MEGHAERTZ SYSTEMS P.LTD, MUMBAI V. DCIT CIRCLE-5(2)(2), MUMBAI

ITA 6587/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0416 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 20-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVINDRA MISHRA
• Keywords: Revenue expenditure; Capital expenditure; TDS; Set aside
• Section: 43B; 143(3); 142(1); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 6587/MUM/2018 ( ASSESSMENT YEARS: 2012-13 ) MEGHAERTZ SYSTEMS PVT LTD 251/253, T ARDEO COURT, NEAR BHATIA HOSPITAL, MUMBAI 400007 / VS. DCIT, CIRCLE 5(2)(2) 571, AAYAKAR BHAVAN, MUMBAI. ./ ./ PAN/GIR NO. : AADCM8203F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI NIMESH CHOTHANI, AR / RESPONDENT BY : SHRI RAVINDRA MISHRA, SR. DR / DATE OF HEARING 09/12/2020 !'# / DATE OF PRONOUNCEMENT 15/12/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -10, MUMBAI, PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 2 - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE A.O IS ADDING AN AMOUNT OF RS. 1,36,350/- TOWARDS FRANKING CHARGES AND RS. 7,21,406/- TOWARDS PROCESS ING CHARGES AND REGISTRATION FEES WITHOUT APPRECIATING THE FACT THE SAME WERE INCURRED TOWARDS MONEY BORROWED FOR BUSINESS PURPOSE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN L AW, THE CIT(A) ERRED IN CONFIRMING THE ADDITIONS OF THE A.O OF RS. 60,375/-, BEING TRADE PAYABLES, ON ACCOUNT OF CREATION OF LIABILITY U/S 41(1). 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ADDING AN AMOUNT OF RS. 13,15,592/- BEING TRADE PAYABLES, AS UNEXPLAINED CR EDIT WITHOUT APPRECIATING THE FACT THAT THE LIABILITY TO PAY FOR THE SAME HAS NOT YET BEEN ABSOLVED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ADDING AN AMOUNT OF RS. 1,58,447/- WITHOUT ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF DEALING IN COMPUTERS AND COMPUTER RELATED PARTS AND FILED THE RETURN OF INCOME ELECTRONICALLY ON 29.09.2012 FOR T HE A.Y 2012-13 WITH TOTAL INCOME OF RS. 48, 68,630/-.T HE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) AND 142(1) OF THE ACT ALONG WITH ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 3 - QUESTIONER WERE ISSUED. IN COMPLIANCE THE LD. AR APPEARED FROM TIME TO TIME AND THE CASE WAS DISCUSSED. ON PERUSAL OF THE FINANCIAL STATEMENTS, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBITED INTEREST ON TDS TO PROFIT AND LOSS ACCOUNT. SINCE THERE ARE NO EXPLANATIONS OF THE ASSESSEE ON THE ISSUE, THE A.O MADE THE ADDITION. SIMILARLY, THE A. O MADE ADDITION OF DIFFERENCE IN STOCK OF RS6,800/- A S NO EXPLANATION OR RECONCILIATION WAS FILED BY THE ASSESSEE. FURTHER THE A.O MADE ADDITION OF STATUTOR Y LIABILITIES IN THE NATURE OF DUTIES AND TAXES OF RS . 12,513/- U/SEC 43B OF THE ACT. SIMILARLY, THE ADDIT ION OF CASH CREDIT WAS MADE IN RESPECT OF CASH DEPOSITS OF RS.7 LAKHS IN THE UNION BANK OF INDIA, TARDEO BRANC H MUMBAI AS THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES OF DEPOSITS. FURTHER THE A.O FIND THAT AN AMOUNT OF RS.3,77,050/- WAS CLAIMED IN THE PROFIT AND LOSS ACCOUNT TOWARDS THE FRANKING CHARGES AND DISALLOWED THE CLAIM BEING IN THE NATURE OF CAPITAL EXPENDITURE. THE A.O. ALSO TREATED PROCESSING CHARGES AND REGISTRATION CHARGES OF RS. 8, 31,076/- AS CAPITAL EXPENDITURE AND MADE AN ADDITION. THE A.O MADE ADDITION OF RS. 11,57,145/- IN RESPECT OF ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 4 - CESSATION OF LIABILITY U/SEC41(1) OF THE ACT, WHICH ARE OUTSTANDING FOR LONGER PERIOD AND THE A.O ASSUMED THAT IT IS NO LONGER NECESSARY FOR ASSESSEE TO MAKE THE PAYMENT. THE A.O. ALSO OBSERVED THAT THE ASSESSEE HAS FAILED TO RECONCILE THE DIFFERENCE IN UNSECURED LOANS AND MADE AN ADDITION OF RS24,28,684/- AND ASSESSED THE TOTAL INCOME OF RS.1,03,87,560/- AND PASSED THE U/S 143(3) OF THE ACT DATED 27.03.2015. 3. AGGRIEVED BY THE ORDER THE ASSESSEE FILED AN APPEAL WITH THE CIT(A), WHEREAS THE LDCIT(A) HAS CONSIDERED THE GROUNDS OF APPEAL, FINDINGS OF THE A .O AND SUBMISSIONS OF THE ASSESSES AND HAS CONFIRMED THE ADDITION IN RESPECT OF CESSATION OF LIABILITY U /S 41(1) OF THE ACT RS. 11,57,145/-AND ENHANCED THE ADDITION. AN AMOUNT OF RS. 3,59,000/- IN RESPECT OF FRANKING CHARGES AND CITI BANK FEES PAID WAS ALLOWE D AS DEDUCTION AND THE REMAINING PROCESSING AND REGISTRATION CHARGES TO THE EXTENT OF RS.8,57,756/ - WAS SUSTAINED. THE LDCIT(A) GRANTED THE PARTIAL RE LIEF IN RESPECT OF OTHER DISALLOWANCES AND PARTLY ALLOW ED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE ITAT. ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 5 - 4. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESS EE SUBMITTED THAT THE CIT(A) HAS ERRED IN CONFIRMING T HE ADDITION OF RS. 1,36,350/- TOWARDS THE FRANKING CHARGES AND RS. 7,21,406/- TOWARDS PROCESSING AND REGISTRATION CHARGES AS THEY ARE WHOLLY INCURRED FO R THE PURPOSE OF BUSINESS. THE CIT(A) ERRED IN ENHANCING AND CONFIRMING THE ADDITION OF CESSATION OF LIABILITIES U/S 41(1) OF THE ACT RS. 13,15,592/- AS THE TRADE LIABILITIES PAYABLE BY THE ASSESSEE EXI ST FROM THE EARLIER YEARS AND ARE DISCLOSED IN THE FINANCIAL STATEMENTS. THE LDAR SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ALL THE DETAILS TO SUBSTANTI ATE THE CASE AND PRAYED FOR ALLOWING THE APPEAL. 5. CONTRA, THE LD. DR RELIED ON THE ORDERS OF THE CIT(A). 6. WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THE CONTENTIONS OF THE LD. AR ARE THAT THE TRADE LIABILITIES ARE CARRIED FORWA RDED IN THE BOOKS OF ACCOUNTS FROM THE EARLIER YEARS AND THE ASSESSEE IS LIABLE FOR PAYMENT TO THE CREDITORS AND SUBSTANTIATED WITH THE DETAILS. WE FIND THE ASSESSE E HAS NOT WRITTEN OFF THE LIABILITIES AS NO LONGER RE QUIRED ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 6 - IN THE BOOKS OF ACCOUNT. FURTHER ON PERUSAL OF ASSESSMENT ORDER, WE FIND THAT THE A.O. HAS NEITH ER RECORDED SATISFACTION FOR MAKING DISALLOWANCE OR MA DE ENQUIRES ON TRADE CREDITORS NOR SUPPORTED WITH ANY EVIDENCE THAT THE TRADE LIABILITIES ARE NO LONGER PAYABLE BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS DISPUTED ISSUE AND DIRE CT THE ASSESSING OFFICER TO DELETE THE ADDITION. 7. WHEREAS, IN RESPECT OF FRANKING, PROCESSING AND REGISTRATION CHARGES, THE LDAR HAS SUBSTANTIATED HI S ARGUMENTS WITH THE DETAILS IN THE PAPER BOOK AT PAG E 1 TO 27 ALONG WITH REGISTRATION CHARGES AND SANCTIO N LETTERS OF THE BANKS SUBSTANTIATING THAT THE SAID AMOUNT ARE REVENUE EXPENDITURE. WE CONSIDERING THE FACTS AND THE MATERIAL FIND THAT THESE DETAILS ARE TO BE VERIFIED AND EXAMINED. ACCORDINGLY, WE REMIT THIS DISPUTED ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE FOR VERIFICATION. THE ASSESSEE SHOU LD BE PROVIDED WITH ADEQUATE OPPORTUNITY OF HEARING AN D SHALL COOPERATE IN SUBMITTING THE INFORMATION AND ALLOW THE GROUNDS OF APPEAL FOR STATISTICAL PURPOSE ITA NO . 6587/MUM/2018 MEGHAERTZ SYSTEMS PVT LTD, MUMBAI. - 7 - 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15.12.2020 SD/- SD/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 15/12/2020 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI