RAMGOPAL K. AGRAWAL, MUMBAI V. JCIT 12(2), MUMBAI

ITA 6370/MUM/2009

• Counselvise Citation: 637019914 RSA 2009
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 10-12-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'D' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6370/MUM/2009 (ASSESSMENT YEAR: 2006-07) SHRI RAMGOPAL K. AGRAWAL JCIT, RANGE 12(2) 221, KEWAL INDUSTRIAL ESTATE AAYAKAR BHAVAN, M.K. R OAD S.B. MARG, LOWER PAREL VS. MUMBAI 400020 MUMBAI 400013 PAN - AABPA 1112 G APPELLANT RESPONDENT APPELLANT BY: SHRI RAHUL HAKANI RESPONDENT BY: SHRI LAL CHAND O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-XXIII, MUMBAI DATED 06.11.2009 IN WHICH THE ASSESSEE HAS R AISED 9 EFFECTIVE GROUNDS, GROUND NOS. 10 & 11 BEING GENERAL IN NATUR E. 2. GROUND NOS. 1 TO 5 PERTAINS TO THE ISSUE OF ADDITIO N UNDER SECTION 41(1) OF SOME OF THE OUTSTANDING AMOUNTS. THE A.O. DURING THE COURSE OF ASSESSMENT NOTICED THAT COMMISSION OF EXPORT SALES PERTAINING TO ASSESSMENT YEARS 2002-03 AND 2003-04 OF ` 64,966/- AND ` 1,31,146/- RESPECTIVELY WERE OUTSTANDING ALONG WITH PROCESSING CHARGES OF ` 53,654/-. IT WAS ASSESSEES SUBMISSION THAT THE COMMISSION OF EX PORT SALES WERE WRITTEN OFF AND SHOWN AS INCOME IN THE A.Y. 2008-09 WHEREAS THE AMOUNT OF PROCESSING CHARGES OF ` 53,654/- WAS STILL OUTSTANDING ON ACCOUNT OF DISPUT E AND CANNOT BE CONSIDERED AS CESSATION OF LIABILITY. THE A.O. DID NOT ACCEPT THE SAME AND EVENTHOUGH THE ASSESSEE HAS NOT TREATE D IT AS CESSATION OF LIABILITY BROUGHT THE AMOUNT TO TAX UNDER SECTION 4 1(1). BEFORE THE CIT(A) IT WAS SUBMITTED THAT ASSESSEE HAS OFFERED THE FIRST T WO AMOUNTS OF COMMISSION ON EXPORT CLAIMED IN EARLIER YEARS AS AN INCOME IN A.Y. 2008-09 AND THE RETURN WAS FILED EVEN BEFORE THE A.O. HAS C OMPLETED THE ASSESSMENT AND, THEREFORE, THERE IS NO NEED TO BRING TO TAX TH E SAME AMOUNT IN THIS ITA NO. 6370/MUM/2009 SHRI RAMGOPAL K. AGRAWAL 2 YEAR. AS FAR AS THE AMOUNT OF PROCESSING CHARGES OF ` 53,654/- IS CONCERNED THE ASSESSEE SUBMITTED THAT THE AMOUNT WAS PAID SUB SEQUENTLY IN A.Y. 2009-10, THEREFORE, IT CANNOT BE TREATED AS CESSATI ON OF LIABILITY DURING THIS YEAR AS THE DISPUTE WAS STILL PENDING IN THE ASSESS MENT YEAR. THE CIT(A), HOWEVER, REJECTED THE CONTENTIONS SUMMARILY AND UPH ELD THE ADDITION UNDER SECTION 41(1). 3. WE HAVE CONSIDERED THE ARGUMENTS OF THE COUNSELS AN D SEEN THE FACTS OF THE ISSUE AS PLACED IN THE PAPER BOOK. THERE IS NO DISPUTE THAT THE COMMISSION OF EXPORT SALES WERE CLAIMED IN EARLIER YEARS AND NOT IN THIS YEAR AND THE SAME WERE TREATED AS INCOME IN A.Y. 2008-09 AND OFFERED TO TAX MUCH BEFORE THE A.O. ENQUIRED AND CONSIDERED AS AN ADDITION IN A.Y. 2005- 06. NOTING HAS HAPPENED DURING 2005-06 AND IT CANNO T BE STATED THAT THERE WAS CESSATION OF LIABILITY DURING THIS YEAR, THEREF ORE, CONSIDERING THE ADDITION UNDER SECTION 41(1) DOES NOT ARISE DURING THE YEAR AT ALL. WITHOUT GOING INTO THE LEGAL PRINCIPLES, SINCE THE ASSESSEE ITSELF TRE ATED IT AS INCOME AND OFFERED IN A.Y. 2008-09, WE DIRECT THE A.O. TO DELETE THE A MOUNTS. WITH REFERENCE TO THE PROCESSING CHARGES OF RS 53,654/- IT WAS ASSESS EES SUBMISSION THAT THE AMOUNTS WERE PAID IN SUBSEQUENT YEAR. THEREFORE, IT CANNOT BE STATED THAT THERE WAS CESSATION OF LIABILITY DURING THE YEAR. W HEN THE AMOUNT IS DISPUTED AND PENDING FOR SETTLEMENT AND WHEN THE AS SESSEE TREATS IT AS PENDING IN THE BOOKS OF ACCOUNT, WITHOUT BRINING AN YTHING ON RECORD THE A.O. CANNOT BRING THE OUTSTANDING LIABILITY AS INCO ME DURING THE YEAR. FOR THESE REASONS THE TREATMENT GIVEN TO THE UNPAID OUT STANDING PROCESSING CHARGES UNDER SECTION 41(1) IS NOT CORRECT. A.O. IS DIRECTED TO DELETE THE AMOUNTS. GROUND NOS. 1 TO 5 ARE ALLOWED. 4. GROUND NOS. 6 & 7 PERTAIN TO DISALLOWANCE OF TELEPH ONE EXPENSES. 5. A.O. NOTICED THAT ASSESSEE DEBITED TELEPHONE EXPEND ITURE OF ` 63,066/- IN RESPECT OF THE TELEPHONE INSTALLED AT THE RESIDE NCE OF THE PARTNER. THE A.O. WAS OF THE OPINION THAT THERE CAN BE PERSONAL USE A ND DISALLOWED AN AMOUNT OF 50% OF THE CLAIM THUS MAKING ADDITION OF ` ,31,533/-. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REDUCE D IT TO 1/4 TH OF THE CLAIM. ITA NO. 6370/MUM/2009 SHRI RAMGOPAL K. AGRAWAL 3 6. AFTER CONSIDERING THE ARGUMENTS OF THE LEARNED A.R. AND THE LEARNED D.R. WE ARE OF THE OPINION THAT PERSONAL USE OF THE TELEPHONE AT THE RESIDENCE CANNOT BE RULED OUT. HOWEVER, CONSIDERING ASSESSEES BUSINESS AND TURNOVER AND INCOMES AND THE CLAIM MADE FOR THE TELEPHONE AT THE RESIDENCE ABOUT ` 5,000/- PER MONTH, WE ARE OF THE OPINION THAT AN A MOUNT OF 10% OF THE CLAIM CAN BE CONSIDERED AS PERSONAL E XPENSES. IN VIEW OF THIS WE RESTRICT THE DISALLOWANCE OF TELEPHONE EXPENSES FOR PERSONAL USE TO 10% OF THE CLAIM AND THE A.O. IS DIRECTED TO RESTRICT T HE SAME TO 10% ACCORDINGLY. GROUNDS ARE PARTLY ALLOWED. 7. GROUND NOS. 8 & 9 PERTAINS TO ADDITION OF ` 62,700/- AS EXCESS PURCHASES CLAIMED BY THE ASSESSEE. 8. A.O., IN THE COURSE OF SCRUTINY, ENQUIRED FROM M/S. RUPESH TEXTILES AND FOUND THAT AN AMOUNT OF ` 62,700/- HAS BEEN SHOWN AS PURCHASES BY THE ASSESSEE IN THE BOOKS M/S. RAM TEXTILES AND DIS ALLOWED THE SAID AMOUNT AS M/S. RUPESH TEXTILES DID NOT ACCOUNT FOR THE SAME. IT WAS ASSESSEES SUBMISSION THAT ASSESSEE PURCHASED FROM M/S. RUPESH TEXTILE GOODS WORTH ` 2,52,08,670/- AND THIS PURCHASE WAS REFLECTED IN TH E ACCOUNT OF M/S. RAM TEXTILES AS THE CHEQUE PAID WAS ACCOUNT ED FOR AS RECEIPTS. THEREFORE IT WAS THE SUBMISSION THAT THE AMOUNT CAN NOT BE TREATED AS EXCESS PURCHASES. THE A.O., HOWEVER, DID NOT AGREE AND TREATED THE AMOUNT OF ` 62,700/- AS EXCESS PURCHASES CLAIMED. BEFORE THE CI T(A) THE ASSESSEE FURNISHED HAS ACCOUNT COPY AS WELL AS ACCOUNT COPY OF M/S RUPESH TEXTILES AND ALSO EVIDENCE THAT THE SAID FIRM HAS ACCOUNTED FOR THE RECEIPT OF THE AMOUNT CLEARED THROUGH BANKING CHANNELS ON 30 TH AUGUST 2005 WITH REFERENCE TO THE INVOICES ISSUED. EVEN THOUGH THE C OPIES OF BILLS, BANK STATEMENTS AND ACCOUNT COPIES WERE FURNISHED, THE C IT(A), HOWEVER, WITHOUT EXAMINING THE FACTS CONFIRMED THE ORDER OF THE A.O. STATING VERY BRIEFLY, THAT A.O. ENQUIRED UNDER SECTION 133(6) AND FOUND THAT P URCHASES WERE NOT REFLECTED IN THE BOOKS OF M/S RUPESH TEXTILES. 9. BEFORE US THE LEARNED COUNSEL PLACED ON RECORD INV OICES NOS.246 PERTAINING TO THE PERIOD OF 19.07.2005 IN WHICH AN AMOUNT OF ` 1,31,550/- WAS PURCHASED FROM M/S. RUPESH TEXTILES AND ANOTHER INVOICE NO. 264 DATED 06.08.2005 IN WHICH GOODS OF ` 62,700/- WERE PURCHASED AS ACCOUNTED ITA NO. 6370/MUM/2009 SHRI RAMGOPAL K. AGRAWAL 4 FOR IN ASSESSEES BOOKS. THEN HE REFERRED TO THE EN TRY IN M/S. RAM TEXTILES ON 30.08.2005 IN WHICH AN AMOUNT PERTAINING TO INVO ICE NOS. 246 & 264 WAS PAID BY CHEQUE NO. 671782 OF ` 1,94,250/- AND RECONCILED THE ACCOUNTS IN BOTH THE BOOKS OF ACCOUNTS. IT WAS HIS SUBMISSIO N THAT ASSESSEE HAS PURCHASED GOODS FROM M/S. RUPESH TEXTILES, WHICH IS NOT A CONNECTED PARTY. AMOUNTS ARE PAID BY CHEQUES AND THE TRANSACTIONS AR E TALLYING TO AN EXTENT OF ` 2.5 CRORES AND ONE TRANSACTION PERTAINING TO THIS P URCHASE WAS NOT VERIFIED BY THE A.O. IT IS HIS SUBMISSION THAT THE OTHER PARTY HAS ACKNOWLEDGED THE RECEIPT OF MONEY WITH REFERENCE TO THE NUMBER OF INVOICES ISSUED AND THE ASSESSEE PURCHASED GOODS AND PAID TH E AMOUNT. THERE CANNOT BE ANY EXCESS PURCHASES AS MADE OUT BY THE A .O. 10. THE LEARNED D.R. RELIED ON THE ORDER OF THE A.O. 11. AS SEEN FROM THE ACCOUNT COPIES, INVOICES AND DETAI LS OF PAYMENT PLACED ON RECORD IN THE PAPER BOOK, WE ARE OF THE O PINION THAT THE A.O. HAS WRONGLY CONSIDERED THE AMOUNT OF ` 62,700/- AS EXCESS PURCHASES. THERE IS NO DISPUTE WITH REFERENCE TO THE PURCHASE OF GOODS BY THE INVOICES AND PAYMENT THEREON AS WAS EVIDENCED BY THE ENTRIES IN THE BOOK S OF ACCOUNT OF RUPESH TEXTILES. HOW THE EXACT INVOICES WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNT OF RUPESH TEXTILES COULD HAVE BEEN GONE INTO BY THE A.O. WHEREAS THE ASSESSEES BOOKS ARE CONCERNED THE TRANSACTIONS ARE TALLYING AND PAYMENTS ARE ALSO VERIFIABLE. IN VIEW OF THIS, WE ARE OF THE OPINION THAT THE AMOUNT TREATED AS UNACCOUNTED PURCHASES CANNOT BE SUSTAINE D AS THE ASSESSEE HAS FURNISHED NECESSARY EVIDENCES OF PROPER PURCHASE AN D PAYMENT OF MONEY ALSO TO M/S. RUPESH TEXTILES. IN VIEW OF THIS, THE A.O. IS DIRECTED TO DELETE THE AMOUNT SO BROUGHT TO TAX. ASSESSEES GROUNDS ARE AL LOWED 12. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH APRIL 2011. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 13 TH APRIL 2011 ITA NO. 6370/MUM/2009 SHRI RAMGOPAL K. AGRAWAL 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXIII, MUMBAI 4. THE CIT XII, MUMBAI CITY 5. THE DR, D BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.