ITO, New Delhi V. M/s Mehra Jewel Palace Pvt. Ltd., New Delhi

ITA 5749/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2811 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Earning of tax free income
• Section: 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.5749/DEL/2015 ASSESSMENT YEAR : 2011-12 ITO, WARD- 16(3), NEW DELHI. VS. MEHRA JEWEL PALACE PVT. LTD., S- 555, GREATER KAILASH, PART- II, NEW DELHI. PAN : AAACM5478K (APPELLANT) (RESPONDENT) ITA NO.5855/DEL/2015 ASSESSMENT YEAR : 2011-12 MEHRA JEWEL PALACE PVT. LTD., S- 555, GREATER KAILASH, PART- II, NEW DELHI. VS. ITO, WARD- 6(3), NEW DELHI. PAN : AAACM5478K (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI ATIQ AHMAD, SR.DR ASSESSEE BY : SHRI SUMIT GUPTA, CA SHRI VIVEK KUMAR, CA DATE OF HEARING : 05-02-2018 DATE OF PRONOUNCEMENT : 20-03-2018 O R D E R PER R. K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED BY THE REVENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DIRECTED A GAINST THE ORDER DATED 30.07.2015 OF THE CIT(A)- 6, DELHI RELATING TO ASSE SSMENT YEAR 2011-12. FOR 2 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 THE SAKE OF CONVENIENCE, THESE APPEALS WERE HEARD T OGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. GROUND NO.1 BY THE REVENUE READS AS UNDER :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,90,000/- MADE BY THE ASSESSING OFFICERS ON ACCOUNT OF DISALLOWANCE OF LOAN PROCESSING CHARGES AS CLAIMED BY THE ASSESSEE? 3. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESS ING OFFICER DISALLOWED AN AMOUNT OF RS.1,90,000/- CLAIMED BY THE ASSESSEE UND ER THE HEAD LOAN PROCESSING CHARGES ON THE GROUND THAT THESE EXPENS ES ARE RELATED TO PRIOR PERIOD AND, THEREFORE, CANNOT BE ALLOWED. WE FIND IN APPE AL THE LD. CIT(A) ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON THE GROUND THA T THE ASSESSEE AVAILED LOAN OF RS.75 LAKHS + RS.55 LAKHS + RS.60 LAKHS TOTALING TO RS.1.9 LAKHS FROM CORPORATION BANK FOR WHICH THE BANK CHARGED 1% OF T HE LOAN TOWARDS LOAN PROCESSING CHARGES AND THESE AMOUNTS WERE CHARGED O N 28.04.2010, 18.09.2010 AND ON 16.03.2010 AND ALL THREE DATES FALL WITHIN T HE YEAR UNDER CONSIDERATION AND THE LOAN WAS ALSO IN THE NATURE OF CASH CREDIT. HE ACCORDINGLY ALLOWED THE CLAIM OF DEDUCTION. WE FIND NO INFIRMITY IN THE SA ME ESPECIALLY WHEN ASSESSEE HAS AVAILED CASH CREDIT FROM THE BANK AND BANK CHAR GED PROCESSING CHARGES DURING THE IMPUGNED ASSESSMENT YEAR. THEREFORE, TH E ORDER OF THE LD. CIT(A) DOES NOT CALL FOR ANY INFERENCE AND ACCORDINGLY THE SAME IS UPHELD. THE GROUND NO.1 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED . 3 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 4. GROUND NO.2 BY THE REVENUE READS AS UNDER :- 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.62,21,309/ - MADE BY THE AO BY MAKING A DISALLOWANCE OF EXPENSES U/S 14A OF THE I.T. ACT, 1 961 READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 BEING RELATED TO THE EXEMPT INCOME? 5. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE A SSESSING OFFICER APPLYING THE PROVISIONS OF SECTION 14A R.W. RULE 8D DISALLOW ED AN AMOUNT OF RS.62,21,309/- ON THE GROUND THAT THE ASSESSEE COMP ANY HAS INVESTED RS.3,07,72,300/- IN SHARES AND SECURITIES, THE DIVI DEND INCOME OF WHICH IS EXEMPT. WE FIND THE LD. CIT(A), FOLLOWING THE DECI SION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S HOLCIM INDIA PVT. LTD . DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS NOT EARNED ANY EXEMPT INCOME DURING THE YEAR. THIS FACTUAL FINDING OF THE LD. CIT(A) THAT THE ASS ESSEE HAS NOT RECEIVED ANY DIVIDEND INCOME DURING THE YEAR COULD NOT BE CONTRO VERTED BY THE REVENUE. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE U/S 14A R.W. RULE 8D BY RELYING ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN ABSENCE OF ANY CONTRAR Y MATERIAL. THE GROUND NO.2 RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 6. GROUND NO.3 BY THE REVENUE READS AS UNDER :- 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,58,231/- MADE BY THE AO ON ACCOUNT OF REPAIRS AND MAINTENANCE U/S 37 OF THE ACT BY IGNORI NG THE FACT THAT THE ASSESSEE HAD TAKEN A CONTRADICTORY STAND BEFORE LD. CIT(A) AS CO MPARED TO ITS CLAIMS BEFORE THE AO? 4 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 7. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS ING OFFICER DISALLOWED AN AMOUNT OF RS.1,58,231/- OUT OF REPAIRS AND MAINTENA NCE OF RS.1,65,575/- CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE HAS CLAIMED REPAIRS OF THE BUILDINGS WHICH IS GIVEN ON LEASE. ACCORDING T O THE ASSESSING OFFICER, THESE EXPENSES ARE COVERED BY DEDUCTION U/S 24(A) AND, TH EREFORE, CANNOT BE ALLOWED AS EXPENSE. FURTHER, THE ASSESSEE COMPANY HAS PAID SALARY OF RS.45,500/- TO PERSONS EMPLOYED AS MAALI AT FARM HOUSE. HE OBSE RVED THAT THE ASSESSEE COMPANY DOES NOT OWN ANY FARM HOUSE. HE, THEREFORE , DISALLOWED THE CLAIM OF MAALI EXPENSES AT RS.45,500/-. THUS, HE DISALLOWED AN AMOUNT OF RS.1,58,231/- I.E. RS.1,12,731/- + RS.45,500/-. 8. IN APPEAL, THE LD. CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE ON THE GROUND THAT THE AMOUNT WAS INCURRED FOR THE PREMISES NO.2 AJMOL KHAN ROAD, KAROLBAGH WHICH IS NEW PREMISES OCCUPIED BY THE ASS ESSEE AS THE BUSINESS HAS SHIFTED FROM CONNAUGHT PLACE TO KAROLBAGH. HE ACCE PTED THE PLEA OF THE ASSESSEE THAT NO RENT WAS PAID FOR THIS PREMISES AN D TO MAKE IT SUITABLE FOR THE BUSINESS THESE REPAIRS WERE UNDERTAKEN. THE MAALI EXPENSES WERE ALSO FOR THE SAID PREMISES. 9. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SEE HAS SHOWN RENT RECEIPT OF RS.2,12,50,000/-. THEREFORE, IT IS NOT COMING O UT CLEARLY FROM THE ORDER OF 5 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 THE LD. CIT(A) AS TO HOW HE ARRIVED AT THE CONCLUSI ON THAT THE REPAIR AND MAINTENANCE EXPENSES RELATED TO THE NEW PREMISES AT AJMOL KHAN ROAD, KAROLBAGH. SINCE THE FACTUAL DETAILS ARE NOT COMIN G OUT CLEARLY, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE DEEM IT PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO ADJUDICATE THIS ISSUE AFRESH AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND RAISED BY THE REVE NUE IS ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.4 BY THE REVENUE AND GROUND NO.2 BY T HE ASSESSEE RELATE TO THE PARTIAL RELIEF GIVEN BY THE LD. CIT(A) ON ACCOU NT OF DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40A(2)(B) UNDER THE HEAD SALARY. 12. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSE E COMPANY HAS DEBITED SALARY OF RS.29,42,930/- WHICH INCLUDE RS.24,00,000 /- PAID TO PERSONS COVERED UNDER THE PROVISIONS OF SECTION 40A(2)(B) OF THE I. T. ACT. ALTHOUGH, THERE WAS DECLINE IN THE BUSINESS DURING THE IMPUGNED ASSESSM ENT YEAR THE ASSESSEE COMPANY HAS PAID HUGE SALARY TO DIFFERENT PERSONS A S COMPARED TO SALARY PAID IN THE PRECEDING ASSESSMENT YEAR, THE DETAILS OF WHICH ARE AS UNDER :- NAME A.Y. 2011-12 A.Y. 2010-11 DIFFERENCE C.L. MEHRA 3,00,000 NIL 3,00,000 PAWAN MEHRA 3,00,000 NIL 3,00,000 LATA RANI MEHRA 3,00,000 NIL 3,00,000 SAKSHI MEHRA 3,00,000 NIL 3,00,000 ARADHANA MEHRA 6,00,000 1,80,000 4,20,000 6 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 ROSHENI MEHRA 6,00,000 1,80,000 4,20,000 TOTAL 24,00,000 3,60,000 20,40,000 13. HE, THEREFORE, ASKED THE ASSESSEE TO JUSTIFY SU CH SALARY PAID TO RELATED PERSONS. IN ABSENCE OF ANY JUSTIFICATION FROM THE SIDE OF THE ASSESSEE, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.20,40, 000/- BEING DIFFERENCE BETWEEN THE SALARY PAID DURING THIS YEAR AND SALARY PAID DURING THE PRECEDING ASSESSMENT YEAR. 14. IN APPEAL, THE LD. CIT(A) CONSIDERED ITEM-WISE AND ALLOWED THE SALARY PAID TO ROSHNI MEHRA AND ARADHANA MEHRA @ RS.50,000 /- EACH PER MONTH ON THE BASIS OF THEIR ACADEMIC QUALIFICATION AND THE N ATURE OF RESPONSIBILITY DISCHARGED BY THEM DURING THE YEAR ESPECIALLY DIVER SIFICATION INTO LEASING OUT OF THE C.P. PREMISES ETC. WHICH BENEFITED THE BUSINESS A LOT. SO FAR AS SALARY PAID TO CHARANJIT LAL MEHRA AND LATA RANI MEHRA AT THE R ATE OF 25,000/- EACH PER MONTH IS CONCERNED, HE SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE TURNOVER DURING THE YEAR HAS CO ME DOWN HEAVILY FROM RS.3.5 CRORES TO RS.0.46 CRORES AND THE ASSESSEE FAILED TO SUBSTANTIATE WITH EVIDENCE, THE SERVICES IF AT ALL RENDERED BY THEM OR THEIR JU STIFIABILITY. SO FAR AS SALARY PAID TO PAWAN MEHRA IS CONCERNED, I.E. AT THE RATE OF 25 ,000/- PER MONTH, HE ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT HE IS ENTRUSTED WITH THE JOBS WHICH INVOLVED COLLECTION OF RENT CHEQUES, DEPOSITS OF CH EQUES WITH THE BANK, FOLLOWING UP ON SERVICE TAX, SUPERVISING THE OFFICE PERSONNEL LOOKING AFTER THE 7 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 COMPANYS MACHINERY INCLUDING THE PERIOD MAINTENANC E ETC AND VARIOUS OTHER RESPONSIBILITIES AS ENTRUSTED TO HIM IN PAGE 9 OF H IS ORDER. SO FAR AS SALARY PAID TO SAKSHI MEHRA AT THE RATE OF 25,000/- PER MONTH, HE SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT TH E ASSESSEE COULD NOT SUBSTANTIATE THE NATURE OF WORK CONDUCTED BY HER. THUS, OUT OF RS.20,40,000/- DISALLOWED BY THE ASSESSING OFFICER, THE LD. CIT(A) SUSTAINED THE AMOUNT OF RS.9,00,000/- AND DELETED THE AMOUNT OF RS.11,40,00 0/-. 15. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE AS WELL AS THE ASSESSEE ARE IN APPEAL BEFORE THE TRIBUNAL. 16. AFTER HEARING BOTH THE SIDES, WE FIND NO INFIRM ITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. HE HAS GIVEN JUSTIFIABLE REA SONS WHILE DELETING OR SUSTAINING THE DISALLOWANCE U/S 40A(2)(B) MADE BY T HE ASSESSING OFFICER. HE HAS CONSIDERED THE QUALIFICATION OF THE CONCERNED P ERSONS AND THE NATURE OF JOB/RESPONSIBILITY OF EACH OF THE PERSONS AND ACCOR DINGLY HE HAS COME TO A CONCLUSION THAT THE SALARY PAID TO ARADHANA MEHRA, ROSHNI MEHRA AND PAWAN MEHRA ARE JUSTIFIED WHERE THE SALARY PAID TO REMAIN ING PERSONS ARE NOT JUSTIFIED. WE DO NOT FIND ANY INFIRMITY IN THE FINDING GIVEN B Y THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS UPHELD AND THE GROUND RAISED BY THE REVENUE AND THE ASSESSEE IS DISMISSED. 8 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 17. GROUND NO.5 BY THE REVENUE AND GROUND NO.3 BY T HE ASSESSEE RELATE TO THE PARTIAL RELIEF ARE GRANTED BY THE LD. CIT(A) OUT OF INTEREST PAID TO THE SPECIFIED PERSONS AS PER THE PROVISIONS OF SECTION 40A(2)(B) OF THE I.T. ACT. 18. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE LOANS A ND ADVANCES GIVEN DURING THE YEAR HAS INCREASED TO RS.1,03,10,277/- FROM RS. 79,88,155/- IN THE PRECEDING YEAR. FROM THE DETAILS FURNISHED BY THE ASSESSEE, HE OBSERVED THAT MOST OF THE ADVANCES ARE ATTRACTED BY PROVISIONS OF SECTION 40A (2)(B) OF THE IT ACT. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN THE REASON S FOR GIVING SUCH ADVANCES TO SUCH PERSONS ATTRACTED BY THE PROVISIONS OF SECTION 40A(2)(B) FROM THE INTEREST BEARING LOAN AND NOT CHARGING ANY INTEREST. IT WAS SUBMITTED THAT C.L. MEHRA OR HIS HUF OR COPARCENERS OF THE HUF REQUIRED FUNDS TO MEET REQUIREMENTS SUCH AS MEDICALS EXPENSES, EDUCATION OF CHILDREN ETC. FOR W HICH THE COMPANY HAS EXTENDED INTEREST FREE LOAN. THE TRADEMARK MEHRAS ONS WAS THE SECURITY HELD BY THE COMPANY FOR THE SAID ADVANCES. IN RESPECT O F ANY WRITTEN AGREEMENT FOR SUCH ARRANGEMENTS, THE ASSESSING OFFICER REJECTED T HE CLAIM OF THE ASSESSEE AND DISALLOWED AMOUNT OF RS.10,47,593/- U/S 37 OF THE I .T. ACT. 19. IN APPEAL, THE LD. CIT(A) DELETED AN AMOUNT OF RS.3,59,976/- OUT OF RS.10,47,593/- AND SUSTAINED THE BALANCE AMOUNT FOR WHICH THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 9 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 20. AFTER HEARING BOTH THE SIDES, WE FIND THE LD. C IT(A) SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE G ROUND THAT THE ASSESSEE FAILED TO PROVE THAT C.L. MEHRA OWNS THE TRADEMARK MEHRASONS AND C.L. MEHRA IS NOT AT ALL THE OWNER OF THE TRADEMARK MEH RASONS AND THE AMOUNT ADVANCED TO C.L. MEHRA CANNOT BE TREATED AS PRUDENT AND EXPEDIENT FOR THE BUSINESS PURPOSES. SIMILARLY, IN THE CASE OF CHAND MEHRA, HE OBSERVED THAT THE ASSESSEE FAILED TO PROVE WITH EVIDENCE THAT ANY SER VICE HAS BEEN RENDERED AT ALL BY CHAND MEHRA TO THE ASSESSEE. HOWEVER, IN THE CA SE OF ADVANCE GIVEN TO MEHRA SONS JEWELERS PVT. LTD. OF RS.23,50,000/-, NA MITA MEHRA OF RS.6,94,914/- AND SAKSHI MEHRA OF RS.2,57,779/- THE SE WERE ALLOWED BY HIM ON THE GROUND THAT THESE ADVANCES ARE FOR BUSINESS PUR POSES. SO FAR AS ADVANCE OF RS.11,71,865/- TO VINAY MEHRA IS CONCERNED, HE GAVE A FINDING THAT THE ASSESSEE FAILED TO PROVE WITH EVIDENCE AS TO WHETHER ANY SER VICE AT ALL HAS BEEN RENDERED BY MR. VINAY MEHRA AND, THEREFORE, HE HELD THAT THE SE ADVANCES ARE NOTHING BUT DIVERSIFYING OF BUSINESS FUND FOR WHICH HE UPHELD T HE DISALLOWANCE OF INTEREST. 21. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE THE TRIBUNAL. 22. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. SO FAR AS DISALLOWANCE OF INTEREST ON ADVANCES PAID TO MEHRA SONS JEWELERS PVT.LTD., NAMITA MEHRA AND SAKS HI MEHRA ARE CONCERNED, THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THESE ADVANCES ARE FOR 10 ITA NO.5749/DEL/2015 ITA NO.5855/DEL/2015 BUSINESS PURPOSE OR SALARY ADVANCE FOR WHICH NO DIS ALLOWANCE OF INTEREST IS CALLED FOR. SO FAR AS ADVANCES TO OTHER PARTIES AR E CONCERNED, LD. CIT(A) HAS GIVEN A FINDING THAT THE ASSESSEE COULD NOT SUBSTAN TIATE WITH EVIDENCE REGARDING THE JUSTIFICATION OF DIVERSIFICATION OF INTEREST BE ARING FUNDS FOR WHICH HE SUSTAINED THE DISALLOWANCE OF INTEREST. UNDER THES E CIRCUMSTANCES AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE LD. CIT(A) O N THIS ISSUE, WE FIND NO INFIRMITY IN HIS ORDER ON THIS ISSUE. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE A SSESSEE AND THE REVENUE ARE DISMISSED. 23. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED AND THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH MARCH, 2018. SD/- SD/- (BEENA A. PILLAI) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20-03-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI