THE LD CIT (A) FAILED TO CONSIDER RELEVANT FACTORS, CONSIDERATIONS, PRINCIPLES AND EVIDENCES WHILE HE WAS OVERWHELMED, INF LUENCED AND PREJUDICED BY IRRELEVANT CONSIDERATIONS AND FACTORS. 3. THE LD CIT (A) ERRED IN HOLDING THAT LEVY OF INTEREST U/S 234B AND 234C OF THE INCOME TAX ACT, 1961 IS MANDATORY. THE APPELLANT DENIES ITS LIABILITY FOR SUCH INTEREST. 2. BRIEFLY STATED RELEVANT FACTS IN THIS REGARD ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADE OF FABRICS AND FILED THE RETURN OF INCOME DECLARING THE RETURN OF INCOME OF RS. 9,79,050/ - . ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3) OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 13,99,154/ - . IN THE ASSESSMENT, ASSESSING OFFICER MADE THE ABOVE MENTIONED DISALLOWANCES UNDER VARIOUS HEADS EITHER FOR WANT OF DETAILS OR FOR FAILURE OF THE ASSESSEE TO DEMONSTRATE THE BUSINESS CONNE CTIVITY OF THE SAID EXPENSES. BEFORE US , LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AND MENTIONED THAT ALL THE GROUNDS REVOLVE AROUND DISALLOWANCE OF EXPENDITURE ON ACCOUNTS OF (I) BROKERAGE AND COMMISSION (RS. 30,294/ - ); (II) BUSINESS PROMOTION EXPENSE (RS. 40,000/ - ); (III) CONVEYANCE EXPENSES (RS. 76,822/ - ); (IV) SUNDRY EXPENSES (RS. 58,180/ - ); (V) TRAVELLING EXPENSES (RS. 1,66,836/ - ); (VI) TELEPHONE EXPENSES (RS. 47,973/ - ). 3. DURING THE FIRST APPELLATE PROCEEDINGS, THERE WAS NONE APPEARED TO REPRESENT THE ASSESSEES CASE. THEREFORE, CIT (A) PASSE D AN EX - PARTE ORDER CONFIRMING THE ADDITIONS MADE BY THE ASSESSING OFFICER AS PER THE DISCUSSION GIVEN IN PARA 5 OF THE IMPUGNED ORDER. AGGRIEVED WITH THE SAME, ASSESSEE IS IN APPEAL BEFORE US. 4. DURING THE PROCEEDINGS BEFORE US, AT THE VERY OUTSET, LD COUNSEL FOR THE ASSESSEE FILED A CHART GIVING ACCOUNT WISE ADDITION AND THE REASONS GIVEN BY THE ASSESSING OFFICER FOR MAKING ADDITIONS. THE SAID CHART ALSO CONTAINS THE ACCOUNT WISE SUBMISSIONS IN SUPPORT OF THE CLAIMS . LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE RECORDED THE TURNOVER OF RS. 14.17 CRS AND THE CLAIMS OF THE ASSESSEE UNDER THE VARIOUS HEADS MENTIONED ABOVE ARE REASONABLE AND THEREFORE, NO DISALLOWANCE IS WARRANTED. HOWEVER, HE SUBMITTED THE BENCH MAY TAKE A REASONABLE VIEW IN QUANTIFYING THE DISALLOWANCE CONSIDERING THE FACTS OF THE PRESENT CASE. 3 5. ON THE OTHER HAND, LD DR HIGHLIGHTED THE ASSESSEES FAILURE IN FURNISHING THE CONFIRMATIONS , THIRD PART Y EVIDENCES ETC. DURING THE REBUTTAL TIME, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE TOTAL DISALLOWANCE WORKS OUT TO RS. 4,20,105/ - . HE ALSO BROUGHT OUR ATTENTION TO THE AD - HOC DISALLOWANCE APPLYING THE FLAT RATE OF 20% ON CERTAIN ACCOUNTS. FURTHER , HE BROUGHT OUR ATTENTION TO THE ASSESSMENT ORDER AND SUBMITTED THAT ON ACCOUNT OF SUNDRY EXPENSES, ASSESSING OFFICER QUANTIFIED THE DISALLOWANCE APPLYING THE FLAT RATE OF RS. 28% OF RS. 58,180/ - . HOWEVER, HE ADDED WHOLE OF THE IMPUGNED EXPENSES INSTEAD OF ONLY RS. 11,363/ - . 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE FACTS PLACED BEFORE US. ASSESSING OFFICER MADE ADDITION ON ACCOUNT OF BROKERAGE AND COMMISSION OF RS. 30,294/ - FOR WANT OF CONFIRMATIO NS FROM THE BROKERS. IT IS ADMITTED POSITION THAT THE SAID BROKERAGE COMMISSION WAS PAID IN CASH TO VARIOUS PARTIES WHOSE FULL POSTAL ADDRESSES ARE NOT IN RECORD AT LEAST IN SOME CASES. FURTHER, WE HAVE ALSO EXAMINED THE BUSINESS PROMOTION EXPENSES OF RS . 40,000/ - AND THESE EXPENSES ARE INCURRED THROUGH BANKING CHANNELS. FURTHER, WE FIND THAT ASSESSING OFFICER MADE ADHOC DISALLOWANCE APPLYING 20% FLAT RATE ON OTHER ACCOUNTS NAMELY CONVEYANCE EXPENSES, SUNDRY EXPENSES, TRAVELLING EXPENSES AND TELEPHONE EX PENSES. THERE IS NO BASIS FOR THE ASSESSING OFFICER FOR ADOPTING SUCH FLAT RATE. NO COMPARABLE CASES WERE BROUGHT ON TO THE RECORD. THIS IS AN ADMITTED POSITION THAT THE THIRD PARTY VERIFICATION OF SOME EXPENDITURE IN RESPECT OF THESE CLAIMS IS NOT POSS IBLE. CONSIDERING THE ABOVE FACTS OF THIS CASE, WE ARE OF THE OPINION, IN PRINCIPLE THERE IS A NEED FOR SOME DISALLOWANCE. WE DISAPPROVE THE 20% FLAT RATE DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT (A). CONSIDERING THE FACTUAL MATRIX O F THE PRESENT CASE, WE ARE OF THE OPINION THAT MAKING DISALLOWANCE OF RS. 1 LAKH OUT OF THE CLAIMS IN ALL THESE ACCOUNTS (SIX ACCOUNTS) SHOULD FAIR AND REASONABLE. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO RS. 1 LAKH ONLY . THUS, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRON OUNCED IN THE OPEN COURT ON 1 1 T H MARCH, 2015. S D / - S D / - (D. MANMOHAN) (D. KARUNAKARA RAO) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 11/3/2015 4 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI