SAROJ ANIL STEEL P.LTD, THANE V. ITO WD NO 3(4), THANE

ITA 5854/MUM/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8435 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 1999-2000
• Appeal Filed On: 25-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: DINESH SHAH
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC , MUMBAI BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO. : 5854/MUM/2012 ASSESSMENT YEAR : 1999-2000 M/S. SAROJ ANIL STEEL PVT. LTD. 21/103, TULSIDHAM, BLDG NO.21, GHODBUNDER ROAD, THANE VS. ITO, WARD NO.3(4), THANE (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DINESH SHAH RESPONDENT BY : SHRI MANOJ KUMAR DATE OF HEARING : 30 .10.2012 DATE OF PRONOUNCEMENT : 30 .10.20 12 ORDER PER RAJENDRA SINGH, A.M. : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 16.07.2012 OF CIT(A)-I, THANE FOR THE A.Y. 1999-200 0. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING DISALLOWANCE OF EXPENSES COMPUTING THE INCOME FROM HAWALA BUSINESS. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE HAD CLA IMED THAT HE WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF IRO N AND STEEL. HOWEVER, IT WAS FOUND THAT THE ASSESSEE WAS ONLY DOING HAWAL A BUSINESS IN IRON AND STEEL WITHOUT ANY ACTUAL DELIVERY OF GOODS. TH E ASSESSEE WAS THUS SHOWING PURCHASE AND SALE ENTRIES ON WHICH HE WAS E ARNING COMMISSION. ITA NO : 5854/MUM/2012 M/S. SAROJ ANIL STEEL PVT. LTD. 2 THERE IS NO DISPUTE RAISED IN THIS APPEAL THAT THE ASSESSEE WAS DOING THE HAWALA BUSINESS. THE ONLY DISPUTE IS REGARDING THE COMPUTATION OF INCOME FROM HAWALA BUSINESS. THE ASSESSEE HAD DECL ARED THE TOTAL TURNOVER OF `. 4,66,42,149/- FROM THE HAWALA BUSINESS. THE EXPEN SES CLAIMED BY THE ASSESSEE WERE `. 4,01,682/- ON ACCOUNT OF ADMINISTRATIVE EXPENSES AND `. 1,17,440/- ON ACCOUNT OF SALE PROMOTION, BROKERAGE AND WAREHOUSE CHARGES AND `. 1,04,703/- ON ACCOUNT OF INTEREST, WHICH IS CLEAR FROM THE COPY OF THE P & L ACCOUNT PLACED AT PAGE NO. 8 OF THE PAPER BOOK. THERE WERE DISPUTES REGARDING THE ASSESSMENT OF GROSS INCOME FROM HAWALA BUSINESS AND ALLOWABILITY OF EXPENSES C LAIMED. IN THE FIRST ROUND OF APPEAL, THE CIT(A) HAD DIRECTED THE A.O. T O ESTIMATE THE COMMISSION FROM HAWALA AT THE RATE OF 0.4% OF TURNO VER. IN FURTHER APPEAL, THE TRIBUNAL HELD THAT THE COMMISSION FROM HAWALA BUSINESS SHOULD BE ESTIMATED AT THE RATE OF 1% OF THE TOTAL TURNOVER IN THE ORDER DATED 16.11.2005 IN ITA NO.4319/M/2003. THE TRIBUN AL IN THE SAID ORDER DIRECTED THE A.O. TO ESTIMATE THE INCOME FROM BUSINESS AT 1% OF THE TURNOVER SUBJECT TO ALLOWING DEDUCTION TOWARDS STAT UTORY PAYMENTS, EXPENDITURE ON INTEREST AND OFFICE EXPENSES. THE A .O. HOWEVER, IN THE ORDER DATED 30.11.2006 ALLOWED THE EXPENSES ONLY TO THE TUNE OF `. 2,29,344/- WHICH INCLUDED A SUM OF `. 60,000/- AS OFFICE EXPENSES ON ESTIMATE. THE ASSESSEE DISPUTED THE DECISION OF TH E A.O. AND THE MATTER AGAIN REACHED THE STAGE OF THE TRIBUNAL AND THE TRI BUNAL VIDE ORDER DATED ITA NO : 5854/MUM/2012 M/S. SAROJ ANIL STEEL PVT. LTD. 3 11.09.2008 IN ITA NO.6060/M/07 HELD THAT THE ASSESS EE WILL NOT BE ENTITLED TO SALE PROMOTION, COMMISSION AND WAREHOUS E EXPENSES. THE TRIBUNAL HOWEVER, HELD THAT ALL THE OTHER EXPENSES INCURRED BY THE ASSESSEE FOR RUNNING OF THE OFFICE INCLUDING THE OF FICE RENOVATION, CONVEYANCE ETC. HAVE TO BE ALLOWED, IF, FOUND GENUI NE. THE TRIBUNAL ACCORDINGLY RESTORED THE ISSUE TO THE FILE OF THE A .O. FOR FRESH COMPUTATION OF THE INCOME. 2.1 IN THE FRESH ORDER DATED 22.12.2009 WHICH IS TH E IMPUGNED ORDER, THE A.O. ALLOWED THE ADMINISTRATIVE EXPENSES AT `. 3,52,721/- AGAINST THE CLAIM OF `. 4,01,682/- AFTER DISALLOWING CERTAIN EXPENSES ON ES TIMATE AMOUNTING TO `. 48,961/-. THE A.O. ALSO ALLOWED THE DEPRECIATION O F `. 21,604/- AND PRELIMINARY EXPENSES OF `. 950/- AND COMPUTED THE TOTAL INCOME AT `. 91,150/-. THE ASSESSEE DISPUTED THE DECISION OF TH E A.O. TO DISALLOW THE EXPENSES ON ESTIMATE BASIS AND ALSO RE GARDING THE DISALLOWANCE OF INTEREST OF `. 1,04,703/-. THE CIT(A) CONFIRMED THE DISALLOWANCE OF EXPENSES ON ESTIMATE AND REGARDING THE CLAIM OF INTEREST EXPENSES, THE CIT(A) OBSERVED THAT THE A.O. HAD NOT DISALLOWED THE SAME AND, THEREFORE, REJECTED THE GROUND RAISED BY THE A SSESSEE. AGGRIEVED BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING OF APPEAL BEFORE ME THE L EARNED AR FOR THE ASSESSEE ONLY PRESSED THE DISALLOWANCE OF INTEREST OF `. 1,04,703/-. IT WAS ITA NO : 5854/MUM/2012 M/S. SAROJ ANIL STEEL PVT. LTD. 4 SUBMITTED THAT THE CIT(A) WAS NOT CORRECT IN STATIN G THAT THE A.O. HAD NOT DISALLOWED THE INTEREST. HE REFERRED TO THE ASSESSM ENT ORDER IN WHICH THE A.O. FROM THE GROSS INCOME FROM COMMISSION OF `. 4,66,421/- ESTIMATED AT 1% AS PER THE DIRECTION OF THE TRIBUNAL, HAD ALLOWE D ONLY THE ADMINISTRATIVE EXPENSES AFTER REDUCING THE SAME BY `. 48,961/- AND DEPRECIATION AND PRELIMINARY EXPENSES. IT WAS POIN TED OUT THAT IT WAS OBVIOUS THAT THE INTEREST EXPENSES HAVE NOT BEEN AL LOWED. IT WAS ACCORDINGLY URGED THAT THE CLAIM OF THE ASSESSEE SH OULD BE ALLOWED. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THAT THE D ISALLOWANCE OF INTEREST WAS NOT THE ISSUE BEFORE THE TRIBUNAL IN T HE EARLIER ROUNDS OF APPEAL. IT WAS ALSO POINTED OUT THAT THE INTEREST HAD NOT BEEN DISALLOWED BY THE A.O. AND, THEREFORE, THERE WAS NO QUESTION O F ALLOWING THE SAME AGAIN. 4. I HAVE PERUSED THE RECORDS AND CONSIDERED THE MA TTER CAREFULLY. THE DISPUTE IS REGARDING THE ALLOWABILITY OF INTERE ST EXPENSES OF `. 1,04,703/- WHILE COMPUTING THE HAWALA INCOME. THE G ROSS INCOME FROM HAWALA TRANSACTIONS WAS COMPUTED BY THE A.O. AT THE RATE OF 1% WHICH CAME TO `. 4,66,421/-. THE ASSESSEE HAD CLAIMED EXPENSES OF `. 4,01,682/- AS ADMINISTRATIVE EXPENSES, `. 1,17,440/- ON ACCOUNT OF SALE PROMOTION, BROKERAGE AND WAREHOUSING CHARGES AND `. 1,04,703/- AS INTEREST EXPENSES. THE TRIBUNAL IN THE FIRST GROUND OF APPE AL IN THE ORDER DATED ITA NO : 5854/MUM/2012 M/S. SAROJ ANIL STEEL PVT. LTD. 5 16.11.2005 IN ITA NO.4319/M/03 HAD DIRECTED THE A.O . TO ALLOW THE DEDUCTION TOWARDS STATUTORY PAYMENTS, EXPENDITURE O N INTEREST AND OFFICE EXPENSES FROM THE ESTIMATED COMMISSION INCOME AT TH E RATE OF 1%. THE A.O. HOWEVER, HAD ALLOWED THE EXPENSES ONLY TO THE TUNE OF `. 2,29,344/-. THE ASSESSEE RAISED THE DISPUTE AND THE MATTER AGA IN REACHED THE STAGE OF THE TRIBUNAL AND THE TRIBUNAL IN THE ORDER DATED 11.09.2008 IN ITA NO.6060/M/07 HELD THAT THE ASSESSEE WOULD NOT BE EN TITLED TO COMMISSION, SALE PROMOTION AND WAREHOUSING EXPENSES , BUT ALL THE REMAINING EXPENSES FOR RUNNING OF THE OFFICE INCLU DING OFFICE RENOVATION HAD TO BE ALLOWED AFTER VERIFYING THE GENUINENESS. THUS IN TERMS OF THE ORDER OF THE TRIBUNAL, ALL OTHER EXPENSES REQUIRED FOR RUNNING OF THE BUSINESS HAVE TO BE ALLOWED. IN FACT THE TRIBUNAL IN THE EARLIER GROUND HAD ALREADY DIRECTED TO ALLOW THE INTEREST EXPENSES . HOWEVER, WE FIND THAT THE A.O. IN THE IMPUGNED ORDER DATED 22.12.2009 HAS NOT ALLOWED THE INTEREST EXPENSES WHICH IS CLEAR FROM THE COMPUTATI ON OF INCOME GIVEN IN THE PARA 7 OF THE ASSESSMENT ORDER. THEREFORE, THE CIT(A) IS NOT CORRECT IN STATING THAT THE A.O. HAD NOT DISALLOWED THE INTERE ST EXPENSES. THERE IS ALSO NO FINDING BY THE A.O. THAT THE INTEREST EXPEN SES WERE NOT GENUINE. THEREFORE, IN OUR VIEW, THE ORDER OF THE CIT(A) WHI CH IS BASED ON WRONG FACTS CANNOT BE SUSTAINED. I, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND ALLOW THE CLAIM OF INTEREST OF `. 1,04,703/-. ITA NO : 5854/MUM/2012 M/S. SAROJ ANIL STEEL PVT. LTD. 6 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER, 2012. SD/ - ( RAJENDRA SINGH ) ACCOUNTANT MEMBER MUMBAI, DT: 30.10.2012 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI