MANGESH JAYWANT BORSE, MUMBAI V. ITO WD 20(2)(2), MUMBAI

ITA 635/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8865 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-04-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 01-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Fair market value

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALB BENCH, MUMBAI . . , , , , BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.635/MUM/2012 ( / ASSESSMENT YEAR: 2001-02) SHRI MANGESH JAYWANT BORSE 4, NEW NEELAM MACHLIMMARE, VERSOVA ROAD ANDHERI (W), MUMBAI - 400061 / VS. INCOME TAX OFFICER WARD 20(2)(2) 6 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI. ./ ./ PAN/GIR NO. : AAGAB9277N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING:17.10.2016 /DATE OF PRONOUNCEMENT:.25.01.2017 / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 07.12.2011 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-31, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2001-02. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- ASSESSEE BY: SHRI REEPAL TRALSHAWALA DEPARTMENT BY: SHRI PRADEEP KUMAR SINGH ITA NO.635/M/12 A.Y. 2001-02 2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)ERRED IN CONFIRMING THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, LEVIED BY THE ASSESSING OFFICER ON DISALLOWANCE OF ADVERTISEMENT EXPENSES DUE TO NON- PRODUCTION OF INDIVIDUAL LABOUR CONTRACTORS BEING THIRD PARTIES TO THE TRANSACTION DURING THE RE-ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S. 263 OF THE I.T.ACT., DISREGARDING THE FACT THAT THE APPELLANT HAS HIS BUSINESS ACTIVITY IN THE SAME NATURE. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE PENALTY DISREGARDING THE FACT THAT ALL LABOUR CONTRACTORS CANNOT BE PRODUCED, SINCE THEY ARE NOT NORMALLY FOUND AT THE SAME PLACE AFTER FIVE YEARS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE PENALTY LEVIED ON THE ENTIRE ADDITIONS DISREGARDING THE FACT THAT PENALTY WERE INITIATED ONLY ON THE CONFIRMED ADDITION OF RS.23,64,359/- OUT OF TOTAL ADDITION OF RS.40,28,359/- RELATING THERETO. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE PENALTY DISREGARDING THE FACT THAT THE A.O. HAS NOT RECORDED ANY FINDING ADVERSE TO THE RETURN AND EXPLANATION MADE BY THE APPELLANT AND HAS ALSO ACCEPTED THE BOOKS OF ACCOUNTS EVEN IN THE RE-ASSESSMENT U/S.143(3) R.W.S. 263 OF THE I.T.ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT) ON 13.05.2003 DETERMINING TOTAL INCOME TO THE TUNE OF RS.10,32,390/- AS AGAINST THE RETURNED INCOME OF RS.9,49,170/-. THE SAID ORDER WAS SET ASIDE BY THE CIT(A) BY VIRTUE OF ORDER DATED 18.02.2004 PASSED U/S.263 OF THE ACT. THEREAFTER, FURTHER ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S.263 OF THE ACT ON 31.01.2006 ITA NO.635/M/12 A.Y. 2001-02 3 DETERMINING TOTAL INCOME TO THE TUNE OF RS.53,69,550/-. THEREAFTER, THE PENALTY PROCEEDINGS WAS INITIATED U/S.271(1)(C) OF THE ACT BY VIRTUE OF ORDER DATED 31.01.2006. HOWEVER, PENALTY PROCEEDINGS WAS KEPT ABEYANCE AS THE ASSESSEE PREFERRED AN APPEAL AGAINST THE SAID ORDER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE CLAIMED THE ADVERTISING EXPENSES AND REPAIR EXPENSES BUT FAILED TO JUSTIFY THE CLAIM PROPERLY, THEREFORE AN AMOUNT OF RS.26,31,490 WAS DISALLOWED ON ACCOUNT OF ADVERTISING EXPENSES AND DISALLOWED AN AMOUNT OF RS.2,63,150/- ON ACCOUNT ADVERTISEMENT EXPENSES / COMMISSION ETC. AND AN AMOUNT OF RS.5,650/- ON ACCOUNT OF UNEXPLAINED EXPENSES AND AN AMOUNT OF RS.40,000/- ON ACCOUNT OF REPAIR EXPENSES. THEREAFTER, THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ADDITION TO THE TUNE OF RS.26,31,490/- ON ACCOUNT OF ADVERTISEMENT EXPENSES AND AN AMOUNT OF RS.3,90,669/- WHICH WAS NOT SUBSTANTIATED AND THE ASSESSEE DID NOT PREFER AN APPEAL AGAINST THE ADDITION OF RS.40,000/- MADE UNDER THE HEAD REPAIRS, THEREFORE, THE NOTICE WAS SENT TO THE ASSESSEE AND AFTER GETTING THE REPLY THE PENALTY TO THE TUNE OF RS.9,25,408/- WAS LEVIED WHICH WAS CONFIRMED BY THE CIT(A), HENCE THE PRESENT APPEAL HAS BEEN FILED BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEARNED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. THE ABOVE SAID ISSUES ONLY LEADS TO THE CONTENTION THAT THE CIT(A) HAS WRONGLY CONFIRMED THE PENALTY LEVIED BY THE ASSESSING OFFICER BY VIRTUE OF ITA NO.635/M/12 A.Y. 2001-02 4 ORDER DATED 25.03.2009. IN THE INSTANT CASE THE ASSESSMENT U/S.143 OF THE ACT WAS COMPLETED ON 13.05.2003 DETERMINING TOTAL INCOME TO THE TUNE OF RS.10,32,390/- AS AGAINST THE RETURNED INCOME OF RS.9,49,170/- THIS ORDER WAS SET ASIDE BY THE CIT(A) BY VIRTUE OF ORDER DATED 18.02.2004 PASSED U/S.263 OF THE ACT. THEREAFTER, FURTHER ASSESSMENT WAS COMPLETED U/S.143(3) R.W.S.263 OF THE ACT ON 31.01.2006 DETERMINING TOTAL INCOME TO THE TUNE OF RS.53,69,550/-. BEFORE PROCEEDING FURTHER, IT IS NECESSARY TO WRITE DOWN THE REASONS UNDER WHICH THE CIT(A) INVOKED THE PROVISION U/S.263 OF THE ACT. (I) YOU HAVE PAID TO A RELATED CONCERNS HIT BY PROVISIONS OF SEC.40A(2)(B) ADVERTISING EXPENSES OF RS.5,20,000/- AND PAINTING EXPENSES OF RS.59,000/-. HOWEVER, IT IS SEEN FROM THE RECORD THAT THE ASSESSING OFFICER HAS NOT MADE ANY STUDY OF FAIR MARKET VALUE OF THE SERVICES RENDERED BY THIS CONCERNS M/S.SYMBOSIS ADVERTISING NOR EXAMINED THE SAME DURING THE SCRUTINY PROCEEDINGS. (II) IT IS SEEN THAT AN AMOUNT OF RS.62,407/- BY WAY OF SERVICE TAX HAS NOT BEEN PAID HOWEVER THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY REGARDING THE SAME WITH REFERENCE TO THE DISALLOWANCE U/S.43B. (III) THE ASSESSING OFFICER HAS NOT CROSS VERIFIED IN ANY MANNER THE EXPENSES CLAIMED BY YOU. ITA NO.635/M/12 A.Y. 2001-02 5 5. WHILE COMPLETING THE SAID ASSESSMENT, THESE ISSUES WERE NOT TOUCHED. HOWEVER, THE ASSESSMENT WAS COMPLETED BY ADDING THE AMOUNT OF RS.23,64,359/- ON ACCOUNT OF OTHER ADVERTISEMENT EXPENSES AS THE ASSESSEE FAILED TO PRODUCE THE EVIDENCE IN THIS REGARD. THE ASSESSEE ALSO FAILED TO JUSTIFY THE CLAIM ON ACCOUNT OF ADVERTISEMENT EXPENSES, COMMISSION ETC. TO THE TUNE OF RS.2,63,150/- ON ACCOUNT ADVERTISEMENT EXPENSES / COMMISSION ETC. AND AN AMOUNT OF RS.5,650/- ON ACCOUNT OF UNEXPLAINED EXPENSES. THEREFORE, THE SAID ADDITION WAS MADE. ON ACCOUNT OF REPAIR EXPENSES, THE ASSESSEE FAILED TO JUSTIFY THE CLAIM FOR REPAIR EXPENSES TO THE TUNE OF RS.40,000/-, THEREFORE, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. ON APPRAISAL OF THE RECORD, NO DOUBT THE REASONS HAVE BEEN MENTIONED DIFFERENT WHILE COMPLETING THE ASSESSMENT WHEREAS THE CIT(A) HAS INVOKED THE PROVISION U/S.263 ON ACCOUNT OF THE REASONS WHICH HAS BEEN MENTIONED ABOVE. ANYHOW, THE ASSESSMENT IS NOT UNDER CHALLENGED. IT IS THE PENALTY ORDER WHICH IS CHALLENGED BY THE ASSESSEE. IT IS NOT IN DISPUTE THAT FIRSTLY THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT ON 13.05.2003 DETERMINING TOTAL INCOME TO THE TUNE OF RS.10,32,390/- AGAINST RETURN OF INCOME OF RS.9,49,170/-. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE WAS RUNNING A BUSINESS IN THE GROUND FLOOR OF ITS OFFICE AND ON ACCOUNT OF FLOOD IN THE YEAR OF 2005 THE CONCERNED VOUCHERS AND RELEVANT RECORD HAVE BEEN DESTROYED WHEREAS THE ACCOUNT BOOK MAINTAINED BY THE ASSESSEE HAS NOT BEEN DISCREDITED BY THE ASSESSING OFFICER AT THE TIME OF EARLIER ASSESSMENT. ITA NO.635/M/12 A.Y. 2001-02 6 THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT IN THE CIRCUMSTANCES WHERE THE VOUCHERS HAVE NOT BEEN PRODUCED AND THE NOTICE U/S.133(6) OF THE ACT HAS NOT BEEN SERVED AND ON THIS GROUND THE ADDITION WAS MADE BUT THE PENALTY IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW SPECIFICALLY IN VIEW OF THE LAW SETTLED BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN CASE OF M/S. NAMAN ENTERPRISES PVT. LTD. IN ITA NO.5546&5490/M/2009 FOR THE A.Y.2003-04 AND HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CAFCO SYNDICATE SHIPPING CO. 294 ITR 134 AND HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158. 6. CONSIDERING THE SPECIFIC FACTS AND CIRCUMSTANCES OF THE PRESENT CASE WHEREIN IT CAME INTO THE NOTICE THAT THE ASSESSMENT OF THE ASSESSEE WAS EARLIER COMPLETED U/S.143(3) OF THE ACT ON 13.05.2003 WITHOUT INITIATION THE PENALTY AND THE PENALTY PROCEEDINGS WAS INVOKED WHEN THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER WHEN THE CIT(A) INVOKED THE POWER U/S.263 OF THE ACT ON THE OTHER GROUNDS WHICH WERE NOT DECIDED IN THE ASSESSMENT ORDER SUBSEQUENTLY. THE ASSESSING OFFICER LEVIED THE PENALTY ON THE GROUND OF THAT THE ASSESSEE FAILED TO FILE THE VOUCHERS CONCERNED TO JUSTIFY HIS CLAIM AND ON ACCOUNT OF NON SERVICE OF NOTICE U/S.133(6) OF THE ACT THEREFORE, IN THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT IS NOT A CASE TO FURNISH THE INACCURATE PARTICULARS AND CONCEALMENT OF PARTICULARS OF ITS ITA NO.635/M/12 A.Y. 2001-02 7 INCOME AND IN THIS REGARD WE ALSO PLACED RELIANCE UPON THE FINDING OF THE HONBLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN CASE OF M/S. NAMAN ENTERPRISES PVT. LTD. IN ITA NO.5546&5490/M/2009 FOR THE A.Y.2003-04 AND HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. CAFCO SYNDICATE SHIPPING CO. 294 ITR 134 AND HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. 322 ITR 158. IN VIEW OF THE SAID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) IS NOT JUSTIFIABLE AND IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF LAW, THEREFORE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND DELETE THE PENALTY. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2017. SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 25 TH JANUARY, 2017 MP ITA NO.635/M/12 A.Y. 2001-02 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI