M/S. ROHAN PAPER LTD., MUMBAI V. ITO 10 (2)(2), MUMBAI

ITA 571/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79169 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-05-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SATARIYA
• Assessee Lawyers: RAHUL K HAKANI; DR K SHIVARAM SENIOR
• Keywords: Business income; Business expenditure
• Section: 133A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI . . , ! #, ! % BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER /. ITA NO. 571/MUM/2011 # # # # # ## # / ASSESSMENT YEAR: 2007-08 M/S. ROHAN PAPER LTD. 23, KAILAS NAGAR, M.G.ROAD, GHATKOPAR (E), MUMBAI-400 077 / VS. ITO 10(2)(2) MUMBAI. ( ) / APPELLANT) ( *+) / RESPONDENT) PERMANENT ACCOUNT NO. :- AABCR 4594 E #, / ASSESSEE BY : DR. K. SHIVARAM (SENIOR ADVOCATE) & SHRI RAHUL K. HAKANI ! . / REVENUE BY : SHRI DEEPAK SATARIYA / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A)-22, MUMBAI DATED 26.11.2010 RELEVANT TO T HE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE VIDE REVISED GROUND NO.1 (ORIGINAL GROUNDS NO. 1 &2) OF THE APPEAL HAS AGITATED THE CONFIRMATION OF THE DISALLO WANCE OF BUSINESS EXPENSES OF RS.19,19,182/- WHILE COMPUTING OF THE BUSINESS PR OFITS CONSEQUENT TO DECLARATION OF ADDITIONAL INCOME OF RS. 30 LAKHS DURING SURVEY. 3. BRIEFLY STATED, THE ASSESSEE, A COMPANY ENGAGED IN THE BUSINESS OF BUILDERS & DEVELOPERS AND OF CIVIL CONSTRUCTION FOLLOWING THE METHOD OF ACCOUNTING AS PER SECTION 145 OF THE INCOME-TAX ACT, FOR RECOGNIZING THE REVENUE GENERATED FROM . / DATE OF HEARING : 15.05.2014 . / DATE OF PRONOUNCEMENT : 18.06.2014 ITA NO. 571/MUM/2011 M/S. ROHAN PAPER LTD. ASSESSMENT YEAR: 2007-08 2 BUSINESS ACTIVITY AND AS SUCH RECOGNIZED THE REVENU E ON SALE OF RESIDENTIAL PREMISES DURING THE YEAR. A SURVEY WAS CONDUCTED UNDER SECTI ON 133A OF THE ACT AT THE ASSESSEES PLACE ON 22.03.2007, DURING WHICH, THE S TATEMENT OF DIRECTOR OF THE ASSESSEES COMPANY MR. KISHOR PATEL WAS RECORDED ON OATH. IN THE SAID STATEMENT, THE DIRECTOR OF THE ASSESSEES COMPANY HAD DECLARED A BUSINESS PROFIT OF RS. 30 LAKHS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE ASSESSEE WHILE FILING THE RETURN, DECLARED A TOTAL INCOME OF RS. RS.21,80,818 /- WHICH INCLUDED THE ADDITIONAL INCOME DECLARED DURING THE SURVEY ACTION. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID INCOME WAS ARRIVED AT AFTER ACCOUNTING FOR ALL POST SURVEY EXPENSES, WHICH WERE NOT TAKEN INTO ACCOUNT WHILE ESTIMATING INCOME FOR ADVANCE TAX. IN THE ASSESSMENT FRAMED, THE AO DISALLOWED THE EXPENSES OF RS. RS.19 ,19,182/- HOLDING THAT THE CLAIM OF THE EXPENSES WAS AN AFTER THOUGHT AND FURT HER THAT THE INCOME DURING THE SURVEY WAS OFFERED BY THE ASSESSEE AFTER ACCOUNTING ALL RELEVANT EXPENSES OF THE CURRENT YEAR. ON APPEAL, THE LD.CIT(A) CONFIRMED TH E ACTION OF THE AO. AGGRIEVED BY THE IMPUGNED DECISION, THE ASSESSEE HAS PREFERRED T HIS APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE ISSUE RAISED IN GROUN D NO 1 AS REGARDS THE DISALLOWANCE OF BUSINESS EXPENSES IS COVERED BY THE DECISION OF THE TRIBUNAL DATED 20.06.2013 IN THE CASE OF OTHER GROUP CONCERN M/S. SHRRESHAY ENGG. PVT. LTD VS. ACIT , IN ITA NO.670/MUM/2011, WHEREIN THE TRIBUNAL HAS HELD THAT THE EXPENSES ARE TO BE ALLOWED BY AO AFTER VERIFICATION. THE REL EVANT FINDINGS OF THE TRIBUNAL IN THE CASE OF M/S. SHRRESHAY ENNG. PVT. LTD IS EXTRAC TED HEREUNDER:- 6. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE HAS INV ITED OUT ATTENTION TO THE STATEMENT OF ESTIMATED PROFIT PREPARED FOR THE PURPOSE OF ADV ANCE TAX AS ON 15.03.2007 GIVEN ON PAGE NO. 73 OF HIS PAPER-BOOK TO SHOW ABOVE THE BAS IS OF THE SAID ESTIMATE. IN THE SAID STATEMENT, PROFIT AS PER TRIAL BALANCE WAS TAKEN AT 1.58,00,000/- AND AFTER DEDUCTING PROVISION FOR INTEREST ON UNSECURED LOAN OF RS.16,0 0,000/- MADE ON ESTIMATED BASIS, NET PROFIT ON RS.1,42,00,000/- WAS WORKED OUT FOR T HE PURPOSE OF ADVANCE TAX. THE LD. COUNSEL OF THE ASSESSEE HAS ALSO INVITED OUT ATTENT ION TO THE STATEMENT PLACED AT PAGE NO. 99 OF HIS PAPER-BOOK GIVING THE DETAILS OF EXPE NSES INCURRED PRIOR TO SURVEY AND EXPENSES INCURRED AFTER SURVEY. A PERUSAL OF THE SA ID DETAILS SHOWS THAT THE IMPUGNED EXPENSES OF RS.8,17,7462/- COMPRISED OF EXPENSES IN CURRED DURING THE POST SURVEY PERIOD UNDER VARIOUS ROUTINE HEADS INCLUDING THE MA JOR AMOUNT OF INTEREST ON UNSECURED LOANS FOR WHICH PROVISION OF RS.16,00,000 /- WAS MADE BY THE ASSESSEE ON ESTIMATED BASIS WHILE COMPUTING PROFIT FOR THE PURP OSE OF ADVANCE TAX ON AS 15.03.2007. A COPY OF PROFIT & LOSS ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER ITA NO. 571/MUM/2011 M/S. ROHAN PAPER LTD. ASSESSMENT YEAR: 2007-08 3 CONSIDERATION IS PLACED AT PAGE NO. 72 OF THE PAPER -BOOK WHICH SHOWS THAT THE INCOME OF RS.15,00,000/- SURRENDERED BY THE ASSESSEE DURIN G THE COURSE OF SEPARATELY DECLARED AS INCOME AND THE ENTIRE ROUTINE EXPENSES INCLUDING THE EXPENSES IN QUESTION INCURRED DURING THE POST SURVEY PERIOD WERE DEBITED THE PROF IT AND LOSS ACCOUNT. IN OUR OPINION, ALL THESE FACTS AND FIGURES APPEARING IN THE RELEVA NT FINANCIAL STATEMENTS CLEARLY SHOW THAT THE AMOUNT EXPENSES OF RS.8,17,7462/- WERE CLA IMED BY THE ASSESSEE AS REGULAR BUSINESS EXPENSES INCURRED DURING THE POST SURVEY P ERIOD AGAINST REGULAR BUSINESS INCOME WHICH RESULTED IN REDUCTION OF ITS REGULAR B USINESS INCOME WHICH WAS ESTIMATED AT RS.1,42,00,000/- AS ON 15.03.2007 FOR ADVANCE TA X PURPOSE TO THAT EXTENT. IT APPEARS THAT THE AO AND THE LD.CIT(A), HOWEVER, MIS CONCEIVED THE CLAIM OF THE ASSESSEE FOR THE SAID EXPENSES AS THAT OF AGAINST T HE ADDITIONAL INCOME OF RS.15,00,000/- DECLARED DURING THE COURSE OF SURVEY AND MADE DISALLOWANCE OF THE SAID EXPENSES ON THE BASIS OF THIS MISCONCEPTION WITHOUT CONSIDERING OR EXAMINING THE SAID CLAIM ON MERIT BEING THE CLAIM FOR REGULAR BUSINESS EXPENSES OF POST SURVEY PERIOD AGAINST REGULAR BUSINESS INCOME. WE, THEREFORE, SET ASIDE THEIR ORDERS ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE AO WITH A DIR ECTION TO CONSIDER AND ALLOW THE CLAIM OF THE ASSESSEE FOR THE IMPUGNED EXPENSES AS REGULA R BUSINESS EXPENSES ON MERIT AFTER THE NECESSARY VERIFICATION GROUND NO. 1 AND 2 OF TH E ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. THE ABOVE SAID DECISION HAS ALSO BEEN FOLLOWED IN THE CASE OF M/S. PATEL BUILDERS AND DEVELOPERS PVT. LTD. VS. ITO IN ITA NO. 572/M/2011 VIDE ORDER DATED 03.01.2014 AND FURTHER IN THE CASE OF OTHER GROUP C ONCERN M/S. DKP ENGINEERS & CONSTRUCTIONS PVT. LTD. VS ITO ITA NO. 573/MUM/201 1 DECIDED ON 26.02.2014. IN THE PRESENT CASE, THE FACTS INVOLVED ARE SIMILAR TO THE FACTS INVOLVED IN THE CASE OF GROUP CONCERN AS AFOREMENTIONED WHICH IS EVIDENT FR OM THE RELEVANT PORTION OF THE SAID ORDER OF THE TRIBUNAL AND THE POSITION IS NOT DISPUTED BY THE LD.DR ALSO. THEREFORE, FOLLOWING THE AFOREMENTIONED ORDER OF TH E TRIBUNAL, WE SET ASIDE THE IMPUGNED ORDER OF THE LD.CIT(A) ON THIS ISSUE AND R ESTORE THE MATER TO THE FILE OF THE AO WITH A SIMILAR DIRECTION GIVEN BY THE TRIBUN AL IN THE CASE OF SHRRESHAY ENGG. PVT. LTD. AND THEREBY ALLOW THE CLAIM OF THE ASSESS EE FOR THE IMPUGNED EXPENSES AS REGULAR BUSINESS EXPENSES ON MERIT AFTER NECESSARY VERIFICATION. ACCORDINGLY, GROUND NO. 1 IS ALLOWED FOR STATISTICAL PURPOSE. 5. GROUND NO. 2 OF THE REVISED GROUNDS OF APPEAL (O RIGINAL GROUND NO.3) RELATING TO DISALLOWANCE U/S 14 A R.W. RULE 8D HAS NOT BEEN PRESSES BY THE LD. AR OF THE ASSESSEE AND THE SAME IS ACCORDINGLY DISMISSED BEIN G NOT PRESSED. ITA NO. 571/MUM/2011 M/S. ROHAN PAPER LTD. ASSESSMENT YEAR: 2007-08 4 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. . 2 18.06. 201 4 . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JUNE, 2014. SD/- SD/- ( P.M. JAGTAP ) (SANJAY GARG) ! !! ! / ACCOUNTANT MEMBER ! ! ! ! / JUDICIAL MEMBER /MUMBAI, 2 /DATED: 18 .06.2014. . ./ P.S. *A.K.PATEL COPY TO: ) / THE APPELLANT *+) / THE RESPONDENT 4 5 / THE CIT, CONCERNED, MUMBAI 4 5 / THE CIT(A) CONCERNED, MUMBAI 6 * /THE DR D BENCH # / GUARD FILE. +6 * //TRUE COPY// / BY ORDER / DY/ASSTT. REGISTRAR, , / ITAT, MUMBAI. ITA NO. 571/MUM/2011 M/S. ROHAN PAPER LTD. ASSESSMENT YEAR: 2007-08 5 SR. NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATION SHEETS ARE ATTACHED YES SR.PS/PS 2 DRAFT DICTATED ON SR.PS/PS 3 DRAFT PLACED BEFORE AUTHOR SR.PS/PS 4 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 5 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 6 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 7 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 8 FILE SENT TO THE BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE AR 11 DATE OF DISPATCH OF ORDER