BEEKAYLON SYNTHETICS PVT. LTD., MUMBAI V. DCIT CIR. 1(1)(1), MUMBAI

ITA 5905/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7531 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 04-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VIDYADHARDR
• Section: 143(3); 14A; 115JB

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.5905/MUM/2016 ASSESSMENT YEAR: 2012-13 M/S. BEEKAYLON SYNTHETICS PVT. LTD JASVILLE, 2ND FLOOR, 9 NEW MARINE MUMBAI. LINES, OPP. LIBERTY CINEMA, MUMBAI 400020 / VS. ACIT1(1)(1), ROOM NO.579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 ( ! /ASSESSEE) ( ' / REVENUE) P.A. NO. AACB2976M ITA NO.7353/MUM/2016 ASSESSMENT YEAR: 2012-13 ACIT1(1)(1), ROOM NO.579, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S. BEEKAYLON SYNTHETICS PVT. LTD JASVILLE, 2ND FLOOR, 9 NEW MARINE MUMBAI. LINES, OPP. LIBERTY CINEMA, MUMBAI 400020 ( ' / REVENUE) ( ! /ASSESSEE) P.A. NO. AACB2976M ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 2 ' / REVENUE BY SHRI V. VIDYADHAR-DR ! / ASSESSEE BY SHRI RAKESH JOSHI # '$ % !& / DATE OF HEARING : 24/04/2018 % !& / DATE OF PRONOUNCEMENT 24/04/2018 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE AS WELL AS ASSESSEE IS IN CROSS APPEAL AGAINST THE IMPUGNED ORDER DATED 02/08/2016 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. IN THE APPEAL OF THE A SSESSEE (ITA NO.5905/MUM/2016), THE FIRST AND SECOND GROUND RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING THE ASSESSME NT ORDER DISALLOWING A SUM OF RS.11,12,458/- ON ADHOC BASIS, BEING 1% OF TOTAL PACKAGING EXPENSES OF RS.11,12,45,790/- AN D FURTHER DISALLOWING A SUM OF RS.25,127/- ON AD-HOC BASIS, B EING 1% OF THE TOTAL MISCELLANEOUS EXPENSES OF RS.25,12,775/- WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, INVITED OUR ATTENTION TO THE CASE OF THE ASSESSEE F OR ASSESSMENT YEAR 2011-12 (ITA NO.4073/MUM/2016) ORDE R DATED 04/01/2017, WHEREIN, SUCH ADDITION-HOC DISALL OWANCE ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 3 WAS REDUCED TO BE 50%. THE LD. DR, DID NOT CONTROV ERT THE CLAIM OF THE ASSESSEE TO THE EFFECT THAT THE TRIBUN AL HAS ALREADY TAKE A VIEW. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, THE AFORESAID ORDER OF THE TRIBUNAL DATED 04/01/201 7, IN THE CASE OF THE ASSESSEE, FOR ASSESSMENT YEAR 2011-12 I S REPRODUCED HEREUNDER FOR READY REFERENCE AND ANALYS IS:- THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEV ANT ASSESSMENT YEAR IS 2011-12. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER (APPEALS) 2, MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX AC T, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER:- I. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS WEL L AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF LEARNED ASSESSING OFFICER IN DISALLOWING A SUM OF R S. 8,90,553/- ON ADHOC BASIS BEING 1% OUT OF THE TOTAL PACKING EXPENSES OF RS. 8,90,55,258/- WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. II. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LEARNED ASSESSING OFFICER IN DISALLOWING A SUM OF R S. 2,11,355/- ON ADHOC BASIS BEING 1% OUT OF THE TOTAL PACKING EXPENSES OF RS. 2,11,35,583/- WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 4 3. BRIEFLY STATED, THE FACTS ARE THAT THE ASSESSING OFFICER (AO) FOUND DURING THE COURSE OF ASSESSMENT PROCEEDING TH AT MOST OF THE EXPENSES IN RESPECT OF PACKING MATERIALS OF RS. 8,90,55,258/- AND MISCELLANEOUS EXPENSES OF RS. 2,11,35,583/- HAVE BEEN INCURRED BY RAISING SELF-MA DE VOUCHERS NOT SUPPORTED BY SPECIFIC BILLS. THE AO RE FERRED TO THE DISALLOWANCE @1% MADE IN RESPECT OF SIMILAR EXP ENSES FROM A.Y. 2006-07 TO 2010-11 AND THEN DISALLOWED 1% OF PACKING MATERIAL AND MISCELLANEOUS EXPENSES WHICH C OMES TO RS. 8,90,553/- AND RS. 2,11,355/- RESPECTIVELY. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEAR NED CIT(A). WE FIND THAT THE LEARNED CIT(A) AGREED WITH THE REASONS GIVEN BY THE AO THAT THE EXPENSES ARE SUPPO RTED BY SELF-MADE VOUCHERS WHICH ARE NOT VERIFIABLE IN NATU RE. THE LEARNED CIT(A) ALSO NOTED THAT THE ASSESSEE GAVE TH E SAME SUBMISSION WHICH WAS GIVEN BEFORE THE AO AT THE TIM E OF ASSESSMENT PROCEEDINGS AND NO FRESH EVIDENCES COULD BE FILED BEFORE HIM DURING THE APPELLATE PROCEEDINGS. AS THE VOUCHERS ARE SELF-MADE ONES, POSSIBILITY OF INFLATION OF EXP ENDITURE CANNOT BE RULED OUT, THEREFORE, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 8,90,553/- AND RS. 2,11,355 /- MADE BY THE AO. 5. BEFORE US, THE LEARNED COUNSEL OF THE ASSESSEE R EFERRED TO THE ORDER OF THE LEARNED CIT(A) FOR THE A.Y. 2010-1 1, WHEREIN THE DISALLOWANCE OF 1% OF PACKING MATERIAL EXPENSES AND MISCELLANEOUS EXPENSES MADE BY T HE AO WERE DELETED FOLLOWING THE ORDER OF THE LEARNED CIT(A) FOR A.Y. 2008-09 AND 2009-10. 6. THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNE D CIT(A) FOR THE IMPUGNED ASSESSMENT YEAR CONFIRMING THE DISALLOWANCE OF THE ABOVE EXPENSES MADE BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT A SIMILAR ISSUE AROSE ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 5 BEFORE THE COORDINATE BENCH IN THE CASE OF THE ASSE SSEE FOR THE A.Y. 2005-06 [ITA NO. 6506/MUM/2008]. THE TRIBUNAL ON SIMILAR FACTS REDUCED THE DISALLOWANCE TO RS. 50,00 0/- FROM THE DISALLOWANCE OF RS. 1,20,040/- MADE BY THE AO. CONS IDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE FACT THAT THE ASSESSEE FAILED TO FILE BEFORE THE LEARNED CIT(A) ANY FRESH EVIDENCE, WE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE JUST AND FAIR IF AN ESTIMATED ADDITION IS MADE TOWA RDS SUCH EXPENSES AT RS. 6,00,000/-. THE AO IS DIRECTED TO R ESTRICT THE DISALLOWANCE TO RS. 6,00,000/- . 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 2.2. WE FIND THAT ON IDENTICAL ISSUE AN AD-HOC DISALLOWANCE WAS MADE BY THE LD. ASSESSING OFFICER AND FINALLY BEFORE THIS TRIBUNAL FOR ASSESSMENT YEAR 2011-12, C ONSIDERING THE FACTS AND THE DECISION OF THE COORDINATE BENCH FOR ASSESSMENT YEAR 2005-06 (ITA NO.6506/MUM/2008) , TH E AD- HOC DISALLOWANCE WAS REDUCED. FOLLOWING THE AFORESA ID DECISION, THE DISALLOWANCE SO SUSTAINED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS REDUCED TO 5 0%, THUS, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 3. THE NEXT GROUND PERTAINS TO DISALLOWANCE OF EXPENSES OF RS.11,37,585/-, BEING 1% ON ADHOC BASIS OUT OF THE TOTAL PACKING EXPENSES AND MISCELLANEOUS EXPENS ES, WHILE COMPUTING THE BOOK PROFIT U/S 115 JB OF THE ACT HAS BEEN ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 6 CHALLENGED. IT WAS CONTENDED THAT NO SUCH ADDITION IS REQUIRED FOR WHICH RELIANCE WAS PLACED UPON THE DECISION IN THE CASE OF APOLLO TYRES (255 ITR 273) 3.1. IF THE SPECIAL PROVISION U/S 115JB OF THE ACT FOR PAYMENT OF TAX BY CERTAIN COMPANIES IS ANALYZED, IT SAYS THAT WHERE IN THE CASE OF THE ASSESSEE BEING A COMPANY, THE INCOME TAX PAYABLE ON THE TOTAL INCOME AS COMPUTED UNDER THIS ACT IN RESPECT OF ANY PREVIOUS YEAR, RELEVANT TO ASSESSMENT YEAR COMMENCING ON OR AFTER, THE 1 ST DAY OF APRIL 2012 AS SUBSTITUTED FOR 2011 BY THE FINANCE ACT, 20 11 W.E.F 01/04/2012 IS LESS THAN EIGHTEEN AND ONE HALF PERC ENT OF ITS BOOKS PROFIT. SUCH BOOKS PROFIT SHALL DEEM TO THE T OTAL INCOME OF THE ASSESSEE AND THE TAX PAYABLE BY THE ASSESSEE ON SUCH INCOME SHALL BE THE AMOUNT OF INCOME TAX. OUR VIEW FIND SUPPORT FROM THE DECISION IN THE CASE OF APOLLO TYR ES 255 ITR 273 (SUPREME COURT). THUS, NO FURTHER DISALLOWANCE WAS REQUIRED TO BE MADE. THIS GROUND OF THE ASSESSEE IS ALLOWED. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 4. NOW, WE SHALL TAKE UP THE CROSS APPEAL OF THE REVENUE (ITA NO.7535/MUM/2016), WHEREIN, DELETING T HE ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 7 DISALLOWANCE OF RS.59,39,938/- MADE U/S 14A READ WI TH RULE- 8D OF THE RULES HAS BEEN CHALLENGED MERELY ON THE B ASIS OF THE DECISION OF THE TRIBUNAL IN CIT VS GRAVISS HOSPITAL ITY LTD. (ITA NO.3542/MUM/2013) ORDER DATED 31/11/2014. 4.1. DURING HEARING, THE LD. DR, DEFENDED THE ADDI TION MADE BY THE LD. ASSESSING OFFICER, WHEREAS, THE LD. COUNSEL FOR THE ASSESSEE, DEFENDED THE ORDER OF THE LD. COM MISSIONER OF INCOME TAX (APPEAL). 4.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE MADE SUO-MOTO DISALLOWANCE OF RS.11,17,815/- U/S 14A. THE LD. ASSESSING OFFICER M ADE FURTHER DISALLOWANCE OF RS.59,39,938/-. THE LD. ASS ESSING OFFICER WHILE MAKING THE DISALLOWANCE APPLIED THE F ORMULA UNDER RULE-8D OF THE ACT. WITHOUT GOING INTO MUCH DELIBERATION, WE FIND THAT THIS ISSUE WAS DELIBERAT ED UPON BY HON'BLE BOMBAY HIGH COURT IN THE GODREJ & BOYCE MFG . LTD. (328 ITR 81) AND ALSO MADE DISCUSSION ON RULE-8D OF THE RULES. AS PER WHICH THE AMOUNT OF EXPENDITURE BY WA Y OF INTEREST THAT WILL BE TAKEN (AS A IN THE FORMULA) W ILL EXCLUDE ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 8 ANY EXPENDITURE BY WAY OF INTEREST WHICH IS DIRECTL Y ATTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. T HE CASE OF THE ASSESSEE IS FURTHER FORTIFIED BY THE DECISION O F THE TRIBUNAL IN THE CASE OF CIT VS GRAVISS HOSPITALITY LTD. (ITA NO.3542/MUM/2013) ORDER DATED 21/11/2014, WHEREIN, THE TRIBUNAL DELETED THE DISALLOWANCE MADE U/S 14A R.W. S. 8D AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF SUO-MO TO MADE BY THE ASSESSEE. IN THE PRESENT APPEAL, THE ASSESSEE H AS ALSO MADE SUO-MOTO DISALLOWANCE OF RS.11,17,815/- U/S 14 A AS PER THE CALCULATION FILED WITH THE COMPUTATION. WE AFFIRM THE STAND DRAWN BY THE LD. COMMISSIONER OF INCOME TAX ( APPEAL), RESULTING INTO, DISMISSAL OF APPEAL OF THE REVENUE. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND THAT OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/04/2018. SD/- (G. MANJUNATHA) SD/- (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; + DATED : 24/04/2018 F{X~{T? P.S/. . . , ITA NOS.5905 & 7535/MUM/2016 BEEKAYLON SYNTHETICS PVT. LTD. 9 %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. 2 2 # 3! , ( ,- ) / THE CIT, MUMBAI. 4. 2 2 # 3! / CIT(A)- , MUMBAI 5. 5'6 0! , 2 ,-& , , # $ / DR, ITAT, MUMBAI 6. 7 8$ / GUARD FILE. / BY ORDER, 15-! 0! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI