MANISH D KADAM, MUMBAI V. ASST CIT 14(3), MUMBAI

ITA 568/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70609 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARESH JOHRI DR
• Assessee Lawyers: C N VAZE
• Keywords: Business income; Salary income

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENC H, MUMBAI !' , $ % BEFORE SHRI I.P. BANSAL, JM AND SHRI KARUNAKARA RAO , AM ./I.T.A. NO.568/M/2012 ( & ' (' / ASSESSMENT YEAR :2008-2009) MR. MANISH D. KADAM, R.NO. 14, 3 RD FLOOR, SHREEJI BHUVAN, LOHAR CHAWL, MUMBAI- 400 002. & / VS. ACIT - 14(3), MUMBAI. ) $ ./PAN : AHNPK 2923 Q ( )* /APPELLANT) .. ( +,)* / RESPONDENT) )* - . / APPELLANT BY : SHRI C.N. VAZE +,)* - . / RESPONDENT BY : SHRI PARESH JOHRI, DR & - /$ /DATE OF HEARING : 3.7.2013 01( - /$ /DATE OF PRONOUNCEMENT : 2.8.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 27.1.2012 IS A GAINST THE ORDER OF CIT (A)- 25, MUMBAI DATED 23.11.2011 FOR THE ASSESSMENT YEAR 2008-2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GRO UNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF ENTIRE EXPENDITURE DEBITED TO THE P&L ACCOUNT AND THUS ASSESSING THE BUSINESS INCOME AT T OTAL TURNOVER OF THE BUSINESS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES IN CURRED ON REVENUE ACCOUNT TOTALING TO RS. 8,41,103/- ON SURMISES AND CONJECTURES DRAWN FROM THE VOUCHER S MAINTAINED AND PRODUCED BEFORE THE AO. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING DISALLOWANCE OF THE COMMISSION PAYMENTS OF RS. 6,50,000/- MADE BY THE APPELLANT IN THE COURSE OF HIS BUSINES S WITHOUT APPRECIATING THE FACT THAT BY PAYING SUCH COMMISSION APPELLANT H AD EARNED SUBSTANTIAL BROKERAGE / COMMISSION. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD CIT (A) ERRED IN CONFIRMING INTEREST UNDER SECTION 234A/B/C OF THE ACT. 2 3. RELEVANT FACTS ARE THAT THE ASSESSEE EARNED INCO ME FROM SALARY AND COMMISSION. RS 21,23,425/- WAS EARNED AS COMMISSION INCOME FROM COUPLE OF RELATED COMPANIES. ASSESSEE ALSO EARNED THE SALARY INCOME ALSO FROM M/S. CROSS BORDER INVESTMENT PVT. LTD., ONE OF THESE COMPANIES. THE BONE OF CONTENTION BEFORE THE PARTIES RELATES THE ISSUE OF ALLOWABILITY OF EXPENDITURE AMOUNTING TO RS. 14,91,103/-. IT INCLUDES OTHER EXPENSES AMOUNTING TO RS. 8,41,103/ - AND ALSO RS. 6.5 LACS ON ACCOUNT OF COMMISSION PAID BY THE ASSES SEE. ASSESSEE PAID COMMISSION TO SEVEN PARTIES. RS. 4 LACS OF THE COMMISSION IS PAID IN CHEQUE AND THE BALANCE IS INCURRED IN CASH. RECIPIENTS OF THE COMMISSIONS AR E COUPLES IE EITHER HUSBAND-WIFE; UNCLES-AUNTS, SISTERS ETC. EXCEPT SELF-MADE VOUCHER S AND SUSPICIOUS CONFIRMATION LETTERS, NO EVIDENCES WERE FURNISHED IN SUPPORT OF THE CLAIM THAT THE SAID EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. AO DISALLOWED THE ENTIRE COMMISSION EXPENDITURE STA TING THAT THE SAID EXPENDITURE IS NOT INCURRED FOR BUSINESS PURPOSES. REGARDING OTHER EXPENDITURE OF RS 8,41,103/-, AO GAVE A FINDING THAT THE EXPENDITURE INCURRED IS FOR PERSONAL REASONS AND REJECTED THE SELF-MADE VOUCHERS IN THE PROCESS. UNDISPUTEDLY , THESE AMOUNTS WERE PAID IN CASH. THUS, THE AO MADE ADDITION OF RS. 14,91,103/-. AGGRIEVED WITH THE SAME, ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE CIT (A) HELD T HAT THE SAID EXPENDITURE IS CLEARLY BOGUS IN NATURE AND THE EVIDENCES FURNISHED ARE MERELY SELF-SERVING DOCUMENTS. THE EXPENDITURE INCURRED ON TELEPHONE C HARGES, ELECTRICITY CHARGES, OFFICE EXPENSES ETC CONSTITUTES PERSONAL EXPENDITUR E WHICH IS NOT ALLOWABLE AGAINST THE SAID COMMISSION INCOME. HE ALSO GAVE A FINDING THAT THE COMMISSIONS INCOME OF RS. 21,23,425/- ACTUALLY INCURRED FOR PROFESSIONAL AND TECHNICAL SERVICES RENDERED BY THE ASSESSEE AND THERE IS NO REQUIREMENT OF INCURRI NG OF SUCH HUGE EXPENDITURE. HE IS ALSO SUSPICIOUS OF THE FACT THAT THE ASSESSEE WH ILE WORKING WITH THE COMPANY FOR THE SALARY ALSO DOING THE BUSINESS USING THE INFRAS TRUCTURE OF THE SAID COMPANIES. IN SUCH CIRCUMSTANCES, THE EXPENDITURE IS A MANIPULATE D ONE WHICH IS NOT ALLOWABLE. CIT (A) IS OF THE OPINION THAT THE SAID EXPENDITURE WAS INTENDED FOR REDUCTION OF THE TAX. ACCORDINGLY, CIT (A) CONFIRMED THE DISALLOWAN CE ON BOTH THE COMMISSION PAID 3 AND OTHER EXPENSES AMOUNTING TO RS. 48,41,103/-. A GGRIEVED WITH THE SAME, ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUN AL. 5. DURING THE PROCEEDINGS BEFORE US, SHRI C.N. VAZE , LD COUNSEL FOR THE ASSESSEE DEVIATING FROM THE GROUNDS RAISED, MENTIONED THAT T HE MATTER MAY BE SET ASIDE TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH AFTER APPRECIATION OF THE RELEVANT FACTS THAT THE INCOME CANNOT BE EARNED WITHOUT INCU RRING OF EXPENDITURE. THE FACT EARNING SUBSTANTIAL IN LATER YEARS WAS ALSO MENTION ED. ASSESSEE PLEADED FOR GRANT OF ANOTHER OPPORTUNITY FOR DEMONSTRATING THE SCHEME OF BUSINESS OF THE ASSESSEE WHICH HELPED THE ASSESSEE TO EARN COMMISSION INCOME AFTER INCURRING OF COMMISSION EXPENDITURE AS WELL THE OTHER EXPENSES. LD COUNSEL PROMISED TO DEMONSTRATE THE SAME BEFORE THE AO IN THE SET ASIDE PROCEEDINGS. 6. ON THE OTHER HAND, LD DR HEAVILY RELIED ON THE O RDERS OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE MATERIAL PLACED BEFORE U S. IT IS THE CLAIM OF THE ASSESSEE SO FAR AS THE COMMIS SION EXPENDITURE OF RS 6.5 LAKHS IS CONCERNED, MAJOR SUM OF RS 4 LAKHS WAS PAI D BY WAY OF CHEQUE AND IT SHOULD ESTABLISH THE GENUINENESS OF THE PAYMENTS. R EGARDING THE CLAIM RELATINGTHE PAYMENT IN CASH, ASSESSEE RELIES ON THE CONFIRMATIO N LETTERS OF THE PARTIES, WHO ASSERTED THE CLAIM OF RENDERING OF THE SERVICES TO THE ASSESSEE. PRIMA FACIE, WE FIND THE PAYMENTS MADE IN CHEQUE AMOUNTING TO RS 4 LAKHS APPEAR GENUINE AND AO SHOULD ALLOW THE CLAIM IN THIS REGARD AFTER DUE VER IFICATION OF THE PARTIES QUA THE RENDERING OF THE SERVICES TO THE ASSESSEE. REGARDIN G THE COMMISSION PAYMENTS IN CASH, AO IS DIRECTED TO EXAMINE THE PARTIES BEFORE REJECTING THE CLAIM OF THE ASSESSEE. IT IS A SETTLED LAW THAT THE ONUS IS ON T HE ASSESSEE TO DEMONSTRATE WHEN A CLAIM OF EXPENDITURE IS MADE IN THE RETURN OF INCOM E. WE ACCORDINGLY ACCEPT THE PRAYER OF THE ASSESSEES COUNSEL AND SET ASIDE THIS ISSUE OF COMMISSION PAYMENTS OF RS. 6.5 LACS TO THE FILES OF THE AO FOR FRESH AD JUDICATION. 4 7.1. REGARDING THE OTHER EXPENSES AMOUNTING TO RS 8, 41,103/-, CIT (A) HAS DONE VOUCHER WISE, ACCOUNT WISE ANALYSIS AND CAME T O A CONCLUSION IE THE SUM OF THE EXPENDITURE BEING PERSONAL IN NATURE WHICH IS N OT ALLOWABLE. TO THAT EXTENT, THE ORDER OF THE CIT (A) IS SUSTAINABLE IN LAW. THE CON TENTS OF PARA 3.4 AND ITS SUB-PARAS ARE RELEVANT IN THIS REGARD. HOWEVER, IT IS A FACT THAT THE ASSESSEES CLAIM OF EARLIER YEARS WAS ACCEPTED AS CLAIMED BY THE ASSESSEE BEFO RE US. THIS IS ALSO REFERRED TO IN PARA 3.4.5 OF THE IMPUGNED ORDER. IT IS EXPECTED T HAT THE CONSISTENCY MUST BE MAINTAINED SO FAR AS THE REVENUES DECISIONS ARE CO NCERNED OVER THE ASSESSMENT YEARS, AS LONG AS THE CLAIMS AND THE FACTS OF THE I SSUES ARE COMMON. 7.2. IT IS A SETTLED FOR THAT THE PERSONAL EXPENDITU RE LIKE HOTEL, ELECTRICITY BILLS, TELEPHONE BILLS, CONVEYANCE ETC ARE NOT ALLOWABLE U NLESS THE ASSESSEE DEMONSTRATE THE SAID EXPENDITURE ARE INCURRED WHOLLY AND EXCLUS IVELY FOR THE PURPOSES OF THE BUSINESS. FURTHER, IT IS A FACT THAT SOME EXPENDITU RE CERTAINLY SHOULD HAVE BEEN INCURRED BY THE ASSESSEE FOR THE PURPOSES OF EARNIN G OF SUCH COMMISSION INCOME. THEREFORE, THERE IS A NEED FOR SEGREGATING SUCH ATT RIBUTABLE EXPENDITURE AND ALLOW THE SAME IN FAVOUR OF THE ASSESSEE. DISALLOWING TH E ENTIRE EXPENDITURE DOES NOT REVEAL THE TRUTH. THEREFORE, AS REQUESTED BY THE L D COUNSEL, WE ARE OF THE OPINION THAT BOTH THE ISSUES MUST BE SET ASIDE TO THE FILES OF THE AO FOR EXAMINING THE ISSUE AFRESH AND IDENTIFY & QUANTIFY THE RELATABLE EXPEND ITURE FROM THE PERSONAL EXPENDITURE CLAIMED IN THE RETURN. ACCORDINGLY, GR OUNDS ARE SET ASIDE . 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2.8.2013 SD/- SD/- ( I.P. BANSAL) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER MUMBAI; 2& 2.8.2013 . & . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 5 2. +,)* / THE RESPONDENT. 3. 3/ ( ) / THE CIT(A)- 4. 3/ / CIT 5. 4 56 +/& , , / DR, ITAT, MUMBAI 6. 6!' 7 / GUARD FILE. ,4/ +/ //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI