MAYUR SEJPAL (HUF), MUMBAI V. ITO 20(2)(2), MUMBAI

ITA 5444/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8552 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 22-07-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTHY

Judgement Text

PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI B.R.MITTAL , JUDICIAL MEMBER & SHRI B.R. JAIN, ACCOUNTANT MEMBER I.T.A.NO. 5444/MUM/2011 A.Y 2006 - 07 MAYUR SEJPAL (HUF), A/904, PARIMAL BUILDING, JUHU LANE, ANDHERI (W), MUMBAI 400 058 PAN: AAFHS 1527 K VS. INCOME TAX OFFICER 20 (2)(2), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAYANT R. BHATT. RESPONDENT BY : SHRI V. KRISHNAMOORTHY. DATE OF HEARING: 11 - 10 - 2012. DATE OF PRONOUNCEMENT: 11 - 10 - 2 012. O R D E R PER B.R.JAIN, A M : THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25 - 05 - 2011 OF THE LD. CIT(A) - 31, MUMBAI, RAISES THE FOLLOWING GROUNDS: 1) THE LD. C.I.T (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPEN SES IN ALL AMOUNTING TO RS 95,754/ - COMPRISING OF EXPENSES DISALLOWED OUT OF CONVEYANCE RS32,080/ - OUT OF MISCELLANEOUS RS3,874/ - AND OUT OF SALARY RS 59,800/ - . 2) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.2,98,629/ - AND RS.62,536/ - RESPECTI VELY BEING AMOUNT OF SUPPRESSION OF SALES AND GROSS MARGIN THEREON WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE HIM IN THIS REGARD. 3) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.30,000/ - OUT OF SALARY PAYMENT MA DE TO PARTY REFERRED TO IN SECTION 40A(2)(B) OF THE ACT. 4) THE LD. CIT(A) HAS ERRED IN IGNORING THE ADHOC DISALLOWANCE OF 20% OF CONVEYANCE EXPENSES MADE BY THE AO DESPITE THE FACT THAT SUCH DISALLOWANCE HAS RESULTED IN TOTAL DISALLOWANCE OF CONVEYANCE EX PENSES TO 120% OF THE TOTAL EXPENSES CLAIMED. SIMILARLY THE CIT(A) HAS ALSO ERRED IN NOT CONSIDERING THE ADHOC DISALLOWANCE ON ACCOUNT OF MISCELLANEOUS EXPENSES . ITA NO.5444 OF 2011 MAYUR SEJPAL HUF PAGE 2 OF 5 2. IN GROUND NO.1 IN APPEAL, BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HUF IS ENGAGED IN THE BUSINESS OF TRADING IN TIMBER, BAMBOO AND PLYWOOD ETC., AS A PROPRIETARY CONCERN UNDER THE NAME AND STYLE OF M/S TIMBERLAND. A SURVEY U/S.133A OF THE ACT WAS CARRIED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 06 - 03 - 2006 WHEN INVENTORY OF STOCK AND CASH W AS TAKEN AND THE SAME WERE FOUND SHORT WHEN COMPARED WITH THE BALANCES APPEARING IN THE BOOKS OF ACCOUNT. IN THE RETURN OF INCOME FILED BY THE ASSESSEE, ASSESSEE RECONCILED CASH ACCOUNT BY SHOWING EXPENDITURE INCURRED TO THE EXTENT OF RS.95,754/ - AS UNDER: I. CONVEYANCE RS.32,080/ - II. MISCELLANEOUS EXPENSES RS. 3,874/ - III. SALARY TO VARIOUS RELATIVES/OTHERS RS.59,800/ - RS.95,754/ - THE AO WAS NOT SATISFIED ABOUT THE CREDITABILITY OF THE VOUCHERS AND, THEREFORE, PROCEEDED TO MAKE THE DISALLOWANCE. THIS S TOOD CONFIRMED BY THE LD. CIT(A). 3. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED DEDUCTION OF TOTAL EXPENSES OF RS.32,080/ - UNDER THE HEAD CONVEYANCE ACCOUNT FOR THE ENTIRE YEAR. THE AO DID NOT MAKE VERIFICATION OF THE CORR ECTNESS OF THE CLAIM MADE BY THE ASSESSEE AND CASUALLY STATED THAT THE VOUCHERS ARE NOT CREDIBLE. KEEPING IN VIEW THE TURN OVER OF RS.43 LACS IN THE ASSESSEES BUSINESS, ESTIMATED DEDUCTION OF EXPENSES AT RS.24,000/ - IS CONSIDERED REASONABLE AND THE SAME I S ACCORDINGLY DIRECTED TO BE ALLOWED HAVING REGARD TO THE JUDGMENT RENDERED BY HON'BLE KERALA HIGH COURT IN THE CASE OF CIT VS. S.P. NAIR ITA NO.5444 OF 2011 MAYUR SEJPAL HUF PAGE 3 OF 5 & ORS. (234 ITR 94) (KER). THE BALANCE ADDITION OF RS.8,080/ - IS SUSTAINED. 4. IN SO FAR AS THE DISALLOWANCE OF MISCEL LANEOUS EXPENSES OF RS.3,874/ - OUT OF THE TOTAL EXPENSES OF RS.8,288/ - IS CONCERNED, THE DISALLOWANCE IS FOUND REASONABLE AS ESTIMATED DEDUCTION ALLOWED BY THE ASSESSING AUTHORITY IS COMMENSURATE TO THE BUSINESS ACTIVITIES AND TURNOVER ACHIEVED BY THE ASSE SSEE. THE DISALLOWANCE SO MADE, THEREFORE, STANDS CONFIRMED. 5. IN SO FAR AS THE DISALLOWANCE OF SALARY OF RS.59,800/ - IS CONCERNED, THE AUTHORITIES BELOW HAVE ALSO DISALLOWED A SUM OF RS.30,000/ - PAID IN CASH TO A LADY EMPLOYEE WHO IS WIFE OF KARTA OF HUF . THE DISALLOWANCE OF RS.30,000/ - , PAID TO THIS LADY RELATIVE, HAS BEEN MADE U/S. 40A(2)(B) OF THE ACT AS THE SAME WAS EXCESSIVE COMPARED TO THE SERVICES RENDERED BY HER VIS - - VIS HER EXPERTISE AND QUALIFICATION. THE ASSESSEE DID NOT ADDUCE ANY REASONING A S TO HOW THE DISALLOWANCE IS UNCALLED FOR. WE, THEREFORE, UPHOLD THE DISALLOWANCE OF RS.30,000/ - MADE U/S.40A(2)(B) OF THE ACT AND CONSIDERING THE SAID DISALLOWANCE AS AN INTEGRAL PART OF THE DISALLOWANCE OF RS.59,800/ - THE BALANCE ACCOUNT OF RS.29,800/ - B EING SALARY PAID TO THE OTHER EMPLOYEES FOR THE WORK DONE BY THEM, IS DIRECTED TO BE ALLOWED WHEN IN THE PART OF THE YEAR , THE SALARY PAID TO SUCH EMPLOYEES HAS BEEN ALLOWED AS A DEDUCTION BY THE ASSESSING AUTHORITY HIMSELF. IN THIS VIEW OF THE MATTER, IN GROUND NO.1 IN APPEAL ASSESSEE GETS RELIEF OF RS.24,000/ - OUT OF DISALLOWANCE OF CONVEYANCE EXPENSES AND ITA NO.5444 OF 2011 MAYUR SEJPAL HUF PAGE 4 OF 5 RS.29,800/ - OUT OF THE DISALLOWANCE OF SALARY EXPENSES, WHILE GROUND NO.3 BEING DEVOID OF ANY MERIT STANDS REJECTED. 6. IN GROUND NO.2 IN APPEAL, LD. C IT(A) SUSTAINED THE ADDITIONS OF RS.2,98,629/ - AND RS.62,536/ - TREATING THE SAME AS SUPPRESSION OF SALES AND GROSS PROFIT MARGIN THEREON. 7. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD. THE SURVEY PROCEEDINGS REVEALED SHORTAGE OF STOCK WHEN A COMPAR ISON WAS MADE WITH THE BOOK STOCK AND THE STOCK FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. SUCH SHORT STOCK COULD ONLY BE DEEMED AS SALES MADE OUTSIDE THE BOOKS. PARTIES BEFORE US ADMIT THAT INVESTMENT IN THE PURCHASE OF GOODS DEALT BY THE ASSESSEE IS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT . THAT BEING SO, ENTIRE AMOUNT OF SALES COULD NOT HAVE BEEN BROUGHT TO TAX. IT IS ONLY THE GROSS PROFIT MARGIN ON THE SALES EFFECTED OUTSIDE THE BOOKS BY THE ASSESSEE , COULD BE ALONE TREATED AS HIS INCOME. WE, T HEREFORE, DIRECT THE AO TO APPLY THE GROSS PROFIT MARGIN AS DECLARED BY THE ASSESSEE @ 23% ON THE SALES OF RS.2,98,629/ - . THE ADDITION TO THAT EXTENT STANDS SUSTAINED AND BALANCE OF THE ADDITION IS DIRECTED TO BE DELETED. 8. GROUND NO. 4 HAS NOT BEEN PRESS ED. THE SAME HAS STANDS DISMISSED AS NOT PRESSED. 9. IN THE RESULT, ASSESSEES APPEAL STANDS PARTLY ALLOWED AS ANNOUNCED IN THE OPEN COURT IN THE PRESEN CE OF BOTH THE PARTIES ON 11 - 10 - 2012. SD/ - SD/ - ( B.R.MITTAL) ( B.R.JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO.5444 OF 2011 MAYUR SEJPAL HUF PAGE 5 OF 5 MUMBAI: 12/10/ 2012. P/ - * COPY TO - 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY/ASST.REGISTRAR,ITAT MUMBAI.