ASST CIT 14(3), MUMBAI V. SEVANTILAL KANTILAL & CO., MUMBAI

ITA 5345/MUM/2013

• Counselvise Citation: 534519914 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 01-08-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: H S RAHEJA
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 ACIT-14(3) 6 TH FLOOR, EARNEST HOUSE, NARIMAN POINT MUMBAI 400 021 .(APPELLANT) VS. M/S. SEVANTILAL KANTILAL & CO. 7, MANGALDAS ROAD, PRINCESS STREET KALBADEVI, MUMBAI 400 002 PAN:AAAFS 4445 N (RESPONDENT) APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI H.S. RAHEJA DATE OF HEARING : 04.06.2015 DATE OF PRONOUNCEMENT : 10.06.2015 O R D E R PER SUSHMA CHOWLA, JM: THE PRESENT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A)-25, MUMBAI DATED 13.05.2013 RELATING TO ASSE SSMENT YEAR 2010-11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE I. T. ACT. ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 2 2. THE REVENUE HAS RAISED THE FOLLOWING REVISED GRO UNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN LAW IN AS WELL AS ON FACT IN DI RECTING TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF CASH EXPENSES INC URRED IN VIOLATION OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 2. FURTHER, THE LD .CIT(A) HAS ERRED IN LAW AS WELL AS ON THE FACT BY IGNORING THE FACT THAT THE ASSESSEE HAS NOT MADE ANY ADDITION IN THE NUMBER OF GENERATOR SET AS COMPARED TO AY 2006- 0, WHEREIN THE AO HAS RESTRICTED THE CLAIM OF THE ASSESSEE TO RS. 2 LAKHS AND SAME HAD BEEN CONFIRMED BY THE THEN LD. CIT(A). 3. FOR THESE AND ANY OTHER REASONS THAT MAY BE URGE D AT THE TIME OF HEARING, IT IS REQUESTED THAT THE ORDER OF THE CIT( A) BE QUASHED AND THAT OF THE AO BE RESTORED. 3. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE LATION TO DISALLOWANCE OF CASH EXPENSES IN VIOLATION OF SECTION 40A(3) OF THE ACT. THE LD. A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE ISSUE I N THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN VARIOUS YEARS. IT WAS FAIRLY POINTED OUT BY THE LD. A.R. FOR THE ASSE SSEE THAT IN ASSESSMENT YEAR 2009-10, THE ISSUE HAS BEEN SET ASIDE TO THE FILE O F THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE AND DECIDE THE ISSUE AFRESH. 4. THE LD. D.R. FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE R ECORD. BRIEFLY IN THE FACTS OF THE CASE BEFORE US, THE ASSESSEE WAS A PAR TNERSHIP FIRM ENGAGED IN THE BUSINESS OF DISTRIBUTION OF PHARMACEUTICALS PRODUCT S AND CLEARING AND FORWARDING AGENT. IN THE LIGHT OF BUSINESS OF THE A SSESSEE, THERE WAS REQUIREMENT TO STORE THE DRUGS AT REQUIRED LOW TEMPERATURE DEPE NDING UPON THE NATURE OF THE DRUGS. THE ASSESSEE FOR THE PURPOSE HAD WAREHOUSE A T BHIVANDI, IN ORDER TO MAINTAIN THE STORAGE FACILITY UNDER AIR-CONDITION, THE ASSESSEE HAD INSTALLED HIGH CAPACITY GENERATOR SO THAT AIR CONDITIONING WAS NOT AFFECTED BY IRREGULAR SUPPLY ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 3 OF ELECTRICITY. TO RUN GENERATOR DIESEL WAS REQUIRE D IN LARGE QUANTITY AND DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD INCU RRED EXPENDITURE OF RS.16,85,391/- UNDER THE HEAD GENERATOR RUNNING EXP ENSES. THE AO NOTED THAT IN THE EARLIER YEARS SIMILAR EXPENDITURE HAD BEEN R ESTRICTED BY THE AO TO RS.2 LAKH ONLY WHICH IN TURN HAS BEEN DELETED BY THE CIT (A). HOWEVER, SINCE THE MATTER IS PENDING IN APPEAL BEFORE THE TRIBUNAL, TH E AO ALLOWED ONLY THE EXPENDITURE OF RS.2 LAKH AND THE BALANCE AMOUNT OF RS.14,85,391/- WAS DISALLOWED. 6. THE CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL I N ASSESSMENT YEAR 2006-07 NOTED THAT THE ADDITION WAS CONFIRMED TO TH E EXTENT OF VIOLATION OF SECTION 40A(3) OF THE ACT, ACCORDINGLY, THE AO WAS DIRECTED TO DISALLOW CASH EXPENSES INCURRED IN VIOLATION OF SECTION 40A(3) O F THE ACT. 7. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF TH E CIT(A). THE TRIBUNAL IN ITA NO. 3711/MUM/2010 RELATING TO ASSESSMENT YEAR 2006-07 VIDE ORDER DATED 30.05.2012 HAD NOTED THAT THERE WAS VIOLATION OF SECTION 40A(3) OF THE ACT. SIMILAR OBSERVATIONS WERE MADE BY THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 2007-08 IN ITA NO. 397/ MUM/2011 ORDER DATED 22.05.2013. HOWEVER, THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 6716/MUM/2012 RELATING TO ASSESSMENT YEAR 2009-10 V IDE ORDER DATED 04.04.2014 NOTED THE ABOVE TWO DECISIONS IN ASSESSE ES OWN CASE AND OBSERVED AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E FINDINGS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAS DISALLOWED THE EXPENDITURE TO THE EXTENT OF RS.21,71,218 AFTER ALLOWING ONLY RS.2 LAKHS, FOLLOW ING THE FINDINGS GIVEN BY , THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2 006-07. THE LEARNED COMMISSIONER (APPEALS) TOO HAS RESTRICTED THE DISAL LOWANCE AFTER FOLLOWING THE DECISION OF THE TRIBUNAL IN THE ASSES SMENT YEAR 2006-07 I.E., ONLY CASH EXPENSES WHICH ARE IN VIOLATION OF SECTION 40A(3) SHOULD BE DISALLOWED. THE FACTS OF THE CASE, WHICH NEED TO BE APPRECIATED ARE THAT THE ASSESSEE IS HAVING WAREHOUSING FACILITY AT BHIVANDI, WHEREIN IT ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 4 HAS BEEN STORING THE DRUGS AT A LOW TEMPERATURE FOR WHICH IT HAS MAINTAINED AIR CONDITIONED SPECIFIED TEMPERATURE AN D FOR THIS PURPOSE, CONTINUOUS POWER IS REQUIRED. THE ASSESSEE'S CASE H AS BEEN THAT IN BHIVANDI WHERE THE STORAGE FACILITIES HAVE BEEN MAI NTAINED, THERE IS IRREGULAR AND SHORTAGE OF ELECTRICITY SUPPLY, WHICH LEADS TO MORE USAGE OF GENERATORS WHICH ARE RUNNING FOR LARGE PERIOD OF TIME ROUND THE YEAR. FOR THE PURPOSE OF RUNNING GENERATOR, HUGE CONSUMPT ION OF DIESEL AND GENERATOR MAINTENANCE IS REQUIRED. BEFORE THE ASSES SING OFFICER, THE ASSESSEE HAD SUBMITTED COPY OF LEDGER ACCOUNT OF DA Y-TO-DAY EXPENDITURE INCURRED FOR RUNNING OF GENERATOR WHICH ARE ALSO DULY SUPPORTED BY THE BILLS & VOUCHERS. THE COPY OF LEDG ER ACCOUNT AND BILLS & VOUCHERS HAVE ALSO BEEN PLACED IN THE PAPER BOOK FROM PAGE-12 TO 70. THE ASSESSING OFFICER HAS NEITHER FOUND ANY DIS CREPANCY IN SUCH DETAILS NOR IN THE BILLS & VOUCHERS PRODUCED BEFORE HIM. HE HAS ALSO NOT TRIED TO VERIFY FROM THE DEALERS OR CARRIED OUT ANY INQUIRY FROM THE PARTIES THAT THE ASSESSEE HAS SHOWN SOME FICTITIOUS PURCHASES OF DIESEL. FROM THE RECORDS PLACED BEFORE US, IT I~ SEEN THAT 'THE ASSESSEE HAS MADE REGULAR PURCHASES FROM A PARTICULAR DEALER MIS . DOLLAR MOTORS STORES, MULUND. THE ASSESSING OFFICER COULD HAVE VE RIFIED FROM THIS PARTY, IF HE HAD ANY DOUBT ON THE PURCHASES SHOWN B Y THE ASSESSEE. BESIDES THIS, THE ASSESSEE HAD ALSO SHOWN PURCHASES FROM THE LOCAL DEALERS FROM BHIVANDI FOR WHICH THE BILLS HAVE BEEN MAINTAINED AND PRODUCED. IF THE ASSESSEE HAS BEEN ABLE TO PRODUCE ALL THE DETAILS, THEN IT WAS INCUMBENT UPON THE ASSESSING OFFICER AND THE LE ARNED COMMISSIONER (APPEALS) TO VERIFY THE GENUINENESS OF SUCH DETAILS. 7. COMING TO THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 2007 -08, IT IS SEER THAT THE TRIBUNAL HAS TAKEN NOTE OF THE FACT T HAT THE ASSESSEE'S CONSUMPTION HAS INCREASED TO 300% IN THE ASSESSMENT YEAR 2007-08 AS COMPARED TO THE EARLIER YEARS DESPITE THE FACT THAT THERE IS NO ADDITION OF NEW GENERATOR. IT HAS BEEN FURTHER NOTED THAT CERTA IN PAYMENTS HAVE BEEN MADE IN CASH AND THAT THE MAJOR PURCHASES HAS BEEN MADE FROM MULUND WHEN THE GODOWN IS AT BHIVANDI. IT WAS ON TH ESE FACTS THE TRIBUNAL HAS RESTRICTED THE DISALLOWANCE TO RS. 8 L AKHS AFTER TAKING NOTE OF THE FACT THAT THE ASSESSEE HAS ALSO MADE SUO-MOT U DISALLOWANCE TO 4,39,595. IN THIS YEAR I.E., ASSESSMENT YEAR 2009-1 0, THE ASSESSEE HAS SHOWN BEFORE US THAT THE GENERATOR RUNNING EXPENSES IS QUITE CONSISTENT SINCE THE YEAR 2007-08, AS COMPARED FROM THE ASSESS MENT YEAR 2006-07. IN THAT YEAR, THE CONSUMPTION OF DIESEL WAS LOW ON ACCOUNT OF THE FACT THAT THE WAREHOUSING STORAGE WAS MAINTAINED FOR THE BRIEF PERIOD OF THREE MONTHS. ANOTHER IMPORTANT FACTOR WHICH NEEDS TO BE TAKEN INTO CONSIDERATION IS THAT THE TRIBUNAL HAS GONE BY THE FACT THAT THE ASSESSEE WAS UNABLE TO PRODUCE ANY RECORD TO SUBSTANTIATE TH E HIGHER CONSUMPTION IN THE INITIAL YEAR. IN THIS YEAR, THE ASSESSEE HAS PLACED ALL ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 5 THE RELEVANT DETAILS AND ALSO GIVEN ASSESSMENT YEAR 2007-08 TO 2009-10, WHICH IS QUITE CONSISTENT. THE ALLOWABILITY OF THE EXPENDITURE HAS TO BE SEEN FROM THE POINT, WHETHER THEY HAVE BEEN INCURRE D FOR THE PURPOSE OF BUSINESS AND WHETHER SUCH EXPENDITURES ARE VERIFIAB LE OR NOT. ON A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER AS WE LL AS OF THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT NONE OF THE AU THORITIES HAVE PROPERLY APPRECIATED THE FACTS OF THE CASE EXCEPT F OR BLINDLY RELYING UPON THE EARLIER YEARS. THEREFORE, IN THE INTEREST OF JU STICE, WE ARE OF THE CONSIDERED OPINION THAT THIS ISSUE NEEDS TO BE REST ORED BACK FOR PROPER EXAMINATION. CONSEQUENTLY, WE SET ASIDE THE IMPUGNE D ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WHO SHALL EXAMINE THE ASSESSEE'S LEDGER ACCOUNT AND ALSO THE SUPPORTING BILLS & VOUCHERS AN D DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE AFORESAID OBSERVATIONS A ND IN ACCORDANCE WITH THE PROVISIONS OF LAW. THUS, THE GROUNDS RAISED BY THE REVENUE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 8. THE ISSUE ARISING BEFORE US IS IDENTICAL TO THE ISSUE BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2009-10 (SUPRA) AND FOLLOWING THE S AME PARITY OF REASONING WE DEEM IT FIT TO RESTORE THE ISSUE BACK TO THE FIL E OF THE AO TO DECIDE THE ALLOWABILITY OF THE EXPENDITURE IN LINE WITH THE DI RECTION OF THE TRIBUNAL IN ASSESSEES OWN CASE RELATING TO ASSESSMENT YEAR 200 9-10. THUS, THE GROUND -OF APPEAL RAISED BY THE REVENUE ARE ALLOWED FOR STATIS TICAL PURPOSES. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JUNE, 2015. SD/- SD/- (R. C. SHARMA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER J UDICIAL MEMBER MUMBAI, DATED: 10.06.2015 *SRIVASTAVA ITA NO. 5345/MUM/2013 ASSESSMENT YEAR: 2010-11 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR E BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.