LAKOZY ELECTRONICS & SERVICES, MUMBAI V. ITO 15(1)(1), MUMBAI

ITA 5512/MUM/2010

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4041 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 13-01-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 133A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 5512 / MUM/ 201 0 ( / ASSESSMENT YEA R : 200 6 - 07 ) LAKOZY ELECT RONICS AND SERVICES, LAKOZY MANSION, 21, CHOPATTY SEA FACE, MUMBAI - 400007 / VS. INCOME TAX OFFICER 15(1)(1),MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AACFL1606K / A SSESSEE BY SHRI K GOPAL / RE VENUE BY SHRI GANESH BARE / DATE OF HEARING : 13 .1.20 16 / DATE OF PRONOUNCEMENT: 3. 2 .2016 / O R D E R P ER B R BASKARAN,AM: THE ASSES SEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29.4.2010 PASSED BY THE LD. CIT(A) - 26, MUMBAI FOR THE ASSESSMENT YEAR 2006 - 07 ON THE FOLLOWING ISSUES: A ) ADDITION RELATING TO UNEXPLAINED STOCK RS.14 , 83,851/ - ; B ) DISALLOWANCE OUT OF ELECTRICITY EXPENSES RS.1,56,734/ - ; C ) DISALLOWANCE OF MUNICIPAL EXPENSES RS.94,285/ - ; D ) DISALLOWANCE OF RENT EXPENSES RS.90,000 /; AND E ) DISALLOWANCE OF TELEPHONE EXPENSES RS.1,61,044/ - . 2. THE ASSESSEE IS A DEALER IN ELECTRONICS GOODS. A S URVEY ACTION U/S 133A OF THE ACT WAS C ONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 2.1.2005. DURING THE COURSE OF SURVEY ACTION , EXCESS STOCK VALUED AT RS.14,83,851 / - WAS FOUND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASSESSED THE SAME AS INCOME OF THE ASSESSEE . BESIDES ABOVE, THE ASSE SSING OFFICER ALSO DISALLOWED A PART OF EXPENSES CLAIMED BY THE 5512 /M/201 0 2 ASSESSEE. THE ASSESSEE COULD NOT SUCCEED IN THE APPEAL FILED BEFORE THE LD. CIT(A) ON ALL THE ISSUES AND HENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE FIRST ISSU E RELATES TO THE ADDITIONS PERTAINING TO EXCESS STOCK FOUND DURING THE COURSE OF SEARCH, DETAILS OF WHICH ARE REPRODUCED BELOW: S. NO. NAME OF THE ITEM PARTY TO WHOM BELONG OTHER DETAILS AMOUNT IN RS. 1 ADAM SPEAKERS DAWINDER S SHENA ANF 10 PAI R 25,000 2 ADAM SPEAKERS DAWINDER S SHENA SIA 1 PAIR 45,000 3 MEGANEPAN MG 12 AUDIO VISION INDIA P LTD 12 PAIR 62,101 4 AVANTH GRADE HORN SPEAKER UNO SOUND AND VISION 3,00,000 5 BOWERS AND WILLKINS 703 AUDIO VISION INDIA P LTD 1 PAIR 1,52,000 6 MA NGER SWING INNOVATIVE INFORMATION TECHNOLOGY P LTD. 1 3,60,000 7 PSB 45 T LAKOZY IMPEX & SERVICES 1 36,000 8 HITACHI PLASMA 55 S K OFFICER SOLUTION P LTD 1 3,95,000 9 PROJECTORS CAPTAIN BLACK LUGGAGE BAG LAKOZY SERVICES 35,000 10 WOOFERS LAKOZY SER VICES 2,000 11 SPEAKERS DRIVER LAKOZY SERVICES 1,750 14,83,851 THE LD. COUNSEL APPEARING FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS A DEALER IN MUSICAL SYSTEMS AND HENCE THE SUPPLIERS USED TO KEEP THEIR OWN STOCK FOR DISPLAY PURPOSES AT THE BUSINESS PREMISES OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THE STOCKS, WHICH WERE FOUND TO BE IN EXCESS, ACTUALLY DO NOT BELONG TO THE ASSESSEE. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS MOVED A PETITION FOR ADMISSION OF CERTAIN ADDITIONAL EVIDENC ES , WHICH CONSISTS OF AFFIDAVITS GIVEN BY THE OWNERS OF THE FOLLOWING ITEMS OF STOCK , WHICH HAVE BEEN ASSESSED AS EXCESS STOCK IN THE HANDS OF THE ASSESSEE. 5512 /M/201 0 3 A ) AVANTH GRADE HORN SPEAKER UNO BY SHRI FAISAL HAMID (1 ITEM) B ) MANGER SWING AND WOOFERS BY M/S IN NOVATIVE INFORMATION TECHNOLOGY P VT. LTD (2 ITEMS) AND C ) HITACHI PLASMA 55 BY SHRI RAJIV JAIN . (1 ITEM) THE LD. AR SUBMITTED THAT THE ASSESSEE COULD OBTAIN THE AFFIDAV IT S FROM THE ABOVE SAID PARTIES ONLY RECENTLY AND HENCE THEY ARE BEING PRODUCED BEF ORE THE TRIBUNAL . HE SUBMITTED THAT THESE AFFIDAVITS SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE EXCESS STOCK FOUND DURING THE COURSE OF SEARCH DOES NOT BELONG TO IT AND THEY HAVE BEEN KEPT IN THE BUSINESS PREMISES OF THE ASSESSEE BY THE CONCERNED OWN ERS FOR DISPLAY. ACCORDINGLY, HE PRAYED THAT THESE ADDITIONAL EVIDENCES MAY KINDLY BE ADMITTED AND EXAMINED. 4 . WE HEARD THE LD. DR AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAS BEEN CLAIMING THAT THAT THE EXCESS STOCK FOUND DURING THE COURSE O F SEARCH DOES NOT BELONG TO IT AND THE S A ID CONTENTIONS HAVE BEEN REJECTED BY THE TAX AUTHORITIES FOR WANT OF DOCUMENTARY EVIDENCE S . NOW, THE ASSESSEE HAS FILED CERTAIN ADDITIONAL EVIDENCE S, IN THE FORM OF AFFIDAVITS CLAIMED TO HAVE BEEN OBTAINED FROM THE ORIGINAL OWNERS OF THE STOCKS, TO SUBSTANTIATE ITS CLAIM . SINCE THE ASSESSEE HAS OBTAINED THE AFFIDAVITS ONLY RECENTLY, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE ASSESSEES PRAYER FOR ADMISSION OF THE ADDITIONAL EVIDENCE S SHOULD BE ACCEPTED . ACCORDINGLY , WE ADMIT THE ADDITIONAL EVIDEN CES AND SINCE THE Y REQUIRE PROPER EXAMINATION, WE SET ASIDE THE ORDER OF THE LD. CIT(A) IN RESP ECT OF THE ADDITIONS COVERED BY THE AFFIDAVIT S GIVEN BY M/S INNOVATIVE INFORMATION TECHNOLOGY PVT. LTD, SH RI RAJIV JAIN AND SHRI FAISAL HAMID AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE T HE SE THREE ADDITIONS AFRESH AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 5 . IN RESPECT OF ADDITION PERTAINING TO MEGANEPAN MG 12 AMOUNT ING TO RS. 62,101/ - , THE ASSESSEE HAS FURNISHED AN INVOICE DATED 14.12.2004 5512 /M/201 0 4 RAISED BY AUDIO - VISION INDIA PRIVATE LIMITED. A CAREFUL PERUSAL OF INVOICE SHOWS THAT THE ABOVE SAID COMPANY HAS RAISED A PROPER INVOICE ON THE ASSESSEE, MEANING THEREBY IT HAS A CTUALLY SOLD THE INSTRUMENT TO THE ASSESSEE . HENCE THE CONTENTIONS OF THE ASSESSEE THAT THE INSTR UMENT WAS KEPT FOR DISPLAY, IS IN CONTRADICTION WITH THE EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE. BEFORE US, THE ASSESSEE COULD NOT FURNISH ANY OTHER EVIDE NCE TO SHOW THAT THE SALE/PURCHASE RELATING TO MEGANEPAN MG 12 DID NOT TAKE PLACE. H ENCE WE DO NOT FIND ANY MERIT IN THE CONTENTION S OF THE ASSESSEE THAT MEGNEPAN MG 12 DOES NOT BELONG TO IT. ACCORDINGLY , WE REJECT THE CLAIM OF THE ASSESSEE IN RESPECT OF THIS INSTRUMENT AND ACCORDINGLY CONFIRM THE ADDITION RELATING THERETO . 6 . WITH REGARD TO THE INSTRUMENT S NAMED ADAM SPEAKERS ANF 10 PAIR RS.25,000 / - AND ADAM SPEAKERS - SIA 1 PAIR - RS.45,000/ - , THE ASSESSEE FURNISHED A LETTER DATED NIL WRITTEN BY AD AM, GERMANY, WHEREIN IT IS STATED THAT THE ABOVE SAID TWO ITEMS WERE GIVEN ON LOAN BASIS TO M/S LAKOZY IMPEX AND SERVICES. FIRST OF ALL, THE SAID LETTER DOES NOT REFER THE NAME OF THE ASSESSEE AND SECONDLY THE ASSESSEE COULD NOT EXPLAIN AS TO HOW THESE ITEMS PASSED THROUGH THE C USTOMS G ATE AND ENTERED INTO INDIA. EVEN THOUGH THE ASSESSEE SUBMITTED THAT THE LOCAL REPRESENTATIVE OF M/S ADAM GERMANY HAS PLACED THE INSTRUMENTS, YET NO DOCUMENTARY EVIDENCE TO SUPPORT THE SAID CLAIM WAS FURNISHED. HENCE, THE CONTENTION S URGED BY THE ASSESSEE WITH REGARD TO THESE TWO ITEM S ARE ALSO NOT ACCEPT ABLE. A CCORDINGLY WE REJECT THE SAME AND ACCORDINGLY CONFIRM THE ADDITIONS RELATING THERETO . 7 . THE ASSESSEE DID NOT FURNISH ANY EXPLANATION WITH REGARD TO THE REMAININ G ITEMS OF INSTRUMENTS. ACCORDINGLY, EXCEPT FOUR ITEMS (COVERED BY THREE AFFIDAVITS), WHICH HAVE BEEN RESTORED BACK TO THE FILE OF THE AO, THE REMAINING ADDITIONS CONFIRMED BY LD. CIT(A) IS HEREBY UPHELD . 5512 /M/201 0 5 8 . THE NEXT ISSUE RELATES TO DISALLOWANCE MADE OUT OF VARIOUS EXPENSES. THE AO NOTICED THAT FOUR CONCERNS BELONG ING TO THE SAME GROUP WERE OPERATING FROM THE SAME BUILDING DURING THE YEAR UNDER CONSIDERATION. THE AO ALSO FURTHER NOTICED THAT THE EXPENSES PERTAINING TO ELECTRICITY, MUNICIPAL TAXES, RE NT AND TELEPHONE HAVE BEEN INCURRED BY ALL THESE CONCERNS IN COMMON. IT WAS FURTHER NOTICED THAT THE ASSESSEE HAS ACCOUNTED FOR THE ENTIRE AMOUNT OF EXPENDITURE INCURRED UNDER ABOVE STATED HEAD S . ACCORDINGLY, THE AO TOOK THE VIEW THAT ONLY TH OF EXPENSE S SHOULD BELONG TO THE ASSESSEE . ACCORDINGLY, THE AO DISALLOWED 75% OF THE EXPENSES CLAIMED BY THE ASSESSEE TOWARDS ELECTRICITY, MUNICIPAL TAXES, RENT AND TELEPHONE. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 9 . THE LD. AR SUBMITTED THAT T HE CONCERN NAME D M/S LAKOZY ELECTRONICS P LTD HAS STOPPED BUSINESS ACTIVITY IN THE YEAR 2003 - 04 . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS BEEN OCCUPYING MAXIMUM AREA OF THE BUILDING. THE LD. AR FURTHER SUBMITTED THAT ANOTHER CONCERN NAMED M/S LAKOZY IMPEX AND SERVICES H AS DEBITED AN AMOUNT OF RS.44155/ - IN I T S PROFIT AND LOSS ACCOUNT. ACCORDINGLY, THE LD.AR SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING 75% OF THE EXPENDITURE CLAIMED. 10 . THE LD. DR, ON THE CONTRARY, PLACED HEAVY RELIANCE ON THE ORDERS PASSED BY THE LOWER AUTHORITIES. 1 1 . WE HAVE HEARD RIVAL CONTENTIONS ON THIS ISSUE. THE ASSESSEE HAS STATE D THAT ONE CONCERN HAS STOPPED ITS BUSINESS ACTIVITIES, EVEN THOUGH ITS REGISTERED ADDRESS IS CONTINUED WITH THE SAME PREMISES. IT WAS FURT HER STATED THAT ANOTHER CONCERN HAS ACCOUNTED FOR CERTAIN EXPENSES. WITH REGARD TO THE ASSESSEE HEREIN, IT WAS STATED THAT IT IS OCCUPYING MAXIMUM SPACE, MEANING THEREBY MOST OF THE EXPENSES STATED ABOVE HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF T HE ASSESSEE. WE NOTICE THAT THE 5512 /M/201 0 6 TAX AUTHORITIES HAVE ALLOCATED THE EXPENSES IN EQUAL PROPORTIONS AND ACCORDINGLY DISALLOWED 75% OF THE AMOUNT CLAIMED BY THE ASSESSEE. THERE SHOULD NOT BE ANY DOUBT THAT THE ADMISSIBILITY OF THE EXPENSE SHOULD BE EXAMINED FROM THE P OINT OF VIEW OF THE ASSESSEE BY CONSIDERING THE LEVEL OF ITS BUSINESS ACTIVITIES. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THE DISALLOWANCE WORKED OUT AT 75% OF THE EXPENSES IS ON THE HIGHER SIDE. SINCE ALL THE FOUR CONCERNS SHARE COMM ON BUILDING, WE ARE OF THE VIEW THAT SOME DISALLOWANCE IS CALLED FOR. SINCE IT IS CLAIMED THAT THE ASSESSEE IS OCCUPYING MORE SPACE AND ITS BUSINESS ACTIVITIES ARE MORE, WE ARE OF THE VIEW THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO 25% OF THE EXPENDITU RE CLAIM. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE TO 25% OF THE EXPENSES CLAIMED UNDER THE FOUR HEADS, REFERRED SUPRA. 1 2 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY AL LOWED. PRONOUNCED ACCORDINGLY ON 3RD FEBRUA RY , 2016 . 3 RD FEBRU ARY, 2016 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: FEBRUARY , 201 6 . . . ./ SRL , SR. PS 5512 /M/201 0 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI