MUKESH BABULAL RACHH, MUMBAI V. INCOME TAX OFFICER 17(2)(4), MUMBAI

ITA 6066/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2654 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 23-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: R C JAIN
• Keywords: Principle of natural justice; Additional evidence; Reason to believe; TDS
• Section: 40A(3); 40(a)(ia); 133(6); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6066/MUM/2018 ASSESSMENT YEAR : 2014-15 MUKESH BABULAL RACHH, OFFICE NO. 5, ANNA BHUVAN, 87/G, DEVJI RATANJI MARG, GROUND FLOOR, BROACH ROAD, MASJID (EAST), MUMBAI [PAN : AAEPR3683E] VS. THE INCOME TAX OFFICER- 17(2)(4), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.C. JAIN RESPONDENT BY : SHRI D.G. PANSARI, SR.AR-CIT DATE OF HEARING : 06-03-2019 DATE OF PRONOUNCEMENT : 08-03-2019 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL, CHALLENGING THE ORDER DATED 30-08-2018 PASSED BY THE LD. COMMISSIONER OF IN COME TAX (APPEALS)-28, MUMBAI AND IT RELATES TO THE AY. 201 4-15. ITA NO. 6066/MUM/2018 : 2 : THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD.CIT (A) RENDERED ON THE FOLLOWING ISSUES: (A) DISALLOWANCE OF REIMBURSEMENT OF EXPENSES (B) DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT (C) DIRECTION GIVEN U/S 150(1) OF THE ACT 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEAL ING IN DEPB LICENCE. THE FIRST ISSUE RELATES TO THE DISALLOWA NCE OF REIMBURSEMENT OF EXPENSES. THE ASSESSEE HAD CLAIMED A SUM OF RS.26.47 LAKHS AS REIMBURSEMENT OF EXPENSES. TH E AO WAS OF THE VIEW THAT THE SAME HAS BEEN PAID TO A PERSON NAM ED MANOJ PANDEY AND ISSUED NOTICE U/S 133(6) OF THE ACT. SINCE THE NOTICE WAS RETURNED WITH THE REMARKS NOT KNOWN, THE AO DEPUTED INSPECTOR TO SERVE THE NOTICE. HOWEVER, THE INS PECTOR REPORTED THAT NO SUCH ADDRESS OR NO SUCH PERSON EXISTS . NO OTHER DETAILS WERE FURNISHED BY THE ASSESSEE. HENCE THE AO DISALLOWED THE ENTIRE CLAIM OF RS.26.47 LAKHS. THE L D CIT(A) ALSO CONFIRMED THE SAME. 3. WE HEARD THE PARTIES ON THIS ISSUE. THE LD A.R DID NOT IMPROVE THE CASE OF THE ASSESSEE IN RESPECT OF PAYMEN TS MADE TO MANOJ PANDEY EXCEPT STATING THAT THE DISALLOWANCE MAY B E ITA NO. 6066/MUM/2018 : 3 : RESTRICTED TO 20% OF THE EXPENSES AS PER SECTION 40A(3) , AS THE PAYMENTS HAVE BEEN MADE BY WAY OF CASH. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS PAID A SUM OF RS.19.99 LAKHS ONLY TO MANOJ PANDEY AND THE REMAINING AMOUNTS WERE PAID TO M/S SONAL ENTERPRISES AND SHRI KRISHNA P VAID YA. THE LD A.R FURNISHED CERTAIN DOCUMENTS AS ADDITIONAL EVIDENCES TO SUPPORT HIS CASE. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF EXPENSES AND HENCE THE LD CIT(A) HAS CONFIRMED THE ADDITION. 4. THE QUESTION OF INVOKING THE PROVISIONS OF S EC.40A(3) SHALL ARISE ONLY IF THE EXPENDITURE IS OTHERWISE PROVE D. IN THE INSTANT CASE, THE TAX AUTHORITIES HAVE DISALLOWED THE CL AIM OF EXPENDITURE, SINCE THE ASSESSEE HAS FAILED TO PROVE THE SAME. HENCE WE DO NOT FIND MERIT IN THE SUBMISSION OF LD A .R THAT THE DISALLOWANCE MAY BE RESTRICTED TO 20% OF EXPENSES BY FOLLOWING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. SINCE THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF EXPEN SES INCURRED ON MANOJ PANDEY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE . HOWEVER, THE ASSESSEE HAS SUBMITTED THAT THE AMOUNT PAID TO MANOJ ITA NO. 6066/MUM/2018 : 4 : PANDEY WAS ONLY RS.19,99,250/-. ACCORDINGLY WE CON FIRM THE DISALLOWANCE TO THE TUNE OF RS.19,99,250/-. THE BALANC E AMOUNT HAS BEEN CLAIMED TO HAVE BEEN PAID TO M/S SONAL ENTERPRISE (RS.5.00 LAKHS) AND SHRI KRISHNA P VAIDYA (RS.2.20 LAKHS). SINCE BOTH THESE PAYMENTS REQUIRE EXAMINATION, WE RESTORE THEM TO THE FILE OF THE ASSESSING OFFICER FOR EX AMINING THEM. 5. THE NEXT ISSUE RELATES TO THE DISALLOWANCE MADE U /S 40(A)(IA) OF THE ACT. THE AO DISALLOWED INTEREST EXPENS ES OF RS.7,35,036/- PAID ON UNSECURED LOANS AS THE ASSESSE E FAILED TO PROVE THAT DUE TDS WAS DEDUCTED FROM THE PAYMENTS. T HE LD CIT(A) ALSO CONFIRMED THE SAME. 6. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS PAID INTEREST TO FOUR PARTIES, OUT OF WHICH HE HAS DEDUCTED TAX AT SOUR CE FROM THE PAYMENTS MADE TO TWO PARTIES. WITH REGARD TO THE REMAINING TWO PARTIES, THE LD A.R SUBMITTED THAT THE PAYE ES HAVE DECLARED THE INCOME IN THEIR RESPECTIVE RETURN OF INCOME AND HENCE THE BENEFIT OF THE PROVISO TO SECTION 40(A)( IA) OF THE ACT BE GIVEN TO THE ASSESSEE. ITA NO. 6066/MUM/2018 : 5 : 7. WE HEARD LD D.R ON THIS ISSUE AND PERUSED THE RECORD. SINCE THESE DETAILS REQUIRE EXAMINATION, IN THE INTERE ST OF NATURAL JUSTICE, WE SET ASIDE THE ORDER PASSED BY LD CI T(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FOR EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH THE LAW. 8. THE LAST ISSUE RELATES TO THE DIRECTION GIVEN BY LD CIT(A) U/S 150(1) OF THE ACT. THE FACTS RELATING THERETO ARE DISCUSSED IN BRIEF. AS NOTICED EARLIER, THE LD CIT(A) CONFIRM ED THE DISALLOWANCE OF REIMBURSEMENT OF EXPENSES. IN VIEW OF THE SAME, THE LD CIT(A) ALSO GAVE FOLLOWING DIRECTION TO T HE AO: 6. THE A.O IS DIRECTED FURTHER TO VERIFY PAST AND SUBSEQUENT YEARS OF ROI FILED BY ASSESSEE TO EXAMINE WHETHER T HESE EXPENSES HAVE BEEN CLAIMED THEREIN ALSO. IF SO, AFT ER CONDUCTING APPROPRIATE ENQUIRY/RETURN OF INCOME VER IFICATION AND RECORDING REASON TO BELIEVE THE ASSESSMENT SHOU LD BE REOPENED U/S 147. INSTRUCTION ISSUES U/S 150(1) PO WER VESTED IN ME. 9. THE CONTENTION OF LD A.R IS THAT THE POWER GIVEN U/S 150(1) OF THE ACT IS RESTRICTED TO THE ISSUES CONSIDERED BY LD CIT(A) IN A PARTICULAR YEAR AND THE FINDING/DIRECTION GIVEN BY HIM ON THAT ISSUE SHALL HAVE BEARING IN ANOTHER YEAR . AS AN ILLUSTRATION, THE LD A.R SUBMITTED THAT THE LD CIT(A) MAY H OLD ITA NO. 6066/MUM/2018 : 6 : THAT A PARTICULAR INCOME IS NOT ASSESSABLE IN THE YEAR U NDER CONSIDERATION, BUT ASSESSABLE IN ANOTHER YEAR. HE SU BMITTED THAT THIS KIND OF FINDING IS CONTEMPLATED IN SEC.150(1) OF THE ACT. HE SUBMITTED THAT THE EXPENSES HAVE BEEN DISALLOWED IN THE CURRENT YEAR FOR WANT OF PROPER EXPLANATIONS AND TH E LD CIT(A) HAS CONFIRMED THE DISALLOWANCE FOR THE VERY SA ME REASON. THE DIRECTION GIVEN BY THE LD CIT(A) WAS GEN ERAL IN NATURE COVERING PAST AND SUBSEQUENT YEARS. HE SUBMITTED THAT SUCH KIND OF DIRECTION CANNOT BE GIVEN BY LD CIT(A ). 10. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS NOT GIVEN ANY BLANKET DIRECTION TO REOPEN THE ASSESSMENT OF ANY OTHER YEARS. HE SUBMITTED THAT THE LD CIT(A) HAS STATED THE AO SHOULD CONDUCT APPROPRIATE ENQUIRIES AND AFTER RECORDING REASONS, THE ASSESSMEN T SHOULD BE REOPENED. THE LD D.R SUBMITTED THAT THERE IS NOTHIN G WRONG IN THE DIRECTION SO GIVEN. 11. WE HEARD THE PARTIES ON THIS ISSUE AND PERUSED T HE RECORD. THE SCOPE OF FINDING OR DIRECTION THAT CAN BE GIVEN BY THE APPELLATE AUTHORITY WITHIN THE MEANING OF SECTION 15 0(1) HAS BEEN EXPLAINED BY THE HON'BLE COURTS. IN THE CASE OF ITA NO. 6066/MUM/2018 : 7 : PEICO ELECTRONICS AND ELECTRICALS LTD. (210 ITR 991), THE HON'BLE CALCUTTA HIGH COURT OBSERVED THAT THOUGH THE POWE RS OF THE FIRST APPELLATE AUTHORITY ARE CO-TERMINUS WITH TH AT OF THE AO AND HAS POWERS TO ENHANCE THE ASSESSMENT BUT THAT IS CONFINED TO THE ASSESSEE AND A FINDING OR DIRECTION, WHILE DISPOSING OF THE APPEAL, MUST BE A FINDING N ECESSARY FOR GIVING RELIEF IN RESPECT OF THE ASSESSMENT YE AR IN QUESTION. IN THE CASE OF CIT VS. BANWARI LAL & SONS P. LTD. 257 ITR 518 AT PAGE 522 THE HON'BLE DELHI HIGH CO URT APPROVED THE FINDINGS OF THE APPELLATE TRIBUNAL BY OBSERVING AS UNDER: BEFORE CLOSING, WE WOULD LIKE TO SAY A WORD ABOUT THE DIRECTION OF THE LEARNED APPELLATE ASSISTANT COMMIS SIONER TO THE INCOME-TAX OFFICER TO BRING THE AMOUNT IN QUESTION TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY IN THE RESPECT IVE ASSESSMENT YEARS TO WHICH THE INCOME RELATES. THIS DIRECTI ON OF THE LEARNED APPELLATE ASSISTANT COMMISSIONER HAS TO BE CONSTRUE D IN THE LIGHT OF THE DECISION OF THE SUPREME COURT IN THE CASE OF RAJINDERNATH V. CIT [1979] 120 ITR 14. IT WAS NOT AT ALL N ECESSARY FOR THE DISPOSAL OF THE ASSESSEES APPEAL FOR THIS Y EAR TO GIVE SUCH A DIRECTION AND, THEREFORE, THE SAME COULD NOT BE T REATED AS A DIRECTION GIVEN BY THE LEARNED APPELLATE ASSISTANT COMMISSIONER AS CONTEMPLATED IN SECTION 153(3)(II). 12. IN THE INSTANT CASE, WE NOTICE THAT THE IMPUGNED DIRECTIONS GIVEN BY LD CIT(A), WHICH ARE EXTRACTED AB OVE, WERE NOT AT ALL NECESSARY FOR DISPOSING OF THE ISSUE BEFOR E HIM AND ITA NO. 6066/MUM/2018 : 8 : ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN GIVING THE ABOVE SAID DIRECTION. ACCORDI NGLY, WE SET ASIDE THE SAME. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREAT ED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF MARCH, 2019 SD/- SD/- (RAVISH SOOD) (B.R. BASKARAN) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /MUMBAI; /DATED : 8 TH MARCH, 2019 TNMM ITA NO. 6066/MUM/2018 : 9 : / COPY OF THE ORDER FORWARDED TO : 1. !' / THE APPELLANT 2. #!' / THE RESPONDENT 3. $ % ( ) / THE CIT(A), MUMBAI 4. $ % / CIT, MUMBAI 5. ()* +, , $ .+,$/ , / DR, ITAT, MUMBAI 6. *012 / GUARD FILE $ / BY ORDER, # //TRUE COPY// / $ (DY./ASST. REGISTRAR) $ .+,$/, / ITAT, MUMBAI